20FR12B/A 1 a2238112z20fr12ba.htm 20FR12B/A

Use these links to rapidly review the document
TABLE OF CONTENTS
TABLE OF CONTENTS 2

Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Amendment No. 6
to
FORM 20-F


ý

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-31269

Alcon Inc.
(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant's name into English)

Switzerland
(Jurisdiction of incorporation or organization)

Rue Louis-d'Affry 6
1701 Fribourg, Switzerland
(Address of principal executive office)

Royce Bedward
Chemin de Blandonnet 8
1214 Vernier
Geneva, Switzerland
Tel: +1 (817) 293-0450
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Copies to:

D. Scott Bennett
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
Tel: +1 (212) 474-1000

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 
  Title of each class   Name of each exchange on which registered    

 

 

Ordinary Shares, nominal value CHF 0.04 per share

 

SIX Swiss Exchange
New York Stock Exchange

 

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

Not applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o    No ý

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o    No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý   Emerging growth company o

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o   International Financial Reporting Standards as issued
by the International Accounting Standards Board ý
  Other o

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o    Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No o

   


Table of Contents

March 21, 2019

Dear Novartis Shareholder:

        On June 29, 2018, we announced our intention to separate our Alcon business from the rest of Novartis by means of a spin-off of a newly formed company named Alcon Inc., which will contain our eye care devices business, consisting of our surgical and vision care businesses. Novartis, the existing publicly traded company, will retain the Innovative Medicines and Sandoz businesses. As two distinct publicly traded companies, we believe Novartis and Alcon will be better positioned to capitalize on significant growth opportunities and focus resources on their respective businesses and strategic priorities.

        To implement the separation, Novartis will first transfer its eye care devices business to Alcon, and will subsequently distribute all of the Alcon shares held by Novartis to Novartis shareholders, pro rata to their respective holdings. Each Novartis shareholder will receive 1 Alcon share for every 5 Novartis shares or 5 Novartis American Depositary Receipts they hold or have acquired and do not sell or otherwise dispose of prior to the close of business on April 8, 2019. The distribution generally should not be taxable to Novartis shareholders for Swiss withholding or income tax or U.S. federal income tax purposes. An application will be made to list the Alcon shares on the SIX Swiss Exchange (SIX) and the New York Stock Exchange (NYSE) and trading in Alcon shares is expected to begin on the SIX and the NYSE on April 9, 2019.

        You do not need to take any action to receive Alcon shares to which you are entitled as a Novartis shareholder, and you do not need to pay any consideration or surrender or exchange your Novartis shares or American Depositary Receipts.

        We encourage you to read the attached Form 20-F, which is being made available to all Novartis shareholders and is also publicly available. The Form 20-F describes the separation in more detail and contains important business and financial information about Alcon.

        We believe the separation provides tremendous opportunities for our businesses and our shareholders, as we work to continue building long-term shareholder value. We appreciate your continuing support of Novartis, and look forward to your future support of both companies.

    Sincerely,

 

 

GRAPHIC
    Vasant (Vas) Narasimhan, M.D.
Chief Executive Officer
Novartis AG

Table of Contents

March 21, 2019

Dear Alcon Shareholder:

        It is my pleasure to welcome you as a shareholder of our company, Alcon Inc. We are the leading global eye care devices company with a substantial worldwide customer base and a suite of industry-leading products.

        As an independent, publicly-traded company, we believe we can more effectively focus on our objectives and advance the strategic needs of our company. In connection with the distribution of our shares by Novartis, we intend to list our shares on the SIX Swiss Exchange and on the New York Stock Exchange under the symbol "ALC".

        We invite you to learn more about Alcon by reviewing the enclosed Form 20-F. We look forward to your continued support as a holder of Alcon shares.

    Sincerely,

 

 

GRAPHIC
    David Endicott
Chief Executive Officer
Alcon Inc.

Table of Contents


TABLE OF CONTENTS

Introduction and Use of Certain Terms

    1  

Unaudited Pro Forma Combined Financial Statements

    1  

Market Information

    2  

Special Note About Forward-Looking Statements

    3  

Summary

    5  

PART I

 

Item 1.

 

Identity of Directors, Senior Management and Advisers

   
31
 

Item 2.

  Offer Statistics and Expected Timetable     31  

Item 3.

  Key Information     31  

Item 4.

  Information on the Company     77  

Item 4A.

  Unresolved Staff Comments     127  

Item 5.

  Operating and Financial Review and Prospects     127  

Item 6.

  Directors, Senior Management and Employees     172  

Item 7.

  Major Shareholders and Related Party Transactions     188  

Item 8.

  Financial Information     197  

Item 9.

  The Offer and Listing     199  

Item 10.

  Additional Information     200  

Item 11.

  Quantitative and Qualitative Disclosures About Market Risk     212  

Item 12.

  Description of Securities Other than Equity Securities     212  

PART II

 

Item 13.

 

Defaults, Dividend Arrearages and Delinquencies

   
213
 

Item 14.

  Material Modifications to the Rights of Security Holders and Use of Proceeds     213  

Item 15.

  Controls and Procedures     213  

Item 16.

  [Reserved]     213  

Item 16A.

  Audit Committee and Financial Expert     213  

Item 16B.

  Code of Ethics     213  

Item 16C.

  Principal Accountant Fees and Services     213  

Item 16D.

  Exemptions from the Listing Standards for Audit Committees     213  

Item 16E.

  Purchases of Equity Securities by the Issuer and Affiliated Purchasers     213  

Item 16F.

  Change in Registrant's Certifying Accountant     213  

Item 16G.

  Corporate Governance     213  

Item 16H.

  Mine Safety Disclosure     213  

PART III

 

Item 17.

 

Financial Statements

   
214
 

Item 18.

  Financial Statements     214  

Item 19.

  Exhibits     215  

Index to Financial Statements

   
F-1
 

i


Table of Contents


INTRODUCTION AND USE OF CERTAIN TERMS

        Alcon Inc. publishes combined financial statements expressed in U.S. dollars. Our combined financial statements responsive to Item 18 of this Form 20-F are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). "Item 5. Operating and Financial Review and Prospects", together with the sections on products in development and key development projects of our businesses (see "Item 4. Information on the Company—4.B. Business Overview"), constitute the Operating and Financial Review ("Lagebericht"), as defined by the Swiss Code of Obligations.

        Unless the context requires otherwise, the words "we", "our", "us", "Alcon", "Company" and similar words or phrases in this Form 20-F refer to Alcon Inc. and its combined subsidiaries after giving effect to the separation and the words "Novartis" and "Novartis Group" refer to Novartis AG and its combined affiliates. In this Form 20-F, references to the "eye care market" or "eye care devices market" are to the eye care market in which we participate, including the sale of ophthalmic surgical devices, contact lenses and ocular health products, but not including the sale of spectacles and prescription ophthalmic pharmaceutical products; references to our "surgical" business, market or products are to our ophthalmic surgical business, market or products, as the case may be; references to "U.S. dollars", "USD" or "$" are to the lawful currency of the United States of America, and references to "CHF" are to Swiss francs, the lawful currency of Switzerland; references to the "United States" or to the "U.S." are to the United States of America, references to the "European Union" or to the "EU" are to the European Union and its 28 member states, and references to "Latin America" are to Central and South America, including the Caribbean, unless the context otherwise requires; references to "associates" are to our employees; references to the "SEC" are to the U.S. Securities and Exchange Commission, references to the "FDA" are to the U.S. Food and Drug Administration, and references to "EMA" are to the European Medicines Agency, an agency of the EU; references to the "NYSE" are to the New York Stock Exchange; references to the "SIX" are to the SIX Swiss Exchange; references to "Alcon shares" or "our shares" are to Alcon ordinary shares, nominal value CHF 0.04 per share, references to "Novartis shares" are to Novartis ordinary shares, nominal value CHF 0.50 per share, and references to "ADR" or "ADRs" are to Novartis American Depositary Receipts.

        All product names appearing in italics are trademarks owned by or licensed to Alcon or its subsidiaries. Product names identified by a "®" or a "™" are trademarks that are not owned by or licensed to Alcon or its subsidiaries and are the property of their respective owners.


UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The unaudited pro forma combined financial statements included in this Form 20-F are based on the combined financial statements of the Novartis AG Alcon business after giving effect to the separation and the spin-off and applying the estimates, assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements. The historical column in the unaudited pro forma combined income statement for the year ended December 31, 2018 is derived from the combined income statement of the Novartis AG Alcon business for the year ended December 31, 2018 included in this Form 20-F. The historical column in the unaudited pro forma combined balance sheet is derived from the combined balance sheet of the Novartis AG Alcon business as of December 31, 2018 included in this Form 20-F. The unaudited pro forma combined financial statements have been prepared by Alcon management for illustrative purposes and are not intended to represent the combined financial position or combined results of operations of Alcon in future periods or what the financial position or the results of operations actually would have been had Alcon completed the proposed separation and spin-off during the specified periods or as of the specified date.

1


Table of Contents


MARKET INFORMATION

        This Form 20-F contains certain industry and market data that were obtained from third-party sources, such as industry surveys and industry publications, including, but not limited to, publications by Market Scope, GfK and Nielsen. This Form 20-F also contains other industry and market data, including market sizing estimates, growth and other projections and information regarding our competitive position, prepared by our management on the basis of such industry sources and our management's knowledge of and experience in the industry and markets in which we operate (including management's estimates and assumptions relating to such industry and markets based on that knowledge). Our management has developed its knowledge of such industry and markets through its experience and participation in these markets.

        In addition, industry surveys and industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and that any projections they contain are based on a number of significant assumptions. Forecasts, projections and other forward-looking information obtained from these sources involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section "Special Note About Forward-Looking Statements" below. You should not place undue reliance on these statements.

2


Table of Contents


SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

        This Form 20-F contains certain "forward-looking statements" that involve risks and uncertainties. Forward-looking statements can be identified by words such as "potential", "expected", "will", "planned", "pipeline", "outlook", or similar terms, or by express or implied discussions regarding potential new products, or regarding potential future revenues from any such products; or regarding the potential outcome, or financial or other impact on Alcon or any of its businesses of the separation and spin-off; or regarding potential future sales or earnings of Alcon or any of its businesses or potential shareholder returns; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements.

        Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that any new products will be approved for sale in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor can there be any guarantee that Alcon will be able to realize any of the potential strategic benefits or opportunities as a result of the separation and spin-off. Nor can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Nor can there be any guarantee that Alcon, or any of its businesses, will be commercially successful in the future, or achieve any particular credit rating or financial results. Nor can we guarantee the separation and spin-off will be successful.

        In particular, our expectations could be affected by, among other things:

    uncertainties regarding the commercial success of our products and our ability to maintain our position in the markets in which we compete;

    our ability to keep pace with the advances in the highly competitive eye care devices market, including the impact of competitive market entries, new therapies and new business models that may disrupt traditional sales channels;

    the success of our research and development efforts;

    uncertainties regarding the success of our separation and spin-off from Novartis, including our ability to establish the infrastructure needed to operate as a standalone company without significant management distraction or business disruption;

    pricing pressure from changes in third-party payor coverage and reimbursement methodologies and potential regulatory price controls;

    general political, economic and trade conditions, including uncertainties regarding the effects of ongoing instability in various parts of the world;

    consolidation among our distributors and retailers;

    uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, intellectual property disputes and government investigations generally;

    potential product recalls or voluntary market withdrawals in connection with adverse events, defects, potential health hazards or unanticipated use of our products;

    regulatory actions or delays or government regulation generally;

    changes in tax laws;

3


Table of Contents

    the potential volatility in the price of our shares; and

    uncertainties regarding future sales or dispositions of our shares.

        Some of these factors are discussed in more detail in this Form 20-F, including under "Item 3. Key Information—3.D. Risk Factors", "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects". Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Form 20-F as anticipated, believed, estimated or expected. We provide the information in this Form 20-F as of the date of its filing. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set out in this Form 20-F as a result of new information, future events or otherwise.

4


Table of Contents



SUMMARY

        This summary highlights selected information from this Form 20-F and provides an overview of our company, our separation from Novartis AG ("Novartis") and the distribution by Novartis of our shares to its shareholders. For a more complete understanding of our business and the spin-off (as defined below), you should read this entire Form 20-F carefully, particularly the discussion under "Item 3. Key Information—3.D. Risk Factors" beginning on page 40 of this Form 20-F and our combined financial statements and the notes to those financial statements appearing elsewhere in this Form 20-F.

        Prior to the distribution by Novartis of our shares to its shareholders, Novartis will complete a series of internal transactions, following which Alcon will hold, directly or through our subsidiaries, the businesses formerly constituting the Novartis eye care devices business, comprising its surgical and vision care operations, which we collectively refer to as the "Alcon Business". We refer to this series of internal transactions, which is described in more detail under "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us", as the "Internal Transactions".

        The transaction in which we will be separated from Novartis is sometimes referred to in this Form 20-F as the "separation". The transaction in which Novartis will distribute to its shareholders all of the Alcon shares held by Novartis is referred to in this Form 20-F as the "spin-off" or the "distribution".

Overview

        Alcon is the largest eye care devices company in the world, with $7.1 billion in sales to third parties during the year ended December 31, 2018. We research, develop, manufacture, distribute and sell a full suite of eye care products within two key businesses: surgical and vision care. Based on sales for the year ended December 31, 2018, we are the number one company by global market share in the ophthalmic surgical market and the number two company by global market share in the vision care market. We employ over 20,000 employees from more than 90 nationalities, operating in over 74 countries and serving consumers and patients in over 140 countries. We believe our market leading position and global footprint allow us to benefit from economies of scale, maximize the potential of our commercialized products and pipeline and will permit us to effectively grow the market and expand into new product categories.

        Our surgical business is focused on ophthalmic products for cataract surgery, vitreoretinal surgery, refractive laser surgery and glaucoma surgery. Our broad surgical portfolio includes implantables, consumables and surgical equipment required for these procedures and supports the end-to-end needs of the ophthalmic surgeon. Our vision care business comprises daily disposable, reusable and color-enhancing contact lenses and a comprehensive portfolio of ocular health products, including products for dry eye, contact lens care and ocular allergies, as well as ocular vitamins and redness relievers. Alongside our world-class products, Alcon provides best-in-class service, training, education and technical support for our customers.

        Our surgical and vision care businesses are complementary and benefit from synergies in research and development (R&D), manufacturing, distribution and consumer awareness and education. This allows us to position ourselves as a trusted partner for eye care products across the continuum of care from retail consumer, to optometry, to surgical ophthalmology. For example, in R&D, we can apply our expertise in material and surface chemistry to develop innovative next-generation products for both our intraocular lens (IOL) and contact lens product lines. Similarly, our global commercial footprint and expertise as a global organization provide us with product development, manufacturing, distribution and commercial promotion and marketing knowledge that can be applied to both of our businesses.

5


Table of Contents

        We are dedicated to providing innovative products that enhance quality of life by helping people see better. Our strong foundation is based on our longstanding success as a trusted brand, our legacy of industry firsts and advancements, our leading positions in the markets in which we compete and our continued commitment to substantial investment in innovation. With over 70 years of history in the ophthalmic industry, we believe the Alcon brand name is synonymous with innovation, quality, service and leadership among eye care professionals worldwide.

Our Markets

Overview

        We currently operate in the global ophthalmic surgical and vision care markets, which are large, dynamic and growing. As the world population grows and ages, the need for quality eye care is expanding and evolving, and we estimate that the size of the eye care market in which we operate was approximately $23 billion for the year ended December 31, 2017 and is projected to grow at approximately 4% per year from 2018 to 2023.

        Although it is estimated that 80% of all visual impairments are currently preventable, treatable or curable, we operate in markets that have substantial unmet medical and consumer needs. For example, based on market research, it is estimated that there are currently 20 million people globally that are blind from treatable cataracts, 1.7 billion who suffer from presbyopia, 153 million with uncorrected refractive errors, 93 million with diabetic retinopathy, 67 million living with glaucoma and approximately 352 million affected by dry eye, among other unaddressed ocular health conditions. In addition, there are over 1 billion people living with some form of visual impairment, as well as 70% of the global population needing basic vision correction. Below is a brief description of these ocular disorders, as well as a diagram showing where in the eye the disorders occur and the placement of certain medical devices to treat ocular disorders:

GRAPHIC

6


Table of Contents

GRAPHIC

        Our surgical and vision care products are targeted at addressing many of these unmet medical and consumer needs. We expect the surgical and vision care markets to continue to grow, driven by multiple factors and trends, including but not limited to:

    Aging population with growing eye care needs:  A growing aging population continues to drive the increased prevalence of eye care conditions worldwide, as the number of persons aged 60 years or over is expected to more than double by 2050, rising from 962 million globally in 2017 to 2.1 billion in 2050.

    Innovation improving the quality of eye care:  Technology innovation in eye care is driving an increased variety of products that more effectively treat eye conditions. Given the importance of vision correction and preservation, which can provide a high return on healthcare spend, the resulting better patient outcomes are leading to increased coverage and reimbursement opportunities from governmental and private third-party payers, expanding patient access to such eye care products.

    Increasing wealth and growth from emerging economies:  It is estimated that between 2015 and 2030, the middle class population in emerging markets will grow by approximately 1.5 billion people, from 2.0 billion to 3.5 billion; this major demographic shift is generating a large, new customer base with increased access to eye care products and services along with the resources to pay for them.

    Increasing prevalence of myopia, progressive myopia and digital eye strain:  It is estimated that by 2050, half of the world's population (nearly five billion people) will be myopic. Further, the modern work environment, along with leisure preferences, have increased the number of hours people spend in front of a screen, adversely impacting vision and increasing the risk of progressive myopia and digital eye strain.

The Surgical Market

        The surgical market in which we operate was estimated to be approximately $9 billion for the year ended December 31, 2017 and is projected to grow at approximately 4% per year from 2018 to 2023. The surgical market includes sales of implantables, consumables, and surgical equipment, including associated technical, clinical and service support and training. Surgical implantables are medical devices designed to remain in the eye, such as monofocal and advanced technology intraocular lenses

7


Table of Contents

(AT-IOLs) placed in the eye during cataract surgery. Consumables include handheld instruments, surgical solutions, equipment cassettes, patient interfaces and other disposable items typically used during a single ophthalmic surgical procedure. Finally, surgical equipment includes multiuse surgical consoles, lasers and diagnostic instruments used across procedures to enable surgeons to visualize and conduct ophthalmic surgeries. The following diagram shows the surgical market in which we participate:

GRAPHIC

2017 surgical market breakdown by relative allocation of market sales.

        The major conditions of the eye for which surgical products and equipment are offered include cataracts, vitreoretinal disorders, refractive errors such as myopia, hyperopia and astigmatism, glaucoma and corneal disease. For cataracts, surgical removal of the clouded lens followed by insertion of a transparent artificial replacement lens, called an intraocular lens, is the standard treatment. Vitreoretinal surgery, which allows a surgeon to operate directly on the retina or on membranes or tissues that have covered the retina, is indicated for the treatment of various conditions such as diabetic retinopathy, trauma, tumors, complications of surgery on the front of the eye and pediatric disorders. Finally, for treatment of myopia, hyperopia and astigmatism, laser refractive surgery targeting the cornea, such as LASIK, offers an alternative to eyeglasses or contact lenses.

        The surgical market in which we participate is projected to grow at a compound annual growth rate of approximately 4% from 2018 through 2023. In particular, growth drivers in the surgical market include:

    Global growth of cataract and vitreoretinal procedures, driven by an aging population;

    Increased access to care, for example, in emerging markets and other international markets where the cataract surgery rate is 3.2 procedures per 1,000 people as compared to 12.7 in the U.S.;

    Higher uptake of premium patient-pay technologies, for example AT-IOL penetration is only 6% in international markets versus 14% in the U.S.;

    Increased adoption of advanced technologies, for example, improved diagnostic instruments, surgical options for glaucoma management, and the growing use of phacoemulsification during cataract removal, which is utilized in less than 50% of cases in emerging markets versus over 95% in the U.S.; and

    Eye disease as a comorbidity linked to the global prevalence of diabetes, which has nearly doubled from 4.7% in 1980 to 8.5% in 2014, combined with improving diagnostics capabilities and new product innovations, driving uptake of premium procedures.

The Vision Care Market

        The vision care market in which we operate was estimated to be approximately $14 billion for the year ended December 31, 2017 and is projected to grow at approximately 4% per year from 2018 to 2023. The vision care market is comprised of products designed for ocular care and consumer use. Products are largely categorized across two product lines: contact lenses and ocular health.

8


Table of Contents

        Contact lenses are thin lenses placed directly on the surface of the eye that are commonly used to treat refractive errors such as myopia, hyperopia, astigmatism and presbyopia. The contact lens market was estimated to be approximately $8 billion for the year ended December 31, 2017, and the following diagram identifies the relative breakdown of contact lens sales in 2017 by modality and design:

GRAPHIC

2017 contact lens market breakdown by relative allocation of market sales.

        Maintaining ocular health is also an essential part of people's daily lives. Ocular health products can address conditions such as dry eye, ensure effective contact lens care, supplement overall eye health, or provide temporary relief from allergies and related symptoms, such as red eye. The ocular health market was estimated to be approximately $6 billion for the year ended December 31, 2017, and the following diagram identifies the relative allocation of sales of each product category within the ocular health market:

GRAPHIC

2017 ocular health market breakdown by relative allocation of market sales.

        The vision care market in which we participate is projected to grow at a compound annual growth rate of approximately 4% from 2018 through 2023, driven mainly by:

    Continued modality shift to daily disposable lenses from reusable lenses and the resulting sales premium (an increase of 2 - 3x sales per patient, after customary rebates and discounts) associated with daily disposable wearers as compared to users of reusable lenses;

    Advancements in specialty lenses combined with increasing demand for toric, multifocal and cosmetic lenses, which command an approximately 15 - 30% pricing premium over spherical lenses, allowing patients to continue wearing contact lenses as they become older and helping to expand the market;

    A significant population of approximately 194 million undiagnosed dry eye patients, with an additional 42 million self-diagnosed dry eye patients using unsuitable products for treatment, and advances in diagnostics and ocular health treatments, facilitating the increase in patient awareness of dry eye;

9


Table of Contents

    Growing access and consumption of vision care products in emerging markets such as Asia, which had only 3% contact lens penetration in 2017 as compared to 15% in the U.S.; and

    Increasing consumer access through the expansion of distribution models, including internet sales and other direct-to-consumer channels.

Our Business

Overview

        With $7.1 billion in sales to third parties during the year ended December 31, 2018, we are the number one eye care devices company worldwide by revenues. Our broad range of products represents one of the most complete portfolios in the ophthalmic device industry, and comprises high-quality and technologically advanced products across all major product categories in the surgical and vision care markets. Our surgical and vision care products are used in treating multiple ocular health conditions and offer leading eye care solutions for patients throughout their lives.

GRAPHIC

        Our leadership position across most of our product categories enhances our ability to extend our product offering through the launch of new and innovative products, and to expand our geographic reach into ophthalmic markets worldwide. Our surgical business had approximately $4.0 billion in sales to third parties of implantables, consumables and equipment, as well as services and other surgical products, and our vision care business had approximately $3.1 billion in sales to third parties of our contact lens and ocular health products, during the year ended December 31, 2018. The United States accounted for 41% of our sales and international markets accounted for 59% of our sales during the year ended December 31, 2018.

10


Table of Contents

GRAPHIC

        We believe the Alcon brand name is synonymous with innovation, quality, service and leadership among eye care professionals worldwide. In each of our markets, we rely on our strong relationships with eye care professionals and consumers to attract and retain customers and expand the market. We customize our selling efforts to the medical practice needs of each customer, with the goal of surrounding eye care professionals with Alcon representatives that can help address each aspect of a customer's needs. Our field force supplements the direct promotion of our products by providing customers with access to clinical education programs, hands on training, data from clinical studies and technical service assistance.

        We have 18 state-of-the-art manufacturing facilities that employ our proprietary technologies and know-how. We believe our global footprint, knowledge base in manufacturing, state-of-the-art facilities and capacity planning enable us to handle increased levels of product demand and product complexity. Furthermore, our global manufacturing and supply chain allows us to leverage economies of scale and reduce cost per unit as we ramp up production.

        We have also made one of the largest commitments to research and development of any surgical and vision care company, with over 1,200 associates worldwide researching and developing treatments for vision conditions and eye diseases, and have sought innovation from both internal and external sources. In 2018, we invested $587 million in research and development, representing 8.2% of our total 2018 revenues. In addition to our in-house R&D capabilities, we also consider external innovation opportunities and routinely screen for companies developing emerging technologies that we believe could enhance our existing product offerings or develop into innovative new products. As part of these efforts, our dedicated business development team has completed over 25 business development and licensing (BD&L) transactions since 2016. We intend to continue to pursue acquisition, licensing and collaboration opportunities as part of our goal of remaining a market leader in innovation.

Our Surgical Business

        We hold the number one position in the global surgical market, offering implantable products, consumables and equipment for use in surgical procedures to address cataracts, vitreoretinal conditions, refractive errors and glaucoma. Our surgical business has the most complete line of ophthalmic surgical devices in the industry, creating a "one-stop shop" for our customers that we consider to be a key differentiator for our business. For the year ended December 31, 2018, our surgical business had $4.0 billion in sales to third parties.

11


Table of Contents

GRAPHIC

        Our surgical portfolio includes implantable devices, consumables and equipment, as well as services and other ancillary surgical products. We have the most extensive global installed base of surgical equipment in the industry, including the largest installed base of cataract phacoemulsification consoles and vitrectomy consoles. Our global installed equipment base drives pull-through sales of consumables specific to our equipment and helps cross-promote the sales of our implantable devices. Our key surgical equipment offerings include the Centurion vision system for phacoemulsification and cataract removal, our Constellation vision system for vitreoretinal surgery and our WaveLight refractive lasers used in LASIK and other laser-based vision correction procedures, including topography-guided procedures marketed under the Contoura brand. The key brands in our implantables portfolio include our AcrySof family of IOLs, with offerings from monofocal IOLs for basic cataract surgery to AT-IOLs for the correction of presbyopia, such as our PanOptix brand, and astigmatism at the time of cataract surgery. We have recently launched our UltraSert and Clareon AutonoMe pre-loaded IOL delivery systems to reduce lens handling and simplify the surgical procedure. Alongside our implantable business, we sell a broad line of consumable products that support ophthalmic surgical procedures, such as viscoelastic products, surgical solutions, incisional instruments, such as our MIVS platform, and dedicated consumables, including fluidics cassettes and patient interfaces, which work with Alcon equipment. The Alcon consumables portfolio also includes our Custom Pak surgical procedure pack, which can be custom built for the surgeon and which includes drapes, incisional instruments and all of the materials needed to perform a surgery.

        Across our surgical portfolio, we sell a tiered offering of products intended to meet the specific needs of customers in markets around the world at different price points. Newly launched offerings that bring considerable technology innovation to the market are typically introduced at a price premium to offset the cost of research and development. As these products age and/or competitive products advance, prices typically trend downward, requiring continuous innovation cycles to maintain and/or grow our margins. We also develop specific products to match customer needs in different customer segments, for example, premium-tier and mid-tier surgical consoles that can be manufactured and sold at different price points in different markets.

Our Vision Care Business

        Our vision care business consists of an extensive portfolio of contact lens and ocular health products, aimed at helping consumers see better. Our product lines include daily disposable, reusable and color-enhancing contact lenses. We also offer a comprehensive portfolio of ocular health products, including over-the-counter products for dry eye, contact lens care and ocular allergies, as well as ocular vitamins and redness relievers. With $3.1 billion in vision care sales to third parties for the year ended December 31, 2018, we are the number two company in the global vision care market. We aim to

12


Table of Contents

continue to innovate across our vision care portfolio to improve the lives of consumers and eye care professionals around the world.

GRAPHIC

        We have a broad portfolio of daily disposable, reusable and color-enhancing contact lenses, including Dailies and Air Optix, two of our key brands. Our Dailies product line includes DAILIES AquaComfort PLUS and DAILIES TOTAL1, the first and only water gradient contact lens in the market, which is also offered in a multifocal design to address the fast growing presbyopia market. DAILIES TOTAL1 is designed to be a super-premium lens positioned to compete at a premium price point in the contact lens market. Our Air Optix monthly replacement product line features silicone hydrogel contact lenses in monofocal, astigmatism-correcting, and multifocal options, as well as Air Optix Colors and Air Optix plus HydraGlyde contact lenses. Our key brands in our ocular health portfolio include the Systane family of artificial tear and related dry eye products, as well as the Opti-Free and Clear Care lines of multi-purpose and hydrogen peroxide disinfecting solutions, respectively.

        Sales of our contact lens and ocular health products are influenced by optometrist and other eye care professional recommendations, our marketing and consumer education efforts and consumer preferences. In addition to price, contact lenses compete on functionality, design and comfort, while ocular health products compete largely on product attributes, brand familiarity and professional recommendations. For our contact lens and ocular health products, we typically compete in the premium price segments of the market and we use improvements in functionality, design and consumer convenience to maintain our pricing position over time.

Our Strengths

        We have a strong foundation based on robust industry expertise, leading brands and excellence in customer service, backed by more than 70 years of history as a trusted brand. Our strengths include:

    Global leader in highly attractive markets with most complete brand portfolio.  With $7.1 billion in sales to third parties in the year ended December 31, 2018, we are the leader in an attractive eye care devices market, which is supported by favorable population megatrends and is expected to grow at approximately 4% per year from 2018 to 2023. For the year ended December 31, 2018, our sales were closely split between our businesses, with $4.0 billion in surgical and $3.1 billion in vision care, as well as geographically, with 41% of our sales in the United States and 59% in international markets. Our surgical business is the market leader in sales of ophthalmic equipment used in the operating room and is supported by the largest installed base of equipment worldwide, which we use to cross-promote our surgical consumables and IOLs. In our vision care business, our extensive portfolio of contact lens and ocular health products

13


Table of Contents

      includes well-recognized brands such as Dailies, Systane and Opti-Free. We believe our global leadership position and extensive brand portfolio allow us to benefit and build on the robust fundamentals driving growth in our markets.

    Innovation-focused with market leading development capabilities and investment.  We have made one of the largest commitments to research and development in the eye care devices market, with proven R&D capabilities in the areas of optical design, material and surface chemistry, automation and equipment platforms. Currently, we employ over 1,200 individuals dedicated to our research and development efforts, including physicians, doctors of optometry and PhDs. In addition, we actively seek opportunities to collaborate with third parties on advanced technologies to support our eye care devices business. We believe our reputation for innovation and our global commercial footprint makes us the partner of choice for developers of next-generation technologies, which has resulted in our completion of over 25 BD&L transactions since 2016. These efforts have collectively led to more than 60% growth in the number of projects within our portfolio of internal and external innovation over the past three years, with more than 100 pipeline projects in process as of December 31, 2018, including over 35 that have achieved positive proof of concept or are undergoing regulatory review.

    Global scale and reach supported by high-quality manufacturing network.  We have an extensive global commercial footprint that provides us with the scale and reach to support future growth, maximize the potential of new launches, enter new geographies efficiently and to take advantage of the large, dynamic and growing surgical and vision care markets. Our commercial footprint, which includes operations in over 74 countries, reaches consumers and patients in over 140 countries and is supported by over 3,000 highly rated sales force employees, 18 state-of-the-art manufacturing facilities employing our proprietary technologies and know-how, and our extensive global regulatory capability. We manufacture approximately 90% of our products at our own facilities and have continued to invest in next-generation manufacturing for our products, allowing us to leverage our existing scale to manufacture novel technologies on a flexible platform at a lower cost. Our extensive sales and distribution network, supported by our market leadership position and focus on innovation and customer experience, enhances our ability to expand our geographic reach and extend our product offerings through the launch of new and innovative products worldwide.

    Outstanding customer relationships and a trusted reputation for customer service, training and education. We believe that maintaining the highest levels of service excellence in our customer experience is a critical success factor in our industry. As such, in our surgical business, we have substantially increased our investment in external training, medical education and technical service. As a result of our efforts, we have achieved overall number one ratings in customer satisfaction, value, innovation, sales representatives and training and education in a third-party survey that we commissioned in 13 different markets, representing 80% of our surgical sales, in which surgical customers were asked to rank Alcon and our key competitors in each of the specified categories without being aware the survey was commissioned by Alcon. In our vision care business, we regularly meet with eye care practitioners to gain feedback and insights on our products and consumers' needs. We also provide training support at our approximately 30 state-of-the-art interactive training centers around the world, as well as through numerous digital and event-based training programs that we provide for practitioners, clinical support staff, students, residents, patients and consumers. In each of our businesses, we have built and maintained our relationships with key stakeholders to establish our trusted reputation in the industry.

    World leading expertise in eye care led by a first-class management team.  Our expertise in eye care is driven by our more than 70-year history in the industry and is supported by a high-quality workforce of more than 20,000 employees. We believe our institutional knowledge provides a

14


Table of Contents

      competitive advantage because our employees' industry expertise, relationships with our customers and understanding of the development, manufacture and sale of our products helps us to better identify new customer needs, assess markets for entry and identify promising technologies. In addition, we believe the diverse experience of our management team in running complex businesses allows them to add significant value to our company. In particular, we benefit from having a management team with an extensive background in the medical device industry. Led by David J. Endicott, our Chief Executive Officer, our management team's deep knowledge of eye care has allowed us to build a more nimble medical device culture within Alcon and created excitement among our workforce for our mission.

Our Strategy

        Our going-forward strategy builds on five key pillars in order to generate sustainable and profitable growth:

    Maximize the potential of our near-term portfolio by growing key products.  In surgical, we plan to build on our leading position in the IOL market through the launch of new AT-IOLs, where premium pricing drives a disproportionate 30% of IOL market value while representing only 8% of global IOL units sold. In addition, we expect improved diagnostics and new optical designs will address historical barriers to AT-IOL adoption to further grow this patient-pay market. We will also continue to invest behind our presbyopia-correcting PanOptix and ReSTOR IOL brands, and will continue to invest in our vitreoretinal equipment and consumables, where we also see meaningful opportunities for near-term growth. In vision care, we intend to maintain and grow our leading position in most of our product categories through increased eye care professional and consumer education, supported by continuous production innovation. For example, we believe that the expanding presbyopia market represents a potential multibillion dollar opportunity for market participants. We intend to further grow our DAILIES TOTAL1 family of products by increasing awareness among presbyopic patients to accelerate growth of multifocal sales and by capitalizing on the general market shift to daily disposables. We also aim to expand the dry eye product market by leveraging our well-recognized Systane family of eye drops and increasing investment in dry eye education and awareness, where we see a significant unmet need and an opportunity for robust market growth.

    Accelerate innovation and deliver the next wave of technologies.  We are committed to accelerating innovation by continuing to be one of the market leaders in investment in ophthalmic research and development. The R&D activities of our surgical business are focused on expanding our AT-IOL portfolio to further improve surgical and refractive outcomes, including through the use of advanced optics, light adjustable materials, accommodating lenses and modular platforms. We are also developing next-generation lasers, robotics and other equipment for cataract, vitreoretinal and laser-refractive surgery, as well as improved visualization equipment. In our vision care business, our focus is on developing and launching new contact lens materials, coatings and designs to extend our product lines and improve patient comfort, as well as on new products to expand our portfolio of presbyopia and ocular health products. Finally, we expect to continue to supplement our internal innovation investments by identifying and executing on attractive acquisition, licensing and collaboration opportunities with leading academic institutions and early-stage companies.

