After the prolonged underperformance of its generics division, Sandoz, Novartis has announced a spin off that will allow the company to focus on its core business and which is part of a broader paring down strategy.
For Novartis, the separation of Sandoz would further support our strategy of building a focused innovative medicines company, with depth in five core therapeutic areas, and strength in technology platforms.
Vas Narasimhan, CEO of Novartis
The announcement comes after mounting pricing pressures have led to Sandoz’ prolonged poor performance. A strategic review in October set out the options for Novartis that finally resulted in the spin off choice. “Our strategic review … concluded that a 100% spin-off is in the best interest of shareholders,” said Joerg Reinhardt, Chair of the Board of Directors of Novartis.
While last year Sandoz accounted for almost one fifth of Novartis’ USD 51.6 billion in sales, it remained deeply affected by the price strain that has been impacting the generics industry for years. In 2021, Sandoz’s sales dropped by 2 percent in Europe and 15 percent in the United States and the company also suffered from a COVID-related fall in demand.
As of yet, Novartis has received no formal offers for Sandoz, but claims that through the spin off the two companies will enhance their focus and the ability to pursue independent growth strategies. “Sandoz is expected to deliver its next wave of growth based on the existing biosimilars pipeline of 15+ molecules, a strong and experienced management team and organization,” the company said.
“For Novartis, the separation of Sandoz would further support our strategy of building a focused innovative medicines company, with depth in five core therapeutic areas, and strength in technology platforms,” said Vas Narasimhan M.D., CEO of Novartis.
Letting go of Sandoz is not the first move the company has made towards greater focus on its essential business. In 2019, Novartis already let go of its Alcon eye care division and in 2021 it sold back its shares in Roche. This is also not the first time Sandoz’s future is on the table. In 2018 Novartis attempted to divest part of its generics unit through a USD 900 million deal with India’s Aurobindo Pharma that finally fell through.
Apart from shedding its generics division, Novartis is undergoing a restructuring programme that will involve cutting up to 8,000 jobs, or about 7.4 percent of its global workforce.
As a standalone company, Sandoz will be headquartered in Switzerland and listed on the SIX Swiss Exchange. The transaction is expected to be completed in the second half of next year.
