ZURICH (Reuters) - Sales growth at Alcon, Novartis’s (NOVN.S) struggling eye care unit, accelerated in the second quarter, boosting options for the business including a possible sale, Chief Executive Joe Jimenez said on Tuesday.
Alcon sales rose 1 percent to $1.5 billion, including intraocular lenses sales that grew for the first time in the second quarter since 2014. Spending to promote products with eye surgeons resulted in a $19 million operating loss.
Novartis has been reviewing the future ownership of Alcon, with an update slated for this year. All options are under consideration, Jimenez said on Tuesday, including a possible IPO that he has suggested could value Alcon at $25 billion to $35 billion.
“It just increases the options we have,” Jimenez told reporters on a call. “It makes a capital markets exit a possibility, because you’ve got a growing business with presumably over time margins that are going to grow.”
The shares traded 0.5 percent higher at 1400 GMT.
Novartis lifted Alcon’s full-year sales outlook slightly and now expects revenue to rise by a low single-digit percentage rate. It previously forecast revenue to remain stable or to rise by a low-single digit percentage.
“Although Alcon profits continued to decline, this is now moderating and showing signs that the company have it under control,” Deutsche Bank analyst Tim Race said.
For all of Novartis, second-quarter core net income fell 2 percent to $2.87 billion, but beat the average analyst forecast of $2.668 billion in a Reuters poll. Sales fell 2 percent to $12.242 billion, hurt by declining revenue from blood cancer drug Gleevec.
Jimenez underscored plans to return Novartis to growth in 2018, as newer drugs including heart failure medicine Entresto, psoriasis treatment Cosentyx and breast cancer medicine Kisqali make up for generic competition now eating into Gleevec sales.
Cosentyx sales rose 90 percent to $490 million, while Entresto more than doubled to $110 million and remained on track to hit $500 million in 2017.
Even so, U.S. pricing headwinds are working against Novartis’s Sandoz generics division, whose sales fell 5 percent to $2.5 billion. Fierce competition will continue, Jimenez said, predicting further price erosion.
“Sandoz was soft,” Bernstein analyst Timothy Anderson said. “Volume growth was anemic, and overwhelmed by steady price erosion.”
Analysts now hope Sandoz’s launch of biosimilars - knockoff versions of Roche’s (ROG.S) blockbuster Rituxan and Amgen’s (AMGN.O) Enbrel won approval in June - will help but Jimenez tempered expectations. He remains uncertain how quickly these cheaper drugs will poach patients from name-brand rivals.
“We really don’t know yet what the market reaction will be,” he said. “This will be a slow burn, you shouldn’t see a big spike in it...but nice steady growth.”
Scrutiny continues over business practices at Novartis, which was fined $49 million over kickbacks in South Korea this year. In the second quarter, Alcon was hit with a subpoena by the U.S. Department of Justice and Securities and Exchange Commission regarding activities in Russia and Asia.
“It had to do with sales practices,” Jimenez said. “We had done an investigation a couple of years ago, based on some aggressive sales practices, we took action in terms of changing certain leaders in that part of the world. We’re cooperating fully with the investigation, and we’re able to show them what we found.”
Reporting by John Miller; editing by Susan Thomas