Novartis Profit Beats Estimates as Entresto Sales Plunge 50%

Novartis AG NVS, a Swiss pharmaceutical company focused on innovative medicines, reported stronger-than-expected second-quarter results as newer cancer treatments helped offset declining sales from its former blockbuster heart drug Entresto. Earnings excluding certain items remained unchanged at $5.94 billion, beating the $5.34 billion average estimate from analysts surveyed by Bloomberg, while sales also came in above expectations and returned to growth. Novartis shares rose as much as 3.25% on Tuesday after gaining about 12% over the year through Monday, outperforming Roche Holding AG (RHHBY), a Swiss rival that is also scheduled to report earnings this week. The results may offer investors some reassurance that Novartis is moving through the most difficult stage of its patent cliff, although Entresto sales fell 50% last quarter as cheaper generic alternatives entered the market.

Novartis maintained its full-year forecast for sales growth and a low-single-digit decline in core operating profit, despite the stronger quarter. Vontobel analyst Stefan Schneider said he was surprised that the performance did not lead to a guidance upgrade. Investors may now focus on Rhapsido, the company's new pill for chronic skin disease, which generated $64 million in quarterly revenue after launching in the US and China and exceeded estimates. Novartis is also preparing to release important clinical results for experimental treatments targeting heart disease and multiple sclerosis, including Del-desiran, a medicine designed to address the genetic cause of a muscle disease and acquired through the company's $12 billion purchase of Avidity Biosciences, an RNA-medicine developer.

Chief Executive Officer Vas Narasimhan has announced more than $15 billion of acquisitions over the past year as Novartis works to build a new generation of growth medicines. These transactions include Avidity Biosciences, Tourmaline Bio, a biotechnology company developing a treatment for inflammation linked to heart disease, and Synnovation Therapeutics, a developer of experimental compounds targeting cancer-driving proteins. Novartis has also agreed to acquire Myricx Bio, an early-stage cancer-drug company whose treatments have only recently entered clinical testing, while Narasimhan said the company remains interested in smaller biotechnology deals and is open to larger acquisitions. The company is also planning seven new US facilities as part of a broader $23 billion manufacturing expansion, with much of the investment directed toward radioligand therapy, where Novartis has two approved medicines, Pluvicto and Lutathera, and the additional capacity may help reduce its exposure to potential industry tariffs.