Novartis to separate Sandoz generics drug unit into standalone company
Novartis has announced its intention to separate Sandoz, its generics and biosimilars division into a new publicly traded standalone company, by way of a 100% spin-off.
The spin-off aims to maximize shareholder value by creating the number one European generics company and a global leader in biosimilars, allowing Novartis shareholders to participate fully in the potential future upside for both Sandoz and Novartis Innovative Medicines, the company said.
For both the Innovative Medicines and Sandoz businesses, the spin-off would enable enhanced 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, and a strong and experienced management team and organization. Novartis aims to become a focused innovative medicines company with a stronger financial profile, and improved return on capital.
“Our strategic review examined all options for Sandoz and concluded that a 100% spin-off is in the best interest of shareholders," said Joerg Reinhardt, chair of the board of directors of Novartis. "A spin-off would allow our shareholders to benefit from the potential future successes of a more focused Novartis and a standalone Sandoz, and would offer differentiated and clear investment theses for the individual businesses. Sandoz would become the publicly traded number one European generics company and a global leader in biosimilars based in Switzerland.”
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The standalone Sandoz would be headquartered in Switzerland and listed on the SIX Swiss Exchange, with an American Depositary Receipt program in the United States.
“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, CEO of Novartis. “In addition, both companies would be able to focus on maximizing value creation for their shareholders by prioritizing capital and resource allocation, employing separate capital structure policies and increasing management focus on their respective business needs.”
Novartis said that it will continue expanding its strong position in five core therapeutic areas (hematology, solid tumors, immunology, neuroscience and cardiovascular), strength in technology platforms (gene therapy, cell therapy, radioligand therapy, targeted protein degradation and xRNA) and a balanced geographic footprint. Novartis also will continue progressing the implementation of its new organizational structure announced in April 2022, integrating the Pharmaceuticals and Oncology business units with separate U.S. and International commercial organizations supported by a new strategy and growth function and operations unit to increase focus, strengthen competitiveness and drive synergies.
"Novartis remains committed to its strong investment-grade credit rating and capital allocation priorities, including our growing annual dividend," the company said.
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Sandoz generated $9.6 billion in sales in 2021 sales and served 100+ markets globally with a strong presence in Europe as well as in the United States and ‘Rest of World.’ Sandoz would leverage its strong brand and sustain its leading global position by continuing to invest in the key strategic areas of biosimilars, antibiotics and generic medicines.
As a standalone company, Sandoz would focus on its vision to deliver access to patients, leveraging the business’ strengths and purpose-driven workforce. Sandoz would execute a growth strategy with a focused approach to deploy resources efficiently and effectively, strengthen key platforms and deliver launch excellence. Following the proposed spin-off, Sandoz would target an investment grade credit rating, providing sufficient financial flexibility to deliver on its growth plans, and invest in incremental growth opportunities, with a vision to deliver attractive dividends.
An update on Sandoz’s planned dividend policy will be provided in due course. Any Sandoz dividends would be incremental to Novartis dividends, the company said.