In a strategic move that’s been eagerly anticipated, Novartis has officially given the green light to the spin-off of its generics and biosimilars powerhouse, Sandoz. The Swiss pharmaceutical giant is not wasting any time, scheduling an extraordinary general meeting for September 15th, where shareholders will cast their crucial votes. Should the plan get the thumbs up, Novartis is on track to finalize Sandoz’s spin-off ‘on or around’ October 4th, according to the company’s announcement.
But that’s not all; Novartis has even bigger ambitions. The company intends to list Sandoz on the prestigious SIX Swiss Exchange, alongside an American Depository Receipt (ADR) program in the United States. Naturally, securing regulatory approvals will be a vital step in this grand endeavor.
This monumental decision traces its roots back to October 2021 when Novartis initiated a comprehensive review of its generics division. At the time, Sandoz was grappling with sliding drug prices in the U.S., its largest market, despite showing impressive volume sales. This review was part of CEO Vas Narasimhan’s master plan to streamline Novartis’ operations, encompassing initiatives like spinning off its eye care business, Alcon, and an extensive restructuring aimed at achieving $1 billion in cost savings by 2024. The restructuring also saw the departure of high-ranking company officials and significant layoffs.
In a move that sent shockwaves through the industry, Novartis floated the idea of spinning off Sandoz into an independent entity in July 2022, a plan that was solidified a month later. This strategic maneuver aimed to unlock value for shareholders, allowing Novartis to laser-focus on its core therapeutic areas and strengthen its technology platforms.
Fast forward to July 2023, and Novartis’ Board of Directors gave a unanimous thumbs-up to the separation of Sandoz as an independent entity. If shareholders give their blessing, they will receive one Sandoz share for every five Novartis shares they own, or one Sandoz ADR for every five Novartis ADRs.
In an exciting twist, Novartis also unveiled Sandoz’s impressive financial performance for the first half of 2023. Sandoz clocked in a remarkable $4.8 billion in net sales to third parties during this period, marking an impressive 8% surge at constant currencies. The driving force behind this growth? Volume, which contributed a whopping 12 percentage points, effectively offsetting the challenges of pricing fluctuations.
Novartis pointed out that Sandoz’s stellar sales were primarily propelled by Europe, benefiting from robust volume growth stemming from previous product launches, a robust cough and cold season, and a thriving Biosimilars business. Looking forward, Sandoz is eyeing mid-single-digit net sales growth not just for 2023, but also for the promising years ahead, spanning 2024 to 2028, according to Novartis’ projections.