Novartis Earnings: Strong Results and Pipeline Advancements Support Fair Value Increase

Novartis NVS reported first-quarter results ahead of our projections, and we expect to increase Novartis’ fair value estimate based on the strong performance and pipeline advancements. The solid portfolio growth and pipeline strength reaffirms Novartis’ wide moat rating. Plans to spin off the generics division Sandoz remain on track for later in the year, which will likely strengthen Novartis’ competitive position by exiting the weaker-positioned generics business.

In the quarter, total sales increased 8% operationally, buoyed by several more recently launched drugs offsetting generic pressures to multiple sclerosis drug Gilenya and the maturing and slightly declining immunology drug Cosentyx. We expect this trend to largely continue over the next three years before generic pressures intensify in 2026 to cardiovascular drug Entresto (over 10% of sales). However, strong expected growth from cancer drug Pluvicto (excellent ongoing launch and supply capacity growing), multiple sclerosis drug Kesimpta (up 100% in the quarter), and breast cancer drug Kisqali (up 81%) should partly mitigate patent losses and support margins over the long term.

Pipeline advancements are setting up additional long-term growth drivers. While already approved in the metastatic breast cancer setting, Kisqali’s positive top-line data in the adjuvant setting (Natalee study) opens up a major new indication with limited competition. We expect Kisqali will face only one other CDK4/6 breast cancer drug (Eli Lilly’s Verzenio) in the adjuvant setting. Further, given the broader patient population in the Natalee study, we expect Kisqali’s opportunity to be close to 50% greater than Verzenio’s, opening up over a $5 billion opportunity for the drug. Beyond Kisqali, we expect more detailed data for rare disease drug iptacopan later in the year that should create a very competitive drug in paroxysmal nocturnal hemoglobinuria (PNH), a market with over $2 billion potential.