Novartis has announced plans to re-organise its eye unit Alcon in order to secure future growth and lift the company’s profit.
The Swiss drug giant said it is transferring Alcon's pharmaceutical products, which pulled in sales of $3.8 billion in 2015, to its Pharmaceuticals Division, “creating the world leading ophthalmology business” with around $6 billion in sales.
“This will simplify our ophthalmic medicines business, leverage Alcon's strong brand with Pharmaceuticals development and marketing capabilities, and help us accelerate innovation and growth in eye care,” the firm noted, explaining the strategy behind the move.
At the same time, selected mature, non-promoted pharmaceutical products will be relocated to Sandoz, while ex-Hospira chief Mike Ball, who replaces Alcon division head Jeff George from February 1, will drive a sharper focus on the unit’s core Surgical and Vision Care business.
Novartis said it will also streamline operations to boost efficiency and save costs, including centralising manufacturing operations across group and integrating some drug development functions across divisions to improve resource allocation. The move is expected to generate over $1 billion in annual cost savings by 2020, with one-time restructuring costs of around $1.4 billion spread over five years.
The plans were unveiled alongside Novartis’ fourth-quarter results, which fell short of analyst expectations largely because of currency effects and dwindling sales from Alcon.
Core net income slipped 5 percent to $2.70 billion versus the fourth quarter of last year, compared to an average forecast of $2.97 from analysts polled by Reuters, though this masked a 7% rise at constant exchange rates. Net sales were down 4 percent at $12.52 billion, or up 4% taking currency effects out of the equation.
The drug giant’s chief executive Joseph Jimenez insisted that the firm “delivered solid financial results and improved core margin despite a very strong currency impact”.
“Across the Group we will further focus our divisions, create even greater innovation by integrating drug development, and lower our costs by centralising our manufacturing across divisions. This will position the company well for the future,” he said.