As the long-anticipated spinoff of Novartis’ Sandoz division draws near, the Swiss pharmaceutical giant has unveiled a novel approach to commemorate the occasion through a special stock distribution plan.
After nearly a year since revealing intentions to separate Sandoz, Novartis has now announced that the division’s split, separating its generics and biosimilars business, is scheduled to occur around October 4th.
In the spirit of this transformative move, Novartis proposes an innovative arrangement, offering its shareholders one Sandoz share for every five Novartis shares they currently possess. To provide further clarity and engagement, the company has convened an extraordinary general meeting on September 15th, dedicated to discussing and ratifying the spinoff plans.
The endorsement of the proposed separation by Novartis’ board of directors is unanimous, and shareholders are encouraged to support this strategic shift.
The trajectory of Sandoz has been uncertain since October 2021 when Novartis initiated a comprehensive evaluation of the division. At that juncture, the company had expressed its openness to various options, including retaining the business or pursuing separation.
The decision to proceed with the spinoff crystallized last summer. By August 2022, Novartis unveiled its plan to transform Sandoz into an independent, publicly traded entity, effectively establishing Europe’s largest generics company. The competitive landscape and pricing pressures in the U.S. have challenged Sandoz and the broader generics sector for several years. This evolution also aligns with Novartis’ focus on innovative pharmaceuticals as outlined by its CEO, Vas Narasimhan.
Novartis underscores that the spinoff is strategically aligned with the best interests of its shareholders, aiming to foster a European champion and a global frontrunner in the generics and biosimilars domain, while concurrently affording Novartis itself a more streamlined and focused direction.
Despite Sandoz witnessing a decline in revenue annually since 2016, this trend could be poised for reversal. Sandoz recently projected potential sales growth this year, which is expected to persist until 2028. Novartis’ initiative parallels similar actions within the pharmaceutical industry, as other major players like GSK, Pfizer, and Johnson & Johnson have executed separations of their consumer units, prioritizing their core prescription medicine segments.
In line with these strategies, Johnson & Johnson’s recent split-off goal seeks to reduce its stake in its consumer health spinoff, Kenvue, by approximately 80%. This business separation strategy underscores the company’s intention to sharpen its focus on pharmaceutical and medtech endeavors. GSK also successfully detached its consumer group, Haleon, in July 2022. Meanwhile, Pfizer merged its Upjohn unit with Mylan to establish Viatris in November 2020.
As Novartis ushers in a new chapter with the Sandoz spinoff, this unconventional stock distribution approach marks a noteworthy milestone in the evolving landscape of pharmaceutical strategies.
