Novartis Faces Patent Expiry Amid Pipeline Shifts

Novartis (NVS) delivered a blowout second quarter in July 2025, lifting full-year profit guidance, even as generic headwinds on blockbuster heart drug Entresto now threaten to reshape the company’s revenue mix through 2026 and beyond.

For long-horizon investors, the critical question is whether the Swiss drugmaker’s oncology and immunology launches can structurally replace the roughly $4 billion in annual sales that Entresto is forecast to surrender to generics – a transition already underway by early 2026.¹

Key Takeaways

Q2 2025 core operating income rose 21% in constant currencies to $5.9 billion.
Kisqali (+64%), Scemblix (+79%), and Leqvio (+61%) are primary growth drivers.
Entresto generic entry triggered a 42% sales drop by Q1 2026.

Strong Q2, But Storm Clouds Form Ahead

Second-quarter net sales reached $14.1 billion, up 12% in U.S. dollar terms, with volume contributing 12 percentage points of growth while generic competition shaved off two percentage points.¹ Core operating income margin expanded 340 basis points in constant currencies to 42.2%, a level that rivals the sector’s more efficient peers but masks an approaching revenue cliff.

By comparison, Eli Lilly and AstraZeneca have benefited from cleaner near-term patent runways; Novartis enters a more complex period as Entresto – which made up roughly 14% of 2024 group sales – faces U.S. generic erosion followed by European patent expiries from November 2026 onward.²

The Replacement Portfolio: Can Launches Fill the Gap?

Cancer drug Kisqali (ribociclib) posted $1.18 billion in Q2 2025 sales, up 64% in constant currencies, driven by an early breast cancer indication launched in the United States that contributed to 100% U.S. growth in the quarter.¹ Scemblix (asciminib), targeting chronic myeloid leukemia, surged 79% to $298 million on first-line market penetration, while cholesterol-lowering injectable Leqvio climbed 61% to the same $298 million figure.

Multiple sclerosis drug Kesimpta added $1.08 billion (+33%), and radioligand therapy Pluvicto contributed $454 million (+30%) after receiving a pre-taxane prostate cancer approval, with a Phase III readout in hormone-sensitive disease also turning positive during the quarter.¹ Together, these five brands are the engine management is counting on to absorb Entresto’s decline.

Pipeline Milestones Add Long-Term Optionality

Beyond current launches, the quarter delivered regulatory and clinical catalysts that matter for the 2027-2030 revenue outlook. The FDA granted accelerated approval to Vanrafia (atrasentan) for IgA nephropathy, a disease area where Novartis also holds zigakibart in Phase III and recently acquired renal-focused Regulus Therapeutics.¹

Votoplam showed a positive Phase II readout in Huntington’s disease, and remibrutinib met its primary endpoint in a food allergy Phase II study, with Phase III planning underway – extending Novartis’s reach into neurological and immunological indications that carry multi-billion-dollar peak sales potential.¹

Capital Allocation: Buyback Signals Confidence, Raises Leverage

Management initiated a new up-to $10 billion share buyback to be completed by year-end 2027, following the completion of the prior $15 billion programme.¹ Net debt rose to $23.8 billion at June 30, 2025, from $16.1 billion at year-end 2024, as the dividend payout ($7.8 billion), buyback activity, and M&A spending outpaced free cash flow of $9.7 billion for the first half.

Chief Executive Vas Narasimhan said the balance sheet underpins the company’s strategic ambitions.

“Our robust balance sheet and confidence in our mid and long-term growth enable us to initiate an up-to USD 10 billion share buyback as part of our commitment to balanced capital allocation,” Narasimhan said.¹

Guidance Raised – With a Visible Caveat

Full-year 2025 core operating income guidance was raised to low-teens growth (from low double-digit), while net sales growth was held at a high single-digit rate.¹ However, company assumptions explicitly incorporate Entresto U.S. generic entry at mid-2025, suggesting the raised bar already prices in the first wave of erosion.

By Q1 2026, those assumptions proved prescient: Entresto sales had fallen 42% to $1.31 billion, missing analyst consensus, and the company guided for roughly $4 billion in full-year 2026 sales lost to generics – with European patent expiries adding a second leg of pressure later that year.^2,3 Management maintained full-year guidance nonetheless, citing acquisition momentum including the $12 billion Avidity Biosciences deal and pipeline readouts expected in the second half of 2026.²

Investor Perspective

The Q2 2025 results demonstrate that Novartis’s growth engine is firing on multiple cylinders across oncology and immunology, generating a cash-flow profile sufficient to fund both capital returns and pipeline investment. The durability of that engine over the 2026-2028 patent-cliff period – and whether Kisqali, Scemblix, Pluvicto, and emerging assets such as Vanrafia and remibrutinib can collectively replicate Entresto’s roughly $9 billion annual sales peak – is the central valuation question for investors with a multi-year horizon.

Not investment advice. For informational purposes only.