Novartis AG

Novartis reported Q2 2026 net sales of $14.4 billion, up 1%, with core operating income flat at $5.9 billion. Core operating margin was 41.2%, down 70 basis points year over year, and free cash flow was $5.6 billion in the quarter. For H1 2026, net sales declined 2%, core operating income declined 7%, core operating margin fell 2.3 percentage points to 39.4%, and free cash flow was $8.9 billion. Management reaffirmed full-year 2026 guidance for low single-digit net sales growth, low single-digit core operating income decline, core net financial results of around $1.7 billion, and a core tax rate of around 16.5%; if FX stays at mid-July levels, they expect a positive 1-point impact on full-year net sales and core operating income. H2 sales are expected to grow mid-single digits, and H2 core operating income is expected to grow mid- to high-single digits.

Vas Narasimhan said Novartis is returning to growth thanks to strong execution across priority brands, launches, and pipeline progress. He emphasized that growth drivers grew 36% in constant currencies and said the company is moving beyond the Entresto patent expiry with momentum into the second half and beyond. His tone was confident but measured, repeatedly pointing to upcoming data and approvals as the next catalysts.

Mukul Mehta focused on the bridge from Q2 to the rest of the year: Q2 sales growth was helped by one-time phasing items, including inventory-related changes and delayed clinical-trial costs, with about a 1% sales benefit and about a 5% core operating income benefit that will reverse in H2. He said the Q2 margin decline to 41.2% was mainly due to incremental Avidity cost and lower gross margin, partially offset by productivity gains. On capital allocation, he noted $9.1 billion of dividends paid in H1, $2.1 billion of share repurchases, and $5.6 billion remaining under the up-to-$10 billion buyback program, targeted for completion by end-2027.

Analysts pressed on pelacarsen, remibrutinib in MS, cardiology launch strategy, KISQALI exclusivity, ianalumab review timing, and the impact of one-time phasing in Q2. Management said pelacarsen is powered for 20% in certain patient groups, with mid-teens benefit viewed as clinically meaningful; for remibrutinib, they said they are tracking blinded data but cannot yet handicap disability progression. On ianalumab, Novartis said Q3 approval remains the base case, with no advisory committee planned, and on KISQALI they guided to second-half 2031 loss of exclusivity inclusive of settlements and pediatric exclusivity.