Sandoz’s (SDZ.S) investors are giving CEO Richard Saynor the benefit of the doubt. Shares in the generics drug maker, which $217 billion pharma giant Novartis (NOVN.S) has finally managed to spin off, started to trade in Zurich on Wednesday. There was a risk that Novartis investors, who have long called for a sale or spinoff, would quickly dump the new Sandoz shares. Yet the company is trading in line with its starting price of 24 Swiss francs a share, which suggests shareholders are waiting to see if Novartis’s perennial problem child can do better as a solo entity.
At current market prices, Sandoz is worth nearly $11 billion, or $14.4 billion once net debt is added in. That’s 7.8 times an expected 2023 EBITDA of $1.9 billion, assuming Saynor can expand annual revenue by 5% this year and deliver an EBITDA of 19% of sales, in line with his business targets, Breakingviews calculations show. The valuation puts Sandoz in the same realm as UK peer Hikma Pharmaceuticals (HIK.L), which analysts expect to grow at the same pace but already enjoys a higher EBITDA margin than the 24% to 26% of sales Saynor is hoping to achieve by 2028. For now, Novartis investors seem to believe Sandoz’s treatment may be effective. (By Aimee Donnellan)
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