It has been a busy year for Sandoz. Fresh from its spinoff from former parent company Novartis in October 2023, the firm has moved forward as a standalone business, taking in management reshuffles, restructuring initiatives and a new company headquarters in Basel – all alongside the daily activities that come with being the world’s largest generics and biosimilars company.
At this year’s Global Generics & Biosimilars Awards, the firm walked away with the awards for Company of the Year and Biosimilar Initiative of the Year, with CEO Richard Saynor also picking up the award for Leader Of The Year for the third year running.
But for the Sandoz chief executive, the work is far from done.
“This was always going to be a multi-year journey,” Saynor tells Generics Bulletin in an exclusive interview. “Sandoz was never a standalone company within Novartis. We’ve shared IT systems – these things are complicated, take time. We’re still getting supply of a number of products from Novartis for many years while we continue to build our own capacity. So this is a multi-year journey really to move from being a division of a large company to being a fully independent business.“
“It’s not something that happens overnight, and I know it’s a cliché, but in a sense we’re flying the plane and building the plane at the same time. And I think that really is the bulk of it, probably for another couple of years.”
Having said that, Saynor is also clearly proud of Sandoz’s achievements so far as a standalone company. “It’s been an incredible year, 14 months since we separated,” he recalls. “First and foremost, we did what we said we would do when we had the capital markets days back in New York and in London; we set out a plan about our growth, our margin delivery, our pipeline – and I’m proud that actually we’ve done everything and a little bit more than the things that we said at that time. So I think that’s what we focused on and clearly we’ve been rewarded by doing that in terms of our share price gain.”
“The inherent value of what we’re delivering is being recognized by our shareholders,” Saynor reflected. “I’m very proud about that.” And “then when you look at our multiple compared to – I mean, it’s always difficult to look at peers – but I think from some of the obvious other competitors we have now a stronger multiple.”
“We are choosing now to make the investment choices that we want to make that are right for the business, rather than as a compromise as a division to a parent.”
Midway through this year, Sandoz announced management changes including a new chief commercial officer and head of Europe, at the same time as revealing details of a restructuring plan that would “reduce layers across the organization and simplify our processes” to drive efficiencies. This came after the firm earlier in the year named a new chief financial officer, Remco Steenbergen, to take over from Colin Bond in July.
Asked whether these changes grew out of the spinoff process or were simply part of the day-to-day business for Sandoz, Saynor said it was “a bit of both.”
“Colin, my CFO, did a phenomenal job helping me spin the company, but obviously we always knew he was going to retire in the early part of this year. I’m delighted that Remco has joined us, and I think he brings a lot of experience certainly to the capital markets and running high-intensity businesses.”
But across the broader business, he observed, “when you’re a division of a big parent, invariably you mirror some of the systems and processes of their parents and a lot of the changes that we’re going through is becoming a pure generics company, and we all know what that’s like. It’s about execution, focus. This is a much faster business than an innovative pharma business.”
Sandoz’s strategy was also about “being thoughtful about where we want to invest – we’re investing billions of dollars in terms of building new facilities, expanding our development capabilities and growing our business,” he said. “So we are choosing now to make the investment choices that we want to make that are right for the business, rather than as a compromise as a division to a parent.”
There was also an element of streamlining to reduce unnecessary complication that was still hanging over from Novartis’s ownership, Saynor indicated. “Coming out of a bigger parent, there are systems and processes… I mean, we have something like 1,500 shared software platforms with the parent company. I don’t need 1,500 software platforms to run a generics company.”
“So clearly there’s a process of changing those things, making sure we have the right infrastructure to do that. So some areas we’ve cut back, other areas we’ve increased our investment, and that’s typical to any company.”
“If you’re an oncologist, you don’t wake up on a Monday morning and think, well, today I’m going to use a biologic and tomorrow I’m going to use a small molecule.”
In recent quarters, one recurring feature of Sandoz’s results has been the increasingly prominent role played by biosimilars in driving the company’s turnover growth, despite small-molecule generics still representing more than two-thirds of sales.
Recent biosimilar launches have included European rivals to Tysabri (natalizumab) and Stelara (ustekinumab), while third-quarter biosimilars growth of 37% also reflected uptake for Sandoz’s Hyrimoz (adalimumab) rival to Humira in the US, as well as the firm’s acquisition of Cimerli (ranibizumab) in the US from Coherus. And Sandoz is also seeing “continued strong demand” for its first ever biosimilar, Omnitrope (somatropin).
As a result, Sandoz recently raised its full-year guidance for 2024, predicting high-single-digit turnover growth in constant currencies – up from the previous forecast of mid-to-high-single-digit growth – and a core EBITDA margin of around 20%.
“I’m delighted with the launches that we’ve had and we’ve got a number of launches now over the next year or 18 months or so,” Saynor commented. “And yes, biosimilars are important, but also we are still a very broad-based generic company. We would still look to cover about 80% of all the generics coming off patent in Europe and an increasing proportion in the US as well as expanding our pipeline in biosimilars.”
