Novartis raises outlook as priority brands drive third-quarter growth

Novartis growth supports a higher outlook

Novartis’ third-quarter performance points to improving operating momentum, with sales rising 4% in constant currencies to $14.5 billion and core operating income increasing 10% to $6 billion. The company raised its full-year 2026 core operating income outlook to flat-to-low-double-digit growth from a previous forecast of a low-single-digit decline. Core operating margin reached 41.6%, up 2 percentage points from the prior-year quarter. The reviewed disclosures do not identify a new customer or procurement event, so the development is an earnings and demand signal rather than a confirmed supplier opportunity.

The core earnings and margin figures should be kept separate from the reported results: core EPS rose 8% to $2.46, while reported operating income fell 61% and reported net income declined 71% to $1.2 billion. The reported operating-income decline reflected higher R&D spending, including a $1.9 billion partial impairment charge for del-desiran after the Phase III HARBOR readout in myotonic dystrophy type 1.

Priority brands supplied the growth signal

Novartis attributed the quarter’s performance to demand for priority medicines and productivity initiatives. Priority brands collectively grew 29%, with company-reported gains across Kisqali, Kesimpta, Scemblix, Leqvio, Pluvicto, Cosentyx and Rhapsido. This mix indicates that the operating improvement was distributed across several products rather than dependent on one disclosed launch.

Kisqali sales increased 37%, with US growth of 38%, while Kesimpta revenue rose 22% and Pluvicto grew 20%. Leqvio sales increased 63% and Scemblix sales rose 67%. Rhapsido had more than 15,000 US patients treated and an approximately 26% share of new prescriptions, according to the company’s description of its launch momentum.

Productivity measures supported profitability

CFO Mukul Mehta said gross-margin improvement and productivity measures, including lower selling, general and administrative expenses, supported profitability. SG&A expenses declined 7% year over year while sales increased 4%. Free cash flow was $5.1 billion in the quarter and $14 billion for the first nine months of 2026.

The combination of higher sales, improved gross margin and lower SG&A spending supports the company’s higher operating-income outlook. However, the reviewed disclosures do not quantify the contribution of each productivity measure separately, so the relative importance of margin improvement and expense control cannot be isolated from the available figures.

Stronger second-half expectations remain conditional

Novartis expects stronger second-half performance as the effect of US generic competition for Entresto recedes. Management expects mid- to high-single-digit sales growth and high-single-digit to low-double-digit core operating income growth in the second half. It also expects fourth-quarter margins to decline sequentially because of typical year-end spending, higher royalties as growth brands scale, and lower other income related to US Xolair biosimilars.

Novartis maintained its outlook for low-single-digit net sales growth, core net financial expenses of $1.7 billion and a core tax rate of about 16.5%. The next meaningful test is whether sales growth across the priority-brand portfolio and productivity savings can deliver the strengthened second-half operating-income performance while absorbing the expected fourth-quarter margin pressure.