Novartis Earnings Beat: New Drug Momentum Offsets Entresto's Steep Decline
Published on 07/25/2026 at 18:06 | Redaktion boerse-global.de
The Swiss pharmaceutical giant delivered a second-quarter performance that caught analysts off guard, with core operating profit surging to $5.94 billion — roughly 12 percent above the consensus estimate of $5.31 billion. The result came despite a dramatic collapse in sales of its former blockbuster heart drug Entresto, underscoring how effectively newer products are filling the revenue gap.
Net sales rose 3 percent in dollar terms to $14.4 billion in the three months through June, though currency-adjusted growth stood at a more modest 1 percent. Core earnings per share hit $2.41, comfortably beating the $2.17 analysts had penciled in and representing a 12 percent year-on-year increase. Management used the occasion to reaffirm its full-year 2026 guidance, a move that signals confidence given the headwinds in the cardiovascular franchise.
The numbers, however, laid bare the scale of the Entresto problem. Revenue from the blood pressure and heart failure treatment plunged 50 percent to $1.18 billion in the second quarter, accelerating from the 42 percent drop recorded in the prior period. The culprit is the loss of US patent protection, which has opened the door to generic competition. The erosion is gathering pace quarter by quarter.
Three Growth Engines Keep the Ship Steady
What prevented the Entresto shortfall from derailing the group's overall performance was the strength of its newer medicines. Kisqali posted volume growth of 43 percent, Kesimpta climbed 32 percent, and Leqvio surged 59 percent. Together, these three products more than compensated for the blockbuster's decline, providing a clear signal that the pipeline is maturing into a revenue-generating force. Scemblix, the chronic myeloid leukemia treatment, also contributed to the momentum; Germany's Federal Joint Committee had already in June certified a "considerable additional benefit" for the drug in first-line therapy, strengthening its reimbursement position in Europe's largest pharmaceutical market.
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Regulatory developments added further tailwinds. On Monday, the US Food and Drug Administration granted full traditional approval to Fabhalta (iptacopan) for IgA nephropathy, backed by Phase III data showing a 48 percent reduction in the rate of eGFR decline compared with placebo over two years. The approval followed a busy week in Europe: the European Commission on Friday authorized the gene therapy Itvisma for spinal muscular atrophy and Rhapsido (remibrutinib) for chronic spontaneous urticaria. Early launch data for both products have been encouraging, according to the company.
Analyst Reactions Split on Valuation
The earnings release triggered a flurry of target price revisions, though the recommendations themselves remained cautious. Bernstein's Justin Smith lifted his price target from CHF 125.00 to CHF 132.84 on Wednesday, citing upgraded earnings estimates through 2031, but kept his "Market-Perform" rating unchanged. JPMorgan stuck with "Overweight" and a CHF 135.00 target, describing the quarterly results as strong. UBS struck a more reserved tone: analyst Matthew Weston maintained "Neutral" with a CHF 116.00 price objective, acknowledging the solid quarter but pointing to structural patent cliff risks looming from 2029 onward. Morningstar pegged fair value at CHF 109 or $140, labeling the stock slightly overvalued while noting timing distortions in research spending.
The stock itself showed little reaction. Shares closed Friday at €136.10, down 0.56 percent on the day, leaving them 5.68 percent below the 52-week high of €144.30 reached in late February. The muted price action reflects the mixed picture the results painted: a strong operational beat on one side, a structural revenue problem on the other.
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Buyback Programs Remain on Track
Novartis continues to return capital to shareholders through its buyback initiatives. The $15 billion repurchase program launched in July 2023 still had roughly $5.4 billion outstanding at mid-year. A separate $10 billion program initiated in July 2025 had about $6.1 billion remaining after first-half transactions. The ongoing buybacks signal management's confidence in the balance sheet despite the Entresto headwinds.
Investors will now look ahead to October 27, when Novartis reports third-quarter and nine-month results for the 2026 fiscal year.
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