Investing.com — shares climbed more than 2% on Tuesday after the Swiss drugmaker posted second-quarter net sales and core earnings that beat analyst consensus by 5% and 12% respectively, driven partly by established-brand phasing that the company flagged will reverse in the third quarter.
Net sales of $14.41 billion exceeded both Jefferies’ estimate of $13.83 billion and the Visible Alpha consensus of $13.69 billion.
Core operating income of $5.94 billion beat the Jefferies forecast of $5.16 billion and consensus of $5.31 billion by 12%. Core earnings per share came in at $2.41, against consensus of $2.14.
Jefferies, who carries a “hold” rating on the stock with a price target of CHF110, cautioned that more than half the sales beat was attributable to phasing in established brands rather than underlying demand. “The company expects to give that back in Q3,” Leuchten wrote in a note published Tuesday.
Kisqali breast cancer sales rose 44% year-on-year to $1.695 billion, broadly in line with consensus of $1.717 billion. Kesimpta for multiple sclerosis jumped 32% to $1.424 billion, beating consensus of $1.326 billion by 7%. Scemblix surged 89% to $562 million, ahead of consensus by 18%.
Cosentyx posted sales of $1.824 billion, 5% above consensus of $1.735 billion, though Jefferies noted the beat included a one-off item of approximately $100 million.
Entresto fell 50% to $1.181 billion, missing consensus of $1.299 billion by 9%, driven by gross-to-net adjustments and destocking. Xolair, Pluvicto and Kisqali also came in below consensus on an individual basis.
The core operating income margin reached 41.2%, against a consensus expectation of 38.8%. Leuchten attributed the margin outperformance to lower selling, general and administrative expenses and reduced research and development costs, the latter linked to phasing benefits from Novartis’s Avidity deal, a drag that Jefferies expects to materialise in the third quarter.
Free cash flow fell 12% to $5.56 billion. Net debt rose sharply to $39.4 billion at June 30 from $21.9 billion at December 31, 2025, reflecting the $15.3 billion net cash outflow for acquisitions, a $9.1 billion annual dividend payment and $3.1 billion in share buybacks.
Novartis left its full-year 2026 guidance unchanged, targeting low single-digit net sales growth and a low single-digit decline in core operating income at constant currencies. Jefferies said the reasons cited by management for not raising guidance were revenue phasing and operational expenditure phasing related to Avidity.
The company’s second-half outlook calls for mid single-digit percentage growth in net sales and mid-to-high single-digit percentage growth in core operating income, implying a material step-up from the first half.
Jefferies flagged key investor questions for the earnings call, including the timing of a Phase III readout for pelacarsen targeting Lp(a), confidence in the remibrutinib multiple sclerosis programme, the timing of pivotal data from the Avidity deal and the rationale for the absence of a guidance upgrade.
Minor pipeline updates included a six-year follow-up study for NATALEE in early breast cancer, an accelerated submission timeline for ianalumab in systemic lupus erythematosus, FDA fast-track designation for VHB937 in ALS and a submission for KLU156 in acute uncomplicated malaria.