Novartis has raised the prospect of divesting its generic drugs unit Sandoz after years of revamping the business, as price pressures mount in the off-patent drug sector.
"Novartis has commenced a strategic review of the Sandoz Division," the Swiss-based group said in statement alongside quarterly results in which it lifted its peak revenue estimate for its two best-selling pharmaceuticals.
Sandoz achieved sales of $9.7 billion last year, about 20 percent of the group's total, but Novartis on Tuesday warned it expected the unit's operating income to fall faster than previously expected this year.
"The review will explore all options, ranging from retaining the business to separation, in order to determine how to best maximize value for our shareholders," the statement said.
Novartis added it would have more to say on the review of Sandoz, which makes cheaper copies of drugs that have lost patent protection, by the end of next year.
"It's synergies versus freedom and the ability to allocate capital and all of these considerations will of course be undertaken now," Chief Executive Vas Narasimhan said in a media briefing.
He started setting up the generics business as an independent unit and slashing costs in early 2019, shortly after selling most of Sandoz's U.S. operations. Competitive pressures on prices, which have long been a burden, increased in the third quarter, with the U.S. market a particular challenge.
The company would not say whether rivals or financial investors might buy it, or whether Sandoz could be floated on the stock exchange.
Though the group's 2021 target for group earnings growth remained at a "mid-single digit" percentage rate, Novartis downgraded Sandoz's full-year outlook for operating income to a decline by a "mid to high teens” percentage rate," worse than the "low to midteens” seen previously.
https://finance.yahoo.com/news/novartis-more-bullish-cosentyx-entresto-052626740.html
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