Novartis Defends Deal Strategy After $1.9 Billion Writedown, as Analysts Split on Pipeline Risk
Published on 10/27/2026 at 15:31 | Editorial boerse-global.de
Novartis chief executive Vas Narasimhan used the group's third-quarter 2026 results day to push back against the idea that the $1.9 billion impairment on Del-Desiran undermines its acquisition playbook. The write-down, he argued, does not call the broader strategy into question — even though the asset sat at the heart of the $12 billion Avidity deal.
For shareholders, the charge is only part of the story. Just as pressing is whether bought-in and in-house medicines can generate enough growth down the line. A simultaneously raised profit outlook underpins confidence in the existing business, yet it leaves the clinical setbacks untouched.
Smaller bolt-ons stay in the crosshairs
According to Citeline, Narasimhan is sticking with a focus on smaller acquisitions below $2 billion. Del-Desiran itself will be developed further despite the failure of the pivotal HARBOR study, in which the drug missed its primary endpoint in myotonic dystrophy type 1.
The write-down therefore does not spell the end of the programme. A further pivotal trial would, however, delay any potential launch. Narasimhan is also leaning on other Avidity assets that are either in advanced clinical development or under review by the US regulator.
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Financial headroom merits close attention. Reuters data show net debt climbing from $21.9 billion at the start of the year to $37.4 billion, while free cash flow is projected to exceed $20 billion by the end of the decade. Higher borrowings thus sit opposite expectations of stronger future cash generation. Continuing the deal strategy does not remove that burden — it bets instead that the acquired programmes will contribute to the business over the long haul.
The base business carries the upgraded guidance
Revenue in the third quarter of 2026 came in at $14.522 billion, up 4% year on year. New medicines are offsetting generic pressure on Entresto, according to a Bloomberg report — which explains how Novartis could lift its outlook despite the hefty impairment. Core operating income tells a different story from reported profit: it reached $6.036 billion, an 11% increase in dollar terms, with a core margin of 41.6%.
For the full year, Novartis now expects core operating income at constant currencies to be stable to grow at a low single-digit rate. It had previously guided for a low single-digit decline. The forecast of low single-digit sales growth stands. The impairment nonetheless left its mark: net profit fell 70% to $1.196 billion, so a stronger operating performance and a sharply lower reported profit sit side by side.
Clinical news cuts both ways
The quarter's data flow has been mixed. Friday brought results from the Phase III REMODEL-1 and REMODEL-2 trials in relapsing multiple sclerosis, where Remibrutinib cut the annualised relapse rate by a relative 35.2% and 31.2% respectively versus teriflunomide. Both studies showed an advantage over the comparator — but an efficacy edge does not automatically satisfy expectations already priced in.
Barclays trimmed its price target for Novartis yesterday to CHF 125 from CHF 130, keeping an "Equal Weight" rating. Media reports said the move reflected Remibrutinib data that fell short of expectations on two key efficacy measures. The criticism targeted the size of the effect and does not contradict the lower relapse rate reported against teriflunomide. UBS, also citing slightly weaker-than-expected efficacy, stayed "Neutral" with a CHF 116 target.
Kisqali provided the positive counterweight. Six-year follow-up from the Phase III NATALEE study, published the same Friday, showed the drug plus endocrine therapy reduced the risk of death by a relative 19.1% versus endocrine therapy alone in early HR+/HER2? breast cancer with a high risk of recurrence. Unlike the Remibrutinib readout, this concerns survival — the two programmes answer different medical questions, and the cautious analyst reactions to Remibrutinib cannot be applied wholesale to Kisqali.
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Regulatory and study news round out the picture. The European Commission on Wednesday approved Cosentyx for adults with polymyalgia rheumatica when glucocorticoids are inadequate or a relapse occurs during tapering. Fabhalta, by contrast, will not advance: Novartis decided not to continue the Phase II lupus nephritis study after the first part concluded, citing strategic considerations, Medscape reported on 19 October. Interim efficacy or safety findings did not drive the decision.
Where the analysts diverge
JPMorgan read the numbers positively, putting core earnings per share 7% above market expectations and arguing the higher guidance implies a 3% lift to the corresponding analyst consensus. ZĂĽrcher Kantonalbank, by contrast, stays at "Market Weight", training its lens on looming patent expiries for key products and on how durable growth really is. In the bank's view, patent losses on Cosentyx, Kisqali and Kesimpta affect almost 40% of sales in 2029.
Narasimhan, speaking on CNBC, stressed Novartis's ability to offset patent expiries with new products — and the raised profit guidance offers operating support for that case. The Del-Desiran setback shows at the same time why hoped-for pipeline wins are not yet a guaranteed replacement for existing revenue.
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