Receive free Novartis AG updates
We’ll send you a myFT Daily Digest email rounding up the latest Novartis AG news every morning.
Novartis is planning to list its generics business Sandoz in October in a spin-off set to be one of the largest on the Swiss exchange, with an estimated valuation of up to $25bn.
The Swiss pharmaceuticals group is following many rivals to focus its operations on higher-value innovative treatments rather than the cheaper off-patent drugs made by Sandoz, including generic versions of biologic infusion drugs known as biosimilars.
In 2020, Pfizer spun off its generics business Upjohn, combining it with Mylan to form Viatris, while Johnson & Johnson, GSK, Pfizer and Novartis have all shed their consumer health businesses selling over-the-counter drugs in recent years.
Novartis said in a statement on Friday it was “confident that the spin-off is in the best interests of shareholders, creating a European champion and a global leader in generics and biosimilars, and a more focused Novartis”.
Earlier this year, several private equity firms including Blackstone, Carlyle, and EQT were considering a bid for Sandoz, according to people familiar with the situation.
Analyst estimates for Sandoz’s potential market capitalisation range from $18bn to $25bn, which would be slightly smaller than eyecare business Alcon, which Novartis spun off in 2019 and listed at a valuation of $28bn. They base their valuations on Sandoz trading at about eight to 10 times its forward earnings before interest, tax, depreciation and amortisation.
Each Novartis investor will receive one Sandoz share for every five Novartis shares they hold. The spin-off is due to take place on or around October 4, pending shareholder approval at an extraordinary meeting on September 15. The Novartis board of directors has unanimously backed the proposal.
In its prospectus published on Friday, Sandoz said the generics and biosimilars market was worth about $208bn in gross sales before discounts and rebates in 2022, and was forecast to grow at about 8 per cent over the next decade.
It said the market played a “critical role in modern healthcare systems”, accounting for about 80 per cent of prescription volumes and a quarter of total medication costs. “As a result, it substantially increases access to treatments, while simultaneously enabling savings that contribute to the financial sustainability of healthcare systems as well as to the overall economic wellbeing of individuals and societies,” it added.
Sandoz forecast net sales growth in the mid-single digits for 2023 and in the medium term, as it expected a return to growth in the US and launches of biosimilars including a version of the blockbuster anti-inflammatory drug Humira.
The generics business forecast core ebitda margin of 18-19 per cent in 2023 because of inflation and the costs of separation but expected this to rise to 24-26 per cent in the medium term.
Credit: Source link
