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Novartis AG (CH:NOVN)
:NOVN
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Novartis AG
(NOVN)
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Rating:78Outperform
Price Target:
CHF136.00
▲(6.52% Upside)
Action:ReiteratedDate:02/06/26
The score is driven primarily by strong financial performance (improving profitability and robust free cash flow) and supportive technical trend strength (price above key moving averages). Offsetting factors include stretched momentum signals (RSI/Stoch), a fair-to-moderate valuation, and cautious 2026 guidance with notable LOE/generics and deal-related margin/financing headwinds.
Positive Factors
Robust free cash flow
Sustained, industry-leading free cash flow provides durable funding for R&D, manufacturing scale-ups, dividends and buybacks without over-reliance on new equity. Strong FCF supports strategic deals and capacity investments (e.g., radioligand sites) and cushions LOE shocks over the medium term.
High and improving margins
Very high gross margins and a rapid improvement in core operating margin reflect pricing power, efficient commercialization and product mix skewed to premium patented medicines. Margin strength enhances reinvestment capacity and long-term return on capital even as some near-term dilution events occur.
Strong portfolio and pipeline
A deep set of growing blockbusters plus upcoming pivotal readouts and recent approvals provide clear replacement power for expiring franchises. Diverse therapeutic exposures and recent launches reduce single-product dependency and support the company's multi-year sales CAGR and revenue resilience.
Negative Factors
Rising leverage
Increasing debt levels reduce financial flexibility and raise sensitivity to rising interest costs, constraining capital allocation choices. For a pharma with large upcoming LOE and required investment in new launches, higher leverage elevates execution and rating risks over the medium term.
Major patent expiries / generics in 2026
Extensive LOE/generic entries create a significant near-term revenue gap and increase execution pressure to convert pipeline and launch uptake. Even with long-term pipeline strength, timing mismatches between expiries and replacement launches can materially depress sales and margins across the coming 2–6 months.
Deal-related margin dilution & financing costs
The Avidity acquisition will exert near-term margin dilution and raise interest/finance expenses, reducing incremental cash available for organic investment or shareholder returns. Integration and funding execution risks can prolong margin recovery and add uncertainty to 2026 profitability.
Novartis AG (NOVN) vs. iShares MSCI Switzerland ETF (EWL)
Market Cap
CHF240.57B
Dividend Yield3.18%
Average Volume (3M)2.71M
Price to Earnings (P/E)27.2
Beta (1Y)0.99
Revenue Growth7.62%
EPS Growth-18.33%
CountryCH
Employees75,883
SectorHealthcare
Sector Strength45
IndustryDrug Manufacturers - General
Share Statistics
EPS (TTM)1.58
Shares Outstanding2,112,421,900
10 Day Avg. Volume2,438,245
30 Day Avg. Volume2,709,021
Financial Highlights & Ratios
PEG Ratio0.66
Price to Book (P/B)5.81
Price to Sales (P/S)4.69
P/FCF Ratio14.54
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
CHF118.25Price Target Upside-7.39% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering13
EPS Forecast (FY)8.84
Revenue Forecast (FY)CHF57.28B
Novartis AG Business Overview & Revenue Model
Company DescriptionNovartis AG researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines and Sandoz. The Innovative Medicines segment offers prescription medicines for patients and healthcare providers. It also provides ophthalmology, neuroscience, immunology, hepatology, dermatology, respiratory, cardiovascular, renal, and metabolism medicine products. The Sandoz segment develops, manufactures, and markets finished dosage form medicines; active ingredients and finished dosage forms of small molecule pharmaceuticals to third parties; and retail generics and anti-infectives. It also provides active pharmaceutical ingredients and intermediates primarily antibiotics; protein- or other biotechnology-based products, including biosimilars; and biotechnology manufacturing services. Novartis AG has a license and collaboration agreement with Alnylam Pharmaceuticals to develop, manufacture, and commercialize inclisiran; and a clinical collaboration with Kura Oncology, Inc. to evaluate the combination of Tipifarnib and Alpelisib in patients with head and neck squamous cell carcinoma. The company was incorporated in 1996 and is headquartered in Basel, Switzerland.
How the Company Makes MoneyNovartis generates revenue primarily through the sale of its pharmaceutical products, with a significant portion coming from its Innovative Medicines segment, which includes blockbuster drugs and new therapies that command premium pricing. Key revenue streams include sales from patented medications, including oncology treatments like Kymriah and other therapeutic areas. Additionally, the Sandoz division contributes revenue through the sale of generic drugs and biosimilars, which cater to cost-sensitive markets. The company also engages in strategic partnerships and collaborations with other biopharmaceutical companies and research institutions, which can result in shared revenues from co-developed products and licensing agreements. Furthermore, Novartis invests in research and development to ensure a robust pipeline of new drugs, which is crucial for sustaining long-term revenue growth as older patents expire. Overall, