Novartis granting Sandoz independence within the company sounds a lot like what Pfizer did with its own generics business before it struck a deal to merge the unit with Mylan.
But to hear Novartis CEO Vas Narasimhan tell it, his company won’t go down the split-off path.
“No, we will not sell Sandoz,” Narasimhan said in an interview with German newspaper Sueddeutsche Zeitung, as quoted by Reuters. “We will make the company more autonomous within Novartis to make it more competitive. Our plan is to focus Sandoz and make it better in the long term.”
Narasimhan’s comment was published just hours before The Wall Street Journal reported that Pfizer was nearing a merger between its Upjohn established medicines business and Mylan, though the interview could have happened much earlier. His tone was largely in line with previous statements, with perhaps one exception.
Nevertheless, there’s no denying the similarity between the two cases. Before the Mylan transaction, Pfizer turned Upjohn—which comprises off-patent branded drugs and generics—into a unit with “substantial autonomy.” Novartis is doing a similar transformation with Sandoz.
As soon as Novartis unveiled its plan last year to make the Sandoz generics business an independent unit, market watchers speculated that the Swiss drugmaker was priming Sandoz for an eventual sell-off. The sale of Sandoz’s U.S. oral solids to India’s Aurobindo Pharma—and the subsequent departure of Sandoz’s former CEO Richard Francis—only fueled that theory.
Then, on the company’s fourth-quarter earnings call in January, Narasimhan reiterated that Sandoz is “an integral part of Novartis.”
But he qualified that somewhat. Once the de-integration is done, he said, in about a year from now, “we can have further conversations about where we want to head from there,” arguably leaving a small window for potential dealmaking.
Sandoz just wrapped up a surprisingly good second quarter, with sales jumping 3% year over year to $2.4 billion. That was no thanks to U.S. price erosion, but Novartis said demand for biosimilars in Europe had helped offset that. While it boosted Sandoz’s full-year sales guidance, Narasimhan acknowledged that the U.S. side is still struggling with declines in the mid-teens, percentage-wise.
Analysts agreed. For example, SVB Leerink analysts noted that Sandoz had still been suffering steeper price erosion than what they’d seen across the broader U.S. generics market.
Narasimhan hopes complex generics and biosimilars can drive future growth at Sandoz, though. These include Symjepi, its recently launched rival epinephrine injector to none other than Mylan and Pfizer’s EpiPen, as well as a biosimilar of Amgen’s Neulasta.