Novartis AG (SIX: NOVN; NYSE: NVS) reported third-quarter 2026 net sales of $14.52 billion, representing 4% growth, while statutory net income declined 70% to approximately $1.20 billion. The sharp earnings decline was driven principally by higher research and development expenses, including a $1.9 billion partial impairment of the in-process research and development asset associated with del-desiran, an investigational treatment for myotonic dystrophy type 1. However, core operating income increased 11% to $6.04 billion, lifting the core operating margin to 41.6%. The October 27 results therefore present a contrasting picture of a pharmaceutical business delivering strong commercial performance while facing material setbacks in clinical development.
The company raised its full-year core operating income outlook, now expecting performance ranging from broadly unchanged to low-single-digit growth in constant currencies. This replaced an earlier forecast for a low-single-digit decline. Management maintained expectations for low-single-digit net sales growth, supported by newer medicines and continued productivity improvements.
The announcement also included encouraging developments involving oncology, immunology and neuroscience programmes. However, the Phase III HARBOR trial of del-desiran failed its primary endpoint, while the Phase III HORIZON trial of pelacarsen also failed to demonstrate its intended cardiovascular benefit. These setbacks highlight the importance of separating successful commercial medicines from the uncertain returns associated with pharmaceutical research.
Why did Novartis report a 70% fall in net income when core operating profit increased?
Novartis reported statutory operating income of $1.84 billion, compared with $4.50 billion during the corresponding quarter of 2025. Net income declined from $3.93 billion to $1.20 billion, while reported earnings per share fell to $0.63 from $2.04. These figures show that the quarter’s reported profitability was substantially weaker than a year earlier.
However, core operating income increased from $5.46 billion to $6.04 billion, representing 11% growth in reported US dollars and 10% growth in constant currencies. Core earnings per share increased 9% to $2.46. The difference reflects expenses excluded from the company’s core financial calculations, particularly the impairment associated with del-desiran.
The impairment reduced the carrying value of an acquired research asset after new clinical evidence weakened expectations for its development. Such charges can be non-cash in the period recognised, but they remain economically important because they indicate that an earlier investment is expected to generate less value than previously assumed. They should not be dismissed simply because adjusted earnings exclude them.
Novartis also reported free cash flow of approximately $5.11 billion, down 18% from a year earlier. The decline provides another qualification to the stronger core earnings figures because cash generation did not improve alongside adjusted operating profit. Investors should therefore assess profitability, asset impairments and cash flow together.
The latest results show that the company’s commercial medicines continue generating substantial earnings, but research investment remains exposed to clinical failure. Maintaining attractive returns requires successful product launches and careful decisions about how much capital to commit to investigational programmes.
What went wrong with del-desiran, and why was the $1.9bn impairment necessary?
Del-desiran is an investigational medicine developed for myotonic dystrophy type 1, a genetic condition associated with progressive muscle dysfunction and other complications. Novartis evaluated the treatment in the Phase III HARBOR study, which included a predefined primary endpoint measuring video hand opening time. The trial did not demonstrate a statistically successful result against placebo on that primary measure.
The failure is significant because the primary endpoint is central to the interpretation of a pivotal clinical trial. Improvements in secondary or exploratory measures may provide useful scientific information, but they do not erase a missed primary endpoint. Regulators generally consider the complete evidence, including the prespecified statistical analysis and the clinical relevance of observed effects.
Novartis reported evidence of clinical activity in certain secondary endpoints and exploratory analyses. The company intends to examine the complete dataset and engage with health authorities before determining the programme’s future direction. However, no new approval or established commercial pathway has resulted from the HARBOR findings.
The $1.9 billion partial impairment indicates that management reduced the expected value of the associated in-process research and development asset. The charge is particularly important because pharmaceutical acquisitions and licensing deals frequently assign substantial value to medicines that have not yet completed clinical testing. A setback can therefore affect accounting profit as well as future development strategy.
The impairment does not necessarily mean the programme has been cancelled or that the underlying science has no value. It indicates a material reduction in the asset’s recognised value under the company’s accounting assessment. Investors should monitor future development decisions rather than assume that the medicine will either proceed to approval or be abandoned.
Why did the pelacarsen cardiovascular trial add another challenge to the Novartis pipeline?
Novartis also reported that pelacarsen failed to meet the primary endpoint in the Phase III HORIZON trial. The study evaluated whether the investigational medicine could reduce cardiovascular events among patients with elevated lipoprotein(a) and established cardiovascular disease. Despite lowering lipoprotein(a) levels, the treatment did not demonstrate the required reduction in cardiovascular events compared with placebo.
This distinction is scientifically important because changing a biomarker does not always establish a corresponding improvement in meaningful clinical outcomes. A medicine may reduce a laboratory measurement while failing to demonstrate that patients experience fewer cardiovascular complications. The trial therefore provides information that may influence future research into the relationship between lipoprotein(a) and cardiovascular risk.
Novartis intends to present the results at a medical congress, allowing further examination of the data. However, the failure of the primary endpoint is already a material development for the programme. Investors should avoid treating the biomarker reduction as evidence of proven cardiovascular benefit.
The two clinical setbacks demonstrate why pharmaceutical pipeline valuations require careful probability assessments. Late-stage trials are expensive, and favourable early evidence does not guarantee regulatory success. Companies must diversify research investments while continuing to review programmes when new data emerge.
The financial implications extend beyond individual asset values because clinical setbacks can alter expected product-launch schedules and future revenue forecasts. Novartis will need successful medicines elsewhere in its portfolio to offset the opportunities affected by these results.
How are Kisqali, Kesimpta and other priority medicines replacing sales lost to generic competition?
