Novartis Q3 Profit Beats, Guidance Raised Despite Revenue Miss and $1.9B Writedown

Novartis (NVS) reported third-quarter earnings that surpassed profit estimates and prompted an upgraded full-year outlook, driven by robust sales from its newer medicines. The positive results were tempered by a slight revenue miss and a significant impairment charge related to a pipeline setback, leading to a measured market reaction.

Earnings Beat and Margin Strength

For the third quarter, Novartis posted core earnings per share of $2.46, well ahead of the consensus estimate of $2.28, according to figures published by Investing.com. However, quarterly revenue came in at $14.52 billion, narrowly missing the projected $14.60 billion.

The company's growth was fueled by its portfolio of priority brands, including Kisqali, Kesimpta, and Leqvio, which collectively grew 29%. Management highlighted this as evidence of the portfolio's "replacement power" in offsetting revenue losses from older drugs like Entresto, which have lost US exclusivity. This performance helped drive core operating income up 10% to $6 billion, with the core margin reaching a strong 41.6%.

Upgraded Profit Guidance Masks Cautions

Reflecting the strong quarter, Novartis significantly raised its full-year guidance for core operating income. The company now expects low double-digit growth, a substantial improvement from its previous forecast of a low single-digit decline. The forecast for full-year sales growth was maintained at a low single-digit rate.

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Despite the upgrade, the quality of the earnings beat came with caveats. Management noted that part of the profit upside stemmed from lower selling, general, and administrative (SG&A) expenses, which are expected to partially reverse in the fourth quarter. This, along with pressure from biosimilars, is expected to lead to a dip in margins in the final quarter of the year.

Pipeline Setback and Key Catalysts

While core results were strong, the company's reported operating income fell sharply due to a $1.9 billion impairment charge on the experimental drug del-desiran after it failed a clinical trial. This writedown underscores the inherent risks in pharmaceutical research and development.

Looking ahead, investors are focused on several upcoming milestones that could influence the company's growth trajectory. Key catalysts include:

• An FDA submission for remibrutinib in the fourth quarter of 2026.
• A regulatory decision on ianalumab by the end of the year.
• New clinical trial data for the cholesterol drug Leqvio in Q4 2026.
• The release of fourth-quarter results and formal 2027 guidance in February 2027.