Novartis Inc Earnings - Q1 2026 Analysis & Highlights
Novartis delivered strong Q1 2026 results driven by priority brands and pipeline progress, with growth drivers up 34% in constant currency, while navigating significant generic erosion and maintaining full-year guidance amid a challenging macroeconomic environment in key markets like China.
Key Financial Results
Q1 2026 sales declined 5% in constant currency, impacted by significant US generic erosion from Entresto, Promacta, and Tasigna, partially offset by strong performance in priority brands.
Core operating income declined 14% in Q1, driven by the sales decline and increased R&D investments.
Core margin declined 4.1 percentage points in Q1, primarily due to higher R&D investments and the impact of generics on gross margin.
Free cash flow remained broadly in line with prior year Q1 despite lower core operating income, supported by favorable working capital movements.
Growth drivers (priority brands and launches) grew 34% in constant currency, demonstrating strong momentum in key medicines.
Base business was largely stable but significantly impacted by generic erosion as previously guided.
Business Segment Results
Kisqali grew 55% with strong momentum in both early breast cancer and metastatic breast cancer, achieving 65% NBRx share in early breast cancer (up 2 percentage points) and 47% NBRx share in metastatic breast cancer in the US.
Kesimpta grew 26%, ahead of both the MS and B-cell markets, with 21% TRx growth in the US and NBRx market share reaching 17% overall and 28% in the B-cell class.
Pluvicto grew 76% in the US with over 70% of business coming from the pre-taxane mCRPC setting, and grew 48% outside the US driven by strong EU uptake and a solid start in Japan.
Leqvio grew 31% in the US and achieved 106% constant currency growth outside the US, led by strong China performance following NRDL-listing.
Scemblix grew 79% with 31% first-line NBRx share in the US and 42% share across all lines, while growing 68% outside the US driven by third-line leadership at 73% share.
Cosentyx was broadly stable with approximately 2% global sales growth when adjusting for onetime effects from the prior quarter, with stable gross-to-net dynamics across the indication suite.
Fabhalta grew 103% with 50% NBRx share in PNH and 56% NBRx share in C3G, approved in 46 countries.
Rhapsido CSU launch achieved 24% NBRx share with 3,000 prescribers and 6,000 patient starts in early phases, with early access wins from ESI, Cigna, and Optum.
Capital Allocation
Closed the Avidity acquisition in Q1 2026, adding three late-stage medicines for neuromuscular disease.
Announced two early-stage deals to support oncology and immunology disease franchises.
Paid $9.1 billion in dividends in March and April as previously announced.
Share buyback program has $6.1 billion remaining and is targeted to complete by end of 2027, with up to $10 billion total program.
Increased R&D investments as part of the company's strategic focus on pipeline advancement.
Industry Trends and Dynamics
China market stabilization with high-single digit to low-double digit growth expected going forward, though not returning to pre-2025 growth levels.
Increased competitive entries across segments in China with a higher number of competitors entering each segment.
Strong demand for advanced therapies in multiple indications including MS, breast cancer, and renal disease.
Market expansion opportunities in multiple therapeutic areas, including hidradenitis suppurativa where the market is growing and guided to be a $5 billion market.
Significant runway for Kesimpta with two-thirds of DMT-treated patients continuing to not be on B-cell therapy in key markets.
Competitive Landscape
Kisqali maintains strong competitive position in both early and metastatic breast cancer, with unique positioning in node1 high-risk and node0 high-risk patient segments.
Cosentyx facing competitive pressures in China with multiple local NRDL entrants, though the company has maintained very strong share performance over many years.
Kesimpta gaining market share from both B-cell class competitors and older drugs, with strong operational execution and improved targeting of physician groups.
Scemblix demonstrating breadth of interest across all treatment lines with leadership position in third-line setting outside the US at 73% share.
Pluvicto successfully positioned as community-accessible medicine with over 60% of NBRxs coming from community oncologists.
Macroeconomic Environment
MFN (Most Favored Nation) pricing impact fully factored into guidance for both 2026 and the five-year outlook, with clear assumptions on impact to existing portfolio and future launches.
Tariff mitigation through commercial agreement with US government and scaling up of US manufacturing plants to produce fully in the US for the US market.
Exchange rate assumptions showing positive plus 2% impact on full year sales and positive 1% on full year core operating income at late-April levels.
