Novartis launches strategic review of its Sandoz generic drugs unit

Novartis has commenced a strategic review of its Sandoz division and will explore all options ranging from retaining the business to separation, according to Reuters.
Sandra Levy
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Novartis may divest its generic drugs unit Sandoz, according to an Oct. 26 Reuters report.

"Novartis has commenced a strategic review of the Sandoz Division," the Swiss-based group said in a statement alongside quarterly results. 

Sandoz achieved sales of $9.7 billion last year, about 20% of the group's total, but Novartis on Tuesday warned it expected the unit's operating income to fall faster than previously expected this year.

[Read more: Sandoz launches generic Feraheme]

"The review will explore all options, ranging from retaining the business to separation, in order to determine how to best maximize value for our shareholders," the statement said.

Novartis noted that it would have more to say on the review of Sandoz by the end of next year.

"It's synergies versus freedom and the ability to allocate capital and all of these considerations will of course be undertaken now," chief executive Vas Narasimhan said in a media briefing.

[Read more: Sandoz resolves legacy federal government civil investigation regarding generic drugs]

Narasimhan started setting up the generics business as an independent unit and slashing costs in early 2019, shortly after selling most of Sandoz's U.S. operations. Competitive pressures on prices, which have long been a burden, increased in the third quarter, with the U.S. market a particular challenge, the report stated.

The company would not say whether rivals or financial investors might buy it, or whether Sandoz could be floated on the stock exchange, according to the report.

"Given the continued drag on Novartis growth from Sandoz, the announcement of a strategic review is likely to be well received," JP Morgan analysts said in a research note.