Sandoz reports strong FY 2024 results and Q4 2024 sales

Ad hoc announcement pursuant to art. 53 SIX Swiss Exchange Listing Rules

MEDIA RELEASE

• FY 2024 net sales[1] of USD 10.4 billion, up by 9%[2] in constant currencies (+7% in USD); Q4 net sales of USD 2.7 billion, up by 9% in constant currencies (+7% in USD)
• Strong sales performances in all three regions, driven by double-digit growth in biosimilars, both in the fourth quarter and full year, benefitting from recent launches and base-business momentum
• Operating income of USD 307 million, up by 5% in constant currencies (-18% in USD)
• Core EBITDA margin[3] in the year of 20.1%, a strong 200 basis-points improvement, reflecting higher biosimilar sales, as well as savings from operational and organizational initiatives
• Full-year 2025 guidance of mid-single digit net-sales growth[4] and a core EBITDA margin of around 21%

Basel, March 5, 2025 – Sandoz (SIX: SDZ / OTCQX: SDZNY), the global leader in generic and biosimilar medicines, announced today results for the full year and net sales for the fourth quarter of 2024.

KEY FULL-YEAR FIGURES

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Richard Saynor, CEO of Sandoz, said: “We delivered strong results in our first full year as an independent company. At the same time, we made excellent progress in transforming the business, providing sustainable platforms for future growth, while all three regions grew net sales. We produced strong double-digit biosimilars sales growth in both the full year and fourth quarter, with generics growth accelerating in the second half. We also expanded our core EBITDA margin for the full year, driven by the strength of our biosimilars and increasing operating leverage. This was further helped by the transformation program launched in early 2024.

“As we look to 2025, we expect the positive momentum in the business to continue. We anticipate contribution from several exciting biosimilar launches, including Pyzchiva® and Tyruko® in the US and Wyost®/Jubbonti® in Europe and the US. These will add to an already-growing in-market portfolio and contribute to margin expansion. In addition, we will continue to build on our industry-leading pipeline across generics and biosimilars. Our 2025 guidance and mid-term outlook reflect the confidence we have in the strategic roadmap, our ability to expand patient access further, as well as the many attractive opportunities ahead.”

2024 STRATEGIC PROGRESS

2024 saw a number of biosimilar launches, beginning in January, when Tyruko® (natalizumab) was launched in Germany. The product was available in 11 markets by the end of the year and is ramping up steadily. In April, Sandoz leveraged a private-label agreement in the US to accelerate patient switching to its biosimilar; Hyrimoz® (adalimumab) is now the leading adalimumab biosimilar in the US market. In July, the Company launched Pyzchiva® (ustekinumab) in Europe and, by the end of the year, the product had been rolled out in 20 markets and took a leading share of the ustekinumab biosimilar market.

Sandoz became the leading biosimilars provider on a worldwide basis. Moving up to #3 in the US during the period, the Company reaffirms its ambition to occupy the leading position in that market. The Company added five assets to its industry-leading biosimilars pipeline, which now comprises 28 molecules. Pembrolizumab and nivolumab, two oncology assets addressing more than USD 40 billion of loss-of-exclusivity value, entered late-stage clinical trials. Around 450 generic pipeline products, in addition to its 28 biosimilars, support the goal of sustainable long-term growth.

Sandoz also made good progress on simplifying the business and adapting its processes. It achieved its planned reduction to 15 internal manufacturing sites, while increasing capacity at its remaining sites through extensions and efficiencies. The Company also made further headway in its consolidation of external suppliers, with the exit of around 100 finished-dosage-form suppliers ongoing and a similar number identified. Finally, Sandoz initiated a transformation program to make its organization more agile, simpler and more efficient.

GUIDANCE: 2025

The Company anticipates further major biosimilar launches in 2025, including Pyzchiva® and Tyruko® in the US, as well as Wyost®/Jubbonti® (denosumab) in Europe and the US. Price erosion is expected to return to normalized levels of a low to mid-single-digit percentage. Sandoz anticipates core EBITDA-margin expansion by focusing on product mix, simplification of its external network and its ongoing transformation program. As a result, Sandoz expects, in FY 2025:

• net sales to grow by a mid-single digit percentage in constant currencies
• a core EBITDA margin of around 21%

The guidance excludes any impacts of unforeseen events or unconfirmed developments. This includes potential trade tariffs emanating from the US government.

MID-TERM OUTLOOK

Reaffirming its mid-term outlook to 2028, the Company expects:

• net sales to grow annually by mid-single digit in constant currencies
• the core EBITDA margin to increase to 24-26%
• the annual dividend to represent 30-40% of full-year core net income

FOURTH-QUARTER AND FULL-YEAR SALES

Net sales for the fourth quarter were USD 2.7 billion, up by 9% in constant currencies. Volume contributed eight percentage points of growth, with the balance reflecting favorable pricing. Strong double-digit growth in biosimilars was driven by recent launches and strong momentum in the base business, while generics delivered solid growth that reflected recent launches.

Net sales for the full year were USD 10.4 billion, up by 9% in constant currencies. Volume contributed 10 percentage points of growth, partly offset by price erosion of one percentage point. The growth in sales primarily reflected the strong double-digit performance in biosimilars, continued demand in the base business, new launches in the US and Europe, as well as the acquisition of Cimerli® in the US.

