Novartis says all options open on Sandoz after private equity interest emerges

The chief executive of Novartis has said the company is keeping an open mind on the future of its generics business Sandoz after it emerged that private equity firms were interested in buying it.

“We do not have a bias to any of the options at the moment,” Vas Narasimhan told reporters on Wednesday. “We are doing the work towards the carve out of financials for the relevant parties and we will see what proposals come back and make an appropriate decision at the appropriate time.”

A review of options, announced in October last year, could include a spin-off, sale or retention of the business, though people with knowledge of the company’s thinking have said the last option is unlikely.

Novartis on Wednesday said it expected sales and profit to grow at a mid-single digit rate in 2022. Fourth-quarter sales were up 4 per cent year on year at constant currencies to $13.2bn. Net profit was $16.3bn, largely because of the divestment of its stake in rival Roche.

Its shares fell 3 per cent in early trading. Citigroup analysts said the quarter was “underwhelming” with key drugs Entresto, Gilenya, and Cosentyx missing consensus estimates for sales.

A number of private equity firms are considering bids of up to $25bn for Sandoz.

Potential suitors include Blackstone and Carlyle, Sweden’s EQT and others. No formal bids have been made. Other pharmaceutical companies have also shown early interest in the unit, Narasimhan has told the FT. A Sandoz insider said discussions about the unit had been continuing for years, and estimated the unit was worth between $20bn and $30bn.

Under Narasimhan’s leadership, Novartis has been switching its focus to higher-grossing, specialist drugs, disposing of other assets, including its Alcon eyecare division in 2019.

Sandoz generated $9.6bn in sales in 2021, about a fifth of the group’s total, Novartis reported on Wednesday, which was a 2 per cent fall compared with the previous year. It expects a further decline in sales in 2022.

Novartis has not produced its own Covid-19 vaccine, helping instead with the manufacture of vaccines made by other pharma groups.

However, it is working on a number of possible coronavirus treatments, including ensovibep, for which it has said it aims to seek expedited approval.

The drug reduced the risk of emergency hospitalisation and death by 78 per cent in a mid-stage trial compared with a placebo. A single infusion of the drug also cut viral loads, a measure of the presence of the virus in a patient’s bloodstream.