日本経済新聞　2005/2/22

後発医薬品　ノバルティス１位に　米独２社を７９００億円で買収

　スイスの医薬品大手ノバルティスは２１日、ドイツの後発医薬品（ジェネリクス）２位のヘクサルを買収することで合意したと発表した。ヘクサルと提携関係にある米後発品大手イオン・ラブズも傘下に収める。両社の買収の結果、ノバルティスの後発品部門「サンド」は、後発品メーカーとしては世界最大手となる。
　非上場のヘクサルについては、すでに全株式の取得で合意。米ナスダックに上場のイオン・ラブズに関しては６７．７％の株式取得で合意した。残りのイオン・ラブズ株も公開買い付けで１００％子会社化を目指す。両社とも「サンド」に吸収する方針だ。
　イオン・ラブズ株式の６７．７％とヘクサル全株の買収費用は合計で５６億５千万ユーロ（約７９００億円）にのぼる。両社の吸収による相乗効果は年間２億ユーロと見込む。
　買収完了後の「サンド」は売上高５１億ドル、従業員２万人を超える規模となる。特許切れ後に低価格で医薬品を販売する後発品は、医療費の抑制が重要課題の先進国を中心に成長している。特にドイツを中心とした欧州での伸びが大きい。
　ノバルティスはスイスに本拠を置く世界的な製薬大手。旧チバ・ガイギーと旧サンドの合併で誕生した。２００３年からは旧社名の「サンド」を後発医薬品部門のブランド名として復活、同部門の拡充に力を入れている。

（毎日新聞）　後発品メーカーとしてはイスラエルのテバ・ファーマシューティカルを抜き世界最大手となる。

2005/2/21　Novartis

Novartis to acquire Hexal AG and Eon Labs, creating the world leader in generics
http://dominoext.novartis.com/NC/NCPRRE01.nsf/44aff02a639be034c1256b4b007b5f4d/4cd9e3c925ebe6f8c1256fae00802fdc?OpenDocument

Novartis announced today the strategic acquisition of two leading generic drug companies that will be integrated into its Sandoz division, creating the world leader in the generic drug industry.

Definitive agreements have been signed to acquire 100% of Hexal AG, the privately-held No. 2 generics company in Germany with a strong European presence, and a 67.7% stake (65.4% fully diluted) in Eon Labs, Inc. (NASDAQ: ELAB), a fast-growing US generics company that has a strategic partnership with Hexal AG, for a total of EUR 5.65 billion in cash. In addition, pursuant to a merger agreement unanimously approved by the Eon Board of Directors and the Special Committee of independent directors of the Eon Board, Novartis will launch a tender offer to acquire the remaining 31.9 million fully diluted shares (34.6%) in Eon Labs for USD 31.00 per share.

The acquisitions bring together three premier generics companies that combine Sandoz's global geographic presence and expertise in anti-infectives, Hexal's leadership in Germany and strong track record of successful product development, and Eon Labs' strong position in the US for "difficult-to-make" generics.

Sandoz, after the closing of these transactions, will be the global leader in generics with combined pro forma 2004 sales of USD 5.1 billion, a portfolio of over 600 active ingredients in more than 5,000 dosage forms and more than 20,000 employees.

Annual cost synergies totaling USD 200 million are anticipated within three years after closing, with 50% in the first 18 months. Synergies will be driven mainly by savings in production, especially in sourcing, lower processing costs and reduced Cost of Goods Sold (COGS) through vertical integration; Marketing & Sales through consolidation of back-office operations and distribution; Development through the streamlining of the project portfolio and less need for in-licensed products; and General & Administrative expenses due to the consolidation of administration and management structures. The strong growth outlook for Sandoz, which will create jobs, is expected to partially compensate for necessary reductions in the workforce.

