ZURICH (Reuters) - Novartis (NOVN.S) eyecare unit Alcon is counting on a nearsightedness epidemic to help to drive growth and profitability as a growing number of people damage their eyes by spending less time outdoors and more on mobile devices.
By 2050 half the world, about 5 billion people, will suffer from myopia and struggle to see things in the distance, Alcon’s incoming Chief Executive David Endicott told analysts and investors at a capital markets day in New York on Tuesday.
Endicott is preparing the unit to be spun off to Novartis shareholders in early 2019, when it will become a separate listed company and is eventually expected to join Switzerland’s benchmark Swiss Market Index, joining the likes of food giant Nestle (NESN.S) and drugmaker Roche (ROG.S) among the nation’s biggest listed companies.
Myopia linked to rising screen time creates opportunities for Alcon’s contact lenses or surgical lasers, Endicott said, as do megatrends such as cataract-plagued baby boomers who need intraocular lenses and eye disorders related to diabetes and emerging markets’ burgeoning middle classes.
“We believe we’re positioned to grow in the mid-single-digits compounded through 2023,” said Endicott, who is also targeting core operating margins near the mid-20 percent range by then, up from the high teens now.
He said that Alcon is optimistic that trends of an ageing population and lifestyle-related eye conditions play in the company’s favor over the long term.
Alcon, with $6.8 billion in sales last year, is being jettisoned from the Novartis portfolio as Chief Executive Vas Narasimhan focuses on new drugs rather than the surgical devices and contact lenses Alcon makes.
The business could be valued between $20 billion and $30 billion when it us spun off, Novartis officials have said.
Sales at Alcon, whose biggest competitors include Johnson & Johnson (JNJ.N) and Bausch + Lomb, returned to growth in 2017 after Novartis was forced to invest heavily in sales and service staff to arrest revenue declines and customer dissatisfaction.
The eyecare company will be headquartered in the Swiss city of Geneva, with shares listed in both Switzerland and New York. It aims to pay a dividend from 2020, amounting to 10 percent of 2019 core net income.
Nearly a decade ago, Novartis bought Alcon in a series of transactions totaling $52 billion as its ex-chairman, Daniel Vasella, sought to build the drugmaker into a European healthcare giant along the lines of Johnson & Johnson.
Alcon no longer includes prescription eye drugs that came with the original acquisition. Novartis has shifted those into its main drugs division.
Endicott said that Alcon does not plan to challenge its former owner on that turf once the companies have separated.
“In the near-term, we don’t have any intent to get back into the pharmaceuticals business, other than what we’re already doing in the surgical space with some adjacencies we have there,” he said.
“We’ve got a lot going on right now in devices and think there’s a lot of opportunity there.”
Editing by David Goodman