In terms of the coexistence of the firm’s biosimilars and small-molecule generics business, “really I see that very synergistically,” the CEO observed. “I know we sort of artificially a little bit talk about the two halves of the business, but if you’re an oncologist, you don’t wake up on a Monday morning and think, well, today I’m going to use a biologic and tomorrow I’m going to use a small molecule. You think about the patient.”
“And so we think about the business in a very similar lens. Clearly there are different skill sets, different times, different investment curves, but we still think it’s important to be a broad-based generics and biosimilars company.”
Meanwhile, in terms of geographies “I think we have a good footprint. I think we’re in over 120 markets in one form or another. So I think we have strong global reach.” And “we’ve built scale where we believe we can win. So if you look at our scale in Australia, Canada, Japan, Brazil, South Africa, Turkey, all of those, we have scale and increasingly we’re bringing biosimilars to those markets and it’s a huge growth opportunity. So I think it’s a nice balance. It fits well with our strategy and particularly our ability to leverage and bring biosimilars to those markets presents a huge opportunity.”
Investing In European Manufacturing
Turning to Sandoz’s manufacturing base – into which the firm has invested significantly in recent years, whether in its antibiotics plant in Kundl, Austria, or its major new biologics facility in Lendava, Slovenia – Saynor explained why these assets were key for the company.
“In Kundl, we’ve now increased our capacity – I think we have an installed capacity of well over 200 million packs,” he noted. “So more than sufficient to meet certainly the European demand and some of the global demand. So I’m pleased how that’s evolved. And we will continue to invest. I mean we’re proud that we’re pretty much the only remaining betalactam and cephalosporin manufacturer left in the western world, not just Europe. I think that gives us a unique access to government and payers that a lot of our competition doesn’t have.”
Meanwhile, in biologics the firm is still building up its own capabilities as it continues to be supplied from its former parent company. “We have a long-term supply agreement with Novartis that isn’t a CDMO relationship, it’s a cost-plus relationship,” Saynor explained. “So it means we have a good access to cost of goods.” Meanwhile, the Slovenian biologics capabilities “are well on track in terms of the physical building of the sites; obviously then we need to validate them and then start a tech-transfer process,” with Saynor again emphasizing that “this was always going to be a multi-year journey.”
Then “in parallel, further out, we’re partnering with Just-Evotec. That gives us access to continuous manufacturing, which will allow us to have a step change, I mean a significant step change in terms of cost and efficiency of manufacturing. So really thinking medium and long-term, how we can really open up markets with a transformative cost of goods potentially on some of our biosimilar products in the future.”
“So really a multi-pronged strategy,” Saynor summarized. “I think many people understand in this industry, you’re very rarely a sole supplier to a market. Frequently competitors come in and out of stock, batches fail and biologics you generally have to forecast much further out than small molecules. So building some flexibility in your network, whether that’s both within your own installed capacity or through partners is important.”
Asked whether there would be any rationalization of manufacturing for Sandoz as part of its ongoing streamlining, the CEO said the firm was “pretty much happy with the footprint. I mean we did a lot of work over the last three or four years before we spun the company. We reduced our footprint quite significantly. So I think we now have a solid footprint, broadly the right scale in Europe. And now we’re investing heavily again in Europe for biologics capacity or expanding the antibiotics capacity. So I think, plus or minus, we’re pretty much there.”
M&A Not On The Cards
Asked whether M&A was a significant part of Sandoz’s strategy going forward – and whether attractive opportunities existed for the firm – Saynor’s reply was straightforward: “Not really.”
“I think we’ve always said, look, we’re at scale. We have an unrivaled pipeline. We’re still halfway through the simplification and separation of our business from a big parent. I don’t see any significant M&A opportunities that will be appropriate for Sandoz.”
“We have global scale, we have probably the best pipeline in the industry. We’re growing. So everything in a sense is in our own hands to execute. And I think that should be our focus.”
In terms of key upcoming product opportunities, “I think we’re fortunate,” he laid out. “Clearly things like denosumab, aflibercept in Europe, ustekinumab, momentum we’re building on adalimumab are pretty much all now in place to execute.”
“So I think really the next couple of years is about executing on what we said we would do: being disciplined, focusing on growing the business, focusing on expanding the margin, focusing on leveraging the launches that we’ve got, expanding the pipeline both in-house and with strategic partners, and keep doing what we’ve done.”
“I think certainly the last 14 months has shown that if you do what you say you do, you get rewarded. And clearly my focus over the next few years is to continue to do what we’re doing and in a sense, be as predictable and as consistent as possible.”
In the next instalment of this three-part interview, Saynor delves into more details on Sandoz’s generics and biosimilars businesses, before looking ahead to the opportunities offered by GLP-1s, ADCs and beyond.