"Generic drugs are crucial to meeting the health-care needs of patients in industrialized and developing countries as cost pressures continue to mount due to the ever-increasing demand of an aging population. As such, generic medicines are a critical complement to innovative medicines, freeing up resources and also providing an indirect stimulus to continued innovation. The acquisitions of Hexal AG and Eon Labs will significantly strengthen our geographic presence and product portfolio, our development and registration capabilities, and increase our scale to rapidly bring a broad array of generic products to patients. These acquisitions expand our medicine-based business portfolio, providing synergies with our branded medicines in dealing with large purchasers and in manufacturing. They underscore our commitment to being the industry leader in offering innovative prescription medicines, high-quality generics and self-medication products," said Dr. Daniel Vasella, Chairman and CEO of Novartis.

Dr. Andreas Rummelt, CEO of Sandoz, commented, "The combination of Sandoz with Hexal and Eon Labs offers an outstanding opportunity to capitalize on the unique strengths of each company. Together, we will create a highly competitive leader with a comprehensive global presence and the expertise necessary for success in the rapidly changing generics market."

Combination creates a fast-growing world leader in generics
The enlarged company will provide considerable scale and breadth. The new company will be No. 1 or No. 2 in major markets, particularly in the US and Germany, and will have a strong foothold in Asia (India, China and Japan) as well as Latin America.

Hexal is one of the fastest-growing European generics companies and provides a leading position in Germany, the second-largest generics market in the world. The acquisition will propel Sandoz into a leading position in most other European markets. In the past three years, Hexal has launched 121 products, including highly successful versions of the cholesterol-lowering drug simvastatin (ZocorR), and is preparing to launch the pain treatment fentanyl (DuragesicR) based on its proprietary transdermal patch drug-delivery technology.

In the US, the world's largest generics market, Novartis is acquiring control of Eon Labs, one of the fastest-growing generic pharmaceutical companies. Over the past three years alone, Eon Labs has produced 15 first-to-market launches and has positioned itself as the market share leader for nearly half of the products in its portfolio, which includes 67 molecules in 147 dosage strengths. Eon Labs currently has 27 ANDAs (Abbreviated New Drug Applications) pending before the US Food and Drug Administration (FDA) covering approximately USD 14.3 billion in annual branded prescription drug sales.
The combined pipeline covers nearly all of the major molecules predicted to lose patent protection during the next few years, representing an estimated USD 69 billion in US product sales between 2005 and 2009. In addition, Sandoz will have strong development and regulatory capabilities with high productivity and a goal of delivering more than 100 registration files annually. The larger scale will further increase penetration of the physician and pharmacist markets, which is particularly important as the new company plans 70 launches in the US and Germany alone in 2005.

Through this acquisition, Sandoz will also significantly strengthen its technology base, particularly in the application of transdermal patches, inhalation products, sustained-release implants and multi-particulate drug delivery dosage forms. Sandoz will also expand its strong capabilities in biopharmaceuticals. In addition, Sandoz will reinforce its vertical integration in active pharmaceutical ingredient manufacturing, which is often critical to gaining first-to-market status and offering high-quality generics products at a competitive price.

"This agreement with Novartis has been reached to secure the future of Hexal and its employees. We have reviewed all options in the interests of the employees and the family - an initial public offering (IPO), merger or sale. We decided that this option not only allows for what we have created to continue, but more importantly to keep developing with the capabilities and resources of an industry-leading company. This merger provides the best possible fit in the industry in terms of product, geography, technology and employee skills that will form the basis for the most competitive generics company. The combined company will be well-positioned for dynamic growth," said Dr. Thomas Strungmann, a co-founder and co-CEO of Hexal AG along with his twin brother, Dr. Andreas Strungmann.

