Novartis Earnings Preview: Can New Medicines Offset Generic Pressure and Growing U.S. Pricing Risks?

Although first-quarter revenue fell 1% year over year to $13.1 billion, or 5% at constant currencies, the results largely matched management's expectations as several blockbuster medicines lost patent protection in the United States.

Chief Executive Vas Narasimhan described the period as "the biggest loss of exclusivity in Novartis ' history, emphasizing that the weakness reflected temporary patent expirations rather than deteriorating demand across the company's portfolio.

Core operating income declined 14% on a constant-currency basis, while core EPS fell 15% to $1.99. The decline reflected lower sales as well as continued investment in research and development. Despite this pressure, Novartis maintained healthy profitability with a 37.3% core operating margin, while free cash flow remained broadly stable at $3.3 billion. That suggests the company continues to generate substantial cash even during a challenging earnings period.

The brighter picture came from Novartis' growth portfolio, where nearly every strategic medicine continued to post double-digit expansion.

Kisqali remained the standout performer, with sales jumping 55% as adoption broadened in breast cancer. Pluvicto climbed 70%, reflecting growing demand for radioligand therapies, while Kesimpta increased 26% as multiple sclerosis patients continued switching to newer treatments.

Other recently launched medicines also maintained exceptional momentum. Scemblix surged 79%, and Leqvio advanced 69%. Several pipeline candidates also achieved important regulatory milestones, including positive late-stage data for Remibrutinib and priority review for Ianalumab.

The acquisition of Avidity Biosciences also strengthened Novartis' long-term growth pipeline by adding several late-stage neuromuscular disease candidates.

Overall, these performances suggest that the underlying business remains healthy despite temporary revenue headwinds from generic competition. Management therefore reaffirmed its full-year guidance, still expecting low-single-digit sales growth while forecasting a low-single-digit decline in core operating income during fiscal 2026.

The second-quarter report is unlikely to be judged solely on whether earnings beat analyst estimates. Instead, investors will be looking for confirmation that the company's growth engines continue to compensate for patent losses.

The first area to monitor will be sales momentum across Novartis' priority medicines. Markets will want to see whether Kisqali, Pluvicto, Kesimpta, Leqvio, and Scemblix can maintain the exceptional growth rates seen in the first quarter. Sustained expansion would reinforce management's confidence that the worst impact from generic erosion may already be passing.

Novartis' shift toward high-innovation pharmaceuticals has made regulatory milestones, late-stage trial results, and new product rollouts top priorities for investors. Progress on key therapies such as remibrutinib, Fabhalta, and ianalumab will likely influence the company's long-term growth trajectory far more than minor quarterly earnings fluctuations.

Industry analysts also 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 widely seen as important long-term opportunities. Collectively, these therapies 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.

Investors will also focus on management's commentary regarding the second half of 2026. The company previously guided for stronger growth later in the year as comparisons become easier after the initial wave of generic competition. Any indication that this recovery remains on track would likely reassure investors that 2026 represents a transition year rather than the beginning of a longer slowdown.

Finally, analysts will pay close attention to research and development spending. Novartis has deliberately continued investing aggressively despite lower earnings. If management maintains this strategy while preserving margins, it would reinforce confidence that today's spending is intended to support tomorrow's product launches rather than simply offset current weaknesses.

Although second-quarter numbers will attract most of the immediate attention, a much larger issue has been dominating discussions across the global pharmaceutical industry in recent months: the impact of the Most Favored Nation (MFN) pricing policy.

President Donald Trump's MFN pricing policy has fundamentally changed how pharmaceutical companies think about launching medicines around the world. Under the policy, prices paid in the United States — the world's most profitable pharmaceutical market — can increasingly be linked to prices charged in other wealthy countries, including many European nations.

For decades, drugmakers accepted lower prices across Europe because premium pricing in the United States largely compensated for thinner overseas margins. That model is now under pressure. Novartis CEO Vas Narasimhan recently warned that the full impact of the policy could become visible over the next 18 months, describing it as a potentially "very difficult situation" for both patients and pharmaceutical companies.