As generics market stalls, Novartis said to weigh sale of copycat skin medications

Sandoz manufacturing
Sandoz snapped up Fougera in a $1.5 billion deal in 2012 partly to gain technical expertise in producing skin drugs.

Pick up one, cast off another. Just as Novartis agreed to buy a radiotherapy company, it's reportedly considering a selloff of its generic dermatology business, a once-hot field that's been hit by pressure on copycat drug prices. And some big-name bidders could come to the table.

Novartis is running the numbers on the potential deal, which could be worth up to $1.5 billion, Bloomberg reports. The sale would include products and some manufacturing facilities, the news service said, citing anonymous sources.

Novartis' Sandoz unit became the largest seller of generic dermatology meds with its 2012 acquisition of Fougera Pharmaceuticals in a $1.5 billion deal, and it had big plans for growth in the field. The business could attract bids from skin drug specialists such as Nestlé—currently on the list of potential buyers for Pfizer or Merck KGaA's consumer health assets—and Almirall.

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When Sandoz jumped to the head of the generic dermatology pack, generic skin medications were seen as a big growth area; because many of the drugs are topical, rather than oral, they require specialized manufacturing, which theoretically keeps new competition at bay.

And Fougera delivered that manufacturing capability, Sandoz' then-CEO Jeff George said at the time. The buyout brought "valuable technical capabilities," particularly in production of semi-solid meds such as creams and ointments, he said. Sandoz planned to expand Fougera's business to take advantage of a growing number of branded dermatology drugs going off patent, and to extend its reach internationally. 

That was five years ago. Novartis has changed since then, and it's changing further, socking money into growing its oncology business and taking a close look at its other businesses. The company announced Monday that it would buy Advanced Acclerator Applications, a company that produces radioactive tracers and therapeutics for diagnosing and treating cancer. It has a pipeline med up for FDA approval early next year.

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The generics market has also changed, with fields that once promised pricing premiums no longer able to deliver. Sandoz has said it's expecting biosimilar revenue to kick in to make up for shrinkage in small-molecule generics. And it continues to invest in "complex generics," which include injectables, creams and ointments.

Last year, Novartis was said to be weighing a deal for the Spanish generics maker Amneal, which would have beefed up Sandoz' pipeline with meds that included injectables and skin drugs. That deal didn't come to fruition, though, and last month, Impax Laboratories jumped in to snag Amneal for $6.4 billion.