Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

"2016 is going to be a transition year," Novartis CEO Joe Jimenez announced on the company's fourth-quarter earnings call Wednesday. 

Struggle Bus
Novartis shares are weighed down by a big patent expiration and a struggling eye care business
Source: Bloomberg

Cue the synchronized investor winces.

Novartis shares are down 25 percent from a July 2015 high, including a 4 percent drop on Wednesday after the company missed profit estimates. There's more rough sledding ahead. Novartis is losing patent protection this year on blood cancer treatment Glivec, its best-selling drug. And it's only now committing to a revamp of its long-struggling eye-care business Alcon.

When a company admits it's turnaround time, it starts a stopwatch. Novartis' is ticking.

The nearest self-set deadline is for Alcon. Novartis is mixing things up at the expensively acquired business. It's overhauling operations, replacing division head Jeff George with former Hospira head Mike Ball, and focusing Alcon more narrowly on devices, surgery, and vision care. Novartis may do some M&A to boost the eye-care pipeline, and the company is putting an extra $200 million into the business this year. 

Jimenez said he expects Alcon to start to "turn" (read: stop shrinking) after the first half of the year. He expects low- to mid-single-digit year-over-year sales growth by the end of the year. The company's sense of urgency is sensible, if belated. Sales fell 13.1 percent in the fourth quarter compared to the same period last year.

Past Due
Novartis' Alcon eye care business is in dire need of a turnaround.
Source: Bloomberg

It will be a difficult turnaround; Alcon has been slow to release new products and faces increased competition. It will be watched closely, particularly because the business doesn't have an obvious strategic fit with the rest of drug-focused Novartis. 

As much of a drag as Alcon has been, it still accounts for only about 20 percent of the company's revenue. Novartis' drug sales will truly make or break it.  

Asked by an analyst when investors would be able to have conviction the company as a whole was really on the right track, Jimenez said that he believes Novartis will exit 2016 on a much more stable footing. 

The biggest threat to that timetable is the loss of Glivec's patent protection. Analysts expect sales of the $4.5 billion-a-year drug to be nearly cut in half this year. The key to moving on is Novartis' two new drugs, the promising heart failure treatment Entresto and psoriasis drug Cosentyx. They have the potential, combined, to more than make up for Glivec. But both have their risks. 

Blockbuster Alert
Novartis is depending on two drugs in particular to make up for Glivec's declining sales.
Source: Bloomberg
Analyst consensus projections

Entresto, approved in the U.S. in July, is having a difficult time getting off the blocks. Analysts expected it to generate $79 million in sales last year. It only managed $21 million. The U.S. government and insurers have been slow to embrace the drug and have restricted access. That could take some time to resolve, though Novartis said prescriptions have been accelerating. 

The company suggested analyst expectations in the near term were too high. It kept its long-term view of Entresto's multi-billion-dollar potential, but the company needs to find a way to improve sales. Fast. 

Cosentyx is doing considerably better since launching in February, with $261 million in sales in 2015, compared to expectations of $230 million. But it's duking it out in a crowded market with Johnson & Johnson's dominant Stelara, so growth may be capped and requires good execution and aggressive marketing. These two drugs will determine if Glivec's loss is surmountable, or if it will reset expectations for Novartis more permanently.

There are other bright spots. The company has launched drugs at a solid clip. It had four drugs approved by the FDA last year that were new medicines rather than variants of old ones, the most of any pharma company. It expects to file four novel drugs for approval in 2016, and has a group of cancer medicines with high sales potential down the line. The company's third big business, its Sandoz generics unit, has upside from its investment in generic versions of expensive biologic drugs, or drugs made from living cells instead of through chemistry. 

But with so much uncertainty and bad news in the near term, all of that upside is hard for investors to see. The company just gave itself a year to unmuddy the waters.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at

To contact the editor responsible for this story:
Mark Gongloff at