What's going on?

On Friday, leading Swiss drugmaker Novartis � worth over $190 billion � announced it intends to amputate its eye-care unit. And it�s spying as much as $20 billion for it�

What does this mean?

Novartis� new CEO took the reigns six months ago and is decidedly set on getting the company focused on the business of developing new medicines. In March, he sold off Novartis� share of a consumer health business (to GlaxoSmithKline, which owned the other half) and put the money to use almost immediately, buying AveXis � an early-stage biotechnology company.


The company hasn�t decided exactly how to split off from its eye-care segment yet, but selling it to a private equity investor or listing it on the stock market via an initial public offering (IPO) are possible options.

Why should I care?

For markets: Investors likely see this as a good thing for Novartis.

Novartis� stock rose by 4% on Friday. The company�s eye-care unit wasn�t profitable last year, so investors are likely buying Novartis shares in the hope that future profit will be higher after the split. They may also be positive on the company�s strategy � developing new drugs for complicated ailments. When successful, pharmaceutical companies can charge high prices on new medicines for a long time because patents stop others from producing identical, competing products � leading to many years of high sales and profits.

The bigger picture: It�s all to play for in the pharma industry.

On Thursday, Amazon announced its acquisition of online pharmacy, PillPack � shaking up the distribution of medicines in the US. And, on Friday, a group of private equity firms agreed to buy 52% of Italian pharmaceutical company, Recordati, for $3.5 billion. Companies, both public and private are investing in the pharma sector � possibly attracted by its size (over $800 billion is expected to be spent worldwide on prescription drugs in 2018 alone!) and growth potential as emerging markets develop and more of the world�s population demand better healthcare.