Terms of the transactions with Hexal AG and Eon Labs
Novartis will undertake a series of transactions to acquire Hexal AG and control of Eon Labs, which will be funded by Group cash reserves:

・ Two separate definitive agreements to pay a total of EUR 5.65 billion in cash to acquire 100% of privately-held Hexal AG, which was founded in 1986 by the Strungmanns and is wholly owned by the brothers and their families, and to acquire 60 million shares of Eon Labs (67.7% of Eon Labs's share capital and 65.4% on a fully-diluted basis) from Santo Holding (Deutschland) AG, which is also owned by the Strungmanns and their families.
・ A definitive agreement by which Novartis will offer to acquire the remaining approximately 31.9 million fully diluted shares (treasury method) of Eon Labs for USD 31.00 per share in cash. The agreement, which has been unanimously approved by the Eon Labs Board of Directors and by a Special Committee consisting of directors not affiliated with the Strungmanns, provides that an affiliate of Novartis will commence a tender offer and will, subject to legal requirements, purchase any and all shares tendered, if the acquisition of the Santo Holdings stake is consummated. The offer price represents a 25% premium over the unaffected price of approximately USD 24.75 (before media speculation about a possible takeover of Hexal and Eon Labs) and a premium of 9% over the price paid to Santo Holding for its majority stake in Eon Labs. The agreement also provides that if a majority of the public shares are tendered, Novartis will effect a merger to acquire all remaining shares at the offer price.
The transactions, which are subject to regulatory approvals in a number of countries (including the US and Europe), are expected to close in the second half of 2005.

Highly experienced management team
Following the closing, the new Sandoz management team, under the leadership of
Dr. Andreas Rummelt as CEO, will include top management from all three companies. In the new company, Dr. Andreas Strungmann will be responsible for the regional operations in Europe, Africa and also for Asia-Pacific on an ad-interim basis. Dr. Thomas Strungmann will continue in the position of head of regional operations in Germany, the Americas and Middle East. Both will join the Sandoz Executive Committee. Other members of the Executive Committee will include Kevin Plummer as Chief Financial Officer, Dr. Gerhard Schaefer as head of Product Development and Markus Delfosse as head of Technical Operations. The Anti-Infectives business unit will be headed by Ernst Meijnders and Biopharmaceuticals by Dr. Patrick Vink. Dr. Bernhard Hampl, currently CEO of Eon Labs, has been designated as new head of the US operations of Sandoz and will report to Thomas Strungmann.

About Novartis
Novartis AG (NYSE: NVS) is a world leader in pharmaceuticals and consumer health. In 2004, the Group's businesses achieved sales of USD 28.2 billion and a net income of USD 5.8 billion. The Group invested approximately USD 4.2 billion in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ about 81,400 people and operate in over 140 countries around the world. Further information is available at www.novartis.com.

Sandoz, a Novartis Company, is a world leader in generic pharmaceuticals and develops, manufactures and markets these medicines as well as pharmaceutical and biotechnological active ingredients. Decades of experience and know-how make Sandoz a renowned partner in pharmaceuticals, biogenerics and industrial products. Altogether, Sandoz employs around 13,000 people in over 110 countries and posted sales of USD 3.0 billion in 2004.

About Hexal
Headquartered in Holzkirchen, Germany, Hexal is a privately-held generics manufacturer holding the No. 2 position in generics in Germany, the second largest generics market, and a significant presence in other key markets. Sustaining recent annual percentage sales growth rates in the high teens, Hexal achieved sales of USD 1.65 billion in 2004. Altogether, Hexal employs approximately 7,000 people in over 40 countries.

About Eon Labs
Eon Labs, one of the largest suppliers of generic pharmaceuticals in the US, is committed to providing high quality, affordable products. Eon Labs, which has a strategic partnership with Hexal AG, produces a broad range of pharmaceuticals in a wide variety of therapeutic categories. Eon Labs reported record 2004 sales of USD 431 million, an increase of 31% from 2003, and employs approximately 500 people. Drs. Andreas and Thomas Strungmann and their families hold a 67.7% stake in Eon Labs through a holding company.

2006/7/12 新華社

Swiss drug giant Novartis targets China vaccines sales

Swiss pharmaceutical giant Novartis AG announced in Beijing it would increase investment in vaccines research and production in China.

The company will join international manufacturers Glaxo Smith Kline and Sanofi Pasteur in competing for the booming Chinese vaccines market, said Wednesday's Beijing News.

