Novartis profit beat driven by cost control as patent expiries bite
By Bhanvi Satija and Marleen Kaesebier
Novartis Outperforms Expectations Amid Patent Challenges
LONDON, July 21 - Novartis beat second-quarter profit forecasts and kept its 2026 expectations unchanged on Tuesday, which analysts said signalled it had shifted some costs into the second half.
Quarterly Performance and Patent Expiries
The Swiss drugmaker's shares rose 3% after it said quarterly core operating profit increased to $5.94 billion, above analysts' predictions of about $5.31 billion cited by Visible Alpha. Novartis, which has a market capitalization of about $310 billion after a 14% share rise so far this year, faces its most intense period of patent expiries, most notably for Entresto, which accounted for about 10% of total sales.
Impact on Entresto Sales
Sales of the heart drug fell 50% to $1.18 billion, worse than analysts forecast, due to generic competition in the U.S., its largest market. Although Entresto will lose patent exclusivity in Europe from November, Novartis expects the drop-off to be less steep in the second half.
Entresto sales had declined 42% in the first quarter and are expected to fall by $4 billion this year.
Cost Control and Guidance
HIGHER SPENDING IN SECOND HALF
Novartis kept its 2026 guidance unchanged, forecasting low-single-digit sales growth and a low-single-digit decline in core operating profit, both excluding currency swings.
James Eugene, analyst at Novartis shareholder Verso Investment Management, said its research and development expenses were also lower than expected.
Barclays analysts said the outlook implied higher second-half spending after operating expense control helped the second-quarter beat.
Novartis said core SG&A expenses fell 6% to $3.24 billion, helped by productivity gains, but analysts expect costs to rise from the third quarter as it absorbs its $12 billion Avidity Biosciences acquisition and launches newer drugs.
Return to Sales Growth
A U.S. inventory benefit for psoriasis drug Cosentyx and cost control helped Novartis post a 1% constant-currency rise in quarterly sales to $14.41 billion, ahead of expectations and its previous guidance for growth to return in the second half.
Performance of Newer Drugs
Novartis is relying on newer drugs including Kisqali, Scemblix, Kesimpta and Cosentyx to offset Entresto's decline. Kisqali sales rose 44% to $1.7 billion, Scemblix nearly doubled to $562 million and Cosentyx grew 12% to $1.82 billion, helped by a roughly $100 million stocking benefit, analysts said.
Future Growth Prospects
Investors are also watching trial readouts for pelacarsen, remibrutinib and del-desiran, which analysts estimate could together generate $10 billion in peak annual sales and support growth beyond 2030.
Reporting and Editing
(Reporting by Bhanvi Satija and Marleen Kaesebier; Editing by Miranda Murray, Lincoln Feast and Alexander Smith)
