Thursday, 1 February 2024 Reading time : 2 minutes

Sandoz has been trading as a standalone company for about four months. On 4 October 2023, Novartis spun off its generics division and listed it as an independent entity on the Swiss Stock Exchange.

A first assessement turns out to be mixed. Sandoz shares have gained around 19% since the IPO and were trading just below CHF 30.00 at the end of January, valuing the corporate at around CHF 12.9 billion. In the run-up to the IPO, however, analysts had expected the Basel-based company to be valued significantly higher, with estimates ranging from CHF 15 billion to CHF 20 billion, according to the Financial Times. 

Sandoz is one of the world's largest generics and biosimilars companies in terms of sales (2022: CHF 9.1 billion). The drugmaker currently generates the bulk of its revenue from its generics, which are copycats of chemical drugs with the same active ingredient as the original. Of particular interest, however, is Sandoz's position in biosimilars, where it claims to be a market leader.

Biosimilars are copycats of biologics (biopharmaceuticals). Their structure is highly similar to the brand-name biologic, but never exactly the same. The market potential for biosimilars is likely to grow significantly in the coming years as patent protection expires on several blockbuster biopharmaceuticals, according to an analysis by McKinsey. The US consulting firm expects sales of biosimilars to climb to USD 74 billion by 2030, a threefold increase from 2022. The US market, where sales of biosimilars are still significantly lower than in Europe, is of particular interest.

However, the business is challenging. As biosimilars are not 1:1 replicas of the original brand-name drug, they must undergo complex clinical trials to prove their efficacy. According to McKinsey analysts, it takes six to nine years from the first analysis of a patented drug to the launch of a biosimilar. Of course, there is always the risk that a potential follow-on drug could prove a failure.

The success of the Swiss generics company will therefore depend on how it manages to position its biosimilars in the US market over the next few years. In mid-March, when Sandoz publishes its new figures, investors will get the latest insight into the company's performance.

 

Reverse Convertible on Sandoz

If investors expect the share price to move sideways, the Reverse Convertible on Sandoz offers a guaranteed coupon of 7.00% per annum. If the price of the Sandoz shares is below the strike of 90% at expiry, the share is delivered, whereby the purchase price of the share equals 90% of the initial fixing.

7.00% p.a. Reverse Convertible on Sandoz

• 90% strike
• 6 months tenor
• Subscription period until 12. February 2024
• Termsheet

Indicative terms

 

Disclaimer
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Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements.
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