Company Reports

After the market close on Sept. 4, Novartis reported that cardiometabolic drug pelacarsen missed its primary endpoint in its Lp(a)HORIZON trial. Separately, on Sept. 8, rare disease drug del-desiran missed its primary endpoint in the HARBOR trial in myotonic dystrophy type 1.

With strong positions in its core focus therapeutic areas of oncology, immunology, neuroscience, and cardiovascular, renal, and metabolic, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on cardiology drug Entresto will weigh on near-term growth, a strong portfolio of newly launched drugs and a robust pipeline should ensure a steady long-term outlook.

With strong positions in its core focus therapeutic areas of oncology, immunology, neuroscience, and cardiovascular, renal, and metabolic, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on cardiology drug Entresto will weigh on near-term growth, a strong portfolio of newly launched drugs and a robust pipeline should ensure a steady long-term outlook.

Net sales grew 1% at constant currency and core operating income was flat. Management reiterated its full-year guidance of low-single-digit growth in sales and a low-single-digit decline in core operating income. Shares rallied July 21 2%-3% from the previous day's close.

Novartis' net sales declined 5% at constant currency and core operating income fell 14% in the first quarter. Management reiterated its full-year guidance for low-single-digit sales growth and a low-single-digit decline in core operating income.

In the fourth quarter, Novartis' net sales declined 1% at constant currency, and core operating income grew 1%. Management announced 2026 guidance for low-single-digit growth in sales but a low-single-digit decline in core operating income.

With strong positions in its core focus therapeutic areas of oncology, immunology, neuroscience, and cardiovascular, renal, and metabolic, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on cardiology drug Entresto will weigh on near-term growth, a strong portfolio of newly launched drugs and a robust pipeline should ensure a steady long-term outlook.

With strong positions in multiple key therapeutic areas, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on multiple sclerosis drug Gilenya and cancer drug Afinitor will weigh on near-term growth, a strong portfolio of drugs along with a robust pipeline should ensure a steady long-term outlook.

Novartis increased revenue by 7% year on year at constant currency and core operating income by 7%. It raised its 2024-29 revenue growth target to 6% from 5%, and about half is due to its $12 billion acquisition of Avidity Biosciences, while the other half is attributed to overall portfolio growth.

On Sept. 25, President Donald Trump announced that 100% tariffs on branded or patented pharmaceuticals will be enacted starting Oct. 1, unless the drugmaker is building its manufacturing plant in the US. At the time of this writing, share prices for big drugmakers have held steady.

Novartis increased revenue by 11% year on year at constant currency and core operating income by 21%. Core margin increased by 230 basis points compared with same period last year. It slightly bumped up its full-year guidance for core operating income growth to low-teens (from low-double digits).

With strong positions in multiple key therapeutic areas, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on multiple sclerosis drug Gilenya and cancer drug Afinitor will weigh on near-term growth, a strong portfolio of drugs along with a robust pipeline should ensure a steady long-term outlook.

President Trump released an executive order on May 12 calling for a 30-day negotiation period between the Department of Health and Human Services and the biopharma industry, with the threat of a rule from the Centers for Medicare and Medicaid Services to lower US drug prices if no deal is reached.

Novartis grew revenue by 15% year-on-year at constant currency and core operating income by 44%. It increased guidance for 2025 revenue growth to high single-digits (from mid-to-high single-digit) and core operating income growth to low double-digits (from high single-digit to low double-digit).

With strong positions in multiple key therapeutic areas, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on multiple sclerosis drug Gilenya and cancer drug Afinitor will weigh on near-term growth, a strong portfolio of drugs along with a robust pipeline should ensure a steady long-term outlook.

With strong positions in multiple key therapeutic areas, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on multiple sclerosis drug Gilenya and cancer drug Afinitor will weigh on near-term growth, a strong portfolio of drugs along with a robust pipeline should ensure a steady long-term outlook.

Wide-moat Novartis reported fourth-quarter results and 2025 guidance that were in line with our expectations. We maintain our fair value estimates of $105 per ADR and CHF 91 per local share class and view shares as fairly valued. Despite upcoming loss of exclusivity events, the company’s inline products should enable it to maintain a positive growth trajectory over the midterm.

Following President-elect Donald Trump’s Nov. 14 announcement of the nomination of Robert F. Kennedy Jr. as secretary of the US Department of Health and Human Services, there have seen several more nominations for leadership in the 13 HHS divisions, including Dr. Mehmet Oz (Centers for Medicare and Medicaid Services) on Nov. 19, Dr. Marty Makary (US Food and Drug Administration) and Dr. Dave Weldon (Centers for Disease Control and Prevention) on Nov. 22, and Dr. Jay Bhattacharya (National Institutes of Health) on Nov. 26. Overall, we think these selections show a consistent theme of introducing potential disruptive forces to US healthcare, although their lack of experience and the power of career staffers in these agencies could serve to blunt any significant proposed changes. We continue to see obesity drugs and vaccines as areas of potential scrutiny, although without any clarity on proposals, we’re not making any changes to our fair value estimates following these announcements.

President-elect Donald Trump announced on Nov. 14 that he is nominating Robert F. Kennedy Jr. to be secretary of the Department of Health and Human Services under his new administration in 2025. RFK Jr. has strong views on public health and, if confirmed, could use his position to make changes at several of the 13 HHS divisions. In our Nov. 8 note, we discussed the potential tailwinds of a Trump administration, including possible repeal of the Medicare negotiation provision in the Inflation Reduction Act, less Federal Trade Commission scrutiny of acquisitions, and a likely continuation of lower corporate taxes. However, if RFK’s nomination is confirmed, we expect more “wild card” headwinds to the industry will come to fruition. As the HHS covers the US Food and Drug Administration and the Centers for Disease Control and Prevention, an HHS secretary skeptical of vaccine and obesity drug benefits could work to erode public trust, put up roadblocks for approval of new vaccines, and prevent the CDC from recommending any vaccines that make it through the approval process. With less federal guidance, we think it is possible certain states could waver in support of broad mandates for childhood vaccines. All of these could weigh on sales of vaccines in the US, including covid vaccine makers Moderna and BioNTech and big biopharma vaccine makers like GSK (we model 14% of GSK revenue from US vaccine sales in 2024), Pfizer (12%), Merck (9%), and Sanofi (6%).

We think that President-elect Donald Trump brings a mix of potential headwinds and tailwinds to the biopharma industry, and we’re not making any adjustments to our fair value estimates at this time. We had previously assumed that the most likely case was split control of the presidency and Congress by Democrats and Republicans. However, with Republicans locking in control of the Senate and holding a lead in elections in the House, we think it looks increasingly likely that Trump and his party could have control across both branches of government, making any potential policy priorities more likely to be implemented.