Healthcare Industry News: S.A.
News Release - April 7, 2008
Novartis to further strengthen its healthcare portfolio by acquiring 25% stake in Alcon from Nestlé with right to take over majority ownership of the world leader in eye care
Basel, April 7, 2008--(HSMN NewsFeed)--Novartis has reached an agreement with Nestlé S.A. providing the right to acquire majority ownership of Alcon Inc. (NYSE:ACL ) in two stepS.A.d add the world leader in eye care to its diversified portfolio focused on growth areas of healthcare.The transaction's first step to purchase a 25% S.A.e in Alcon from Nestlé for USD 11 billion is expected to be completed in the second half of 2008. The second step provides rights for Novartis to acquire, and Nestlé to sell, the remaining 52% Alcon S.A.e held by Nestlé between January 2010 and July 2011.
Completion of these steps would make Alcon a majority-owned subsidiary of NovartiS.A.d further strengthen its healthcare-focused business portfolio of innovative medicines, high-quality low-cost generics, preventive vaccines, diagnosticS.A.d consumer health products, taking advantage of growth opportunitieS.A.d cost synergies while mitigating risks.
The transition of Alcon's majority ownership to Novartis would also enhance the Group's longer-term growth prospects with greater access to the fast-growing eye care market, a specialty field with unmet patient needS.A.d annual sales of about USD 25 billion in 2007.
Alcon is the world's largest and most profitable eye care company with 2007 annual sales of USD 5.6 billion, operating income of USD 1.9 billion and net income of USD 1.6 billion. Alcon offerS.A.range of pharmaceutical, surgical and consumer eye care products used to treat diS.A.es, disorderS.A.d other conditions of the eye.
"ThiS.A.quisition furthers our strategy of accessing high-growth segments of the healthcare market while balancing inherent risks. The strategic fit of Alcon and Novartis is excellent with our complementary product portfolioS.A.d R&D synergies. Eye care will continue to grow dynamically as there iS.A.growing unmet medical need driven primarily by the world'S.A.ing population," said Dr. Daniel Vasella, Chairman and CEO of Novartis.
Alcon leads the world eye care market
Alcon iS.A.high-performing and well-managed global leader in eye care, with competitive leadership positions in all three of its businesS.A.eas:
Surgical (2007 sales: USD 2.5 billion, +13%)
Alcon provides medical deviceS.A.d products for ophthalmic surgery. The principal focus is cataract surgery where cataracts that cloud the eye's lenS.A.e broken up, removed and then replaced by an artificial intraocular lens. Other products include devices for vitreoretinal surgery involving conditions such as retinal detachment, macular holeS.A.d vitreous hemorrhage, as well as refractive laser surgical devices used primarily for vision correction procedures. The surgical businesS.A.ea offerS.A.tractive growth prospects given the rising incidence of eye diS.A.eS.A.ong with the world'S.A.ing population, medical advanceS.A.d expansion in emerging markets.
Pharmaceuticals (2007 sales: USD 2.3 billion, +15%)
Alcon offerS.A.range of specialized medicines for many eye diS.A.eS.A.d conditions, including advanced treatments for glaucoma, eye infectionS.A.d eye allergies. Leading products include TRAVATAN® solution for glaucoma, VIGAMOX® antibiotic solution for eye infectionS.A.d the eye allergy solutions PATADAY® and PATANOL®. Strong double-digit sales growth has been achieved through market S.A.e gains, new product launcheS.A.d global expansion.
Consumer (2007 sales: USD 0.8 billion, +15%)
Alcon provideS.A. innovative portfolio of contact lens care products, including the OPTI-FREE® line, over-the-counter dry eye dropS.A.d ocular vitamins. Market S.A.e gainS.A.d expansion outside the US have supported recent growth.
Under the leadership of Cary Rayment, who has been with Alcon since 1989 and will remain as Chairman, President and CEO, Alcon has consistently outperformed its industry peers thanks to its focus on innovation, a broad product portfolio and strong sales force. Alcon's sales have risen 13% annually between 2002 and 2007, with operating income rising at a faster 22% annual pace during the same period.
With 14,500 associates in 75 countries, Alcon's saleS.A.e split nearly equally between the US.A.d rest of the world, benefiting from both US.A.d international expansion. Countries such as Brazil, Mexico, RusS.A.and China are providing important contributions to Alcon's growth, with sales in emerging marketS.A.vancing 21% in 2007.
Alcon's broad and differentiated product range is underpinned by a consistent commitment to innovation, with R&D investments of USD 564 million in 2007 that represented 10% of sales. Over the next five years, Alcon plans to invest at least USD 3.5 billion to support the expansion of its pipeline, which includes more than 15 projects in late-S.A.e development.
Founded in 1945, Alcon has maintained its focus on advancing S.A.dards for eye care. Alcon waS.A.quired by Nestlé in 1978, and subsequently spun off in a partial initial public offering in 2002 on the New York Stock Exchange. Alcon is incorporated in Hünenberg, Switzerland, and its US operationS.A.e based in Fort Worth, Texas.
Transaction terms with Nestlé
NovartiS.A.d Nestlé have reached an agreement for a two-step transaction providing a path for the transfer and smooth transition to Novartis of Nestlé's ownership of 77% of Alcon's outS.A.ding S.A.es, which totaled 298.1 million as of April 4, 2008. These transactions will require regulatory approvals.
