Initial Thoughts on Sandoz

September 25, 2023


On October 4, 2023, Novartis will spin-off Sandoz, its generics and biosimilars business.

Let’s start with the basics.

NVS shareholders will receive 1 share of SDZ for every 5 shares of NVS.

Why is NVS spinning off SDZ?

NVS included all the boilerplate reasons for the spin-off including:

  • Enhanced strategic and management focus.
  • Ability to pursue independent growth strategies
  • More efficient allocation of capital
  • Clearer alignment of incentives with performance objectives
  • Distinct investment thesis.

But if you cut through the jargon, this is Novartis’ final step to complete its transformation from a diversified healthcare company to a pure play innovative health company:

Further, Sandoz, which focuses on generic drugs, has been a drag on growth and margins.

Nonetheless, Sandoz has a high quality business that is attractively positioned.

Last year, it generated $1.9BN of EBITDA and $9.1BN of Revenue.


Sales are diversified by geography:


A key focus for Sandoz is biosimilars.

A biosimilar is a little like a generic version of a biologic drug, but there are differences. For example, unlike a generic drug, a biosimilar is not an exact copy of its brand name drug. However, they are tested and compared to brand name drugs.

Management believes the biosimilar market will grow rapidly:

And that $SDZ is well positioned to benefit from that growth:


Management expects mid-single digit sales growth through 2023. It expects EBITDA margins to increased from ~18.5% to ~25%.