(Reuters) — Long-suffering Novartis (NYSE:NVS) unit Alcon‘s sales growth accelerated in the second quarter, boosting options for the business including a possible disposal, CEO Joe Jimenez said today.
The eye care subsidiary’s sales rose 1% to $1.5 billion, including intraocular lens revenues, which grew for the first time in the second quarter since 2014. Spending continued to promote products with eye surgeons, resulting in a $19 million operating loss.
Novartis has been reviewing Alcon for a possible disposal, with an update slated for this year. All options are under consideration, Jimenez reiterated today, including a possible initial public offering 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 opened 1.1% higher in Zurich.
Novartis boosted 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% to $2.87 billion, but beat the average analyst forecast of $2.67 billion in a Reuters poll. Sales fell 2% to $12.24 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% to $490 million, while Entresto more than doubled to $110 million and remained on track to hit $500 million this year.
Even so, U.S. pricing headwinds are working against Novartis’s Sandoz generics division, whose sales fell 5% to $2.5 billion. Fierce competition will continue, Jimenez said, predicting further mid-to-high-single-digit price erosion.
“Sandoz was soft,” Bernstein analyst Timothy Anderson said. “Volume growth was anaemic, and overwhelmed by steady price erosion.”
Analysts now hope Sandoz’s launch of biosimilars – knockoff versions of Roche’s blockbuster Rituxan and Amgen’s 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.”
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