    Capture opportunities to expand markets and pursue adjacencies.  We believe there is a significant opportunity for growth in markets around the world due to under-penetration of both premium surgical devices, such as AT-IOLs, and of our vision care portfolio. For example, AT-IOL penetration in international markets was approximately 6% in 2017, as compared to 14% in the U.S. Similarly, contact lens penetration in international markets was approximately 3% in 2017, as compared to 15% in the U.S., demonstrating significant potential for future

15


Table of Contents

      growth. We intend to facilitate this growth by continued investment in promotion and customer education across all of our markets. In emerging markets in particular, we believe that the growing number of eye care professionals and dedicated eye hospitals, increased levels of affluence, improving technology access and better patient awareness will increase the adoption of our products. In addition, we believe we have significant opportunities to expand into adjacent product categories in which Alcon has not significantly participated in the past, through a combination of internal development efforts and potential bolt-on mergers and acquisitions activity. These opportunities include office-based diagnostics, surgical visualization, solutions for myopia control and consumer driven ocular health products, where we expect our eye care expertise and global commercial footprint will allow us to attract and retain new customers.

    Support new business models to expand customer experience.  In surgical, we intend to continue to identify new business models that benefit healthcare providers and improve access to leading Alcon products and technologies. For example, we are pursuing value-based business models that reward improved patient outcomes, as well as models that contract the entire procedure versus individual products. In vision care, where e-commerce entries have created some disruption of traditional sales channels, we believe that digital technology can address pain points experienced in existing paths to purchase. We intend to continue investing and innovating in digital capabilities to develop new business models in response to channel shifts and the increase in direct-to-consumer influence.

    Leverage infrastructure to improve operating efficiencies and margin profile over time.  With the significant organizational and infrastructure investments we have made over the last several years, we believe we have established a stable foundation that will allow us to continue to enhance the productivity of our commercial resources and meaningfully improve our core operating income margins over time. Further, we intend to improve the mix of our products, implement further supply chain efficiency initiatives and support new lower-cost manufacturing platforms to drive future operating profit and cash flows.

History of Company

        Alcon was originally founded in 1945 by pharmacists Robert Alexander and William Conner, who opened a small pharmacy under the "Alcon" name in Fort Worth, Texas. In 1947, Alcon Laboratories, Inc. was first incorporated and began manufacturing specialty pharmaceutical products to address ocular health needs. In the succeeding years, Alcon began operating internationally with the opening of an office in Canada and first formed its surgical division.

        In 1977, Alcon was acquired by a subsidiary of Nestlé organized under the laws of Switzerland, and operated as a wholly owned subsidiary of Nestlé until 2002. In 2001, the name of the entity was officially changed to Alcon, Inc. and, on March 20, 2002, Nestlé completed an initial public offering of approximately 25% of the outstanding common shares of Alcon, Inc. From March 20, 2002 until its merger into Novartis, Alcon was publicly listed and traded on the New York Stock Exchange under the symbol "ACL".

        On April 6, 2008, Nestlé and Novartis entered into an agreement pursuant to which Nestlé agreed to sell approximately 25% of the then outstanding Alcon shares to Novartis, with an option for Novartis to acquire Nestlé's remaining shares in Alcon beginning in 2010. This sale was consummated on July 7, 2008. On January 3, 2010, Novartis announced it was exercising its option to purchase the remaining approximately 52% of the total outstanding Alcon shares owned by Nestlé and submitted a merger proposal to acquire the approximately 23% of Alcon shares that were publicly traded. Upon consummation of the purchase from Nestlé on August 25, 2010, Novartis owned an approximate 77% interest in Alcon. On December 14, 2010, Novartis entered into a definitive agreement to merge Alcon into Novartis in consideration for Novartis shares and a contingent value amount. On April 8, 2011, a

16


Table of Contents

Novartis Extraordinary General Meeting approved the merger with Alcon, creating the Alcon Division within Novartis (the "Alcon Division"), which at the time became the fifth reported segment in the strategically diversified Novartis healthcare portfolio. In connection with the Novartis acquisition of Alcon, Novartis also merged its then-existing contact lens and contact lens care unit, CIBA Vision, and certain of its ophthalmic pharmaceutical products into Alcon, making the Alcon Division the second-largest division of Novartis at the time of merger, and moved the generic ophthalmic pharmaceutical business conducted by Alcon prior to the merger into the Sandoz Division of Novartis. In 2016, Novartis moved the management and reporting of Alcon ophthalmic pharmaceutical and over-the-counter ocular health products to its Innovative Medicines Division. Subsequently, effective January 1, 2018, Novartis returned to Alcon the management and reporting of over-the-counter ophthalmic products and certain surgical diagnostic medications previously transferred from Alcon in 2016.

        In early 2017, Novartis announced a strategic review of its Alcon Business to explore all options for its future, ranging from retention or sale of the business to the separation of the business via an initial public offering or spin-off transaction, in order to maximize value for its shareholders. Following the completion of such review in 2018, Novartis concluded that a spin-off transaction would be in the best interests of Novartis shareholders. Novartis conducted its strategic review during the course of 2017 and early 2018, with the key criteria for a final decision and timing being continued Alcon sales growth and margin improvement, which needed to have been demonstrated for multiple quarters in the judgment of the Novartis Board of Directors (the "Novartis Board") and management. On June 29, 2018, Novartis announced its intention to seek shareholder approval for the spin-off of its Alcon Business, following the complete legal and structural separation of Alcon into a standalone company.

Separation from Novartis

        Since our acquisition by Novartis in 2011, we have operated as a division within Novartis. Before or substantially concurrently with the separation and the spin-off, Novartis will transfer to us substantially all of the assets and liabilities of its eye care devices business, consisting of our surgical and vision care businesses. In addition, before or substantially concurrently with the spin-off, we and Novartis intend to enter into, or have entered into, a series of agreements that will provide a framework for our ongoing relationship. For a description of these agreements, see "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us".

        In connection with the separation and the spin-off, Alcon will apply to list its shares on the SIX and the NYSE and will register its shares with the SEC under applicable U.S. federal securities laws and, subject to the receipt of necessary authorizations, the completion of legal formalities and the satisfaction of the conditions precedent, Novartis will distribute to its shareholders all of the Alcon shares it holds immediately prior to the spin-off, in proportion to their share ownership in Novartis based on a ratio of 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs.

Reasons for the Separation and Spin-off

        On June 29, 2018, Novartis announced that its strategic review of the Alcon Business had concluded that the separation of the Alcon Business from the remainder of its businesses would be in the best interests of Novartis and its shareholders and that the Novartis Board intended to seek shareholder approval for the spin-off. At the Novartis Annual General Meeting of shareholders held in Basel, Switzerland on February 28, 2019 (the "Novartis AGM"), the Novartis Board obtained the approval of the Novartis shareholders to consummate the spin-off on the terms described in this Form 20-F. We and Novartis believe that the separation and the spin-off will provide a number of benefits to our business, to the business of Novartis and to Novartis shareholders. A wide variety of

17


Table of Contents

factors were considered by Novartis and the Novartis Board in their evaluation of the proposed separation and the spin-off, including the following potential benefits:

    enhanced strategic and management focus;

    creation of a more nimble medical device company with ability to quickly focus on innovating products to meet the needs of the market;

    distinct investment identity;

    more efficient allocation of capital;

    direct access to capital markets; and

    alignment of incentives with performance objectives.

        Novartis and the Novartis Board also considered a number of potentially negative factors in their evaluation of the potential separation and spin-off, including the following:

    disruptions to the business as a result of the separation;

    increased significance of certain costs and liabilities and impact of certain stranded costs;

    one-time costs of the separation and spin-off;

    inability to realize anticipated benefits of the separation and spin-off; and

    covenants and obligations of Alcon pursuant to the Separation and Distribution Agreement, the Tax Matters Agreement and other agreements entered into in connection with the separation.

        We describe the factors considered by Novartis and the Novartis Board in greater detail under "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Reasons for the Spin-off". In addition, the completion of the spin-off remains subject to the satisfaction, or waiver by the Novartis Board, of a number of conditions. See "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Conditions to the Spin-off" for additional detail.

Risks Associated with Our Business and the Separation

        Our business is subject to numerous risks, including:

    uncertainties regarding the commercial success of our products and our ability to maintain our position in the markets in which we compete;

    our ability to keep pace with the advances in the highly competitive eye care devices market, including the impact of competitive market entries, new therapies and new business models that may disrupt traditional sales channels;

    the success of our research and development efforts;

    uncertainties regarding the success of our separation and spin-off from Novartis, including our ability to establish the infrastructure needed to operate as a standalone company without significant management distraction or business disruption;

    pricing pressure from changes in third-party payor coverage and reimbursement methodologies and potential regulatory price controls;

    general political, economic and trade conditions, including uncertainties regarding the effects of ongoing instability in various parts of the world;

18


Table of Contents

 

    consolidation among our distributors and retailers;

    uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, intellectual property disputes and government investigations generally;

    potential product recalls or voluntary market withdrawals in connection with adverse events, defects, potential health hazards or unanticipated use of our products;

    regulatory actions or delays or government regulation generally;

    changes in tax laws;

    the potential volatility in the price of our shares;

    uncertainties regarding future sales or dispositions of our shares;

    other developments affecting us, our industry or our competitors; and

    the other factors described in the "Risk Factors" section of this Form 20-F.

        Neither Alcon nor Novartis can assure you that, following the separation and spin-off, any of the benefits described in this Form 20-F will be realized to the extent or at the time anticipated or at all. For additional information, please read carefully the risks described under "Item 3. Key Information—3.D. Risk Factors" beginning on page 40 of this Form 20-F.

Corporate Information

        Alcon is a stock corporation (Aktiengesellschaft) organized under the laws of Switzerland in accordance with article 620 et seq. of the Swiss Code of Obligations ("Swiss CO") and registered with the commercial register of the Canton of Fribourg, Switzerland (the "Swiss Register"), under registration number CHE-234.781.164. Alcon is registered in the Swiss Register under each of Alcon AG, Alcon SA and Alcon Inc., all of which are stated in our Articles of Incorporation ("Articles") as our corporate name. Alcon was formed by Novartis in connection with our separation from Novartis, for an unlimited duration, effective as of the date of the registration of Alcon in the Swiss Register on September 21, 2018.

        Alcon is domiciled in Fribourg, Switzerland and our registered office is currently located at Rue Louis-d'Affry 6, 1701 Fribourg, Switzerland. Our headquarters is currently located in Geneva, Switzerland at the following address: Chemin de Blandonnet 8, 1214 Vernier, Geneva, Switzerland. Our telephone number is +41 58 911 2110. Our principal website is www.alcon.com. The information contained on our website is not a part of this Form 20-F.

Implications of Being a Foreign Private Issuer

        Upon consummation of the spin-off, we will report under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as a non-U.S. company with foreign private issuer, or FPI, status. As long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

19


Table of Contents

    the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.

Summary Historical and Pro Forma Combined Financial Information

        The following tables set forth summary financial information for the periods and dates indicated below and should be read together with our combined financial statements and related notes, our unaudited pro forma combined financial statements and related notes, "Item 3. Key Information—3.B. Capitalization and Indebtedness" and "Item 5. Operating and Financial Review and Prospects" appearing elsewhere in this Form 20-F. We derived the summary historical income statement data for the years ended December 31, 2018, 2017 and 2016 and the summary historical balance sheet data as of December 31, 2018 and 2017 from our combined financial statements and related notes appearing elsewhere in this Form 20-F. We derived the summary historical balance sheet data as of December 31, 2016 from our audited combined financial statements and related notes not included in this Form 20-F, and prepared on a basis consistent with the audited combined financial statements included in this Form 20-F.

        The summary unaudited pro forma combined financial data have been prepared to reflect adjustments to our historical financial results in connection with the separation and the spin-off, including the expected incurrence of $3.5 billion in total indebtedness. We derived the summary unaudited pro forma combined income statement data for the year ended December 31, 2018 and the summary unaudited pro forma combined balance sheet data as of December 31, 2018 from our unaudited pro forma combined financial statements that appear elsewhere in this Form 20-F. The unaudited pro forma combined income statement data give effect to the separation and the spin-off as if these transactions had occurred at the beginning of our most recently completed fiscal year. The unaudited pro forma combined balance sheet data give effect to the separation and the spin-off as if these transactions had occurred as of our latest fiscal year-end balance sheet date. The assumptions used, and pro forma adjustments derived from such assumptions, are based on currently available information and we believe such assumptions are reasonable under the circumstances. See our unaudited pro forma combined financial statements and related notes appearing elsewhere in this Form 20-F.

        The summary unaudited pro forma combined financial data will not necessarily be indicative of our results of operations or financial condition had the spin-off and our anticipated post-separation capital structure been completed and implemented on the dates assumed. In addition, the summary financial data is not intended to replace our combined financial statements and related notes. Our historical results could differ from those that would have resulted if we operated autonomously or as an entity independent of Novartis in the periods for which historical financial data is presented below, and such results are not necessarily indicative of results that may be expected in the future.

        For additional details regarding the preparation of our combined financial statements and unaudited pro forma combined financial statements, please see "Item 5. Operating and Financial Review and Prospects—5.A. Operating Results—Basis of Preparation", "Note 2. Basis of Preparation" to our combined financial statements and the notes to our unaudited pro forma combined financial statements appearing elsewhere in this Form 20-F.

20


Table of Contents

        We prepare our combined financial statements in accordance with IFRS, as issued by the IASB.

 
  Year Ended December 31,  
($ millions unless indicated otherwise)
  Pro Forma
2018
  2018   2017   2016  

Income Statement Data:

                         

Net sales to third parties

    7,149     7,149     6,785     6,589  

Operating (loss)/income

    (248 )   (248 )   (77 )   10  

Interest expense

    (126 )   (24 )   (27 )   (31 )

Other financial income and expense

    (37 )   (28 )   (23 )   (92 )

Loss before taxes

    (411 )   (300 )   (127 )   (113 )

Taxes

    96     73     383     (57 )

Net (loss)/income

    (315 )   (227 )   256     (170 )

Basic earnings per share ($)(1)

    (0.64 )   N/A     N/A     N/A  

Diluted earnings per share ($)(1)

    (0.64 )   N/A     N/A     N/A  

(1)
The weighted average number of shares outstanding used in calculating basic earnings per share and diluted earnings per share is 488,700,000. For additional information regarding the calculation of our basic and diluted shares outstanding, see our unaudited pro forma combined financial statements and related notes appearing elsewhere in this Form 20-F.

 

 
  At December 31,  
($ millions)
  Pro Forma
2018
  2018   2017   2016  

Balance Sheet Data:

                         

Cash and cash equivalents

    500     227     172     162  

Total assets

    27,301     27,062     27,388     27,740  

Total debt(1)

    3,566     136     149     249  

Invested capital / Equity

    19,515     22,639     23,029     23,012  

(1)
Total debt is calculated based on the sum of our total current financial debt and total non-current financial debt. For additional information on total debt as of December 31, 2018 and 2017, see our combined financial statements and related notes appearing elsewhere in this Form 20-F. For additional information on the total debt as of December 31, 2016, see our audited combined financial statements and related notes not included in this Form 20-F. The pro forma total debt as of December 31, 2018 reflects the expected incurrence of $3.5 billion in total indebtedness prior to the spin-off. For additional information, see our unaudited pro forma combined financial statements and related notes appearing elsewhere in this Form 20-F.

21


Table of Contents

        The following table sets forth certain other income statement data, including net sales by segment and certain margin data.

 
  Year Ended December 31,  
($ millions unless indicated otherwise)
  Pro Forma
2018
  2018   2017   2016  

Other Income Statement Data:

                         

Net sales by segment

                         

Surgical

    3,999     3,999     3,733     3,606  

Vision Care

    3,150     3,150     3,052     2,983  

Gross profit

    3,192     3,192     3,204     3,111  

Margin data

                         

Gross profit margin (%)

    44.6     44.6     47.2     47.2  

Operating income margin (%)

    (3.5 )   (3.5 )   (1.1 )   0.2  

        The following tables set forth certain non-IFRS financial measures, including core financial data and net (debt)/liquidity data, which have not been prepared in accordance with IFRS, and should be read together with our combined financial statements and related notes, our unaudited pro forma combined financial statements and related notes, and "Item 5. Operating and Financial Review and Prospects" appearing elsewhere in this Form 20-F. These non-IFRS financial measures should be viewed in addition to, and not as a substitute for, our reported results prepared in accordance with IFRS. For definitions and reconciliations of the non-IFRS financial measures presented below to the most comparable financial measures in accordance with IFRS, please refer to "Item 5. Operating and Financial Review and Prospects—5.A. Operating results—Non-IFRS Measures as Defined by the Company".

 
  Year Ended December 31,  
($ millions unless indicated otherwise)
  Pro Forma
2018
  2018   2017   2016  

Core financial data:

                         

Core gross profit

    4,541     4,541     4,211     4,123  

Core gross profit margin (%)

    63.5     63.5     62.1     62.6  

Core operating income

    1,212     1,212     1,086     1,128  

Core operating income margin (%)

    17.0     17.0     16.0     17.1  

Core net income

    886     974     908     922  

Basic core earnings per share ($)(1)

    1.81     N/A     N/A     N/A  

Diluted core earnings per share ($)(1)

    1.81     N/A     N/A     N/A  

(1)
The weighted average number of shares outstanding used in calculating basic core earnings per share and diluted core earnings per share is 488,700,000. For additional information regarding the calculation of our basic and diluted shares outstanding, see our unaudited pro forma combined financial statements and related notes appearing elsewhere in this Form 20-F.
 
  At December 31,  
($ millions)
  Pro Forma
2018
  2018   2017   2016  

Net (debt)/liquidity(1)

    (2,977 )   180     107     (8 )

(1)
Excludes financial lease liabilities and other financial liabilities/receivables to/from Novartis Group.

22


Table of Contents



The Spin-off

Overview

        On June 29, 2018, Novartis announced its intention to seek shareholder approval for the spin-off of its Alcon Business following the complete legal and structural separation of Alcon, which is currently a wholly owned subsidiary of Novartis that was formed to hold the Novartis eye care devices business. The separation of Alcon from Novartis and the distribution of the Alcon shares described in this Form 20-F are intended to provide Novartis shareholders with equity investments in two separate, independent public companies that will be able to focus on each of their respective businesses. Novartis and Alcon expect that the separation and spin-off will result in enhanced long-term performance of each business for the reasons discussed in "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Reasons for the Spin-off".

        To enable the separation, prior to the spin-off, Novartis will complete a series of internal transactions described under "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us" or the "Internal Transactions". Novartis will subsequently distribute all of the Alcon shares held by Novartis immediately prior to the spin-off to Novartis shareholders in the spin-off and Alcon, holding the Alcon Business, will become an independent, publicly traded company.

        Prior to completion of the spin-off, Alcon intends to enter into a Separation and Distribution Agreement and several other agreements with Novartis related to the separation and the spin-off. These agreements will govern the relationship between Novartis and Alcon up to and after completion of the spin-off and allocate between Novartis and Alcon various assets, liabilities and obligations, including employee benefits, intellectual property and tax-related assets and liabilities. See "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions" for more detail.

        Completion of the spin-off is subject to the satisfaction, or waiver by the Novartis Board, of a number of conditions. See "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off" for more detail.

Questions and Answers about the Spin-off

        The following provides only a summary of and certain questions relating to the terms of the spin-off. You should read the section entitled "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off" below in this Form 20-F for a more detailed description of the matters identified below.

Q:
Why am I receiving this document?

A:
Novartis has made this document available to you because you are a holder of Novartis shares or ADRs. If you hold or have acquired and do not sell or otherwise dispose of your Novartis shares or ADRs prior to the close of business on April 8, 2019, you will be entitled to receive 1 Alcon share for each of your 5 Novartis shares or 5 Novartis ADRs. An application will be made to list the Alcon shares on the SIX and the NYSE. This document will help you understand how the separation and distribution will affect your investment in Novartis and your investment in Alcon after the spin-off.

23


Table of Contents

Q:
How will the spin-off of Alcon from Novartis work?

A:
To accomplish the spin-off, Novartis will distribute all of the Alcon shares held by Novartis to holders of Novartis shares and ADRs on a pro rata basis. You will not receive fractional Alcon shares and will instead receive cash upon the sale of the aggregated fractional shares in lieu of any fractional shares. For more information, see "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Treatment of Fractional Shares". Following the spin-off, Alcon will be an independent, publicly traded company, and Novartis will not retain any ownership interest in Alcon. See also "Item 7. Major Shareholders and Related Party Transactions—7.A. Major Shareholders".

Q:
Why is the separation of Alcon structured as a spin-off?

A:
Novartis believes that a tax-neutral distribution for Swiss withholding and income tax and U.S. federal income tax purposes of all Alcon shares held by Novartis to the Novartis shareholders is an efficient way to separate its eye care devices business in a manner that will create long-term value for Novartis, Alcon and their respective shareholders.

Q:
When will Alcon shares begin to trade on a standalone basis?

A:
Alcon will become a standalone public company, independent of Novartis, on April 9, 2019, and Alcon shares will commence trading on a standalone basis on the SIX and the NYSE at market open on April 9, 2019 (9:00 AM Central European Time on the SIX and 9:30 AM Eastern Standard Time on the NYSE). Alcon shares will be able to be traded and transferred across applicable borders without the need for conversion, with identical shares to be traded on the SIX in CHF and on the NYSE in USD. See also "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Listing and Trading of our Shares".

Q:
What will be the ticker symbol of the Alcon shares that Novartis shareholders will receive in the spin-off?

A:
Alcon shares will trade on the SIX and the NYSE under the ticker symbol "ALC".

Q:
When will Novartis shares and ADRs cease to trade including the right to receive Alcon shares?

A:
The last day of trading of Novartis shares and ADRs including the right to receive Alcon shares on the SIX and the NYSE, respectively, will be April 8, 2019. This means that any Novartis shares or ADRs that you hold or acquire and do not sell or otherwise dispose of prior to the close of business on April 8, 2019 will include the right to receive Alcon shares.

Q:
If I sell my Novartis shares or ADRs on or before April 8, 2019, will I still be entitled to receive Alcon shares in the spin-off?

A:
If you sell your Novartis shares or ADRs before the close of business on April 8, 2019, you will not be entitled to receive Alcon shares in the distribution. If you hold or have acquired and do not sell or otherwise dispose of your Novartis shares or ADRs prior to the close of business on April 8, 2019 and decide to sell them after such time, you will still be entitled to receive Alcon shares in the distribution. You should discuss these options with your bank, broker or other nominee.


See "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—When and How You Will Receive Alcon Shares" for more information.

24


Table of Contents

Q:
When will Novartis shares and ADRs commence trading excluding the right to receive Alcon shares?

A:
Novartis shares and ADRs will commence trading on a standalone basis without the right to receive Alcon shares on the SIX and the NYSE, respectively, on April 9, 2019. This means if you purchase a Novartis share or ADR on or after April 9, 2019, the Novartis share or ADR will reflect an ownership interest solely in Novartis and will not include the right to receive any Alcon shares in the spin-off.

Q:
What do I have to do to participate in the spin-off?

A:
Holders of Novartis shares or ADRs held in book-entry form with a bank or broker and holders of registered Novartis ADRs.    If you hold or have acquired and do not sell or otherwise dispose of your Novartis shares or ADRs prior to the close of business on April 8, 2019, you will not be required to take any action, pay any cash, deliver any other consideration, or surrender any existing Novartis shares or ADRs in order to receive Alcon shares in the spin-off, but we urge you to read this Form 20-F carefully.


Holders of Novartis physical share certificates (Heimverwahrer).    Following the Novartis AGM, all registered Novartis shareholders holding physical share certificates who have previously provided a valid mailing address to Novartis will have received a notice with instructions on how to receive Alcon shares in the spin-off. If you have not received such a notice from Novartis by March 4, 2019, please contact the Novartis Share Registry by telephone at +41 61 324 7204 or by email at share.registry@novartis.com. For more information, see "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—When and How You Will Receive Alcon Shares", as well as "—Where can I get more information?" below.


The spin-off will not affect the number of outstanding Novartis shares or ADRs or any rights of Novartis shareholders, although it will affect the market value of each outstanding Novartis share and ADR. See "—Will the spin-off affect the trading price of my Novartis shares or ADRs?" below.


At the Novartis AGM held in Basel, Switzerland on February 28, 2019, the Novartis Board obtained the approval of the Novartis shareholders to consummate the spin-off on the terms described in this Form 20-F.

Q:
Will there be any "when-issued" trading of Alcon shares or any "ex-distribution" trading of Novartis shares or ADRs before April 9, 2019?

A:
There will not be any trading of Alcon shares on a "when-issued" basis or any "ex-distribution" trading of Novartis shares or ADRs before April 9, 2019. This means that Alcon shares will not trade separately from Novartis shares or ADRs prior to April 9, 2019 and any Novartis share or ADR purchased or sold up to the close of business on April 8, 2019 will include the right to receive Alcon shares in the spin-off.

Q:
How does the spin-off impact conversion of Novartis ADRs into ordinary shares?

A:
March 29, 2019 is the last date on which Novartis ADR holders can convert their ADRs into Novartis shares before completion of the spin-off and vice versa. March 29, 2019 is also the last date for Novartis ADR holders to directly register or de-register their Novartis ADRs with the Novartis ADR depositary, J.P. Morgan, before the completion of the spin-off. From and after April 11, 2019, holders of Novartis ADRs will again be able to convert their Novartis ADRs into Novartis shares and directly register or de-register their Novartis ADRs with J.P. Morgan. See "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—When and How You Will Receive Alcon Shares".

25


Table of Contents

Q:
How many Alcon shares will I receive in the spin-off?

A:
Novartis will distribute to you 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs that you hold or have acquired and do not sell or otherwise dispose of prior to the close of business on April 8, 2019. For additional information on the distribution, see "Item 4. Information and Development of the Company—4.A. History and Development of the Company—The Spin-off—When and How You Will Receive Alcon Shares".

Q:
How many Alcon shares are expected to be outstanding immediately following the spin-off?

A:
Based on approximately 2,433,000,000 issued shares of Novartis (excluding treasury shares held by Novartis and its subsidiaries) as of December 31, 2018, an estimated number of Novartis shares delivered under equity participation plans and share buybacks between December 31, 2018 and the completion of the spin-off, and the application of the distribution ratio, Alcon expects to have approximately 488,700,000 shares of Alcon outstanding immediately following the spin-off. The actual number of Alcon shares that Novartis will distribute in the spin-off will depend on the total number of issued Novartis shares (excluding treasury shares held by Novartis and its subsidiaries) as of the close of business on April 8, 2019. The Alcon shares that Novartis distributes will constitute all of the Alcon shares held by Novartis immediately prior to the spin-off. For additional information on the expected share capital of Alcon following the spin-off, including the treasury shares expected to be held by Alcon at the time of the spin-off, see "Item 10. Additional Information—10.A. Share Capital".

Q:
How will fractional shares be treated in the spin-off?

A:
Novartis will not distribute any fractional Alcon shares in connection with the spin-off. Instead, except as otherwise described in "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Treatment of Fractional Shares", UBS, as the Swiss settlement agent, will aggregate all fractional shares that Novartis shareholders would otherwise have been entitled to receive and that have been notified to UBS by any of Computershare Trust Company, N.A., the U.S. distribution agent, the Novartis Share Registry or the relevant deposit banks through SIX SIS AG ("SIX SIS") into whole shares and sell the whole shares in the open market at prevailing market prices. The aggregate net cash proceeds of the sales will be distributed pro rata to the relevant holders that would otherwise have been entitled to receive the fractional shares (based on the fractional share each such holder would otherwise be entitled to receive) on or around April 23, 2019. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient shareholders for U.S. federal income tax purposes and will, in certain circumstances, be taxable to the recipient shareholders for Swiss income tax purposes, as described in greater detail in "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Material U.S. Federal Income Tax Consequences of the Spin-off" and "—Swiss Tax Consequences of the Spin-off". See "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Treatment of Fractional Shares" for more detail.

Q:
What will happen to the listing of Novartis shares and ADRs?

A:
After the spin-off, Novartis shares will continue to trade on the SIX under the symbol "NOVN" and Novartis ADRs will continue to trade on the NYSE under the symbol "NVS".

26


Table of Contents

Q:
Will the number of Novartis shares or ADRs I own change as a result of the spin-off?

A:
No, the number of Novartis shares or ADRs you own will not change as a result of the spin-off.

Q:
Will the spin-off affect the trading price of my Novartis shares or ADRs?

A:
Yes. As a result of the spin-off, Novartis expects the trading prices of Novartis shares and ADRs at market open on April 9, 2019 to be lower than the trading prices at market close on April 8, 2019, because the trading prices will no longer reflect the value of the Alcon Business. There can be no assurance that the aggregate market value of the Novartis shares or ADRs and the Alcon shares following the spin-off will be higher than, equal to or lower than the market value of Novartis shares or ADRs if the spin-off did not occur. This means, for example, that the combined trading prices of one Novartis share or ADR and one-fifth of an Alcon share after market open on April 9, 2019 (representing the number of Alcon shares to be received per every one Novartis share or ADR in the distribution) may be equal to, greater than or less than the trading price of one Novartis share or ADR before April 9, 2019. In addition, following the close of business on April 8, 2019 but before the commencement of trading on April 9, 2019, your Novartis shares and ADRs will reflect an ownership interest solely in Novartis and will not include the right to receive any Alcon shares in the spin-off, but may not yet accurately reflect the value of such Novartis shares or ADRs excluding the Alcon Business.

Q:
What is the expected date of completion of the spin-off?

A:
It is expected that the Alcon shares that eligible holders of Novartis shares or ADRs are entitled to receive in the spin-off will begin trading separately from Novartis shares and ADRs on April 9, 2019. This is the date that Alcon will become a standalone public company, independent of Novartis. However, the completion and timing of the separation and spin-off are dependent upon a number of conditions and no assurance can be provided as to the timing of the separation or the spin-off or that all conditions to the spin-off will be met.

Q:
What are the conditions to the spin-off?

A:
We expect that the separation and the spin-off will be effective on April 9, 2019, provided that the following conditions shall have been satisfied or waived by Novartis:

the Alcon shares to be distributed having been accepted for listing on the SIX and the NYSE as from April 9, 2019 (subject to technical deliverables only);

the SEC declaring this Form 20-F effective under the Exchange Act, and no stop order suspending the effectiveness of this Form 20-F being in effect and no proceedings for that purpose being pending before or threatened by the SEC;

no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the spin-off being in effect, and no other event outside the control of Novartis having occurred or failed to occur that prevents the consummation of the spin-off (including, but not limited to, Novartis not being able to complete the Internal Transactions due to elements outside of its reasonable control); and

no other events or developments having occurred prior to April 9, 2019 that, in the judgment of the Novartis Board, would result in the spin-off having a material adverse effect (including, but not limited to, material adverse tax consequences or risks) on Novartis or its shareholders.

27


Table of Contents

      Novartis does not currently expect to waive any of the conditions to the spin-off. Novartis and Alcon cannot assure you that any or all of the conditions to the spin-off will be met. See also "—Can Novartis decide to cancel the spin-off of Alcon shares even if all the conditions are met?" below and "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Conditions to the Spin-off".

Q:
Can Novartis decide to cancel the spin-off of Alcon shares after AGM approval, even if all the conditions are met?

A:
No. The separation is subject to the satisfaction or waiver of certain conditions. If all of such conditions have been satisfied or waived in a timely manner, Novartis does not have the right to subsequently terminate the planned distribution. In addition, as the shareholders of Novartis have authorized the Novartis Board to consummate the spin-off at the Novartis AGM held in Basel, Switzerland on February 28, 2019, Novartis will be required to take such reasonable actions as are within its control to satisfy the conditions to the spin-off. See also "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Conditions to the Spin-off".

Q:
What if I want to sell my Novartis shares or ADRs or my Alcon shares?

A:
You should consult with your custodian bank or broker or other financial advisors and/or your tax advisors.

Q:
What are the Swiss tax and U.S. federal income tax consequences to me of the spin-off?

A:
The spin-off should qualify as a tax-neutral transaction for Swiss tax purposes and for nonrecognition of gain and loss under Section 355 of the Code for U.S. federal income tax purposes. Accordingly, except with respect to the receipt of cash in lieu of fractional shares or cash due to holders of physical shares certificates (Heimverwahrer) in certain circumstances, no gain or loss should be recognized by, or be includible in the income of, a Swiss Holder or a U.S. Holder (each as defined below) as a result of the spin-off. Additionally, no Swiss withholding tax should apply on the distribution of Alcon shares in the spin-off. For Swiss tax and U.S. federal income tax purposes, the aggregate tax basis of your Novartis shares (including shares held in the form of ADRs) and the Alcon shares you receive in the spin-off should be the same as the aggregate tax basis of the Novartis shares you held immediately before the spin-off, and for U.S. federal income tax purposes the aggregate tax basis will be allocated between your Novartis shares and the Alcon shares you receive in the spin-off in proportion to the relative fair market value of each on April 9, 2019.


See "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off——Material Swiss Tax Consequences of the Spin-off" and "—Material U.S. Federal Income Tax Consequences of the Spin-off" for more information regarding the material tax consequences to Swiss Holders and U.S. Holders of the spin-off (including the respective definitions of "Swiss Holder" and "U.S. Holder").

Q:
Who will manage Alcon after the spin-off?

A:
Alcon benefits from having in place a management team with an extensive background in the medical device industry and the Alcon surgical and vision care businesses. Led by David J. Endicott, the Chief Executive Officer of Alcon, the Alcon management team possesses deep knowledge of, and extensive experience in, its industry. For more information regarding the Alcon management team and leadership structure, see "Item 6. Directors, Senior Management and Employees—6.A. Directors and Senior Management—Senior Management".

28


Table of Contents

Q:
How can I exercise my voting rights in Alcon after the spin-off?

A:
After the spin-off, each Alcon share will be entitled to one vote at any General Meeting of Alcon shareholders. However, voting rights may only be exercised for shares registered on the Alcon share register on the record date for the relevant General Meeting. See "Item 10—Additional Information—10.B. Memorandum and Articles of Association—Shareholder Rights". Alcon shareholders that hold their shares as book-entry shares via the SIX SIS or through the facilities of the DTC should contact their custodian, bank, broker or other nominee for more information on how to register and vote their Alcon shares following the spin-off. Novartis shareholders registered on the Novartis share register will not automatically be registered on Alcon's share register, but to facilitate prompt registration following the spin-off, Alcon will receive data from the Novartis share register. In case you do not want Alcon to receive your data from the Novartis share register, please contact the Novartis Share Registry during regular Swiss business hours by telephone at +41 61 324 7204 or by email at share.registry@novartis.com.

Q:
Does Alcon intend to pay cash dividends?

