Asia ground zero for Alcon turnaround plans with China a focus


Novartis ($NVS) CEO Joe Jimenez changed management teams at troubled eye care unit Alcon this year and brought in former Hospira CEO Mike Ball, who said plans are afoot for a turnaround and specifically discussed the state-of-play in Asia.

On the July 19 earnings call, analysts zeroed in on Alcon with questions on weakness in sales of Intraocular lenses (IOLs) in Asia, a key market for the unit in countries such as China, India and Japan.

"So, with respect to Asia then--so we are in fact looking into this weakness," Ball said on the call.

"Preliminarily, what I think it is, is some issues with distributors both in China and India. We also though clearly are having issues from an ASP (average selling point) standpoint, which is impacting us. Now, we do have new management teams on the ground there since the end of last year, beginning of this year. So I expect that as we move through the year, we'll get some resolution in terms of what exactly is going on here and what exactly we can do about it."

The unit missed expectations in the second quarter, though Jimenez had warned there would be no quick fix as Ball took over from Jeff George on Feb. 1, with a focus on the Surgical and Vision Care business.

But the slow start led to questions that Ball parried with comments that suggested the unit may spend more to bring about a turnaround.

"With respect to Alcon, obviously, our number one objective here is to return the top line to growth," Ball said.

"To do that, as I've mentioned before, we need to make investments both in the marketing and sales and innovation side, which then necessarily impacts the bottom line. So ... over the longer term, our objective is to get back to this low 20s to mid 20s operating income. But in the interim, you're going to see a reduction in terms of operating income as we work towards getting this top line back on track."

In June of last year, two key Alcon executives in Asia left the firm, Roy Acosta, Asia & Russia region president, and Jim West, Asia & Russia chief financial officer, sparking a wider review of operations in the region.

- here's the Novartis financial report

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