Alcon growth trends
Novartis (NVS) expects its Alcon business to report low-single-digit revenue growth in 2017. The company forecasts that this growth will come primarily from the solid performance of its vision care business driven by robust demand for Dailies Total1 contact lenses. Plus, the company has increased its market share in the contact lens segment both in the US and Europe. The company has also launched innovative solutions in the vision care segment such as Dailies Total1 Multifocal contact lenses.
If the vision care business continues to demonstrate solid growth trends in 2017, it may have a positive impact on share prices of Novartis as well as those of the Vanguard FTSE All-World ex-US ETF (VEU). Novartis makes up about 0.74% of VEU’s total portfolio holdings.
Contact lens demand
The above diagram shows that in the last three quarters of 2016, there has been an increase in sales for Alcon’s contact lens portfolio on year-over-year (or YoY) basis. While the 4Q16 YoY growth of 7% is much higher due to significantly lower sales in 4Q15, the underlying YoY growth in sales is close to 4%. In 2016, the vision care business reported YoY revenue growth of around 2%, which is a definite improvement compared to the YoY growth of -2% reported in 2015.
Three major players compete with Alcon in the vision care space: Johnson & Johnson’s (JNJ) Vision Care, Valeant Pharmaceuticals’ (VRX) Bausch & Lomb, and Cooper Companies’ (COO) CooperVision. The segment has been witnessing growth in market value in the range of 3% to 4% annually. Owing to significant entry barriers related to manufacturing and distribution, this segment offers a significant and sustainable growth opportunity to the major vision care players.
In the next article, we’ll discuss Alcon’s surgical business in greater detail.