Novartis AG (NVS) released its first-quarter earnings this morning and raised fresh concerns about U.S. drug pricing policy, with CEO Vas Narasimhan warning that the impact could soon hit both companies and patients. Speaking to CNBC, Narasimhan said the “reality of MFN is going to set in in the next 18 months,” pointing to a shift that could reshape how drugs are priced across global markets.
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The most favored nation policy ties U.S. drug prices to those in other rich markets. While that may lower costs in the U.S., Narasimhan made clear the trade-off could fall on other regions. He said Novartis is pushing Europe and Japan to rethink how they reward new drugs. If not, he warned that “novel medicines might see delayed entry” and patient access could suffer.
This view aligns with peers like Roche (RHHBY) and AstraZeneca (AZN), which have also flagged Europe’s pricing system as a risk to future drug access. Narasimhan added that governments are aware, but not acting fast enough. “There’s awareness, but I still think there’s not a realization of the level of impact that’s coming,” he said.
Importantly, the near-term hit to Novartis is still limited. The CEO noted that MFN currently affects about 5% to 10% of Medicaid-linked sales. Still, he sees the policy as locked in, adding, “I don’t see it disappearing in the U.S.” That sets up a period where drugmakers may need to make “difficult trade-offs” on where and when to launch new treatments.
Meanwhile, NVS shares are down nearly 2% in pre-market trading, after the company posted its Q1 earnings results.
Earnings Snapshot Shows Pressure from Generics
At the same time, Novartis posted a weaker quarter, with results showing pressure from generic drugs. Net sales came in at $13.1 billion, down 1% year-over-year, while core EPS fell to $1.99 from $2.28.
The decline was driven by U.S. generic erosion, which offset strong growth in key drugs like Kisqali and Pluvicto. Operating income dropped 9%, and net income fell 13%, reflecting both lower sales and higher research spending.
Still, the company held its full-year outlook, expecting low single-digit sales growth. Management pointed to a strong pipeline and ongoing launches as key supports, even as pricing and competition remain headwinds.
Is NVS a Good Stock to Buy?
Turning to the Street, Novartis has a Moderate Buy consensus, based on six analysts issuing their ratings. The average NVS stock price target stands at $169.86, which implies about 17% upside from the current price.
