Alcon Reports Third-Quarter Sales Increase and Announces Plan for ‘Multi-Year Transformation Program’

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GENEVA—Alcon (SIX/NYSE:ALC) reported third-quarter financial results showing a 6 percent sales increase (at constant currency) for the period ended Sept. 30 and also announced a plan for “a multi-year transformation program” designed to reorganize and reinvest savings into “strategic growth initiatives supporting long-term financial goals.” The company also noted its successful recent U.S. launches of PanOptix and Precision1 contact lenses. For the third quarter, worldwide sales rose 4 percent on a reported basis to $1.8 billion.

"We reported another good quarter, delivering solid top-line and core operating income growth as a result of our increased focus and disciplined execution," chief executive officer David Endicott said in the announcement. "Our recent launches of Precision1 and PanOptix are off to a strong start, as customers show significant interest in these key products. We also closed on a successful multi-tranche bond offering that refinanced shorter-term debt into a long-term capital structure.”

In terms of the planned organizational realignment, Endicott said the program will “further simplify and streamline our processes, accelerate innovation and strengthen our commercial position.” The program is expected to cost about $300 million, and eventually produce annualized cost savings of $200 to $225 million by 2023. “We will reinvest these savings to support new product development and launches,” Endicott added. “We expect this will drive top line growth, deliver the operating leverage described in our long term objectives and ultimately create significant value for our customers, patients and shareholders.”

On a conference call with analysts, Endicott said, “We’ve always said that we had the right amount of costs, but they weren’t necessarily in the right places.” He noted that the company sees opportunities to “eliminate bureaucratic layers that had built up” under its previous ownership model, and that it intends to streamline its international commercial model and back-office functions.

In the third quarter, Alcon said sales growth was driven by four key growth platforms within the surgical and vision care segments: AT-IOLs, Vitreoretinal, Dailies Total1 contact lens and Systane Complete eye drops. For the nine-month period, worldwide sales totaled $5.5 billion, up 2 percent (5 percent on a constant currency basis) compared with the year-ago period.

Vision care represented 45 percent of overall worldwide sales ($0.8 billion), with contact lenses accounting for 63 percent ($518 million) of the vision care total. Alcon noted that Dailies Total1 achieved double-digit growth in the third quarter.

On the bottom line, Alcon said the third-quarter operating loss was $18 million, which includes charges of $258 million from the amortization of certain intangible assets and $77 million of separation costs. Excluding these and other adjustments, third-quarter core operating income was $320 million, with an operating margin of 17.4 percent. The operating margin increased by 40 basis points compared with the year-ago period.

The company’s net loss was $66 million in the quarter, which compared with $207 million a year earlier. In addition, Alcon said it expects worldwide sales this year to increase in a range of 4 percent to 5 percent on a constant currency basis, while the company incurs $500 million in separation costs. Its earlier forecast projected 2019 sales growth in the range of 3 percent to 5 percent and $300 million in separation costs, with some of the increase due to IT systems.