Novartis To Market Rizmoic Through Sandoz, Spins Off Alcon

Novartis AG’s (NYSE:NVS) ) generic arm, Sandoz, signed an agreement with Japanese pharmaceutical company, Shionogi & Co Ltd, for commercialization of Rizmoic in the key European markets of Germany, the U.K. and the Netherlands, plus right of first refusal for certain other European markets.

Rizmoic, a once-daily 200-microgram oral tablet discovered and developed by Shionogi, was approved in the EU on Feb 22, 2019. The drug is approved to treat opioid induced constipation (OIC) in adult patients previously treated with a laxative.

We note that Sandoz has a strong presence in the European market for anti-pain therapeutics.

Per the agreement, Sandoz will be responsible for commercializing Rizmoic in Germany, the U.K. and the Netherlands, while Shionogi will manufacture and develop the drug.

We note that Sandoz is currently facing competitive pressure in the United States. In September 2018, Novartis agreed to sell selected portions of its Sandoz U.S. portfolio, specifically the Sandoz U.S. dermatology business and the U.S. oral solids portfolio. The divestiture is in accordance with Sandoz’s strategy of focusing on complex generics, value-added medicines and biosimilars to achieve sustainable and profitable growth in the United States in the long run. The transaction will be completed in 2019.

Earlier, Novartis completed the spin-off of the eye care devices business, Alcon, through a dividend-in-kind distribution to holders of Novartis shares and ADRs (American Depositary Receipts), with each holder receiving 1 Alcon share for every 5 Novartis shares or ADRs held on Apr 8, 2019, at the close of business. Shares of Alcon have commenced trading under the symbol "ALC" on the SIX Swiss Exchange (SIX).

We remind investors that Novartis decided to spin-off its ophthalmology unit to better focus on its legacy pharma business, with a financial profile closer to its pharmaceutical industry peers. The company also sold its stake in consumer healthcare joint venture to GlaxoSmithKline (NYSE:GSK) for $13 billion.

Shares of the company have gained 14.9% in the past six months compared with the industry's 5.9% growth.

Last year was a transformative one for Novartis, as it restructured its business to become a core drug-focused company, powered by data and digital technologies. The company acquired U.S.-based clinical-stage gene-therapy company, AveXis, Inc in 2018. Novartis also acquired Endocyte to expand expertise in radiopharmaceuticals. We expect more acquisitions in the coming months, as the company looks to further restructure its business.

Novartis intends to raise its annual dividend from CHF 2.85 per share. The company also plans to complete its previously announced share buyback of $5 billion in 2019.

Zacks Rank & Stocks to Consider

Novartis currently carries a Zacks Rank #5 (Strong Sell).

A couple of better-ranked stocks in the same space are Johnson & Johnson (NYSE:JNJ) and Bayer (DE:BAYGN) AG (OTC:BAYRY) . Both stocks carry a Zacks Rank #2 (Buy). You can see see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Johnson & Johnson’s earnings per share estimates have increased from $9.20 to $9.21 for 2020 in the past 60 days. The company delivered a positive earnings surprise in all the trailing four quarters at an average of 1.61%.

Bayer’s earnings per share estimates have increased from $1.92 to $1.95 for 2019 over the past 60 days.

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