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Novartis to buy majority of Alcon
— -- Swiss drugmaker Novartis agreed to pay Nestlé $39 billion for 77% of eye-care leader Alcon in a two-step deal that would make Novartis the world's biggest maker of eye-care products.
The purchase, to be completed in 2010 or 2011, is the biggest ever in the eye-care sector and one of the largest deals involving a drugmaker in six years, says financial services firm Thomson.
The deal, announced Monday, also underscores the move by many drugmakers to diversify, given pressures on drug prices, increasing competition from generic drugs and a dearth of new blockbusters.
"All are changing in one way or another. Having a diversified product line helps smooth out the bumps of branded drug development," says securities analyst Les Funtleyder of Miller Tabak.
Based on Alcon's closing share price on Friday, Novartis would pay a premium of 13% to complete the two steps. It has no obligation to purchase the remaining 23% of shares.
Novartis CEO Daniel Vasella says Nestlé wanted the two-step process, and that Novartis would have preferred a one-shot deal. He says the eye-care market, at $25 billion worldwide, is poised for growth because of an increase in age-related eye diseases in Europe, Japan and the USA, and opportunities in emerging markets where eye care is not yet much of a focus.
Novartis already has some eye-care products, including solutions for dry eyes and eye scrubs and some marketing rights to Lucentis, a drug to treat macular degeneration. Adding Alcon to Novartis' stable will more than double its eye-care revenue, says Vasella. "This isn't a large diversification. It's a strengthening of our non-pharma business," he says.
Alcon, incorporated in Switzerland with U.S. operations in Fort Worth, makes the Opti-Free contact lens solution. It also sells medical devices and products for eye surgeries, as well as drugs to treat glaucoma and eye infections. With 2007 revenue of $5.6 billion, it's considered the biggest player in its industry.
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