Biotech and Pharma

We’re looking at all options for our struggling eye care business: Novartis CEO

The Novartis headquarters in Basel, Switzerland.
Arnd Wiegmann | Reuters

Novartis will launch a strategic review of its flagging eyecare business, Alcon, chief executive Joe Jimenez told CNBC's Squawk Box on Wednesday.

"We are going to look at what's in the best interest of our shareholders, in terms of the future of that business, ranging all the way from retaining the business to a capital markets exit through an IPO or a spin," he explained.

"We're going to take 2017 to do that and we will be back with an update on that by the end of this year," Jimenez added.

Novartis: Looking at what’s best for shareholders on Alcon

Among the raft of news for investors to digest in its fourth-quarter results announced Wednesday were a 2.75 Swiss franc ($2.75) dividend and an up-to $5 billion share buyback this year.

This as the Swiss pharmaceutical company failed to meet either top or bottom line expectations, held back above all by the negative effects of a strong dollar.

Core net income for the quarter fell 2 percent to $2.66 billion, underperforming average analyst expectations of $2.72 billion. Net sales dropped by the same percentage to $12.32 billion, although viewed on a constant currency basis, finished the three month period flat.

The company was hit by the well-flagged expiration of the patent on Gleevac, which led to a $2.4 billion drop in sales for the blockbuster cancer drug.

Admitting Novartis was going through a "tough time right now" due to the expiration, Jimenez nonetheless pointed out that new growth products fully offset that decline and the company expected to enter its next growth phase towards the end of 2017.

Despite delivering sales of $170 million - and therefore falling short of its internal $200 million target - Jimenez struck a bullish note on the outlook for Novartis's highly anticipated heart failure drug, Entresto, saying market access had improved and the field force had now been fully deployed.

The CEO also pointed to Cosentyx, a new psoriasis and auto-immune drug, as "one of the biggest growth drivers" for the company.

Despite powerful backing for the Right to Try bill, resistance among patient advocacy groups is strong.
Dan Kitwood | Getty Images | Cancer Research UK

Turning to the question of President Donald Trump who recently raged that the industry was "getting away with murder" with regards to the prices charged for medication, Jimenez argued that the pricing issue was not new and Novartis had a plan in place.

"Novartis recognized this a couple of years ago and we started down a path of contracting based on the outcomes that the drug delivered instead of just the transaction of getting a particular price," he began.

"This kind of outcomes-based contracting is in its infancy but Novartis is a leader here and that's one of the ways that we defuse the arguments around pricing because if our products don't deliver then we don't get the same kind of pricing that they would if they deliver on, say, reducing hospitalization," he continued.

Jimenez posited that the sizeable consolidation wave hitting the sector in recent years would likely persist, adding, "the best thing about Novartis is that we don't have to participate in big M&A because our pipeline is quite strong."

Highlighting the four small bolt-on acquisitions made by the company in the past four months, the CEO said Novartis would continue down that path.

"We are going to focus on the M&A strategy we have articulated before which is bolt-on acquisitions between $2 – 5 billion that can strengthen the pipelines of our different divisions," he concluded.

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