Sandoz's Strategic Momentum in Biosimilars and Generics: A Blueprint for Long-Term Value Creation

The pharmaceutical industry is undergoing a profound transformation, driven by the rise of biosimilars and the relentless pressure to reduce healthcare costs. At the forefront of this shift is Sandoz, a subsidiary of Novartis, which has positioned itself as a leader in the biosimilars and generics space. With a diversified pipeline, strategic vertical integration, and a clear path to margin expansion, Sandoz is crafting a compelling long-term value proposition for investors.

A Diversified Pipeline Fueling Growth

Sandoz's biosimilars segment has emerged as a cornerstone of its growth strategy. In the first half of 2025, biosimilars accounted for 30% of the company's net sales—a milestone reflecting the segment's accelerating traction. This growth is underpinned by a robust pipeline of upcoming launches, including Wyost® and Jubbonti® (interchangeable denosumab biosimilars), Afqlir® (aflibercept), and the anticipated U.S. launch of Tyruko® (natalizumab). These products target high-growth therapeutic areas such as oncology, autoimmune diseases, and ophthalmology, where demand for cost-effective alternatives to branded biologics is surging.

The generics segment, while less dynamic, remains a stable contributor to Sandoz's revenue. In H1 2025, generics accounted for 71% of total net sales, with modest growth driven by successful launches like paclitaxel in North America. However, the segment faces headwinds from pricing erosion and product withdrawals, such as the exit of Cimerli® (ranibizumab). Despite these challenges, Sandoz's generics business provides a critical foundation for reinvestment in its biosimilars ambitions.

Vertical Integration: A Catalyst for Margin Expansion

Sandoz's strategic focus on vertical integration is a key differentiator in a sector where operational efficiency determines profitability. The company's recent acquisition of Just-Evotec Biologics in Toulouse, France, for $300 million, exemplifies this approach. The acquisition grants Sandoz access to a fully automated, high-throughput manufacturing platform, enabling faster development cycles, reduced reliance on third-party suppliers, and tighter cost controls. This move aligns with Sandoz's broader investment in biosimilars production facilities in Slovenia, including a new sterile product center in Brnik and a drug-substance production site in Lendava.

The financial impact of these initiatives is already evident. In Q2 2025, Sandoz reported a 2.5 percentage point increase in core EBITDA margin to 20%, driven by an improved sales mix and operational leverage. The company's guidance for 2025 includes a core EBITDA margin of 21%, with a long-term target of 24–26% by 2028. These metrics underscore the effectiveness of vertical integration in compressing costs and enhancing profitability.

Strategic Positioning in a $300 Billion Market

The global biosimilars market is projected to reach $300 billion over the next decade, driven by patent expiries, regulatory streamlining, and growing patient access to affordable therapies. Sandoz is uniquely positioned to capitalize on this opportunity, with a pipeline of 27 biosimilars targeting $200 billion in originator sales. Key upcoming launches, such as Pyzchiva® (ustekinumab) and Afqlir®, are expected to further diversify revenue streams and reduce dependence on any single product.

Moreover, Sandoz's investments in regulatory alignment—such as streamlining clinical trials for nivolumab and ocrelizumab biosimilars—reflect a proactive approach to navigating evolving standards. By reducing development timelines and costs, the company can accelerate time-to-market, a critical advantage in a competitive landscape where first-mover status often dictates market share.

Risks and Considerations

While Sandoz's strategy is compelling, investors must remain mindful of potential risks. Regulatory delays or litigation setbacks, particularly for Tyruko®, could disrupt launch timelines. Additionally, U.S. trade policy uncertainties, including potential tariffs, may impact margins. However, Sandoz's diversified geographic footprint and strong cash flow generation—$500 million in management free cash flow in Q2 2025—provide a buffer against such headwinds.

Investment Thesis

Sandoz's combination of a high-growth biosimilars pipeline, margin-enhancing vertical integration, and strategic manufacturing investments creates a robust foundation for long-term value creation. The company's ability to navigate regulatory complexity, optimize costs, and scale production efficiently positions it as a leader in a sector poised for sustained expansion. For investors seeking exposure to the biosimilars boom, Sandoz offers a compelling blend of innovation, operational discipline, and financial resilience.

In conclusion, Sandoz's strategic momentum is not merely a function of favorable market conditions but a result of deliberate, well-executed initiatives to strengthen its competitive edge. As the biosimilars market matures, the company's focus on vertical integration and operational excellence will likely translate into durable profitability and shareholder value. For those with a long-term horizon, Sandoz represents a rare opportunity to invest in a business that is both a disruptor and a consolidator in a high-growth sector.