- Novartis is weighing selling or spinning off its sizable but struggling generic drug business in a review that could further narrow the Swiss pharmaceutical company's focus on higher-margin branded prescription drugs.
- The strategic review, announced Tuesday alongside earnings for the third quarter, could still result in retention of the Sandoz division, which earned Novartis $7.1 billion in revenue through the first nine months of the year.
- But Novartis expects Sandoz sales to decline by low- to mid-single digit percentage points this year, with a steeper drop predicted in core profits from the unit. Falling generic drug prices, in particular, have hurt the division's performance.
Under CEO Vas Narasimhan, Novartis has slimmed down what was a sprawling conglomerate spanning prescription and generic drugs, eye care and consumer healthcare. The drugmaker sold its stake in a consumer health joint venture with GlaxoSmithKline in 2018 and, a year later, spun off its eye care unit Alcon as a independent company.
Tuesday's announcement of a strategic review for Sandoz, meanwhile, follows a failed bid by Novartis to sell about 300 of its products to India's Aurobindo Pharma, a deal that was terminated after U.S. regulators refused to sign off.
"The review will explore all options, ranging from retaining the business to separation, in order to determine how to best maximize value for our shareholders," Novartis said in a statement.
In a conference call, Narasimhan said the company would provide an update on progress "at the latest by the end of next year."
A sale or separation would carry significant impact for both Novartis and the generic drug industry, potentially untethering one of the largest manufacturers of copycat medicines should Novartis choose to proceed in that direction.
Such options would result in a smaller Novartis, as Sandoz accounts for about 18% of the overall company's sales. Sandoz is also more integrated into the broader company than Alcon was previously, Narasimhan said, potentially making a separation more involved.
But flat-to-falling sales and faltering profits at the division, particularly in the U.S., have counterbalanced the performance of Novartis' branded medicines, revenue from which grew 9% through the first nine months of 2021.
Novartis' earnings figures for the third quarter showcased some of that strength, as the company raised its forecast for peak annual sales of two of its top-sellers, the inflammatory disease drug Cosentyx and the heart failure medicine Entresto. Novartis now expects sales will eventually top $7 billion a year for Cosentyx, and $5 billion a year for Entresto.
The drugmaker is also counting on growing sales from its spinal muscular atrophy treatment Zolgensma and its recently approved multiple sclerosis medicine Kesimpta.
Novartis isn't alone in refashioning its business to focus on branded prescription drugs. Pfizer put its consumer healthcare products into a joint venture with GlaxoSmithKline, which now intends to spin that business into a separate company by next year, and merged its generic drug division Upjohn into a new company with Mylan.
GlaxoSmithKline, meanwhile, is pitching a "new GSK" that's built around its prescription medicines and vaccines.
Earlier, in 2018, Eli Lilly spun out its animal health business into Elanco.