Novartis expects Sandoz to add $3 Billion In Net Sales Over the Next five Years

The generics division of Novartis will be spun off soon. Sandoz expects to expand its pipeline and generate an additional $3 billion in net sales over the next five years, according to the Swiss company. The company plans to spin off Sandoz in the second half of this year to focus on its patented prescription medicine business.

Following a prolonged period of underperformance driven largely by mounting pricing pressures in the off-patent drug sector, Novartis launched a strategic review of Sandoz in 2021, examining a range of options including retaining the business, spinning it off, or selling it. Sandoz sells generics and biosimilars, which are low-cost versions of biologic drugs made from living organisms, and had $9 billion in sales last year.

Novartis expects to generate $3 billion in additional net sales by investing more in high-risk, high-reward biosimilars and complex generics. Novartis CEO Vas Narasimhan has described the generics market as "highly attractive" in the future, citing $400 billion to $500 billion in branded products expected to go off-patent over the next decade. Still, the Sandoz spin-off proposal did not come as a surprise given poor market conditions and the long struggling broader market for generics, analysts have said.

Later that week, Novartis confirmed that it expected Sandoz to generate mid-single-digit net sales growth this year, and that it expected the rate of growth to remain in this range from 2024 to 2028. The division's core earnings before interest, taxes, depreciation, and amortisation (EBIDTA) margin is expected to be in the 18% to 19% range in 2023, down from 21.25% last year, reflecting global inflationary pressures and the investments required to implement the spinoff.