Novartis outlined a wide-reaching restructuring plan in an attempt to revive its struggling Alcon unit with the goal of returning its eye care business to growth by the end of the year.
As part of its quarterly earnings release, Novartis outlined changes to the leadership and structure of Alcon, which once again reported a fall in sales and worse-than-expected fourth quarter profits. As part of the transition, Novartis said it would narrow Alcon’s focus to surgical equipment and vision-care products, including contact lenses. Alcon’s ophthalmic pharmaceuticals business will move to the company’s broader Pharmaceuticals Division, a move the company hopes will better leverage development and marketing capabilities.
Alcon has struggled recently, driven by weaker performance in IOLs and cataract equipment, along with increased generic competition. Alcon reported net sales of $2.3 billion in the fourth quarter, down 6% from the same period last year. Alcon's operating income decreased 36% to $132 million during that time. Novartis CEO Joe Jiminez said the planned changes were expected to generate over $1 billion in annual cost savings by 2020 with one-time restructuring costs of $1.4 billion to be spread over 5 years.
In a company news release, Novartis said by focusing the Alcon division on its core surgical and vision care business, it will be able to accelerate growth in 2016 and beyond by:
- Optimizing IOL innovation and commercial execution
- Prioritizing and investing in promising pipeline opportunities
- Ensuring best-in-class service, training and education for eye care professionals
- Improving sales force effectiveness
- Investing in DTC behind key brands
As part of the restructuring plan, Novartis also announced on Wednesday a change in leadership at Alcon.
Mike Ball has been appointed Division Head and CEO of Alcon, effective February 1, 2016, and will be a member of the Executive Committee of Novartis. He was CEO of Hospira, which was recently acquired by Pfizer, since 2011. Prior to Hospira, he spent 5 years as President of Allergan, where he held a series of leadership positions over 16 years with the company. Mr. Ball succeeds Jeff George, who was named CEO at Alcon in April 2014 after spending about 8 years at Novartis in Europe at its generics division, Sandoz.
Following the restructuring announcement, Mr. Jiminez told the Financial Times that he wanted to keep Alcon, which Novartis took full control of in 2010 after a $50 billion acquisition from Nestlé. However, he made clear that all options were on the table if it continued to underperform.