Closer peek at Novartis-Alcon potential

January 6, 2010 – 1:27 pm by Michael Christel

Not surprisingly, moods are turning a tad testy in Novartis’ bid to gain full control of Swiss neighbor Alcon Inc. (see reports here and here). But talk of “coercive’’ tactics, minority shareholder protection, and independent director committees aside, just how visionary the potential eye-care deal really is appears a bit unclear.

On paper, integrating Alcon, the world’s leading eye-care company with sales of $6.3 billion in 2008, with Novartis’ existing ophthalmic business is an eye-grabber. According to reports, the combination will give Novartis, which sells Lucentis, a popular therapy for wet age-related macular degeneration, up to 70% of the total vision-care market. Alcon is particularly strong in eye surgery, where the company’s equipment was used in more than 60% of micro-incision cataract surgeries in 2008, according to Novartis.

Alcon also has a portfolio of specialty medicines for various eyes diseases, including glaucoma and conditions in the front of the eye such as infections and allergies. The company’s short-term pipeline has 22 projects in development or registration, eight of which are pharmaceutical candidates.

Novartis is active as well in this space. Last month, an application for Lucentis was submitted to the EMEA for the treatment of diabetic macular edema, a major complication of diabetes that often leads to vision loss and blindness.

Lucentis has also demonstrated potential in other eye diseases. The drug was originally discovered by Genentech and is marketed and developed by Genentech and Novartis. Recent data from two Phase III studies conducted by Genentech showed early and sustained improvement in vision in patients with retinal vein occlusion. Another study, called Everest, showed the combination of Visudyne and Lucentis improved eyesight and reduced vessel abnormalities in patients with polypoidal choroidal vasculopathy, a subtype of wet age-related macular degeneration that involves the growth of tiny, abnormal blood vessels under the retina.

According to Novartis, if the deal with Alcon goes through, Lucentis will not be transferred to the new eye-care division, but instead be co-promoted, an approach the company says has already proven effective in Japan.

As far as new chemical entities, Novartis is developing AIN457, which targets interleukin-17 alpha, a major trigger of inflammation in a variety of serious diseases, including uveitis. This condition causes swelling and irritation of the uvea, the middle layer of the eye.

Based on proof-of-concept studies showing that AIN457 delivered a rapid response, Phase III trials were started in November for the use of the drug in treating a certain type of uveitis. A filing of AIN457 with EU regulatory authorities is possible this year, Novartis says. The drug is also being tested in psoriasis and rheumatoid arthritis.

Besides pharmaceuticals, the acquisition of Alcon would expand the capabilities of Ciba Vision, Novartis’ eye-care unit, which develops and manufactures contact lenses and lens-care products.

The question being mulled by some, however, is securing full control of Alcon necessarily a prudent strategic play for Novartis? After all, if the deal goes through, the healthcare giant will have forked over a total of $50.3 billion, making it one of the largest mergers in recent times.

While the move would fit nicely with Novartis CEO Daniel Vasella’s continued push to tap new healthcare niches, there is uncertainty, as The Wall Street Journal notes here, around just what kind of bang for the buck the eye-care market will deliver, particularly in the short term. The report mentions that Novartis expects the ophthalmic market to grow by up to 7% a year over the next five years, faster than the 5% expansion projected for branded prescription drugs. Nevertheless, while the global eye-care market was worth $26 billion in 2008, that was only a small fraction of the $700 billion market for branded medicine, the article says.

WSJ also notes the somewhat uninspiring profits Novartis has reaped from other big niche market investments, mainly in generics and vaccines.

Still, most agree nabbing Alcon would help fuel overall growth at Novartis as patents on the company’s best-selling drugs Diovan and Gleevec begin to expire in the United States in 2012. And news of the deal has been generally hailed by analysts as a “good move.”

Tags: Alcon, eye disease, Lucentis, Novartis