Novartis spinoff Sandoz starts trading as standalone drugmaker

SANDOZ Group, the maker of copycat medicines, was spun off from drugmaker Novartis to begin life as a standalone company on Wednesday (Oct 4), when its shares started trading on Switzerland’s stock exchange.

Sandoz opened at 24 Swiss francs, giving it a market capitalisation of nearly 11 billion Swiss francs (S$16.4 billion) in early trading.

The generics leader will now have more freedom to pursue its own growth strategy to challenge industry stalwarts like Viatris and Teva Pharmaceutical Industries. It caps years of efforts by Novartis chief executive officer Vas Narasimhan to reshape the Swiss pharma behemoth into a nimbler company, focused solely on innovative prescription medicines.

Sandoz’s lead in Europe, a less competitive and volatile generics market than the US, along with its portfolio of cheaper versions of complex biological medicines known as biosimilars, should enable it to trade at a premium to rivals, analysts said. But the company may need to prove itself as a standalone first. 

John Plassard, a director at Mirabaud & Cie, said in e-mailed comments: “While the spinoff is fundamentally a good thing, the timing is very complicated. Investors are in risk-off mode, with rising Treasuries yields and the risk of monetary tightening. It will certainly be some time before Sandoz’s core business is fairly valued.”

Sandoz plans to introduce new biosimilars in the coming years, and these drugs command higher prices than generics because they are more complex. 

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The duplicates, produced in a soup of cells, are not identical to the originals in the same way that traditional generics are. Regulators therefore demand evidence that the copy is similar enough to the original.  

In July, Sandoz launched a biosimilar to the blockbuster arthritis treatment Humira in the US, with a private-label commercialisation agreement with American healthcare company CVS Health. 

Sandoz garnered revenue of US$4.8 billion in the first half. The listing is the first non-global depositary receipt of the year on Swiss exchanges.

Novartis shareholders received one Sandoz share for every five Novartis shares. Novartis traded at 88.8 Swiss francs as at 9:18 am in Zurich; Sandoz hit a high of 25.2 Swiss francs. BLOOMBERG