Novartis reported that volume growth contributed approximately 14 percentage points to third-quarter net sales, while generic competition created a negative effect of nine percentage points. Pricing reduced growth by a further percentage point. These figures demonstrate the scale of the company’s commercial challenge: newer products must generate substantial growth simply to offset declining sales from medicines losing exclusivity.
Kisqali, used in specified breast cancer treatment settings, generated approximately $1.82 billion in quarterly revenue, representing 37% constant-currency growth. The medicine has become an important contributor to Novartis’ oncology business through expanding use across its authorised indications. Its commercial performance is relevant because oncology growth helps compensate for pressure on older products.
Kesimpta generated approximately $1.48 billion in sales, up 22% in constant currencies, supported by continued demand in multiple sclerosis treatment. Cosentyx recorded approximately $1.86 billion, an increase of 9%, while Scemblix sales increased 67% to $593 million. These products contribute across several therapeutic areas rather than relying on one successful franchise.
Leqvio revenue increased 63% to approximately $506 million, while Pluvicto grew 20% to $674 million. The growth demonstrates continued demand for newer cardiovascular and oncology treatments, although each medicine has different reimbursement, manufacturing and competitive requirements. Strong sales momentum can support profitability, but future growth depends on clinical positioning and market access.
Entresto provides an example of the opposing pressure. Revenue declined 38% to approximately $1.17 billion amid generic competition. The contraction illustrates why pharmaceutical companies must continuously develop replacement products before established medicines lose exclusivity.
The latest results suggest that Novartis’ growth portfolio is commercially strong enough to offset much of the decline in older products. However, the margin of safety depends on continued execution and the ability to secure approvals for additional indications. The commercial challenge will remain important through subsequent years.
What do Novartis’ recent approvals and Phase III results mean for future growth?
Novartis reported several regulatory and clinical developments supporting its pipeline. The US Food and Drug Administration approved an additional use of Rhapsido for adults with symptomatic dermographism inadequately controlled by H1 antihistamines. The expansion broadens the medicine’s authorised treatment opportunities, although commercial adoption will depend on patient eligibility and market access.
Pluvicto also obtained additional approvals in the United States and China for specified patients with prostate cancer. These decisions expand the range of authorised treatment settings under the relevant regulatory labels. However, approvals in one indication or jurisdiction should not be interpreted as unrestricted authorisation across all patient populations.
The company also disclosed positive Phase III results from the REMODEL-1 and REMODEL-2 trials evaluating remibrutinib in relapsing multiple sclerosis. The studies met their primary endpoint by reducing annualised relapse rates compared with teriflunomide, according to Novartis. These findings may support future regulatory submissions, but trial success is not the same as approval for that indication.
Additional pipeline developments included submission of pelabresib for European regulatory review in myelofibrosis and US priority review status for del-zota in its specified Duchenne muscular dystrophy population. Submission and priority review are procedural milestones rather than marketing authorisations. Their ultimate commercial value depends on regulatory decisions and subsequent adoption.
Together, these developments illustrate the breadth of Novartis’ research programme. The company has several opportunities to expand its marketed portfolio, but individual clinical and regulatory outcomes remain uncertain. Investors should evaluate each programme through its actual stage of development and available evidence.
Why did Novartis raise annual guidance despite major clinical disappointments?
Novartis upgraded its full-year core operating income outlook to between broadly unchanged performance and low-single-digit growth in constant currencies. This is more favourable than the previous expectation of a low-single-digit decline. Management also maintained its forecast for low-single-digit sales growth.
The improvement reflects the commercial performance of priority brands and continuing productivity initiatives. Higher sales from newer medicines can support operating leverage when related expenses grow more slowly. The latest core operating margin of 41.6%, up approximately two percentage points in constant currencies, provides evidence of stronger profitability within the continuing business.
However, the upgrade concerns core operating income, which excludes specified items such as the del-desiran impairment. It should not be interpreted as a forecast for equivalent growth in statutory net income. The financial distinction is especially important given the substantial difference between the two earnings measures during the quarter.
For the first nine months, net sales increased 2% in reported dollars but were unchanged in constant currencies. Core operating income declined approximately 1% in dollars and 2% in constant currencies. This shows that the stronger third-quarter performance has not yet produced substantial growth across the complete nine-month period.
The guidance therefore indicates improving commercial momentum rather than a uniformly strong year. Investors should monitor whether newer brands continue replacing lost sales and whether productivity gains can be sustained. The next financial results will provide a clearer assessment of the full-year outcome.
What should Novartis shareholders watch after the October clinical and earnings developments?
The immediate priority is understanding the future of del-desiran and the financial consequences of the HARBOR trial. Additional scientific analysis and discussions with regulators may influence development decisions, but the failed primary endpoint remains a material setback. The market will also assess the implications of the pelacarsen HORIZON results for the company’s cardiovascular research strategy.
Commercially, Kisqali, Kesimpta, Scemblix, Leqvio and Pluvicto will remain important indicators of growth. Their performance must continue offsetting declining revenue from older medicines facing competition. Sustained margin expansion will also depend on pricing, manufacturing costs and research expenditure.
The company’s financial resources provide flexibility, with more than $5 billion in third-quarter free cash flow despite the year-on-year decline. However, capital allocation remains demanding because successful research requires substantial investment and late-stage programmes can fail. Novartis must balance internal development with opportunities to license or acquire additional medicines.
The October results demonstrate a company with strong marketed products and significant scientific opportunities, but also a reminder of the financial risks inherent in pharmaceutical innovation. The statutory profit decline reflects a material reassessment of one research asset, while core earnings reveal the strength of the established business. For shareholders, the investment question is whether future product launches can deliver returns sufficient to offset patent expirations and the unavoidable uncertainty of clinical development.
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