Novartis' Sandoz, not 'ashamed' of generics focus, is aiming for Teva's top spot: CEO

Several major generics players have been shifting focus onto innovative medicines, but don’t expect that from Sandoz, the Novartis subsidiary’s newly minted CEO said. In fact, it is coming after Teva’s leading spot in the copycat drug market.

“Sandoz should be able to concentrate on the generics business. We do not need to be ashamed of that, on the contrary, we have every reason to be proud of our work,” Richard Saynor, Sandoz’s CEO since mid-July, said in an interview with the Neue Zürcher Zeitung.

“Our job is to gain market leadership—with as broad a portfolio as possible and, whenever possible, as the first provider after a patent expiration,” he told the German newspaper, according to a Google translated version of the report.

That’s the answer Saynor has come up with after he “dealt intensively with the question of what the company should stand for and what it should not do,” he said.

To become the absolute leader in the copycat drug market, Sandoz will need to beat Teva, which both grew a lot bigger and suffered miserably due to its 2016 Actavis buyout. By 2018’s numbers, Sandoz isn’t so far behind.

Last year, Teva’s generics sales totaled $9.67 billion, excluding its innovative drug franchise that covers migraine drug Ajovy and off-patent multiple sclerosis therapy Copaxone, among others. During the same period, total Sandoz sales amounted to $9.86 billion, though that figure includes some contract manufacturing revenue.

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But Sandoz last year reached a deal with India’s Aurobindo Pharma to offload some 300 U.S. generic oral solids and its dermatology business. That selloff recently hit a U.S. antitrust roadblock, which both companies are working with the Federal Trade Commission to resolve. Those products sold about $600 million in the first half of 2018, and by Aurobindo’s estimate, they could gin up $900 million in sales for the first 12 months after the deal closes.

Once it wraps that deal, Sandoz “will have a much more specialized business in America,” Saynor said. “It focuses mainly on ophthalmic drugs, injectables and biosimilars,” in which the unit has “a good market position.”

Focusing on biosimilars and hard-to-copy products is the strategy Sandoz has resorted to amid growing pricing pressure in the U.S. generics market, but Saynor admitted that the country’s adoption of biosimilars has been slower than expected.

Still, biologics are proving to be the growth driver of Sandoz’s business. In the third quarter, biosimilars sales jumped 27%, helping Sandoz’s total haul increase 3% year over year to $2.48 billion. As a result, Novartis dialed up Sandoz’s full-year outlook to low single-digit growth.

Apart from organic growth, Saynor also didn’t rule out the possibility for acquisitions, as long as the target “suits our strategy, allows the creation of added value and has the desired size,” he said.

“In Europe, it would make little sense to acquire a large provider, because we are already No. 1 there,” he said. “There have been many acquisitions in emerging markets, but the new owners are often struggling. In these markets you have to be very choosy.”

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Saynor recently engineered a €400 million ($442 million) deal to buy Aspen Pharmacare’s Japanese operations, which will bring in about 20 off-patent drugs primarily in anesthetics and specialty brands.

As for the U.S., “the number of buying opportunities for Sandoz seems rather limited,” given the unit’s renewed focus after Aurobindo, he added.

Novartis CEO Vas Narasimhan has touted Sandoz’s goal of becoming the leader in the copycat drug market for some time now as the Swiss pharma works to turn Sandoz into an autonomous unit within the group.

Under Saynor, to focus on knockoff drugs, Sandoz in October exited a prescription smartphone app co-promotion deal with Pear Therapeutics, returning FDA-approved digital therapeutics reSET and reSET-O, which help patients deal with substance or opioid abuse.

Saynor labeled the Pear pact as an example where Sandoz “lost some focus on its primary purpose” by trying to be “a hybrid between a generic company and a provider of innovative medicines.”

“This confused the organization,” he said. “Novartis is a major innovator in the pharmaceutical industry itself and does not need a daughter who follows the same approach.”

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That comment puts into question another recent Sandoz deal sealed during the short-term watch of Francesco Balestrieri, who was the transitional chief before Saynor’s appointment.

In April, Sandoz licensed key European market rights to Shionogi’s opioid-induced constipation drug Symproic, a branded innovative drug sold as Rizmoic in Europe. At that time, Balestrieri framed the deal as major step forward for Sandoz’s goal of “focusing increasingly on differentiated, value-added therapeutics.”

The sudden departure of now-former Sandoz CEO Richard Francis in March and all the “autonomy” talk have fueled the speculation that a spinoff could be near. But to hear from Saynor, who had previously worked for Sandoz between 2005 and 2010, having a unit producing cheaper generics under the same roof with expensive new medicines “certainly does not hurt.”

“I also feel that in the top management of the group, the name and the history of Sandoz still provoke great pride,” he told the Neue Zürcher Zeitung. “There is a strong intellectual and emotional connection.”