Novartis Updates Long-Term Strategy

Novartis presented an update on its long-term strategy, performance, and growth outlook last week, which revealed that the company is on track to deliver the strategic priorities it had set out in 2010. Some highlights during the last 18 months include achieving double-digit sales growth through new products and the integration of Alcon, the eye-care company, which Novartis acquired earlier this year. In addition, Novartis achieved double-digit sales growth in emerging markets, and obtained 17 regulatory approvals (including new indications for existing products) in the United States and Europe in its pharmaceutical division.

Alcon is a key part of the company’s growth platform. “Alcon is enhancing future prospects for Novartis—it brings to us a fast growing business in the eye-care segment. This transaction was about long-term growth and not just cost synergies,” said Joseph Jimenez, CEO of Novartis, in a Sept. 13, 2011, press release. “We believe that Alcon has significant growth potential by leveraging the Novartis expertise in research, market access, and reimbursement, among others.”

Novartis expects that Alcon will achieve high-single to low-double-digit sales growth. Part of that growth involves increasing its share in certain pharmaceutical-based eye-care segments, particularly dry eye and glaucoma outside the US, and further market and brand development in key emerging markets. The company also is exploring new treatments for glaucoma and macular degeneration. Despite competitive glaucoma product patent expirations, Novartis said that it expects that Alcon’s current glaucoma portfolio, including benzalkonium chloride-free formulations of ophthalmic solutions Travatan and DuoTrav, along with the ophthalmic suspension Azarga and a new combination product, will achieve sales growth during the next five years in the low-single-digit range. The company also expects to achieve annual cost synergies of $350 million by 2013.

In terms of new products, the company had 11 regulatory approvals in 2010, six in the first half of 2011, and eight regulatory filings in the first half of 2011. In the first half of 2011, sales growth from recently launched products increased 47% compared to the year-ago period.

In terms of its productivity initiative, which includes changes in manufacturing, the company achieved more than $1.2 billion companywide in savings in the first half of 2011 and expects to exceed the $1.9 billion in savings from 2010. During the last 18 months, Novartis has achieved more than $1.6 billion in savings from procurement. The company also is progressing with reducing excess manufacturing sites, with 10 locations having been reduced or which are being divested, exited, or in which operations are being reduced.

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