Sandoz, the generics branch of Novartis (NOVN.S), will be spun off soon, and the Swiss company said Thursday that it expects the new company to increase its pipeline and potentially produce an additional $3 billion in net sales over the next five years.
To better concentrate on its patented prescription pharmaceutical business, the company plans to spin off Sandoz in the second part of this year.
After a long period of underperformance caused in large part by rising pricing pressures in the off-patent medication industry, Novartis initiated a strategic assessment of Sandoz in 2021, considering a variety of options, including maintaining the firm, spinning it off, or selling it.
About $9 billion in sales were generated by Sandoz last year through the sale of generics and biosimilars, or low-cost alternatives to biologic medications made from living organisms.
Novartis estimates that increasing its investment in high-risk, high-reward biosimilars and sophisticated generics might generate an additional $3 billion in net sales.
After noting that $400 billion to $500 billion worth of branded products are projected to go off-patent in the future decade, Novartis CEO Vas Narasimhan has called the market for generics “highly attractive” moving forward.
According to analysts, poor market circumstances and a long-suffering broader market for generics meant that the Sandoz spin-off proposal was not unexpected.
On Thursday, Novartis reaffirmed that it anticipates Sandoz’s net sales growth to come in at the mid-single digit level this year, and it added that it expects the pace to remain at this range through 2024–2028.
It is anticipated that the division’s core margin on earnings before interest, taxes, depreciation, and amortization (EBITDA) will fall to the 18%–19% level in 2023, from the 21.2% range in 2022, due to global inflationary pressures and investments needed to implement the spinoff.
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