Novartis officially announced the spin-off of Sandoz, and MNC and domestic pharmaceutical companies staged a "break-up"

After waiting for several years, Novartis resolutely decided to spin off Sandoz.

Today, some generic drugs and related businesses have also become "hot potatoes" for domestic and foreign pharmaceutical companies, and the cruel knockout competition has begun

Not doing well? Novartis accelerates spinoff of Sandoz

On August 25, 2022, Novartis announced that it plans to 100% spin off its generic and biosimilar drug division Sandoz (Sandoz) as a newly listed independent operating company, and is expected to complete the spin-off process in the second half of next year

According to the data, Sandoz was established in 1886 and was also a division of Novartis Group in 1996

There have been rumors that Novartis intends to spin off Sandoz

In 2019, former Novartis CEO Richard Francis left his post when Sandoz announced the divestiture; in the same year, industry sources said Novartis planned to sell Sandoz’s US dermatology business and oral generic solid preparation business to Arabindo , but backfired, the $1 billion deal ultimately fell through, and Novartis set out to explore Sandoz's options, from keeping the business to splitting.

And in November 2021, the German newspaper Handelsblatt even reported that Sweden-based EQT and the German Struengmann family were considering a joint move to buy the generic drug company for $21.

Sandoz is a proper generic drug giant, and has become a world leader in generic drug manufacturing

Regarding Novartis's proposed spin-off of Sandoz, many industry insiders said that it is more or less related to factors such as the decline in Sandoz's revenue for consecutive years, the pressure on Novartis' performance, and the divestiture of the generic drug business

Sandoz is also looking to expand its product range in response to declining sales

For Novartis, the future needs to focus on high-growth areas

In 2021, the annual net sales of Novartis innovative drugs will be US$41.

Novartis' latest financial report shows that in the first half of 2022, net sales revenue reached US$25.

And about the reasons for the divestiture and the strategic direction of the company going forward
.
Novartis also disclosed in a statement that in October last year, due to the impact of the epidemic, Sandoz’s sales in the United States fell sharply, making it unable to meet performance expectations.
The company began a strategic review of it and finally decided to Business spun off
.
The split is the latest move by Novartis to shift its strategic focus and will allow the company to focus on developing and manufacturing breakthrough treatments
.

The high-growth field is undoubtedly the direction of innovative drugs, and Sandoz, whose performance has declined, may only be "reluctantly given up" by Novartis
.
After the spin-off, Novartis will focus more on high-value businesses, and Sandoz will be independent
.

MNC, domestic pharmaceutical companies staged "break up"

In recent years, MNCs such as Pfizer, Merck, and AstraZeneca have all divested their generic drug businesses
.
Spin-off is one of the means, which can allow giants to focus more on their core business and maintain sufficient competitive advantage
.

In 2019, Pfizer independently formed its generic drug business into Pfizer Upjohn
.
In November 2020, Pfizer Upjohn and Mylan officially merged into Viatris
.
In 2021, Huizhi's first full financial report year showed that total global revenue was US$17.
9 billion, which was higher than the company's guidance target of US$17.
5 billion
.
Among them, the revenue of branded drugs was $10.
84 billion, the revenue of specialty generic drugs and biosimilars was $1.
34 billion, and the revenue of standard generic drugs was $5.
63 billion
.

In March 2022, industry sources said that Huizhi plans to cut off the biosimilar drug sector
.
India's Biocon Biologics agreed to buy Viatris' biosimilars business for as much as $3.
335 billion
.
The transaction is expected to close in the second half of this year
.
However, in Huizhi's overall business, the biosimilar product portfolio does not account for a large proportion
.
Among them, sales of complex generics and biosimilars in the first three quarters of 2021 were $994 million, accounting for only 7.
4% of its total sales during the same period
.

At the end of 2020, Merck also announced the spin-off of the company's business, and women's health, biosimilars and some mature drugs were spun off into a new company, Ogallon
.
After the divestiture, Ogallon will be responsible for the management of the drug's post-market life cycle, while the corporate R&D pipeline will be handled by Merck
.
In June 2021, Merck announced that the company had completed the spin-off of Ogallon
.

