Novartis Split: Sandoz Spin Off Forming A Standalone Company

On August 25, Novartis announced its planned separation of Sandoz into its own standalone company. Sandoz is Novartis’s generics and biosimilars division. The decision comes after a dip in Sandoz’s US revenue. Novartis expects the Sandoz spin-off to maximize shareholder value.

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Sandoz: One of the Creators of Novartis

Novartis is a pharmaceutical company known for creating medicines for a plethora of different diseases. Their portfolio includes the therapeutic areas Cardio-Metabolic, Ophthalmology, Respiratory, Immunology, Oncology, and Gene Therapy.

Novartis came into being when the pharmaceutical and agrochemical divisions of Ciba-Geigy and Sandoz merged in a multibillion-dollar deal in March 1996. Before the merger, Sandoz was a Switzerland-based pharmaceutical company known for manufacturing the drug Sandimmune (cyclosporine). The drug prevents organ rejection after a heart, liver, or kidney transplant. After the merger, Sandoz became the generics and biosimilars division of Novartis. In 2021, Sandoz generated over $9.6 billion in revenue for Novartis. 

However, Novartis announced that Sandoz would spin off into a separate entity in order for both companies to pursue different growth strategies. The CEO of Novartis, Vas Narasimhan, said that the split was “in the best interest of shareholders.” This idea first bubbled up last year as one of many options going forward after Sandoz saw a decline in US revenue. This would mark another spin off due revenue slow downs this year, with Labcorp making a similar decision with its clinical development business in July.

The Future For the Sandoz Spin Off

The Sandoz spin off will become a publicly-traded company listed on the SIX Swiss Exchange, with an American Depositary Receipt (ADR) program in the US. As with its predecessor, Sandoz’s headquarters will be in Switzerland

The goal of the spin-off is to allow maximization of shareholder value by creating what Novartis expects to be the largest European generics company. On Sandoz’ future, Joerg Reinhardt, Chair of the Board of Directors of Novartis, said “Our strategic review examined all options for Sandoz and concluded that a 100% spin-off is in the best interest of shareholders. A spin-off would allow our shareholders to benefit from the potential future successes of a more focused Novartis and a standalone Sandoz, and would offer differentiated and clear investment theses for the individual businesses.”

As for Novartis, the company intends to follow through with its restructuring that began earlier this year. To focus more on innovative medicines and increase productivity, the company cut 7% of its global workforce in April this year. The reductions continue as on August 23, Novartis cut an additional 1,400 jobs. Half of those cuts included staff leadership positions. 

Although subject to final Board endorsement and shareholder approvals, Novartis expects the completion date to be sometime in the second half of 2023. 

Author

Max Heirich