Novartis to Spin Off Alcon Eye-Care Business

The company said that spinning off Alcon into a stand-alone business, to be publicly traded in Switzerland and the U.S., would allow the drugmaker to be more focused. It expects the spinoff to be completed in the first half of 2019.

The decision is the latest big strategic move by new Chief Executive Vasant Narasimhan who took the helm of the Basel-based company earlier this year and has pledged to refocus Novartis on drug development.

After the Alcon spinoff, Novartis will be entirely a prescription-medicine company, “which is where I think we need to be to be successful,” Mr. Narasimhan said in an interview.

Novartis bought Alcon in two transactions starting 10 years ago for a total of more than $50 billion and has over the past year been reviewing its ownership of the business. Alcon had been a big disappointment—until recently when sales growth has picked up.

“Alcon has returned to a position of strength and it is time to give the business more flexibility to pursue its own growth strategy,” said Mr. Narasimhan, a Harvard-trained doctor and former McKinsey & Co. consultant.

Novartis didn’t provide an estimated valuation of Alcon, which is based in Fort Worth, Texas. The surgical and vision-care device operations that would be included in the spinoff generated sales of more than $7 billion in 2017. The new, stand-alone company will be Swiss-based but Fort Worth will remain a key location, Novartis said.

Analysts at Vontobel Research said the spinoff made strategic sense and that Alcon could have a market capitalization between $15 billion and $23 billion, depending on the earnings multiples.

Alcon’s expected value is lower than what Novartis paid partly because the Swiss company is keeping the eye unit’s Ophthalmology pharmaceuticals business, which generated 2017 sales of $4.6 billion.

Explaining his decision to spinoff Alcon, Mr. Narasimhan said on a call with reporters that he sees a rapidly-evolving technological landscape, and said that Novartis needed to concentrate its capital on using digital technology to innovate.

Under Mr. Narasimhan, Novartis agreed in March to sell its stake in a consumer health care joint venture with GlaxoSmithKline PLC to the British company for $13 billion. Novartis also agreed in April to buy U.S.-based gene-therapy company AveXis for $8.7 billion.

The company also said Friday that it would buy back up to $5 billion worth of shares by the end of 2019. The buyback will be largely funded by the proceeds from the sale of its venture with GSK.

Novartis said Alcon Chief Executive Mike Ball will become chairman-designate of the business from July 1 and be tasked with preparing the company for the spinoff and with recruiting a board of directors. Alcon Chief Operating Officer David Endicott will succeed Mr. Ball.

Write to Brian Blackstone at brian.blackstone@wsj.com

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