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Novartis’s 3Q16 Estimates: How Has Sandoz Performed?

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Sandoz, the generics segment

Sandoz, Novartis’s (NVS) generics arm, develops, manufactures, distributes, and sells prescription drugs that aren’t protected by patents—both pharmaceuticals and biotechnological active substances. Sandoz contributes nearly 20% to NVS’s total revenue.

Sandoz is the number two generic medicines provider worldwide, and it’s number one in differentiated generics, which includes products that are difficult to develop and manufacture. 

Sandoz’s revenue is expected to rise in 3Q16 following increased demand for biopharmaceuticals, including biosimilars and Glatopa, and continued strong growth in dermatology products.

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Biopharmaceuticals

The segment’s global sales of biopharmaceuticals such as biosimilars, biopharmaceutical contract manufacturing, and Glatopa are expected to rise in 3Q16 following increased demand for drugs.

Glatopa is the first generic version of Teva Pharmaceutical’s (TEVA) Copaxone 20mg. It’s used for the treatment of relapsing forms of multiple sclerosis.

Sandoz has continued to strengthen its global market position in biosimilars, and its growth is expected to be driven by the three in-market biosimilars Omnitrope, Binocrit, and Zarzio.

Anti-infective franchise and retail generics

The anti-infective franchise restored its production capacities in 2014. The anti-infective franchise is expected to report lower revenues due to lower sales and a weak flu season in 3Q16.

Investors can consider ETFs such as the iShares Global Health Care ETF (IXJ), which holds 5.0% in Novartis, in order to divest risk. IXJ also holds 2.4% of its total assets in Gilead Sciences (GILD) and 3.0% of its total assets in Amgen (AMGN).

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