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Inside Novartis’s Eye Care Performance in 4Q16

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Alcon, the eye care business

Alcon, the Eye Care segment of Novartis (NVS), is divided into two sub-segments, including surgical and vision care. On April 1, 2016, the ophthalmic pharmaceuticals portfolio was transferred to NVS’s Innovative Medicines segment. The segment’s 4Q16 revenues fell ~2% to ~$1.4 billion, including no change in sales but a -2% impact from foreign exchange.

Notably, the decline in 4Q16 revenues was reported across the surgical franchise, while vision care reported a 5% growth in revenues.

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Surgical sales

NVS’s global surgical sales reported declines in cataract and refractive equipment and intra-ocular lenses. This led to a 4% fall at constant exchange rates in surgical sales in 4Q16, coming in at $887 million, as compared to $937 million in 4Q15.

The surgical franchise has noticed ongoing uptake of cataract consumables. Consumables sales grew by 2% at constant exchange rates during the quarter due to the strong base of installed equipment.

Vision care

The company’s vision care franchise reported a 5% growth in revenues, climbing to $557 million in 4Q16, as compared to $531 million for 4Q15. Revenues from contact lenses rose 7% at constant exchange rates to $420 million, driven by increased revenues from Dailies Total.

However, the revenues from contact lens care products reported a 2% fall at constant exchange rates, dropping to $137 million in 4Q16 due to competition and the consumer shift to daily disposable lenses.

Notably, to divest risk, investors can consider ETFs like the VanEck Vectors Pharmaceutical ETF (PPH), which has ~7.7% of its total assets in Novartis. PPH also holds 5.1% of its total assets in Merck (MRK), ~10.3% in Johnson & Johnson (JNJ), and 4.9% in Bristol-Myers Squibb (BMY).

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