China's vaccines market is expanding at a rate of 20 percent annually, with the market value expected to hit three billion yuan (375 million U.S. dollars) this year.

Novartis has just completed the purchase of U.S. vaccines maker Chiron Corp. at a cost of 5.1 billion dollars.

Novartis international business chairman Alexandre Sudarskis said in Beijing that the purchase of Chiron enabled Novartis to explore new fields in China and vaccines were the new focus.

Doctor Ni Xiangyang, head of Novartis' China section, said Novartis had decided to increase capital and technical input into research and production of new vaccines.

From next year, Novartis would introduce new products into China, including the high-efficiency flu and H5N1 avian influenza vaccines for human beings, Ni said.

2005/10/31　Novartis

Novartis announces agreement to acquire remaining stake in Chiron

Novartis announced today that it has entered into a definitive merger agreement with Chiron Corporation to acquire all of the remaining publicly held shares of Chiron it does not currently own. This transaction will strengthen Chiron's capabilities to better meet the needs of patients with high-quality vaccines and provide Novartis entry into this dynamic growth market.

"Our plan is to turn around the Chiron vaccines business, which will require investments in R&D and manufacturing to increase quality and capacity, so that we can better meet customer demand and address public health needs. Together with the dynamically growing diagnostics business, vaccines will form a new division, while biopharmaceuticals will be integrated into the existing pharmaceuticals business of Novartis," said Dr. Daniel Vasella, Chairman and CEO of Novartis.

Chiron, which has approximately 5,400 associates worldwide and is comprised of activities in vaccines, blood testing and biopharmaceuticals, had overall sales of USD 1.7 billion in 2004 and pro-forma net income of USD 152 million.

Chiron offers access to fast-growing vaccines and dynamic blood testing businesses
Novartis is gaining entry to the global vaccines market, which is expected to experience accelerating growth, more than doubling in sales in the next five years to over USD 20 billion in 2009 from about USD 9.6 billion in 2004, according to industry surveys.

Chiron is the world's fifth-largest vaccines business, currently offering more than 30 novel and conventional vaccines for adults and children. The company had 2004 vaccine revenues of USD 510 million.

Ranked as one of the largest suppliers of influenza vaccines worldwide, Chiron's product portfolio also includes vaccines against meningococcal C, rabies, tick-borne encephalitis, haemophilus influenzae type B (Hib), polio, mumps, measles and rubella (MMR) as well as diphtheria, tetanus and pertussis (whooping cough).

This acquisition also provides access to Chiron's blood testing business, which offers strong near-term growth opportunities and potential for access to the emerging growth segment of molecular diagnostics. Chiron products are used to test more than 25 million blood donations annually in North America, Europe and Asia-Pacific. The Procleixｮ assays and systems incorporate nucleic acid testing (NAT) technology to detect viral RNA and DNA in donated blood and plasma during the very early stages of infection, when those infectious agents are present but cannot be detected by immunodiagnostic tests. Annual revenues reached USD 494 million in 2004. Future growth is expected from further geographic expansion outside of the US and through the development of new products with Chiron's partner Gen-Probe Incorporated. Chiron also has a collaboration with Ortho-Clinical Diagnostics to market immunoassay screening and supplemental tests for infectious diseases, including hepatitis and HIV. In addition, Chiron markets recombinant antigens and is working to expand its portfolio of immunoassays.

Biopharmaceuticals business adds specialty products to Novartis portfolio
Novartis intends to integrate the biopharmaceuticals activities of Chiron, which had revenues of USD 596 million in 2004, into its Novartis Pharma division. Chiron's product portfolio includes the flagship product TOBIｮ (tobramycin solution for inhalation), an antibiotic for infections associated with cystic fibrosis; Proleukinｮ (aldesleukin), the first treatment approved for metastatic kidney cancer and metastatic melanoma; and Betaseronｮ (interferon beta-1b), a multiple sclerosis drug sold by marketing partner Schering AG.

