Novartis Sells Some Sandoz US Businesses to Aurobindo Pharma
Swiss drugmaker Novartis International AG has entered into
an agreement to sell certain segments of its Sandoz Inc. US portfolio to Indian
pharmaceutical group Aurobindo Pharma Ltd., as the company refocuses its
business to achieve sustainable and profitable growth in the US.
According to the terms of the deal, Aurobindo Pharma will
acquire the dermatology and generic US oral solid businesses of Sandoz US,
Novartis generic arm, for $900 million.
The India-based firm will also get hold of approximately 300
products and other development projects of Sandoz, as well as an additional
$100 million in performance-based payments.
Aurobindo Pharma Managin Director N. Govindarajan said the
deal will position Aurobindo as the second largest dermatology player and the
second biggest generics company in the US by prescriptions.
Additionally, Aurobindo Pharma USA Inc., a unit of Aurobindo
Pharma, will acquire the plants located in Wilson, North Carolina, Hicksville, Melville,
and New York.
Upon closing, around 750 employees and field representatives
of the PharmaDerm-branded dermatology unit are expected to transfer to
Aurobindo.
An exchange filing by the company stated that the
transaction has been done in an all-cash basis, without absorbing any cash or
debt from the purchased businesses. The agreement will be funded through debt
and will be concluded by 2019, following the completion of customary closing
conditions.
After the deal, the Sandoz US portfolio will stay significant,
and will include biosimilars, value-added medicines and complex generics such
as injectables, respiratory, and ophthalmics.
Boosting Sandoz Margins in the US
Novartis had already suggested earlier this year its plans
to sell the Sandoz unit after the segment presented disappointing sales
results.
Portions of the 131-year-old Sandoz unit were put up for
sale after Novartis Chief Executive Vas Narasimham saw how price pressure
weighed on the business in the US.
The sale was no surprise, according to analyst Stefan
Schneider, saying they had assumed a price of 1 times sales for such deal,
which was not the case.
Schneider noted that they realize the pricing pressure in
the US generic markets is greater that they had expected, as revenues in 2017
were at $1.5 billion for this business and 1H18 revenues were only $0.6 billion.
Sandoz Chief Executive Richard Francis said sharpening their
portfolio focus in the US allows them to devote more time and resources toward
their strategy of bringing complex generics, value-added medicines, and
biosimilars to patients in the US.
So far, Sandoz businesses elsewhere remain key parts of Novartis,
according to Naramsimhan.
He is also keeping Sandoz biosimilars business -
less-expensive near copies of complex biological medicines whose patents have
expired – on hopes that growing demand from cash-strapped governments and
insurers looking for ways to curb prices will help Sandoz lift its margins.
Shares of Novartis fell 0.2 percent to CHf79.24, while Aurobindo
Pharma climbed 9.3 percent to ₹759.30 on Thursday.
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Novartis Sells Some Sandoz US Businesses to Aurobindo Pharma
Reviewed by fsmsmart
on
September 06, 2018
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