Novartis Completes Spin-off of Alcon, its Eye-Care Device BusinessBy
Novartis has completed the spin-off of Alcon, its eye-care device business, through a dividend-in-kind distribution to holders of Novartis shares and American depositary receipts (ADRs), with each holder receiving one Alcon share for every five Novartis shares or ADRs held on April 8, 2019. Alcon is now a separately traded public company on the SIX Swiss Exchange and New York Stock Exchange. ADRs of Alcon opened at $57.81, giving the company a market value of approximately $28 billion.
Novartis announced plans to spin off Alcon last year (June 2018) following a strategic review of the business that it had initiated in 2017. It explored various options ranging from retention or sale of the business to the separation of the business via an initial public offering or spin-off transaction. Alcon, which provides eye-care products to the surgical and vision-care markets, had $7.1 billion in sales in 2018. The Geneva, Switzerland-headquartered company has over 20,000 employees. Alcon says its facilities in Fort Worth, Texas will remain a major operational center and innovation hub with a large base of employees.
Novartis had acquired Alcon in 2011, with the business at that time including surgical and vision-care products and ophthalmic pharmaceuticals. In January 2016, Novartis began the process of creating two businesses with the transfer of Alcon’s ophthalmic pharmaceuticals to the Novartis Innovative Medicines Division. The ophthalmology pharmaceuticals business will continue to be part of Novartis. In October 2017, the company announced that certain over-the-counter and diagnostic ophthalmic products would be moved from the Innovative Medicines Division to the Alcon Division, effective January 1, 2018.
Pharmaceuticals remain the core competency of Novartis. The company says it expects 10 potential blockbuster launches in the next two years and an additional 20 potential blockbusters on the horizon. Of these potential blockbuster launches, four are planned in 2019, including brolucizumab, which is part of the ophthalmology pharmaceuticals business retained by Novartis. Its ophthalmology pharmaceuticals business had 2018 sales of $4.6 billion and a pipeline of treatments for presbyopia, dry eye and genetic diseases.
In announcing the completion of the spin-off, Novartis reiterated its intention to continue paying a strong and growing annual dividend up from the CHF 2.85 ($2.84) per share paid in 2019, without adjustments for the Alcon spin-off. The company says that share buybacks will continue to be part of the mix to create shareholder value, with $800 million of an up to $5-billion commitment completed in 2018, and the remainder expected to be completed by the end of 2019.