Stronger together: Novartis and Alcon creating the global leader in eye care
Expansion in emerging countries has been a strategic priority at Alcon as well as Novartis in recent years. Sales in emerging markets surged 21.3% in 2010, accounting for 20% of Alcon’s worldwide sales.
“When we enter a market, we begin with surgical equipment to address the critical medical need,” Mr. Buehler says. “In many countries it is also faster to get a device approved than a pharmaceutical product. When you are selling capital equipment, you obviously have to have local technical service capability. You can’t send the machine back to the United States to adjust a setting for technical service. From there we build other products and disposables – including intraocular lenses – around the surgical equipment.”
If there is a commercial opportunity, contact lenses and lens care also are approved as devices and are introduced before pharmaceuticals. Some pharmaceutical products are used in a surgical setting but others, including glaucoma treatments, are used by physicians in the office setting. Regulatory applications are usually submitted parallel with introduction of other product groups but reach the market last because of the time required for regulatory reviews.
“We have the surgical base, as well as equipment sales and technical service capabilities, in place in all major emerging markets,” Mr. Buehler says. “That is our core platform.”
Still, countries such as Russia, Brazil and China rely on earlier generation technologies by contrast to advanced systems popular in Europe and North America. Broadening its product offerings in 2007, Alcon introduced the Laureate system for cataract surgery, a more compact phacoemulsification system with a lower per-procedure cost earmarked for surgeons in emerging markets to improve clinical results for their patients.
In developed markets such as the United States, phacoemulsification systems based on ultrasound technology and foldable intraocular lenses account for more than 90% of cataract replacement procedures. In India, by contrast, penetration of phacoemulsification systems is currently about 30%. “Our challenge is to educate physicians and payors about the value of our more advanced technology,” Mr. Buehler says.
In a letter to shareholders, Novartis Chairman Daniel Vasella predicted that the integration of the new Alcon Division would be completed within six months after formal closing of the merger transaction. Dr. Vasella added that the merger would unlock annual cost synergies estimated at USD 300 million by 2014.
The Alcon integration will proceed on two fronts: first, the combination of Alcon, CIBA Vision, and Novartis Ophthalmics products and, concurrently, the integration of Alcon into Novartis “When you think about the integration with CIBA Vision, there is no overlap with the Surgical business and very limited overlap with Pharmaceuticals. I don’t expect this to be difficult,” Mr. Jimenez says.
Sales forces will remain specialized and dedicated to each business segment. Yet greater scale as a single business will allow the new Alcon to improve service to customers, particularly in markets where parts of existing portfolios have low sales volume. CIBA Vision products, for example, can benefit from Alcon’s direct sales force in markets previously served by third-party distributors. In the short-term, customers should expect no change in daily business interactions, as ordering, sales force and customer service systems will remain in place.
Just as other Novartis divisions, senior management of the Alcon Division will benefit from focus on a specific sector of healthcare and that focus traditionally has translated into premium growth rates. In addition, the integration of CIBA Vision into Alcon created an opportunity to streamline decision making in the former Consumer Health Division for OTC and Animal Health which, along with Alcon, also will report directly to Mr. Jimenez.
“We need the ideas, passion and commitment of associates as we build the new Alcon,” Mr. Jimenez adds. “At the same time, there will be unique career opportunities to grow and develop with the division. We have the unique ability to address unmet needs and help improve the lives of patients and consumers around the world.”
These materials contain forward-looking statements that can be identified by terminology such as "will," "to be issued," "will continue," "expected," "committed," "would," or similar expressions, or by express or implied discussions regarding potential future sales or earnings of the Novartis Group or any of its divisions; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements. Such forward-looking statements reflect the current views of the Group regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. There can be no guarantee that the Novartis Group, or any of its divisions will achieve any particular financial results. In particular, management's expectations could be affected by, among other things, unexpected regulatory actions or delays or government regulation generally; unexpected clinical trial results, including additional analyses of existing clinical data or unexpected new clinical data; the Group's ability to obtain or maintain patent or other proprietary intellectual property protection; disruptions from the integration of Alcon making it more difficult to maintain business and operational relationships, and relationships with key employees; unexpected product manufacturing issues; uncertainties regarding actual or potential legal proceedings, including, among others, litigation seeking to prevent the merger from taking place, product liability litigation, litigation regarding sales and marketing practices, government investigations and intellectual property disputes; competition in general; government, industry, and general public pricing and other political pressures; uncertainties regarding the after-effects of the recent global financial and economic crisis; uncertainties regarding future global exchange rates and uncertainties regarding future demand for our products; uncertainties involved in the development of new eye care products; the impact that the foregoing factors could have on the values attributed to the Group's assets and liabilities as recorded in the Group's consolidated balance sheet; and other risks and factors referred to in Novartis AG's current Form 20-F on file with the US Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. Novartis is providing the information in these materials as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.