Sandoz, the generic drugs subsidiary of Novartis, reported a 70% decline in profits for the first half of 2023, primarily due to substantial legal expenses. The company’s net profit fell to $109 million following a $480 million fine in the United States. This financial impact was anticipated, as Sandoz had previously set aside provisions for the legal costs, according to the half-yearly report released on Wednesday.
Revenue Growth from Biosimilars
Despite the profit drop, Sandoz's turnover increased by 10% in U.S. dollars, reaching $5.76 billion, driven by a 25% rise in revenue from biosimilars, which totaled $1.86 billion. The core generics business showed signs of stabilization, with revenue falling by 1% in local currencies but rising by 4% in U.S. dollars to $3.89 billion. The decline in generics revenue was attributed to disruptions in the penicillin market, which saw a 3% drop in the first quarter.
Restructuring and Other Costs
The report also detailed various costs impacting profitability, including $54 million in restructuring expenses, $47 million for empowerment initiatives, $41 million for production optimization, and $33 million related to software deployment. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) increased by 15% to $1.21 billion, with a margin improvement of around 90 basis points to 20.9%. Basic net profit rose by 18% to $750 million, aligning with analyst forecasts.
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The significant legal costs and restructuring efforts may weigh on Sandoz's stock performance and investor sentiment, particularly in the generic pharmaceuticals sector. Investors will closely monitor how these factors influence future profitability and market share.
Watch for Sandoz's upcoming quarterly earnings report, which will provide further insights into the company's recovery strategies and market performance.
Based on reporting by: swissinfo.ch