Novartis sells parts of Sandoz US to India's Aurobindo for US$900m

[BENGALURU] Novartis AG said on Thursday it would sell the dermatology and generic US oral solids portfolios of Sandoz US to India's Aurobindo Pharma Ltd for US$900 million, as the Swiss drugmaker looks to focus on higher growth areas.

The deal also includes about 300 products and additional development projects of Sandoz and an additional US$100 million in performance-based payments, Novartis said.

Shares in Aurobindo rose more than 5 per cent on the news, while Novartis stock was little changed in early business.

Analyst Stefan Schneider at Swiss bank Vontobel said in a research note the sale was no surprise.

"We had assumed a price of 1 times sales for such a transaction, which was not the case. We realise that pricing pressure in the US generics market is greater that we had anticipated, as last year's revenues were US$1.5 billion for this business and 1H18 revenues only $0.6 billion," he noted, maintaining his "hold" rating on Novartis stock.

The 131-year-old Sandoz unit was hurt by price pressure in the United States, prompting Novartis Chief Executive Officer Vas Narasimhan to sell parts of the Sandoz unit.

He has so far said Sandoz businesses elsewhere remain core parts of Novartis. Mr Narasimhan is also keeping Sandoz biosimilars business - less-expensive near copies of complex biological medicines whose patents have expired - on hopes that rising demand from cash-strapped governments and insurers seeking to contain costs will help Sandoz boost its margins.

Novartis had earlier this year expressed its intention to sell the Sandoz unit after reporting disappointing sales form the unit.

"Through this transaction, we are refocusing our business but also striving to ensure continuity of supply of important long-used generic medicines for patients and customers in the US," said Richard Francis, Sandoz chief executive.

Following the transaction, the Sandoz US portfolio will continue to be substantial, and will include biosimilars, value-added medicines and complex generics such as injectables, respiratory and ophthalmics, the company said.

"Overall the transaction will position Aurobindo as the 2nd largest dermatology player and the 2nd largest generics company in the U.S. by prescriptions," said N Govindarajan, Managing Director of Aurobindo Pharma. 

As part of the transaction, Aurobindo Pharma USA Inc, a unit of the Hyderabad, India-based company, will acquire the plants in Wilson, North Carolina, as well as Hicksville and Melville, New York, Novartis said.

About 750 employees as well as the field representatives for the PharmaDerm branded dermatology business are expected to transfer to Aurobindo upon closing, Novartis said.

REUTERS