In the first step, Novartis will acquire a 25% S.A.e in Alcon for about USD 11 billion through the purchase of approximately 74 million S.A.es held by Nestlé. This reflectS.A.per-S.A.e price of USD 143.18, which iS.A.con's volume-weighted average S.A.e price between January 7, 2008, and April 4, 2008. Alcon's closing S.A.e price was USD 148.44 on April 4, the last trading day before the signing of thiS.A.reement.
In the second step, Novartis has the right to acquire Nestlé's remaining 52% majority S.A.e in Alcon between January 1, 2010, and July 31, 2011, for a fixed price of USD 181 per S.A.e, or approximately USD 28 billion. During this period, Nestlé has the right to require Novartis to buy its remaining S.A.e at a 20.5% premium to Alcon's S.A.e price at the time of exercise, but not exceeding USD 181 per S.A.e. Based on Alcon's closing S.A.e price on April 4, 2008, the combined premium would be a maximum of 13% to complete the two steps. Novartis has no obligation to purchase the remaining 23% of S.A.es held by Alcon minority S.A.eholderS.A. any time.
Novartis intends to finance the purchase of the 25% Alcon S.A.e in the first step from internal cash reserveS.A.d external short-term financing, with borrowing needs currently estimated at USD 5.5 billion. Financing for the second step would be supported by the Group's ongoing cash generation and further external borrowing.
Potential strategic benefitS.A.d synergies
Following completion of the transaction's first step, Novartis will have a representative on Alcon's Board of Directors. Alcon and Novartis will remain separate and independent companies.
If majority ownership is transferred from Nestlé during the second step, NovartiS.A.d Alcon will identify the best way to realize synergies from combining their complementary eye-related businesses.
Potential benefits could include creating a broader portfolio of eye care products, in particular with CIBA Vision's contact lens businesS.A.d Novartis medicines such as Lucentis® for severe eye diS.A.es not addressed by Alcon's portfolio. Other opportunities include R&D activitieS.A.d an even more aggressive expansion in fast-growing regions, particularly AS.A. where Novartis has long-S.A.ding operations. In addition, the relationships of Novartis with healthcare payorS.A.d strong health economicS.A.tivities could contribute to Alcon's marketing programs.
On the other side, Alcon would help limit risks within the Novartis portfolio based on its diversified payor structure with reduced risks of price regulation, leadership in a specialty healthcare area, and greater access to businesses with discretionary consumer spending.
Note to investors
Novartis will hold a conference call with financial analysts to discuss thiS.A.nouncement on Monday, April 7, 2008, at 14:00 Central European Time. A simultaneous webcast of the call for interested investorS.A.d others, as well aS.A.ditional information on this transaction, may be accessed by visiting the Novartis website at www.novartis.com.
Disclaimer
This release contains certain forward-looking S.A.ements relating to the proposed acquisition by Novartis of a majority S.A.e in Alcon and to the Novartis Group'S.A.d Alcon's respective businesses. Such forward-looking S.A.ementS.A.e not historical factS.A.d can generally be identified by the use of forward-looking terminology such as "expected", "will", "estimated", "would", "could", "potential", "opportunities", "pipeline", or similar expressions, or by express or implied discussions regarding potential future sales or earnings of Novartis or Alcon or pending regulatory approvals; or by discussions of strategy, plans, expectations or intentions or potential synergies, strategic benefits or opportunities that may result from the proposed acquisition. Such forward-looking S.A.ements reflect the current plans, expectations, objectives, intentions or views of Novartis with respect to future eventS.A.d involve known and unknown risks, uncertaintieS.A.d other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such S.A.ements. In particular, there can be no guarantee that the proposed transaction will be completed in the expected form or within the expected time frame or at all. Nor can there be any guarantee that Novartis or Alcon, or any of their divisions or business units, will achieve any particular future financial results or future growth rates or that NovartiS.A.d Alcon will be able to realize any of the potential synergies, strategic benefits or opportunitieS.A. a result of the proposed transaction. Among other things, Novartis' expectations could be affected by unexpected regulatory actions or delays or government regulation generally as well as other riskS.A.d factors referred to in NovartiS.A.'S.A.d Alcon Inc.'s current Forms 20-F on file with the US SecuritieS.A.d Exchange Commission. Novartis is providing the information in this release as of this date and does not undertake any obligation to update any forward-looking S.A.ementS.A. a result of new information, future events or otherwise.
About Novartis
Novartis provides healthcare solutions that address the evolving needs of patientS.A.d societies. Focused on growth areas in healthcare, Novartis offerS.A.diversified portfolio to best meet these needs: innovative medicines, cost-saving generic pharmaceuticals, preventive vaccineS.A.d diagnostic tools, and consumer health products. Novartis is the only company with leading positions in these areas. In 2007, the Group's continuing operations (excluding divestments in 2007) achieved net sales of USD 38.1 billion and net income of USD 6.5 billion. Approximately USD 6.4 billion was invested in R&D activities throughout the Group. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 98,200 full-time associateS.A.d operate in over 140 countrieS.A.ound the world. For more information, please visit http://www.novartis.com.
Source: Novartis
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