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Novartis to Spin Off $24 Billion Sandoz Business

UTC by Babafemi Adebajo · 2 min read
Novartis to Spin Off $24 Billion Sandoz Business
Photo: Depositphotos

CEO of Novartis noted the spin-off will allow the company to concentrate on building an innovative medicine company.

Novartis AG has announced its intention to spin off its Generics and Biosimilars division, Sandoz, with a valuation of $24 billion. Following a spin-off, Sandoz would become the top-tier European Generics company and a global leader in Biosimilars.

The announcement has been in the works since Novartis announced plans to close 8000 positions in its recent restructuring plan. The firm commenced a strategic review of Sandoz to determine its fate.

Chair of the Board of Directors of Novartis, Joerg Reinhardt, noted that the concluded strategic review revealed a 100% spin-off is in the best interest of shareholders. He noted a spin-off would guarantee maximum benefit for shareholders.

Upon completion, Sandoz will be listed on the Swiss exchange and have its headquarters in Switzerland. It would also receive an American Depositary Receipt allowing American investors to buy their stocks. As CNBC noted, “The spin-off would enable enhanced focus and the ability to pursue independent growth strategies.”

Already, Sandoz has a strong brand position in Antibiotics, Biosimilars, and Generics medicine. In 2021, it generated $9.6bn in sales across 100 markets. The firm will leverage its brand presence in Europe and the United States to continue to grow.

Novartis to Focus on Innovative Medicine after Spinning Off Sandoz

CEO of Novartis, Vas Narasimhan, noted the spin-off will allow Novartis to concentrate on building an innovative medicine company. He also said the firm will focus on its strong positions in Hematology, Solid Tumors, Immunology, Neuroscience and Cardiovascular.

“Both companies would be able to focus on maximizing value creation for their shareholders by prioritizing capital and resource allocation, employing separate capital structure policies, and increasing management focus on their respective business needs,” he noted.

While doing this, Novartis will ensure its investment-grade credit rating remains strong and maintain its capital allocation priorities. This will also involve growing (CHF) its annual dividend. Also, the firm will implement its new organizational structure as previously announced in April.

No Further News on Possible Acquisitions

Notably, the announcement contained no news about the possible acquisition of Sandoz soon. Earlier media reports highlighted the interests of Blackstone and Carlyle in purchasing Sandoz. Handelsblatt also reported that the Strüngmanns and the Swedish investment firm EQT was also looking to buy the firm.

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