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Novartis plans to spin off its Sandoz unit, creating the largest European generic and biosimilar drug company by sales.
The Swiss company is the latest pharmaceutical giant to try to reshape its business with a plan to separate a unit that has been struggling to meet expectations. The move, announced on Thursday, is a long-awaited answer for Novartis’s shareholders after the Basel-based group started a strategic review of Sandoz last October.
Novartis shares rose as much as 1.1% on Thursday in Zurich, where Sandoz will also be listed.
Though the unit accounts for nearly one-fifth of Novartis’ $52.9bn in sales, questions have remained about its future prospects. The Covid-19 pandemic was one drag on revenue, as social distancing cut down on the cold and flu season and lowered demand for generic drugs and over-the-counter medicines. Even as those restrictions lifted, however, Sandoz’s growth continued to lag the innovative side of Novartis’s business.
Pressure has been mounting on CEO Vas Narasimhan to come up with a solution. He said Thursday that a spin-off will help the company better focus on cutting-edge medicines.
“We believe this decision is in the best interests of our shareholders,” and creates a “new Novartis”, Narasimhan said in a conference call with journalists. The move will “conclude Novartis’s journey to become a focused innovative medicines company”, he said.
Novartis and other big drugmakers are homing in on innovation and casting off consumer or generic businesses.
GSK, the UK pharmaceutical giant, recently spun off its consumer health unit to improve the focus on developing new medicines. The move followed a long period of mounting criticism, including from activist investors, about GSK’s performance under CEO Emma Walmsley.
Healthcare giant Johnson & Johnson said in November it will also split off its consumer division.
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