A:
Alcon currently expects that it will pay a regular cash dividend beginning in 2020 equivalent to approximately 10% of 2019 core net income. However, while the Alcon Board of Directors (the "Alcon Board") may, in its discretion, recommend the payment of a dividend in respect of each fiscal year, the declaration, timing, and amount of any dividends to be paid by Alcon following the spin-off will be subject to the approval of the Alcon shareholders at a General Meeting of shareholders. The determination of the Alcon Board as to whether to recommend a dividend and the approval of any such proposed dividend by the Alcon shareholders will depend upon many factors, including Alcon financial condition, earnings, corporate strategy, capital requirements of its operating subsidiaries, covenants, legal requirements and other factors deemed relevant by the Alcon Board and shareholders. See "Item 8. Financial Information—8.A. Combined Statements and Other Financial Information—Dividend Policy" for more information.

Q:
Will Alcon incur any debt prior to or at the time of the spin-off?

A:
In connection with the separation and spin-off and prior to the spin-off, Alcon intends to pay to Novartis approximately $3.0 billion in cash, including payment in satisfaction of certain intercompany indebtedness owed by Alcon and its subsidiaries to Novartis and its affiliates. Alcon expects to fund such cash payment with the proceeds from $3.5 billion in total debt financing that Alcon anticipates arranging prior to the spin-off. See "Item 3. Key Information—3.B. Capitalization and Indebtedness" and "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Conditions to the Spin-off" for more information.

Q:
What will the Alcon relationship with Novartis be following the spin-off?

A:
Alcon will enter into a Separation and Distribution Agreement with Novartis to effect the separation and provide a framework for the Alcon relationship with Novartis after the separation and spin-off. Alcon will also enter into certain other agreements with Novartis, including but not limited to a Transitional Services Agreement, an Employee Matters Agreement, a Tax Matters Agreement, a Manufacturing and Supply Agreement and certain other agreements. These agreements will govern the separation between Alcon and Novartis of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax liabilities) of Novartis and its subsidiaries that constitute the Alcon Business and are attributable to periods prior to, at and after the separation of Alcon from

29


Table of Contents

      Novartis, and will govern certain relationships between Alcon and Novartis after the separation and spin-off. We describe these arrangements in greater detail under "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us", and describe some of the risks of these arrangements under "Item 3. Key Information—3.D. Risk Factors—Risks Related to the Separation from Novartis".

Q:
Are there risks associated with owning Alcon shares?

A:
Yes. Ownership of Alcon shares is subject to both general and specific risks relating to the Alcon business, the industry in which Alcon operates, its ongoing contractual relationships with Novartis and its status as a separate, publicly traded company. Ownership of Alcon shares is also subject to risks relating to the spin-off. Accordingly, you should carefully read the information set forth under "Item 3. Key Information—3.D. Risk Factors" in this Form 20-F.

Q:
Who will be the registrar and transfer agent for the Alcon shares?

A:
Computershare will act as registrar for the Alcon shares. Computershare Switzerland Ltd will act as the Alcon Swiss share registrar and Computershare Trust Company, N.A. will act as the Alcon U.S. share registrar and transfer agent.

Q:
Where can I get more information?

A:
Before the spin-off, if you have any questions relating to the business performance of Novartis or Alcon or the spin-off, you should contact Novartis at:


Novartis International AG

Investor Relations

P.O. Box

CH-4002 Basel, Switzerland

Tel: +41 61 324 7944

www.novartis.com/investors


After the spin-off, if you have any questions relating to Alcon business performance, you should contact Alcon at:


Alcon

Investor Relations
Chemin de Blandonnet 8
1214 Vernier
Geneva, Switzerland
Tel: +41 58 911 2110
www.alcon.com


If you hold Novartis ADRs and have any questions with respect to the mechanics of the spin-off as they relate to your ADRs, you should contact Computershare Trust Company, N.A., the Novartis U.S. ADR distribution agent for the Alcon shares for the spin-off, at:


Computershare Trust Company, N.A.

P.O. Box 505000

Louisville, KY 40233-5000

U.S. Toll Free: +1 800 736 3001

International: +1 781 575 3100

30


Table of Contents


PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

1.A. DIRECTORS AND SENIOR MANAGEMENT

        For information regarding our directors and senior management, see "Item 6. Directors, Senior Management and Employees—6.A. Directors and Senior Management".

1.B. ADVISERS

        Our Swiss legal counsel is Bär & Karrer AG, Brandschenkestrasse 90, 8027 Zurich, Switzerland. Our U.S. legal counsel is Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019.

1.C. AUDITORS

        We have retained PricewaterhouseCoopers SA to act as our independent Registered Public Accounting Firm. The address for PricewaterhouseCoopers SA is Avenue Giuseppe-Motta 50, CH-1211 Geneva 2, Switzerland. PricewaterhouseCoopers SA is registered with the Public Company Accounting Oversight Board.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

        Not Applicable.

ITEM 3.    KEY INFORMATION

3.A. SELECTED FINANCIAL DATA

        The following selected financial data should be read together with our combined financial statements and related notes and "Item 5. Operating and Financial Review and Prospects" appearing elsewhere in this Form 20-F. We derived the selected income statement data for the years ended December 31, 2018, 2017 and 2016 and the selected balance sheet data as of December 31, 2018 and 2017 from our combined financial statements and related notes appearing elsewhere in this Form 20-F. We derived the selected income statement data for the years ended December 31, 2015 and the selected balance sheet data as of December 31, 2016 and 2015 from our audited combined financial statements and related notes not included in this Form 20-F, and prepared on a basis consistent with the audited combined financial statements included in this Form 20-F. We derived the selected income statement data for the year ended December 31, 2014 and the selected balance sheet data as of December 31, 2014 from our unaudited combined financial statements and related notes not included in this Form 20-F, and prepared on a basis consistent with the audited combined financial statements included in this Form 20-F.

        The selected financial data in this section are not intended to replace our combined financial statements and the related notes. Our historical results could differ from those that would have resulted if we operated autonomously or as an entity independent of Novartis in the periods for which historical financial data is presented below, and such results are not necessarily indicative of the results that may be expected in the future.

        For additional details regarding the preparation of our combined financial statements, please see "Item 5. Operating and Financial Review and Prospects—5.A. Operating Results—Basis of Preparation", and "Note 2. Basis of Preparation" to our combined financial statements appearing elsewhere in this Form 20-F.

31


Table of Contents

        We prepare our combined financial statements in accordance with IFRS, as issued by the IASB.

 
  Year Ended December 31,  
($ millions)
  2018   2017   2016   2015   2014  

Income Statement Data:

                               

Net sales to third parties

    7,149     6,785     6,589     6,751     7,407  

Operating (loss)/income

    (248 )   (77 )   10     417     904  

Interest expense

    (24 )   (27 )   (31 )   (18 )   (14 )

Other financial income and expense

    (28 )   (23 )   (92 )   (48 )   (47 )

(Loss)/income before taxes

    (300 )   (127 )   (113 )   351     843  

Taxes

    73     383     (57 )   (43 )   (11 )

Net (loss)/income

    (227 )   256     (170 )   308     832  

 

 
  At December 31,  
($ millions)
  2018   2017   2016   2015   2014  

Balance Sheet Data:

                               

Cash and cash equivalents

    227     172     162     285     316  

Inventories

    1,440     1,303     1,207     1,149     1,147  

Other current assets

    1,732     1,812     1,650     1,540     1,753  

Non-current assets

    23,663     24,101     24,721     25,228     26,055  

Total assets

    27,062     27,388     27,740     28,202     29,271  

Trade payables

    663     615     516     493     645  

Other current liabilities

    1,230     1,163     1,149     1,150     1,255  

Non-current liabilities

    2,530     2,581     3,063     2,922     2,904  

Total liabilities

    4,423     4,359     4,728     4,565     4,804  

Invested capital

    22,639     23,029     23,012     23,637     24,467  

Total invested capital and liabilities

    27,062     27,388     27,740     28,202     29,271  

Net assets

    22,639     23,029     23,012     23,637     24,467  

32


Table of Contents

Exchange Rates

        The following table shows, for the years and dates indicated, certain information concerning the rate of exchange of U.S. dollar per Swiss franc based on exchange rate information found on Bloomberg Market System. The exchange rate in effect on March 19, 2019 as found on Bloomberg Market System was CHF 1.00 = USD 1.00.

($ per CHF)
Period
  Average(1)  

Year ended December 31, 2014

    1.09  

Year ended December 31, 2015

    1.04  

Year ended December 31, 2016

    1.01  

Year ended December 31, 2017

    1.02  

Year ended December 31, 2018

    1.02  

 

 
  Low(2)   High(2)  

September 2018

    1.02     1.04  

October 2018

    0.99     1.02  

November 2018

    1.00     1.00  

December 2018

    1.01     1.02  

January 2019

    1.00     1.01  

February 2019

    1.00     1.01  

March 2019 (through March 19, 2019)

    1.00     1.00  

(1)
Represents the average of the exchange rates on the last day of each month during the relevant time period.

(2)
Represents the lowest and highest, respectively, of the exchange rates on the last day of each month during the year.

33


Table of Contents

3.B. CAPITALIZATION AND INDEBTEDNESS

        The following table sets forth our combined capitalization and indebtedness as of December 31, 2018 on:

    an actual basis; and

    an adjusted basis, to give effect to the pro forma adjustments set forth in "—Unaudited Pro Forma Combined Financial Statements" below.

        The "as adjusted" information below is not necessarily indicative of what our capitalization and indebtedness would have been had the separation and related transactions been completed as of December 31, 2018. Investors should read the information in this table together with the combined financial statements and related notes to those statements appearing elsewhere in this Form 20-F, as well as the sections of this Form 20-F captioned "Item 3. Key Information—3.A. Selected Financial Data", "Item 5. Operating and Financial Review and Prospects" and "—Unaudited Pro Forma Combined Financial Statements" below.

 
  As of December 31, 2018  
($ millions)
  Actual   As adjusted  

Cash and cash equivalents(1)

    227     500  

Debt(2)

             

Net financial liabilities to Novartis Group(3)

    28        

Current financial debt

    47     1,735  

Non-current financial debt(4)

          1,742  

Equity

             

Share capital, par value CHF 0.04 per share(5)

          20  

Reserves

          19,495  

Net parent investment

    22,639        

Total Capitalization

    22,714     22,992  

(1)
In connection with the separation and the spin-off, we expect to have approximately $0.5 billion in cash and cash equivalents immediately following the spin-off as reflected in our unaudited pro forma combined balance sheet appearing elsewhere in this Form 20-F.

(2)
In connection with the separation and the spin-off, we expect to incur approximately $3.5 billion in total indebtedness, including (i) approximately $2.8 billion and $0.4 billion (or the equivalent in EUR) in bridge and other term loans as described in "Item 10 Additional Information—10.C. Material Contracts—Bridge Loan, Term Loan and Revolving Credit Facilities"; and (ii) approximately $0.3 billion of borrowings under a number of local bilateral facilities in different countries, with the largest share of borrowings in Japan.

(3)
Net financial liabilities to Novartis Group is calculated based on the sum of other financial receivables from Novartis Group and other financial liabilities to Novartis Group, and will be settled through the Internal Transactions. For additional information, see our combined financial statements and related notes appearing elsewhere in this Form 20-F.

(4)
Non-current financial debt excludes finance lease liabilities.

(5)
Based on an expected 488,700,000 issued shares of Alcon at the date of the spin-off, as described in more detail in the notes to our unaudited pro forma financial statements appearing elsewhere in this Form 20-F.

3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS

        Not applicable.

34


Table of Contents


UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The following unaudited pro forma combined financial statements of the Novartis AG Alcon business consist of the unaudited pro forma combined income statement for the year ended December 31, 2018, and the unaudited pro forma combined balance sheet as of December 31, 2018, which have been derived from our historical combined financial statements included elsewhere in this Form 20-F. If the conditions precedent to the spin-off are either satisfied or waived by Novartis, Novartis will distribute to holders of Novartis shares and ADRs (excluding treasury shares held by Novartis and its subsidiaries), as a pro rata dividend, 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs such shareholders hold or have acquired and do not sell or otherwise dispose of prior to the close of business on April 8, 2019, the Cum Date for the spin-off. Prior to the distribution, Novartis will complete the Internal Transactions, following which Alcon will hold, directly or through our subsidiaries, the businesses formerly constituting the Novartis AG Alcon business.

        The unaudited pro forma combined financial statements reflect adjustments to our historical financial results in connection with the spin-off. The unaudited pro forma combined income statement gives effect to the spin-off as if the spin-off had occurred on January 1, 2018, the beginning of our most recently completed fiscal year. The unaudited pro forma combined balance sheet gives effect to the spin-off as if the spin-off occurred as of December 31, 2018, the date of our most recently completed fiscal year.

        The unaudited pro forma combined financial statements have been prepared to reflect adjustments to our historical combined financial statements that are: (i) factually supportable, (ii) directly attributable to the spin-off, and (iii) with respect to the unaudited pro forma combined income statement, expected to have a continuing impact on Alcon following the completion of the spin-off. However, such adjustments are subject to change based on the finalization of the terms of the spin-off and related transaction agreements.

        The unaudited pro forma combined financial statements have been adjusted to give effect to the following transactions (collectively, the "Pro Forma Transactions"):

    certain going-forward contract manufacturing arrangements that have been entered into between Alcon and the Innovative Medicines Division of Novartis;

    the capitalization of Alcon through the contribution by Novartis of its investments in the Alcon business and the distribution of the Alcon shares to Novartis shareholders;

    the capitalization of Alcon through the incurrence of third party debt by Alcon and the transfer of a portion of the net proceeds of such debt incurred by Alcon to Novartis; and

    the settlement of outstanding related party financing between Alcon and its subsidiaries and Novartis and its affiliates and certain internal financing transactions with Novartis to complete the Internal Transactions.

        The unaudited pro forma combined financial statements should be read together with our historical combined financial statements and the related notes, "Item 3. Key Information—3.B. Risk Factors" and "Item 5. Operating and Financial Review and Prospects" appearing elsewhere in this Form 20-F.

        The unaudited pro forma combined financial statements are provided for illustrative and informational purposes only and are not intended to represent what the results of operations or financial position would have been had the spin-off and the Pro Forma Transactions been completed and implemented, as applicable, on the dates assumed. The assumptions used, and pro forma adjustments derived from such assumptions, are based on currently available information and we believe such assumptions to be reasonable under the circumstances. The unaudited pro forma combined financial information also may not be indicative of our future results of operations or financial position as a standalone public company.

35


Table of Contents


NOVARTIS AG ALCON BUSINESS

UNAUDITED PRO FORMA COMBINED INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2018

 
   
  Pro forma adjustments    
 
($ millions unless indicated otherwise)
  Historical
reported
  Contract
manufacturing
arrangements(1)
  Interest on
third party
financing(2)
  Amortization of
financing
fees(2)
  Pro forma
total
 

Net sales to third parties

    7,149                       7,149  

Sales to Novartis Group

    4     123                 127  

Net sales

    7,153     123                 7,276  

Cost of goods sold

    (3,961 )   (123 )               (4,084 )

Gross profit

    3,192     0                 3,192  

Selling, general & administration

    (2,801 )                     (2,801 )

Research & development

    (587 )                     (587 )

Other income

    47                       47  

Other expense

    (99 )                     (99 )

Operating loss

    (248 )   0                 (248 )

Interest expense

    (24 )         (102 )         (126 )

Other financial income and expense

    (28 )               (9 )   (37 )

Loss before taxes

    (300 )   0     (102 )   (9 )   (411 )

Taxes

    73           21     2     96  

Net loss

    (227 )   0     (81 )   (7 )   (315 )

Net loss attributable to shareholders of Alcon Inc

                            (315 )

Number of shares(3)

                               

Weighted average number of shares outstanding used in basic earnings per share

                            488.7  

Adjustment for vesting of restricted shares, restricted share units and dilutive shares from options

                               

Weighted average number of shares in diluted earnings per share

                            488.7  

Basic earnings per share ($)

                            (0.64 )

Diluted earnings per share ($)

                            (0.64 )

   

The accompanying Notes form an integral part of the unaudited pro forma combined
financial statements.

36


Table of Contents


NOVARTIS AG ALCON BUSINESS

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2018

 
   
  Pro forma adjustments    
 
($ millions)
  Historical
reported
  Third
party
financing(2)
  Settlement of
financial
balances and
other
internal
financing
transactions
with
Novartis(4)
  Settlement of
financing
transactions
with
Novartis(5)
  Equity
allocation(6)
  Pro forma
total
 

Assets

                                     

Non-current assets

                                     

Property, plant & equipment

    2,879                             2,879  

Goodwill

    8,899                             8,899  

Intangible assets other than goodwill

    10,679     5                       10,684  

Deferred tax assets

    670                             670  

Financial assets

    388                             388  

Other non-current assets

    148                             148  

Total non-current assets

    23,663     5                       23,668  

Current assets

                                     

Inventories

    1,440                             1,440  

Trade receivables

    1,253                             1,253  

Receivables from Novartis Group

    20                             20  

Income tax receivables

    33                             33  

Other financial receivables from Novartis Group

    39           (39 )                  

Cash and cash equivalents

    227     3,425     (162 )   (2,990 )         500  

Other current assets

    387                             387  

Total current assets

    3.399     3,425     (201 )   (2,990 )         3,633  

Total assets

    27,062     3,430     (201 )   (2,990 )         27,301  

Invested capital and liabilities

                                     

Share capital (Par value per share: 0.04 CHF)

                            20     20  

Reserves

                            19,495     19,495  

Total equity

                            19,515     19,515  

Invested capital

    22,639           (134 )   (2,990 )   (19,515 )      

Liabilities

                                     

Non-current liabilities

                                     

Financial debts

    89     1,742                       1,831  

Deferred tax liabilities

    1,528                             1,528  

Provisions and other non-current liabilities

    913                             913  

Total non-current liabilities

    2,530     1,742                       4,272  

Current liabilities

                                     

Trade payables

    663                             663  

Payables to Novartis Group

    85                             85  

Financial debts

    47     1,688                       1,735  

Other financial liabilities to Novartis Group

    67           (67 )                  

Current income tax liabilities

    151                             151  

Provisions and other current liabilities

    880                             880  

Total current liabilities

    1,893     1,688     (67 )               3,514  

Total liabilities

    4,423     3,430     (67 )               7,786  

Total invested capital and liabilities

    27,062     3,430     (201 )   (2,990 )         27,301  

   

The accompanying Notes form an integral part of the unaudited pro forma combined
financial statements.

37


Table of Contents


NOVARTIS AG ALCON BUSINESS

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The unaudited pro forma combined income statement for the year ended December 31, 2018, and the unaudited pro forma combined balance sheet as of December 31, 2018, include the following adjustments:

(1)
Effective January 1, 2019, multi-divisional production sites have been restructured to legally separate the net assets and manufacturing activities between those attributable to the Alcon Division and the Innovative Medicines Division of Novartis. As a result, contract manufacturing arrangements have been entered into between Alcon and the Innovative Medicines Division of Novartis on an arm's length basis. The annual sales by Alcon to the Innovative Medicines Division of Novartis are estimated to be $123 million with an estimated cost of sales of $111 million. The annual purchases by Alcon of products produced by the Innovative Medicines Division of Novartis are estimated to cost an additional $12 million compared to the Alcon production cost in 2018, resulting in a total cost of goods sold adjustment of $123 million.

(2)
In connection with the separation and the spin-off, we expect to incur $3.5 billion in total indebtedness prior to the spin-off through new third party borrowings. We currently expect to incur the proposed new third party borrowings through a combination of some or all of the following types of borrowings:

approximately $2.8 billion and $0.4 billion (or the equivalent in EUR) in bridge and other term loans under our new Group Facilities Agreement (as defined in "Item 10 Additional Information—10.C. Material Contracts—Bridge Loan, Term Loan and Revolving Credit Facilities"); and

approximately $0.3 billion of borrowings under a number of local bilateral facilities in different countries, with the largest share of borrowings in Japan.

    For additional information relating to the Group Facilities Agreement, see "Item 10 Additional Information—10.C. Material Contracts—Bridge Loan, Term Loan and Revolving Credit Facilities".

    The unaudited pro forma combined financial information presented above reflects the expected interest expense related to the $3.5 billion of total indebtedness we expect to incur prior to the spin-off (as described above), and $17.5 million for the amortization of financing fees related to the expected entry into the Group Facilities Agreement, as well as commitment fees on the expected undrawn portion of the Revolving Facility (as defined in "Item 10 Additional Information—10.C. Material Contracts—Bridge Loan, Term Loan and Revolving Credit Facilities") under the Group Facilities Agreement. The unaudited pro forma combined financial statements do not reflect the impact of any potential future refinancing of the Group Facilities Agreement.

    With respect to the new third party borrowings we expect to incur, we have assumed interest expenses based on the expected prevailing interest rates and our expected debt structure immediately prior to the spin-off. In particular, we determined the assumed approximate weighted average annual interest rate of 3.2% based on current market conditions, including the prevailing London Interbank Offered Rate ("LIBOR") and the prevailing Euro Interbank Offered Rate ("EURIBOR"), among others, as well as our anticipated credit ratings. The actual interest rate and term of any such indebtedness may vary from these assumptions and will depend upon the final debt structure that we execute prior to the spin-off, as well as market conditions at that time. In particular, the expected future refinancing of the Bridge Facility through the proposed issuance of longer-term indebtedness might increase our overall future weighted annual interest rate.

38


Table of Contents


NOVARTIS AG ALCON BUSINESS

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (Continued)

        The following table shows the pro forma interest expense:

 
   
  Pro forma
adjustments
   
 
($ millions)
  Historical
reported
  Interest on
third party
financing
  Pro forma
total
 

Interest expense on short-term financial debt

    (10 )   (102 )   (112 )

Interest expense on finance lease liability

    (5 )         (5 )

Expense arising from discounting long-term liabilities

    (9 )         (9 )

Total interest expense

    (24 )   (102 )   (126 )

    Each 0.125% change in the estimated weighted average annual interest rate would cause our pro forma interest expense to change by approximately $4 million on an annual basis.

    The pro forma income tax adjustments were determined using the statutory tax rate in effect in 2018, in the respective tax jurisdictions of the legal entities that will incur the debt.

(3)
For basic earnings per share, we assumed that the number of outstanding shares is 488,700,000, corresponding to the expected issued and outstanding shares of Alcon held by Novartis immediately prior to the spin-off as described above, and that such shares were outstanding for the full year starting from January 1, 2018.

    The weighted average number of shares used to compute diluted earnings per share is based on the weighted average number of basic shares. Since the Novartis AG Alcon business had a net loss for the year ended December 31, 2018, incremental shares associated with the stock-based awards granted to our employees under the Novartis compensation plans (including restricted stock units, performance shares and stock options) were not included in the computation of earnings per share in either period since, if included, they would have been anti-dilutive.

(4)
In connection with the separation and the spin-off, Alcon and its subsidiaries will settle all related party financing balances they have with Novartis and its affiliates and certain internal financing transactions with Novartis to complete the Internal Transactions.

(5)
In connection with the separation capitalization plan discussed in Note 2 above, Alcon is expected to transfer to Novartis approximately $3.0 billion in cash as part of the Internal Transactions, in part to eliminate financial balances between Novartis and Alcon that were not specifically related to the operations of the Novartis AG Alcon business and therefore were excluded from the historical combined financial statements through invested capital. See "Note 2. Basis of preparation" to our combined financial statements appearing elsewhere in this Form 20-F.

(6)
As of the date of the spin-off, the Novartis investment in the Novartis AG Alcon business will be redesignated as Alcon shareholders' equity and will be allocated between Share Capital, Treasury shares and Reserves, based on the number of Alcon shares outstanding as of the date of the spin-off. The number of Alcon issued and outstanding shares at the date of the spin-off is expected to be 488,700,000 shares based on the number of issued shares of Novartis (excluding treasury shares held by Novartis and its subsidiaries) as of December 31, 2018, an estimated number of Novartis shares delivered under equity participation plans and share buybacks between December 31, 2018 and the completion of the spin-off, and the application of the distribution ratio of 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs, as of the close of business on April 8, 2019, the Cum Date for the spin-off. The number and value of Alcon treasury shares are expected to be insignificant.

39


Table of Contents

3.D. RISK FACTORS

        You should carefully consider the risks described below, together with all of the other information included in this Form 20-F, in evaluating Alcon and our shares. The following risk factors could adversely affect our business, financial condition, results of operations and the price of our shares.

Risks Related to Our Business Generally

Our financial performance depends on the commercial success of our products and our ability to maintain our position in the markets in which we compete and to build and expand our markets.

        Our financial performance, including our ability to replace revenue and income lost to competition and to grow our business, depends heavily on the commercial success of our products. If any of our major products were to become subject to problems such as changes in growth rates for clinical procedures using our products, quality concerns, loss of intellectual property protection, pricing and reimbursement cuts, tax changes, supply chain issues or other product shortages, regulatory actions, negative publicity affecting doctor, eye care professional or patient confidence in the product, unfavorable guidance from healthcare or other governmental agencies, material product liability litigation, pressure from new or existing competitive products, or if our products fail to meet consumer needs, the adverse impact on our revenue and profit could be significant. In addition, our revenue and profit could be significantly impacted by the timing and rate of commercial acceptance of our products.

        Products that compete with ours, including products competing against our major products, are launched from time to time. We cannot predict with certainty the timing of the introduction of such competitive products or their possible effect on our sales. Such competitive products could significantly affect the revenue from our products and our results of operations. In addition, the impact on our results of operations could be compounded to the extent such competition results in us making significant additional investments in marketing and sales.

        Furthermore, while we currently enjoy leading positions within our industry, our success depends on our ability to maintain or build on those leading positions. We continue to experience pressures across our businesses due to competitive activity, increased market power of our healthcare industry and retail distributors, economic pressures experienced by the end-users of our vision care products, trade disputes among the countries in which we operate or sell our products, and the impact of managed care organizations and other third-party payors for our surgical products. These and other factors may adversely impact market sizes, as well as our position in the markets in which we compete, and the medical procedure volumes or average selling prices for our products.

        Our financial performance also depends on our ability to successfully build and expand our markets. For example, while we currently expect our key markets to grow, particularly in multifocal contact lenses and AT-IOLs, the size of the markets in which we compete may not increase above existing levels, we may not be able to regain or gain market share, expand our market penetration or the size of the market for our products, or compete effectively on the basis of price, and the number of procedures in which our products are used may not increase above existing levels. Decreases in market sizes or our market share and declines in average selling prices or procedural volumes could materially adversely affect our results of operations or financial condition. Furthermore, our failure to expand our markets beyond existing levels could impact our ability to grow in line with or above current industry standards.

The eye care devices market is highly competitive and if we fail to keep pace with advances in our industry, we may be unable to maintain our position in the markets in which we compete.

        The eye care devices market is highly competitive and, in both our surgical and vision care businesses, we face a mixture of competitors and intense competition from competitors' products. In

40


Table of Contents

order to continue to compete effectively, we must continue to create, invest in, or acquire advanced technology, incorporate this technology into our proprietary products, obtain regulatory approvals in a timely manner where required, and manufacture and successfully market our products. Additionally, we may experience design, manufacturing, marketing or other difficulties that could delay or prevent our development, introduction or marketing of new products or new versions of our existing products. As a result of such difficulties and delays, our development expenses may increase and, as a consequence, our results of operations could suffer. Our failure to respond to competitive pressures in a timely manner could have a material adverse effect on our business, financial condition and results of operations.

        For example, in our surgical business, we face a mixture of competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. Development by other companies of new or improved products, processes, or technologies may make our products or proposed products less competitive or obsolete. We also face competition from providers of alternative medical therapies such as pharmaceutical companies that have the potential to disrupt core elements of our business. Competitive factors include, but are not limited to:

    disruptive product technology;

    alternative treatment modalities;

    breadth of product lines and product services;

    ability to identify new market trends;

    acceptance of equipment and other products by ophthalmic surgeons;

    customer and clinical support;

    regulatory status and speed to market;

    price;

    product quality, reliability and performance;

    capacity to recruit engineers, scientists and other qualified employees;

    digital initiatives that change business models;

    reimbursement approval from governmental payors and private healthcare insurance providers; and

    reputation for technical leadership.

        Shifts in industry market share can occur in connection with product issues, physician advisories, safety alerts, and publications about our products. In the current environment of managed care, consolidation among healthcare providers, increased competition and declining reimbursement rates, we are increasingly required to compete on the basis of price.

        In addition, our vision care business operates within a highly competitive environment. In contact lenses, we face intense competition from competitors' products and may face increasing competition as other new products enter the market, for example with increased product entries from contact lens manufacturers in Asia. New market entrants and existing competitors are also challenging distribution models, with innovation in non-traditional, disruptive models such as direct-to-consumer, internet and other e-commerce sales opportunities, which could adversely impact the traditional eye care professional (ECP) channel in which Alcon has a significant presence. Our major competitors in contact lenses offer competitive products and differentiated materials, plus a variety of other eye care products including ophthalmic pharmaceuticals, which may give them a competitive advantage in

41


Table of Contents

marketing their lenses. Our vision care business also competes with manufacturers of eyeglasses and providers of other forms of vision correction including ophthalmic surgery. The market for contact lenses is intensely competitive and is characterized by declining sales volumes for older and reusable product lines and growing demand for daily lenses and advanced materials lenses. As the market for contact lenses shifts toward daily lenses, we expect our sales in daily lenses to at least in part cannibalize sales of our reusable contact lenses and contact lens care offerings. Furthermore, our ocular health product category is also highly competitive. We cannot predict the timing or impact of the introduction of competitive products, including new market entries, "generic" versions of our approved products, or private label products that treat the same conditions as those of our products. In addition, the introduction of alternatives in medical devices and medical prescriptions could also alter the dry eye product market and impede our sales growth. Our ability to respond to these competitive pressures will depend on our ability to decrease our costs and maintain gross margins and operating results and to introduce new products successfully and on a timely basis, and to achieve manufacturing efficiencies and sufficient manufacturing capacity and capabilities for such products.

        With respect to all of our other businesses, competitive pressures could decrease sales volumes for existing products or decrease prices to respond to competitive pressures, which could have a material adverse effect on our business, financial condition and results of operations.

Our research and development efforts may not succeed in bringing new products to market, or may fail to do so in a cost-efficient manner, or in a manner sufficient to grow our business, replace lost revenue and income or take advantage of new technologies.

        Our ability to continue to maintain and grow our business, to replace sales lost due to competition, and to bring to market products that take advantage of new and potentially disruptive technologies depends heavily on the success of our research and development activities. Our success relies on our ability to identify and successfully develop cost-effective new products that address unmet medical and consumer needs. To accomplish this, we commit substantial financial, human and capital resources to product research and development, both through our internal dedicated resources and through external investments, alliances, acquisitions and BD&L transactions intended to expand or complement our internal research and development efforts. However, developing and marketing new surgical and vision care products involves a costly, lengthy and uncertain process. Even when our new product development projects make it to market, there have been, and in future may be, instances where projects are subsequently discontinued for technical, clinical, regulatory or commercial reasons. In spite of our investments, there can be no guarantee that our research and development activities or external investments will produce commercially successful new products that will enable us to replace income lost to our competitors or increase revenue to grow our business, or that we will be able to successfully identify and obtain value from our external business development and strategic collaborative efforts. In addition, new products we create through research and development activities may cannibalize a portion of the revenues we derive from existing products, therefore driving replacement revenue instead of incremental revenue.

        Finally, even if we are able to secure regulatory approval and achieve initial commercial success of our products, we may be unable to predict the long-term health effects of our implantables or other products, and such products may cease to be commercially viable if negative health impacts are subsequently identified. See also, "—Our voluntary market withdrawal of our CyPass micro-stent glaucoma product in August 2018 will have an adverse impact on our business and may result in additional liability" below.

        If we are unable to cost-effectively maintain a flow of successful new products sufficient to maintain and grow our business, cover any sales erosion due to competition, and take advantage of market opportunities, this could have a material adverse effect on our business, financial condition or results of operations. For a description of the approval processes which must be followed to market our

42


Table of Contents

products, see "—Regulatory clearance and approval processes for our products are expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products" below and "Item 4. Information on the Company—Item 4.B. Business Overview—Government Regulation".

The separation and spin-off from Novartis could have an adverse effect on our business or cause management distraction or business disruption as we begin to operate as a standalone company.

        Since 2011, we have operated as a division of Novartis. Upon completion of the separation and spin-off, we will be a standalone public company. As a standalone public company, we may not enjoy the same benefits we did as a subsidiary of Novartis, including the strong capital base and financial strength of Novartis and access to the Novartis global information technology infrastructure. We expect the transfer of information technology systems from Novartis to us to be complex, time consuming and costly. Further, we will incur costs relating to establishing our own financial, administrative, information technology and other support functions as well as running and maintaining such functions on a going-forward basis. In addition, the process of establishing such functions may distract our management from focusing on business and strategic opportunities and could result in disruptions to our business. We will also enter into a series of agreements with Novartis relating to the separation and the spin-off, including a Separation and Distribution Agreement, Transitional Services Agreement, Manufacturing and Supply Agreement and certain other agreements pursuant to which we will continue to rely on Novartis for certain key business functions for a transitional period. The transitional services Novartis has agreed to provide us may not be sufficient to meet our needs, are costly, and disputes may arise between Novartis and us in the course of Novartis providing such transitional services to us.

        In addition, in connection with the separation, we expect to incur $3.5 billion in total indebtedness. Such indebtedness will require us to dedicate a portion of our future cash flows to payments on our debt, reducing our ability to use our cash flow to pay dividends or to fund capital expenditures,
BD&L or other strategic transactions, working capital and other general operational requirements. Management attention to complying with debt covenants relating to such indebtedness and maintaining our credit ratings may also limit our operational flexibility.

        The potential loss of benefits and the expected additional costs associated with being a standalone public company independent of Novartis, as well as any conflicts with Novartis relating to the transitional arrangements we will enter into or any impacts of our future debt arrangements, could have a material adverse effect on our business, financial condition or results of operations. See "Item 3. Key Information—3.D. Risk Factors—Risks Related to the Separation from Novartis" and "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Us and Novartis" for more detail.

Pricing pressure from changes in third-party payor coverage and reimbursement methodologies and potential regulatory price controls may impact our ability to sell our products at prices necessary to support our current business strategy.

        The prices, sales and demand for some of our products, in particular our surgical products, could be adversely affected by the increased emphasis managed care organizations and governments continue to place on the delivery of more cost-effective medical therapies. For example, major third-party payors for hospital services, including government insurance programs, such as Medicare and Medicaid in the United States and certain private healthcare insurers, have substantially revised their payment methodologies during the last few years, resulting in stricter standards for, and lower levels of reimbursement of, hospital and outpatient charges for some clinical procedures. In addition, some third-party payors will not provide reimbursement for new products until the innovative value or improved patient outcome of the new product is demonstrated. If we are unable to demonstrate such innovative value or improved patient outcome, our products may not be eligible for reimbursement,

43


Table of Contents

which would impact our ability to grow the market for sales of those products. There have also been recent initiatives by third-party payors to challenge the prices charged for medical products. Physicians, eye care professionals and other healthcare providers may be reluctant to purchase our surgical products if they do not receive adequate reimbursement from third-party payors to cover the cost of those products and for procedures performed using those products. Reductions in the prices for our products in response to these trends could reduce our profit margins, which would adversely affect our ability to invest and grow our business. In addition, changes to current regulations in certain countries, including the United States, requiring a prescription for the purchase of contact lenses could have a significant impact on the way we market and distribute contact lens and contact lens care products, by limiting the role of the ECP as an intermediary in the sale of our vision care products. Such changes could require us to incur significant costs to update our marketing and distribution methodologies and could adversely affect the sales of our vision care products.

