Novartis Completes Spinoff of Generics Unit Sandoz, Shares Debut at 24 Swiss Francs
Novartis, the Swiss drugmaker, has successfully completed the spinoff of its generics and biosimilars business, Sandoz. The company’s shares began trading at 24 Swiss francs during its debut on the SIX Swiss Exchange. This spinoff was initially announced in August, with Novartis offering stakeholders one Sandoz share for every five Novartis shares through a dividend-in-kind distribution.
The decision to spin off Sandoz comes as Novartis aims to sharpen its focus on patented prescription medicines. CEO Vas Narasimhan told CNBC that over the last six years, the company has undertaken a series of transactions, totaling over $100 billion, to transform Novartis into a pure play innovative medicines company. This involves exiting consumer health to create one of the largest consumer health companies, divesting Alcon in the largest public market spin in European capital markets, and selling their stake in Roche. With the spinoff of Sandoz, Novartis can now solely concentrate on bringing their R&D efforts and new medicines to markets around the world.
Upon news of the spinoff, Novartis shares surged over 3% in early trade in Zurich, leading the pan-European Stoxx 600 index. The company also reaffirmed its full-year guidance, with sales expected to grow in the high single-digit percentage range and core operating income set to rise in the low double digits to mid-teens.
Narasimhan described the completion of the spinoff as a “truly historic moment” for both Novartis and Sandoz as they embark on their journeys as independent companies. He expressed confidence that Sandoz, a global leader in generics and biosimilars, would continue to deepen its impact on patients and society as it starts from a position of strength.
According to Jefferies analysts, the Sandoz listing is estimated to be valued between $12.3 billion and $16.2 billion when the company begins trading independently. Sandoz CEO Richard Saynor emphasized that the spinoff would allow their company to focus on its own strategy, which includes a pipeline of 25 biologics projects, with an additional five projects set to launch in the next two years. Saynor stated that focus is crucial and being an independent company enables Sandoz to grow its business, bring more products to patients, and build on the momentum achieved in recent years.
Sandoz generates approximately half of its revenues from Europe, providing a significant platform for growth. Saynor highlighted their heavy investments in the biologics pipeline, with around $3 billion in sales expected to come from this pipeline, more than double what Sandoz has seen in the previous five years. The company expects half of the growth to stem from biosimilars and anticipates an acceleration of their U.S. business in the coming years.
Overall, the spinoff of Sandoz marks a crucial step in Novartis’ strategic focus on innovative medicines, while Sandoz is well-positioned to continue its growth as an independent player in generics and biosimilars.