Sandoz's Strategic Momentum in Biosimilars and Generics: A Convincing Case for Long-Term Outperformance

Sandoz, a global leader in generics and biosimilars, has emerged as a standout performer in 2025, driven by a trifecta of catalysts: robust Q2 2025 financial results, a strategic pipeline expansion, and a bullish upgrade from RBC Capital Markets. For investors seeking long-term outperformance in the healthcare sector, Sandoz's combination of operational discipline, market-leading biosimilars, and a resilient generics business presents a compelling case.

Q2 2025 Results: Margin Expansion and Biosimilars-Driven Growth

Sandoz's Q2 2025 results underscore its ability to navigate macroeconomic headwinds while accelerating growth. The company reported 4% sales growth, with underlying sales rising 6%, driven by a 2.5-point expansion in core EBITDA margin to 20%. This margin improvement, despite R&D investments and new product launches, highlights Sandoz's operational efficiency. The biosimilars segment, now accounting for 29% of total net sales (up from 27% in 2024), was a key driver. Products like PEACETIVA (a biosimilar adalimumab in the U.S.), PISCHIVA (ustekinumab auto-injector in Europe), and WiOS/Juvanti (interchangeable denosumab biosimilars) have captured market share, with HYMEROS (adalimumab biosimilar) achieving over 60% penetration in Europe.

The generics segment, though facing pricing pressures, delivered 3% underlying growth in Q2, supported by 180 product launches in H1 2025. Sandoz's generics business remains a cash-flow engine, contributing ~70% of total sales and providing a stable base for reinvestment in biosimilars.

RBC's Upgrade: A Biosimilars-First Thesis

RBC Capital Markets upgraded Sandoz to "Outperform" in April 2025, setting a price target of CHF 44 (a 24% upside from its Q2 closing price of $48.40). The upgrade hinges on Sandoz's 27 biosimilar assets, which target $200 billion in originator sales. RBC highlighted denosumab as a standout opportunity, estimating $1.2 billion in annual sales by 2027 from WiOS and Juvanti alone. The firm also noted Sandoz's leadership in a sector projected to grow at 9% CAGR through 2030, driven by expiring biologic patents and regulatory tailwinds.

RBC's analysis acknowledges near-term risks, including U.S. tariffs (estimated at $25–60 million annually) and separation costs from Novartis. However, Sandoz's diversified supply chain and pricing flexibility are seen as mitigants. The company's valuation at ~14x 2025E EV/EBITDA also appears undemanding compared to peers like Mylan and Teva, offering a margin of safety for investors.

Strategic Catalysts: Pipeline and Manufacturing Expansion

Sandoz's long-term outperformance is anchored in its expanding biosimilar pipeline and strategic acquisitions. The proposed $300 million acquisition of Just Evotec Biologics in Toulouse, France, will bolster in-house development capabilities, while expanded manufacturing in Slovenia ensures supply reliability. These moves align with Sandoz's goal of achieving a 24–26% core EBITDA margin by 2028, up from 20% in Q2 2025.

The company's pipeline includes five near-term launches (e.g., leflunomide in Europe, rituximab in the U.S.) and eight assets in technical development. Regulatory streamlining efforts, such as accelerated approvals for pembrolizumab and ocrelizumab biosimilars, further reduce time-to-market risks. Meanwhile, the generics segment's 400+ asset pipeline targets $220 billion in originator sales, ensuring a steady flow of incremental revenue.

Investment Thesis: Balancing Risks and Rewards

While Sandoz faces challenges—such as U.S. pricing pressures and global supply chain disruptions—its strategic focus on biosimilars and disciplined capital allocation position it to outperform. The company's $500 million management free cash flow in Q2 2025, coupled with a strong balance sheet (including a $2 billion revolving credit facility), provides financial flexibility to navigate headwinds.

For investors, the key risks are near-term margin compression and regulatory delays. However, Sandoz's 2028 margin target and RBC's price target imply a 24% upside if the company executes its roadmap. Given the sector's growth trajectory and Sandoz's leadership in biosimilars, the stock is well-positioned to deliver double-digit returns over the next three to five years.

Conclusion: A Buy for Long-Term Growth

Sandoz's Q2 2025 results, RBC's upgraded price target, and its expanding biosimilar pipeline collectively form a compelling case for long-term outperformance. The company's ability to balance margin expansion with innovation, coupled with a favorable valuation, makes it an attractive addition to healthcare portfolios. Investors who recognize the inflection point in biosimilars adoption—and Sandoz's role as a market leader—stand to benefit from sustained growth and margin expansion in the years ahead.

Final Recommendation: Buy Sandoz for its strategic momentum in biosimilars, disciplined execution, and long-term margin expansion potential.