Investors are increasingly favoring suppliers of cheap drug copies. This also benefits Teva.
Large parts of the Elsässertor office building in Basel are empty. But with Sandoz, a tenant was found at least for one floor.
Gilbert Ghostine, President of Sandoz.
The President was particularly satisfied that important targets announced before the IPO had been achieved. “We delivered what we promised. And that is reflected in the share price. “
On the way to the SMI?
For a newcomer to the stock market, Sandoz has improved significantly. Since last April, the company’s share price has continued to rise to new heights. On Monday it reached another all-time high of 40.50 francs.
Compared to the closing level on the first day of trading a year ago, the price has increased by two thirds. The market capitalization is now more than 17 billion francs, and Sandoz hopes to be promoted to the Swiss Market Index next year and thus into the circle of the twenty most valuable Swiss companies. “We’re keeping our fingers crossed for ourselves,” Ghostine said.
A year ago, almost no one at Sandoz wanted to expect such a dynamic start. Under Novartis’ leadership, the generics business had barely grown for years, and strong pricing pressure in the US had a negative impact on profitability.
The weak performance of direct competitors on the stock exchange, namely the other two international heavyweights Teva Pharmaceuticals and Viatris, also called for caution. However, Teva has also recently shined on the stock market. The Israeli generics provider’s share price has risen 75 percent since the beginning of the year, surpassing even the listing of Sandoz. Teva has also been the most valuable manufacturer of drug copies; its market capitalization is now close to $21 billion.
However, Viatris still does not seem to grow faster. The US group’s market value has grown by just 7 percent to just under $14 billion since the beginning of the year.
The growth forecast was revised up for the second time
Sandoz has already raised business expectations twice this year. This was the case as recently as last week, when the company announced that it expected sales growth in the high single-digit percentage range for this year as a whole. Before that, it was assumed that an increase would be in the mid-to-high single-digit percentage range – also in local currencies.
Investors are indeed welcoming these changes. What may be even more important to investors is how Sandoz will perform in the medium term.
Financial analysts have a lot of confidence in the group in this regard. According to the Bloomberg database, they expect Sandoz to increase sales by an average of 5 percent annually through 2027. For its two competitors Teva and Viatris, which, unlike Sandoz, also offers original provisions as well as copycat products, they expect to grow a little less than 3 percent or even slightly down income.
It still depends on Novartis for production
Sandoz is benefiting from having a growing offer, especially in the so-called biosimilars business. Unlike generics, these copycat products are not based on chemically produced drugs, but on biotechnological drugs. Since their production is linked to higher requirements, there is less competition and price pressure.
However, the Basel-based group still relies heavily on the services of its former parent company and other third-party companies in the production of biosimilars. A large production plant in Slovenia is currently under construction.
Despite all the progress that management has already made in becoming independent, Sandoz is still not in control of all operational activities. In addition, the company inherited cost structures from Novartis that are suitable for a high-margin business with innovative pharmaceutical products, but not suitable for a generic drug manufacturer.
The group has started to make changes in each country, especially in administration and sales. But the negotiations with workers’ representatives are dragging on. Sandoz will be very busy on his own in this regard for a while.
“Proud” Swiss Taxpayer.
India plays a leading role in improving the cost structure, which is expected to allow annual savings of $200 million from next year. Sandoz employs approximately 3,000 of its 20,000 people worldwide across functions in production, development and administration.
In terms of workers, India is just as important as the largest European market, Germany. In Switzerland, including the Swiss subsidiary in Rotkreuz, only 400 people work for Sandoz. The group does not operate laboratories or production facilities in this country. But Ghostine confirmed that people are proud to pay taxes in Switzerland.
2024-11-04 15:57:00
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