Sandoz Group Navigates Challenges with Strong Q1 Performance, Reaffirms 2025 Guidance

Sandoz Group, the generics and biosimilars division of Novartis, reported Q1 2025 net sales of $2.48 billion, up 3% in constant currencies, confirming its full-year guidance of mid-single-digit sales growth and a core EBITDA margin of around 21%. Despite headwinds like price erosion and regulatory complexities, Sandoz’s focus on high-margin biosimilars and operational efficiency continues to drive resilience.

A Resilient Start to 2025

The Q1 results reflect Sandoz’s strategic shift toward biosimilars, which now account for 27% of sales ($671 million), up from 25% a year earlier. Biosimilars grew 11% in constant currencies, driven by launches like Hyrimoz (adalimumab) in Europe and Omnitrope (somatropin) in international markets. Generics, representing 73% of sales, grew modestly (+2% in cc), buoyed by the North American launch of paclitaxel and European market penetration.

Regional Dynamics: Europe Shines, North America Struggles

• Europe: Sales rose 7% in cc, fueled by biosimilars and generics. Hyrimoz and Pyzchiva (natalizumab) contributed significantly.
• North America: Sales grew just 1% in cc, hampered by the withdrawal of Cimerli (etelcalcetide). Excluding Cimerli, biosimilar sales grew 3%, while generics benefited from the paclitaxel launch.
• International Markets: Sales fell 2% in cc overall, but rose 2% when excluding the divested China business. Omnitrope and other biosimilars offset weakness in some regions.

Drivers of Growth and Profitability

1. Biosimilar Pipeline: Sandoz plans four major launches in 2025:
2. Wyost/Jubbonti (denosumab) in Europe and the U.S.
3. Tyruko (natalizumab) in the U.S.

4. Afqlir (aflibercept) in Europe.
   These launches aim to push biosimilars to 30% of sales by 2028, boosting margins as they command higher prices than generics.

5. Margin Expansion: The 21% EBITDA target hinges on:

6. A sales mix shift toward biosimilars.
7. Cost efficiencies from simplifying its supply chain and reducing external suppliers.

8. Volume growth (+6% contribution to Q1 sales) offsetting price erosion (-3%).

9. Tariff Mitigation: The U.S. imposed a 20% tariff on Chinese imports in March 2025, but Sandoz’s reliance on European and U.S. manufacturing (15 sites, 11 in Europe) limits exposure. U.S. sales account for less than 20% of total revenue.

Challenges and Risks

• Price Erosion: While normalized to low to mid-single digits in 2025, continued pressure in generics remains a drag.
• Regulatory Hurdles: Sandoz paused a Phase III trial for a pembrolizumab biosimilar, citing regulatory alignment efforts. It also sued Amgen for allegedly stifling competition for its Enbrel biosimilar Erelzi.
• Divestments: The China business divestment in 2024 continues to affect international sales comparisons.

Long-Term Outlook: Biosimilars as the Engine

Sandoz has now posted 14 consecutive quarters of top-line growth, a streak underpinned by its biosimilar strategy. By 2028, it aims for mid-single-digit annual sales growth, with biosimilars contributing ≥30% of sales. Management emphasized that this trajectory is achievable through disciplined execution, regulatory advocacy, and cost controls.

Conclusion: A Steady Hand in a Volatile Sector

Sandoz’s Q1 performance reaffirms its ability to navigate a challenging environment. With biosimilars driving high-margin growth and a diversified manufacturing footprint mitigating tariffs, the company is well-positioned to meet its 2025 targets. Key metrics to watch include:
- Biosimilar sales growth: A 10–15% expansion in 2025 would validate its pipeline strength.
- Margin stability: A 21% EBITDA margin in 2025 would reflect successful cost-cutting and mix shifts.
- Regulatory wins: Success in litigation against Amgen could unlock untapped markets.

While risks like generic competition and macroeconomic uncertainty linger, Sandoz’s track record and strategic focus suggest it will remain a consistent performer in the generics and biosimilars space. For investors, this is a story of steady growth in a sector where affordability and innovation are increasingly prized.

Data sources: Sandoz Q1 2025 earnings release, prior quarterly performance reports.