Novartis Sales Soar but Patent Risks Ahead

Novartis (NVS) delivered second-quarter core operating income of $5.9 billion, up 21% in constant currencies, lifting full-year guidance as oncology and cardiovascular drugs offset mounting generic headwinds.

The guidance upgrade signals near-term earnings resilience, yet investors face a structural test ahead: blockbuster heart drug Entresto – roughly 14% of group sales in 2024 – began facing U.S. generic erosion in mid-2025, with European patent expirations set to follow.

Key Takeaways

Q2 core EPS of $2.42 rose 24% year-on-year in constant currencies.
Full-year core operating income guidance raised to low-teens growth.
$10 billion share buyback launched; net debt rose to $23.8 billion.

Market Context & Peer Benchmarking

Novartis’s 11% constant-currency top-line growth in Q2 2025 outpaced the mid-single-digit organic revenue expansion typical of large-cap European pharma peers such as Roche and AstraZeneca over the same period. ¹ Free cash flow surged 37% year-on-year to $6.3 billion, a metric deal-focused investors watch closely as a gauge of acquisition firepower.

The core operating margin reached 42.2% of net sales, expanding 340 basis points in constant currencies – a level that compares favorably with the sector’s typical 35%-38% range and supports the company’s capital-return program. ¹

Detailed Analysis: Growth Drivers and Generic Drag

Six products accounted for the bulk of Q2 momentum. Cancer drug Kisqali (ribociclib) surged 64% in constant currencies to $1.18 billion, fueled by U.S. sales doubling following its early breast-cancer approval. ¹ Leukemia therapy Scemblix (asciminib) jumped 79% to $298 million, while cardiovascular treatment Entresto rose 22% to $2.36 billion – its final full quarter before U.S. patent expiry began weighing on results. ¹

Generic competition shaved two percentage points from net-sales growth in the quarter. The headwind is set to intensify: Entresto’s U.S. patent expired around mid-2025, and a Reuters report from April 2026 confirmed that Q1 2026 Entresto sales had already fallen 42% to $1.31 billion, undershooting analyst forecasts of $1.37 billion compiled by Visible Alpha. ^{2, 3}

Radioligand therapy Pluvicto (lutetium Lu177 vipivotide tetraxetan) climbed 30% to $454 million and delivered a Phase III win in hormone-sensitive prostate cancer during the quarter, offering a potential new indication to sustain long-term volume. ¹ The FDA submission for that new label is planned for the second half of 2025.

On the negative side, gene therapy Zolgensma declined 17% in constant currencies to $297 million, reflecting lower-than-usual spinal muscular atrophy incidence rather than competitive loss, according to company disclosures. ¹

Capital Allocation: Buyback vs. M&A

Novartis initiated a new up-to-$10 billion share repurchase program to be completed by year-end 2027, immediately after closing a prior $15 billion buyback that retired 140.9 million shares. ¹ Net debt climbed to $23.8 billion from $16.1 billion at end-2024, reflecting the $7.8 billion annual dividend, $5.4 billion in buyback outflows, and $3.1 billion in M&A and intangible acquisitions. ¹

Deal activity included the completed acquisition of Regulus Therapeutics, a microRNA platform play targeting polycystic kidney disease, and a July 2025 option agreement with Sironax for a blood-brain-barrier crossing technology – moves consistent with Novartis’s stated strategy of plugging pipeline gaps ahead of the patent cliff. ¹

Outlook & Management Quote

Full-year 2025 net sales guidance was held at high-single-digit constant-currency growth, while core operating income guidance was raised from low-double-digit to low-teens growth. ¹ The company continues to assume mid-2025 Entresto U.S. generic entry for modelling purposes, subject to ongoing litigation.

“Novartis delivered another strong quarter, with double-digit sales and core operating income growth. We continue to drive strong performance on our ongoing launches for Kisqali, Pluvicto, and Scemblix, demonstrating the replacement power in our portfolio.” – Vas Narasimhan, CEO, Novartis, July 17, 2025 ¹

Looking into 2026, management’s tone shifted materially: CFO Mukul Mehta told reporters he expected a better second half of 2026, noting that in Europe “the drop-off from branded sales into generics is not as steep a curve as it is in the U.S.” ³ The company estimated Entresto generic competition would cost roughly $4 billion in 2026 revenues. ³

Conclusion

For deal-focused investors, Novartis’s Q2 2025 print offered a clean beat with a guidance upgrade, strong free-cash-flow generation, and a rich pipeline of potential catalysts – balanced against a clearly signposted patent-expiry cycle that is now playing out in reported earnings. The degree to which Kisqali, Scemblix, Pluvicto, and pipeline assets can offset Entresto attrition will determine whether the current valuation re-rates higher or merely holds steady through 2026 and beyond.

Not investment advice. For informational purposes only.