UPDATE 2-Novartis hands investors Alcon spin-off and $5 bln share buyback

* Spinoff planned for H1 2019

* Shareholders would get new Alcon stock

* $5 billion buyback by the end of 2019 (Rewrites, adding comment from CEO, details, analysts)

ZURICH, June 29 (Reuters) - Novartis plans to spin off its Alcon eye care business to shareholders and repurchase up to $5 billion in shares, as Chief Executive Vas Narasimhan refocuses the Swiss firm on prescription drugs.

Narasimhan, a Harvard-trained U.S. doctor, said on Friday it was premature to give a valuation for U.S.-based Alcon, which Novartis bought for $52 billion in 2011, although his predecessor Joe Jimenez once estimated it at $25-$35 billion.

Alcon, a hangover from the empire-building legacy of former Novartis boss Daniel Vasella, could be worth between $15 and $23 billion, Bank Vontobel analysts said, adding that its ongoing recovery would influence the final price.

Novartis had to make massive investments to reverse falling sales and losses at Alcon, although its revenue is again growing and it posted a $90 million first quarter operating profit.

Novartis plans a shareholder meeting in February 2019 to seek approval for the spin-off, which is due to be completed in the first half of next year, while the share buyback is due to be completed by the end of next year.

Shares in Novartis were 2.9 percent higher at 0757 GMT as investors welcomed the Alcon separation and share buyback.

Narasimhan is pressing ahead with Jimenez's reversal of the decade-long expansion under Vasella, the former CEO and chairman. (https://reut.rs/2KvMKPK)

Since Vasella's departure in 2013, Novartis has exited vaccines, dumped its animal health business and earlier this year unloaded its consumer health joint venture with GlaxoSmithKline for around $13 billion.

"A company like ours needs to focus our capital in our area of strength which I believe is innovating world class medicines and I'd like to build our strength in digital and data technologies," Narasimhan told reporters on a conference call.


Since last year, Novartis has bought U.S.-based Avexis for $8.7 billion and French-based Advanced Accelerator Applications for $3.9 billion, giving it a platform in both gene therapy and radiopharmaceuticals respectively.

Novartis has also been investing in digital technology, including a mobile app to collect eye disease data.

Alcon makes surgical equipment to treat cataracts and contact lenses, businesses that no longer fit Novartis's prescription drugs blueprint.

Novartis will retain its roughly $3.6 billion prescription eye drugs portfolio, which it previously moved from Alcon into its main pharma unit.

Narasimhan has opted to unload to business to shareholders, long the company's preferred option, after a review and Novartis will not keep any Alcon stock, he said.

A listing is slated for New York and Zurich, with Alcon's existing head, Mike Ball, set become its chairman, while David Endicott will become Alcon CEO.

The share buyback will be partially financed out of proceeds from the OTC sale to GSK, Narasimhan said.

The Alcon spin off is a welcome diversion from a political scandal in the United States triggered by Novartis paying $1.2 million in fees to President Donald Trump's personal lawyer.

Narasimhan has called the payments a mistake, and the furore cost Novartis's top lawyer his job. (Reporting by John Miller, editing by John Revill and Alexander Smith)