Novartis (NVS) just reminded the market why it's still a force to be reckoned with. The Swiss drugmaker reported second-quarter earnings on Tuesday that blew past expectations, showing that strong demand for its key medicines can more than make up for the generic competition that's been weighing on the stock.
Adjusted earnings came in at $2.41 per share, well above the analyst consensus of $2.13. Revenue rose to $14.41 billion from $14.05 billion a year earlier, also ahead of the $14.04 billion forecast. Net sales grew 3% year over year, or 1% at constant currencies. Volume growth contributed 18 percentage points, but that was largely offset by a 14-point hit from generic competition and a 3-point drag from pricing.
So yes, generics are still a problem—but Novartis is showing it can outrun them.
CEO Commentary
CEO Vas Narasimhan said the company returned to sales growth in the second quarter, driven by continued strength in key growth brands including Kisqali, Kesimpta, Scemblix, and Pluvicto. He also highlighted recently launched therapies Rhapsido for chronic spontaneous urticaria and Itvisma for spinal muscular atrophy, which are showing an encouraging early trajectory. The pipeline also advanced with updated overall survival data for Kisqali in early breast cancer and an FDA submission seeking accelerated approval for del-zota in Duchenne muscular dystrophy.
Narasimhan added that Novartis expects several important clinical readouts in the second half of the year and remains on track to achieve its full-year guidance and mid-term outlook. And for those wondering about his own future, he confirmed he has "no change of plans" and intends to remain at the helm for the company's next growth phase.
Priority Medicines Fuel Growth
The numbers tell a clear story. Breast cancer drug Kisqali remained the largest growth driver, with sales rising 43% at constant currencies to $1.70 billion. Multiple sclerosis treatment Kesimpta increased 32% to $1.42 billion, while leukemia drug Scemblix surged 89% to $562 million. Radioligand therapy Pluvicto climbed 43% to $651 million, cholesterol drug Leqvio advanced 59% to $480 million, and Cosentyx gained 10% to $1.82 billion. Together, the company's priority growth brands expanded 36% at constant currencies during the quarter.
But it wasn't all good news on the bottom line. Operating income fell 2% to $4.75 billion, and net income declined 19% to $3.26 billion due to higher income taxes and increased interest expense. Core operating income was flat at $5.94 billion, and free cash flow decreased 12% to $5.56 billion.
Outlook Reaffirmed
Novartis reaffirmed its fiscal 2026 guidance, still expecting low single-digit net sales growth and a low single-digit decline in core operating income for the year. That might seem conservative given the strong quarter, but as Barclays analysts pointed out, the earnings beat was largely driven by disciplined operating expense management. The decision to maintain guidance suggests spending is expected to ramp up in the second half.
The company also highlighted several pipeline milestones during the quarter, including European Commission and Japan approvals for Rhapsido in chronic spontaneous urticaria, European approval for Itvisma in spinal muscular atrophy, an FDA accelerated approval filing for del-zota in Duchenne muscular dystrophy, and updated long-term survival data for Kisqali in early breast cancer.
Investors are particularly focused on upcoming trial data for three experimental drugs—pelacarsen, remibrutinib, and del-desiran—which analysts estimate could collectively generate about $10 billion in peak annual sales. That's the kind of pipeline potential that makes the current generic headwinds look manageable.
NVS Price Action: Novartis shares were up 3.02% at $154.08 during premarket trading on Tuesday.
