NVS · Novartis AG

Novartis reported Q1 2026 results reflecting the impact of generic competition on legacy products, partially offset by strong growth from key growth drivers. Net sales declined 1% to $13.1 billion, with volume growth of 13 percentage points more than offset by 14 percentage points from generic erosion, primarily from Entresto, Promacta, and Tasigna. Pricing had a negative 4 percentage point impact, including 1 percentage point from US revenue deduction adjustments. Currency provided a 4 percentage point tailwind. US sales fell 13% to $5.0 billion, while rest-of-world sales grew 8% (+1% cc) to $8.2 billion. Gross profit decreased 3% to $10.1 billion, with gross margin declining slightly. SG&A expenses were down 3% in USD but up 2% in cc, reflecting marketing and sales productivity. R&D expenses decreased 16% (-9% cc) to $2.7 billion, driven by investments in recently acquired assets. Other income surged 112% to $478 million due to higher divestment gains. Operating income fell 9% to $4.2 billion, with margin contracting 2.9 percentage points to 32.3%. Core operating income declined 12% to $4.9 billion, with core margin down 4.8 percentage points to 37.3%. Net income decreased 13% to $3.2 billion, and EPS fell 10% to $1.65. Core net income dropped 15% to $3.8 billion, with core EPS down 13% to $1.99. Operating cash flow was $3.7 billion, flat year-over-year, and free cash flow was $3.3 billion, also broadly flat. The company highlighted strong performance from Kisqali (+59% to $1.5B), Pluvicto (+73% to $642M), Kesimpta (+29% to $1.2B), Scemblix (+82% to $433M), and Leqvio (+76% to $452M). Entresto sales declined 42% to $1.3B due to US generic competition. No forward guidance was provided in the filing.