Novartis' Sandoz, still working on U.S. slim-down, bets on Japan with Aspen deal

Tokyo japan
Novartis is beefing up its hospital portfolio in Japan through a deal to buy Aspen Pharmacare's local operations for up to €400 million. (Getty Images)

Novartis’ Sandoz has yet to nail down its generics selloff to Aurobindo Pharma, but that hasn't stopped it from pursuing deals outside the troublesome U.S. market.

The Novartis generics unit has penned a deal to buy Aspen Pharmacare subsidiary Aspen Global’s Japanese operations for up to €400 million ($442 million).

“The acquisition of Aspen’s Japanese operations would significantly strengthen our position in this country, a stable but growing generics market,” Sandoz CEO Richard Saynor said in a Monday statement.

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Altogether, about 20 off-patent drugs that raked in ZAR 2.1 billion ($141 million) in revenue for the fiscal year ended in June will land in Sandoz’s pocket once the two wrap up the deal, which is expected in the first half of 2020. These primarily encompass anesthetics and specialty brands, such as topical drug Xylocaine (lidocaine) and organ rejection prevention med Imuran (azathioprine).

According to Aspen’s full-year results released in September, sales of Japan’s anesthetics brands were flat year over year “as volume gains offset pricing decreases.” In a statement, Aspen CEO Stephen Saad said the Japanese operations “do not provide appropriate scale and leverage” for the company.

RELATED: Lupin sells off Japanese operation to tidy up its balance sheet 

But for Sandoz, adding the portfolio will strengthen its existing hospital generic and biosimilar pipeline, and, together with a dedicated sales, marketing and medical organization, the deal could help its reach in Japan's hospital channel, it said.

The South African company will continue to manufacture and supply the active pharmaceutical ingredients, semi-finished and finished dosage drugs to Sandoz for five years, with an option to extend for another two years. Besides the €300 million upfront payment, the rest will come in milestones upon achieving supply criteria and licensing opportunities by the end of 2023, Aspen said Monday.

RELATED: Don't wait up. FTC delays Novartis' Sandoz deal with Aurobindo into 2020: report

Sandoz recently embarked on a multiyear transformation championed by CEO Vas Narasimhan. The goal is to turn the generics unit into an autonomous business within the Swiss drugmaker with an intensified focus on hard-to-copy generics, injectables and biosimilars.

As part of that pivot, Novartis has agreed to sell some under-pressure U.S. generic oral solids and dermatology meds to India’s Aurobindo for up to $1 billion. But closure of that deal has been delayed as the U.S. antitrust regulators are reportedly digging into a lawsuit that involves the Indian drugmaker.

The Aspen transaction won’t have to pass the U.S. Federal Trade Commission, which has recently taken a tough stance on biopharma acquisitions in general. The latest deal only needs antitrust clearance from Japan’s Fair Trade Commission.

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