Novartis Inc Earnings - Q2 2026 Analysis & Highlights
Novartis delivered strong Q2 2026 performance with growth drivers accelerating, returning to sales growth while advancing a robust pipeline with multiple anticipated readouts in the second half of the year.
Key Financial Results
Net sales grew 1% in constant currencies to $14.4 billion in Q2 2026, with strong performance from priority brands offsetting significant generic erosion.
Core operating income was flat at $5.9 billion in Q2, as sales growth drivers and productivity gains offset generic erosion impact.
Core operating income margin was 41.2% of net sales, declining 70 basis points versus the prior year, primarily due to incremental Avidity costs with lower gross margin offset by productivity gains.
Free cash flow for Q2 was $5.6 billion, in line with expectations.
First half net sales declined 2% with core operating income declining 7% and core operating margin declining 2.3 percentage points to 39.4%.
Free cash flow for the first half was $8.9 billion.
Q2 results were positively impacted by one-time phasing items that added approximately 1 percentage point to net sales and about 5 percentage points to core operating income, which will reverse in the second half.
Business Segment Results
Growth drivers were up 36% in constant currencies, including strong performance from Kisqali, Kesimpta, Scemblix, Pluvicto, and Leqvio.
Kisqali grew 43% in constant currencies, with US sales up 39% reaching over $1 billion for the first time, and ex-US sales up 49% with accelerating early breast cancer launches.
Kesimpta grew 32% in Q2, with increasing treatment share in both B-cell and MS markets, and growing new patient share ahead of competitors in first line and first switch segments.
Pluvicto grew 43%, driven primarily by the PSMA-4 population and pre-taxane mCRPC, with pre-taxane now driving over 70% of new patients in the US and 83% growth in new patients outside the US.
Leqvio grew 59% driven by strong global demand, with US growth of 55% and monthly TRx growth of 49%, demonstrating strong persistency.
Scemblix had 89% constant-currency growth, with 93% growth in the US and expected first line NBRx leadership share in the second half of the year.
Cosentyx grew 10% in constant currencies, with US growth of 16% and steady NBRx share in the high 40s for hidradenitis suppurativa.
Rhapsido continues its strong launch trajectory with over 4,000 prescribers and over 10,000 patients treated in the CSU launch, with 60% of patients treated in the first line setting.
Capital Allocation
Dividends paid in the first half were $9.1 billion.
Share repurchases totaled $2.1 billion under the current up to $10 billion share buyback program in the first half.
$5.6 billion remains to be executed in the current share buyback program, with completion targeted by end of 2027.
Multiple bolt-on M&A and BD transactions were completed, including Pikavation and Excellergy acquisitions.
Continued investment in internal R&D pipeline alongside M&A activities.
Industry Trends and Dynamics
Strong demand for advanced lipid-lowering therapies, with Leqvio outpacing the advanced lipid lowering market with 49% monthly TRx growth.
B-cell therapies have not adequately penetrated markets outside the US, with two-thirds of patients remaining treated with older therapies, representing a clear expansion opportunity.
Significant opportunity in chronic inducible urticaria, with approximately 100,000 CIndU patients in the US uncontrolled with antihistamines and no other treatment options.
Strong demand for infrequently administered, physician-administered medicines for lipid lowering in the United States, particularly in the Medicare Part B segment.
High demand for siRNAs in Asia and Middle East for cardiovascular applications.
Competitive Landscape
Kisqali outpaced the CDK4/6i market with strong performance in both US and ex-US markets, reaching 79% eBC NBRx share in Germany.
Kesimpta growing NBRx share ahead of competitors in first line and first switch segments, which are target switch segments for the medicine.
Scemblix achieving first line NBRx leadership in Japan with 15% early NBRx first line share in Germany.
Competitive advantages in RLT delivery through extensive supply network and ability to deliver on time in full to physicians globally.
Leqvio positioned in a segment insulated from gross-to-net battles between monoclonal antibodies and oral therapies, supporting long-term $4-5 billion plus product potential.
Macroeconomic Environment
Generic erosion impact in first half, with significant generic erosion offsetting sales growth drivers.
US Entresto generic erosion of approximately $800 million in Q3 base, impacting H2 sales growth rates between Q3 and Q4.
Exchange rate impact expected to be positive 1 percentage point on full-year net sales and core operating income if rates remain at mid-July 2026 levels.
Growth Opportunities and Strategies
Kisqali exclusive early breast cancer segments driving future growth, with 58% of new patients from exclusive N0 and N1 nodal populations and 16% increase in total prescriber base.
Pluvicto HSPC approval expected in Q3 will increase eligible patient pool by 75%, providing strong foundation for further growth.
Kesimpta Phase III program with once every two months dose for maintenance dosing on track for 2027 readout.
Rhapsido expansion into chronic inducible urticaria with RemIND data supporting remibrutinib as first targeted therapy for CIndU, with FDA approval expected in second half for SD subtype.
Ianalumab multi-blockbuster potential with ongoing Phase III readouts for ITP first line in second half 2026, SLE and Lupus Nephritis in 2027, and Systemic Sclerosis Phase II in 2027.
Del-zota FDA submission for accelerated approval in DMD exon 44 skipping using Dystrophin as surrogate biomarker, with expected first launch in first half 2027.
Del-brax Phase I/II study met primary and key secondary biomarker endpoints, with base case submission in 2028 but potential for earlier filing based on regulatory engagement.
Leverage existing Leqvio field force for pelacarsen launch with investments factored into margin guidance.
Expansion of siRNA portfolio in China with opportunity to bring additional siRNAs rapidly for cardiovascular applications.
Financial Guidance and Outlook
Full-year 2026 guidance reaffirmed with net sales expected to grow low single digit and core operating income expected to decline low single digit.
Core net financial result expected around $1.7 billion for full year 2026.
Core tax rate expected around 16.5% for full year 2026.
H2 net sales expected to grow mid single digit as the company moves beyond US generic erosion impact.
H2 core operating income expected to grow mid to high single digit with continued investment in growth drivers and R&D pipeline.
Kisqali peak sales goal of $10 billion remains on track.
Cosentyx $8 billion peak sales guidance maintained with FDA approval for Polymyalgia Rheumatica indication expected in second half.
Ianalumab standalone Sjogren's potential of multibillion dollars.
Leqvio peak sales potential of $4-5 billion plus in the US and beyond.
ITVISMA and Zolgensma combined $3 billion peak sales potential, with ITVISMA expected to reach $2 billion range.
Pipeline and Clinical Development
Kisqali six-year follow-up data demonstrates clinically meaningful OS in broadest at-risk eBC population, with iDFS benefit continuing to strengthen over time.
Four readouts completed in first half with multiple additional readouts expected in second half including pelacarsen, remibrutinib, and Daldisaran.
Pelacarsen HORIZON trial powered for 13-15% CVRR benefit, with study on track for readout in second half 2026.
Remibrutinib MS Phase III study on track with blinded safety and relapse rate monitoring indicating study performing as expected.
Abelacimab Phase III study upsized given observed event rates, on track for readout at 75% of events before end of year with potential continuation to 2028 if stopping criteria not met.
Votoplam Huntington's disease base case remains Phase III study requirement with FDA engagement expected in second half.
