Alcon unleashes $2.3 billion IPO; Nestlé still owns 75% of company

“ACL” is the newest ophthalmic moniker on the New York Stock Exchange, now that parent company Nestlé has spun off the eye care giant.

Issue: April 15, 2002

NEW YORK – The biggest company in ophthalmology recently went public, in the process revealing for the first time its financial situation and short- and long-term clinical outlooks. With an initial public offering on the New York Stock Exchange in late March, Alcon stepped from beneath the cloak of Nestlé SA, its former parent company.

Alcon sold nearly $2.3 billion in stock on its first day of trading, March 21, as part of the largest initial public offering (IPO) for 2002. It held that distinction for exactly 1 day, until Citigroup Inc. sold shares in Travelers Property Casualty Corp. for nearly $3.8 billion on March 22.

Alcon, which priced 69.75 million shares at $33 apiece on March 21, now trades on the New York Stock Exchange under the symbol ACL. As this issue of Ocular Surgery News went to press, the stock was trading at $34.25.

The leader of the pack

Over the years there has been much speculation regarding the finances of privately held Alcon, but with the release of its IPO Alcon has laid its cards on the table. In its prospectus, Alcon said in 2001 they had sales of more than $2.7 billion, EBITDA of $784 million and net earnings of $316 million.

It also had the leading U.S. market share position, based on sales, in many product categories.

According to its prospectus, Alcon is first in market share for cataract surgery products; first for vitreoretinal surgery products; first for ocular allergy products; first for combination ocular anti-infective/anti-inflammatory products; first for ocular anti-infective products; first for ocular anti-inflammatory products; first for soft contact lens disinfecting solutions; and first for generic ophthalmic pharmaceuticals through its Falcon Pharmaceuticals business.

In 2001, according to its prospectus, Alcon had more than twice the global ophthalmic sales of its nearest competitor, excluding sales of eyeglasses and contact lenses.

The prospectus also stated that Alcon has the largest research and development commitment of any eye care company worldwide. It intends to invest more than $1.4 billion in research and development projects over the next 4 years.

The prospectus noted the company’s strong track record of converting discoveries into commercially viable products. Alcon has successfully introduced 16 internally developed products since 1994, the document said. Approximately 45% of sales in 2001 came from products introduced since 1994.

Nestlé still in driver’s seat

Upon the completion of the IPO, Nestlé will own about 77% of Alcon’s outstanding common shares, or 75% if the underwriters exercise its over-allotment option in full. Nestlé will have the ability to direct the election of members of the board of directors and to determine the outcome of all other matters submitted to a vote of Alcon’s shareholders.

Nestlé has advised Alcon that it intends to continue to hold all of the common shares it owns for at least 2 years following the completion of the IPO.

Alcon plans to use all of the net proceeds the company receives from the IPO (other than proceeds from shares sold pursuant to the underwriters’ over-allotment option) to redeem its nonvoting preferred shares, all of which are owned by Nestlé. Alcon expects to use any net proceeds that it receives from the exercise of the underwriters’ over-allotment option to repay short-term debt.

For now, the board of directors for Alcon will consist of Timothy R.G. Sear, Alcon chairman and president; seven executives from Nestlé; Dr. James I. Cash; Phillip H. Geier; Lodewijk J.R. de Vink; Stefan Basler; Guido Koller; and Martin Schneider.

The top executives of Alcon are Mr. Sear, Dr. G. Andre Bens, senior vice president, global manufacturing and technical support; Dr. Gerald D. Cagle, senior vice president, research and development; Charles E. Miller Sr., senior vice president, finance and chief financial officer; Fred J. Pettinato, senior vice president, Alcon International; and Cary R. Rayment, senior vice president, Alcon United States.

Alcon’s pipeline

Perhaps the biggest news to come from the Alcon IPO is the company’s report on its products in development.

Alcon has a variety of products, spanning all the major ophthalmic subspecialties, that it expects to bring to market in the next 5 years in the United States, European Union and Japan.

Alcon states in its IPO that the company has the largest research and development commitment of any eye care company worldwide. The research and development organization consists of approximately 1,100 employees, including more than 270 individuals who are either medical doctors, doctors of optometry or PhDs.

To keep the new products coming, Alcon says it has invested approximately $1.1 billion over the past 5 years (including $213 million in 1999, $246 million in 2000 and $290 million in 2001) to carry out a strategy of developing products primarily from the company’s own research and development activities. Alcon states it expects to invest more than $1.4 billion throughout the next 4 years.

To bring its products to market, Alcon claims to have a force of more than 2,200 sales representatives, including approximately 700 sales representatives in the United States, its largest market, and approximately 1,500 sales representatives outside the United States.

The company said it also sells through more than 50 local operating entities and 28 scientific offices around the world.

For Your Information:

Alcon can be reached at Alcon Laboratories, 6201 S Freeway, Fort Worth, TX 76134; (817) 551-8058; e-mail: Mary.Dulle@AlconLabs.com; website: www.alconlabs.com.

The Alcon prospectus can be found on-line at: http://invest.alconinc.com/ireye/ir_site.zhtml?ticker=ACL&script=1901.