The development pipeline includes several oncology products with research activities targeting the most promising approaches in cancer therapy, including monoclonal antibodies and molecular oncology.

Chiron independent directors unanimously support improved proposal
Novartis has made an improved offer to acquire the remaining approximately 113 million fully diluted shares of Chiron not owned by Novartis for USD 45.00 per share in cash, or approximately USD 5.1 billion. The merger price represents a 23% premium over the unaffected price of USD 36.44, which was the price of Chiron shares on the last trading day (August 31) before Novartis made its initial proposal of USD 40.00 per share.

Chiron's Board of Directors, based upon the unanimous recommendation of Chiron's independent directors, who were charged with acting solely on behalf of Chiron shareholders other than Novartis, have approved the Merger Agreement and recommended that Chiron shareholders vote to approve the merger.

Novartis has negotiated a customary merger agreement with the Chiron independent directors that will be subject to approval by a majority of the Chiron shares not owned by Novartis as well as regulatory approvals. Proxy materials for a meeting of Chiron shareholders to approve the merger will be distributed in due course.

Annual cost synergies totaling USD 200 million are anticipated within three years after closing, with 50% expected to be achieved in the first 18 months.

About Chiron
Chiron Corporation is a pharmaceutical company based in Emeryville, California, that addresses patient needs with more than 50 diverse products to detect, prevent and treat disease worldwide. The company, which had 2004 overall sales of USD 1.7 billion, operates in three business segments: Vaccines, which offers more than 30 products including influenza, meningococcal, travel and pediatric vaccines; Blood Testing, which develops and commercializes a range of blood safety products used by the blood banking and transfusion medicine industry; and Biopharmaceuticals, which discovers, develops, manufactures and markets a range of therapeutic products focusing on infectious disease and cancer. R&D efforts are focused on developing high-value products for infectious disease and cancer. Founded in 1981, Chiron has approximately 5,400 associates worldwide.

About Novartis
Novartis AG is a world leader in pharmaceuticals and consumer health. In 2004, the Group's businesses achieved net sales of USD 28.2 billion and pro forma net income of USD 5.6 billion. The Group invested approximately USD 4.1 billion in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ about 91,700 people and operate in over 140 countries around the world.

2006/11/6 Novartis

Novartis creates new strategic biomedical R&D center in Shanghai

• Integrated Research & Development center the first Novartis site of its kind in China
• Primary focus on infectious causes of cancer endemic to China and Asia
• Center will capitalize on talent in emerging life sciences cluster in Shanghai
• Initial investment of USD 100 million to create Shanghai site - set to begin operations in May 2007

Novartis announced plans today to build an integrated biomedical Research & Development center in Shanghai's Zhangjiang Hi-Tech Park that will become an integral part of the Group's global research and development network.  
The establishment of this strategic site is a commitment by Novartis to conduct cutting-edge pharmaceutical research and development in China. It will also enable further expansion of the strong network of existing R&D alliances that Novartis has in China.  
Research and development activities at the site will initially focus on addressing urgent medical needs in China and Asia, particularly infectious causes of cancer endemic to the region.  
"The level of scientific expertise in China is rising rapidly. At the same time, the healthcare needs of the Chinese are growing, primarily the result of urbanization, lifestyle changes and associated chronic diseases," said Dr. Daniel Vasella Chairman and CEO of Novartis. "The Shanghai center will allow us to combine modern drug discovery approaches with those of traditional Chinese medicine that have been used to treat patients in China for thousands of years. This new research center will help Novartis contribute to the needs of patients in China and elsewhere and has the potential to become a global center for biomedical innovation."  

Expansion of global Novartis R&D network
The center will become the eighth site within Novartis Research and Development network. It will be staffed primarily by scientists recruited from Shanghai's emerging cluster of innovative academic, biotech and pharmaceuticals research institutions.  
Scientists will initially work in a 5,000 square meter start-up facility that is expected to open in May 2007. Construction of a permanent 38,000 square meter facility for approximately 400 scientists will begin in July 2007. An investment of USD 100 million has been planned for the design and construction of the two facilities.

