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How Sandoz Performed for Novartis in 3Q16

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Nov. 17 2016, Updated 11:04 a.m. ET

Sandoz, the generics segment

Sandoz, the generics arm of Novartis (NVS), is the number-two generic medicines provider worldwide. It’s number one in differentiated generics, which include products difficult to develop and manufacture. For 3Q16, Sandoz contributed ~20.8% of total revenues at $2.5 billion.

Sandoz reported a fall of 1.0% in 3Q16 revenues at constant exchange rates. The operational growth was driven by a 5.0% rise in volumes, substantially offset by a 6.0% fall due to price erosion.

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Performance of Sandoz products

Revenue drivers for Sandoz are biopharmaceuticals, including biosimilars and Glatopa. Growth was reported across all regions worldwide. For US markets, a 4.0% fall in revenues to $917.0 million was reported for 3Q16.

But the Western European region reported a 3.0% rise in revenues at constant exchange rates to $706.0 million, driven by strong growth in France, Switzerland, the Netherlands, and Italy. Revenues for Central and Eastern Europe rose about 9.0% at constant exchange rates, with revenue of $276.0 million for 3Q15, driven by increased sales in Russia.

Biopharmaceuticals

Global sales for biopharmaceuticals rose 41.0% at constant exchange rates to $262.0 million. The figure included revenues from biosimilars, biopharmaceutical contract manufacturing, and Glatopa. Growth was mainly from three in-market biosimilars—Omnitrope, Binocrit, and Zarzio—and strong performances of Glatopa and Zarxio in US markets. Glatopa is the first generic version of Teva Pharmaceutical’s (TEVA) Copaxone 20 mg (milligram) for the treatment of relapsing forms of multiple sclerosis.

Anti-infective franchise

The anti-infective franchise reported a 2.0% fall in revenues at constant exchange rates to $339.0 million for 3Q16. Sandoz discontinued low-margin products, which led to an overall fall in franchise revenues.

To divest the risk, you can consider ETFs such as the PowerShares International Dividend Achievers ETF (PID), which holds ~1.1% of its total assets in Novartis, 2.4% in GlaxoSmithKline (GSK), and 1.5% in Sanofi (SNY).

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