While the generics business is being abandoned, MNC is actively divesting its mature and off-patent drug businesses
.
For example, AstraZeneca has successively divested its blockbuster drugs Crestor (rosuvastatin calcium), Eklira and Duaklir related rights; Daiichi Sankyo transferred to Chongqing Yaoyou the production and sales rights of the production and sales of the preparations in mainland China and the production of the preparations The entire equity of the company; Japan's Takeda's five patent expired drug businesses were eventually acquired by Hessen Pharmaceuticals at a price of US$230 million.
.
.
Affected by domestic pharmaceutical policies and competing products, including Eli Lilly, Roche, Bristol Multinational pharmaceutical giants including M.
Squibb and GSK are also accelerating the divestment of their mature products and related businesses
.

Generic drugs are no longer a sweet treat, especially for low-end, repetitive generic drugs.
Gross profit margins continue to decline, forcing companies to make changes
.

In recent years, domestic pharmaceutical companies are also accelerating the divestiture and cutting off the generic drug business, involving Hengrui, Huadong Medicine, Kelun Pharmaceutical, Sihuan Pharmaceutical and so on
.

In July 2022, Sihuan Pharmaceutical announced that it intends to propose to sell some or all of its generic drugs and other non-core traditional medicine businesses that have failed to meet performance expectations or long-term strategic goals due to the impact of changes in the pharmaceutical industry and policies.
and assets, the sale will be completed gradually in the next 12 to 24 months
.
In 2021, the revenue of Sihuan Pharmaceutical's generic drug business segment will reach 2.
598 billion yuan, accounting for 78.
94% of the total revenue
.
The generic drug business is properly its "cash cow"
.
It can be seen that Sihuan Pharmaceutical decided to discard the worthless generic drug business and assets
.

Kelun Pharmaceutical's 2021 financial report shows that its research and development personnel will have a total of 2,588 research and development personnel in 2021, a decrease of 627, or nearly 20%, compared with the data of 3,215 last year
.
The reduced R&D personnel are mainly responsible for the pharmaceutical research of domestic generic drugs
.

Huadong Medicine's 2019 annual report also revealed that the company has comprehensively adjusted its existing product structure in light of the market competition pattern and project research and development progress.
Erlotinib Tablets, Imatinib Tablets, Bosupronil Tablets Projects in the Anti-tumor Field, Fidaxomycin Tablets and Dalbavancin Freeze-dried Powder Injection Projects in the Super Antibiotic Field, Levopantrope in the Digestive Tract Field Prazole freeze-dried powder injection project
.

Regarding the reason behind it, Huadong Medicine stated that the purpose of phasing out outdated varieties that do not have market competitiveness is to ensure the maximum utilization of R&D resources
.

In 2019, Hengrui also announced that it would suspend the general generic drug project and only make innovative drugs and high-end generic drugs with core value
.
According to the latest financial report of Hengrui Medicine, in the first half of 2022, the revenue was 10.
228 billion yuan, and the net profit attributable to the parent was 2.
119 billion yuan, a year-on-year decrease of 23.
08% and 20.
55% respectively
.
Regarding the decline in performance, Hengrui said that the revenue from centralized procurement of generic drugs fell sharply, the implementation of new medical insurance negotiated prices for a number of innovative drugs, and the impact of the domestic epidemic on the company's product sales, resulting in a significant decline in the company's revenue
.
Based on this, Hengrui has increased its research and development, and the number of listed innovative drugs has increased to 11, which is accelerating the transformation
.
In 2020, Hengrui Medicine's innovative drug revenue accounted for 34%, and the 2021 semi-annual report increased to 39.
15%
.

Under the current situation, many pharmaceutical companies choose to divest, spin off, and sell their generic drug business, while focusing on innovative research and development of drugs such as oncology and immunotherapy, which is not unrelated to the internal and external competitive environment
.
On the other hand, splitting and mergers and acquisitions, or integrating resources, and making a strategic layout that is more in line with their own development will also be an important way for pharmaceutical companies to remain competitive and strong
.

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