Net sales by business

* In constant currencies

Generics overview
Net sales for the fourth quarter were USD 1.9 billion, up by 4% in constant currencies. Net sales for the full year were USD 7.5 billion, up by 2% in constant currencies.

Growth in Europe accelerated in the second half of the year, mainly driven by recent launches. Strong momentum also continued in the International region, reflecting favorable pricing dynamics and demand for antifungal agent Mycamine®, partly offset by the divestment in the year of the Sandoz Chinese business. The decline in North America generics sales was due to price erosion on the mature products portfolio in the US, partly offset by new launches in the fourth quarter in the US.

Biosimilars overview
Net sales for the fourth quarter were USD 769 million, up 25% in constant currencies. Net sales for the full year were USD 2.9 billion, up 30% in constant currencies. The biosimilars share of total net sales increased from 23% in FY 2023 to 28% in FY 2024.

The strong double-digit biosimilars growth reflects the uptake of Hyrimoz® in the US through the private- label agreement with Cordavis as well as the Sandoz Hyrimoz® and unbranded adalimumab-adaz. In addition, the acquisition of Cimerli®, the continued strong demand for the first-ever biosimilar, Omnitrope® (somatropin), and the launches of Tyruko® and Pyzchiva® in Europe all contributed to the strong performance.

Net sales by region[5]

Europe overview
Net sales for the fourth quarter were USD 1.4 billion, up 8% in constant currencies. Net sales for the full year were USD 5.4 billion, up 6% in constant currencies.

Strong growth in biosimilars continued, led by demand for Omnitrope® and the contribution from the recent launch of Tyruko® and Pyzchiva®. Generics momentum accelerated in the second half of the year, driven by recent launches.

North America overview
Net sales for the fourth quarter were USD 695 million, up 14% in constant currencies. Net sales for the full year were USD 2.4 billion, up 15% in constant currencies.

Growth was driven by biosimilars with the ongoing uptake of Hyrimoz® in the US, the acquisition of Cimerli®, market share gains for Omnitrope® in the US, and the launch of Wyost®/Jubbonti® in Canada. In generics, price erosion on the mature portfolio in the US was partly offset by new launches in the fourth quarter, including paclitaxel.

International overview
Net sales for the fourth quarter were USD 653 million, up 6% in constant currencies. Net sales for the full year were USD 2.6 billion, up 8% in constant currencies.

This was primarily a result of strong volume growth across both generics and biosimilars, the contribution from the acquisition of Mycamine® in the prior year, favorable price dynamics and recent launches, partly offset by the divestment of the Chinese business in the second quarter.

OPERATING RESULTS

Core gross profit amounted to USD 5.3 billion compared to USD 4.9 billion in the prior year, resulting in a core gross profit margin of 50.7% compared to 50.9% in 2023. Adjusted for sales to the former parent, the core gross profit margin was 49.4% in 2023. The favorable product mix from strong double-digit biosimilars growth and operational improvements was partly offset by price erosion and inflation on cost of goods sold, which impacted the results in the first half of 2024.

Core EBITDA was USD 2.1 billion versus USD 1.7 billion in the prior year, resulting in a core EBITDA margin of 20.1% compared to 18.1% in 2023. Adjusted for sales to the former parent and the ramp-up of standalone costs, the core EBITDA margin was 16.9% in 2023. The strong increase was driven by improvement in core gross profit margin, leveraging expenses from a growing topline and initial savings from our transformation program.

EBITDA was USD 820 million versus USD 914 million in the prior year. Core adjustments for EBITDA in 2024 were USD 1.3 billion compared to USD 829 million in 2023. These were mainly driven by separation costs of USD 348 million, transformation costs of USD 233 million and costs of rationalization of internal manufacturing sites of USD 78 million. In addition, adjustments for legal costs of USD 598 million were mainly driven by the legacy US generic antitrust class action litigation.

NON-OPERATING RESULTS

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The core net financial result was an expense of USD 325 million compared to an expense of USD 251 million in 2023. The increase was primarily a result of our new standalone financing structure following the spin-off from our former parent and net currency result.

The core effective tax rate was 21.4% compared to 23.0% in the prior year, mainly driven by the geographical allocation of pre-tax income and losses.

Core net income was USD 1.2 billion, compared to USD 953 million in the prior year, mainly driven by a higher core operating income, partly offset by a higher core net financial result and core income taxes.

Core diluted earnings per share were USD 2.71, compared to USD 2.20 in the prior year. The weighted average number of shares diluted was 434.0 million in 2024.

CASH FLOW

The Company generated net cash flows from operating activities of USD 656 million, compared with USD 362 million in the prior year. This was driven by working capital enhancements through improvements in receivables and a lower rate of increase in inventories following the spin-off from our former parent, partly offset by two deposited settlement amounts relating to the legacy US legal matters.

Cash flows used for capital expenditures (CAPEX) were USD 554 million compared to USD 586 million in the prior year. This includes investments in our new biosimilars facility in Slovenia and new development capabilities in Slovenia and Germany, as well as separation-related investments in facilities and technology. These investments are mainly focused on meeting growing demand for our current and future biosimilars and include a new biosimilar production plant in Lendava, Slovenia, and investments in the Sandoz antibiotics network in Kundl, Austria.

Free cash flow was USD 98 million compared to negative USD 234 million in the prior year. The improvement was mainly due to net cash flows from operating activities.

Management free cash flow, defined as free cash flow adjusted for one-off items, was USD 1