Novartis (NYSE: NVS) raises profit guidance as newer brands offset Entresto erosion

Novartis raised its full-year guidance for core operating income after third-quarter net sales rose 4% to $14.5 billion. Core operating income increased 10% at constant currencies to $6.0 billion, giving a core margin of 41.6%. The company now expects core operating income to grow by a low single-digit percentage in 2026, having previously guided to a low single-digit decline.

Newer medicines carried the quarter. Kisqali sales rose 37% at constant currencies to $1.8 billion, Kesimpta grew 22% to $1.5 billion, and Leqvio and Scemblix increased by 63% and 67% respectively. Against that, Entresto sales fell 38% to $1.2 billion following generic entry, and generic competition as a whole reduced quarterly sales growth by nine percentage points. Pricing took a further percentage point off growth.

The reported figures are considerably weaker. Operating income fell 59% to $1.8 billion and net income 70% to $1.2 billion, driven largely by a $1.9 billion partial impairment of del-desiran after the Phase 3 HARBOR study in myotonic dystrophy type 1 missed its primary endpoint. Core measures exclude such charges by design, which makes them a useful view of the operating business but not a substitute for the full accounts. Free cash flow declined 18% to $5.1 billion.

Sales guidance is unchanged at low single-digit growth, so the upgrade reflects cost discipline and mix rather than a faster top line. The investment question is whether the growth brands can keep outrunning patent losses as Entresto erosion continues, and whether acquired assets such as the Avidity programmes justify their price. With up to $4.9 billion still to be executed under the existing buyback, capital returns provide support while that evidence accumulates.

Source: Novartis third-quarter results, 27 October.