Focus on diseases prevalent in China
An initial area of research will be infectious causes of cancer. One disease is liver cancer caused by the hepatitis viruses. Some one-third of the 400 million people infected with the hepatitis B virus are in China, with experts estimating that the virus kills 300,000 people in mainland China each year.  
"Shanghai is clearly emerging as a new epicenter of science globally, and is a magnet for the best and the brightest investigators. It is a perfect location for exploring novel scientific approaches for the discovery of new medicines that will ultimately benefit patients in China and around the world," said Dr. Mark Fishman, President of the Novartis Institutes for BioMedical Research.  
The site will also include an integrated exploratory development center that will closely collaborate with basic research and local academic centers to further develop the concept of mechanism-based medicine and leverage emerging new technologies.  
"Our activities in the new R&D center will go far beyond conducting early clinical trials by expanding drug discovery with translational medicine principles enhanced with safety investigations, biomarker detection and bio-analytics as well as gene expression profiling. We aim to complement the search of useful and safe medicines with diagnostic tools to support local and global R&D efforts," said Dr. Jean Jacques Garaud, Global Head of Exploratory Development at Novartis Pharma AG.  

Long-term commitment to China
Novartis and its predecessor companies have been active in China since 1938 when Ciba opened its office in Shanghai, initially entering the country as a provider of dyestuff and later expanding into pharmaceuticals through steady investments.  
Novartis currently ranks as the fourth largest pharmaceutical company in the Chinese hospital market with a compound annual sales growth rate of over 30% during the last five years. In February 2006, construction began on a USD 83 million development and production plant in Changshu, Jiangsu Province, which is expected to open in mid-2007.  
A series of important research collaborations have been fostered with Chinese partners. Novartis has a six-year research partnership with the Shanghai Institute of Materia Medica (SIMM) to identify and test traditional medicines for pharmacological properties. Collaborations have also been established with WuXi PharmaTech Co, Ltd., Chinese University of Hong Kong National Institutes of Biological Sciences (NIBS) and Kunming Institute of Botany.

2006/12/14 Nestle

Nestle to Acquire Novartis Medical Nutrition, Moving Toward Nutrition, Health and Wellness

As a part of its continuing efforts to reinforce the Group's leading position in nutrition, Nestle has agreed to acquire the entire medical nutrition business of Novartis for a total amount of USD 2.5 billion. The move propels Nestle into a strong number two position in the fast growing and profitable healthcare nutrition segment, where so far Nestle played only a minor role. Through this acquisition Nestle also strengthens its existing R&D capability, helping to accelerate the growth of the nutrition business.

With sales of about USD 950 million in 2006, Novartis Medical Nutrition is the worldwide number two. Geographically and with regard to the products, the business is complementary to Nestle's healthcare nutrition and the combination of both offers a product portfolio covering all disease specific cases where special nutrition is needed. As a result of the strong complementarity, Nestle does not expect the acquisition to have any material impact on Group earnings in the short term.

As a result of the acquisition, about 2 000 employees of Medical Nutrition with their specific know-how and expertise will join the Nestle Group, thereby also boosting Nestle's R&D research capability, as well as providing better access to medical institutions.

The transaction, which is expected to be completed during the second half of 2007, is subject to regulatory approval.

Peter Brabeck-Letmathe, Chairman and CEO of Nestle, said: "I am very pleased that this acqui-sition allows us to become a very strong player in the strategic core category of nutrition. I welcome the people from Novartis who will strengthen our capability in healthcare nutrition, including specific R&D. This is a very important step for the Nestle Group in its strategic trans-formation process to a nutrition, health and wellness company as it strengthens the core of our globally managed Nestle Nutrition business."

