Novartis (NVS) Q3 2026 earnings review
Novartis raises its profit plan, but trial failures cut earnings
Swiss drugmaker Novartis grew sales and lifted its full-year profit plan while a failed muscle-disease trial cut reported earnings. Third-quarter revenue rose 4% to $14.5 billion as fast-growing cancer and multiple sclerosis drugs outweighed generic copies of heart drug Entresto. Lower administrative overhead lifted operating profit excluding one-offs by 10%, so chief executive Vas Narasimhan raised the annual profit forecast. By our math, the full-year outlook points to sales growth reaching about 8% in the fourth quarter.
| Net sales | $14.5B +4% in constant currencies |
|---|---|
| Profit per share, excluding one-offs | $2.46 +8% in constant currencies |
| Reported net income | $1.2B -70% on $1.9B trial write-down |
| Full-year profit outlook (excluding one-offs) | Raised flat to low single-digit growth (was low single-digit decline) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because strong commercial execution and a major clinical failure pulled in opposite directions. Newer medicines and lower overhead proved they can cover the Entresto patent loss and research costs from acquired biotechs. The bad news: del-desiran — the lead drug from February's $12 billion Avidity purchase — and heart drug pelacarsen both missed their main Phase III goals, triggering a $1.9 billion write-down.
The question now is whether Novartis's $15.5 billion buying spree will replace the blockbusters losing patent protection around 2030. One camp sees remibrutinib's multiple sclerosis win and earlier-stage Pluvicto approval as enough, while the other sees the Avidity write-down and higher debt as proof that buying growth is getting harder. Fourth-quarter FDA talks on Avidity's second muscle drug, del-brax, will provide the next test.
🐂 Bull Case
Newer Medicines Outrun the Entresto Patent Loss
Novartis is navigating the loss of US patent protection on Entresto, its biggest heart failure medicine, along with cancer drugs Promacta and Tasigna. Chief executive Vas Narasimhan said that "priority brands and launches more than offset generic erosion, demonstrating the replacement power of the business". Sales grew 4% in the third quarter even though cheaper generic copies took 9 percentage points off total growth.
- Kisqali (breast cancer): $1,821 million, up 37% in constant currencies
- Kesimpta (multiple sclerosis): $1,484 million, up 22% in constant currencies
- Pluvicto (prostate cancer): $674 million, up 20% in constant currencies
- Scemblix (leukemia): $593 million, up 67% in constant currencies
- Leqvio (cholesterol): $506 million, up 63% in constant currencies, lifted by China reimbursement
- Entresto, Promacta and Tasigna combined: $1,448 million, down 41% in US dollars by our math
Those five growing medicines now bring in 35% of company sales, up from 27% a year ago by our math. Because the three older drugs have already shrunk to 10% of revenue, their falling sales subtract less from the total each quarter. Sales in China also rose 18% in constant currencies to $1.2 billion.
What to watch: fourth-quarter constant-currency sales growth on February 3, 2027. By our math, the full-year outlook points to about 8% growth as the first full quarter of US Entresto generics enters the year-ago base.
Lower Overhead Lifts Margin and Full-Year Plan
Three months ago, Novartis expected full-year core operating income (profit excluding one-offs and asset write-downs) to fall by a low single-digit percentage because of research costs from newly acquired biotech companies. Instead, third-quarter core operating income rose 10% in constant currencies to $6.0 billion, and the Swiss drugmaker raised its full-year profit forecast.
Lower selling and administrative overhead carried the margin. Selling, general and administrative expenses fell 7% to $3.1 billion, or 21.2% of net sales, down 2.6 percentage points from 23.8% a year ago by our math, which Novartis said was "driven by productivity". That saving more than covered a 5% constant-currency increase in core research spending and lifted the core operating margin by 2.3 percentage points to 41.6%.
What to watch: fourth-quarter selling and administrative expenses as a share of sales. Staying near 21% during the heavier year-end spending quarter would show that overhead savings can absorb ongoing biotech research costs.
Pluvicto and Remibrutinib Clear Late-Stage Hurdles
Pluvicto, a targeted radioactive therapy for prostate cancer, had slowed to single-digit quarterly dollar gains as its initial patient group matured. In the third quarter, US and Chinese regulators approved the medicine for earlier-stage hormone-sensitive prostate cancer, making it eligible for patients across all stages of metastatic disease that carry the target protein.
Meanwhile, oral tablet remibrutinib (sold as Rhapsido for skin hives, where it reached $101 million in third-quarter sales) passed two Phase III trials in relapsing multiple sclerosis. It reduced relapse rates and slowed disability progression against standard pill teriflunomide with no liver safety issues, while the FDA also approved Rhapsido for a second hive condition. Novartis stopped a separate trial of the drug in myasthenia gravis after an interim check showed it was unlikely to work.
What to watch: Pluvicto quarterly sales additions over the next two quarters. A step-up from the $23 million added in the third quarter would show doctors are adopting the earlier-stage prostate cancer approval.
🐻 Bear Case
Two Late-Stage Trial Failures Cost $1.9 Billion
Novartis bought Avidity Biosciences in February 2026 for $12.0 billion in cash to get RNA medicines for rare muscle diseases, assigning $7.48 billion of that price to lead drug del-desiran for myotonic dystrophy type 1 (DM1). In September, del-desiran failed to meet its main goal of improving hand-opening time in its Phase III trial.