        Outside the U.S., governmental programs in the other jurisdictions in which we operate that typically reimburse at predetermined fixed rates may also decrease or otherwise limit amounts available through reimbursement. For example, in the EU, member states impose controls on whether products are reimbursable by national or regional health service providers and on the prices at which medical devices are reimbursed under state-run healthcare schemes. Some member states operate reference pricing systems in which they set national reimbursement prices by reference to those in other member states. Other governmental funding restrictions, legislative proposals and interpretations of policy may negatively impact amounts available through reimbursement, including by restricting payment increases to hospitals and other providers through reimbursement systems, or by restricting whether reimbursement is available for our products at all. We are not able to predict whether changes will be made in the availability of reimbursement or the rates prescribed by governmental programs or, if they are made, what effect they could have on our business. However, governmental rate changes and other similar developments could negatively affect our ability to sell our products.

        We expect that additional health care reform measures will be adopted in the future in the countries in which we operate, including those initiatives affecting coverage and reimbursement for our products, any of which could limit the amounts that governments will pay for health care products and services, which could adversely affect the growth of the market for our products or the demand for our products, or result in additional pricing pressures. We cannot predict the effect such reforms or the prospect of their enactment may have on our business.

        Finally, the implementation of government price controls on our products or product categories in the jurisdictions in which we operate, or to which we may intend to expand in the future, could adversely affect the revenue we could obtain from sales of our products. For example, in India, the National Pharmaceutical Pricing Authority (NPPA) recently began imposing 75% to 85% price reductions on coronary stents (implantable medical devices intended to ensure an adequate flow of blood to the heart). The NPPA has begun to evaluate prices on other categories of medical devices, potentially including IOLs used in cataract surgeries. If the NPPA chooses to impose similar price reductions on IOLs from Alcon, this could have a negative impact on our surgical sales in India. It is also possible that regulatory agencies in other countries may consider similar or comparable price controls on our eye care devices in the future, which could have an adverse impact on our business, financial condition and results of operations.

The unstable global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results of operations due to the global nature of our business.

        Our products are sold in more than 140 countries. We have operations in over 74 countries worldwide and more than half of our revenues in the year ended December 31, 2018 came from

44


Table of Contents

customers outside the United States. As a result, our results of operations and business are influenced and affected by the global economic and financial environment.

        Unpredictable political conditions currently exist in various parts of the world, including a backlash in certain areas against free trade, anti-immigrant sentiment, social unrest, the refugee crisis, terrorism and the risk of direct conflicts between nations. In addition, the current trade environment is extremely volatile. Changes in trade policy vis-à-vis countries that we operate in could affect our ability to and/or the cost of doing business in such countries. For example, we expect that the ongoing trade disputes between the United States and China and Russia, respectively, could potentially have an adverse effect on the export of our surgical equipment to either or both countries. In the United States, the current presidential administration's opposition to free trade agreements could cause barriers to be raised to international trade, and the elimination of the Affordable Care Act's individual mandate could have a negative impact on individuals' ability to afford health insurance. Similarly, following the UK's "Brexit" vote and with the rise of nationalist, separatist and populist sentiment in various countries, there is a risk that barriers to free trade and the free movement of people may rise in Europe. As we have a sizeable commercial presence in the UK, the uncertainty surrounding the implementation and effect of "Brexit" may impact our business in the UK and the rest of Europe, including our costs and the distribution of our products in those markets. Further, significant conflicts continue in parts of the Middle East, including conflicts involving Saudi Arabia and Iran, and with respect to places such as North Korea. Collectively, such difficult conditions could, among other things, disturb the international flow of goods and increase the costs and difficulties of international transactions.

        In addition, local economic conditions may adversely affect the ability of payors, as well as our distributors, customers, suppliers and service providers, to pay for our products, or otherwise to buy necessary inventory or raw materials, and to perform their obligations under agreements with us. Although we make efforts to monitor these third parties' financial condition and their liquidity, our ability to do so is limited, and some of them may become unable to pay their bills in a timely manner, or may even become insolvent, which could negatively impact our business and results of operations. These risks may be elevated with respect to our interactions with fiscally-challenged government payors, or with third parties with substantial exposure to such payors. For example, we have significant outstanding receivable balances that are dependent upon either direct or indirect payment by various governmental and non-governmental entities across the world. The ultimate payment of these receivables is dependent on the ability of these governments to maintain liquidity primarily through borrowing capacity, particularly in the EU. If certain governments are not able to maintain access to liquidity through borrowing capacity, the ultimate payment of their respective portion of outstanding receivables could be at risk and impact profits and cash flow. See also "—Our reliance on outsourcing key business functions to third parties heightens the risks faced by our businesses" below.

        Financial market issues may also adversely affect our earnings, the return on our financial investments and the value of some of our assets. Alternately, inflation could accelerate, which could lead to higher interest rates, increasing our costs of raising capital. Uncertainties around future central bank and other economic policies in the United States and EU, as well as high debt levels in certain other countries, could also impact world trade. Sudden increases in economic, currency or financial market volatility in different countries have also impacted, and may continue to unpredictably impact, our business and results of operations, including the value of our investments in our pension plans. See also "—If any of numerous key assumptions and estimates in calculating our pension plan obligations turn out to be different from our actual experience, we may be required to increase substantially our contributions to pension plans as well as the amount we pay toward pension-related expenses in the future" below. Changes in exchange rates between the U.S. dollar, our reporting currency, and other currencies can also result in significant increases or decreases in our reported sales, costs and earnings as expressed in U.S. dollars, and in the reported value of our assets, liabilities and cash flows. Despite any measures we may undertake in the future to reduce, or hedge against, foreign currency exchange

45


Table of Contents

risks, because a significant portion of our earnings and expenditures are in currencies other than the U.S. dollar, any such exchange rate volatility may negatively and materially impact our business, results of operations and financial condition, and may impact the reported value of our net sales, earnings, assets and liabilities. The timing and extent of such volatility can be difficult to predict. Further, depending on the movements of particular foreign exchange rates, we may be materially adversely affected at a time when the same currency movements are benefiting some of our competitors. For more information on the effects of currency fluctuations on our combined financial statements and on how we manage currency risk, see "Item 5. Operating and Financial Review and Prospects—5.B. Liquidity and Capital Resources—Effects of Currency Fluctuations" and "Item 11. Quantitative and Qualitative Disclosures About Market Risk".

        There is also a risk that countries facing local financial difficulties, including countries experiencing high inflation rates and highly indebted countries facing large capital outflows, may impose controls on the exchange of foreign currency. Such exchange controls could limit our ability to distribute retained earnings from our local affiliates, or to pay intercompany payables due from those countries.

        To the extent that economic and financial conditions directly affect consumers, some of our businesses, including the elective surgical and contact lens businesses, may be particularly sensitive to declines in consumer spending, as the costs of elective surgical procedures and discretionary purchases of contact lenses are typically borne by individuals with limited reimbursement from their medical insurance providers or government programs. For example, while cataract surgery involving our monofocal IOLs is generally fully covered by medical insurance providers or government reimbursement programs, implantation of certain of our AT-IOL products may only be partially covered, with the individual paying out-of-pocket for the non-covered component. Accordingly, individuals may be less willing to incur the costs of these private pay or discretionary procedures or purchases in weak or uncertain economic conditions and may elect to forgo such procedures or products or to trade down to more affordable options. This could negatively impact our business, financial performance and results of operations.

        At the same time, significant changes and potential future volatility in the financial markets, in the consumer and business environment, in the competitive landscape and in the global political and security landscape make it increasingly difficult for us to predict our revenues and earnings into the future. As a result, any revenue or earnings guidance or outlook which we elect to give may be overtaken by events, or may otherwise turn out to be inaccurate. Though we will endeavor to give reasonable estimates of future revenues and earnings at the time if we elect to give such guidance, based on our then-current knowledge and conditions, there is a significant risk that any such guidance or outlook we elect to give will turn out to be, or to have been, incorrect.

A portion of our operations are conducted in emerging markets, and are subject to the economic, political, legal and business environments of such emerging markets, which may prevent us from realizing the expected benefits of our investments.

        Economic, social and political conditions, laws, practices and local customs vary widely among the countries in which we sell our products, including emerging markets. Our operations in emerging markets are subject to a number of risks and potential costs, including lower profit margins, less stringent protection of intellectual property and economic, political and social uncertainty in certain of such countries in which we operate. These and other risks may have a material adverse effect on our results of operations in any particular emerging market country and on our business as a whole. For example, many emerging markets have currencies that fluctuate substantially. If currencies devalue and we cannot offset with price increases, our products may become less profitable. Inflation in emerging markets also can make our products less profitable and increase our exposure to credit risks. We have previously experienced currency fluctuations, unstable social and political conditions, inflation and

46


Table of Contents

volatile economic conditions in emerging markets, which have impacted our profitability in the emerging markets in which we operate and we may experience such impacts in the future.

        Further, in many emerging markets, average income levels are relatively low, government reimbursement for the cost of healthcare products and services is limited and prices and demand are sensitive to general economic conditions. These challenges may prevent us from realizing the expected benefits of our investments in such emerging markets, which could have an adverse impact on our business, financial condition and results of operations.

Ongoing consolidation among distributors, retailers and healthcare provider organizations could increase both the purchasing leverage of key customers and the concentration of credit risk.

        Increasingly, a significant portion of our global sales are made to a relatively small number of distributors, retail chains and other purchasing organizations, as consolidation and vertical integration have the potential to disrupt existing channels. The recent trend, both in the United States and internationally, has been toward further consolidation among distributors, retailers and other eye care industry customers, such as eye care professionals, including through the acquisition of consolidated ophthalmology practices by private equity and other venture fund investors. As a result, our customers are gaining additional purchasing leverage, which increases the pricing pressures facing our businesses.

        In our surgical business, healthcare providers, practices, hospitals, and surgery centers around the world continue to consolidate in response to declining reimbursement rates and intensifying cost pressures driven by care delivery expenses. This consolidation is increasing the ability of large groups to negotiate on price, accelerating the transition of the decision maker from physicians to cost-focused professional buyers, and potentially increasing price transparency or price referencing in instances of consolidation across borders. Such consolidation in the surgical market adds considerable downward pricing pressure to our product sales and margins.

        In vision care, private label growth and retailer-branded lenses may drive the commoditization of contact lenses and further boost the bargaining power of our distributors and retailers. Moreover, we could become exposed to a concentration of credit risk as a result of any such concentration among our customers. If our customers consolidate and one or more of our major customers experienced financial difficulties, the effect on us would be substantially greater than in the past, and could include a substantial loss of sales and an inability to collect amounts owed to us. By contrast, if the consolidation of our customers and distributors were to continue, leading to the further increase of their size and purchasing power, we may be challenged to continue to provide consistently high customer service levels for increasing sales volumes, while still offering a broad portfolio of innovative products and on-time and complete deliveries. If we fail to provide high levels of service, broad product offerings, competitive prices and timely and complete deliveries, we could lose a substantial amount of our customer base and our profitability, margins and net sales could decrease. This could have a material adverse effect on our business, financial condition and results of operations.

If we fail to maintain our relationships with, and provide appropriate training in our products to, healthcare providers, including ophthalmologists, optometrists, opticians, hospitals, ambulatory surgical centers and group purchasing organizations, customers may not buy our surgical and vision care products and our sales and profitability may decline.

        We market our surgical products to numerous healthcare providers, including ECPs, public and private hospitals, ambulatory surgical centers, eye clinics and ophthalmic surgeons' offices and group purchasing organizations and our vision care products to various major retailers and distributors. We have developed and strive to maintain strong relationships with members of each of these groups who assist in product research and development and advise us on how to satisfy the full range of consumer and surgeon needs. We rely on these groups to recommend our products to their patients and to other

47


Table of Contents

members of their organizations. Consumers in the eye health industry, especially contact lens and lens care consumers, have a tendency not to switch products regularly and are repeat consumers. As a result, the success of our products, particularly our vision care products, is impacted by a physician's initial recommendation of our products and a consumer's initial choice to use our products. Because clinicians are the key decision makers with respect to utilizing surgical products and influencing consumer product decisions in the eye care industry, the failure of our products to retain the support of ECPs, public and private hospitals, ambulatory surgical centers, optometry chains or group purchasing organizations and, with respect to our vision care products, to retain the support of the end-users and the distributors and retailers to whom we sell such products, could have a material adverse effect on our sales and profitability.

        In particular, ophthalmic surgeons play a significant role in determining the course of treatment and, ultimately, the type of products that will be used to treat a patient for cataracts, vitreoretinal conditions, refractive errors and glaucoma, among other things. As a result, it is important for us to properly and effectively market our surgical products to such surgeons. Acceptance of our surgical products also depends on the ability to train ophthalmic surgeons and their clinical staff on the safe and appropriate use of our surgical and medical device products. There is a learning process involved in ophthalmic surgeons and their clinical staff becoming proficient in the use of our surgical products. It is critical to the success of our commercialization efforts to train a sufficient number of ophthalmic surgeons and to provide them with adequate instruction in the use of our surgical products. This training process may take longer than expected and may therefore affect our ability to increase sales. Following completion of training, we expect to rely on the trained ophthalmic surgeons to advocate the benefits of our products in the broader marketplace. Convincing ophthalmic surgeons to dedicate the time and energy necessary for adequate training is challenging, and we cannot ensure we will be successful in these efforts. If we are not successful in convincing ophthalmic surgeons of the merits of our products or educating them on the use of our products, they may not use our products and we will be unable to fully commercialize or profit from such products.

        Further, in our vision care business, ECPs may continue to lose influence in the consumer's selection of contact lenses. With potential diminishing influence of the ECPs, our business may become more dependent upon the success of consumer marketing. In pursuit of direct-to-consumer marketing, we could potentially face challenges in maintaining our good relationships with ECPs, who may view our direct-to-consumer marketing as a threat to their business.

Changes in inventory levels or fluctuations in buying patterns by our large distributor and retail customers may adversely affect our sales and earnings and add to sales variability from quarter to quarter.

        We balance the need to maintain inventory levels that are sufficient to ensure competitive lead times against the risk of inventory obsolescence because of changing customer requirements, fluctuating commodity prices, changes to our products, product transfers or the life-cycle of our products. In order to successfully manage our inventories, we must estimate demand from our customers and produce products that substantially correspond to that demand. If we fail to adequately forecast demand for any new or existing product, or fail to determine the optimal product mix for production purposes, we may face production capacity issues in manufacturing sufficient quantities of a given product, such as our IOLs, daily contact lenses or certain ocular health products. In addition, failures in our information technology systems, issues created by the implementation of our new enterprise resource planning (ERP) system or human error could also lead to inadequate forecasting of our overall demand or product mix.

        As the number of unique products (SKUs) we offer grows, for example as we offer an increasing number of IOL and contact lens styles, the demand forecasting precision required for us to avoid production capacity issues will also increase. Accordingly, the continued proliferation of unique SKUs in our surgical and vision care portfolios could increase the risk of product unavailability and lost sales.

48


Table of Contents

Additionally, an increasing number of SKUs could increase global inventory requirements, especially for consigned products such as IOLs, negatively impacting our working capital performance and leading to write-offs due to obsolescence and expired products.

        In addition, due to the lead times necessary to acquire, install and ramp up production of new equipment and product lines, if we fail to adequately forecast the need for additional manufacturing capacity, whether for new or existing products, we may be unable to scale production in a timely manner to meet demand for our products. For example, in 2016, as a result of certain such factors, we experienced shortfalls in our inventory that resulted in a temporary disruption in our ability to timely deliver sufficient amounts of our IOL products in the U.S., which had an adverse impact on our business. In addition, the technically complex manufacturing processes required to manufacture many of our products increase the risk of production failures, and can increase the cost of producing our goods. For example, we manufacture and sell a number of sterile products which require sophisticated environmental controls. As a result, because the production process for many of our products is so complex and sensitive, the cost of production and the chance of production failures and lengthy supply interruptions is increased, which can have a substantial impact on our inventory levels.

        Finally, a significant portion of our vision care products are sold to major healthcare distributors and major retail chains in the United States. Consequently, our sales and quarterly growth comparisons, as well as our estimates for required inventory levels, may be affected by fluctuations in the buying patterns of major distributors, retail chains and other trade buyers. These fluctuations may result from seasonality, pricing, large retailers' and distributors' buying decisions or other factors. If we overestimate demand and produce too much of a particular product, we face a risk of inventory obsolescence, leaving us with inventory that we cannot sell profitably or at all. In addition, we may have to write down such inventory if we are unable to sell it for its recorded value. By contrast, if we underestimate demand and produce insufficient quantities of a product, we could be forced to produce that product at a higher price and forego profitability in order to meet customer demand. For example, if a competitor initiates a recall and there is an unexpected increase in the demand for our products, we may not be able to meet such increased demand. Insufficient inventory levels may lead to shortages that result in loss of sales opportunities altogether as potential end-customers turn to competitors' products that are readily available. If any of these situations occur frequently or in large volumes or if we are unable to effectively manage our inventory and that of our distribution partners, this could have a material adverse effect on our business, financial condition and results of operations.

Our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies.

        We single-source or rely on limited sources of supply for many components, raw materials and production services, such as sterilization, used in the production of our products. The loss of our significant suppliers or the inability of any such supplier to meet performance and quality specifications, requested quantities or delivery schedules could cause our sales and profitability to decline and have a negative impact on our customer relations. In addition, a significant price increase from any of our significant suppliers could cause our profitability to decline if we cannot increase our prices to our customers. In order to ensure sufficient supply, we may determine that we need to provide financing to some of our single-source suppliers, which could increase our financial exposure to such suppliers.

        In addition, in some cases, we manufacture our products at a single manufacturing facility. In many cases, regulatory approvals of our products are limited to a specific approved manufacturing facility. If we fail to produce enough of a product at a facility, or if our manufacturing process at that facility is disrupted, we may be unable to deliver that product to our customers on a timely basis. Problems may arise during the manufacturing process for a variety of reasons, including technical, labor or other difficulties, equipment malfunction, contamination, failure to follow specific protocols and procedures, destruction of or damage to any facility (as a result of a natural disaster, use and storage of

49


Table of Contents

hazardous materials or other events) or other reasons. In the event of a quality control issue, we may voluntarily, or our regulators may require us to, close a facility indefinitely. If any such problems arise, we may be unable to purchase substitute products from third-party manufacturers to make up any resulting shortfall in the production of a product, as such third-party manufacturers may only exist in limited numbers or appropriate substitutes may not be available. This is particularly relevant with respect to products for which we represent a substantial portion of the market, such as vitreoretinal equipment and other vitreoretinal-related products. A failure to deliver products on a timely basis could lead to customer dissatisfaction and damage our reputation. Significant delays in the delivery of our products or a delay in the delivery of a key product could also negatively impact our sales and profitability. For example, our Constellation vision system is manufactured using more than 3,000 components, many of which routinely need to be sourced from an alternate supplier as part of our ongoing efforts to manage obsolescence.

        Some of our products are manufactured or assembled fully or in part by third parties under contract. Business conditions and regulatory actions may lead to recalls of products assembled or manufactured by these companies, may result in delays in shipments of such products or may cause these contractors to abandon their contract manufacturing agreements. Any of these occurrences could have a negative impact on sales and profitability. In addition, we will continue to rely on Novartis for certain manufacturing needs following the completion of the spin-off. In particular, we have historically depended on and, following the completion of the spin-off, will continue to depend on Novartis for the production of our entire supply of viscoelastics. We currently sell viscoelastics on a standalone basis for procedures using our products and also use them as a component in our surgical pack offerings. As a result, a shortage in our supply of viscoelastics could not only cause a failure in our ability to meet our commitments to our customers, but could also have significant collateral impacts on other parts of our business due to related decreases in the rates of procedures requiring viscoelastics that feature our equipment or other products, which may have a material effect on our business, financial condition and results of operations. In addition, as an entity separate from and independent of Novartis following the spin-off, we may encounter situations in which Novartis and our interests do not align. For instance, in the event of supply shortages, Novartis may choose to prioritize the manufacturing of Novartis products over our products. Should Novartis no longer provide for our manufacturing needs, either sufficiently or at all, we would have to seek alternative sources. Seeking out and securing such alternative sources to meet our manufacturing needs may take time and come at a significant cost to our business. See "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions".

Our reliance on outsourcing key business functions to third parties heightens the risks faced by our businesses.

        We outsource the performance of certain key business functions to third parties, and invest a significant amount of effort and resources into doing so. Such outsourced functions can include research and development collaborations, clinical trial activities, manufacturing operations, warehousing and distribution activities, certain finance functions, submission of regulatory applications, marketing activities, data management and others. In particular, in many developing countries, we rely heavily on third party distributors and other agents for the sales, marketing and distribution of our products. Similarly, we often obtain the intermediate and raw materials used in the manufacture of our products from third parties located in developing countries. In addition, we will continue to rely on Novartis for certain key business functions following the completion of the spin-off, including certain transitional services that will be covered under the Transitional Services Agreement, certain manufacturing needs that will be covered under the Manufacturing and Supply Agreement and certain transitional distribution services that will be covered under a transitional distribution and services agreement that we intend to enter into with Novartis. See "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions".

50


Table of Contents

        Our reliance on outsourcing and third parties for certain functions, such as the research and development or manufacturing of our products, may reduce the potential profitability of such products.

        Ultimately, if the third parties fail to meet their obligations to us, we may lose our investment in the collaborations and fail to receive the expected benefits of these arrangements. In addition, many of the companies we outsource key business functions to have limited resources, and, in particular, do not have internal compliance resources comparable to those within our organization. Should any of these third parties fail to carry out their contractual duties or regulatory obligations or fail to comply with the law, including laws relating to export and trade controls, or should they act inappropriately in the course of their performance of services for us, there is a risk that we could be held responsible for their acts, that our reputation may suffer, and that penalties may be imposed upon us. Any such failures by third parties could have a material adverse effect on our business, financial condition, results of operations or reputation.

Even if we protect our intellectual property to the fullest extent permitted by applicable law, our competitors and other third parties could develop and commercialize products similar or identical to ours, which could impair our ability to compete.

        We rely on a combination of patents, trademarks, and copyrights to protect our intellectual property. The scope, strength and duration of those intellectual property rights can vary significantly from product to product and country to country. We also rely on a variety of trade secrets, know-how, and other confidential information to supplement these protections. In the aggregate, these intellectual property rights are of material importance to our business.

        The protections afforded by these intellectual property rights may limit the ability of competitors to commercialize products covered by the applicable intellectual property rights, but they do not prevent competitors from marketing non-infringing products that compete with our products. In addition, these intellectual property rights may be challenged by third parties and regulatory agencies, and intellectual property treated as trade secrets and protected through confidentiality agreements may be independently derived by third parties and/or subject to misappropriation by others. Therefore, even if we protect our intellectual property to the fullest extent permitted by applicable law, competitors and other third parties may nonetheless develop and commercialize products similar or identical to ours, which could impair our ability to compete and have an adverse effect on our business, financial condition and results of operations.

Unauthorized or illegal importation of products from countries with lower prices to countries with higher prices or sales of counterfeit versions of our products may result in lowering the prices we receive for our products and could harm our business and reputation.

        In the United States and elsewhere, our products are subject to competition from lower priced versions of our products and competing products from countries where there are government imposed price controls or other market dynamics that make the products lower priced. Despite government regulations aimed at limiting certain low quality imports, the volume of imports may continue to rise in certain countries. This importation may adversely affect our profitability in the United States and elsewhere, and could become more significant in the future.

        In addition, our industry continues to be challenged by the vulnerability of distribution channels to counterfeiting. Reports of increased levels of counterfeiting could materially affect consumer confidence in the authentic product and harm our business or lead to litigation. In addition, it is possible that adverse events caused by unsafe counterfeit products could mistakenly be attributed to the authentic product. If a product of ours was the subject of counterfeits, we could incur substantial reputational and financial harm.

51


Table of Contents

We may not successfully complete and integrate strategic acquisitions to expand or complement our business.

        As part of our growth strategy, we expect to evaluate and pursue strategic BD&L transactions or other acquisitions to expand or complement our business. Such ventures may bring new technologies, products or customers to our prominent position in the ophthalmic industry. However, suitable acquisition candidates may not be identified. Acquisition activities can be thwarted by overtures from competitors for the targeted candidates, governmental regulation (including market concentration limitations and other competition laws) and replacement product developments in our industry. Further, after an acquisition, successful integration of the venture can be complicated by corporate cultural differences, difficulties in retention of key personnel, customers and suppliers, and coordination with other products and processes. Also, acquisitions could divert management's attention from our existing business, could result in liabilities being incurred that were not known at the time of acquisition or could create tax or accounting issues. We also often acquire early-stage technologies, which may fail in the development process or proof-of-concept stage, or which we may not be able to integrate into or use to develop commercialized products. If we fail to timely recognize or address these matters or to devote adequate resources to them, we may fail to achieve our growth strategy or otherwise not realize the intended benefits of any acquisition.

Litigation, including product liability lawsuits, may harm our business or otherwise distract our management.

        We from time to time are, and may in the future be, subject to various investigations and legal proceedings that arise or may arise, such as proceedings regarding sales and marketing practices, pricing, corruption, trade regulation and embargo legislation, including laws relating to export and trade controls, product liability, commercial disputes, employment and wrongful discharge, business disputes, securities, insider trading, occupational health and safety, environmental, tax audits, cybersecurity, data privacy and intellectual property matters.

        We also periodically receive inquiries from antitrust and competition authorities in various jurisdictions and, from time to time, are named as a defendant in antitrust lawsuits. For example, since the first quarter of 2015, more than 50 putative class action complaints have been filed in several courts across the U.S. naming as defendants contact lens manufacturers, including Alcon Laboratories, Inc. (ALI), and alleging violations of federal antitrust law, as well as the antitrust, consumer protection and unfair competition laws of various states, in connection with the implementation of unilateral price policies by the defendants in the sale of contact lenses. The cases have been consolidated in the Middle District of Florida by the Judicial Panel on Multidistrict Litigation and the claims are being vigorously contested. See "Item 8 Financial Information—8.A. Combined Statements and Other Financial Information—Legal Proceedings".

        In addition, from time to time, we are named as a defendant in product liability lawsuits and, to the extent we are, we may in the future incur material liabilities relating to such product liability claims, including claims alleging product defects and/or alleged failure to warn of product risks. The risk of material product liability litigation is increased in connection with product recalls and voluntary market withdrawals. We have voluntarily taken products off the market in the past, including the global discontinuation of the AcrySof Cachet phakic IOL, the voluntary recall of AcrySof IQ ReSTOR, AcrySof IQ ReSTOR Toric and certain AcrySof IQ Toric IOLs manufactured specifically for the Japan market, and the global voluntary market withdrawal of the CyPass micro-stent. The combination of our insurance coverage, cash flows and reserves may not be adequate to satisfy product liabilities that we may incur in the future. Successful product liability claims brought against us or recalls of any of our products could have a material adverse effect on our business, results of operations or our financial condition.

        Substantial, complex or extended litigation could cause us to incur large expenditures, affect our ability to market and distribute our products and distract our management. For example, intellectual

52


Table of Contents

property litigation in which we are named as a defendant from time to time could result in significant damage awards and injunctions that could prevent the manufacture and sale of the affected products or require us to make significant royalty payments to continue to sell the affected products. Lawsuits by employees, shareholders, customers or competitors, or potential indemnification obligations and limitations of our director and officer liability insurance, could be very costly and substantially disrupt our business. Disputes with such companies or individuals from time to time are not uncommon, and we cannot be sure that we will always be able to resolve such disputes on terms favorable to us.

        Even meritless claims could subject us to adverse publicity, hinder us from securing insurance coverage in the future or require us to incur significant legal fees. As a result, significant claims or legal proceedings to which we are a party could have a material adverse effect on our business, prospects, financial condition and results of operations.

Failure to comply with law, legal proceedings and government investigations may have a significant negative effect on our results of operations.

        We are obligated to comply with the laws of all of the countries around the world in which we operate and sell products with respect to an extremely wide and growing range of activities. Such legal requirements can vary from country to country and new requirements may be imposed on us from time to time as government and public expectations regarding acceptable corporate behavior change, and enforcement authorities modify interpretations of legal and regulatory provisions and change enforcement priorities. In addition, our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, in violation of such laws and public expectations.

        For example, we are faced with increasing pressures, including new laws and regulations from around the world, to be more transparent with respect to how we do business, including with respect to our interactions with healthcare professionals and organizations. These laws and regulations include requirements that we disclose payments or other transfers of value made to healthcare professionals and organizations, including by our employees or third parties acting on our behalf, as well as with regard to the prices for our products. We are also subject to certain privacy laws, including Swiss privacy laws and the EU's recent General Data Protection Regulation, which includes operational and compliance requirements that are different than those previously in place and also includes significant penalties for non-compliance.

        In addition, we have significant activities in a number of developing countries around the world, both through our own employees, and through third parties retained to assist us. In some of these countries, a culture of compliance with law may not be as fully developed as in other countries.

        To help us in our efforts to comply with the many requirements that impact us, we have a significant global ethics and compliance program in place, and we devote substantial time and resources to efforts to ensure that our business is conducted in a lawful and publicly acceptable manner. Nonetheless, any actual or alleged failure to comply with law or with heightened public expectations could lead to substantial liabilities that may not be covered by insurance, or to other significant losses, and could affect our business, financial position and reputation.

        In particular, in recent years, there has been a trend of increasing government investigations, legal proceedings and law enforcement activities against companies and executives operating in our industry, both in the United States and in countries around the world. Increasingly, such activities can involve criminal proceedings, and can retroactively challenge practices previously considered to be acceptable. For instance, in 2011, ALI received a subpoena from the United States Department of Health & Human Services relating to an investigation into allegations of healthcare fraud and potential off-label promotion of certain products. The subpoena requests the production of documents relating to marketing practices and the remuneration of healthcare providers in connection with surgical

53


Table of Contents

equipment and certain Novartis products (Vigamox®, Nevanac®, Omnipred®, Econopred®). ALI is cooperating with this investigation. In addition, in 2017 and 2018, Alcon and Novartis Group companies, as well as certain present and former executives and associates of Alcon and Novartis, received document requests and subpoenas from the U.S. Department of Justice (DoJ) and the SEC requesting information concerning Alcon accounting, internal controls and business practices in Asia and Russia, including revenue recognition for surgical equipment and related products and services and relationships with third-party distributors, both before and after Alcon became part of the Novartis Group. Alcon and Novartis are cooperating with this investigation. Alcon aggregate net sales for its surgical and vision care businesses in the Asia and Russia region represented 24.2%, 21.1% and 22.1% of Alcon total net sales during the years ended December 31, 2018, 2017 and 2016, respectively. For additional information, including with respect to certain Novartis obligations to indemnify Alcon, see "Item 8 Financial Information—8.A. Combined Statements and Other Financial Information—Legal Proceedings".

        Such proceedings are inherently unpredictable, and large judgments or penalties sometimes occur. As a consequence, we may in the future incur judgments or penalties that could involve large cash payments, including the potential repayment of amounts allegedly obtained improperly, and other penalties, including enhanced damages. In addition, such proceedings may affect our reputation, create a risk of potential exclusion from government reimbursement programs in the United States and other countries, and may lead to civil litigation. As a result, having taken into account all relevant factors, we may in the future enter into major settlements of such claims without bringing them to final legal adjudication by courts or other such bodies, despite having potentially significant defenses against them, in order to limit the risks they pose to our business and reputation. Such settlements may require us to pay significant sums of money, and to enter into corporate integrity or similar agreements intended to regulate company behavior for a period of years, which can be costly to operate under.

        Any such judgments or settlements, and any accruals that we may take with respect to potential judgments or settlements, could have a material adverse impact on our business, financial condition or results of operations, as well as on our reputation.

We may implement product recalls or voluntary market withdrawals of our products, and this could have a material adverse effect upon our business, subject us to regulatory actions, impact regulatory approvals of subsequent products, lead to litigation, and cause a loss of customer confidence in our products.

        The manufacturing and marketing of medical devices, including surgical equipment and instruments, involve an inherent risk that our products may prove to be defective and cause a health risk. We are also subject to a number of laws and regulations requiring us to report adverse events associated with our products. Such adverse events and potential health risks identified in our monitoring efforts or from ongoing clinical studies may lead to voluntary or mandatory market actions, including recalls, product withdrawals or changes to the instructions for using our devices.

        The FDA and similar foreign governmental authorities have the authority to require the recall of our commercialized products in the event of material deficiencies or defects in, for example, design, labeling or manufacture. In the case of the FDA, it has the authority to require a recall of a medical device if there is a finding of a reasonable probability that the device would cause serious adverse health consequences or death.

        We may also voluntarily initiate certain field actions, such as a correction or removal of our products in the future as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. If a correction or removal of one of our devices is initiated to reduce a health risk posed by the device, or to remedy a violation of the Federal Food, Drug, and Cosmetic Act (FDCA) caused by the device that may present a risk to health, the correction or removal must be reported to the FDA. Similarly, field actions conducted for safety reasons in the

54


Table of Contents

European Economic Area ("EEA") must be reported to the regulatory authority in each country where the field action occurs.

        We have voluntarily taken products off the market in the past, including the global discontinuation of the AcrySof Cachet phakic IOL, the voluntary recall of AcrySof IQ ReSTOR, AcrySof IQ ReSTOR Toric, and certain AcrySof IQ Toric IOLs manufactured specifically for the Japan market, and the global voluntary market withdrawal of the CyPass micro-stent. Based on this experience, we believe that the occurrence of a recall could result in significant costs to us, potential disruptions in the supply of our products to our customers and adverse publicity, all of which could harm our ability to market our products. A recall of one of our products or a similar competing product manufactured by another manufacturer could impair sales and subsequent regulatory approvals of other similar products we market and lead to a general loss of customer confidence in our products. A product recall could also lead to a health authority inspection or other regulatory action or to us being named as a defendant in lawsuits. See "—Litigation, including product liability lawsuits, may harm our business or otherwise distract our management" above.

Our voluntary market withdrawal of our CyPass micro-stent glaucoma product in August 2018 will have an adverse impact on our business and may result in additional liability.