日本経済新聞　2006/12/15

医療用食品でネスレは世界5位でノバルティスは2位。今回の買収でネスレのシェアは25%となり、最大手でシェア30%の米アボット･ラボラトリーズに次ぐ2位に浮上する。

April 07, 2008 Novartis

Novartis to further strengthen its healthcare portfolio by acquiring 25% stake in Alcon from Nestlé with right to take over majority ownership of the world leader in eye care

• Definitive agreement with Nestlé S.A. provides Novartis the right to acquire 77% majority ownership of Alcon in two steps

• Novartis to first acquire 25% stake from Nestlé for USD 143.18 per share for approximately USD 11 billion, closing expected in second half of 2008

• In optional second step, Novartis has exclusive right to acquire Nestlé's remaining 52% stake for a fixed price of USD 181 per share, totaling about USD 28 billion; Nestlé has right to require Novartis to buy this stake

• Alcon the world leader in eye care with its pharmaceutical, surgical and consumer eye care products, and a highly-rated development pipeline

• Eye care market growing dynamically, driven by increase in age-related eye diseases, global expansion and novel therapies

• Strong strategic fit with complementary Novartis contact lens and ophtha pharmaceutical businesses; synergies expected to be realized in due time

アルコンは1945年に米テキサス州で薬局として創業し、点眼薬やコンタクトレンズケア商品など眼科分野の最大手メーカー。78年にネスレが買収し、77%の株式を保有する。

Novartis has reached an agreement with Nestlé S.A. providing the right to acquire majority ownership of Alcon Inc. in two steps and add the world leader in eye care to its diversified portfolio focused on growth areas of healthcare.
The transaction's first step to purchase a 25% stake in Alcon from Nestlé for USD 11 billion is expected to be completed in the second half of 2008. The second step provides rights for Novartis to acquire, and Nestlé to sell, the remaining 52% Alcon stake held by Nestlé between January 2010 and July 2011.
Completion of these steps would make Alcon a majority-owned subsidiary of Novartis and further strengthen its healthcare-focused business portfolio of innovative medicines, high-quality low-cost generics, preventive vaccines, diagnostics and consumer health products, taking advantage of growth opportunities and cost synergies while mitigating risks.
The transition of Alcon's majority ownership to Novartis would also enhance the Group's longer-term growth prospects with greater access to the fast-growing eye care market, a specialty field with unmet patient needs and annual sales of about USD 25 billion in 2007.
Alcon is the world's largest and most profitable eye care company with 2007 annual sales of USD 5.6 billion, operating income of USD 1.9 billion and net income of USD 1.6 billion. Alcon offers a range of pharmaceutical, surgical and consumer eye care products used to treat diseases, disorders and other conditions of the eye.
"This acquisition furthers our strategy of accessing high-growth segments of the healthcare market while balancing inherent risks. The strategic fit of Alcon and Novartis is excellent with our complementary product portfolios and R&D synergies. Eye care will continue to grow dynamically as there is a growing unmet medical need driven primarily by the world's aging population," said Dr. Daniel Vasella, Chairman and CEO of Novartis.

Alcon leads the world eye care market
Alcon is a high-performing and well-managed global leader in eye care, with competitive leadership positions in all three of its business areas:

Surgical (2007 sales: USD 2.5 billion, +13%)
Alcon provides medical devices and products for ophthalmic surgery. The principal focus is cataract surgery where cataracts that cloud the eye's lens are broken up, removed and then replaced by an artificial intraocular lens. Other products include devices for vitreoretinal surgery involving conditions such as retinal detachment, macular holes and vitreous hemorrhage, as well as refractive laser surgical devices used primarily for vision correction procedures. The surgical business area offers attractive growth prospects given the rising incidence of eye diseases along with the world's aging population, medical advances and expansion in emerging markets.

