Novartis AG
NVS · NYSE
Next quarter
Expected to report Feb 3, 2027 — estimated from last year’s reporting date.
Consensus is $2.23 EPS for Dec 2026 across 5 estimates, ranging $2.19 to $2.31.
NVS Sep 2026
- 9.33%
- $2.25
- $2.46
- —
- —
Highlights
- Core EPS: Core basic EPS was USD 2.46, up 9% year on year and 9.3% above the USD 2.25 consensus; core operating income rose 11% to USD 6.0 billion.
- Sales: Q3 net sales increased 4% to USD 14.5 billion, with 14 percentage points of volume growth partly offset by 9 points from generic competition and 1 point from pricing.
- Growth brands: Oncology sales rose 27% at constant currencies to USD 4.7 billion, led by Kisqali (+37% to USD 1.8 billion) and Scemblix (+67% to USD 593 million); Kesimpta grew 22% to USD 1.5 billion.
- GAAP earnings: Operating income fell 61% at constant currencies to USD 1.8 billion and net income fell 71% to USD 1.2 billion, principally reflecting a USD 1.9 billion del-desiran impairment and higher other expense.
- Avidity setback: Phase III HARBOR in DM1 missed its primary endpoint; Novartis impaired the del-desiran asset by USD 1.94 billion to USD 5.54 billion and recorded a USD 0.6 billion provision for an onerous supply agreement.
- Generic pressure: Entresto sales fell 38% to USD 1.2 billion, mainly due to US generic competition; Promacta/Revolade fell 61% to USD 142 million.
- Cash and leverage: Operating cash flow was USD 5.5 billion, down 16%, and free cash flow was USD 5.1 billion, down 18%; net debt rose to USD 37.4 billion from USD 21.9 billion at year-end 2025.
Analysis
Novartis delivered a stronger underlying quarter than the statutory results suggest. Q3 net sales rose 4% year on year to USD 14.5 billion, while core operating income grew 11% to USD 6.0 billion and core EPS increased 9% to USD 2.46, beating the supplied USD 2.25 consensus by 9.3%. Core operating margin expanded 2.3 percentage points to 41.6%. The release provides year-on-year comparisons but no Q2 figures, so sequential performance cannot be assessed from the supplied material.
The defining tension was between growing newer medicines and continued erosion in older products, alongside a sharp GAAP hit from the Avidity-derived del-desiran program. Kisqali, Kesimpta, Scemblix and Leqvio all posted strong growth, but generic competition—especially for Entresto—remained a substantial offset. The HARBOR Phase III study in DM1 missed its primary endpoint, prompting a USD 1.94 billion impairment and a USD 0.6 billion onerous-contract provision; operating income consequently fell 61% at constant currencies and net income fell 71%. Cash generation also weakened, with free cash flow down 18%, while net debt increased to USD 37.4 billion after acquisition spending that included Avidity.
Core earnings and impairment
The underlying operating result improved even as reported earnings contracted sharply. Higher sales and a 2.3-point expansion in core operating margin supported growth in core operating income and EPS, while the statutory result absorbed substantial asset and provision charges.
- Core performance: Core operating income was USD 6.036 billion, up 11% in reported dollars and 10% at constant currencies; the margin reached 41.6%, versus 39.3% a year earlier. Core net income rose 8% to USD 4.655 billion and core EPS increased 9% to USD 2.46, helped in part by fewer weighted-average shares.
- Reported result: Operating income dropped 59% in dollars (61% at constant currencies) to USD 1.843 billion; net income declined 70% to USD 1.196 billion and basic EPS was USD 0.63. R&D expense rose to USD 5.150 billion from USD 2.944 billion, while other expense increased to USD 1.575 billion from USD 335 million.
- Adjustment burden: Core adjustments were USD 4.2 billion, primarily impairments and provisions, versus USD 1.0 billion in Q3 2025. The release also reports a 9.2% statutory tax rate, affected by deferred tax income linked to intangible-asset impairments; the core tax rate was 16.1%.
Sales and portfolio mix
Revenue growth came from volume and newer growth medicines, with generic competition continuing to pressure established brands. Oncology was the largest growth engine, while the aggregate increase in sales remained modest against the scale of the generic drag.