        In August 2018, we announced the immediate, voluntary market withdrawal of our CyPass micro-stent, designed to reduce intraocular pressure in the treatment of glaucoma, from the global market based on an analysis of the five-year post-surgery data from the COMPASS-XT long-term safety study. The five-year post-surgery data showed that the subjects who received the CyPass micro-stent at the time of cataract surgery experienced statistically significant endothelial cell loss compared to subjects who underwent cataract surgery alone. In connection with this voluntary market withdrawal, which the FDA subsequently classified as a Class I recall, we have communicated and will continue to communicate directly with ophthalmic surgeons with recommendations for evaluating and managing patients who have received a CyPass micro-stent, as well as instructions for returning any unused devices. In addition, we may become the subject of claims or other actions in connection with this market action. In the year ended December 31, 2018, we recognized an impairment charge of $337 million in relation to the CyPass micro-stent market withdrawal. Although we cannot predict the full impact of the voluntary market withdrawal of our CyPass micro-stent, such withdrawal and related impacts could have a material adverse effect on our business, financial condition, results of operations and reputation.

Significant breaches of data security or disruptions of information technology systems and the use of Internet, social media and mobile technologies could adversely affect our business and expose people's personal information.

        We are heavily dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support our business processes. In addition, Alcon and our employees rely on Internet and social media tools and mobile technologies as a means of communication and to gather information, which can include people's personal information. We are also increasingly seeking to develop technology-based products to improve patient welfare in a variety of ways, which could also result in us gathering personal information about patients and others electronically.

        The size and complexity of our information technology systems, and, in some instances, their age, make them potentially vulnerable to external or internal security incidents, breakdowns, malicious intrusions, cybercrimes, including State-sponsored cybercrimes, malware, misplaced or lost data, programming or human errors, or other similar events. Like many companies, we have experienced certain of these events and expect to continue to experience them in the future and, as the external cyber-attack threat only keeps growing, we may not be able to prevent future breakdowns or breaches

55


Table of Contents

in our systems and we may not be able to prevent such events from having a material adverse effect on our business, financial condition, results of operations or reputation. See the risk factor "—We may experience difficulties implementing our new enterprise resource planning system" below for more details on our ongoing implementation of a new enterprise resource planning system.

        Any such event could negatively impact important business processes, such as the conduct of scientific research and clinical trials, the submission of the results of such efforts to health authorities in support of requests for product approvals, the functioning of our manufacturing and supply chain processes, our compliance with legal obligations and our other key business activities, including our employees' ability to communicate with one another and with third parties. Such potential information technology issues could also lead to the loss of important information such as trade secrets or other intellectual property and could accelerate the development or manufacturing of competing products by third parties. Furthermore, malfunctions in software or in devices that make significant use of information technology, including our surgical equipment, could lead to a risk of harm to patients.

        In addition, our routine business operations, including through the use of information technologies such as the Internet, social media, mobile technologies, and technology-based medical devices like our surgical equipment, also increasingly involve our gathering personal information (including sensitive personal information) about patients, vendors, customers, employees, collaborators and others. Breaches of our systems or those of our third-party contractors, or other failures to protect such information, could expose such people's personal information to unauthorized persons. Any such event could give rise to significant potential liability and reputational harm, including potentially substantial monetary penalties. We also make significant efforts to ensure that any international transfers of personal data are done in compliance with applicable law. We are subject to certain privacy laws, including Swiss privacy laws and the EU's recent General Data Protection Regulation, which includes operational and compliance requirements that are different than those previously in place and also includes significant penalties for non-compliance. Failure to comply with these laws could lead to significant liability. In addition, any additional restraints that may be placed on our ability to transfer such data could have a material adverse effect on our business, financial condition, results of operations and reputation.

        We also use Internet, social media and mobile tools as a means to communicate with the public, including about our products or about the diseases our products are intended to treat. However, such uses create risks, such as the loss of trade secrets or other intellectual property. In addition, there continue to be significant uncertainties as to the rules that apply to such communications, and as to the interpretations that health authorities will apply in this context to the rules that do exist. As a result, despite our efforts to comply with applicable rules, there is a significant risk that our use of Internet, social media and mobile technologies for such purposes may cause us to nonetheless be found in violation of them.

        Our dependence upon information technology, including any breaches of data security, technology disruptions, privacy violations, or other uses of interconnected technologies could give rise to the loss of trade secrets or other intellectual property, to the public exposure of personal information, and to interruptions to our operations, and could result in enforcement actions or liability, including potential government fines, claims for damages, and shareholders' litigation. Any such events could require us to expend significant resources beyond those we already invest to further modify or enhance our protective measures, to remediate any damage, and to enable the continuity of our business. Such events could have a material adverse effect on our business, financial condition, results of operations and reputation.

56


Table of Contents

We may experience difficulties implementing our new enterprise resource planning system.

        We are engaged in a multi-year implementation of a new ERP system across our global commercial and manufacturing operations, which is intended to enhance and streamline our existing ERP system. ERP implementations are inherently complex and time-consuming projects that involve substantial expenditures on system software, implementation activities and business process reengineering. Any significant disruption or deficiency in the design and implementation of our new ERP system could adversely affect our ability to process orders, ship our products, provide services and customer support, fulfill contractual obligations or otherwise operate our business, and could have a material adverse effect on our business, financial condition or results of operations. For additional information, see "Item 4. Information on the Company—4.A. History and Development of the Company—Significant Acquisitions, Dispositions and other Events".

An inability to attract and retain qualified personnel could adversely affect our business.

        We highly depend upon skilled personnel in key parts of our organization, and we invest heavily in recruiting, training and retaining qualified individuals, including significant efforts to enhance the diversity of our workforce. The loss of the service of key members of our organization—including senior members of our scientific and management teams, high-quality researchers and development specialists and skilled personnel in developing countries—could delay or prevent the achievement of major business objectives.

        Our future growth will demand talented associates and leaders, yet the market for talent has become increasingly competitive. In particular, emerging markets are expected to continue to be an important source of growth, but in many of these countries there is a limited pool of executives with the training and international experience needed to work successfully in a global organization like Alcon.

        In addition, shifting demographic trends are expected to result in fewer students, fewer graduates and fewer people entering the workforce in the Western world in the next 10 years. Moreover, many members of younger generations around the world have changing expectations toward careers, engagement and the integration of work in their overall lifestyles.

        The supply of talent for certain key functional and leadership positions is decreasing, and a talent gap is visible for some professions and geographies—engineers in Germany, for example. Recruitment is increasingly regional or global in specialized fields such as clinical development, biosciences, chemistry and information technology. In addition, the geographic mobility of talent is expected to decrease in the future, with talented individuals in developed and developing countries anticipating ample career opportunities closer to home than in the past. This decrease in mobility may be worsened by anti-immigrant sentiments in many countries, and laws discouraging immigration.

        In addition, our ability to hire qualified personnel also depends on the flexibility to reward superior performance and to pay competitive compensation. Laws, regulations and customary practice on executive compensation, including legislation and customary practice in our home country, Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel. For example, pay benchmarks for Swiss and other European companies may be inconsistent with the current market in the United States, making it more difficult to recruit U.S. talent. Further, we may lose talent in connection with the separation and spin-off, as certain functions are expected to be moved from the United States to Switzerland, and certain U.S. employees may be unwilling or unable to make such transition.

        We face intense competition for an increasingly limited pool of qualified individuals from numerous healthcare companies, universities, governmental entities, research institutions, other companies seeking to enter the healthcare space and companies in other industries. As a result, we may

57


Table of Contents

be unable to attract and retain qualified individuals in sufficient numbers, which could have an adverse effect on our business, financial condition and results of operations, including, but not limited to, a loss of customer relationships.

Our third-party insurance may not be sufficient to cover all of our property and casualty, business interruption and liability risks.

        The medical device business involves an inherent risk of product liability and any claims of this type could have an adverse impact on us. Furthermore, we have all the risks of property and casualty, general liability, business interruption and environmental liability exposures that are typical of a public enterprise with manufacturing and marketing activities. Although we intend to purchase insurance coverage from third parties, there can be no assurance that our third-party insurance coverage, assets and internally generated cash flows will be adequate to provide for future liability claims and other such losses. Any significant losses from these risks could have a material adverse effect on our business, financial condition or results of operations.

If any of numerous key assumptions and estimates in calculating our pension plan obligations turn out to be different from our actual experience, we may be required to increase substantially our contributions to pension plans as well as the amount we pay toward pension-related expenses in the future.

        We sponsor pension and other post-employment benefit plans in various forms. These plans cover a significant portion of our associates. While most of our plans are now defined contribution plans, certain of our associates remain under defined benefits plans. For these defined benefits plans, we are required to make significant assumptions and estimates about future events in calculating the present value of expected future plan expenses and liabilities. These include assumptions used to determine the discount rates we apply to estimated future liabilities and rates of future compensation increases. Assumptions and estimates we use may differ materially from the actual results we experience in the future, due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants, among other variables. For example, in 2018, a decrease in the interest rate we apply in determining the present value of expected future total defined benefit plan obligations (consisting of pension and other post-employment benefit obligations) of one-quarter of one percent would have increased our year-end defined benefit obligation for plans in Switzerland, the U.S., the UK and Germany, which represent 83% of our total defined benefit plan obligations, by $29 million. Any differences between our assumptions and estimates and our actual experience could require us to make additional contributions to our pension funds. Further, additional employer contributions might be required if plan funding falls below the levels required by local rules. Either such event could have a material adverse effect on our business, financial condition or results of operations.

Regulatory clearance and approval processes for our products are expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products.

        Our businesses are subject to varying degrees of governmental regulation in the countries in which we operate, and the general trend is toward increasingly stringent regulation. The exercise of broad regulatory powers by the FDA continues to result in increases in the amounts of testing and documentation required for the commercialization of regulated products and a corresponding increase in the expense of product introduction. Similar trends are also evident in the EU and in other markets throughout the world. Compliance with these laws and regulations is costly and materially affects our business. Among other effects, health care regulations substantially increase the time, difficulty, and costs incurred in obtaining and maintaining approval to market newly developed and existing products.

58


Table of Contents

        Most of our products are regulated as medical devices and face difficult development and approval processes in most jurisdictions we operate in, particularly in the U.S. and EU. The U.S. and EU each use a risk-based classification system to determine the type of information that must be provided to the local regulatory bodies in order to obtain the right to market a product. In the U.S., many of our devices are either Class II devices that require FDA clearance of a 510(k) pre-market notification or Class III devices that require FDA approval of a pre-market approval (PMA) application. In the EEA, our device products are not subject to pre-market governmental authority approval but must undergo a conformity assessment procedure to demonstrate compliance with the applicable essential requirements set forth in the EU Medical Devices Directive, before the product may be CE marked and placed on the market. For most Class I devices, the manufacturer may self-certify compliance with the applicable essential requirements, but for all other devices a notified body must be involved in the conformity assessment procedure and issue a CE Certificate of Conformity. Some of our products are regulated as drug products and are also subject to various pre-market regulatory requirements. For example, in the U.S., drug products must either be the subject of an approved drug application or be marketed in accordance with an over-the-counter drug monograph.

        Clinical trials may be required to obtain clearance or approval of our products or may be required as a condition of approval. Clinical trial activities are subject to extensive regulation and review by numerous governmental authorities, both in and outside of the U.S. For example, outside the U.S., an increasing number of local regulators, particularly in Europe and Asia, have started to require the performance of local clinical trials as part of heightened regulatory review and approval processes for new products. We, regulatory authorities, or the reviewing institutional review board, may suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. We cannot be certain that the results of any clinical trial will support our product claims or that the applicable regulatory authorities and notified bodies will agree with our conclusions regarding them. The clinical trial process may fail to demonstrate that our products are safe and effective for the proposed indicated uses, which could cause us to abandon a product and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our products and generate revenues.

        The process of developing new products and obtaining necessary FDA clearance or approval, CE marking, or other regulatory marketing authorization is lengthy, expensive, and uncertain. Our potential products could take a significantly longer time than we expect to gain marketing authorization or may never gain such marketing authorization. Regulatory authorities may require additional testing or clinical data to support marketing authorization, delaying authorization and market entry of our products. Even if the FDA or another regulatory agency or notified body approves a product, the approval may limit the indicated uses for a product, may otherwise limit our ability to promote, sell and distribute a product or may require post-marketing studies or impose other post-marketing obligations. There is no assurance that we will be able to obtain the necessary regulatory clearances or approvals for any product on a timely basis or at all. If a regulatory authority delays authorization of a potentially significant product, our market value and operating results may decline. Similarly, if we are unable to obtain regulatory approval or CE marking of our products, we will not be able to market these products, which would result in a decrease in our sales.

        In addition, if our regulatory registrations, licenses or authorizations, such as marketing authorizations, establishment registrations or clinical trial applications or notifications, are transferred to a new corporate entity or our or our relevant subsidiary's legal name changes, we may be required to notify regulatory authorities or update such registrations or authorizations. We cannot assure you that we will successfully maintain the registrations, licenses, clearances or other authorizations we have received or may receive in the future. We also routinely make minor modifications to our products, labelling, instructions for use, manufacturing process and packaging that may trigger a requirement to notify regulatory authorities or to update such registrations or authorizations. This may subsequently

59


Table of Contents

require us to manage multiple versions of individual products around the world, depending on the status of any re-registration approvals. Managing such multiple versions may require additional inventory in the form of "bridging stock", extensive redress operations and inventory increases that could exceed our manufacturing capacity or supply chain ability at the time. This could result in prolonged product shortages that could negatively impact our sales, both in terms of any unavailable products and the potential loss of customers that opt for another supplier.

        The loss of previously received clearances or approvals, or the failure to comply with existing or future regulatory requirements could also have a material adverse effect on our business. For example, we offer custom surgical pack products that combine both Alcon and third-party products. Changes in local regulatory statutes, health authority practices, or local importation laws, or the failure of Alcon or our suppliers comply with them, could result in our products being barred from importation into a given territory. Continued growth in our sales and profits will depend, in part, on the timely and successful introduction and marketing of some or all of the products we are currently pursuing approval for.

The manufacture of our products is highly regulated and complex, and may result in a variety of issues that could increase our cost of goods and lead to extended supply disruptions and significant liability.

        The manufacture of our product portfolio is complex and heavily regulated by governmental health authorities around the world, including the FDA. Whether our products and the related raw materials are manufactured at our own dedicated manufacturing facilities or by third parties, we must ensure that all manufacturing processes comply with current Good Manufacturing Practices (cGMP), quality system requirements, and other applicable regulations, as well as with our own high quality standards. In recent years, health authorities have substantially intensified their scrutiny of manufacturers' compliance with such requirements.

        Any significant failure by us or our third-party suppliers to comply with these requirements or the health authorities' expectations may cause us to shut down our production facilities or production lines. Alternatively, we may be forced to shut them down by a government health authority, or could be prevented from importing our products from one country to another. This could lead to product shortages, or to our being entirely unable to supply products to customers and consumers for an extended period of time. Such shortages or shutdowns have led to and could continue to lead to significant losses of sales revenue and to potential third-party litigation. In addition, health authorities have in some cases imposed significant penalties for such failures to comply with regulatory requirements. A failure to comply fully with regulatory requirements could also lead to a delay in the approval of new products to be manufactured at the impacted site.

        Thus, complex production processes and compliance with regulatory requirements can increase our cost of producing our products, and any significant disruption in the supply of our products could impact our sales, either of which could have a material adverse effect on our business, financial condition or results of operations, as well as our reputation.

We may be subject to penalties if we fail to comply with post-approval legal and regulatory requirements and our products could be subject to restrictions or withdrawal from the market.

        The research, development, testing, manufacturing, sale and marketing of our products are subject to extensive governmental regulation. Government regulation includes inspection of and controls over testing, manufacturing, safety and environmental controls, efficacy, labeling, advertising, marketing, promotion, record keeping, tracking, reporting, distributing, import, export, samples, electronic records and electronic signatures.

        Among other requirements, we are required to comply with applicable adverse event and malfunction reporting requirements for our products. For example, for our medical device products, in

60


Table of Contents

the U.S. we are required to report to the FDA any incident in which one of our marketed devices may have caused or contributed to a death or serious injury or has malfunctioned and the malfunction of the device or a similar device that we market would be likely to cause or contribute to death or serious injury if the malfunction were to recur. In addition, all manufacturers placing medical devices on the market in the EEA are legally required to report any serious or potentially serious incidents involving devices produced or sold by the manufacturer to the relevant authority in those jurisdictions where any such incident occurred.

        Our advertising and promotional activities are also subject to stringent regulatory rules and oversight. The marketing approvals from the FDA and other regulators of certain of our products are, or are expected to be, limited to specific uses. We are prohibited from marketing or promoting any uncleared or unapproved use of our product, referred to as "off-label" use. In addition to promoting our products in a manner consistent with our clearances and approvals, we must have adequate substantiation for the claims we make for our products. If any of our claims are determined to be false, misleading or deceptive, we could be subject to enforcement action. In addition, unsubstantiated claims also present a risk of consumer class action or consumer protection litigation and competitor challenges. In the past, we have had to change or discontinue promotional materials because of regulatory agency requests, and we are exposed to that possibility in the future.

        Failure to comply with statutes and regulations administered by the FDA and other regulatory bodies or failure to adequately respond to any notices of violation or any similar reports could result in, among other things, any of the following enforcement actions:

    warning letters or untitled letters issued by the FDA;

    fines, civil penalties, in rem forfeiture proceedings, injunctions, consent decrees and criminal prosecution;

    detention of imported products;

    delays in approving, or refusal to approve, our products;

    withdrawal or suspension of approval of our products or those of our third-party suppliers by the FDA or other regulatory bodies;

    product recall or seizure;

    operating restrictions or interruption of production; and

    inability to export to certain foreign countries.

        If any of these items were to occur, it could result in unanticipated expenditures to address or defend such actions, could harm our reputation and could adversely affect our business, financial condition and results of operations.

We are subject to laws targeting fraud and abuse in the healthcare industry, the violation of which could adversely affect our business or financial results.

        We are subject to various federal, state and non-U.S. laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws. The U.S. federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering, arranging for or recommending the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between medical device manufacturers, on the one hand, and prescribers, purchasers, formulary managers and other healthcare-related professionals, on the other hand. Due to recent legislative changes, a person or entity no longer needs to have actual knowledge of this statute

61


Table of Contents

or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. Pricing and rebate programs must comply with the Medicaid drug rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, the Veterans Health Care Act of 1992, as amended, and the Deficit Reduction Act of 2005, as amended. The statutes and regulations governing the various price reporting requirements are complex and have changed over time, and the U.S. government has not given clear guidance on many issues. In addition, recent statutory and regulatory developments have not yet been applied by the government or courts to specific factual situations. We believe that Alcon is in compliance with all applicable government price reporting requirements, but there is the potential that the Centers for Medicare & Medicaid Services (CMS), other regulatory and law enforcement agencies or a court could arrive at different interpretations, with adverse financial or other consequences for us. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws. Some European Union bodies and most European Union member states and Japan impose controls and restrictions that are similar in nature or effect to those described above.

        In recent years, the federal government and several states have enacted legislation requiring medical device companies to establish marketing compliance programs and file other periodic reports. Similar legislation is being considered in other states. Many of these requirements are new and uncertain, and available guidance is limited. We could face enforcement action, fines and other penalties and could receive adverse publicity, all of which could harm our business, if it is alleged that we have failed to fully comply with such laws and regulations. Similarly, if the physicians or other providers or entities that we do business with are found to have not complied with applicable laws, they may be subject to sanctions, which could also have a negative impact on our business.

        Depending on the circumstances, failure to meet these applicable legal and regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, private "qui tam" actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into supply contracts, including government contracts, any of which could have a material adverse effect on our business, financial condition or results of operations.

Legislative and regulatory reforms may impact our ability to develop and commercialize our products.

        The global regulatory environment is increasingly stringent and unpredictable. Any changes or new requirements relating to the regulatory approval process or postmarket requirements applicable to our products in any jurisdiction could be costly and onerous to comply with and could have an adverse effect on our business, financial condition and results of operations. For example, in 2017 the EU published a new EU Medical Devices Regulation, which has introduced substantial changes to the requirements for medical device manufacturers bringing new products to the EU market, including with respect to clinical development, labelling, technical documentation and quality management systems. The regulation has a three-year implementation period. Medical devices placed on the market in the EU after May 2020 will require certification according to these new requirements, except that devices with valid CE certificates, issued pursuant to the Medical Device Directives before May 2020, can be placed on the market until those certificates expire, at the latest in May 2024, provided there are no significant changes in the design or intended purpose of the device. In addition, several countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations. While harmonization of global regulations has been pursued, requirements continue to differ significantly

62


Table of Contents

among countries. Further, the FDA is also pursuing various efforts to modernize its regulation of devices, including potential changes to the 510(k) pathway such as limiting reliance on older predicate devices and establishing an alternative 510(k) pathway that permits reliance on objective performance criteria. We expect this global regulatory environment to continue to evolve, which could impact the cost of, the time needed to approve, and ultimately, our ability to maintain existing approvals or obtain future approvals for, our products.

        In the U.S., there have been a number of health care reform legislative and regulatory measures proposed and adopted at the federal and state government levels that affect the health care system generally and that have had significant impact on our business. For example, the 2010 Patient Protection and Affordable Care Act (the "ACA") made extensive changes to the delivery of health care in the United States including, among other changes: (i) a 2.3 percent excise tax, currently suspended through December 31, 2019, on any entity that manufactures or imports medical devices offered for sale in the U.S., with limited exceptions (one of which is for contact lenses) and (ii) new reporting and disclosure requirements on medical device manufacturers for certain payments or other "transfers of value" made to physicians and teaching hospitals, and any ownership or investment interests in the device manufacturer held by physicians or their immediate family members (except ownership in publicly traded companies). In addition, the purchase of contact lenses currently requires a prescription under the Contact Lens Consumers Act. Should the purchase of contact lenses become permissible without a prescription under amended legislation, this could disintermediate traditional distribution models, including the ECP channel in which Alcon has a significant presence.

        Full implementation of these various measures could result in decreased net revenues from or increased expenses for our products. In addition, new legislation and new regulations and interpretations of existing health care statutes and regulations are frequently adopted, any of which could affect our future business and results of operations. For example, in December 2017, certain portions of the ACA relating to the individual mandate insurance program were effectively repealed by the Tax Cuts and Jobs Act of 2017, and the current U.S. President and/or the U.S. Congress may seek to repeal other portions of the ACA. In December 2018, a federal district court judge in Texas found the ACA to be unconstitutional, although the ruling was stayed while the case is appealed. Also, any adoption of health care reform proposals on a state-by-state basis in the U.S. could require us to develop state-specific marketing and sales approaches. At this time, we cannot predict which, if any, proposed measures might be adopted or their full effect on our business.

        Finally, within our surgical business, a considerable portion of our sales and sales growth rely on patient-pay premium technologies, in markets where access to these technologies has been established. For example, in the U.S., two landmark rulings issued by the CMS established a bifurcated payment system for certain of our AT-IOLs pursuant to which part of the cost of the cataract surgery with such AT-IOLs would be reimbursed under Medicare, with the remaining cost paid out-of-pocket. For more details, see "Item 4. Information on the Company—4.B. Business Overview—Our Products—Surgical". To the extent regulatory bodies in the U.S., such as CMS, or other health authorities outside the U.S., decide to amend the regulations governing patient-pay reimbursement for advanced technologies, our sales and sales growth could be negatively impacted.

We are subject to environmental, health and safety laws and regulations, and may face significant costs or liabilities associated with environmental, health and safety matters.

        We are subject to numerous federal, state and local environmental, health and safety laws and regulations, including relating to the discharge of regulated materials into the environment, human health and safety, laboratory procedures and the generation, handling, use, storage, treatment, release and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these hazardous

63


Table of Contents

materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our generation, handling, use, storage, treatment, release or disposal of hazardous materials or wastes, we could be held liable for any resulting damages, and any liability could materially adversely affect our business, operating results or financial condition. Although we maintain workers' compensation insurance, this insurance may not provide adequate coverage against potential liabilities. If we fail to comply with applicable environmental, health and safety laws and regulations, we may face significant administrative, civil or criminal fines, penalties or other sanctions. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, which have tended to become more stringent over time, including any potential laws and regulations that may be implemented in the future to address global climate change concerns. Compliance with current or future environmental, health and safety laws and regulations may increase our costs or impair our research, development or production efforts.

Alcon Pharmaceuticals Ltd ("APL") is party to an investment tax incentive with the Swiss State Secretariat for Economic Affairs in Switzerland (the "SECO") and the Canton of Fribourg, Switzerland that allowed APL to benefit from a ten year investment tax incentive, subject to satisfying certain ongoing obligations through the financial year ending December 31, 2022. Alcon will be subject to significant liability if it fails to comply with such ongoing requirements related to its operations in the Canton of Fribourg.

        Our subsidiary APL, which historically participated in both the surgical and vision care businesses to be conducted by Alcon, as well as the ophthalmology pharmaceutical business now conducted by Novartis Ophthalmics AG, Fribourg ("NOAG"), has benefitted from an investment tax incentive granted by the SECO and the Canton of Fribourg, Switzerland in respect of both Swiss federal taxes and Fribourg cantonal / communal taxes for the fiscal years ended December 31, 2007 through December 31, 2017. This tax incentive is subject to a five year "claw-back" period if APL does not continue to meet certain requirements related to its operations in Fribourg.

        In connection with the separation of the Novartis ophthalmology pharmaceutical business into NOAG and the anticipated separation and spin-off of the Alcon Business, it has been agreed with the Canton of Fribourg that each of APL and NOAG will have separate and standalone obligations and potential liabilities in connection with the five year claw-back period relating to the Fribourg investment tax incentive granted to APL. In particular, APL may be required to pay a "claw-back" amount of up to CHF 1.3 billion to the Fribourg tax authorities if APL fails to: (1) remain tax resident in Fribourg, (2) continue certain business activities in Fribourg, and (3) employ a certain minimum number of employees in Fribourg. Since December 31, 2018, our "claw-back" obligation has begun to be reduced each year by 20% of the original maximum amount and will expire on December 31, 2022.

        We intend to conduct APL's operations so as to comply with these requirements in all respects. However, there can be no assurance we will be able to meet, or that the Canton of Fribourg will not successfully challenge our compliance with, these requirements. If the Canton of Fribourg successfully challenges our compliance with these requirements, we would be required to pay all or a portion of the "claw-back" amount.

We are a multinational business that operates in numerous tax jurisdictions. Changes in tax law or their application in the jurisdictions in which we operate, or successful challenges to our tax positions by tax authorities, could adversely affect our results of operations.

        We conduct operations in multiple tax jurisdictions, and the tax laws of those jurisdictions generally require that the transfer prices between affiliated companies in different jurisdictions be the same as those between unrelated companies dealing at arm's length, and that such prices are supported by contemporaneous documentation. While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding

64


Table of Contents

on applicable tax authorities. If tax authorities in any of these jurisdictions were to successfully challenge our transfer prices as not reflecting arm's length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher overall tax liability to us, and possibly interest and penalties, and could adversely affect our business, results of operations and financial condition.

        Additionally, the integrated nature of our worldwide operations can produce conflicting claims from tax authorities in different countries as to the profits to be taxed in the individual countries. The majority of the jurisdictions in which we operate have double tax treaties with other foreign jurisdictions, which provide a framework for mitigating the impact of double taxation on our revenues and capital gains. However, mechanisms developed to resolve such conflicting claims are largely untested, and can be expected to be very lengthy.

        In recent years, tax authorities around the world have increased their scrutiny of company tax filings, and have become more rigid in exercising any discretion they may have. As part of this, the Organization for Economic Co-operation and Development (OECD) has proposed an initiative that will result in local tax law changes under its Base Erosion and Profit Shifting (BEPS) Action Plans to address issues of transparency, coherence and substance.

        At the same time, the European Commission is finalizing its Anti Tax Avoidance Directive, which seeks to prevent tax avoidance by companies and to ensure that companies pay appropriate taxes in the markets where profits are effectively made and business is effectively performed. The European Commission also continues to extend the application of its policies seeking to limit fiscal aid by Member States to particular companies, including by investigating Member States' practices regarding the issuance of rulings on tax matters relating to individual companies. Furthermore, new EU regulations introducing mandatory automatic exchange of information in relation to "reportable cross-border arrangements" entered into effect on June 25, 2018 and the Member States are required to transpose such regulation into their respective national legislation by December 31, 2019 and apply the new rules from July 1, 2020. The first automatic exchange of information in relation to "reportable cross-border arrangements" will have to take place by October 31, 2020. Over time, these new disclosure requirements may result in significant changes to the manner in which tax authorities and taxpayers view the application of established tax rules.

        These OECD and EU tax reform initiatives require local country implementation, including in our home country of Switzerland, which may result in significant changes to established tax principles. Although we have taken steps to be in compliance with the evolving OECD and EU tax initiatives, and will continue to do so, significant uncertainties remain as to the outcome of these initiatives and their impact on us as a taxpayer.

        In addition, on December 22, 2017, the President of the United States signed into law legislation commonly known as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA includes substantial changes to the U.S. taxation of individuals and businesses. Although the TCJA substantially decreased tax rates applicable to corporations in the U.S., we do not yet know what all of the consequences of the TCJA will be. In particular, significant uncertainties remain as to how the U.S. government will implement the new law, including with respect to the tax qualification of interest deductions, the concept of a territorial tax regime, royalty payments and cost of goods sold.

        Furthermore, Switzerland is considering the implementation of corporate tax reform, which could become effective as early as the first quarter of 2019. Currently, we do not expect Swiss corporate tax reform to have a material effect upon our business or financial condition. However, Swiss corporate tax reform remains pending and subject to change and could be enacted in a materially different form or could be administered or implemented in a manner different than our expectations. Accordingly, there can be no assurance that Swiss corporate tax reform will not adversely affect our business or financial condition.

65


Table of Contents

        In general, tax reform efforts, including with respect to tax base or rate, transfer pricing, intercompany dividends, cross border transactions, controlled corporations, and limitations on tax relief allowed on the interest on intercompany debt, will require us to continually assess our organizational structure and could lead to an increased risk of international tax disputes, an increase in our effective tax rate and an adverse effect on our financial condition.

Intangible assets and goodwill on our books may lead to significant impairment charges in the future.

        We carry a significant amount of goodwill and other intangible assets on our combined balance sheet, primarily due to the value of the Alcon brand name, and also associated with our technologies, acquired research and development, currently marketed products and marketing know-how. As a result, we may incur significant impairment charges in the future if the fair value of the intangible assets and the groupings of cash generating units containing goodwill would be less than their carrying value on our combined balance sheet at any point in time.

        We regularly review our long-lived intangible and tangible assets, including identifiable intangible assets, investments in associated companies and goodwill, for impairment. Goodwill, intangible assets with an indefinite useful life, acquired research projects not ready for use, and acquired development projects not yet ready for use are subject to impairment review at least annually. Other long-lived assets are reviewed for impairment when there is an indication that an impairment may have occurred.

        For a detailed discussion of how we determine whether an impairment has occurred, what factors could result in an impairment and the impact of impairment charges on our results of operations, see "Note 3. Significant accounting policies—Impairment of goodwill and intangible assets" to our combined financial statements included elsewhere in this Form 20-F.

Our existing and expected debt agreements may limit our flexibility to operate our business or adversely affect our business and our liquidity position.

        In connection with the completion of the spin-off, we expect to incur $3.5 billion in total indebtedness and, as of the completion of the spin-off, we expect to have $1.8 billion of outstanding non-current financial debt and $1.7 billion of outstanding current financial debt. In addition, we may incur additional indebtedness in the future and, if we are unable to raise sufficient debt on acceptable terms, we may be required to agree to less favorable terms than desired, such as higher interest rates or more restrictive covenants. Our existing and any future debt may require us to dedicate a portion of our cash flows to service interest and principal payments and, if interest rates rise, this amount may increase. Our indebtedness may also increase from time to time in the future for various reasons, including fluctuations in operating results, capital expenditures and potential acquisitions.

        Any indebtedness we incur could:

    make it difficult for us to satisfy our obligations, including making interest payments on our debt obligations;

    require us to dedicate a portion of our cash flows to payments on our debt, reducing our ability to use our cash flows to fund capital expenditures, BD&L or other strategic transactions, working capital and other general operational requirements, or to pay dividends to our shareholders;

    limit our flexibility to plan for and react to changes in our business;

    negatively impact our credit rating and increase the cost of servicing our debt;

    place us at a competitive disadvantage relative to some of our competitors that have less debt than us;

66


Table of Contents

    increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates or a downturn in our business or the economy; and

    make it difficult to refinance our existing and expected debt or incur new debt on terms that we would consider to be commercially reasonable, if at all.

        The occurrence of any one of these events could have a material adverse effect on our business, financial condition or result of operations or cause a significant decrease in our liquidity and impair our ability to pay amounts due on our indebtedness.

We may need to obtain additional financing which may not be available or, if it is available, may result in a reduction in the percentage ownership of our then-existing shareholders.

        We may need to raise additional funds in order to:

    finance unanticipated working capital requirements or refinance our existing and expected indebtedness;

    develop or enhance our infrastructure and our existing products and services;

    engage in mergers and acquisitions or strategic BD&L transactions;

    fund strategic relationships;

    respond to competitive pressures; and

    otherwise acquire complementary businesses, technologies, products or services.

        Additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund any potential expansion strategy, take advantage of unanticipated opportunities, develop or enhance technology or services or otherwise respond to competitive pressures could be significantly limited. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our then-existing shareholders may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing shareholders.

Risks Related to the Separation from Novartis

The spin-off may not be successful and as an independent, publicly traded company, we will not enjoy the same benefits that we did as a subsidiary of Novartis.

        Upon completion of the spin-off, we will be a standalone public company. The process of becoming a standalone public company may distract our management from focusing on our business and strategic priorities. Further, we may not be able to issue debt or equity on terms acceptable to us or at all and we may not be able to attract and retain employees as desired. We also may not fully realize the anticipated benefits of the separation and of being a standalone public company, or the realization of such benefits may be delayed, if any of the risks identified in this "Risk Factors" section, or other events, were to occur. For example, the transfer to us of the Brazil surgical and vision care business by Novartis may be delayed due to local regulatory and other requirements. Although Novartis is expected to pass through to us the risks and benefits of the Brazil business until such transfer is completed, the transfer may take longer than expected.

        In addition, we enjoyed certain benefits as a subsidiary of Novartis, including:

    strong capital base and financial strength;

    access to Novartis global information technology infrastructure;

    preferred status among our partners and employees; and

67


Table of Contents

    established relationships with government regulators.

        As a separate public company, we will be a smaller and less diversified company than Novartis, and we may not have access to financial and other resources comparable to those available to Novartis prior to the separation and spin-off. We cannot predict the effect that the spin-off and the separation will have on our relationship with partners or employees or our relationship with government regulators. We may also be unable to obtain goods, technology and services at prices and on terms as favorable as those available to us prior to the spin-off. Furthermore, as a less diversified company, we may be more likely to be negatively impacted by changes in global market conditions, regulatory reforms and other industry factors, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We may not achieve some or all of the expected benefits of the separation and spin-off, and the separation and spin-off may adversely affect our business.

        We may not be able to achieve the full strategic and financial benefits expected to result from the separation and spin-off, or such benefits may be delayed or not occur at all. The separation and spin-off are expected to provide the following benefits, among others:

    enhanced strategic and management focus;

    creation of a more nimble medical device company with ability to quickly focus on innovating products to meet the needs of the market;

    distinct investment identity;

    more efficient allocation of capital;

    direct access to capital markets; and

    alignment of incentives with performance objectives.

