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Novartis, staring down tough market for M&A, leans toward $25B Sandoz spinoff: Bloomberg

July 10, 2022
Life sciences

For months, the industry has waited patiently as Novartis mulls the fate of its $25 billion generics arm. Now, it appears a spinoff could be in the cards.

Staring down a tough market for a potential private equity sale, Novartis is leaning toward spinning off its Sandoz division, Bloomberg reports, citing people close to the matter.

The generic unit’s future has been unclear ever since Novartis kicked off a strategic review of Sandoz in the fall of 2021. At the time, Novartis said all options were on the table, including retaining the business and a separation. Meanwhile, the Swiss pharma said it planned to offer an update on the review by the end of 2022.

The company continues to explore its options and hasn’t made a final decision, Bloomberg’s sources pointed out. The strategic review is ongoing, and Novartis still plans to provide an update on the review by year-end, a company spokesperson told Bloomberg.

The potential spinoff comes as inflation, the war in Ukraine and volatile stock markets hamper banks’ willingness to dole out cash for big M&A, Bloomberg said. It flagged Walgreens Boots Alliance’s scuppered 5 billion pound sterling sale of its U.K. drugstore chain as one example of the tough market’s effect in Europe.

Since the unveiling of Novartis’ strategic review, meanwhile, the list of potential Sandoz suitors has grown. Back in February, Bloomberg broke the news that investor groups Blackstone and Carlyle were considering joining forces on a massive $25 billion bid for the company. At the same time, Advent International, Hellman & Friedman and KKR & Co. were said to be sizing up their own approaches, the publication said.

In November, meanwhile, German newspaper Handelsblatt reported that Swedish-based investment group EQT and Germany’s Struengmann family were weighing a joint move to buy Sandoz for $21.6 billion. Germany’s Struengmann twins Thomas and Andreas are no strangers to Novartis, having sold it their generics maker Hexal back in 2005. They’re also primary investors in Pfizer’s COVID-19 vaccine partner BioNTech.

Even with its fate in limbo, Sandoz has bulked up with at least one smaller deal this year. In March, the generics unit widened its foothold in respiratory medicine and complex generics with the acquisition of British medical and drug delivery device developer Coalesce Product Development.

Sandoz already has a sizable stake in the respiratory arena, with an existing portfolio of six commercial products “and nearly twice as many more in the pipeline,” Sandoz said at the time. The company noted that, alongside the Coalesce deal, it planned to “actively explore further opportunities both in-house and externally.”

Meanwhile, Novartis this week said it would lay off 8,000 employees out of its global workforce of 108,000. The company is joining its global pharmaceutical and oncology units and aiming for a “simpler” structure, a spokesperson said.

By Fraiser Kansteiner


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