Novartis plans more ‘autonomy’ for Sandoz. But don't confuse that with a spinoff: report

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Novartis is pursuing a strategy to boost its focus on developing innovative medicines, but CEO Vas Narasimhan also says he remains committed to the company's generics unit, Sandoz. (Wikimedia Commons/Andrew/Flickr)

Just one day after Novartis laid out plans for its long-expected spinoff of its eye unit Alcon, the Swiss pharma giant found itself fending off a rumor that it also intends to wave goodbye to its generics business, Sandoz.

The rumor started when a Swiss newspaper reported comments that Novartis CEO Vas Narasimhan made during a recent investor event in London. Narasimhan reportedly said the company is transforming Sandoz into an independent unit and reviewing “all strategic options” for it. The newspaper interpreted that as a planned “split off,” according to Reuters.

Sandoz did not immediately reply to a request for comment from FiercePharma. A spokesperson told Reuters that Narasimhan talked about giving Sandoz more independence to navigate the challenging generics business—but that there are no plans for a spinoff.

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“The whole goal is to try to make Sandoz as agile as possible, to compete in that environment, to give it the autonomy to be as agile as possible,” the spokesperson said, according to Reuters.

RELATED: Novartis' Sandoz business is broken, CEO says, but he's focused on fixing it

Rumors aside, there’s little doubt Novartis needs some sort of strategy change for Sandoz. Narasimhan said as much in May, when he admitted to investors that Sandoz is performing well in Europe, particularly in biosimilars and branded generics, but that the company has failed to find an effective strategy for dealing with plummeting prices on generic pills in the U.S. and slow uptake of biosimilars.

In September, Novartis found a partial solution to Sandoz’s woes, offloading about 300 generic drugs it sells in the U.S. to India’s Aurobindo Pharma for $1 billion. Aurobindo also picked up Novartis’ dermatology development center and two U.S. manufacturing plants as part of the deal.

But Novartis is still struggling to find a sustainable growth path for Sandoz. In the third quarter of this year, Sandoz’s sales fell 6% year over year to $2.4 billion. The unit suffered 8 percentage points of price erosion that wiped out its volume growth of 4 percentage points, Novartis reported (PDF).

During a conference call with analysts after the earnings report, Narasimhan said that the plan for Sandoz is “about executing a strategy of transformation and shifting the focus to complex generics and biosimilars.”

RELATED: AbbVie inks yet another Humira biosim deal—this time with Novartis—as EU launches near

Still, Sandoz CEO Richard Francis admitted Sandoz is facing plenty of challenges in the European market for biosimilars, which is widely expected to be among the unit’s biggest growth opportunities. The company’s global biosimilar sales rose 22% during the quarter, driven largely by European sales of Rituxan copycat Rixathon to treat cancer and Erelzi, its version of Enbrel for rheumatoid arthritis and other inflammatory diseases.

But makers of the branded versions of those drugs are pushing back on price, Francis admitted. “That gives some variability,” he said.

And earlier this month, Sandoz had to abandon its plans to market biosimilar Rituxan in the U.S.

The FDA initially rejected the drug in May. Sandoz tried again, but when the FDA came back to the company with additional questions, it deep-sixed its plans for a U.S. version of the biosimilar.

Novartis is optimistic about its recent launch of Hyrimoz, a biosimilar version of the world’s top-selling drug, AbbVie’s Humira, to treat inflammatory diseases like rheumatoid arthritis and psoriasis. But there will be plenty of hurdles there as well. The Sandoz product is already competing with a Humira biosimilar from Amgen in Europe, where about 10 entries are expected to eventually be vying for piece of the market.

And Sandoz had to make one big concession to get Hyrimoz on the market in Europe: Under an agreement it struck with AbbVie in October, it can’t launch its biosimilar in the U.S. until 2023.