Novartis weighs sale of contact lens care business as Alcon unit struggles to chart growth

Novartis CEO Joe Jimenez

Novartis ($NVS) is mulling a sale of its contact lens care business as the company faces sluggish growth for its Alcon unit and targets eye care innovation to swing its numbers northward.

The proposed sale is still in early stages and Novartis might decide not to go through with a sale, people familiar with the matter told Bloomberg. But if the Swiss company does unload the business, which includes products to clean lenses, it could bring in $1.6 billion, Kepler Cheuvreux analyst Fabian Wenner told the news outlet. Some analysts set that number lower, though, with Safra Sarasin analysts saying the sale would fetch no more than $1 billion.

A sale would come at a critical moment for Novartis, as it deals with slumping numbers for its contact care business and Alcon unit. Novartis' contact care business sales fell 7.4% to $646 million in 2014 and slow growth ended up taking its toll on Alcon. Sales at Alcon jumped 3.2% to $10.8 billion last year, but things have stalled recently. Alcon's revenue plummeted 8% to $7.5 billion in the first 9 months of 2015, partly due to a dip in surgical equipment sales in the U.S. and emerging markets.

Google and Novartis are teaming up to develop Google's "smart lens" technology for glucose monitoring and presbyopia.--Courtesy of Google

"With the market shift to daily disposable lenses, Novartis will be questioning whether the lens care business is core or unnecessary," Mirabaud Securities analyst Nick Turner told Bloomberg. "On the one hand it is high margin and will be a loss to division cash flow, but if Alcon continues to be a drag on group performance, its days could be numbered."

But Novartis has some ideas for reviving growth. The company is doing a "deep analysis" of Alcon's business and will reveal a plan "to get this business back to a decent growth rate," Novartis CEO Joe Jimenez said in October, as quoted by Bloomberg. Emerging markets could also play a key role in restoring sales, as more people in those countries are still using monthly or weekly lenses rather than daily disposable products, Novartis said earlier this year.

Meanwhile, the company is forging ahead with eye care projects, teaming up with Google to develop a smart lens for ocular medical uses and glucose monitoring. Jimenez in September said that the project "is progressing well" and that the company plans to test a first prototype of the product, a smart lens for vision correction in people with presbyopia, or age-related farsightedness, on humans in 2016.

- read the Bloomberg story

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