Novartis Reports 2018 Results and Says Alcon Is Positioned for ‘Sustainable’ Growth as Standalone Entity

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BASEL, Switzerland—Novartis (NYSE: NVS) reported Wednesday that its net sales and core net income grew at a single-digit percentage rate in the fourth quarter, and that it remains on track to spin-off its Alcon eyecare business unit in the first half of this year. Net sales totaled $13.3 billion in the fourth quarter, an increase of 3 percent (6 percent at constant currency rates), driven by volume growth of 9 percent mainly from prescription drugs Cosentyx and Entresto, oncology treatments and the Alcon segment, the announcement noted. Strong volume growth was partly offset by the negative impacts of pricing (-2 percentage points) and generic competition (-1 percentage point).

In the Alcon business segment, sales totaled $1.8 billion in the fourth quarter, an increase of 2 percent (4 percent at constant currency). Vision care sales grew 3 percent at constant currency, including continued double-digit growth of Dailies Total1 and strong Systane performance, the announcement noted.

For fiscal 2018, Alcon sales increased 6 percent to $7.1 billion (5 percent at constant currency). Surgical sales grew 7 percent (cc), with growth across all key product categories, driven mainly by AT-IOLs and consumables. Vision care sales increased 3 percent (cc), mainly driven by growth in contact lenses with continued double-digit growth of Dailies Total1, the announcement noted.

Novartis said its core net income in Q4 totaled $2.9 billion, an increase of 2 percent (8 percent at constant currency) as growth in core operating income was partly offset by the discontinuation of core income from the GSK consumer health care joint venture. For the full year 2018, core operating income grew 8 percent, “mainly driven by higher sales and gross margin expansion,” the company said.

Looking ahead, Novartis said the “efforts toward the proposed 100 percent spin-off of the Alcon eyecare division are progressing with the Novartis board of directors providing final endorsement of the potential transaction.” Shareholders will vote on the proposed spin-off at the annual meeting on Feb. 28.

“Alcon is positioned for sustainable long-term top-line growth and margin expansion as demonstrated by the strong 2018 results,” the announcement noted.

In addition to shareholder approval, the proposed Alcon spin-off remains subject to certain conditions, such as no material adverse events, receipt of necessary authorizations as well as tax rulings and opinions, Novartis said.

The spin-off is expected to be implemented through the distribution of a dividend-in-kind of Alcon shares to Novartis shareholders and ADR (American Depository Receipt) holders, at a proportion of one Alcon share for every five Novartis shares. The distribution is expected to be tax neutral.

“In 2018, we reimagined Novartis,” chief executive officer Vas Narasimhan said in the company’s announcement. “We took major steps toward becoming a medicines company that focuses its capital on developing, launching and creating global access to breakthrough medicines.”