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Friday has arrived: Novartis’ extraordinary general meeting is approaching. The only issue on the agenda is the division of Sandoz’s generic pharmaceutical division into its own joint stock company. Thus, shareholders decide on one of the largest IPOs of recent years. Sandoz shares will be traded on the stock exchange as of October 4. The general assembly is just a formality.
It has been known since 2018 that Novartis wants to turn problem child Sandoz, led by boss Richard Saynor (56), into an independent unit.
What’s giving the pharmaceutical giant a stomach ache?
Novartis gets in shape
Novartis will become weaker as a result of the spin-off and will therefore be better able to concentrate on its remaining business areas. The main field of “Innovative Medicines” focuses on the production and marketing of patent-protected medicines. A lucrative business; It’s the exact opposite of the generics section. Generics are cheap imitations of drugs; It costs less and margins are lower.
The pharmaceutical giant still sees potential in Sandoz; After all, Sandoz is the third largest generic drug manufacturer in the world. Hope lies in so-called biosimilars. As with generics, these are counterfeit products. These are produced organically and are not exactly the same as the original medicine, as is the case with generic drugs.
Sales of generic and biosimilar medicines in Switzerland reached 1.02 billion francs in 2022; This means a 12 percent increase compared to the previous year. Generics make up a much larger share. Thanks to imitation drugs, 569 million francs were saved in the healthcare system.
Despite the growth of the generic drug market in Switzerland, work done with counterfeit products is not worth much in this country compared to abroad. And this is despite the fact that generic drugs are almost twice as expensive in Switzerland than in other countries.
The large number of special requirements for a small market makes the business unattractive for providers, hence drug shortages. For example, manufacturers are required to offer drugs in every conceivable package size and in three languages – this is often not the case abroad.
Sandoz isn’t going to make big money here. But the potential in the USA is huge. More than 90 percent of drugs prescribed in 2019 were generic drugs. Generic drugs are also more common in Europe than here. In Switzerland, this rate is around 12 percent. Milena Kalin
Sales of generic and biosimilar medicines in Switzerland reached 1.02 billion francs in 2022; This means a 12 percent increase compared to the previous year. Generics make up a much larger share. Thanks to imitation drugs, 569 million francs were saved in the healthcare system.
Despite the growth of the generic drug market in Switzerland, work done with counterfeit products is not worth much in this country compared to abroad. And this is despite the fact that generic drugs are almost twice as expensive in Switzerland than in other countries.
The large number of special requirements for a small market makes the business unattractive for providers, hence drug shortages. For example, manufacturers are required to offer drugs in every conceivable package size and in three languages – this is often not the case abroad.
Sandoz isn’t going to make big money here. But the potential in the USA is huge. More than 90 percent of drugs prescribed in 2019 were generic drugs. Generic drugs are also more common in Europe than here. In Switzerland, this rate is around 12 percent. Milena Kalin
The split will take place on the stock exchange as follows: All Novartis shareholders will receive one Sandoz share for every five Novartis shares. Now they need to vote for this. The same is true for escrow receipts called ADRs traded in the United States. Theoretically, Novartis is five times larger than Sandoz.
The reality will be different: Vontobel analyst Stefan Schneider (56) predicts that Sandoz’s market value will be clearly lower. Other experts see it this way, too. Ultimately, the market determines the value of Sandoz stock.
On Wednesday, the Swiss Stock Exchange (SIX) announced: Sandoz will not be included in the SMI, the index of the 20 largest listed companies. As a result, all SMI funds must sell new Sandoz shares. On the other hand, funds that track the broader SLI and SMIM indexes should include Sandoz shares in their portfolios. In the beginning, there will be a lot of movement until a stable value emerges. The new Sandoz shares are already a gift for Novartis shareholders, because the share value of the Basel-based pharmaceutical giant is almost never decreasing.
Are biosimilars becoming widespread?
The question now is how successful Sandoz will be. As one of the world’s largest generic drug manufacturers, it can certainly stand on its own. Its sales increased by 5 percent in the first half of the year, reaching $4.8 billion. But the targets are high: Sandoz expects net sales growth to be in the mid-single-digit range in 2023 and over the medium term. Core operating profit margin is expected to increase from 18 percent to 19 percent this year and to 24 to 26 percent in the medium term.
Shareholders association Actares sees Sandoz’s forecast as “too optimistic”. The generic drug market is not very profitable, especially in Switzerland.
Vontobel analyst Schneider has difficulty assessing whether the spin-off will achieve its goals. Biosimilars are more important than generics. “It all depends on whether Sandoz’s biosimilars are successful in the US,” he says. The biopharmaceutical business has recently taken off in the US. These drugs have been available in Europe since 2006. Only one of the four Sandoz biosimilars planned for launch in the United States is on the market, and the remaining three have not yet been approved. Now everything depends on them.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
