Sandoz Files Prospectus for Spin-off from Novartis Amid Declining Performance

　　【Pharmaceutical Network Industry DynamicsIn recent years, competition among pharmaceutical companies has continued to intensify. Particularly, pressures brought by events such as drug price reductions and patent expirations have also made many multinational pharmaceutical companies worry about their future performance. Therefore, in order to respond to market adjustments, a large number of multinational pharmaceutical companies are currently transitioning by promptly adjusting their strategic layouts. Against this backdrop, spin-offs and mergers and acquisitions have become increasingly common within the industry.
 

Recently, Sandoz, the generic drug business unit under Novartis, announced externally that Novartis will decide by the end of this year whether to spin off or sell Sandoz. Established in 1886, Sandoz was launched as Novartis' generic drug division in 2003. Sandoz focuses on the generic drug sector and holds a significant global position in biosimilars and non-patented antibiotics. However, as early as 2018, Novartis was already considering selling or spinning off Sandoz, and related news has been frequently mentioned in the past two years.
 

As for the reasons for the spin-off, industry analysis believes that it may mainly be due to the decline in Sandoz's performance in recent years. It is reported that Sandoz's performance began to show a downward trend in 2017, with a 2% decrease that year and a 3% decrease in 2018. In 2021, the core operating profit margin of this division fell from 24.2% in the previous year to 21.4%, and Novartis expects that Sandoz’s profit margin will further decline in 2022.
 

Notably, in recent years, Novartis has gradually shifted its focus to cutting-edge drugs for treating cancer and other diseases, successively divesting its animal health, vaccines, and contact lenses divisions. It had previously spun off its Alcon eye care division and relinquished its stake in a consumer health company.
 

In response, industry analysis believes that in the context of generic drugs replacing original research drugs and the normalization of bulk procurement, accelerating the launch of innovative drugs has become an important goal for Novartis' profit growth. In fact, in addition to Novartis, a large number of multinational pharmaceutical companies are also continuously carrying out business spin-offs to "streamline" their operations, as well as mergers and acquisitions to focus on core businesses.
 

It is reported that, apart from the spin-off in earlier years, Pfizer has already initiated a series of mergers and acquisitions in the first half of this year, acquiring pharmaceutical company Biohaven for $11.6 billion. In late 2020, Merck announced the spin-off of its business, with women's health, biosimilars, and some established medicines being transferred to a new company, Organon. After the spin-off, Organon will be responsible for managing the post-market lifecycle of the drugs, while Merck will handle the R&D pipeline. In June this year, Merck announced that it had completed the spin-off of Organon.
 

In addition, Sanofi changed its brand logo in February. By April, it also announced that the French securities market regulatory agency AMF had approved its subsidiary.Active Pharmaceutical IngredientsEUROAPI's IPO prospectus, once approved by the shareholders' meeting, is expected to be listed on the Euronext Paris on May 6. After the spin-off, Sanofi will hold a 30% stake in Euroapi. In addition to the spin-off, Sanofi is also actively embracing digitalization. To this end, at the quarterly investor conference call held in early February this year, Sanofi stated that it would continue its layoff plan in 2022, with an estimated global workforce reduction of 6,000 employees.
 

Overall, multinational pharmaceutical companies currently under significant cash flow pressure are opting to spin off assets to raise funds for R&D, while those with substantial cash reserves are choosing mergers and acquisitions to achieve new growth points... As we enter the second half of the year, announcements from several multinational pharmaceutical companies suggest that major moves in these areas are expected.
 

Disclaimer: In no event shall the information or opinions expressed in this article constitute investment advice to any person.