Sandoz Bets Big on Biosimilars Ahead of Novartis Spin-off, Targets $3B in Additional Sales

SmartCom APP learned that Novartis (NVS.US) executives said on Thursday that Sandoz, the generic drug division to be spun off, is betting on biosimilars to drive its future as an independent company. Biosimilars are replicas of high-priced drugs used to treat diseases such as rheumatoid arthritis and cancer.

Sandoz Hosts Its First Capital Markets Day in New York to Demonstrate the Company’s Strength to Overcome a Tough Global Macroeconomic Inflation Environment.

Novartis began a strategic review of Sandoz in 2021 after years of underperformance, largely due to mounting price pressures in the generics industry, particularly in the United States.

Given the poor market environment, the long-term sluggishness of the generic drug market, and the slow uptake of biosimilars in the U.S., the world's largest pharmaceutical market, analysts are not surprised by the decision to spin off the business.

Last year, Sandoz generated more than $9 billion in revenue from the sale of generic drugs and biosimilars. Biosimilars are lower-cost versions of biologics cultivated within living cells.

The company expects to generate up to $3 billion in additional net sales over the next five years, primarily through further investment in biosimilars, which currently account for about one-fifth of sales.

Sandoz CFO Colin Bond said that by 2028, this proportion is expected to climb to 30%, thereby improving profit margins.

Sandoz expects its core EBITDA margin to be between 18% and 19% in 2023, down from 21.2% last year, but to climb to a range of 24% to 26% in the mid-term.

Bond said,"Obviously, we are just getting started now,"He was referring to the possibility of cooling inflation, the benefits of newly launched high-margin biosimilars, and operational efficiencies post-spinoff.

"Based on what we know so far... the growth in profit margins looks very attractive."

Of particular interest is the company's anticipated launch in the U.S. of a biosimilar to the autoimmune drug Humira, which could generate annual sales of about $15 billion to $20 billion.

A recent analysis report by McKinsey shows that in the next decade, more than 55 blockbuster biologics in the United States and Europe will lose patent protection, with expected annual sales exceeding $270 billion.

Other companies in the field, such as Israel's Teva and Amgen, also hope to capitalize on the lucrative biosimilar market.