Planned Spin-Off Will Allow Alcon to Better Focus on Growth Strategies, CEO Endicott Says


David Endicott.

FORT WORTH, Texas—The “new” Alcon that emerges from a planned spin-off from Novartis (NYSE: NVS) in the first half of 2019 will look much like “a $7 billion start-up” with a rapt focus on innovation and R&D as it attempts to address ongoing changes in the delivery of eyecare, chief executive officer David Endicott said this week at the company’s Innovation for Better Vision session. “We’re pretty excited about what this means for us,” Endicott told the media during the session at the Alcon Experience Center here. “We think about this as, ‘What a cool idea,’ and we have $7 billion [in annual revenue] to work with and 20,000 employees, and we want to revisit how we grew up…. We like to call ourselves the $7 billion start-up.”

He noted that, with the right approach, Alcon can change the way it addresses business processes, efficiency and productivity and even the way it interacts with the eyecare community as it attempts to address some recent missteps.

Endicott acknowledged that Alcon “drifted away” from some things that had made the company successful and valued by ECPs and customers in terms of service levels. “I would say the low point for us was probably the end of 2015 or early 2016,” Endicott said in response to a question. “The organization made some choices around financial metrics, things like cash flow and working capital, which involves inventory and involves the ability to [speedily] get products to people. … We probably let some folks down in those periods of time, but we’ve spent a lot of time in the last two years reworking most of those issues, getting levels back up and getting service restored.”

Among the steps Alcon has taken are efforts to simplify its ordering systems, adding additional field service representatives and transitioning to e-commerce platforms, Endicott said. Order accuracy is now back up to 99.5 percent levels and the company is working diligently on improving the invoicing process and the ordering and delivery experience, he noted.

In addition, Endicott said Alcon is in the midst of changing from what was “largely a pharmaceutical-dominant eyecare business to much more of a device-oriented company.” Alcon has more than 100 projects in development that “all kind of arrived secretly in the last two years” as the company worked to prepare for the spin-off from Novartis. Alcon has invested in projects of its own as well as moving to acquire “external ideas.” Some of the projects are in early development and others are a “lot further along the way,” he said.

Novartis announced in June its intention to spin-off its Alcon business, as VMAIL reported, and then earlier this week noted that the new independent Alcon will locate its global headquarters in Geneva, Switzerland, as VMAIL reported. A spokesman told VMAIL that the company “doesn’t expect any changes” in its presence in the Fort Worth location following the opening of the global headquarters in Geneva.

Endicott also noted that Alcon was pleased to host the media group at its Fort Worth offices “partly because it’s our home and partly because we have a lot of cool stuff here.”

Two other items at the top of the new Alcon’s to-do list are assembling a new board of directors and building a back-office organization to handle the corporate functions Novartis has been responsible for managing as Alcon’s parent company, Endicott said.

Among the key benefits of the planned spin-off, Endicott said are that it will provide Alcon with more flexibility to pursue its own growth strategies and to align the business with the needs of a nimble, medical devices-focused company. The move will be a win-win for customers and patients, he said, and will allow Alcon to better focus on next-generation eyecare devices and technologies.

“We’re excited about the opportunity to be independent again, but we’re mostly excited about our ability to get back in connection, and in a very direct way, with the optometrists and ophthalmologists … and all of the folks that do the heavy lifting out there,” he said. Alcon has “tremendous leverage” to apply in the quest for innovation and advancing products in eyecare, he said.

The expected terms of the spin-off are akin to a “dividend” payout, with Novartis shareholders receiving an ownership stake in the new Alcon on “day one” of Alcon’s emergence as a separate entity. The calculation of shareholders’ ownership stakes “is still being worked out,” Endicott explained. “Fundamentally, it’s the same shareholder base on the day before the spin that will own the two companies separately on the day after,” he said.

Alcon region president Sergio Duplan told attendees in his opening remarks that the company has a simple and straightforward mission. “We just want to help people see better. That’s what motivates us.” Driving this mission, he said, are three pillars: innovation that helps people see better, partnerships with eyecare professionals and customers, and employing the best people.

“We’ve gone through many stages [and] now we have a very exciting time coming,” he added. “We believe [the potential spin-off from Novartis] is very exciting not only for Alcon, but really for all of eyecare in the U.S. and around the world.”