In a bid to diversify its business away from traditional pharma, Novartis has bought a 25 percent stake in Alcon and is eyeing the purchase of another 52 percent in 2010. The Swiss drugmaker paid $11 billion for this first chunk of the Texas-based eye care business and has an option to buy the rest for $28 billion more.
CEO Daniel Vasella (photo)Â called Alcon an "excellent" strategic fit with Novartis, which makes contact lenses and ophthalmic drugs. The deal furthers his strategy of drilling into high-growth areas of the market, he said. "Eye care will continue to grow dynamically as there is a growing unmet medical need driven primarily by the world's aging population." Alcon makes eye drops, contact lens solutions, surgical equipment, and implantable lenses.
Analysts, however, said the deal wasn't a bargain and that it wouldn't deliver much to Novartis's bottom line, at least initially. It's a good strategic fit, a Landsbanki Kepler analyst told the Financial Times, "but they won't be able to reap much in synergies right away because they're only buying a minority stake." Meanwhile, Standard & Poor's lowered its long-term credit rating on Novartis because the company said it would go into debt to finance the second chunk of its Alcon purchase.
Alcon faces setback on experimental AMD therapy. Report
Cash-rich Novartis CEO mulls biotech buyouts. Report
Novartis plots 2,500 more job cuts. Report
CEO: Novartis plans big restructuring. Report