Alcon, Take Me Away- Novartis Spinoff Set For April 9

Novartis’ (NVS) eye care spinoff Alcon is ready to go. The distribution is set for April 9th and both shareholders and ADR holders as of April 8th will receive one share of Alcon stock for every 5 Novartis shares owned. Alcon will trade in both Switzerland and the NYSE under the ticker ‘ALC’ so a shareholder with 100 shares of NVS should see 20 ALC shares in his or her portfolio. There will be no when issued market or trading for this spinoff.

As part of the transaction, Alcon will move its headquarters from Texas to Switzerland. The Fort Worth office won’t be totally abandoned though and it will remain a ‘major operational, commercial, and innovation hub for the company’. Additionally, the company has secured $3.5b in debt and is expected to carry an investment grade rating.

Alcon’s leaves behind a complex legacy within Novartis. The Swiss giant paid a hefty sum – in three different tranches – for the eye care business in the hopes of creating a more diversified powerhouse. Sales lagged and margins declined leading to several years of losses. Although the business has rebounded a bit, it’s unlikely to trade at its takeover price from a decade ago. It will be free to chart its own course though.

The parent company Novartis will focus its efforts on building its ‘core medicines business’. FiercePharma describes the effort in a bit more detail:

That plan will rest on the company’s 11 projected blockbuster launches—including new indications for approved drugs—by 2020. Some of the new products include spinal muscular atrophy drug Zolgensma (AVXS-101), which was the centerpiece of Novartis’ $8.7 billion acquisition of AveXis in 2018. It is expected to receive an FDA decision in May. Then there’s macular degeneration candidate brolucizumab, a potential challenger to Bayer and Regeneron’s Eylea. Novartis has completed its submission to the FDA and used a Priority Review Voucher to ensure a 2019 launch.

To focus further on pharma, under Narasimhan, Novartis sold GlaxoSmithKline its stake in the pair’s consumer health joint venture and sold Sandoz’ U.S. dermatology business and some 300 U.S. generic oral solids to India’s Aurobindo Pharma in a deal potentially worth $1 billion. Some over-the-counter ophthalmic products and surgical diagnostic products were also transferred from its Innovative Medicines Division to Alcon in preparation for the separation.

Solid pipeline, but there is always risk in this market. There doesn’t appear to be much execution risk left in this transaction though and Novartis released a calendar of upcoming Alcon spinoff milestones:

March 29, 2019 Last day for conversion of ADRs into Novartis shares (and vice versa)
April 1, 2019 ADR record date
April 8, 2019 Cum-dividend date (last day of trading Novartis shares and ADRs including right to receive Alcon shares)
April 8, 2019, close of business Distribution of Alcon shares to Novartis ADR holders (payment date for ADR holders)[2]
April 9, 2019 Ex-dividend date (first day of trading Novartis shares and ADRs excluding the right to receive Alcon shares)
Listing and first day of trading of Alcon shares on the SIX (9.00am CET) and the NYSE (9:30am EST)
Inclusion of Alcon in the SMI® and SPI® Indices
April 9, 2019 or shortly after[3] Credit of Alcon shares to Novartis shareholders by their bank or broker
April 11, 2019 First day ADR holders may again convert their Novartis ADRs into Novartis ordinary shares (and vice-versa)
On or around April 23, 2019 Distribution of net cash proceeds for fractions of shares[4]

We will keep you updated as this progresses.

Disclosure: Author holds no position in any stock mentioned.