Novartis braces for major patent cliffs despite double-digit margin gains

Novartis (NYSE:NVS) reported fourth-quarter adjusted earnings that beat analyst estimates on Wednesday, but the Swiss pharmaceutical giant issued a cautious 2026 outlook as it prepares to navigate the largest wave of patent expirations in its history.

The Basel-based drugmaker posted adjusted earnings of $2.03 per share, surpassing the $1.99 consensus estimate.

However, revenue of $13.34 billion fell short of the $13.7 billion anticipated by Wall Street, primarily due to a 45% plunge in sales of the heart failure drug Entresto following the entry of U.S. generics.

Despite the revenue miss, the company’s focus on high-margin "priority brands" helped expand its core operating margin to a record 40.1% for the full year.

While the company faces generic erosion for legacy blockbusters, its newer oncology and immunology portfolio remains robust.

Breast cancer treatment Kisqali saw a 44% jump in quarterly sales to $1.32 billion, while the radioligand therapy Pluvicto surged 70% as it expanded into earlier lines of prostate cancer treatment.

For the full year 2025, Novartis reported a net profit of $13.98 billion on revenue of $54.53 billion.

Looking ahead to 2026, the company projects net sales to grow in the low single digits, while core operating income is expected to decline by a similar margin as it reinvests in a pipeline featuring over 30 potential high-value assets.

To reward shareholders through the transition, Novartis proposed a 5.7% increase in its dividend to 3.70 Swiss francs per share.