"While the del-desiran readout in DM1 was not what we had hoped, we saw evidence of clinical activity in the data and are working through the development path for this medicine," Narasimhan said. Despite that reassurance, Novartis wrote down the asset by $1.94 billion (26% of its book value) and pushed its planned regulatory filing window out to 2029 or later. That charge pushed research and development expense up 14.3 percentage points of sales to 35.5% and cut reported operating income by 59% to $1.8 billion.
In a second setback, cardiovascular drug pelacarsen failed to reduce heart attacks and strokes in its Phase III trial despite lowering blood levels of lipoprotein(a), and Novartis discontinued lifonebart in Alzheimer's disease and ALS. What to watch: the outcome of fourth-quarter FDA discussions on del-brax, the second Avidity muscle drug, which still carries part of the remaining $9.3 billion of Avidity intangible assets.
Acquisition Debt Lifts Interest Costs by 67%
Novartis has spent $15.5 billion in cash on four biotech acquisitions over the first nine months of 2026 — Avidity, Pikavation, Myricx (closed in August for $1.1 billion) and Excellergy — to refill its pipeline for the 2030s, while supporters view these deals as essential to replace future patent losses. That spending, alongside $9.1 billion in dividends and $4.8 billion in net share buybacks, exceeded the $14.0 billion of free cash flow generated over the same period.
To fund the gap, the company issued $12.9 billion in bonds this year, pushing net debt up to $37.4 billion from $21.9 billion at the end of 2025. Higher borrowing lifted third-quarter interest expense by 67% from a year ago to $468 million and slowed buybacks under the $10 billion programme to $700 million in the quarter by our math.
What to watch: full-year net financial expense against the company's $1.7 billion target, as October's licensing deal with Abogen Biosciences adds further upfront commitments.
Risks this quarter didn't answer
Several standing questions around revenue quality, launch pricing and long-term competition received no new detail in the third-quarter report.
- Cosentyx underlying demand and billing adjustments: sales rose 9% to $1,857 million, but Novartis noted US growth benefited from "prior-year revenue deduction adjustments" without giving the dollar amount.
- Rhapsido paid versus free prescriptions: sales reached $101 million, supported by "a free drug program facilitating patient access", with no split between paid and free volume.
- Ianalumab US launch and pricing: the Sjögren's disease drug remained in the awaiting-regulatory-decision table at quarter-end, leaving its launch timing and US pricing unconfirmed.
- Kisqali long-term competition: six-year trial data showed a 20% reduction in risk of death in early breast cancer, though potential competition from rival oral drugs remains a post-2026 test.
What to watch: management's November 18–19 investor event in London for disclosure on paid Rhapsido prescription rates and the size of third-quarter billing adjustments.
💲 Other KPIs
Free cash flow — operating cash flow minus factory and equipment spending — fell 18% from $6,217 million a year ago, and is down 12% over the first nine months to $14.0 billion. Unfavorable working capital shifts and a $256 million jump in cash interest paid drove the third-quarter drop.
Uncollected customer bills rose 9.4% from $8,937 million at the end of 2025, climbing from $9,386 million in the first quarter and $9,636 million in the second. That 9.4% build outpaced the 2% US dollar net sales growth over the first nine months and weighed on operating cash flow.
Average diluted shares fell 1.8% from 1,940 million a year ago, following 1,916 million in the first quarter and 1,914 million in the second. The lower share count added 1 percentage point to core profit per share growth in the third quarter, lifting it to 9% in US dollars.
🔮 Guidance
Unchanged. The plan still calls for low single-digit constant-currency sales growth for the full year (about 2% at the middle of the range), plus a 1 percentage point lift from exchange rates. Because sales were flat in constant currencies over the first nine months, the full-year midpoint leaves about 8.2% constant-currency growth for the fourth quarter by our math, as the initial US Entresto generic drop enters the year-ago comparison.
Raised. Novartis lifted its full-year core operating income plan from a low single-digit decline to flat or low single-digit growth (about 1.5% at the middle of the range), with a 1 percentage point currency tailwind. With nine-month core operating income down 2% in constant currencies, that midpoint points to about 13.5% growth in the fourth quarter by our math, up from 10% in the third quarter.
❓ Key Questions
What is the regulatory path left for del-desiran in DM1?
After del-desiran missed its main Phase III goal and took a $1.94 billion write-down, Novartis pushed its filing timeline to 2029 or later. Investors need to know whether regulators will require a brand-new Phase III trial before considering approval.
How much of Rhapsido's $101 million came from paid prescriptions?
Novartis said Rhapsido's US uptake was supported by a free drug programme, without disclosing what share of patients are paying. The conversion rate from free starter supply to commercial insurance coverage determines whether the launch is building durable revenue.
How large was the prior-year billing adjustment lifting US Cosentyx?
Cosentyx grew 9% in the quarter, helped in the US by adjustments to prior-year revenue deductions. Because one-time billing true-ups have swung reported growth in four of the last seven quarters, the exact dollar benefit is needed to judge underlying demand.
Why has ianalumab not yet received FDA approval in Sjögren's?
Management previously expected third-quarter FDA approval for ianalumab in Sjögren's disease, but the drug remained on the pending regulatory decisions list at the end of October. Any review extension would delay a launch meant to support growth before 2030.