Will Novartis’s Alcon Revenues Fall Further in 1Q16?
Why Are Novartis’s 1Q16 Revenues Expected to Fall?
Alcon
Alcon, the eye care segment of Novartis (NVS), researches, develops, manufactures, and markets eye care products in over 180 countries worldwide. The business is divided into three sub-segments including surgical, vision care, and ophthalmic pharmaceuticals.
Analysts expect 1Q16 revenues for Alcon to decline due to lower equipment sales in the surgical franchise, lower sales in contact lens products in the vision care franchise, and lower sales of ophthalmic pharmaceuticals due to generic competition.
Surgical sales
Global surgical sales have fallen due to equipment sales, particularly for LenSx technology in Asia and the US in recent quarters. Also, the sales of intraocular lenses (or IOLs) have been impacted by the volume decline in ReSTOR multifocal lenses as well as competition in mono-focal lenses. This supports analysts’ estimate of declining revenues for 1Q16. However, the surgical franchise has noticed continued uptake of cataract and vitreoretinal consumables.
Vision care
The global sales of vision care products have shown a declining trend due to the continued market shift of consumers to daily disposable lenses, thereby affecting sales of contact lens care products. This is substantially offsetting the growth and continued uptake for Dailies Total1, AirOptix Colors, Dailies AquaComfort Plus Toric, and DACP multifocal products. The estimates show a declining revenue trend for 1Q16 for the vision care franchise.
Ophthalmic pharmaceuticals
The global sales of ophthalmic pharmaceuticals are driven by the continued performance of fixed-dose combination products in glaucoma sales including Azarga, DuoTrav, and Simbrinza, which are offset by generic competition in Travatan and Azopt monotherapies. Some of the expected growth contributors include Ilevro and Durezol from the infection and inflammation products of ophthalmic pharmaceuticals.
Overall, the 1Q16 revenues for Alcon are estimated to decline as the revenues from positive growth products will partially offset lower surgical and vision care sales.
Investors can consider ETFs like the Market Vectors Pharmaceutical ETF (PPH), which holds 7.3% of its total assets in Novartis, or the iShares Global Health Care ETF (IXJ), which holds 5.2% in Novartis, in order to divest company-specific risk. IXJ also holds 2.7% of its total assets in Medtronic (MDT), 4.8% of its total assets in Pfizer (PFE), and 7.7% of its total assets in Johnson & Johnson (JNJ).
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