Novartis AG (NYSE:NVS) has announced that its shareholders have approved the proposed 100% spin-off of its generic arm, Sandoz. This move follows Novartis’ strategic decision to separate Sandoz into a new publicly traded standalone company, as announced in 2022.
Sandoz faced challenges in the generic pharmaceutical industry, including industry-wide price competition and buyer consolidation, leading to significant declines in sales and profits, particularly in the United States.
The spin-off is scheduled to take place on October 4, 2023, and will be carried out through the distribution of a dividend-in-kind of Sandoz shares to Novartis shareholders, as well as Sandoz American Depositary Receipts (ADR) to Novartis ADR holders. Novartis shareholders and ADR holders will receive one Sandoz share for every five Novartis shares and one Sandoz ADR for every five Novartis ADRs.
The separation is anticipated to have no tax implications for both Swiss tax and U.S. federal income tax matters. Sandoz is scheduled to be listed on the SIX Swiss Exchange and will also have an ADR program available in the United States. However, the ADRs will not be listed on a U.S. national securities exchange.
In addition to approving the spin-off, Novartis shareholders also approved an ordinary capital decrease of Novartis AG’s share capital in the amount of the share capital of Sandoz.
Sandoz, which reported sales of $9.1 billion in 2022, has a leading global portfolio of eight marketed biosimilars. The positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency for a biosimilar of trastuzumab, developed by EirGenix, Inc., was also announced.
Novartis is streamlining its pharmaceuticals portfolio and focusing on becoming a pure-play pharmaceutical company. This includes divesting its “front of eye” ophthalmology assets to Bausch + Lomb (BLCO) and acquiring Chinook Therapeutics to strengthen its renal pipeline.
Shares of Novartis have risen 13.1% year-to-date, outperforming the industry’s 8.1% growth. These strategic moves are expected to pave the way for solid growth for NVS in the future.
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