Novartis’ strategic review of the Sandoz business, initiated in October 2021, concluded that a 100% spin-off is in the best interest of shareholders.
Joerg Reinhardt, chair of the board of directors of Novartis, said a spin-off would offer differentiated and clear investment theses for the individual businesses.
Making Sandoz a standalone company will allow both entities 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, added Vas Narasimhan, CEO of Novartis.
The spun-off Sandoz would be headquartered in Switzerland and listed on the SIX Swiss Exchange, with an American Depositary Receipt (ADR) program in the US. The move is expected to be finalized in the second half of 2023 and should be generally tax neutral for Novartis.
The transaction would be subject to market conditions, tax rulings and opinions, final board endorsement and shareholder approvals.
Sandoz, which generated US$9.6bn sales in 2021 sales and served 100+ markets globally, has an existing biosimilars pipeline of 15+ molecules.
Novartis is looking to continue its focus on the core areas of hematology, solid tumors, immunology, neuroscience, cardiovascular, gene therapy, cell therapy, radioligand therapy, targeted protein degradation and xRNA, while ensuring a balanced geographic footprint.
The pharma group will also continue progressing the implementation of its new organizational structure, first announced in April 2022, integrating the pharmaceuticals and oncology business units with separate US and international commercial organizations supported by a new strategy and growth function and operations unit, all of which are aimed at strengthening its competitiveness and driving synergies.
We recently reported on Novartis' increasing investment in its CDMO business, another growth area for the Swiss group.
Following the proposed spin-off, Sandoz would target an investment grade credit rating, providing sufficient financial flexibility to deliver on its growth plans, invest in incremental growth opportunities, with a vision to deliver attractive dividends.
Novartis said further details of the proposed spin-off, including the proposed distribution ratio, detailed timeline and the composition of the board of directors of Sandoz will be provided at a later date.