Novartis launches strategic review of generics business Sandoz
Swiss drugmaker Novartis has launched a strategic review of its generics business Sandoz, which might lead to the division being spun off.
Sandoz makes generic and biosimilar drugs, which are cheaper alternatives to branded versions. It focuses on antibiotics and oncology medicines.
The unit generated sales of $9.7bn last year, about a fifth of the group total.
“The review will explore all options, ranging from retaining the business to separation, in order to determine how to best maximise value for our shareholders,” the company said on Tuesday as it released third-quarter earnings.
Vas Narasimhan, chief executive, reiterated that Novartis would explore “all options”, when asked if it would consider selling the unit to a rival business. He said it would be “premature” to go into detail. The company expected to share an update on the review by the end of 2022, he said.
Narasimhan noted that Novartis had long wanted to make Sandoz “more autonomous”, including for manufacturing. That process had evolved to a point where the strategic review was the next step, he said.
Observers have speculated over a spin-off of the generics division for some time.
Since taking the helm three years ago, Narasimhan has moved to slim down Novartis while focusing on higher-grossing speciality drugs, a trend also seen more broadly in the industry. The drugmaker attempted to offload parts of the US Sandoz business in 2018 to Aurobindo, though the transaction was eventually called off last year because the deal did not receive approval from the US Federal Trade Commission.
In 2019 Novartis successfully spun off its Alcon eye-care division, which is now listed as a separate entity.
Sandoz, which last year admitted to price fixing in the US, was one of the components of the merger with Ciba-Geigy that created Novartis in 1996. Having been dormant for a few years, the brand was resurrected in 2003 when Novartis incorporated all its generic businesses under one trade name.
Novartis has reduced its guidance for core operating income at Sandoz, saying on Tuesday it expected it to decline by “mid to high teen” percentage points. Sales in the generics business had been dragged down by pricing pressures, Novartis said. Guidance for the group as a whole was unchanged.
Overall, third-quarter sales grew 5 per cent, while net income rose 43 per cent to $2.8bn.
Novartis’s bet on higher-margin drugs is paying off, with sales of heart failure drug Entresto rising 44 per cent to $924m. Revenues for Zolgensma, a gene therapy that treats spinal muscular atrophy and has a list price of $2.1m, climbed 28 per cent to $375m.
Zurich-listed shares in the company were 1.4 per cent higher in midday trade on Tuesday, having lost little more than 6 per cent in the year to date.