Novartis slims down Sandoz, selling 2 units to Aurobindo for $1B
- Novartis will sell off about 300 products from its Sandoz US division to Aurobindo Pharma for up to $1 billion, the Swiss pharmaceutical giant announced Thursday.
- The products come from Sandoz's generic oral solids and dermatology businesses and earned roughly $600 million in sales through the first six months of 2018, according to Novartis.
- For India-based Aurobindo, the deal will greatly expand its U.S. presence. The company expects the agreement will make them the second-largest generic player in the U.S. by number of prescriptions, although heavyweights like Teva and Mylan remain dominant players by revenue.
Novartis continues to sharpen its focus in 2018 under new CEO Vasant Narasimhan, who took control in February.
Narasimhan already led a number of moves before this sell-off, which is set to give Novartis $900 million in cash initially and potentially an additional $100 million in milestone payments.
In March, Novartis shed its portion of a consumer healthcare venture, selling its 36.5% stake to rival big pharma GlaxoSmithKline for $13 billion. Then in June, the company said it plans to spin out its eye care device business Alcon, though it's holding onto ophthalmology pharmaceuticals.
Now, Novartis is once again dropping off non-core businesses in a deal, this time with a chunk of Sandoz. The 300-something products netted $600 million in sales for the first half of 2018 and $1.2 billion for 2017.
Sandoz represented roughly one-fifth of Novartis' entire sales revenue last year. This sell-off composes slightly more than 10% of the unit's total sales in 2017, which notched $10.1 billion in annual sales last year, according to a company report.
One group of analysts called the deal for Novartis "the best of the worst options for a business under higher pricing and competitive pressure," the Wall Street Journal reported.
Sandoz will now specialize in complex generics, value-added medicines and biosimilars, Sandoz CEO Richard Francis said in a statement.
On the branded side, Novartis is continuing to hone in on oncology and immunology. And in April, Novartis bought gene therapy-focused biotech AveXis for $8.7 billion.
For Aurobindo, the deal will make them a stronger generic competitor in the U.S., vaulting them to the number 2 spot by number of generic prescriptions, the company said in a statement.
Additionally, Sandoz will part with three manufacturing plants in Wilson, North Carolina, Hicksville, New York, and Melville, New York. More than 750 employees will be transferred to Aurobindo upon closing.
Aurobindo reported $2.6 billion in sales last year from the U.S. and Europe, making up more than 70% of its total sales. It expects these newly acquired products to generate $900 million in sales for the first 12 months after the deal closes, which is slated for sometime next year, pending regulatory approval.
In the markets, Novartis traded relatively flat on Wall Street in opening hours Thursday, while Aurobindo jumped up nearly 10% on the National Stock Exchange of India.