Novartis' Sandoz sells Chinese finished drugs plant to CDMO Jiuzhou for $15.1M

Even as Novartis works to separate Sandoz, the Swiss parent hasn’t stopped making deals for the outgoing generics subsidiary. 

Chinese CDMO Jiuzhou Pharmaceutical said it plans to buy a Sandoz finished drugs plant in Zhongshan in southern China for $15.1 million, according to a securities filing (PDF, Chinese) to the Shanghai Stock Exchange.

Sandoz China will peel off the plant, along with its manufacturing assets and staffers, into a new firm that will become a subsidiary of Jiuzhou once the deal is complete, Jiuzhou said. The Chinese firm also plans to refurbish and expand the facility, altogether redirecting $18.5 million of capital to the Sandoz project.

Sandoz has “thoroughly evaluated our production facilities in Zhongshan in order to optimize the overall use of our resources and ensure a sustainable future for the site,” the company said in a statement shared with Fierce Pharma Manufacturing. The Jiuzhou deal is expected to close at the beginning of 2023, Sandoz said.

Jiuzhou is already a contract manufacturer for Novartis, the Chinese firm noted. The deal will further consolidate the company’s position as an important link in Novartis’ global supply chain, Jiuzhou said. Per the agreement, Jiuzhou will continue to supply products for Sandoz from the Zhongshan site for at least 20 months after the deal closes.

Besides Novartis, Jiuzhou also counts Roche, Gilead Sciences and Daiichi Sankyo among its customers. In the first half of 2022, Jiuzhou recorded a 58% revenue surge to 2.95 billion Chinese yuan ($410 million). The company’s current CDMO service offerings include drugs in oncology, diabetes, cardiovascular diseases, antidepressants, antivirals, and central nervous system disorders, according to the company.

Before striking the Sandoz deal, Jiuzhou had intended to build its own factory to produce finished oral solids, with the goal to reach an annual capacity of 450 million tablets. That plan would have taken too long to materialize, Jiuzhou noted in the securities filing.

Instead, it’s using the same capital to purchase an existing enterprise to realize its ambition faster and save money, the company said.

As of June 2022, Jiuzhou has already received 700 CDMO contracts, of which 662 are for phase 1 and phase 2 clinical trials. The company believes those R&D projects bode well for its long-term finished dosage manufacturing business.

As for Sandoz, the generics giant is in the process of spinning off from Novartis so that the Swiss pharma giant can focus on innovative medicines only. Novartis unveiled the plan a month ago, and the separation is expected to be complete in the second half of 2023.

Besides the Chinese plant sale, Novartis is also shuttering its Sandoz oral solid dosage plant in Wilson, North Carolina, which has been supplying products such as tablets and capsules for Canada and the U.S.

In the past few years, Novartis has been working to build Sandoz’s capabilities in biosimilars and complex generics and reduce the company’s reliance on easy-to-make oral solids.

Meanwhile, with the Sandoz spinoff now underway, Novartis has unveiled a new strategy to increase its U.S. presence with a “U.S.-first mindset.” It also aims to be a top three pharma in China, which the company labeled as “a key growth market for the next decade.”

Editor's Note: The story has been updated with a statement from Sandoz.