- Sales bridge: Net sales increased 4% to USD 14.522 billion, also up 4% at constant currencies. Volume contributed 14 percentage points, generic competition subtracted 9 points and pricing subtracted 1 point; currency had no impact. US sales rose 7% to USD 6.429 billion and emerging growth markets rose 8% at constant currencies to USD 3.783 billion.
- Growth franchises: Oncology sales increased 27% at constant currencies to USD 4.678 billion. Kisqali grew 37% to USD 1.821 billion and Scemblix 67% to USD 593 million; neuroscience rose 23% to USD 1.975 billion, led by Kesimpta, up 22% to USD 1.484 billion. Leqvio rose 63% to USD 506 million.
- Erosion and offsets: Entresto fell 38% to USD 1.165 billion, largely due to US generic competition, and Promacta/Revolade fell 61% to USD 142 million. Immunology grew 10% at constant currencies to USD 2.880 billion, including Cosentyx up 9% to USD 1.857 billion; established brands overall declined 14%.
Del-desiran setback
The main company-specific event of the quarter was the HARBOR result for del-desiran, acquired with Avidity. Novartis said the Phase III study did not meet its primary endpoint, though it observed clinical activity in secondary endpoints and exploratory analyses. The company is reviewing the dataset and expects to discuss the development path with health authorities.
- Impairment: Novartis recorded a USD 1.94 billion impairment, reducing the asset’s carrying value from USD 7.48 billion to USD 5.54 billion. The charge was recognized in R&D expense.
- Remaining uncertainty: The recoverable value depends on assumptions including probability of technical and regulatory success, forecast sales, launch timing and competing therapies. The company estimates that a 10-point change in probability of success could change recoverable value by about USD 1.0 billion; a 10% change in forecast sales could change it by about USD 0.7 billion.
- Supply agreement: The HARBOR outcome changed expected use of contracted manufacturing capacity, making a long-term supply agreement onerous and prompting a USD 0.6 billion provision. The release also notes a USD 0.3 billion TQJ230 write-down after its HORIZON study did not meet the primary endpoint.
Cash flow and leverage
Cash generation declined year on year as working capital and interest payments weighed on operating cash flow. At the same time, acquisition funding and shareholder distributions left Novartis with materially higher net debt than at the start of the year.
- Cash generation: Operating cash flow was USD 5.503 billion, down 16%, and free cash flow was USD 5.111 billion, down 18%. Unfavorable working-capital changes and higher interest paid more than offset the effect of non-cash adjustments.
- Debt position: Net debt stood at USD 37.4 billion at September 30, 2026, compared with USD 21.9 billion at December 31, 2025; the debt/equity ratio rose to 1.23 from 0.72. Financial debt, including derivatives, was USD 46.3 billion.
- Uses of capital: Nine-month investing cash outflows were USD 16.6 billion, including USD 11.7 billion for Avidity and USD 1.1 billion for Myricx within business acquisitions, as well as USD 2.7 billion for acquisitions accounted for as separately acquired assets. The company paid a USD 9.1 billion annual dividend and spent USD 4.8 billion on net treasury-share transactions.
Pipeline and approvals
The quarter showed both continued development activity and setbacks beyond the del-desiran result. Novartis reported several product approvals and late-stage milestones, while its disclosed pipeline update included additional discontinued or paused programs.
- Q3 approvals: Novartis reported approvals including Pluvicto for metastatic androgen pathway modulation-naïve or sensitive prostate cancer in the US and China, Fabhalta for IgA nephropathy in the US and Japan, and Rhapsido for chronic inducible urticaria in the US.
- Pipeline progress: Phase III REMODEL-1 and REMODEL-2 studies of remibrutinib in relapsing multiple sclerosis met their primary endpoint. The company also reported a US submission for the malaria combination KLU156 and an FDA priority review designation for the submission.
- Other setbacks: The pipeline update said the Phase III HORIZON study of pelacarsen did not meet its primary endpoint. Novartis also discontinued remibrutinib development in myasthenia gravis after a futility analysis and discontinued lifonebart in Alzheimer’s disease following a preplanned biomarker-data assessment.
