Sandoz (SDZ) Q2 2024 earnings summary

Executive summary

• Achieved 7% net sales growth in constant currency for H1 2024, reaching USD 5.0 billion, with 29% growth in biosimilars and positive contributions from all regions.

• Biosimilars now represent 27% of total sales, up from 22% last year, with key launches including Hyrimoz, CIMERLI acquisition, and strong demand for Omnitrope and Tyruko.

• Generics business grew 1% in H1, with stable sales in Europe and growth in International regions, offset by declines in North America due to product timing.

• Raised full-year net sales guidance to mid- to high-single digits and confirmed core EBITDA margin guidance of around 20%.

• Transformation program underway, targeting CHF 350 million in costs and CHF 200 million in annualized savings by 2026.

Financial highlights

• Net sales reached USD 5,047 million, up 7% in constant currencies; core EBITDA margin was 17.5% in H1 2024, improving 210bps sequentially from H2 2023.

• Core gross profit margin was 50.4%, up 170bps sequentially, but down from 53.2% in H1 2023.

• Management free cash flow was CHF 237 million (USD 237 million), up from CHF 1 million in H1 2023; reported free cash flow improved to USD 21 million from negative USD 86 million.

• Net debt increased to USD 3.4 billion as of June 30, 2024, with a net debt to core EBITDA ratio in the range of 1.7x to 2.0x.

• Net income was USD 151 million, down 36% year-over-year, impacted by legal and transformation costs.

Outlook and guidance

• Net sales expected to grow mid- to high-single digits in constant currency for FY 2024, with core EBITDA margin around 20%.

• Margin expansion in H2 anticipated from favorable biosimilar mix, limited price erosion, and transformation program savings.

• Transformation program to deliver CHF 50 million (USD 50 million) in H2 2024 savings, with annualized run rate savings of CHF 200 million by 2026.

• Key commercial milestones include Pyzchiva launch in Europe (Q3 2024) and Tyruko launch in the US (late 2024, pending FDA approval).