Novartis AG
NVS · NYSE
Next quarter
Expected to report Oct 27, 2026 — estimated from last year’s reporting date.
Consensus is $2.24 EPS for Sep 2026 across 5 estimates, ranging $2.20 to $2.28.
NVS Jun 2026
- 9.55%
- -0.51%
- $2.20
- $2.41
- —
- —
Highlights
- EPS beat: Core EPS was USD 2.41, 9.55% above the USD 2.20 consensus, although IFRS EPS fell 17% year over year to USD 1.71.
- Revenue growth: Q2 net sales rose 3% to USD 14.4 billion, or 1% at constant currencies, as 18 percentage points of volume growth outweighed 14 points of generic erosion.
- Growth portfolio: Kisqali sales increased 44% to USD 1.7 billion, Kesimpta rose 32% to USD 1.4 billion, and Scemblix rose 89% to USD 562 million.
- Oncology momentum: Oncology sales grew 35% to USD 4.5 billion, led by Kisqali, Pluvicto at USD 651 million (+43%), Scemblix and Fabhalta at USD 225 million (+88%).
- Entresto erosion: Entresto sales fell 50% to USD 1.2 billion because of US generic competition, more than offsetting Leqvio growth of 61% to USD 480 million.
- Margins and earnings: Core operating income was flat at USD 5.9 billion, with the core margin down 1.0 percentage point to 41.2%; core net income declined 3% to USD 4.6 billion, mainly on higher interest expense.
- Acquisition spending: Novartis spent USD 2.7 billion on Q2 acquisitions, including USD 1.8 billion for Pikavation and USD 0.9 billion for Excellergy; first-half business-acquisition cash outflows reached USD 11.7 billion, primarily for Avidity.
- Leverage: Net debt increased to USD 39.4 billion from USD 21.9 billion at December 31, 2025, while total debt rose to USD 47.1 billion from USD 33.5 billion.
- Cash generation: Q2 operating cash flow fell 12% to USD 5.9 billion and free cash flow fell 12% to USD 5.6 billion.
Analysis
Novartis delivered a mixed but better-than-feared second quarter: core EPS of USD 2.41 exceeded the USD 2.20 consensus by 9.55%, while net sales of USD 14.4 billion increased 3% year over year and 1% at constant currencies. The quarter improved sequentially from an implied first-quarter net sales base of USD 13.1 billion and core EPS of USD 1.98. However, reported net income fell 19% to USD 3.3 billion and IFRS EPS declined 17% to USD 1.71, reflecting a higher tax rate and increased interest expense.
The print was defined by the continuing handoff from declining established products to a strong growth portfolio. Kisqali, Kesimpta, Scemblix, Pluvicto and Leqvio all delivered growth of at least 43%, but Entresto sales halved to USD 1.2 billion because of US generic competition, leaving operating income down 2% and the core margin 1.0 percentage point lower at 41.2%. The other defining feature was capital deployment: Novartis continued to build its pipeline through acquisitions while funding the USD 12.0 billion Avidity purchase earlier in the year. That expansion lifted net debt to USD 39.4 billion and interest expense to USD 462 million in Q2, up from USD 289 million a year earlier.
Growth portfolio
- Oncology: Q2 sales increased 35% to USD 4.5 billion. Kisqali rose 44% to USD 1.7 billion, supported by share gains in early breast cancer and leadership in metastatic disease; Pluvicto increased 43% to USD 651 million; Scemblix rose 89% to USD 562 million; and Fabhalta rose 88% to USD 225 million.
- Neuroscience: Kesimpta sales grew 32% to USD 1.4 billion, with demand and access supporting growth across all regions. The Zolgensma Group increased 23% to USD 365 million, helped by the Itvisma launch.
- Immunology: Cosentyx sales rose 12% to USD 1.8 billion and Ilaris increased 15% to USD 550 million. Rhapsido generated USD 64 million during its early launch, while Xolair fell 23% to USD 342 million under biosimilar pressure.
- Cardiovascular and renal: Leqvio grew 61% to USD 480 million, driven by the US, Europe and China, while Vanrafia contributed USD 27 million. The franchise nevertheless declined 36% to USD 1.7 billion because Entresto fell 50% to USD 1.2 billion.
Generic erosion
Novartis's 3% reported sales growth was largely a volume story rather than a pricing story. Volume contributed 18 percentage points, but generic competition removed 14 points and pricing reduced growth by another 3 points. The US was the weak geography, with sales down 5% to USD 6.0 billion, as growth from the newer portfolio was more than offset by Entresto and Promacta erosion. Rest-of-world sales rose 8% to USD 8.5 billion, including 10% growth in emerging markets and 12% growth in China.
Profit and cash flow
- Core profitability: Core operating income was unchanged at USD 5.9 billion despite higher sales, as unfavorable product mix and lower government grant income offset productivity savings. The core operating margin fell to 41.2% from 42.2%.
- Reported earnings: IFRS operating income declined 2% to USD 4.8 billion. Net income fell to USD 3.3 billion from USD 4.0 billion, with the tax rate rising to 23.7% from 11.2% and interest expense increasing 60% to USD 462 million.
- Cash conversion: Operating cash flow declined 12% to USD 5.9 billion and free cash flow declined 12% to USD 5.6 billion. First-half free cash flow was USD 8.9 billion, down 9% year over year.
Acquisitions and leverage
Novartis used the quarter to continue rebuilding its pipeline, spending USD 2.7 billion on acquisitions, including USD 1.8 billion for Pikavation Therapeutics and USD 0.9 billion for Excellergy. Including the Avidity Biosciences transaction, first-half cash outflows for business acquisitions were USD 11.7 billion; Avidity's cash purchase price was USD 12.0 billion. The transactions materially changed the balance sheet: total debt rose to USD 47.1 billion from USD 33.5 billion at year-end, net debt reached USD 39.4 billion from USD 21.9 billion, and the debt-to-equity ratio increased to 1.12 from 0.72.
Pipeline and litigation
- New approvals: Q2 approvals included Fabhalta for IgA nephropathy in the US, Itvisma in the EU, and Rhapsido in the EU and Japan. Novartis said its clinical portfolio contains approximately 100 projects.
- Lutathera dispute: A US District Court issued a negative decision in June on the validity of patents covering Lutathera, which expire in 2039 with pediatric exclusivity. Novartis has appealed; no referencing manufacturer has final US approval.
- Other patent exposure: Novartis remains in US ANDA litigation involving Leqvio and Tafinlar plus Mekinist, adding potential uncertainty around parts of the newer and established portfolio.
