Sandoz completed its separation from Novartis this morning, marking the culmination of a strategic review that began in October 2021. The generics and biosimilars company began trading independently on the SIX Swiss Exchange at CHF 24 per share, valuing the newly formed entity at CHF 10.3 billion (approximately $11.2 billion).
The valuation came in slightly below analyst predictions, with shares fluctuating before settling around CHF 23.90. Sandoz represents the largest new entrant to the SIX since Novartis spun off its eyecare unit Alcon in 2019. The company is now listed in the Swiss Performance Index (SPI) and Swiss Leader Index (SLI), with additional trading on the OTCQX exchange in the US through an American Depositary Receipts program.
Strong Financial Performance Drives Independence
The separation follows a period of financial recovery for Sandoz, which had previously faced pressure from pricing challenges and pandemic-related disruptions. The company reported first-half 2022 sales of $4.68 billion, representing 6% growth when adjusted for exchange rates, with operating profit increasing 8% to $798 million.
This momentum continued into 2023, with Sandoz achieving $4.8 billion in first-half sales, up 8% at constant currencies, and operating profit of $1 billion, representing 3% growth. The company's management has outlined ambitious expansion plans, expecting to add $3 billion in annual sales from new product launches following the separation, with the majority coming from biosimilars and complex generics.
Market Impact and Strategic Positioning
Chief Executive Richard Saynor emphasized the company's market significance, stating that Sandoz products generate $17 billion in annual healthcare savings in the US and Europe alone. The company serves 500 million patients across more than 100 countries, highlighting its global reach in the generics and biosimilars market.
"As an independent company, Sandoz will be fully enabled to deliver on its purpose-driven strategy, which targets sustainable leadership in the growing and critical generics and biosimilars industry," Saynor said. "We intend to make an even greater impact going forward."
According to company data, generics and biosimilars account for approximately 80% of medicines used worldwide by volume while representing only 25% of total healthcare costs, underscoring the sector's importance in healthcare accessibility and affordability.
Novartis Refocuses on Innovation
The spin-off represents the latest step in Novartis's strategic transformation from a diversified life sciences company to a focused innovative medicines organization. Novartis CEO Vas Narasimhan stated that the separation "would further support our strategy of building a focused innovative medicines company, with depth in five core therapeutic areas, and strength in technology platforms."
Over the past decade, Novartis has systematically divested non-core assets, including its consumer healthcare joint venture with GlaxoSmithKline in 2018, its vaccines division to GSK, its animal health unit to Eli Lilly, and a blood diagnostics business to Grifols. The company has reinvested proceeds from these divestitures into its pharmaceutical R&D pipeline as part of a broader industry trend toward specialization.
The separation allows Novartis shareholders to "participate fully in the potential future upside of both Sandoz and Novartis Innovative Medicines," according to the company's statement, while enabling dedicated capital and management attention for each business's distinct strategic priorities.
Future Growth Trajectory
Despite completing the separation, Sandoz faces near-term challenges including a limited pipeline of upcoming generic launches and delays in bringing major biosimilar products to market until 2023 and 2024. However, the company has continued strategic investments, including the acquisition of GSK's cephalosporin business for up to $500 million.
The independent structure positions Sandoz as what the company describes as the "number one generics company in Europe and a leader in biosimilars," with enhanced flexibility to pursue growth opportunities in the expanding global generics and biosimilars market.
