Novartis’s 4Q16 Estimates: How Could Sandoz Perform?



Sandoz, the generics segment

Sandoz, the generics arm of Novartis (NVS), develops, manufactures, distributes, and sells prescription drugs that are not protected by patents. This segment includes pharmaceuticals and biotechnological active substances.

Sandoz contributes nearly 20% to Novartis’s total revenues. Sandoz is the world’s second-largest generic medicines provider worldwide, and number one in differentiated generics such as products that are difficult to develop and manufacture.

Sandoz’s revenues are expected to increase during 4Q16, following increased demand for biopharmaceuticals, including biosimilars and Glatopa, as well as continued strong growth in dermatology products.

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The global sales of biopharmaceuticals such as biosimilars, biopharmaceutical contract manufacturing, and Glatopa are expected to increase during 4Q16, following increased demand for these drugs.

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

Sandoz continued to strengthen its market position in biosimilars globally, and this 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 weak sales during 4Q16. Also, Sandoz discontinued its low-margin products, which could have a negative impact on the franchise revenues.

Investors can also consider ETFs like the iShares Global Health Care ETF (IXJ), which holds 4.8% in Novartis. IXJ also holds 2.5% of its total assets in Gilead Sciences (GILD), 4.3% of its total assets in Merck & Co. (MRK), and 2.9% of its total assets in Amgen (AMGN).


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