Novartis to spin off generic drugs unit Sandoz

Pharmaceuticals company Novartis plans to spin off its generic drugs unit to form a publicly traded business, bringing to a close a restructuring that had drawn private equity suitors and calls for nationalisation.

The Swiss group said the move to make Sandoz a separate entity would create the biggest generic drugs company in Europe by sales. It plans to list the business on the Swiss stock exchange with an ADR listing in the US. Novartis in 2019 completed the spin-off of its Alcon eye-care unit, scoring the largest Swiss market debut in years.

Novartis chief executive Vas Narasimhan said on Thursday that the generics sector was “a highly attractive market”.

“We will see as now we have the full carve out financials available how any of the external firms might view the business,” he said. “To be clear, I continue to expect that many external parties will be highly interested in this business.”

Narasimhan said it was “better to separate them [Sandoz and Novartis] in a clean and efficient way”, adding a spin-off was in any case the most likely outcome.

Drugs produced by Sandoz, which employs about 20,000 people and generates almost $10bn in annual sales, are a staple of medicine cabinets in Germany, Austria and Switzerland.

Novartis announced a business review late last year. It had received interest from private equity buyers, though Sandoz and Novartis insiders have long said a spin-off was always the most likely option. Founded by the Sandoz family, the business merged with Ciba-Geigy to create Novartis in 1996.

Novartis anticipates the transaction will be completed in the second half of next year, and it is expected to be “generally tax neutral” for Novartis, subject to market conditions, tax rulings and final board endorsement and shareholder approvals.

Under Narasimhan, who has held the top job since 2018, Novartis has focused its efforts on high-grossing, high-value drugs, and offloading or slimming down other parts of the business.