[Reporter’s View] Novartis's restructuring path similar

to those of other Big Pharmas

Mergers, split-off, purchases, and sales...

 

Global biopharmaceutical companies are busy making transformations to their respective businesses.

 

Among the various transformations being made, the spin-offs and sales of the multinational pharmaceutical companies’ divisions have received particular attention over the past few years.

 

Although such transformations are made under the premise of adopting a "selection and concentration" strategy, the spin-offs and sales draw out various positive and negative responses from society.

 

One thing to note is that this phenomenon is being serially observed in various Novartis, one of the leading Big Pharmas, is currently integrating and spinning off its business at the same time.

 

The company had integrated its Oncology and Pharmaceuticals business units that had been virtually operated like separate entities and announced its decision to separate its generics and biosimilars division, Sandoz.

 

Although Novartis's spin-off of Sandoz was not unexpected, the integration of its other business units may have seemed less usual at first.

 

However, the goal of the company - in conducting the spinoff and merger – has always remained the same.

 

Like the other companies, Novartis is making corporate transformations to “separate innovation with legacy” in its business.

 

Although being in the same company, Novartis’s Pharmaceuticals and Oncology Business Units had been on quite different paths.

 

Its Pharmaceutical Unit focused on sales of relatively low-cost drugs for chronic diseases such as diabetes and respiratory diseases, whereas the Oncology Unit focused on premium-priced oncology drugs like Gleevec.

 

However, at some point, the Pharmaceutical Unit started deviating from its usual path.

 

Including ‘Zolgensma,’ high-priced premium drugs have now become flagship products in non-cancer areas as well.

 

This is why the company decided to integrate the units into one combined unit - Innovative Medicines.

 

Did the company’s separation from Sandoz also affect the company’s internal integration?

 

Of course.

 

With the integration, Novartis is also preparing to create a business unit dedicated to off-patent drugs.

 

Corporate spin-offs cause separation in corporate size and profit structure.

 

In other words, the company is seeking rebirth by dividing its business by concept, into an investment-oriented unit and a legacy unit.

 

Such spin-offs do not impose a financial burden on companies because no claims for stock purchases are made in the process.

 

Since it becomes a legally independent company after the split, the separate company may immediately be listed on the stock market upon spin-off.

 

Most multinational companies conduct split-offs prior to such measures, which then would serve as a stepping stone for improving financial soundness and support sales of companies.

 

For example, Pfizer established three business units (BUs), including its Upjohn Business Unit (BU) that was dedicated to its legacy brands, before initiating the separation of Viatris.

 

Afterward, news of its merger with Mylan had been reported in line with the spin-off.

 

In this sense, Novartis’s separation of Sandoz and integration of its business units are consistent with the steps that had been taken by other multinational companies in the past.