        We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

    the separation will require significant amounts of management's time and effort, which may divert management's attention from operating and growing our business;

    following the separation and the spin-off, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of Novartis;

    the costs associated with being a standalone public company;

    following the separation and the spin-off, our business will be less diversified than the Novartis business prior to the separation; and

    the other actions required to separate our and Novartis respective businesses could disrupt our operations.

        If we fail to achieve some or all of the benefits expected to result from the separation and spin-off, or if such benefits are delayed, our business, financial conditions and results of operations could be adversely affected.

Since 2011, we have operated as a division of Novartis and our historical financial information is not necessarily representative of the results we would have achieved as a standalone public company and may not be a reliable indicator of our future results.

        Our historical financial statements have been derived (carved-out) from the Novartis consolidated financial statements and accounting records, and these financial statements and the other historical

68


Table of Contents

financial information of Alcon included in this Form 20-F are presented on a combined basis. This combined information does not necessarily reflect the financial position, results of operations and cash flows we would have achieved as a standalone public company during the periods presented, or those that we will achieve in the future.

        This is primarily because of the following factors:

    For certain of the periods covered by our combined financial statements, our business was operated within legal entities which hosted portions of other Novartis businesses.

    Income taxes attributable to our business were determined using the separate return approach, under which current and deferred income taxes are calculated as if a separate tax return had been prepared in each tax jurisdiction. Actual outcomes and results could differ from these separate tax return estimates, including those estimates and assumptions related to realization of tax benefits within certain Novartis tax groups.

    Our combined financial statements include an allocation and charges of expenses related to certain Novartis functions such as those related to financial reporting and accounting operations, human resources, real estate and facilities services, procurement and information technology. However, the allocations and charges may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented therein.

    Our combined financial statements include an allocation from Novartis of certain corporate-related general and administrative expenses that we would incur as a publicly traded company that we have not previously incurred. The allocation of these additional expenses, which are included in the combined financial statements, may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented therein.

    In connection with the separation, we expect to incur one-time costs of approximately $0.3 billion after the completion of the spin-off relating to the transfer of information technology systems from Novartis to us. We expect to incur these expenses during the next two to three years.

    As part of Novartis, we historically benefited from discounted pricing with certain suppliers as a result of the buying power of Novartis. As a separate entity, we may not obtain the same level of supplier discounts historically received.

    In connection with the completion of the spin-off, we expect to incur $3.5 billion in total indebtedness and, as of the completion of the spin-off, we expect to have $1.8 billion of outstanding non-current financial debt and $1.7 billion of outstanding current financial debt. Such indebtedness and the related interest expenses associated with such debt, expected to be between $110 million and $130 million per year, are not fully reflected in our combined financial statements.

    On August 28, 2018, we announced our immediate, voluntary market withdrawal of our CyPass micro-stent surgical glaucoma product from the global market. Our combined financial statements include the sales of CyPass micro-stent products from and after the launch of the product in 2016 until our withdrawal of the product from the market in August 2018.

        Therefore, our historical financial information may not necessarily be indicative of our future financial position, results of operations or cash flows, and the occurrence of any of the risks discussed in this "Risk Factors" section, or any other event, could cause our future financial position, results of operations or cash flows to materially differ from our historical financial information.

69


Table of Contents

Our ability to operate our business effectively may suffer if we do not, quickly and cost effectively, establish our own administrative and support functions necessary to operate as a standalone public company.

        As a division of Novartis, we historically relied on financial (including financial and compliance controls) and certain legal, administrative and other resources of Novartis to operate our business. In particular, Novartis Business Services (NBS), the Novartis shared service organization, historically provided us with services across the following service domains: human resources operations, real estate and facility services, including site security and executive protection, procurement, information technology, commercial and medical support services and financial reporting and accounting operations.

        In connection with our separation from Novartis, we are creating our own financial, administrative, corporate governance and listed company compliance and other support systems, including for the services NBS had historically provided to us, or expect to contract with third parties to replace Novartis systems that we are not establishing internally. We expect this process to be complex, time consuming and costly. In addition, we are also establishing or expanding our own tax, treasury, internal audit, investor relations, corporate governance and listed company compliance and other corporate functions.

        These corporate functions fall beyond the scope of the operational service domains formerly provided by NBS and will require us to develop new standalone corporate functions. We expect to incur one-time costs to replicate, or outsource from other providers, these corporate functions to replace the additional corporate services that Novartis historically provided us prior to the separation. Novartis will continue to provide support for certain of our key business functions after the spin-off for approximately 24 months pursuant to a Transitional Services Agreement and certain other agreements we will enter into with Novartis. Any failure or significant downtime in our own financial, administrative or other support systems or in the Novartis financial, administrative or other support systems during the transitional period in which Novartis provides us with support could negatively impact our results of operations or prevent us from paying our suppliers and employees, executing business combinations and foreign currency transactions or performing administrative or other services on a timely basis, which could negatively affect our results of operations.

        In particular, our day-to-day business operations rely on our information technology systems. For example, our production facilities utilize information technology to increase efficiencies and limit costs. Furthermore, a significant portion of the communications among our personnel, customers and suppliers take place on our information technology platforms. We expect the transfer of information technology systems from Novartis to us to be complex, time consuming and costly. There is also a risk of data loss in the process of transferring information technology. As a result of our reliance on information technology systems, the cost of such information technology integration and transfer and any such loss of key data could have an adverse effect on our business, financial condition and results of operations.

        Further, as a standalone public company, we will incur significant legal, accounting and other expenses that we did not incur as a division of Novartis. Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and the NYSE, have imposed various requirements on public companies, including changes in corporate governance practices. For example, Sarbanes-Oxley requires, among other things, that we maintain and periodically evaluate our internal control over financial reporting and disclosure controls and procedures. In particular, we and our managers will have to perform system and process evaluation and testing of our and their internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of Sarbanes-Oxley.

        Although we currently test our internal controls over financial reporting on a regular basis, we have done so in accordance with the financial reporting practices and policies of Novartis, not as a standalone entity. Doing so for ourselves will require our management and other personnel to devote a substantial amount of time to comply with these requirements and will also increase our legal and

70


Table of Contents

financial compliance costs. In particular, compliance with Section 404 of Sarbanes-Oxley will require a substantial accounting expense and significant management efforts. We cannot be certain at this time that all of our controls will be considered effective and our internal control over financial reporting may not satisfy the regulatory requirements when they become applicable to us.

        Furthermore, the listing of our shares on the SIX and the NYSE will require us to comply with the listing, reporting and other regulations for each exchange. Compliance with two sets of regulations, which may have different standards and requirements, will require more time and effort from management.

        We expect to incur one-time costs of approximately $0.3 billion, primarily in connection with the transfer of information technology systems from Novartis to us over the two to three-year period following the completion of the spin-off.

The transitional services Novartis has agreed to provide us may not be sufficient for our needs. In addition, we or Novartis may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

        In connection with the separation, we and Novartis intend to enter into a Separation and Distribution Agreement and will enter into various other agreements, including the Transitional Services Agreement, Tax Matters Agreement, Employee Matters Agreement, Manufacturing and Supply Agreement and other separation-related agreements. See "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us". Certain of these agreements will provide for the performance of key business services by Novartis for our benefit for a period of time after the separation. These services may not be sufficient to meet our needs and the terms of such services may not be equal to or better than the terms we may have received from unaffiliated third parties, including our ability to obtain redress.

        We will rely on Novartis to satisfy its performance and payment obligations under these agreements. If Novartis is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transitional agreements expire, we may not be able to operate our business effectively and this may have an adverse effect on our business, financial condition and results of operations. In addition, after our agreements with Novartis expire, we may not be able to obtain these services at as favorable prices or on as favorable terms.

We may experience an interruption in the supply of our products to certain countries as a result of the change in name and corporate form of some of our subsidiaries in connection with the separation.

        In connection with the separation, some of our subsidiaries will undergo a change in corporate form, which would result in a change in the legal name of such entities. To the extent any regulatory registrations, licenses or authorizations, such as marketing authorizations, or the establishment of registrations or clinical trial applications or notifications have been granted to such entities, we may be required to notify regulatory authorities or to update such registrations or authorizations as a result of the name changes. We will also be required to update the labeling of certain of our existing products to reflect the name changes, and we may be prohibited from selling our existing inventory of products that are packaged with old labels. Relabeling our products will be a costly and time consuming process.

        We cannot assure you that we will be able to obtain the necessary regulatory approvals to operate and market or sell our products through these entities in all affected jurisdictions or that we will manage to relabel our products in a timely manner. If we fail to obtain such necessary approvals in any affected jurisdiction or to relabel our products by the later of the effective date of the legal name

71


Table of Contents

change or the expiration of any applicable grace period in a given jurisdiction, we may experience an interruption in the supply of our products in such affected jurisdictions until the necessary approvals have been obtained or until our products have been relabeled, which could have a material adverse effect on our business, financial condition and results of operations.

The separation and spin-off could result in significant tax liability to Novartis and us, and in certain circumstances, we could be required to indemnify Novartis for material taxes pursuant to indemnification obligations under the Tax Matters Agreement. In addition, we will agree to certain restrictions designed to preserve the tax treatment of the separation and spin-off that may reduce our strategic and operating flexibility. Finally, in certain circumstances, Novartis could determine not to proceed with the spin-off.

        The relevant Swiss tax consequences of the separation and spin-off have been taken up with the Swiss tax authorities. Novartis has received written confirmations (the "Swiss Tax Rulings") from the Swiss Federal Tax Administration and from the tax administrations of the Canton of Basel-Stadt and the Canton of Fribourg addressing the relevant Swiss tax consequences of the separation and spin-off.

        In addition, Novartis has received a private letter ruling from the U.S. Internal Revenue Service (the "IRS", and such ruling, the "IRS Ruling") and expects to obtain a written opinion of Cravath, Swaine & Moore LLP, counsel to Novartis (the "Tax Opinion") to the effect that the separation and spin-off should qualify for nonrecognition of gain and loss to Novartis and its shareholders under Section 355 of the Code.

        The Swiss Tax Rulings and the IRS Ruling (together, the "Tax Rulings") are, and the Tax Opinion will be, based on certain representations as to factual matters from, and certain covenants by, Novartis and us. Neither the Tax Rulings nor the Tax Opinion will be able to be relied on if any of the assumptions, representations or covenants are incorrect, incomplete or inaccurate or are violated in any material respect. The Tax Opinion and the Tax Rulings will not be binding in any court, and there can be no assurance that the relevant tax authorities or any court will not take a contrary position. In addition, if the Tax Rulings fail to remain effective and valid or the Tax Opinion is not able to be delivered to Novartis at the completion of the spin-off, the Novartis Board could determine not to proceed with the spin-off if, in its judgment, it determines that doing so would result in the spin-off having material adverse tax consequences or risks to Novartis or its shareholders.

        If the separation and/or spin-off were determined not to qualify for the treatments described in the Tax Rulings and Tax Opinion, or if any conditions in the Tax Rulings or Tax Opinion are not observed, then we could suffer adverse Swiss stamp duty and Novartis could suffer Swiss and U.S. income, withholding and capital gains tax consequences and, under certain circumstances, we could have an indemnification obligation to Novartis with respect to some or all of the resulting tax to Novartis under the tax matters agreement (the "Tax Matters Agreement") we intend to enter into with Novartis, as described in "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us—Tax Matters Agreement".

        In addition, under the Tax Matters Agreement, we will agree to certain restrictions designed to preserve the expected tax neutral nature of the separation and the spin-off for Swiss tax and U.S. federal income tax purposes. These restrictions may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that might be beneficial and could discourage or delay strategic transactions that our shareholders may consider favorable. See "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us—Tax Matters Agreement" for more information.

72


Table of Contents

Risks related to the Spin-off and Ownership of our Shares

The price of our shares after the spin-off may be volatile.

        The price of our shares after the spin-off may be volatile and may fluctuate due to factors including:

    the success of our products and our ability to maintain our position in our markets;

    market conditions in the surgical and vision care markets;

    the success of our research and development efforts in bringing new products to market;

    changes in third-party payor coverage and reimbursement methodologies;

    general economic, industry and market conditions;

    the maintenance of our relationships with healthcare providers;

    certain inventory management risks;

    our reliance on outsourcing key business functions to third parties;

    our ability to attract and retain qualified personnel;

    regulatory or legal developments (including healthcare reform) in the United States and other countries;

    changes in tax laws;

    future sales or dispositions of our shares;

    securities or industry analysts issuing opinions adverse to our company;

    the localization of the trading of our shares substantially on either the SIX or the NYSE;

    other developments affecting us, our industry or our competitors; and

    the other factors described in this "Risk Factors" section.

        The market price for our shares may be volatile. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our shares in spite of our operating performance. In addition, if trading of our shares is substantially localized on either the SIX or the NYSE, we may not meet the liquidity or other criteria necessary for inclusion in various stock indices that are based on our trading volumes on the other exchange. This could have a further negative impact on the price of our shares.

        Furthermore, in the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because medical device companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

Substantial sales of our shares may occur in connection with the spin-off, which could cause our share price to decline.

        Novartis shareholders receiving our shares in the spin-off generally may sell those shares immediately in the public market. It is likely that some Novartis shareholders, including some of its larger shareholders, will sell their shares of Alcon received in the spin-off if, for reasons such as our business profile or market capitalization as a standalone company, we do not fit their investment objectives, or they consider holding Alcon shares to be impractical or difficult due to listing, tax or

73


Table of Contents

other considerations, or—in the case of index funds—we are not a participant in the index in which they are investing. The sales of significant amounts of our shares, or the perception in the market that this will occur, may decrease the market price of our shares.

The combined post-spin-off value of our shares and Novartis shares or ADRs may not equal or exceed the aggregate pre-spin-off value of Novartis shares or ADRs and our shares.

        After the spin-off, Novartis shares will continue to be listed and traded on the SIX and Novartis ADRs will continue to be listed and traded on the NYSE. Our shares will be traded under the symbol "ALC" on the SIX and on the NYSE. We have no current plans to apply for listing on any additional stock exchanges. As a result of the spin-off, Novartis expects the trading prices of Novartis shares and ADRs at market open on April 9, 2019 to be lower than the trading prices at market close on April 8, 2019, because the trading prices will no longer reflect the value of the Alcon Business. There can be no assurance that the aggregate market value of the Novartis shares or ADRs and the Alcon shares following the spin-off will be higher than, equal to or lower than the market value of Novartis shares or ADRs if the spin-off did not occur. This means, for example, that the combined trading prices of one Novartis share or ADR and one-fifth of an Alcon share after market open on April 9, 2019 (representing the number of Alcon shares to be received per every one Novartis share or ADR in the distribution) may be equal to, greater than or less than the trading price of one Novartis share or ADR before April 9, 2019. In addition, following the close of business on April 8, 2019 but before the commencement of trading on April 9, 2019, your Novartis shares and ADRs will reflect an ownership interest solely in Novartis and will not include the right to receive any Alcon shares in the spin-off, but may not yet accurately reflect the value of such Novartis shares or ADRs excluding the Alcon Business.

Your percentage ownership in Alcon may be diluted in the future.

        In the future, your percentage ownership in Alcon may be diluted because of equity issuances from acquisitions, capital markets transactions or otherwise, including equity awards that we will be granting to our directors, officers and employees and authorized capital we hold for purposes of our employee participation plans. Our employees will have rights to purchase or receive Alcon shares after the distribution as a result of the conversion of their Novartis equity awards into Alcon equity awards and the grant of Alcon equity awards, including restricted share units and performance share units, in each case, in order to preserve the aggregate value of the equity awards held by Alcon employees immediately prior to the spin-off. See "Item 6. Directors, Senior Management and Employees—6.B. Compensation" for further detail on the awards that are expected to be granted in connection with the spin-off. As of the date of this Form 20-F, the exact number of Alcon shares that will be subject to the converted and granted Alcon awards is not determinable, and, therefore, it is not possible to determine the extent to which your percentage ownership in Alcon could be diluted as a result. It is anticipated that the Compensation, Governance and Nomination Committee of the Alcon Board will grant additional equity awards to Alcon employees and directors after the spin-off, from time to time, under Alcon employee benefits plans. These additional awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our shares.

The price of our shares and the U.S. dollar value of any dividends may be negatively affected by fluctuations in the U.S. dollar/Swiss franc exchange rate.

        Our shares will trade on the NYSE in U.S. dollars. Since our shares will also be listed in Switzerland on the SIX and trade in Swiss francs, the value of the shares may be affected by fluctuations in the U.S. dollar/Swiss franc exchange rate. In addition, since dividends that we may declare will be denominated in Swiss francs, exchange rate fluctuations will affect the U.S. dollar equivalent of dividends received by holders of shares held via DTC or shares directly registered with Computershare Trust Company, N.A. in the U.S. If the value of the Swiss franc decreases against the U.S. dollar, the price at which our shares listed on the NYSE trade may—and the value of the U.S. dollar equivalent of any dividend will—decrease accordingly.

74


Table of Contents

No assurance can be given that we will pay or declare dividends.

        Although Alcon currently expects that it will pay a regular cash dividend beginning in 2020 equivalent to approximately 10% of 2019 core net income, there can be no assurance that we will pay or declare dividends in the future. The Alcon Board may, in its discretion, recommend the payment of a dividend in respect of a given fiscal year. However, the declaration, timing, and amount of any dividends to be paid by Alcon following the spin-off will be subject to the approval of the Alcon shareholders at the relevant Annual General Meeting of shareholders. The determination of the Alcon Board as to whether to recommend a dividend and the approval of any such proposed dividend by the Alcon shareholders will depend upon many factors, including our financial condition, earnings, corporate strategy, capital requirements of our operating subsidiaries, covenants, legal requirements and other factors deemed relevant by the Alcon Board and shareholders. See "Item 8. Financial Information—8.A. Combined Statements and Other Financial Information—Dividend Policy" for more information.

As of the date of the spin-off, we will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

        Upon consummation of the spin-off, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to Swiss laws and regulations with regard to such matters and intend to furnish quarterly financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers or controlled companies.

        In addition, as a foreign private issuer, we will also be entitled to rely on exceptions from certain corporate governance requirements of the NYSE. As a result, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

        Furthermore, we prepare our financial statements under IFRS. There have been, and there may in the future be, certain significant differences between IFRS and U.S. Generally Accepted Accounting Principles, or U.S. GAAP, including but not limited to potentially significant differences related to the accounting and disclosure requirements relating to employee benefits, nonfinancial assets, taxation and impairment of long-lived assets. As a result, our financial information and reported earnings for historical or future periods could be significantly different if they were prepared in accordance with U.S. GAAP, and you may not be able to meaningfully compare our financial statements under IFRS with those companies that prepare financial statements under U.S. GAAP.

75


Table of Contents

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur significant additional legal, accounting and other expenses.

        We will be a foreign private issuer as of the date of the spin-off and therefore we will not be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our status as a foreign private issuer, either (a) a majority of our shares must be directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50 percent of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States.

        If we were to lose our foreign private issuer status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. For instance, we would be required to change our basis of accounting from IFRS as issued by the IASB to U.S. GAAP, which we expect would be difficult and costly for us to comply with and could also result in changes, which could be material, to historical financials previously prepared on the basis of IFRS. We would also be required to make changes in our corporate governance practices in accordance with various SEC and NYSE rules. The regulatory and compliance costs to us under U.S. securities laws when we would be required to comply with the reporting requirements applicable to a U.S. domestic issuer could be significantly higher than the costs we will incur as a foreign private issuer. As a result, a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time-consuming and costly. If we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we could be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our Board of Directors.

Our status as a Swiss corporation means that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.

        Swiss law reserves for approval by shareholders certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, the payment of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that our shareholders themselves resolve to, or authorize our Board of Directors to, increase our share capital. While our shareholders may authorize share capital that can be issued by our Board of Directors without additional shareholder approval, Swiss law limits this authorization to 50% of the issued share capital at the time of the authorization. The authorization, furthermore, has a limited duration of up to two years and must be renewed by the shareholders from time to time thereafter in order to be available for raising capital. Additionally, Swiss law grants pre-emptive rights to existing shareholders to subscribe for new issuances of shares and advance-subscription rights to subscribe for convertible bonds or similar instruments with conversion or option rights. A resolution adopted at a shareholders' meeting by a qualified majority of two-thirds of the votes represented, and the absolute majority of the nominal value of the shares represented, may restrict or exclude such pre-emptive or advance-subscription rights in certain limited circumstances. Swiss law also does not provide as much flexibility in the various rights and regulations that can attach to different categories of shares as do the laws of some other jurisdictions. These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would have provided benefits to our shareholders.

76


Table of Contents

U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or members of our Board of Directors.

        We are organized under the laws of Switzerland and our jurisdiction of incorporation is Switzerland. As a result, it may not be possible for investors to effect service of process within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal and state securities laws of the United States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles set forth in the Swiss Federal Act on International Private Law. This statute provides that the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result is incompatible with Swiss public policy. Also, mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise apply.

        Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland are governed by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:

    the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;

    the judgment of such non-Swiss court has become final and non-appealable;

    the judgment does not contravene Swiss public policy;

    the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and

    no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.

ITEM 4.    INFORMATION ON THE COMPANY

4.A. HISTORY AND DEVELOPMENT OF THE COMPANY

General Corporate Information

        Alcon is a stock corporation (Aktiengesellschaft) organized under the laws of Switzerland in accordance with article 620 et seq. of the Swiss CO and registered with the Swiss Register under registration number CHE-234.781.164. Alcon is registered in the Swiss Register under each of Alcon AG, Alcon SA and Alcon Inc., all of which are stated in our Articles as our corporate name. Alcon was formed by Novartis in connection with our separation from Novartis, for an unlimited duration, effective as of the date of the registration of Alcon in the Swiss Register on September 21, 2018.

        Alcon is domiciled in Fribourg, Switzerland and our registered office is currently located at Rue Louis-d'Affry 6, 1701 Fribourg, Switzerland. Our headquarters is currently located in Geneva, Switzerland at the following address: Chemin de Blandonnet 8, 1214 Vernier, Geneva, Switzerland. Our telephone number is +41 58 911 2110. Our principal website is www.alcon.com. The information contained on our website is not a part of this Form 20-F.

77


Table of Contents

General Development of Business

        Alcon was originally founded in 1945 by pharmacists Robert Alexander and William Conner, who opened a small pharmacy under the "Alcon" name in Fort Worth, Texas. In 1947, Alcon Laboratories, Inc. was first incorporated and began manufacturing specialty pharmaceutical products to address ocular health needs. In the succeeding years, Alcon began operating internationally with the opening of an office in Canada and first formed its surgical division.

        In 1977, Alcon was acquired by a subsidiary of Nestlé organized under the laws of Switzerland, and operated as a wholly owned subsidiary of Nestlé until 2002. In 2001, the name of the entity was officially changed to Alcon, Inc. and, on March 20, 2002, Nestlé completed an initial public offering of approximately 25% of the outstanding common shares of Alcon, Inc. From March 20, 2002 until its merger into Novartis, Alcon was publicly listed and traded on the New York Stock Exchange under the symbol "ACL".

        On April 6, 2008, Nestlé and Novartis entered into an agreement pursuant to which Nestlé agreed to sell approximately 25% of the then outstanding Alcon shares to Novartis, with an option for Novartis to acquire Nestlé's remaining shares in Alcon beginning in 2010. This sale was consummated on July 7, 2008. On January 3, 2010, Novartis announced it was exercising its option to purchase the remaining approximately 52% of the total outstanding Alcon shares owned by Nestlé and submitted a merger proposal to acquire the approximately 23% of Alcon shares that were publicly traded. Upon consummation of the purchase from Nestlé on August 25, 2010, Novartis owned an approximate 77% interest in Alcon. On December 14, 2010, Novartis entered into a definitive agreement to merge Alcon into Novartis in consideration for Novartis shares and a contingent value amount. On April 8, 2011, a Novartis Extraordinary General Meeting approved the merger with Alcon, Inc., creating the Alcon Division within Novartis, which at the time became the fifth reported segment in the strategically diversified Novartis healthcare portfolio. In connection with the Novartis acquisition of Alcon, Novartis also merged its then-existing contact lens and contact lens care unit, CIBA Vision, and certain of its ophthalmic pharmaceutical products into Alcon, making the Alcon Division the second-largest division of Novartis at the time of merger, and moved the generic ophthalmic pharmaceutical business conducted by Alcon prior to the merger into the Sandoz Division of Novartis. In 2016, Novartis moved the management and reporting of Alcon ophthalmic pharmaceutical and over-the-counter ocular health products to the Innovative Medicines Division of Novartis. Subsequently, effective January 1, 2018, Novartis returned to Alcon the management and reporting of over-the-counter ophthalmic products and certain surgical diagnostic medications previously transferred from Alcon in 2016.

        In early 2017, Novartis announced a strategic review of its Alcon Business to explore all options for its future, ranging from retention or sale of the business to the separation of the business via an initial public offering or spin-off transaction, in order to maximize value for its shareholders. Following the completion of such review in 2018, Novartis concluded that a spin-off transaction would be in the best interests of Novartis shareholders. Novartis conducted its strategic review during the course of 2017 and early 2018, with the key criteria for a final decision and timing being continued Alcon sales growth and margin improvement, which needed to have been demonstrated for multiple quarters in the judgment of the Novartis Board and management. On June 29, 2018, Novartis announced its intention to seek shareholder approval for the spin-off of its Alcon Business, following the complete legal and structural separation of Alcon into a standalone company.

Significant Acquisitions, Dispositions and other Events

        In 2012, we began a multi-year transformation to standardize our processes, enhance data transparency and globally integrate our fragmented and aging information technology systems across our commercial, supply and manufacturing operations worldwide, through a new foundation of Systems, Applications and Products in Data Processing (SAP), which is an ERP software platform. We expect to

78


Table of Contents

pay a total of approximately $850 million relating to the implementation of the new ERP system. Through December 31, 2018, the total amount paid with respect to the implementation was $429 million.

        In addition, we have made significant investments in certain of our manufacturing facilities to enhance our production capabilities. For more information, see "—Item 4.D. Property, Plants and Equipment—Major Facilities".

        In the past three years, we have also entered into certain acquisition transactions, including the acquisition of 100% of the outstanding shares and equity of ClarVista Medical, Inc. on September 20, 2017, TrueVision Systems, Inc. on December 19, 2018, Tear Film Innovations, Inc. on December 17, 2018 and PowerVision, Inc. on March 13, 2019. For further details on certain of our significant transactions in 2018, 2017 and 2016, see "Item 5. Operating and Financial Review and Prospects—5.A. Operating results—Factors Affecting Comparability of Year-on-Year Results of Operations—Recent Significant Transactions".

THE SPIN-OFF

Background

        On June 29, 2018, Novartis announced its intention to seek shareholder approval for the spin-off of its Alcon Business, following the complete legal and structural separation of Alcon into a standalone company. Novartis announced that the separation would be effected through a pro rata distribution of the shares of a new entity formed to hold the assets and liabilities that constitute the Alcon Business. At the Novartis AGM held on February 28, 2019, the Novartis Board obtained the approval of the Novartis shareholders to consummate the distribution of all of the Alcon shares held by Novartis to holders of Novartis shares and ADRs on the terms described in this Form 20-F.

        On April 9, 2019, referred to as the "Ex Date" for the spin-off, each Novartis shareholder will receive 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs that they held or acquired and did not sell or otherwise dispose of prior to the close of business on April 8, 2019, referred to as the "Cum Date" for the spin-off, and Alcon shares will begin trading separately from Novartis shares and ADRs on the SIX and the NYSE, respectively, on April 9, 2019. Novartis shareholders will not receive fractional Alcon shares and will instead receive cash upon the sale of the aggregated fractional Alcon shares in lieu of any fractional shares that they would have received after application of the distribution ratio. You will not be required to make any payment, surrender or exchange your Novartis shares or ADRs or take any other action to receive your Alcon shares in the spin-off, except as otherwise described below with respect to holders of Novartis physical share certificates, see "—When and How You Will Receive Alcon Shares" below. The distribution of Alcon shares as described in this Form 20-F is subject to the satisfaction, or waiver by the Novartis Board, of certain conditions. For a more detailed description of these conditions, see "—Conditions to the Spin-off" below.

Reasons for the Spin-off

        On June 29, 2018, Novartis announced that its strategic review of the Alcon Business had concluded that the separation of the Alcon Business from the remainder of its businesses would be in the best interests of Novartis and its shareholders and that the Novartis Board intended to seek shareholder approval for the spin-off at the Novartis AGM. We and Novartis believe that the separation and the spin-off will provide a number of benefits to both the Alcon and the Novartis businesses and to Novartis shareholders. A wide variety of factors were considered by Novartis and the

79


Table of Contents

Novartis Board in their evaluation of the proposed separation and the spin-off, including the following potential benefits:

    Enhanced strategic and management focus.  The spin-off will allow Alcon and Novartis to more effectively pursue their distinct operating priorities and strategies and enable management of both companies to focus on unique opportunities for long-term growth and profitability;

    Creation of a more nimble medical device company with ability to quickly focus on innovating products to meet the needs of the market.  The spin-off will allow Alcon to become a more focused and nimble medical device company. For example, focusing on the differing and more iterative product research and development cycle and innovation goals of the medical device industry versus the pharmaceutical industry will allow Alcon to better target its investments in R&D to the products and applied science advancements that are expected to have the maximum impact on its business. In addition, a company solely specializing in medical devices can more quickly adapt to the market and customer demands;

    Distinct investment identity.  The spin-off will allow investors to separately value Novartis and Alcon based on their distinct investment identities. In addition to product R&D cycles, the Alcon business differs from the Novartis business in several other respects, such as commercial call points, distribution models and manufacturing processes;

    More efficient allocation of capital.  The spin-off will permit each company to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital;

    Direct access to capital markets.  The spin-off will create an independent equity structure that will afford Alcon direct access to the capital markets and allow Alcon to capitalize on its unique growth opportunities and potentially make future acquisitions using its shares; and

    Alignment of incentives with performance objectives.  The spin-off will facilitate incentive compensation arrangements for employees more directly tied to the performance of the relevant company's businesses, and may enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.

        Neither Alcon nor Novartis can assure you that, following the separation and spin-off, any of the benefits described above or otherwise in this Form 20-F will be realized to the extent or at the time anticipated or at all. See also "Item 3. Key Information—3.B. Risk Factors".

        Novartis and the Novartis Board also considered a number of potentially negative factors in their evaluation of the potential separation and spin-off, including the following:

    Disruptions to the business as a result of the separation.  The actions required to separate the respective businesses of Novartis and Alcon could disrupt Alcon operations;

    Increased significance of certain costs and liabilities and impact of certain stranded costs.  Certain costs and liabilities that were otherwise less significant to Novartis as a whole will be more significant for Alcon as a standalone company. In addition, the separation will give rise to certain stranded costs at Novartis relating to associates and infrastructure that previously supported the Alcon Division;

    One-time costs of the separation and spin-off.  As a division of Novartis, Alcon historically relied on financial and certain legal, administrative and other resources of Novartis to operate its business. Following the separation, Alcon will no longer benefit from these synergies and will incur costs in connection with the transition to being a standalone public company that may include accounting, tax, treasury, legal, and other professional services costs, recruiting and

80


Table of Contents

      relocation costs associated with hiring key senior management personnel new to Alcon, and costs to separate information systems;

    Inability to realize anticipated benefits of the separation and spin-off.  Alcon may not achieve the anticipated benefits of the separation and spin-off for a variety of reasons, including, among others: (i) the separation and spin-off will require significant amounts of management's time and effort, which may divert management's attention from operating and growing the Alcon business; (ii) following the spin-off, Alcon may be more susceptible to market fluctuations and other adverse events than if it were still a part of Novartis; (iii) the costs associated with Alcon being a standalone public company; (iv) following the separation, the Alcon business will be less diversified than the Novartis business prior to the separation; and (v) the other actions required to separate the respective businesses of Novartis and Alcon could disrupt Alcon operations; and

    Covenants and obligations of Alcon pursuant to the Separation and Distribution Agreement, the Tax Matters Agreement and other agreements entered into in connection with the separation.  Alcon is and will be subject to numerous covenants and obligations arising out of agreements entered into in connection with the separation. For example, under the Tax Matters Agreement, Alcon will agree to covenants and indemnification obligations designed to preserve the tax-neutral nature of the spin-off. These covenants and indemnification obligations may limit the ability of Alcon to pursue strategic transactions or engage in new businesses or other transactions that might be beneficial.

        Novartis and the Novartis Board believe that the potential benefits of the separation and spin-off outweigh these factors. However, the completion of the spin-off remains subject to the satisfaction, or waiver by the Novartis Board, of a number of conditions. See "—Conditions to the Spin-off" below for additional detail.

When and How You Will Receive Alcon Shares

        Novartis will distribute to holders of Novartis shares and ADRs, as a pro rata dividend, 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs such shareholders hold or have acquired and do not sell or otherwise dispose of prior to the close of business on April 8, 2019, the Cum Date for the spin-off. The actual number of Alcon shares that will be distributed will depend on the total number of issued Novartis shares (excluding treasury shares held by Novartis and its subsidiaries) as of the Cum Date. An application will be made to list the Alcon shares on the SIX and on the NYSE under the ticker symbol "ALC". Subject to official notice of issuance, Alcon shares will trade and settle under ISIN code CH0432492467, CUSIP code H01301 128 and Valor Number 43 249 246.

        UBS, as the Swiss settlement agent, in coordination with SIX SIS and the Novartis Share Registry, will arrange for the distribution of Alcon shares to holders of Novartis shares, and Computershare Trust Company, N.A., as the Novartis ADR distribution agent, will arrange for the distribution of Alcon shares to the holders of Novartis ADRs. For purposes of and following the spin-off, Computershare will serve as registrar for the Alcon shares traded on both the SIX and the NYSE. Computershare Switzerland Ltd will serve as the Alcon Swiss share registrar and Computershare Trust Company, N.A. will serve as the Alcon U.S. share registrar and transfer agent.

        The last day of trading of Novartis shares and ADRs including the right to receive Alcon shares on the SIX and the NYSE, respectively, will be April 8, 2019, the Cum Date. In order to be entitled to receive the distribution of Alcon shares in the spin-off, a shareholder must hold or have acquired and not sold or otherwise disposed of their Novartis shares or ADRs prior to the close of business on the Cum Date. This means that if you sell your Novartis shares or ADRs before the close of business on the Cum Date, you will not be entitled to receive Alcon shares in the distribution. However, if you sell or otherwise dispose of your Novartis shares or ADRs after the close of business on the Cum Date, you will still be entitled to receive Alcon shares in the distribution. Investors acquiring or selling

81


Table of Contents

Novartis shares or ADRs on or around the Cum Date in over-the-counter or other transactions not effected on the SIX or the NYSE should ensure such transactions take into account the treatment of the Alcon shares to be distributed in respect of such Novartis shares or ADRs in the spin-off. Please contact your bank or broker for further information if you intend to engage in any such transaction.