Growth Opportunities and Strategies
Rhapsido positioned as pipeline-in-a-pill with potential to address multiple dermatology and immunology indications including CSU, CIndU, MS, HS, and food allergy.
Pluvicto expansion into hormone-sensitive indication expected in second half, which could increase total patient pool available by 75%.
Leqvio outcomes data expected in first half of next year in secondary prevention setting, representing an important inflection point for the medicine.
Kesimpta every two months dose in development with readout expected next year.
Remibrutinib multi-indication strategy with Phase III studies in MS, Phase II data in food allergy showing 86.7% responders at 100-milligram dose, and accelerated HS program into second half.
Del-desiran Phase III readout expected in second half for DM1 with compelling Phase II data showing impressive functional improvements.
Ianalumab received Breakthrough Therapy designation and priority review in Sjögren's disease with positive second-line ITP data and first-line data expected in second half.
Pelacarsen HORIZON study readout expected in early second half with potential for significant market opportunity once testing rates increase.
Cosentyx life-cycle management efforts including new formulations, extended dosing intervals, and pediatric HS indication with FDA approval received.
Kisqali life-cycle strategy focused on CDK2, CDK2/4 combinations and Pikavation as pan-mutant PIK3CA inhibitor to avoid hyperglycemia and off-target toxicities.
Leqvio expansion to 12-month dosing and combinations targeting other siRNA targets within cardiovascular disease.
IL-15 (GIA632) advancement into vitiligo with Phase IIa study in atopic dermatitis recruiting and vitiligo study set to begin.
Pipeline and Clinical Development
Rhapsido CIndU positive readout with significantly higher rates of complete responses versus placebo across all three CIndU types, on track for FDA approval in first subtype with submissions of other two types in second half.
Del-zota one-year results for DMD exon 44 skipping medicine presented at Muscular Dystrophy Association with remarkable creatine kinase declines.
Del-desiran final Phase I/II results published in The New England Journal showing excellent profile with Phase III HARBOR study readout expected in second half.
Fabhalta IgAN data showing 49% slowing in kidney function decline versus placebo and 43% reduction in progression to kidney failure, with FDA priority review granted for traditional approval.
Vanrafia traditional FDA approval expected to drive future growth with 11% NBRx share in competitive field.
Votoplam Phase III study confirmed 10-milligram dose as appropriate with discussions ongoing with partner PTC on next steps.
FSHD biomarker cohort readout expected in first half with plan to disclose data after FDA discussions on accelerated approval potential.
Remibrutinib food allergy Phase III targeting multi-allergen prevention study across ages 12-65 years with initiation expected in second half, addressing 3.5 million high-risk eligible patients.
Multiple H2 readouts including pelacarsen, remibrutinib MS (two replicate studies), del-desiran DM1, Rhapsido HS, QCZ484 siRNA for hypertension Phase II, and VHB937 ALS TREM2 antibody.
Financial Guidance and Outlook
Full year 2026 guidance reaffirmed with low-single digit sales growth and low-single digit decline in core operating income.
2026 characterized as year of two halves with H1 sales expected to decline low-single digit and core OpInc to decline low-double digits, while H2 sales expected to grow mid-single digit and core OpInc to grow mid- to high-single digit.
Q2 sales expected to decline low-single digit and core OpInc expected to decline high-single digit to low-double digit.
Core net financial expense expected at $1.7 billion and core tax rate expected at 16.5%.
Cosentyx peak sales expected in 2027 given IRA event in 2028 and US LOE projected in 2029.
Cosentyx expected to continue mid-single digit growth globally with mix of US and ex-US performance.
Leqvio aspiration to reach Entresto scale with Entresto guided as billion-dollar medicine across indications.
Pluvicto peak sales guidance of $5 billion-plus maintained despite European pre-taxane filing withdrawal.
Rhapsido expected to be very large medicine in CSU alone with additional upside from CIndU, MS, HS, food allergy and other indications.
Mid- to long-term growth outlook of 5% to 6% out to 2030 with potential for upside from multiple H2 readouts including remibrutinib MS, remibrutinib HS, del-desiran DM1, ianalumab first-line ITP, and pelacarsen.
2027 readouts expected including abelacimab in stroke prevention, Kesimpta data, Phase II readouts, and immune reset portfolio.
