Novartis AG Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Novartis AG's Q3 2025 earnings call highlighted solid financial performance driven by priority brands, pipeline milestones, and reaffirmed full-year guidance, while also addressing generic erosions and strategic capital allocation.
Key Financial Results
Net sales grew by 7%.
Core operating income increased by 7%, with a core margin of 39.3%.
Core EPS came in at $2.25, reflecting a 10% increase.
Free cash flow totaled $6.2 billion.
For the first nine months, net sales grew 11%, core operating income 18%, and core EPS up 21% at $6.94.
Free cash flow reached $16 billion, growing 26% in U.S. dollars.
The company reaffirmed its full-year guidance, expecting high single-digit growth in net sales and low teens growth in core operating income.
Business Segment Results
Priority brands drove robust growth, including Kisqali (68%), Kesimpta (44%), Pluvicto (45%), and Scemblix (95%).
Kisqali led in total brand NBRx, driven by the early breast cancer launch, with US growth up 91%.
Kesimpta saw demand-driven growth, with 45% growth in the U.S.
Pluvicto's U.S. sales were up 53%, driven by new patient starts increasing to 60%.
Leqvio was up 54%, on track for over $1 billion in sales for the year.
Scemblix is on track to be the most prescribed TKI by NBRx in the US.
Cosentyx had a mixed quarter, with growth impacted by one-time effects, but remains on track for mid-single-digit growth in full-year 2025.
The renal portfolio continues to gain traction in the US, with the IgAN portfolio growing 98% versus market growth of 23%.
Capital Allocation
Cash flow remains a strategic priority, enabling reinvestment in the business, bolt-on acquisitions, and returning capital to shareholders.
The company executed multiple bolt-on M&As to strengthen key platforms and pipelines.
The up to $15 billion share buyback program was completed early July, and a new up to $10 billion buyback program was launched, targeted for completion by the end of 2027.
$7.8 billion in dividends were distributed during the first half of the year.
Industry Trends and Dynamics
The advanced lipid-lowering market is growing.
The MS and B-cell markets are growing.
Continued market growth is expected in Cosentyx's core indications and rollout of recent launches in HS and IV.
Competitive Landscape
Kisqali is outpacing the market and CDK4/6 competition.
Pluvicto market share is already surpassing chemotherapy in the pre-taxane setting.
Cosentyx continues to be the number 1 prescribed IL-17 across indications.
In HS, Cosentyx share has stabilized at 52% in naive and 50% overall.
Scemblix is approaching NBRx leadership in first line, and already is the NBRx leader in second line and third line plus.
Macroeconomic Environment
The company noted negative growth to net true-ups in the US, mainly related to Medicare Part D redesign.
Growth Opportunities and Strategies
Significant growth potential is seen for Kisqali in the exclusive population where more than 60% of patients are not currently on a CDK4/6 inhibitor.
There is a significant opportunity for Kesimpta outside of the U.S., where approximately 70% of disease-modifying treated patients are not currently being treated with a B-cell therapy.
Key enablers to sustain Pluvicto's growth in the U.S. include driving community adoption and rolling out the prefilled syringe.
Cosentyx achieved a positive Phase III readout in polymyalgia rheumatica (PMR), representing a market on par with the HS market.
Rhapsido was approved by the FDA as the only oral targeted BTK inhibitor for CSU, with a clean safety profile and rapid onset.
Positive Phase 3 studies were announced for ianalumab, with regulatory submissions on track for the first half of 2026.
The company continues to bolster its technology platforms.
Financial Guidance and Outlook
The company expects high single-digit growth in net sales and low teens growth in core operating income for the full year.
Core net financial expenses are anticipated to be slightly higher at $1.1 billion.
The core tax rate is expected to be in the range of 16% to 16.5%.
Q4 underlying growth is expected to be low single digits on the top line and mid-single digits on the bottom line, reflecting increasing generic erosion.
Currency impact for 2025 is expected to be 0% to 1% on net sales and minus 2% points on core operating income.
For 2026, a slight positive 1% point on net sales and no material impact on core operating income is expected due to currency.
The proposed acquisition of Avidity raises the 2024 to 2029 sales average growth rate from 5% to 6%.
Some short-term core margin dilution is expected, in the range of 1% to 2% points for the next three years, due to Avidity Phase III trials.
