Novartis AG Taps Former Hospira CEO to Rescue Alcon

January 27, 2016
By Alex Keown, BioSpace.com Breaking News Staff

BASEL, Switzerland -- Novartis has tapped former Hospira executive Michael Ball to help turn its Alcon eye division around after the company again fell short of earnings expectations, Reuters reported Wednesday.

Ball, who served as chief executive officer of Illinois-based Hospira, was one of the chief architects of that company’s $17 billion deal with Pfizer last year. Ball succeeds Alcon ’s Jeff George, who Novartis said “decided to leave the company” in its latest earnings statement. Ball takes over at Alcon, which has been hurt by poor surgical equipment sales, slower than anticipated growth of its intraocular lens business, as well as patent expirations on its drugs. Novartis Chief Executive Officer Joe Jimenez also told Reuters that Alcon was hurt by a reduction in spending on training and education for surgeons, which undermined customer loyalty. Reuters added that Ball, who earned some $90 million off the Hospira acquisition, “is getting an extra $200 million from Jimenez this year to boost marketing including direct-to-consumer ads.” Swiss-based Novartis acquired Alcon in 2010 for $51.6 billion.

Novartis said it plans to grow Alcon’s business by focusing on its “core surgical and vision care business.” The company said it plans to shift Alcon’s pharmaceutical products, which generated $3.8 billion in revenue in 2015, to Novartis’s pharmaceutical division.

“This will simplify our ophthalmic medicines business, leverage Alcon's strong brand with pharmaceuticals development and marketing capabilities, and help us accelerate innovation and growth in eye care,” the company said in its statement.

Shares of Novartis are down about 4 percent in trading following the earnings release, which included a prediction of a slow 2016 as the company faces $3 billion in patent expirations, including blood-cancer treatment Gleevec. Novartis is also coming off missed forecasts for three straight quarters, which prompted analysts to tell Reuters the outlook for 2016 is dismal, when it comes to Novartis. The company reported its fourth-quarter core net income fell 5 percent to $2.707 billion, lower than analysts’ expectations, Reuters said.

When Ball takes over Alcon, he will have a full plate, as the company moves forward with a new cataract surgery delivery system. The U.S. Food and Drug Administration approved a pre-loaded intraocular lens delivery system, which combines the control of a manually loaded device “with the safety and convenience of a disposable, pre-loaded injector to optimize the implantation of the AcrySof IQ Aspheric IOL into the cataract patient's eye,” Alcon said in a statement. Alcon said the design of the new delivery system creates a less invasive corneal incision during cataract surgery. There are approximately four million cataract surgeries performed each year in the United States.

Last year, Alcon struck a deal with Google to develop “smart contact lens” capable of monitoring glucose levels in diabetes patients. The technology may also have the ability to automatically adjust to some vision problems.

While those are positives that Ball will get to work with, there are some negatives as well. In addition to the poor sales, Ball will have to deal with a $110 million gender discrimination lawsuit suit filed by two former employees who alleged the company fosters a “boys club” attitude that is hostile to women. The two plaintiffs, Elyse Dickerson and Susan Orr, say the company specifically violated Title VII of the Civil Rights Act of 1964, which prohibits gender discrimination by employers, and the U.S. Equal Pay Act. Both charge they were paid less than their male counterparts and that the company created a boy’s club atmosphere that created a hostile environment for female employees. The plaintiffs say women make up less than 15 percent of leadership positions at Alcon.