Rather than selling, Novartis could spin Sandoz off into its own separate entity with its own listing on a stock exchange.
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For months, Swiss pharma giant Novartis has been conducting a review of its generics business unit, Sandoz, even entertaining a potential sale. But rather than selling, Novartis could spin Sandoz off into a separate entity with its own listing on a stock exchange.
Citing unidentified people “familiar with the matter,” Bloomberg reported that Novartis “sees a separate listing of the $25 billion Sandoz business as increasingly likely.” However, those individuals were quick to note that no final decision has been made regarding the fate of Sandoz.
In October 2021, Novartis began to conduct a strategic review of Sandoz. Novartis Chief Executive Officer Vas Narasimhan predicted it would be completed by the end of 2022.
Sandoz is one of the largest generics entities in the world and is also Novartis’ leading business unit for the development of biosimilar products. Over the past several years, Sandoz has seen a significant decline in its sales within the U.S. as the generics business has become increasingly challenging.
Earlier this year, it appeared that Sandoz began an upswing financially. In the first quarter of 2022, Sandoz saw sales growth of 8%, primarily outside of the United States. Sales for the generics and biosimilar unit benefited from what the company called the normalization of impacts of COVID-19.
The review of Sandoz comes after Novartis has undertaken a restructuring plan that includes the slashing of about 8,000 jobs by 2024. While that figure is not yet set in stone, a Novartis spokesperson told BioSpace that the company is “still working on many of the design elements of the new organization.” The restructuring plan, announced earlier this year, will see the merger of two company divisions, its oncological and pharmaceutical divisions, into one innovative medicine (IM) business unit.
As Novartis continues with its restructuring plan, Sandoz will remain in play. What its future is at this time remains to be seen. If Novartis attempts to sell off the generics business, potential suitors could be waiting.
As BioSpace previously reported, some potential buyers have expressed interest in acquiring some or all of the Sandoz business. Last fall, European investment group EQT and the Struengmann family, who own a significant stake in BioNTech, were reportedly considering a deal for the company. According to some reports, a sale of the generics business unit could net Novartis about $21.6 billion. However, some analysts though have pegged the valuation of the company at closer to $25 billion.
Novartis has been focused on streamlining its operations. Under the leadership of Narasimhan, the company spun off its Alcon eye business as well as its animal business. The company also sold its 33% stake in Roche back to its Basel, Switzerland neighbor last year, securing an astounding $20.7 billion.
Some of the funds the company gained from those transactions will be used to acquire up to $15 billion worth of its own common shares. Novartis also plans to keep some of that money in reserve in order to fuel M&A decisions.
