Sandoz's Strong Foothold in the Fast-Growing Biosimilar Space Is Impressive

Sandoz is one of the largest off-patent pharmaceutical manufacturers in the world. It generates roughly 70% of its sales from generic drugs, with the remainder from biosimilars. Europe accounts for around half of its total sales. Generics, on average, suffer low- to mid-single-digit price erosion year over year, but we expect Sandoz to offset cost headwinds through more volume and new product launches. The firm also seeks to dedicate roughly $600 million over the next five years to expanding generics capacity, which could help lift margins upon successful integration. We forecast Sandoz to expand its presence in complex generics, such as injectables. They are more difficult and costly to develop/manufacture but face less competition, which helps maintain higher prices and margins compared with simple generics.