Key Takeaways:
- Novartis Q2 core profit beat estimates on strong drug sales.
- Kisqali and Pluvicto drove growth as generic competition mounted.
- The company navigates patent cliffs and US drug pricing reforms.
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Novartis beats Q2 profit estimates as cancer drugs offset patent losses
Novartis reported second-quarter core operating profit that beat market expectations, driven by strong sales of cancer and multiple sclerosis drugs.
"These results demonstrate the resilience of our growth portfolio during the most significant patent cliff in our history," Chief Executive Vas Narasimhan said.
The Swiss drugmaker's growth portfolio has been powered by Kisqali, which posted a 55% sales jump in the first quarter, and Pluvicto, which surged 70%. Kesimpta rose 26%, Scemblix climbed 79% and Leqvio advanced 69%. The company maintained a 37.3% core operating margin in the first quarter, with free cash flow of $3.3 billion.
The earnings beat comes as Novartis navigates what Narasimhan called the biggest loss of exclusivity in the company's history, with several blockbuster medicines losing US patent protection. The stock has gained about 14% year to date following a 24% rally in 2025, trading at roughly 16 times forward earnings.
Industry analysts view several experimental medicines as critical to the next phase of growth. Pelacarsen in cardiovascular disease, remibrutinib in multiple sclerosis, and Del-desiran in genetic disorders are estimated to have peak annual sales potential exceeding $10 billion, which would help offset expected revenue losses when blockbuster medicines such as Cosentyx and Kisqali face patent expirations around the turn of the decade.
Beyond quarterly earnings, a larger issue looms for the pharmaceutical industry: the Most Favored Nation pricing policy. Narasimhan has warned that the full impact could become visible over the next 18 months, describing it as a potentially "very difficult situation" for patients and drugmakers. The policy links US prices to those charged in other wealthy countries, threatening the premium pricing model that has long made America the world's most profitable pharmaceutical market. Executives at Roche and AstraZeneca have also warned that Europe's fragmented reimbursement systems risk making the region increasingly unattractive for launching innovative therapies.
Jefferies has emphasized that sustaining Novartis' current valuation multiple will depend on strong second-half momentum and successful pipeline readouts. Goldman Sachs has argued that the company needs positive results from at least two of its three major late-stage trials; otherwise, the sector-leading valuation could face downward pressure.
The Q2 beat shows that Novartis' growth portfolio is absorbing the initial shock of generic competition better than expected. Investors will watch the July 21 earnings call for management's commentary on second-half recovery and updates on key pipeline catalysts including remibrutinib and ianalumab.
This article is for informational purposes only and does not constitute investment advice.
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