        Alcon will become a standalone public company, independent of Novartis, on April 9, 2019, the Ex Date for the spin-off, and Alcon shares will commence trading on a standalone basis on the SIX and the NYSE at market open on the Ex Date (9:00 AM Central European Time on the SIX and 9:30 AM Eastern Standard Time on the NYSE). There will not be any "when-issued" trading of Alcon shares or "ex-distribution" trading of Novartis shares or ADRs prior to the spin-off.

        Depending on your bank or broker and whether you hold Novartis shares or ADRs, it is expected that your Alcon shares will be credited to your applicable securities account either on or shortly after the Ex Date or, for certain Novartis ADR holders, at the close of business on the Cum Date, and that you will be able to commence trading your Alcon shares on the SIX or the NYSE, as applicable, on April 9, 2019, the Ex Date. Alcon shares will be able to be traded and transferred across applicable borders without the need for conversion, with identical shares to be traded on the SIX in CHF and on the NYSE in USD. See also "—Listing and Trading of our Shares" below.

        In the event there are any changes to the Cum Date or the Ex Date, or new material information relating to the distribution of Alcon shares becomes available, Novartis will publish any such changes or updates in a press release that will also be furnished with the SEC on a Form 6-K. In addition, Novartis will give at least 10 days' notice of any changes to the Cum Date to the NYSE in accordance with NYSE's requirements.

        We are not asking Novartis shareholders to take any further action in connection with the spin-off, except as described below with respect to Novartis physical share certificate holders. We are not asking you for a proxy and we request that you not send us a proxy. We are also not asking you to make any payment or surrender or exchange any of your Novartis shares or ADRs for shares of Alcon. However, please see "—If You Hold Novartis Shares—Holders of Novartis Physical Share Certificates" below. The number of outstanding Novartis shares and ADRs will not change as a result of the spin-off.

If You Hold Novartis Shares

        If you hold or have acquired and do not sell or otherwise dispose of your Novartis shares prior to the close of business on April 8, 2019, the Cum Date, the Alcon shares that you are entitled to receive in the spin-off are expected to be distributed to you as described below.

        Holders of Novartis shares held in book-entry form with a bank or broker.    If you own your Novartis shares in book-entry form beneficially through a bank, broker or other nominee, your bank, broker or other nominee is expected to credit your custody account with the whole number of Alcon shares you are entitled to receive in the spin-off on or shortly after April 9, 2019, the Ex Date, at which time you should be able to commence trading the Alcon shares you are allotted. Please contact your bank, broker or other nominee for further information about your account and when you will be able to begin trading your Alcon shares. On April 10, 2019, the Swiss record date, the SIX SIS will, for purposes of the distribution, confirm the holdings of SIX SIS participant custodian banks that held Novartis shares as of the close of business on the Swiss record date. The allocation of Alcon book-entry shares to the accounts of SIX SIS participants is expected to settle on April 11, 2019 within the SIX SIS system. However, notwithstanding these later dates, it is expected that Novartis will provide an irrevocable instruction with respect to the settlement of Alcon shares that will permit SIX SIS participants to credit the distribution of Alcon shares into the accounts of Novartis shareholders on April 9, 2019, as described above.

82


Table of Contents

        Holders of Novartis physical share certificates (Heimverwahrer). Following the Novartis AGM, all registered Novartis shareholders holding physical share certificates who have previously provided a valid mailing address to Novartis will receive a notice with instructions on how to receive Alcon shares in the spin-off. If you hold Novartis physical share certificates and provide your response to the notice by March 18, 2019 (the date Novartis receives your response) by either (1) electing to convert your Novartis physical share certificates into electronic shares or (2) providing separate custody account details for the booking of Alcon shares to be distributed in the spin-off, your bank, broker or other nominee is expected to credit the relevant account with the Alcon shares you are entitled to receive in the spin-off on or shortly after April 9, 2019, the Ex Date, at which time you should be able to commence trading the Alcon shares you are allotted. Please contact your bank, broker or other nominee for further information about your custody account. If you do not receive such a notice from Novartis by March 4, 2019, please contact the Novartis Share Registry by telephone at +41 61 324 7204 or by email at share.registry@novartis.com. See also "Summary—The Spin-off—Questions and Answers about the Spin-off—Where can I get more information?".

        If Novartis has not received full and correct details of your securities account by March 18, 2019 in accordance with the instructions in the notice provided to you, you will not receive Alcon shares in the spin-off. In lieu of receiving Alcon shares, UBS, as the Swiss settlement agent, will sell the Alcon shares you are entitled to receive in the spin-off and Novartis will pay the aggregate net cash proceeds of such sale to you on or around April 23, 2019, if you have previously provided valid payment details to Novartis.

If You Hold Novartis ADRs

        If you hold or have acquired and do not sell or otherwise dispose of your Novartis ADRs prior to the close of business on April 8, 2019, the Cum Date, the Alcon shares that you are entitled to receive in the distribution are expected to be credited and issued to your custody account at or after the close of business on the Cum Date and to commence trading on the SIX and the NYSE on April 9, 2019, the Ex Date, as described below. However, we urge you to contact your custodian bank or broker for further information.

        On April 1, 2019, Computershare Trust Company, N.A., in coordination with the Novartis ADR depositary, J.P. Morgan, will confirm, for purposes of the distribution, the holders of Novartis ADRs as of April 1, 2019, the ADR entitlement record date. As a result, March 29, 2019 is the last date on which holders of Novartis ADRs can convert their ADRs into Novartis shares before completion of the spin-off and vice versa. March 29, 2019 is also the last date for Novartis ADR holders to directly register or de-register their ADRs with J.P. Morgan before the completion of the spin-off. Holders of ADRs will again be able to convert their ADRs into Novartis shares and to directly register or de-register their ADRs with J.P. Morgan, after April 11, 2019.

        From March 29, 2019 and up to and including the Cum Date, Novartis ADRs will trade "due bills" with the entitlement to receive Alcon shares in the spin-off. An Alcon "due bill" is an instrument employed for the purpose of evidencing the obligation of a seller of ADRs during this time period to deliver such entitlement to a subsequent purchaser. There will not be any "ex-distribution" trading of ADRs before April 9, 2019, the Ex Date. This means that Alcon shares will not trade separately from Novartis ADRs on the NYSE prior to April 9, 2019 and that any Novartis ADR purchased or sold on the NYSE prior to and up to and including the Cum Date will include the right to receive Alcon shares.

        Holders of Novartis ADRs in street accounts.    Holders of Novartis ADRs that are held in street accounts and that are not sold or otherwise disposed of prior to the close of business on April 8, 2019, the Cum Date, are expected to be able to commence trading the Alcon shares which they are allotted in the spin-off on or after April 9, 2019 through their intermediary and broker. The allocation of Alcon

83


Table of Contents

shares to book-entry accounts of holders of ADRs will settle via the DTC system into the custody accounts of custodian banks or brokers that are direct participants in the DTC system on April 11, 2019. Holders should consult with their intermediary or broker concerning the mechanics of owning Alcon shares held in street accounts and the date as of which they can expect to begin trading their Alcon shares through their intermediary or broker.

        ADR registered holders.    For holders of Novartis ADRs that are registered with the Novartis ADR depositary, J.P. Morgan, and that are not sold or otherwise disposed of prior to the close of business on the Cum Date, Computershare Trust Company, N.A. will distribute a confirmation of the uncertificated holdings of Alcon shares to such holders in paper mail form and such holders are expected to be able to commence trading the Alcon shares which they are allotted in the spin off-on or after April 9, 2019.

Number of Shares You Will Receive

        You will receive 1 Alcon share for every 5 Novartis shares or 5 Novartis ADRs you hold or have acquired and do not sell or otherwise dispose of prior to the close of business on the Cum Date.

Treatment of Fractional Shares

        The settlement and distribution agents will not distribute any fractional Alcon shares in connection with the spin-off. Instead, UBS, as the Swiss settlement agent, will aggregate all fractional shares that Novartis shareholders would otherwise have been entitled to receive and that have been notified to UBS by any of Computershare Trust Company, N.A., the U.S. distribution agent, the Novartis Share Registry or the relevant deposit banks through SIX SIS into whole shares and sell the whole shares in the open market at prevailing market prices. The aggregate net cash proceeds of such sales, net of brokerage fees and other costs, will be distributed pro rata to the relevant holders that would otherwise have been entitled to receive the fractional shares (based on the fractional share each such holder would otherwise be entitled to receive). UBS will not include fractional shares held by custodian banks that do not report their fractional shares to a SIX SIS participant, either directly or through another custodian bank, in the aggregate pool of fractional shares it will sell in the open market on behalf of Novartis shareholders entitled to receive a fractional share. In the case of fractional shares held in the custody of custodian banks that do not report their fractional shares to a SIX SIS participant, each such custodian bank is expected to sell the fractional shares in its custody and pay the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata to the relevant holders in CHF, and net of any required withholding for taxes applicable to each holder.

        We anticipate that UBS, as the Swiss settlement agent, will make these payments on or around April 23, 2019. UBS will, in its sole discretion, without any influence by Novartis or Alcon, determine when, how and at what price to sell the whole shares. UBS is not an affiliate of either Novartis or Alcon.

        Computershare Trust Company, N.A., the Novartis U.S. ADR distribution agent, will send to each registered holder of ADRs entitled to a fractional share a cash payment in lieu of that holder's fractional share on or around April 23, 2019. If you hold your Novartis ADRs through the facilities of the DTC or otherwise through a bank, broker or other nominee, your custodian, bank, broker or nominee will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales of fractional shares. No interest will be paid on any cash you receive in lieu of a fractional share. The cash you receive in lieu of a fractional share will generally be taxable to you for U.S. federal income tax purposes and may, in certain circumstances, be taxable to you for Swiss income tax purposes. See "—Material U.S. Federal Income Tax Consequences of the Spin-off" and "—Material Swiss Tax Consequences of the Spin-off" below for more information.

84


Table of Contents

Results of the Spin-off

        After the spin-off, we will be a standalone publicly traded company. Immediately following the spin-off, we expect to have approximately 488,700,000 shares of Alcon outstanding based on the number of issued shares of Novartis (excluding treasury shares held by Novartis and its subsidiaries) as of December 31, 2018, an estimated number of Novartis shares delivered under equity participation plans and share buybacks between December 31, 2018 and the completion of the spin-off, and the application of the distribution ratio. The actual number of our shares that Novartis will distribute in the spin-off will depend on the actual number of issued shares of Novartis, excluding treasury shares held by Novartis and its subsidiaries, on the Cum Date. The spin-off will not affect the number of outstanding Novartis shares or ADRs or any rights of holders of any outstanding Novartis shares or ADRs, although we expect the trading price of Novartis shares and ADRs immediately following the spin-off to be lower than immediately prior to the spin-off because the trading price of Novartis shares and ADRs will no longer reflect the value of the Alcon Business. In addition, following the close of business on the Cum Date but before the commencement of trading on the Ex Date, your Novartis shares and ADRs will trade without the entitlement to receive the distribution of Alcon shares in the spin-off and will reflect an ownership interest solely in Novartis, but may not yet accurately reflect the value of such Novartis shares or ADRs excluding the Alcon Business.

        Before our separation from Novartis, we intend to enter into a Separation and Distribution Agreement and several other agreements with Novartis related to the separation and the spin-off. These agreements will govern the relationship between us and Novartis up to and after completion of the spin-off and allocate between us and Novartis various assets, liabilities, rights and obligations, including employee benefits, intellectual property and tax-related assets and liabilities. We describe these arrangements in greater detail under "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us".

Listing and Trading of our Shares

        As of the date of this Form 20-F, we are a wholly owned subsidiary of Novartis. Accordingly, no public market for our shares currently exists. We intend to list our shares on the SIX and on the NYSE under the symbol "ALC". As such, our shares will be able to be traded and transferred across applicable borders without the need for conversion, with identical shares to be traded on different stock exchanges in different currencies. During the hours in which both the SIX and NYSE are open for trading, price differences between these exchanges are likely to be arbitraged away by professional market-makers. Accordingly, the share price will typically be similar between the two exchanges when considering the prevailing USD to CHF exchange rate. When the SIX is closed for trading, globally traded volumes will typically be lower. However, Alcon will use a specialist firm to make a market in Alcon shares on the NYSE to facilitate sufficient liquidity and maintain an orderly market in Alcon shares throughout normal NYSE trading hours. Alcon anticipates that there will not be trading of its shares on a "when-issued" basis and that trading will commence on the Ex Date.

        Alcon expects to maintain one share register split into two parts: a Swiss register for shareholders holding shares as book-entry shares via SIX SIS, the Swiss settlement system, and a U.S. register for shareholders in the U.S. that wish to directly hold uncertificated shares of Alcon. Computershare Switzerland Ltd will act as our Swiss share registrar and Computershare Trust Company, N.A. will act as our U.S. share registrar and transfer agent.

        In addition, Alcon currently intends that its issued shares will be held in the following forms:

    Shares issued as book-entry (intermediary-held) securities via SIX SIS.  Alcon shares will be issued in uncertificated form and a portion of such shares will be registered in the main register with SIX SIS, which provides services for the clearing, settlement and custody of Swiss and international securities, in order to issue them in book-entry form. SIX SIS will credit these

85


Table of Contents

      shares to SIX SIS participants, which in turn may credit them further to other custodians or clients. Under Swiss law, investors may hold shares in a custody account with a custodian to which such shares will be credited. It is generally not possible for shareholders (except for certain financial institutions) to hold direct accounts or to otherwise be directly registered with SIX SIS. In addition, the SIX SIS main register and the accounts of participants in the SIX SIS settlement system are different and separate from the share register of Alcon. Investors holding shares in this form may generally be registered as shareholders in the Alcon share register if they so wish.

    Shares held via DTC.  Holders may hold their entitlements to Alcon shares in book-entry form via the DTC system through custody accounts with custodian banks or brokers that are direct participants in the DTC system. Such shares will be held in the name of DTC's nominee, Cede & Co., either via SIX SIS or through Computershare Trust Company, N.A. Such holders' entitlements to Alcon shares will be recorded in their custodian banks' or brokers' records. Such holders may effect the transfer of their entitlements to Alcon shares through their custodian banks or brokers and will receive written confirmations of any purchase or sales of Alcon shares and any periodic account statements from such custodian banks or brokers.

    Directly registered shares held through Computershare Trust Company, N.A. in the U.S.  In the U.S., holders may directly hold their ownership interests in Alcon in the form of uncertificated shares that will be registered in the names of such holders directly on the books of Computershare Trust Company, N.A. Holders will receive periodic account statements from Computershare Trust Company, N.A. evidencing their holding of Alcon shares. Through Computershare Trust Company, N.A., holders may effect transfers of Alcon shares to others, including to banks or brokers that are participants in the DTC Direct Registration System.

        Investors should be aware that, while our shares will be able to be traded and transferred across applicable borders without the need for conversion of our shares into any different form of security, different markets have different settlement systems and it is possible that the manner in which you hold your shares, i.e., as book-entry shares via the SIX SIS or through DTC or as directly registered shares held through Computershare Trust Company, N.A. in the U.S., may change upon the transfer of our shares between the SIX and the NYSE. Investors wishing to trade their Alcon shares on a different exchange or wishing to change the manner in which they hold their Alcon shares should contact their bank or broker for additional information, including with respect to any special settlement considerations that may apply to such a transfer.

        Neither we nor Novartis can assure you as to the trading price of Novartis shares or ADRs or of Alcon shares after the spin-off, or as to whether the combined trading prices of the Alcon shares and the Novartis shares or ADRs after the spin-off will be less than, equal to or greater than the trading prices of Novartis shares or ADRs prior to the spin-off. As a result of the spin-off, Novartis expects the trading prices of Novartis shares and ADRs at market open on April 9, 2019 to be lower than the trading prices at market close on April 8, 2019, because the trading prices will no longer reflect the value of the Alcon Business. See "Item 3. Key Information—3.D. Risk Factors—Risks Related to the Spin-off and Ownership of our Shares" for more detail.

        Subject to any procedural requirements for certain types of transfers that may be included in our Articles, the shares of Alcon distributed to Novartis shareholders will be freely transferable, except for shares received by individuals who are our affiliates. See "Item 10. Additional Information—10.A. Share Capital—Form of the Shares and Transfer of Shares". Individuals who may be considered our affiliates after the spin-off include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of Alcon only pursuant to an effective registration

86


Table of Contents

statement under the Securities Act of 1933, as amended (the "Securities Act"), or an exemption from the registration requirements of the Securities Act, such as those afforded by Section 4(a)(1) of the Securities Act or Rule 144 thereunder.

Conditions to the Spin-off

        We expect that the separation and the spin-off will be effective on the Ex Date, provided that the following conditions shall have been satisfied or waived by Novartis:

    the Alcon shares shall have been accepted for listing on the SIX and the NYSE as from the Ex Date (subject to technical deliverables only);

    the SEC shall have declared effective this Registration Statement on Form 20-F under the Exchange Act, and no stop order suspending the effectiveness of this Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC;

    no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the spin-off shall be in effect, and no other event outside the control of Novartis shall have occurred or failed to occur that prevents the consummation of the spin-off (including, but not limited to, Novartis not being able to complete the Internal Transactions due to elements outside of its reasonable control); and

    no other events or developments shall have occurred prior to the Ex Date that, in the judgment of the Novartis Board, would result in the spin-off having a material adverse effect (including, but not limited to, material adverse tax consequences or risks) on Novartis or its shareholders.

        Novartis does not currently expect to waive any of the conditions to the spin-off. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the approval for listing of our shares and the SEC's declaration of the effectiveness of the Registration Statement, in connection with the spin-off.

Material U.S. Federal Income Tax Consequences of the Spin-off

Consequences to U.S. Holders of Novartis Shares

        The following is a summary of the material U.S. federal income tax consequences to holders of Novartis shares or ADRs in connection with the distribution. For purposes of the following discussion, any reference to Novartis shares includes Novartis ADRs. This summary is based on the Code, Treasury Regulations promulgated thereunder and judicial and administrative interpretations thereof, in each case as in effect as of the date of this Form 20-F and all of which are subject to change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below.

        This summary is limited to holders of Novartis shares that are U.S. Holders, as defined immediately below, that hold their Novartis shares as a capital asset. A "U.S. Holder" is a beneficial owner of Novartis shares that is, for U.S. federal income tax purposes:

    an individual who is a citizen or a resident of the United States;

    a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state thereof or the District of Columbia;

    an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

87


Table of Contents

    a trust if (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (ii) in the case of a trust that was treated as a domestic trust under law in effect before 1997, a valid election is in place under applicable Treasury Regulations.

        This summary does not discuss all tax considerations that may be relevant to shareholders in light of their particular circumstances, nor does it address the consequences to shareholders subject to special treatment under the U.S. federal income tax laws, such as:

    dealers or traders in securities or currencies;

    tax-exempt entities;

    banks, financial institutions or insurance companies;

    real estate investment trusts, regulated investment companies or grantor trusts;

    persons who acquired Novartis shares pursuant to the exercise of employee stock options or otherwise as compensation;

    shareholders who own, or are deemed to own, 10% or more, by voting power or value, of Novartis equity;

    shareholders owning Novartis shares as part of a position in a straddle or as part of a hedging, conversion or other risk reduction transaction for U.S. federal income tax purposes;

    certain former citizens or long-term residents of the United States;

    shareholders who are subject to the alternative minimum tax;

    persons who own Novartis shares through partnerships or other pass-through entities; or

    persons who hold Novartis shares through a tax-qualified retirement plan.

        This summary does not address any U.S. state or local or foreign tax consequences or any estate, gift or other non-income tax consequences.

        If a partnership, or any other entity treated as a partnership for U.S. federal income tax purposes, holds Novartis shares, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership is urged to consult its own tax advisor as to its tax consequences.

        Novartis has received the IRS Ruling and expects to receive the Tax Opinion, described below, which will each rely upon certain facts, assumptions, representations and undertakings from Novartis and us regarding the past and future conduct of Novartis and our businesses and other matters. If any of the facts, assumptions, representations or undertakings described therein are incorrect or not otherwise satisfied, Novartis may not be able to rely upon the IRS Ruling or the Tax Opinion. Accordingly, notwithstanding the Tax Opinion and the IRS Ruling, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to one or more of the conclusions set forth below.

        YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE DISTRIBUTION.

88


Table of Contents

General

        Novartis has received the IRS Ruling and expects to receive the Tax Opinion providing, in each case, that the distribution should qualify for nonrecognition of gain or loss under Section 355 of the Code. As a result:

    no gain or loss should be recognized by, or be includible in the income of, a U.S. Holder as a result of the distribution;

    the aggregate tax basis of the Novartis shares and our shares held by each U.S. Holder immediately after the distribution should be the same as the aggregate tax basis of the Novartis shares held by the U.S. Holder immediately before the distribution, allocated between the Novartis shares and our shares in proportion to their relative fair market values on the date of the distribution; and

    the holding period of our shares received by each U.S. Holder should include the holding period of its Novartis shares.

        Generally, if a Novartis shareholder holds different blocks of Novartis shares (generally Novartis shares purchased or acquired on different dates or at different prices), a U.S. Holder must perform the tax basis allocation described above with respect to each block and will have a holding period in our shares determined with respect to the holding period of such block.

        A U.S. Holder that receives cash in lieu of a fractional share as part of the distribution (see "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—Treatment of Fractional Shares") will be treated as though it first received a distribution of the fractional share in the distribution and then sold it for the amount of cash actually received. The U.S. Holder will generally recognize a capital gain or loss measured by the difference between the cash received for such fractional share and the U.S. Holder's tax basis in that fractional share, as determined above. Such capital gain or loss will be a long-term capital gain or loss if the U.S. Holder's holding period for the Novartis shares is more than one year on the date of the distribution. Certain U.S. Holders are eligible for reduced rates of taxation on their long-term capital gains.

        A U.S. Holder of Novartis physical share certificates (Heimverwahrer) who receives cash due to non-response by March 18, 2019 will be treated as if the U.S. Holder received our shares with respect to its physical share certificates in the distribution and then sold such shares for the cash actually received. The deemed receipt and sale of our shares for cash will be subject to the same treatment as the receipt of cash in lieu of a fractional share for U.S. federal income tax purposes as described above.

Backup Withholding

        Payments of cash in lieu of a fractional share and cash payments to a U.S. Holder of Novartis physical share certificates (Heimverwahrer) who receives cash due to non-response by March 18, 2019 may, under certain circumstances, be subject to "backup withholding", unless the U.S. Holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the requirements of the backup withholding rules. Corporations will generally be exempt from backup withholding, but may be required to provide a certification to establish their entitlement to the exemption. Backup withholding is not an additional tax, and it may be refunded or credited against a U.S. Holder's U.S. federal income tax liability if the required information is timely supplied to the IRS.

Information Reporting

        Treasury Regulations require each Novartis shareholder that, immediately before the distribution, owned 5% or more (by vote or value) of the total outstanding stock of Novartis to attach to such

89


Table of Contents

shareholder's U.S. federal income tax return for the year in which the distribution occurs a statement setting forth certain information related to the distribution.

Material Swiss Tax Consequences of the Spin-off

Consequences to Swiss Holders of Novartis Shares

        This summary is limited to holders of Novartis shares that are Swiss Holders, as defined below. A "Swiss Holder" is a beneficial owner of Novartis shares that is:

    a Swiss tax resident individual who holds Novartis shares as private assets;

    a Swiss tax resident individual or a non-Swiss tax resident individual who is subject to Swiss income tax for reasons other than residency who holds Novartis shares as business assets or qualifies as a professional securities dealer for Swiss tax purposes; or

    a legal entity tax resident in Switzerland or a non-Swiss tax resident legal entity who holds Novartis shares as part of a Swiss permanent establishment or fixed place of business.

        This summary does not discuss all tax considerations that may be relevant to shareholders in light of their particular circumstances, nor does it address the consequences to shareholders subject to special treatment under Swiss tax laws, including but not limited to:

    tax-exempt entities;

    banks, financial institutions or insurance companies;

    persons who acquired Novartis shares pursuant to an employment share plan or otherwise as compensation; or

    persons who own Novartis shares through partnerships or other pass-through entities.

        This summary does not address any non-Swiss tax consequences or non-income tax consequences (such as estate, gift, inheritance, capital or wealth taxes).

        YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE SWISS AND FOREIGN TAX CONSEQUENCES OF THE DISTRIBUTION.

General

        The following statements are based on the requirement of the continuing effectiveness and validity of the Swiss Tax Rulings, each to the effect that the spin-off qualifies as a tax-neutral transaction.

        If the spin-off qualifies as a tax-neutral transaction, and subject to the qualifications and limitations set forth herein (including the discussion below relating to the receipt of cash in lieu of fractional shares), for Swiss tax purposes no gain or loss should be recognized by, or be includible in the income of, a Swiss Holder as a result of the distribution, provided that Swiss Holders who hold Novartis shares as business assets accurately maintain the tax and book values of their Novartis and Alcon shares. This means that for Swiss Holders who hold Novartis shares as business assets, the aggregate tax basis of the Novartis shares and our shares immediately after the distribution should be the same as the aggregate tax basis of the Novartis shares held immediately before the distribution, allocated between the Novartis shares and our shares.

90


Table of Contents

        If a Swiss Holder that holds Novartis shares as business assets is classified as a "professional securities dealer" or is a legal entity and receives cash in lieu of a fractional share, such Swiss Holder will generally recognize a capital gain or loss measured by the difference between the cash received for such fractional share and the Swiss Holder's tax basis in that fractional share. The same Swiss income tax treatment applies to Swiss Holders of Novartis physical share certificates (Heimverwahrer) held as business assets who receive cash due to non-response by March 18, 2019.

        If a Swiss Holder who holds Novartis shares as private assets receives cash in lieu of fractional shares, the receipt of such cash will be tax-free to the holder. The same Swiss income tax treatment applies to Swiss Holders of Novartis physical share certificates (Heimverwahrer) held as private assets who receive cash due to non-response by March 18, 2019. See also "Item 4. Information on the Company—4.A. History and Development of the Company—The Spin-off—When and How You Will Receive Alcon Shares—If You Hold Novartis Shares".

        Novartis has received the Swiss Tax Rulings which cover the relevant Swiss tax aspects of the separation and spin-off. The Swiss Tax Rulings rely upon certain facts, assumptions, representations and undertakings from Novartis and us regarding the past and future conduct of Novartis and our businesses and other matters. If any of the facts, assumptions, representations or undertakings described therein are incorrect or not otherwise satisfied, Novartis may not be able to rely upon the Swiss Tax Rulings.

        Accordingly, notwithstanding the Swiss Tax Rulings, there can be no assurance that the relevant Swiss tax authorities will not assert, or that a court would not sustain, a position contrary to one or more of the conclusions set forth above.

Consequences to Novartis and the Indemnification Obligation

        The following is a summary of the material tax consequences to Novartis in connection with the spin-off that may be relevant to holders of Novartis shares.

        As discussed above, the spin-off will be preceded by several internal restructuring steps to separate the Alcon Business from Novartis. Novartis has received the Tax Rulings and expects to receive the Tax Opinion providing that the spin-off and certain internal restructuring steps taken prior to the spin-off should qualify for nonrecognition of gain or loss for U.S. federal income tax purposes or preserve the tax-neutral nature for Swiss tax purposes, as applicable. In addition, the Swiss Tax Rulings provide that no Swiss withholding tax or stamp duty should apply to the distribution of Alcon shares in the spin-off. The Tax Opinion and IRS Ruling are subject to the qualifications and limitations set forth above under "—Consequences to U.S. Holders of Novartis Shares". Additionally, as discussed below in "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us—Tax Matters Agreement", we intend to enter into the Tax Matters Agreement with Novartis, which will restrict us from taking certain actions that could affect the qualification of the spin-off and certain internal restructuring steps taken prior to the spin-off for nonrecognition of gain or loss or as tax neutral, as applicable.

        Notwithstanding the foregoing, if it were determined that the spin-off or certain internal restructuring steps taken prior to the spin-off that were intended to qualify for nonrecognition of gain or loss or as tax neutral, as applicable, did not so qualify, we could be required to indemnify Novartis for taxes resulting therefrom. This could occur if, notwithstanding our intentions, we take or fail to take any action we are prohibited from taking or required to take by the terms of the Tax Matters Agreement to preserve the intended tax treatment of the transaction, a representation or covenant we made that serves as the basis for the Tax Opinion or the Tax Rulings is determined to be false or as a result of the application of legal rules that depend in part on facts outside our control. For example, current U.S. tax law creates a rebuttable presumption that a 50% or greater change by vote or value in the ownership of our stock during the four year period beginning on the date that begins two years

91


Table of Contents

before the date of the distribution would cause certain internal restructuring steps to be taxable to Novartis, unless it were established that such change in control was not part of a plan with the spin-off and related internal restructuring steps. Our indemnification obligations to Novartis in these circumstances are set forth in the Tax Matters Agreement discussed below in "Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions—Agreements Between Novartis and Us—Tax Matters Agreement". If we are required to indemnify Novartis, we may be subject to substantial liabilities that could materially adversely affect our financial position.

Reasons for Furnishing this Form 20-F

        We are furnishing this Form 20-F solely to provide information to Novartis shareholders who will receive our shares in the spin-off. You should not construe this Form 20-F as an inducement or encouragement to buy, hold or sell any of our securities or any securities of Novartis. We believe that the information contained in this Form 20-F is accurate as of the date set forth on the cover. Changes to the information contained in this Form 20-F may occur after that date, and neither we nor Novartis undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.

4.B. BUSINESS OVERVIEW

Overview

        Alcon is the largest eye care devices company in the world, with $7.1 billion in sales to third parties during the year ended December 31, 2018. We research, develop, manufacture, distribute and sell a full suite of eye care products within two key businesses: surgical and vision care. Based on sales for the year ended December 31, 2018, we are the number one company by global market share in the ophthalmic surgical market and the number two company by global market share in the vision care market. We employ over 20,000 employees from more than 90 nationalities, operating in over 74 countries and serving consumers and patients in over 140 countries. We believe our market leading position and global footprint allow us to benefit from economies of scale, maximize the potential of our commercialized products and pipeline and will permit us to effectively grow the market and expand into new product categories.

        Our surgical business is focused on ophthalmic products for cataract surgery, vitreoretinal surgery, refractive laser surgery and glaucoma surgery. Our broad surgical portfolio includes implantables, consumables and surgical equipment required for these procedures and supports the end-to-end needs of the ophthalmic surgeon. Our vision care business comprises daily disposable, reusable and color-enhancing contact lenses and a comprehensive portfolio of ocular health products, including products for dry eye, contact lens care and ocular allergies, as well as ocular vitamins and redness relievers. Alongside our world-class products, Alcon provides best-in-class service, training, education and technical support for our customers.

        Our surgical and vision care businesses are complementary and benefit from synergies in R&D, manufacturing, distribution and consumer awareness and education. This allows us to position ourselves as a trusted partner for eye care products across the continuum of care from retail consumer, to optometry, to surgical ophthalmology. For example, in R&D, we can apply our expertise in material and surface chemistry to develop innovative next-generation products for both our IOL and contact lens product lines. Similarly, our global commercial footprint and expertise as a global organization provide us with product development, manufacturing, distribution and commercial promotion and marketing knowledge that can be applied to both of our businesses.

        We are dedicated to providing innovative products that enhance quality of life by helping people see better. Our strong foundation is based on our longstanding success as a trusted brand, our legacy of industry firsts and advancements, our leading positions in the markets in which we compete and our

92


Table of Contents

continued commitment to substantial investment in innovation. With over 70 years of history in the ophthalmic industry, we believe the Alcon brand name is synonymous with innovation, quality, service and leadership among eye care professionals worldwide.

Our Markets

Overview

        We currently operate in the global ophthalmic surgical and vision care markets, which are large, dynamic and growing. As the world population grows and ages, the need for quality eye care is expanding and evolving, and we estimate that the size of the eye care market in which we operate was approximately $23 billion for the year ended December 31, 2017 and is projected to grow at approximately 4% per year from 2018 to 2023.

        Although it is estimated that 80% of all visual impairments are currently preventable, treatable or curable, we operate in markets that have substantial unmet medical and consumer needs. For example, based on market research, it is estimated that there are currently 20 million people globally that are blind from treatable cataracts, 1.7 billion who suffer from presbyopia, 153 million with uncorrected refractive errors, 93 million with diabetic retinopathy, 67 million living with glaucoma and approximately 352 million affected by dry eye, among other unaddressed ocular health conditions. In addition, there are over 1 billion people living with some form of visual impairment, as well as 70% of the global population needing basic vision correction. Below is a brief description of these ocular disorders, as well as a diagram showing where in the eye the disorders occur and the placement of certain medical devices to treat ocular disorders:

GRAPHIC

GRAPHIC

93


Table of Contents

        Our surgical and vision care products are targeted at addressing many of these unmet medical and consumer needs. We expect the surgical and vision care markets to continue to grow, driven by multiple factors and trends, including but not limited to:

    Aging population with growing eye care needs:  A growing aging population continues to drive the increased prevalence of eye care conditions worldwide, as the number of persons aged 60 years or over is expected to more than double by 2050, rising from 962 million globally in 2017 to 2.1 billion in 2050.

    Innovation improving the quality of eye care:  Technology innovation in eye care is driving an increased variety of products that more effectively treat eye conditions. Given the importance of vision correction and preservation, which can provide a high return on healthcare spend, the resulting better patient outcomes are leading to increased coverage and reimbursement opportunities from governmental and private third-party payers, expanding patient access to such eye care products.

    Increasing wealth and growth from emerging economies:  It is estimated that between 2015 and 2030, the middle class population in emerging markets will grow by approximately 1.5 billion people, from 2.0 billion to 3.5 billion; this major demographic shift is generating a large, new customer base with increased access to eye care products and services along with the resources to pay for them. The expansion of training opportunities for eye care professionals in emerging markets is also leading to increased patient awareness and access to premium eye care products and surgical procedures, facilitating their growth.

    Increasing prevalence of myopia, progressive myopia and digital eye strain:  It is estimated that by 2050, half of the world's population (nearly five billion people) will be myopic. Further, the modern work environment, along with leisure preferences, have increased the number of hours people spend in front of a screen, adversely impacting vision and increasing the risk of progressive myopia and digital eye strain.

The Surgical Market

        The surgical market in which we operate was estimated to be approximately $9 billion for the year ended December 31, 2017 and is projected to grow at approximately 4% per year from 2018 to 2023. The surgical market includes sales of implantables, consumables, and surgical equipment, including associated technical, clinical and service support and training. Surgical implantables are medical devices designed to remain in the eye, such as monofocal and AT-IOLs placed in the eye during cataract surgery. Consumables include handheld instruments, surgical solutions, equipment cassettes, patient interfaces and other disposable items typically used during a single ophthalmic surgical procedure. Finally, surgical equipment includes multiuse surgical consoles, lasers and diagnostic instruments used across procedures to enable surgeons to visualize and conduct ophthalmic surgeries. The following diagram shows the surgical market in which we participate:

GRAPHIC

2017 surgical market breakdown by relative allocation of market sales.

