Novartis to spin off Alcon and launch a $5 billion share buyback

Posted on June 29, 2018

Novartis (NYSE:NVS) is back to focusing on being a drug company as they've decided to spin off Alcon and launch a $5 billion share buyback. This announcement comes after years of speculation that Novartis would part ways with Alcon and investors welcomed the news with the stock up ~4% in early trading.

"We continue to execute our strategy to focus Novartis as a leading medicines company. Alcon has returned to a position of strength and it is time to give the business more flexibility to pursue its own growth strategy as the world's leading eye care devices company. We will work to ensure a smooth transition for Alcon and Novartis associates while preparing for the launch of RTH258 and building our leading ophthalmology pharmaceuticals business," Dr. Narasimhan said in prepared remarks.

The $5 billion in share buyback will be largely funded through the proceeds of the divestment to GSK of the consumer health joint venture stake, net of the AveXis acquisition payments. This program will be executed by the end of 2019. 

"The share buyback is fully aligned with our strategic capital allocation priorities, reflects our strict financial discipline and our confidence in future top line growth and margin expansion," Dr. Narasimhan added.

Effective July 1, 2018, Mike Ball will become Chairman-designate of Alcon, reporting to Vas Narasimhan, CEO of Novartis. 

Mike Ball's initial duties will focus on preparing for the spin off and recruiting a Board of Directors for Alcon. 

"This promises to be the beginning of an exciting new chapter for everyone associated with Alcon. The planned spinoff will be key to strengthening our leadership in the large, attractive and growing global eye care devices market. As Chairman-designate, I look forward to working closely with David Endicott and the entire team at Alcon to deliver continued innovation for our customers and patients, while creating shareholder value through long-term, sustainable growth," Ball said in prepared remarks.