Novartis (NVS) posted a 21% jump in second-quarter core operating income on Thursday, lifting full-year profit guidance even as generic rivals shaved two percentage points off group sales growth.
The guidance upgrade – to low-teens core operating income growth from low double-digit – signals the Swiss drugmaker believes its oncology and cardiovascular franchise can absorb the coming wave of patent expirations that is already pressuring peers across the sector.
Key Takeaways
- Core operating income rose 21% in constant currencies to $5.9 billion
- Full-year core operating income guidance raised to low-teens growth
- $10 billion share buyback initiated, to be completed by end-2027
Market Context & Competitive Positioning
Novartis reported Q2 net sales of $14.1 billion, up 12% in U.S. dollar terms, outpacing the broader large-cap European pharma peer group where mid-single-digit top-line growth has been the recent norm 1. Generic competition trimmed two percentage points from reported growth – a headwind management expects to intensify, having flagged assumed mid-2025 U.S. generic entry for heart drug Entresto in its modelling assumptions.
The contrast with the company’s own forward trajectory is stark: Morningstar/Dow Jones data published in April 2026 show Entresto sales eventually falling 42% year-on-year once generics fully arrived, underscoring the scale of the replacement challenge Novartis is navigating right now 2.
Detailed Analysis: What Drove the Beat
Six brands accounted for the bulk of growth in constant-currency terms: breast-cancer drug Kisqali (+64%), cholesterol medicine Leqvio (+61%), chronic myeloid leukaemia treatment Scemblix (+79%), multiple sclerosis therapy Kesimpta (+33%), heart-failure drug Entresto (+22%), and prostate-cancer radioligand Pluvicto (+30%) 1. Core operating margin expanded 340 basis points in constant currencies to 42.2% of net sales, reflecting the operating leverage from volume-driven revenue rather than price increases.
Free cash flow surged 37% to $6.3 billion in the quarter, giving the balance sheet room to simultaneously fund a $10 billion share repurchase programme and absorb net debt that stood at $23.8 billion at June 30, up from $16.1 billion at year-end 2024. The debt build reflects a $7.8 billion dividend payment, $5.4 billion in buyback outflows, and $3.1 billion in M&A and intangible-asset transactions during the first half.
Pipeline Milestones Underpin M&A Rationale
The quarter delivered a positive Phase III readout for Pluvicto in hormone-sensitive prostate cancer – the drug’s third positive Phase III result – with a regulatory submission to the FDA targeted for the second half of 2025 1. The FDA also granted accelerated approval for Vanrafia (atrasentan) in IgA nephropathy, while Novartis completed global regulatory submissions for gene therapy OAV101 IT in spinal muscular atrophy.
On the deal front, Novartis completed the acquisition of Regulus Therapeutics and secured an exclusive option on Sironax’s blood-brain-barrier platform – moves consistent with the biotech-consolidation playbook the company has pursued aggressively heading into its patent-cliff period 3. Huntington’s disease candidate votoplam also met its primary endpoint in a Phase II study, providing an early signal for the neuroscience pipeline.
Outlook & Management Commentary
CEO Vas Narasimhan said the quarter demonstrated the company’s ability to replace maturing revenue streams with its newer launches.
“Novartis delivered another strong quarter, with double-digit sales and core operating income growth. We continue to drive strong performance on our ongoing launches for Kisqali, Pluvicto, and Scemblix, demonstrating the replacement power in our portfolio,” Narasimhan said.
For full-year 2025, Novartis kept its net sales growth target at high single-digit in constant currencies while raising the core operating income growth target to low-teens. The company said foreign exchange, at mid-July rates, would add one percentage point to sales but subtract one percentage point from core operating income for the full year.
Conclusion
The Q2 print reinforces the case that Novartis has enough near-term launch momentum to cushion the blow from generic competition – at least through 2025. How durable that cushion proves once Entresto generics fully erode branded sales, and whether the M&A pipeline can generate sufficient new revenue by the early 2030s when Cosentyx, Kesimpta, and Kisqali face their own patent cliffs, remains the central question for longer-term investors.
Not investment advice. For informational purposes only.
References
1Novartis (July 17, 2025). “Novartis reports strong Q2 with double-digit sales growth and core margin expansion; raises FY 2025 core operating income guidance”. Novartis.com. Retrieved July 21, 2026.
2Whittaker, Adam and Chopping, Dominic (April 28, 2026). “Novartis Earnings Hit by Generic Competition – Update”. Morningstar / Dow Jones Newswires. Retrieved July 21, 2026.
3Levy, Sandra (April 29, 2026). “Generic competition impacts Novartis’ earnings”. Drug Store News. Retrieved July 21, 2026.