Novartis hits profit target as new drugs offset drag from generics

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By Ludwig Burger and Bhanvi Satija

FRANKFURT (Reuters) -Swiss drugmaker Novartis met third-quarter profit forecasts on Tuesday, as fast growth of newer drugs offset a sharp slowdown in blockbuster heart drug Entresto as it comes under pressure from generics in the U.S. market.

The results underscore why Novartis is on an aggressive deal-making spree this year, with a push for acquisitions and licensing deals worth up to $30 billion so far to bolster its drug pipeline as established treatments lose patent protection.

The company, which has raised its outlook twice this year, confirmed its 2025 forecasts and said it expected net sales to grow by a “high single-digit” percentage and adjusted operating income to grow by a “low-teens” percentage.

Operating income, adjusted for special items, rose 6% to $5.46 billion in the quarter, just slightly above consensus numbers cited by analysts of $5.4 billion.

CEO SEES NO IMPACT FROM US TRADE TARIFFS

CEO Vas Narasimhan said on an earnings call that the company did not expect a hit from U.S. trade tariffs, despite President Donald Trump threatening levies on drugmakers and pushing for lower drug prices for Americans and more local investment.

“We expect five different groundbreakings before the end of the year at manufacturing sites in the U.S. So no impact from tariffs on our guidance for the remainder of this year and next year,” said Narasimhan.

He said talks over drug pricing with the U.S. administration were progressing well. Peers including Pfizer and AstraZeneca have already struck drug-pricing deals.

In late September, Trump said he would impose a 100% tariff on imports of branded or patented pharmaceuticals, starting October 1, unless a drugmaker is building manufacturing facilities in the United States.

NEW DRUGS VS GENERICS

Novartis has been on a buying spree as it looks to firm-up its drug pipeline in the face of “increasing generic erosion” in the United States. This week it unveiled a $12 billion deal for U.S. biotech firm Avidity.

Quarterly sales of its established heart drug Entresto, which lost patent protection this year, reached $1.88 billion in the third quarter, compared to $1.77 billion expected by analysts, according to LSEG data. That was largely flat versus a year ago, well down from its 20%-plus growth earlier in the year.

REVENUE FROM TOP SELLER SEEN DECLINING

Launched a decade ago, Entresto was Novartis’ top-selling medicine in 2024 with sales of $7.82 billion worldwide. In July, a U.S. federal judge rejected Novartis’ request to stop MSN Pharmaceuticals from selling a generic version.

Analysts project revenue from the drug will surpass $8 billion this year, but will drop to about $6 billion in 2026, according to LSEG data.

Sales of the firm’s psoriasis drug Cosentyx, which faces competition in the treatment of certain types of psoriasis and arthritis from UCB’s Bimzelx, were mostly flat year-on-year at about $1.7 billion.

Sales of breast cancer drug Kisqali, launched last year, came in at $1.33 billion.

(Reporting by Ludwig Burger in Frankfurt and Bhanvi Satija in London; Editing by Janane Venkatraman and David Holmes)