When Novartis agreed its two-step purchase of Alcon, the US eyecare company, from Nestlé last year, everyone came away happy. The Swiss drugmaker would gain control of Alcon’s high-margin contact lens care and medical devices business. Nestlé, the food and beverage group, would unlock several billion dollars in value and shed a non-core asset.

Step one went off without a hitch. Novartis paid Nestlé $11bn – or 23 times forward earnings – for a quarter of Alcon in April 2008. One big market crash later, Daniel Vasella, Novartis’s chief executive, is questioning whether to proceed with step two. Novartis has from January next year until July 2011 to exercise an option to acquire Nestlé’s remaining 52 per cent stake in Alcon for $181 per share. Mr Vasella’s hesitation is understandable. Alcon’s shares now trade at just $113 – down from $143 when the transaction was agreed. If it exercised its option today, Novartis would be paying a 60 per cent premium to gain control of the eyecare outfit. Novartis needs the rest of Nestle’s stake to wring desired cost savings and synergies out of Alcon but it may balk at paying 25 times forecast 2010 earnings to do so. True, that is just a hair above the multiple Nestlé paid for its first slice of Alcon. But the world has changed since then.