Novartis says it has acquired a 25% stake in Alcon in the first step of its $38 billion deal to acquire majority ownership of "the world leader in eye care”.

The Basel-based firm has purchased the stake from Nestle for $10.4 billion in cash, $200 million less than previously announced to account for an Alcon dividend paid in May to the seller rather than Novartis. The optional second step would see the latter buy the remaining 52% stake held by Nestle between January 2010 and July 2011 for no more than $28 billion.

Though the price tag seems eye-watering itself, the response from the investment community to the deal is pretty positive. Last year, Alcon had sales of $5.6 billion, which produced net income of $1.6 billion, so it is a highly profitable business that Novartis is getting involved in.

The deal fits in nicely with Novartis which is battling to cope with generic competition to some of its products, notably the blood-pressure-lowering drug Lotrel (almodipine/benazepril) and the epilepsy treatment Trileptal (oxcarbazepine), plus future key patent expiries, especially on the blood pressure lowerer Diovan (valsartan).

The Alcon deal fits with the company’s restructuring programme, announced at the end of 2007, which involves 2,500 job cuts but also a move towards specialty areas. Beatrice Muzard, an analyst at Natixis Securities, issued a research note saying that Alcon is the world leader in ophthalmology, “a fast-growing market where generic risk is more contained,” and where synergies with Novartis’ CIBA Vision contact lens business and its treatment of age-related macular degeneration Lucentis (ranibizumab) “should be substantial".

She added that the deal is based on “clear strategic and financial considerations" and reduces Novartis’ exposure to the primary care market. Financially, the consolidation of 25% of Alcon will enhance earnings per share by roughly 1%, excluding items, in 2008, 2.4% in 2009 and 2.8% in 2010, she estimated.