Moody’s Assigns Baa2 Rating to Sandoz: A Look at the Implications
Sandoz Earns Baa2 Rating from Moody’s
Moody’s Investors Service, the premier bond credit rating business, has assigned a “Baa2” long-term issuer rating to Sandoz, the generics and biosimilars division of Novartis. The outlook for the pharmaceutical company has been set to “stable”. The rating reflects the company’s strong position in the global market as a leading provider of generics and biosimilars, particularly in Europe.
However, the rating also considers the challenges posed by falling prices in the patent-free drug market, uncertainties about the launch and potential revenue of new biosimilars, and potential implementation risks associated with its separation from Novartis.
Moving Forward: The Next 12 to 18 Months
Moody’s anticipates that Sandoz will focus on smoothly separating from Novartis in the next year to a year and a half. During this period, the company is also expected to begin implementing a plan for improving its margins. The stable outlook is based on projections of revenue growth in the low to mid-single-digit percentage range over the next 12 to 18 months. Additionally, Sandoz is expected to improve its margins after hitting a low point in 2023.
Details of the Spin-off
Novartis has confirmed it will spin off Sandoz on October 4, 2023. The company has secured regulatory approvals, including from the SIX Exchange Regulation, for Sandoz’s shares to be listed on the Swiss exchange under the ticker “SDZ”. Sandoz has also arranged external financing of about $3.75 million from various banks, along with a revolving credit facility of $1.25 billion.
In the United States, Novartis plans to offer an American Depositary Receipts (ADR) program for Sandoz. The spin-off will be finalized by issuing a dividend in kind by Novartis, which is projected to occur on October 4, 2023. Current Novartis shareholders will receive one Sandoz share for every five Novartis shares they hold.
Novartis Scores Success in Cancer Study
Alongside the upcoming spin-off of Sandoz, Novartis has also reported a significant achievement in a cancer study with its radioligand therapy, Lutathera. The therapy met its goals in a Phase III study treating patients with tumors in the digestive tract. The treatment demonstrated a significant improvement in survival rates for patients suffering from specific neuroendocrine tumors of Grades 2 and 3, compared to using high-dose long-acting octreotide alone. The results of the study will be presented at an upcoming medical conference and will be discussed with regulatory authorities.
The developments surrounding Sandoz and Novartis demonstrate the dynamic and evolving nature of the pharmaceutical industry. As Sandoz continues to navigate its spin-off and Novartis makes strides in cancer research, these companies continue to shape the global pharmaceutical landscape.
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