Novartis Faces a Defining Test: Can New Drugs Fill the Entresto Void?
Published on 07/22/2026 at 17:25 | Redaktion boerse-global.de
The Swiss pharmaceutical giant is navigating what its CEO Vas Narasimhan has described as the largest patent cliff in the company’s history, yet the numbers coming out of Basel suggest a business that is far from retreating. Novartis surprised markets on July 21 with second-quarter results that beat analyst expectations on both revenue and profit, sending shares up 2.90 percent in a single session. The stock now trades at €135.36, roughly 6.2 percent below its 52-week high of €144.30 set in late February.
The headline figures tell a story of resilience. Net sales rose 3 percent to $14.4 billion, with currency-adjusted growth of 1 percent. More striking was the bottom-line performance: core earnings per share landed 12 percent above the consensus forecast. Analysts at Jefferies, JPMorgan, and the ZĂĽrcher Kantonalbank all described the quarter as strong, with Bernstein noting a solid beat driven particularly by Cosentyx and Kesimpta.
But beneath the surface, a structural tension is building. The blockbuster heart drug Entresto, long the company’s top revenue generator, saw sales collapse by 50 percent to $1.18 billion in the quarter after losing US patent protection. That gap is being filled by a new generation of products — but not yet at the same margins.
Kisqali, the breast cancer treatment, surged 43 percent on a currency-adjusted basis to roughly $1.7 billion. Kesimpta, Pluvicto, and Scemblix all posted double-digit growth. The UBS analyst team highlighted that strong sales of Cosentyx and Kesimpta were able to offset Entresto’s weakness. Yet the operating core margin slipped to 41.2 percent, a sign that the incoming revenue stream carries lower profitability than the product it is replacing.
Should investors sell immediately? Or is it worth buying Novartis?
The math is straightforward for investors. Novartis expects low single-digit currency-adjusted sales growth for the full year, while adjusted operating profit is forecast to decline by a similar magnitude. That spread — top-line expansion paired with margin compression — will determine whether the stock can challenge its record high or whether the valuation comes under scrutiny.
A Balance Sheet Under Pressure
The growth strategy comes with a financing cost that is becoming harder to ignore. Net debt nearly doubled in just six months, jumping from $21.9 billion at the end of 2025 to $39.4 billion by mid-2026. The reasons are clear: acquisitions and licensing deals consumed $15.3 billion, dividend payments totaled $9.1 billion, and share buybacks added another $3.1 billion.
Novartis bought back 18.2 million of its own shares for $2.8 billion in the first half alone, with roughly half of its existing repurchase program still outstanding. A fresh three-year buyback plan, covering up to 10 percent of outstanding shares, is also in place. These moves support earnings per share mechanically, but they add to the debt pile at a time when the operating margin is under pressure.
The M&A engine shows no signs of cooling. In early July, Novartis agreed to acquire the British oncology startup Myricx Bio for $1.5 billion, a deal aimed at expanding its antibody-drug conjugate (ADC) pipeline. The purchases of Pikavation Therapeutics and Excellergy followed, and CEO Narasimhan has signaled openness to larger transactions, though he typically favors deals under $2 billion. CFO Mehta insists the balance sheet can handle further investment, but the market will be watching closely.
A Regulatory Win Adds Pipeline Depth
Just days before the earnings release, Novartis secured a significant regulatory milestone. The FDA granted full approval on July 18 for Fabhalta (Iptacopan) to slow kidney function loss in adults with primary IgA nephropathy, based on Phase III data from the APPLAUSE-IgAN study. The decision broadens the drug’s indication range and strengthens the company’s nephrology franchise — a segment that now carries greater strategic weight.
The approval, combined with the Myricx acquisition and the strong quarterly results, created a rare trifecta of positive news within a short window. Analysts are now looking ahead to a series of pipeline catalysts in the second half of the year, including readouts for the cardiovascular drug Pelacarsen, the multiple sclerosis candidate Remibrutinib, and Del-Desiran for a genetic disorder. Collectively, analysts estimate these three candidates could generate peak annual sales of $10 billion, providing a growth runway beyond 2030.
Novartis at a turning point? This analysis reveals what investors need to know now.
Technicals and the Road Ahead
The stock’s chart paints a cautiously optimistic picture. At €135.36, Novartis trades above both its 50-day moving average of €131.75 and its 200-day average of €124.87, signaling an intact medium-term uptrend. The relative strength index sits at 53.6, leaving room for further upside before overheating. Year-to-date, the shares have gained 14.27 percent, while the 12-month return stands at 35.94 percent from the August 2025 low of €97.06.
The next concrete test comes on October 27, when Novartis reports third-quarter and nine-month results. Investors will be watching whether the growth pattern from Q2 — strong contributions from Kesimpta, Cosentyx, and Scemblix offsetting Entresto’s decline — can be sustained. If the new drugs maintain their double-digit momentum, the stock has room to challenge its record high. But if the operating margin slips further below 41.2 percent, and if the upcoming pipeline readouts disappoint, the market’s patience with the current valuation may wear thin.
For now, Novartis is executing a delicate balancing act: funding growth through debt and dealmaking while managing a historic patent cliff. The second half of 2026 will reveal whether the new portfolio can generate enough profit to match what was lost.
Ad
Novartis Stock: New Analysis - 22 July
Fresh Novartis information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.
Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
