What Novartis (NVS) Said on Its Q3 Earnings Call

Key Points

• Novartis raised its 2026 outlook after third-quarter sales increased 4% to $14.5 billion and core operating income rose 10% to $6 billion. Core operating margin expanded to 41.6%, supported by gross-margin gains and a 7% decline in SG&A expenses.
• Growth brands drove performance, with priority brands collectively increasing 29%; notable gains included Kisqali, Kesimpta, Pluvicto, Leqvio, Scemblix and Rhapsido. Novartis raised Rhapsido’s combined peak-sales forecast to more than $4 billion.
• Pipeline results were mixed: remibrutinib produced positive multiple-sclerosis data and is expected to be filed in the U.S. in the fourth quarter, while del-desiran and pelacarsen failed key Phase III objectives. The company also repurchased $2.8 billion of shares in the first nine months.

Novartis NYSE: NVS reported third-quarter sales growth and margin expansion, supported by demand for priority medicines and productivity initiatives, while raising its full-year outlook for core operating income.

Chief Executive Officer Vas Narasimhan said quarterly sales rose 4% in constant currencies to $14.5 billion, while core operating income increased 10% to $6 billion. Core operating margin reached 41.6%, up 2 percentage points from the prior-year quarter.

“Priority brands continued to perform well in the quarter,” Narasimhan said, citing growth across Kisqali, Kesimpta, Scemblix, Leqvio and Rhapsido. Priority brands collectively grew 29% during the period, according to the company.

Financial Results and Updated Guidance

Core earnings per share rose 8% to $2.46. On a reported basis, operating income fell 61%, reflecting higher research and development spending, including a $1.9 billion partial impairment charge for del-desiran following the Phase III HARBOR readout in myotonic dystrophy type 1.

Reported net income declined 71% to $1.2 billion. Free cash flow was $5.1 billion in the quarter and $14 billion for the first nine months of the year.

Chief Financial Officer Mukul Mehta said gross-margin improvement and productivity measures, particularly in selling, general and administrative expenses, supported profitability. SG&A expenses declined 7% year over year in the third quarter while sales increased 4%, he said.

Novartis raised its full-year 2026 core operating income outlook to a range from flat to low-double-digit growth. The prior forecast called for a low-single-digit decline. The company maintained its outlook for low-single-digit net sales growth and continued to expect core net financial expenses of $1.7 billion and a core tax rate of about 16.5%.

Mehta said Novartis expects stronger second-half performance as the company moves beyond the effect of U.S. generic competition for Entresto. For the second half, Novartis expects mid- to high-single-digit sales growth and high-single- to low-double-digit core operating income growth. However, the company expects fourth-quarter margins to decline sequentially because of typical year-end spending, higher royalties as growth brands scale, and lower other income tied to U.S. Xolair biosimilars.

Growth Brands Drive Performance

Kisqali sales increased 37%, with U.S. growth of 38%. Narasimhan said the breast cancer drug remained a leader in early breast cancer, with more than half of patients coming from the exclusive node-zero and node-one population. The company also cited six-year NATALEE data showing a clinically meaningful overall-survival result.

Kesimpta revenue rose 22%, driven by demand in multiple sclerosis. In the U.S., Novartis said its overall MS market share rose to 16%, while its share of the B-cell class reached 27%. The company said 77% of new prescriptions were in first-line treatment or first switch settings.

Pluvicto grew 20%, including 68% growth outside the U.S. The U.S. business rose 9%, largely supported by use in metastatic castration-resistant prostate cancer before chemotherapy. Narasimhan said the launch in hormone-sensitive prostate cancer remains in its early stages, with new patients expected to face a five- to 10-week lead time for testing and treatment scheduling. He said broader acceleration is expected next year.

• Leqvio sales rose 63%, including 60% growth in the U.S. and 65% growth outside the U.S.
• Scemblix sales increased 67%, with the drug reaching 33% first-line share in the U.S., according to the company.
• Cosentyx grew 9% in constant currencies, aided by growth in hidradenitis suppurativa and spondyloarthritis.
• Rhapsido showed strong launch momentum, with more than 15,000 patients treated in the U.S. and an approximately 26% share of new prescriptions in chronic spontaneous urticaria.

Novartis raised its combined peak-sales forecast for Rhapsido in chronic spontaneous urticaria and chronic inducible urticaria to more than $4 billion. The company also received approval for Rhapsido in symptomatic dermographism, a form of chronic inducible urticaria.

Pipeline Updates

Narasimhan highlighted positive remibrutinib data in relapsing multiple sclerosis, saying the medicine showed disease control and a favorable safety profile. The company plans a U.S. filing in the fourth quarter using a priority review voucher. Novartis continues to forecast more than $4 billion in potential sales for remibrutinib in multiple sclerosis, excluding possible future opportunities in non-relapsing secondary progressive disease.

The company also said del-desiran failed to meet the primary endpoint in the HARBOR trial, though secondary exploratory analyses showed clinical activity. Novartis expects to present the data at a future medical congress and said it will likely need another Phase III study as it works with regulators on the development path.

Separately, Novartis said its Phase III pelacarsen ORION-4 study did not meet its primary endpoint. The company expects to present the full data at the American Heart Association meeting and publish it in a medical journal. Further development of DII235, a once-yearly small interfering RNA treatment targeting lipoprotein(a), remains under consideration.

Despite these setbacks, Narasimhan reaffirmed Novartis’ 2025-2030 target for 5% to 6% annual constant-currency sales growth and its long-term mid-single-digit growth outlook. He said the company plans to provide additional updates on its 2026-2031 guidance, growth-driver sales potential and pipeline at its upcoming Meet Novartis Management event.

Novartis also continued capital returns during the quarter. Mehta said the company repurchased $2.8 billion in shares during the first nine months under its up-to-$10 billion buyback program, with $4.9 billion still remaining to be executed. The company completed its acquisition of Myricx Bio during the quarter and exercised its option to acquire Sironax’s blood-brain barrier delivery platform.

About Novartis (NYSE:NVS)

Novartis AG is a Switzerland-based pharmaceutical company focused on the discovery, development and commercialization of innovative medicines. The company's research and commercial activities span areas including cardiovascular, renal and metabolic diseases, immunology, neuroscience, oncology and hematology. Its portfolio includes prescription medicines such as Entresto, Cosentyx, Kisqali, Kesimpta, Leqvio, Pluvicto and Scemblix.

Novartis serves patients and healthcare providers in markets around the world.

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