Pharmaceuticals (2007 sales: USD 2.3 billion, +15%)
Alcon offers a range of specialized medicines for many eye diseases and conditions, including advanced treatments for glaucoma, eye infections and eye allergies. Leading products include TRAVATAN® solution for glaucoma, VIGAMOX® antibiotic solution for eye infections and the eye allergy solutions PATADAY® and PATANOL®. Strong double-digit sales growth has been achieved through market share gains, new product launches and global expansion. Consumer (2007 sales: USD 0.8 billion, +15%) Alcon provides an innovative portfolio of contact lens care products, including the OPTI-FREE® line, over-the-counter dry eye drops and ocular vitamins. Market share gains and expansion outside the US have supported recent growth.
Under the leadership of Cary Rayment, who has been with Alcon since 1989 and will remain as Chairman, President and CEO, Alcon has consistently outperformed its industry peers thanks to its focus on innovation, a broad product portfolio and strong sales force. Alcon's sales have risen 13% annually between 2002 and 2007, with operating income rising at a faster 22% annual pace during the same period.
With 14,500 associates in 75 countries, Alcon's sales are split nearly equally between the US and rest of the world, benefiting from both US and international expansion. Countries such as Brazil, Mexico, Russia and China are providing important contributions to Alcon's growth, with sales in emerging markets advancing 21% in 2007.
Alcon's broad and differentiated product range is underpinned by a consistent commitment to innovation, with R&D investments of USD 564 million in 2007 that represented 10% of sales. Over the next five years, Alcon plans to invest at least USD 3.5 billion to support the expansion of its pipeline, which includes more than 15 projects in late-stage development.
Founded in 1945, Alcon has maintained its focus on advancing standards for eye care. Alcon was acquired by Nestlé in 1978, and subsequently spun off in a partial initial public offering in 2002 on the New York Stock Exchange. Alcon is incorporated in Hünenberg, Switzerland, and its US operations are based in Fort Worth, Texas.

Transaction terms with Nestlé
Novartis and Nestlé have reached an agreement for a two-step transaction providing a path for the transfer and smooth transition to Novartis of Nestlé's ownership of 77% of Alcon's outstanding shares, which totaled 298.1 million as of April 4, 2008. These transactions will require regulatory approvals.
In the first step, Novartis will acquire a 25% stake in Alcon for about USD 11 billion through the purchase of approximately 74 million shares held by Nestlé. This reflects a per-share price of USD 143.18, which is Alcon's volume-weighted average share price between January 7, 2008, and April 4, 2008. Alcon's closing share price was USD 148.44 on April 4, the last trading day before the signing of this agreement.
In the second step, Novartis has the right to acquire Nestlé's remaining 52% majority stake in Alcon between January 1, 2010, and July 31, 2011, for a fixed price of USD 181 per share, or approximately USD 28 billion. During this period, Nestlé has the right to require Novartis to buy its remaining stake at a 20.5% premium to Alcon's share price at the time of exercise, but not exceeding USD 181 per share. Based on Alcon's closing share price on April 4, 2008, the combined premium would be a maximum of 13% to complete the two steps. Novartis has no obligation to purchase the remaining 23% of shares held by Alcon minority shareholders at any time.
Novartis intends to finance the purchase of the 25% Alcon stake in the first step from internal cash reserves and external short-term financing, with borrowing needs currently estimated at USD 5.5 billion. Financing for the second step would be supported by the Group's ongoing cash generation and further external borrowing.

Potential strategic benefits and synergies
Following completion of the transaction's first step, Novartis will have a representative on Alcon's Board of Directors. Alcon and Novartis will remain separate and independent companies.
If majority ownership is transferred from Nestlé during the second step, Novartis and Alcon will identify the best way to realize synergies from combining their complementary eye-related businesses.
Potential benefits could include creating a broader portfolio of eye care products, in particular with CIBA Vision's contact lens business and Novartis medicines such as Lucentis® for severe eye diseases not addressed by Alcon's portfolio. Other opportunities include R&D activities and an even more aggressive expansion in fast-growing regions, particularly Asia, where Novartis has long-standing operations. In addition, the relationships of Novartis with healthcare payors and strong health economics activities could contribute to Alcon's marketing programs.
On the other side, Alcon would help limit risks within the Novartis portfolio based on its diversified payor structure with reduced risks of price regulation, leadership in a specialty healthcare area, and greater access to businesses with discretionary consumer spending.