94


Table of Contents

        The major conditions of the eye for which surgical products and equipment are offered include cataracts, vitreoretinal disorders, refractive errors such as myopia, hyperopia and astigmatism, glaucoma and corneal disease. For cataracts, surgical removal of the clouded lens followed by insertion of a transparent artificial replacement lens, called an intraocular lens, is the standard treatment. Vitreoretinal surgery, which allows a surgeon to operate directly on the retina or on membranes or tissues that have covered the retina, is indicated for the treatment of various conditions such as diabetic retinopathy, trauma, tumors, complications of surgery on the front of the eye and pediatric disorders. Finally, for treatment of myopia, hyperopia and astigmatism, laser refractive surgery targeting the cornea, such as LASIK, offers an alternative to eyeglasses or contact lenses.

        Cataract, vitreoretinal, refractive and glaucoma surgeries are generally performed in hospitals or ambulatory surgery centers and are supported through a network of eye clinics, ophthalmic surgery offices and group purchasing organizations. The primary ophthalmic surgical procedures for cataract, vitreoretinal, and glaucoma surgery are broadly reimbursed in most mature markets. Third-party coverage or patient co-pay options are also available for refractive laser correction and AT-IOLs. Finally, a growing private pay market for premium surgical devices provides a mutually beneficial environment for patients, providers and medical device companies by allowing patients to pay the non-reimbursable cost of a procedure associated with selecting premium devices, such as AT-IOLs.

        The surgical market in which we participate is projected to grow at a compound annual growth rate of approximately 4% from 2018 through 2023. In particular, growth drivers in the surgical market include:

    Global growth of cataract and vitreoretinal procedures, driven by an aging population;

    Increased access to care, for example, in emerging markets and other international markets where the cataract surgery rate is 3.2 procedures per 1,000 people as compared to 12.7 in the U.S.;

    Higher uptake of premium patient-pay technologies, for example AT-IOL penetration is only 6% in international markets versus 14% in the U.S.;

    Increased adoption of advanced technologies, for example, improved diagnostic instruments, surgical options for glaucoma management, and the growing use of phacoemulsification during cataract removal, which is utilized in less than 50% of cases in emerging markets versus over 95% in the U.S.; and

    Eye disease as a comorbidity linked to the global prevalence of diabetes, which has nearly doubled from 4.7% in 1980 to 8.5% in 2014, combined with improving diagnostics capabilities and new product innovations, driving uptake of premium procedures.

The Vision Care Market

        The vision care market in which we operate was estimated to be approximately $14 billion for the year ended December 31, 2017 and is projected to grow at approximately 4% per year from 2018 to 2023. The vision care market is comprised of products designed for ocular care and consumer use. Products are largely categorized across two product lines: contact lenses and ocular health.

        Contact lenses are thin lenses placed directly on the surface of the eye that are commonly used to treat refractive errors such as myopia, hyperopia, astigmatism and presbyopia. They are also often worn for additional reasons, such as aesthetic or cosmetic enhancement, to improve peripheral vision or to achieve spectacle independence. Contact lenses are frequently classified according to their modality, with daily and reusable modalities being the most common. Daily contact lenses are designed for one-time use and are disposed of every day. Reusable (e.g., monthly) contact lenses are designed for periodic use and require daily cleaning and maintenance. Contact lenses may also be classified by their

95


Table of Contents

design, with spherical, multifocal and toric designs being the most common. The majority of contact lenses have a spherical design to address the most common visual acuity needs (e.g., myopia). Beyond the standard spherical designs, contact lenses also come in designs to address astigmatism (called toric designs), presbyopia (called multifocal designs) and to change the appearance of the eye (called cosmetic lens designs).

        The contact lens market was estimated to be approximately $8 billion for the year ended December 31, 2017, and the following diagram identifies the relative breakdown of contact lens sales in 2017 by modality and design:

GRAPHIC

2017 contact lens market breakdown by relative allocation of market sales.

        Maintaining ocular health is also an essential part of people's daily lives. Ocular health products can address conditions such as dry eye, ensure effective contact lens care, supplement overall eye health, or provide temporary relief from allergies and related symptoms, such as red eye. The ocular health market was estimated to be approximately $6 billion for the year ended December 31, 2017, and the following diagram identifies the relative allocation of sales of each product category within the ocular health market:

GRAPHIC

2017 ocular health market breakdown by relative allocation of market sales.

        Dry eye is a common condition that occurs when the eye's natural tear film is disturbed or insufficient. It leads to discomfort and potentially serious and chronic vision deterioration and loss, which and can be addressed by artificial tear products. In addition, the increased use of diagnostic tools can help improve the treatment recommendations of eye care professionals for dry eye.

        Effective contact lens care is important for any reusable contact lens user, and is a significant factor in reducing the risk of infection and irritation associated with contact lens use. It is also an important factor in maintaining visual acuity and increasing the comfort of wearing reusable contact lenses. When used correctly, contact lens care products remove contaminants from the surface of the contact lens. Lens rewetting drops may also be used to rehydrate the lens during wear and to clear away surface material.

96


Table of Contents

        Ocular health is frequently supported by the use of ocular vitamins, which are dietary supplements often sold over the counter and formulated to support eye health. Finally, ocular health products also address allergic conjunctivitis, which occurs when the conjunctiva of the eye becomes swollen or inflamed due to a reaction to pollen, dander, mold, or other allergy-causing substances. 'Allergy eyes' can become red and itchy very quickly. Treatment for allergy eye includes medications, such as antihistamines, and combinations of antihistamines and redness relievers.

        The primary customers of the vision care market include optometrists and other ECPs retailers, optical chains and pharmacies, as well as distributors that resell directly to smaller retailers and ECPs, who sell the products to end-users. The vision care market is primarily private pay, with patients substantially paying for contact lenses and ocular health products out-of-pocket. Partial reimbursement is available in some countries for optometrist visits and a portion of either spectacle or contact lens costs.

        The vision care market in which we participate is projected to grow at a compound annual growth rate of approximately 4% from 2018 through 2023, driven mainly by:

    Continued modality shift to daily disposable lenses from reusable lenses and the resulting sales premium (an increase of 2 - 3x sales per patient, after customary rebates and discounts) associated with daily disposable wearers as compared to users of reusable lenses;

    Advancements in specialty lenses combined with increasing demand for toric, multifocal and cosmetic lenses, which command an approximately 15 - 30% pricing premium over spherical lenses, allowing patients to continue wearing contact lenses as they become older and helping to expand the market;

    A significant population of approximately 194 million undiagnosed dry eye patients, with an additional 42 million self-diagnosed dry eye patients using unsuitable products for treatment, and advances in diagnostics and ocular health treatments, facilitating the increase in patient awareness of dry eye;

    Growing access and consumption of vision care products in emerging markets such as Asia, which had only 3% contact lens penetration in 2017 as compared to 15% in the U.S.; and

    Increasing consumer access through the expansion of distribution models, including internet sales and other direct-to-consumer channels.

Our Business

Overview

        With $7.1 billion in sales to third parties during the year ended December 31, 2018, we are the number one eye care devices company worldwide by revenues. Our broad range of products represents one of the most complete portfolios in the ophthalmic device industry, and comprises high-quality and technologically advanced products across all major product categories in the surgical and vision care

97


Table of Contents

markets. Our surgical and vision care products are used in treating multiple ocular health conditions and offer leading eye care solutions for patients throughout their lives.

GRAPHIC

        Our leadership position across most of our product categories enhances our ability to extend our product offering through the launch of new and innovative products, and to expand our geographic reach into ophthalmic markets worldwide. Our surgical business had approximately $4.0 billion in sales to third parties of implantables, consumables and equipment, as well as services and other surgical products, and our vision care business had approximately $3.1 billion in sales to third parties of our contact lens and ocular health products, during the year ended December 31, 2018. The United States accounted for 41% of our sales and international markets accounted for 59% of our sales during the year ended December 31, 2018.

GRAPHIC

        We believe the Alcon brand name is synonymous with innovation, quality, service and leadership among eye care professionals worldwide. In each of our markets, we rely on our strong relationships with eye care professionals and consumers to attract and retain customers and expand the market. We customize our selling efforts to the medical practice needs of each customer, with the goal of surrounding eye care professionals with Alcon representatives that can help address each aspect of a customer's needs. Our field force supplements the direct promotion of our products by providing customers with access to clinical education programs, hands on training, data from clinical studies and technical service assistance.

        We have 18 state-of-the-art manufacturing facilities that employ our proprietary technologies and know-how. We believe our global footprint, knowledge base in manufacturing, state-of-the-art facilities

98


Table of Contents

and capacity planning enable us to handle increased levels of product demand and product complexity. Furthermore, our global manufacturing and supply chain allows us to leverage economies of scale and reduce cost per unit as we ramp up production.

        We have also made one of the largest commitments to research and development of any surgical and vision care company, with over 1,200 associates worldwide researching and developing treatments for vision conditions and eye diseases, and have sought innovation from both internal and external sources. In 2018, we invested $587 million in research and development, representing 8.2% of our total 2018 revenues. In addition to our in-house R&D capabilities, we also consider external innovation opportunities and routinely screen for companies developing emerging technologies that we believe could enhance our existing product offerings or develop into innovative new products. As part of these efforts, our dedicated business development team has completed over 25 BD&L transactions since 2016. We intend to continue to pursue acquisition, licensing and collaboration opportunities as part of our goal of remaining a market leader in innovation.

        As a result of our innovation efforts, Alcon has been a pioneer in eye care throughout its history, leading the way with multiple world firsts. In surgical, we were the first to develop a material specifically for use as an IOL, developed the first synthetic aqueous humor (BSS plus), developed the first acrylic toric IOL to correct corneal astigmatism and developed the first femtosecond laser for cataract surgery. In vision care, we were the first to develop soft bifocal, periodic replacement and continuous wear contact lenses, as well as the first (and only) to develop a water gradient daily disposable contact lens and a water gradient lens for people with presbyopia. Based on what we see as the key unmet medical and consumer needs in eye care, we are continuing to develop products and solutions to treat an extensive range of conditions including cataracts, retinal diseases, refractive errors, dry eye, glaucoma and other problems that keep people from seeing well.

Our Surgical Business

        We hold the number one position in the global surgical market, offering implantable products, consumables and equipment for use in surgical procedures to address cataracts, vitreoretinal conditions, refractive errors and glaucoma. Our surgical business has the most complete line of ophthalmic surgical devices in the industry, creating a "one-stop shop" for our customers that we consider to be a key differentiator for our business. For the year ended December 31, 2018, our surgical business had $4.0 billion in sales to third parties.

GRAPHIC

        Our surgical portfolio includes implantable devices, consumables and equipment, as well as services and other ancillary surgical products. We have the most extensive global installed base of surgical equipment in the industry, including the largest installed base of cataract phacoemulsification consoles

99


Table of Contents

and vitrectomy consoles. Our global installed equipment base drives pull-through sales of consumables specific to our equipment and helps cross-promote the sales of our implantable devices. Our key surgical equipment offerings include the Centurion vision system for phacoemulsification and cataract removal, our Constellation vision system for vitreoretinal surgery and our WaveLight refractive lasers used in LASIK and other laser-based vision correction procedures, including topography-guided procedures marketed under the Contoura brand. The key brands in our implantables portfolio include our AcrySof family of IOLs, with offerings from monofocal IOLs for basic cataract surgery to AT-IOLs for the correction of presbyopia, such as our PanOptix brand, and astigmatism at the time of cataract surgery. We have recently launched our UltraSert and Clareon AutonoMe pre-loaded IOL delivery systems to reduce lens handling and simplify the surgical procedure. Alongside our implantable business, we sell a broad line of consumable products that support ophthalmic surgical procedures, such as viscoelastic products, surgical solutions, incisional instruments, such as our MIVS platform, and dedicated consumables, including fluidics cassettes and patient interfaces, which work with Alcon equipment. The Alcon consumables portfolio also includes our Custom Pak surgical procedure pack, which can be custom built for the surgeon and which includes drapes, incisional instruments and all of the materials needed to perform a surgery.

        Across our surgical portfolio, we sell a tiered offering of products intended to meet the specific needs of customers in markets around the world at different price points. Newly launched offerings that bring considerable technology innovation to the market are typically introduced at a price premium to offset the cost of research and development. As these products age and/or competitive products advance, prices typically trend downward, requiring continuous innovation cycles to maintain and/or grow our margins. We also develop specific products to match customer needs in different customer segments, for example, premium-tier and mid-tier surgical consoles that can be manufactured and sold at different price points in different markets.

Our Vision Care Business

        Our vision care business consists of an extensive portfolio of contact lens and ocular health products, aimed at helping consumers see better. Our product lines include daily disposable, reusable and color-enhancing contact lenses. We also offer a comprehensive portfolio of ocular health products, including over-the-counter products for dry eye, contact lens care and ocular allergies, as well as ocular vitamins and redness relievers. With $3.1 billion in vision care sales to third parties for the year ended December 31, 2018, we are the number two company in the global vision care market. We aim to continue to innovate across our vision care portfolio to improve the lives of consumers and eye care professionals around the world.

GRAPHIC

100


Table of Contents

        We have a broad portfolio of daily disposable, reusable and color-enhancing contact lenses, including Dailies and Air Optix, two of our key brands. Our Dailies product line includes DAILIES AquaComfort PLUS and DAILIES TOTAL1, the first and only water gradient contact lens in the market, which is also offered in a multifocal design to address the fast growing presbyopia market. DAILIES TOTAL1 is designed to be a super-premium lens positioned to compete at a premium price point in the contact lens market. Our Air Optix monthly replacement product line features silicone hydrogel contact lenses in monofocal, astigmatism-correcting, and multifocal options, as well as Air Optix Colors and Air Optix plus HydraGlyde contact lenses. Our key brands in our ocular health portfolio include the Systane family of artificial tear and related dry eye products, as well as the Opti-Free and Clear Care lines of multi-purpose and hydrogen peroxide disinfecting solutions, respectively.

        Sales of our contact lens and ocular health products are influenced by optometrist and other eye care professional recommendations, our marketing and consumer education efforts and consumer preferences. In addition to price, contact lenses compete on functionality, design and comfort, while ocular health products compete largely on product attributes, brand familiarity and professional recommendations. For our contact lens and ocular health products, we typically compete in the premium price segments of the market and we use improvements in functionality, design and consumer convenience to maintain our pricing position over time.

Our Strengths

        We have a strong foundation based on robust industry expertise, leading brands and excellence in customer service, backed by more than 70 years of history as a trusted brand. Our strengths include:

    Global leader in highly attractive markets with most complete brand portfolio.  With $7.1 billion in sales to third parties in the year ended December 31, 2018, we are the leader in an attractive eye care devices market, which is supported by favorable population megatrends and is expected to grow at approximately 4% per year from 2018 to 2023. For the year ended December 31, 2018, our sales were closely split between our businesses, with $4.0 billion in surgical and $3.1 billion in vision care, as well as geographically, with 41% of our sales in the United States and 59% in international markets. Our surgical business is the market leader in sales of ophthalmic equipment used in the operating room and is supported by the largest installed base of equipment worldwide, which we use to cross-promote our surgical consumables and IOLs. In our vision care business, our extensive portfolio of contact lens and ocular health products includes well-recognized brands such as Dailies, Systane and Opti-Free. We believe our global leadership position and extensive brand portfolio allow us to benefit and build on the robust fundamentals driving growth in our markets.

    Innovation-focused with market leading development capabilities and investment.  We have made one of the largest commitments to research and development in the eye care devices market, with proven R&D capabilities in the areas of optical design, material and surface chemistry, automation and equipment platforms. Currently, we employ over 1,200 individuals dedicated to our research and development efforts, including physicians, doctors of optometry and PhDs. In addition, we actively seek opportunities to collaborate with third parties on advanced technologies to support our eye care devices business. We believe our reputation for innovation and our global commercial footprint makes us the partner of choice for developers of next-generation technologies, which has resulted in our completion of over 25 BD&L transactions since 2016. These efforts have collectively led to more than 60% growth in the number of projects within our portfolio of internal and external innovation over the past three years, with more than 100 pipeline projects in process as of December 31, 2018, including over 35 that have achieved positive proof of concept or are undergoing regulatory review.

101


Table of Contents

    Global scale and reach supported by high-quality manufacturing network.  We have an extensive global commercial footprint that provides us with the scale and reach to support future growth, maximize the potential of new launches, enter new geographies efficiently and to take advantage of the large, dynamic and growing surgical and vision care markets. Our commercial footprint, which includes operations in over 74 countries, reaches consumers and patients in over 140 countries and is supported by over 3,000 highly rated sales force employees, 18 state-of-the-art manufacturing facilities employing our proprietary technologies and know-how, and our extensive global regulatory capability. We manufacture approximately 90% of our products at our own facilities and have continued to invest in next-generation manufacturing for our products, allowing us to leverage our existing scale to manufacture novel technologies on a flexible platform at a lower cost. Our extensive sales and distribution network, supported by our market leadership position and focus on innovation and customer experience, enhances our ability to expand our geographic reach and extend our product offerings through the launch of new and innovative products worldwide.

    Outstanding customer relationships and a trusted reputation for customer service, training and education. We believe that maintaining the highest levels of service excellence in our customer experience is a critical success factor in our industry. As such, in our surgical business, we have substantially increased our investment in external training, medical education and technical service. As a result of our efforts, we have achieved overall number one ratings in customer satisfaction, value, innovation, sales representatives and training and education in a third-party survey that we commissioned in 13 different markets, representing 80% of our surgical sales, in which surgical customers were asked to rank Alcon and our key competitors in each of the specified categories without being aware the survey was commissioned by Alcon. In our vision care business, we regularly meet with eye care practitioners to gain feedback and insights on our products and consumers' needs. We also provide training support at our approximately 30 state-of-the-art interactive training centers around the world, as well as through numerous digital and event-based training programs that we provide for practitioners, clinical support staff, students, residents, patients and consumers. In each of our businesses, we have built and maintained our relationships with key stakeholders to establish our trusted reputation in the industry.

    World leading expertise in eye care led by a first-class management team.  Our expertise in eye care is driven by our more than 70-year history in the industry and is supported by a high-quality workforce of more than 20,000 employees. We believe our institutional knowledge provides a competitive advantage because our employees' industry expertise, relationships with our customers and understanding of the development, manufacture and sale of our products helps us to better identify new customer needs, assess markets for entry and identify promising technologies. In addition, we believe the diverse experience of our management team in running complex businesses allows them to add significant value to our company. In particular, we benefit from having a management team with an extensive background in the medical device industry. Led by David J. Endicott, our Chief Executive Officer, our management team's deep knowledge of eye care has allowed us to build a more nimble medical device culture within Alcon and created excitement among our workforce for our mission.

Our Strategy

        Our going-forward strategy builds on five key pillars in order to generate sustainable and profitable growth:

    Maximize the potential of our near-term portfolio by growing key products.  In surgical, we plan to build on our leading position in the IOL market through the launch of new AT-IOLs, where premium pricing drives a disproportionate 30% of IOL market value while representing only 8%

102


Table of Contents

      of global IOL units sold. In addition, we expect improved diagnostics and new optical designs will address historical barriers to AT-IOL adoption to further grow this patient-pay market. We will also continue to invest behind our presbyopia-correcting PanOptix and ReSTOR IOL brands, and will continue to invest in our vitreoretinal equipment and consumables, where we also see meaningful opportunities for near-term growth. In vision care, we intend to maintain and grow our leading position in most of our product categories through increased eye care professional and consumer education, supported by continuous production innovation. For example, we believe that the expanding presbyopia market represents a potential multibillion dollar opportunity for market participants. We intend to further grow our DAILIES TOTAL1 family of products by increasing awareness among presbyopic patients to accelerate growth of multifocal sales and by capitalizing on the general market shift to daily disposables. We also aim to expand the dry eye product market by leveraging our well-recognized Systane family of eye drops and increasing investment in dry eye education and awareness, where we see a significant unmet need and an opportunity for robust market growth.

    Accelerate innovation and deliver the next wave of technologies.  We are committed to accelerating innovation by continuing to be one of the market leaders in investment in ophthalmic research and development. The R&D activities of our surgical business are focused on expanding our AT-IOL portfolio to further improve surgical and refractive outcomes, including through the use of advanced optics, light adjustable materials, accommodating lenses and modular platforms. We are also developing next-generation lasers, robotics and other equipment for cataract, vitreoretinal and laser-refractive surgery, as well as improved visualization equipment. In our vision care business, our focus is on developing and launching new contact lens materials, coatings and designs to extend our product lines and improve patient comfort, as well as on new products to expand our portfolio of presbyopia and ocular health products. Finally, we expect to continue to supplement our internal innovation investments by identifying and executing on attractive acquisition, licensing and collaboration opportunities with leading academic institutions and early-stage companies.

    Capture opportunities to expand markets and pursue adjacencies.  We believe there is a significant opportunity for growth in markets around the world due to under-penetration of both premium surgical devices, such as AT-IOLs, and of our vision care portfolio. For example, AT-IOL penetration in international markets was approximately 6% in 2017, as compared to 14% in the U.S. Similarly, contact lens penetration in international markets was approximately 3% in 2017, as compared to 15% in the U.S., demonstrating significant potential for future growth. We intend to facilitate this growth by continued investment in promotion and customer education across all of our markets. In emerging markets in particular, we believe that the growing number of eye care professionals and dedicated eye hospitals, increased levels of affluence, improving technology access and better patient awareness will increase the adoption of our products. In addition, we believe we have significant opportunities to expand into adjacent product categories in which Alcon has not significantly participated in the past, through a combination of internal development efforts and potential bolt-on mergers and acquisitions activity. These opportunities include office-based diagnostics, surgical visualization, solutions for myopia control and consumer driven ocular health products, where we expect our eye care expertise and global commercial footprint will allow us to attract and retain new customers.

    Support new business models to expand customer experience.  In surgical, we intend to continue to identify new business models that benefit healthcare providers and improve access to leading Alcon products and technologies. For example, we are pursuing value-based business models that reward improved patient outcomes, as well as models that contract the entire procedure versus individual products. In vision care, where e-commerce entries have created some disruption of traditional sales channels, we believe that digital technology can address pain points experienced

103


Table of Contents

      in existing paths to purchase. We intend to continue investing and innovating in digital capabilities to develop new business models in response to channel shifts and the increase in direct-to-consumer influence.

    Leverage infrastructure to improve operating efficiencies and margin profile over time.  With the significant organizational and infrastructure investments we have made over the last several years, we believe we have established a stable foundation that will allow us to continue to enhance the productivity of our commercial resources and meaningfully improve our core operating income margins over time. Further, we intend to improve the mix of our products, implement further supply chain efficiency initiatives and support new lower-cost manufacturing platforms to drive future operating profit and cash flows.

Our Industry

Selected Conditions That Are Treated By Eye Surgery and Surgical Products

        Below are the major conditions of the eye that are treated by surgeries for which we offer surgical products and equipment.

Cataracts

        A cataract is the clouding of the normally transparent natural lens in the eye. This clouding is usually caused by the aging process, although it can also be caused by heredity, diabetes, environmental factors and, in some cases, medications. Cataracts typically result in blurred vision and increased sensitivity to light. Cataract formations occur at different rates and may affect one or both eyes. With an estimated 27 million procedures to be performed in 2018 worldwide, cataract surgery is one of the most frequently performed surgical procedures. According to the National Eye Institute, cataracts are the leading cause of blindness worldwide even though effective surgical treatment exists. Currently, surgical removal of the clouded lens followed by insertion of a transparent artificial replacement lens, called an IOL, is the preferred treatment for cataracts. The clouded lens is usually removed through a process known as phacoemulsification. During phacoemulsification, an ophthalmic surgeon makes a small surgical incision in the eye (approximately 2-3 millimeters wide) and inserts an ultrasonic probe that breaks up, or emulsifies, the clouded lens while a hollow needle removes the pieces of the lens. Once the cataract is removed, the surgeon inserts an intraocular lens through the same surgical incision. An AT-IOL is a type of IOL that also corrects for refractive errors, like presbyopia and astigmatism, at the time of cataract surgery.

Retinal Disorders

        Vitreoretinal procedures involve surgery on the back portion of the eye, namely the retina and surrounding structures. Vitrectomy is the removal of the gel-like substance, known as vitreous, that fills the back portion of the eye. Removal of the vitreous allows a vitreoretinal surgeon to operate directly on the retina or on membranes or tissues that have covered the retina. These procedures typically treat conditions such as diabetic retinopathy, retinal detachment / tears, macular holes, complications of surgery on the front of the eye, diabetic macular edema, trauma, tumors and pediatric disorders. Vitreoretinal surgery can also involve electronic surgical equipment, lasers and hand-held microsurgical instruments as well as gases and liquids that are injected into the eye.

Refractive Errors

        Refractive errors, such as myopia, commonly known as near-sightedness, hyperopia, commonly known as farsightedness, and astigmatism, a condition in which images are not focused at any one point, result from an inability of the cornea and the lens to focus images on the retina properly. If the curvature of the cornea is incorrect, light passing through it onto the retina is not properly focused and

104


Table of Contents

a blurred image results. For many years, eyeglasses and contact lenses were the only solutions for individuals afflicted with common visual impairments; however, they are not always convenient or attractive solutions. Laser refractive surgery offers an alternative to eyeglasses and contact lenses. Excimer lasers, which are low-temperature lasers that remove tissue without burning, are currently used to correct refractive errors by removing small amounts of tissue to reshape the cornea. These lasers remove tissue precisely without the use of heat and without affecting the surrounding tissue. In the LASIK procedure, the surgeon uses either a femtosecond laser or an automated microsurgical instrument, called a microkeratome, to create a thin corneal flap that remains hinged to the eye. The corneal flap is then folded back and excimer laser pulses are applied to the exposed layer of the cornea to change the shape of the cornea. The corneal flap is then returned to its normal position. LASIK has become the most commonly practiced form of laser refractive surgery globally.

Presbyopia

        Presbyopia is another common refractive error in which the natural crystalline lens inside the eye becomes less flexible and loses the ability to focus on close objects. Presbyopia is a vision condition that accompanies the natural aging process of the eye. It cannot be prevented, and affects nearly two billion people worldwide. Although the onset of presbyopia among patients may seem to occur suddenly, generally becoming noticeable when patients reach their mid- to late 30s or early to mid-40s, sight reduction typically occurs gradually over time and continues for the rest of the patient's life. Some signs of presbyopia include difficulty reading materials held close to the reader, blurred vision while viewing a computer screen and eye fatigue along with headaches when reading. Presbyopia can be accompanied by other common vision conditions, such as myopia, hyperopia and astigmatism. Presbyopia, while most commonly managed with reading glasses, can be addressed surgically by the implantation of an AT-IOL that allows for the correction of presbyopia at the time of cataract surgery.

Surgical Glaucoma

        Glaucoma is the second leading cause of blindness worldwide, estimated to affect more than 90 million people around the globe, with only an estimated 32 million people (or approximately 35% of patients) diagnosed. While elevated intraocular pressure (IOP) was historically considered to be synonymous with glaucoma, it is now known that many patients with glaucoma have normal IOP. Treating glaucoma is typically aimed at lowering IOP for patients with normal or elevated pressure.

        Most commonly, glaucoma is managed using medication (e.g., drops). For cases requiring additional intervention, laser-based procedures and conventional surgical techniques, such as filtration surgery and tube shunts, have typically been used to lower IOP. Filtration surgeries, such as trabeculectomy, involve the creation of a new channel to drain aqueous humor from inside the eye. Similarly, tube shunts establish a route for fluid to exit through an implanted device. More recently, a new category of device and procedure-based surgical intervention, known as Micro-Invasive Glaucoma Surgery (MIGS), has emerged and is experiencing rapid adoption among both glaucoma and cataract specialists.

Selected Conditions and Eye Care Considerations That Are Addressed By Vision Care Products

        Below are the major eye care conditions and considerations that are addressed, treated or supported by our contact lens and ocular health products.

Refractive Errors

        Refractive errors such as myopia, hyperopia, astigmatism and presbyopia are commonly addressed by the use of contact lenses and, in the case of reusable contact lenses, complemented by proper contact lens care. Presbyopia, for example, can be addressed by the use of multifocal contact lenses.

105


Table of Contents

Dry Eye Disease

        Dry eye disease is a ubiquitous, complex, and multifactorial condition, and its effect on patients ranges from intermittent and annoying discomfort to a serious and chronic vision-threatening disorder. The incidence of dry eyes rises with age, and longer life spans and aging populations throughout the world are key contributors to increased demand for treatment. Evolving patterns of work and play also contribute to increased demand for treatment, as more people spend significant amounts of time working on computers and other digital devices. Wealthier, professional and urban population segments are expanding in rapidly emerging economies and other developing nations, and these populations have greater access to health care and more resources with which to acquire treatment. In addition, more sophisticated diagnostic tools and a greater variety of dry eye products and treatments, such as artificial tear products, are offering improved effectiveness and greater relief as they simultaneously stimulate demand.

Infections and Contamination due to Inadequate Contact Lens Care

        Proper care of contact lenses through compliance with disinfection regimens is important in reducing the risk of infection and irritation associated with the use of reusable contact lenses, as contact lenses are subject to contamination from cosmetics, grease, bacteria, soaps, hand lotions and atmospheric pollutants, and from proteins contained in natural tears. When used properly, contact lens care products remove such contaminants from the surface of the contact lens. In addition, lens rewetting drops may be used to rehydrate the lens during wear and to clear away surface material.

Ocular Allergies

        Allergic conjunctivitis occurs when the conjunctiva of the eye becomes swollen from inflammation due to a reaction to pollen, dander, mold or other allergy-causing substances. When the eyes are exposed to allergy-causing substances, which can vary from person-to-person and are often dependent on geography, a substance called histamine is released by the body and causes blood vessels in the conjunctiva to swell. 'Allergy eyes' can become red and itchy very quickly. Seasonal Allergic Conjunctivitis (SAC) is the most common type of eye allergy. People affected by SAC experience symptoms during certain seasons of the year. Allergy eye can be treated with various ocular health products including medications, such as antihistamines, and combinations of antihistamines and redness relievers.

Our Products

        We research, develop, manufacture, distribute and sell eye care device products. Our broad range of products represents one of the strongest portfolios in the eye care devices industry, with high-quality and technologically advanced products across all major product categories in ophthalmic surgical devices and vision care. We are organized into two global business segments: surgical and vision care.

Surgical

        We hold the number one position in the global ophthalmic surgical market, offering implantable products, consumables and equipment for use in surgical procedures to address cataracts, vitreoretinal conditions, refractive errors and glaucoma. Our surgical portfolio includes equipment, instrumentation and diagnostics, IOLs and other implantables, and a broad line of consumables, including viscoelastics, surgical solutions, incisional instruments, surgical custom packs, and other products. For the year ended December 31, 2018, sales for our implantables, consumables and equipment and other surgical products were $1.2 billion, $2.2 billion and $0.6 billion, respectively.

        Our installed base of equipment is core to our market leading position in our surgical business, with best-in-class platforms in cataract and vitreoretinal equipment and the largest installed base of

106


Table of Contents

cataract phacoemulsification consoles, vitrectomy consoles and refractive lasers in the industry. These platforms each have long buying cycles that last approximately seven to ten years and act as anchoring technologies that drive recurring sales of our consumables and help cross-promote sales of our implantable devices. Across our cataract, vitreoretinal and refractive surgical product lines, over 40% of our greater than $2 billion consumables business comes from dedicated products that interface with an equipment platform (e.g., cassette packs, patient interfaces).

        Our cataract offerings include the Centurion vision system for phacoemulsification and cataract removal, the LenSx femtosecond laser used for specific steps in the cataract surgical procedure, the LuxOR ophthalmic microscope, the Verion imaged guided system for cataract surgery planning and image guidance throughout the cataract procedure, and the ORA SYSTEM for intra-operative measurements, guidance and outcomes analysis/optimization. Our AcrySof family of IOLs includes offerings ranging from monofocal IOLs for basic cataract surgery to AT-IOLs under our PanOptix and ReSTOR brands for the correction of presbyopia and/or astigmatism at the time of cataract surgery. We also offer a collection of pre-loaded options with the UltraSert and AutonoMe IOL delivery devices. In 2017, we launched a new IOL material under the Clareon CE Mark in the EU, which we intend to launch worldwide following receipt of the necessary regulatory approvals in other countries.

        Our vitreoretinal portfolio includes the Constellation vision system, Grieshaber DSP and MIVS instrumentation and Ultravit high speed vitrectomy probes, the Purepoint laser, and the NGENUITY 3D visualization system.

        Our refractive surgery portfolio includes WaveLight lasers and diagnostics used for LASIK and other laser-based vision correction procedures, including topography guided procedures marketed under the Contoura brand.

        Our glaucoma portfolio includes the EX-PRESS glaucoma filtration device.

107


Table of Contents

        The following table lists certain key marketed surgical products. While we intend to sell our marketed products throughout the world, not all products and indications are currently available in every country:

Cataract

  AcrySof family of IOLs, including:

AcrySof IQ monofocal IOLs

  GRAPHIC

 

UltraSert pre-loaded IOL delivery system with the AcrySof IQ monofocal IOL

  GRAPHIC

 

AcrySof IQ Toric astigmatism-correcting IOLs

AcrySof IQ ReSTOR presbyopia-correcting IOLs

AcrySof IQ ReSTOR Toric presbyopia- and astigmatism-correcting IOLs

AcrySof IQ PanOptix presbyopia-correcting IOLs

AcrySof IQ PanOptix Toric presbyopia- and astigmatism-correcting IOLs

   

 

Clareon monofocal IOL with the automated, disposable AutonoMe pre-loaded IOL delivery system

 

GRAPHIC

 

Cataract Refractive Suite by Alcon, including:

 

 

 

Centurion vision system for phacoemulsification and cataract removal

 

GRAPHIC

 

LenSx femtosecond laser used for specific steps in the cataract surgical procedure

LuxOR ophthalmic microscope

ORA System for intra-operative measurements and guidance during surgery, as well as post-operative analysis/optimization

Verion imaged guided system for cataract surgery planning and guidance

 

GRAPHIC

Surgical Procedure Packs

  Custom Pak surgical procedure packs   GRAPHIC

108


Table of Contents

Vitreoretinal

 

Constellation vision system

 

GRAPHIC

 

Grieshaber DSP and MIVS instrumentation

 

GRAPHIC

 

Purepoint laser

 

GRAPHIC

 

Ultravit high speed vitrectomy probes

 

GRAPHIC

 

NGENUITY 3D visualization system

 

GRAPHIC

Refractive

 

WaveLight EX500 excimer laser for LASIK and other refractive correction procedures

WaveLight Topolyzer VARIO diagnostic device for measurement and planning before refractive surgery

 

GRAPHIC

 

WaveLight FS200 femtosecond laser for refractive surgery

   

Glaucoma

 

EX-PRESS glaucoma filtration device

 

GRAPHIC

Cataract Equipment

        We maintain our market leadership in cataract surgical products by providing a comprehensive offering of surgical equipment, single-use and disposable products, viscoelastics, surgical solutions and surgical packs, all supported by our broad and experienced team of field service professionals. We currently market products for cataract surgery in substantially all of our markets.

       &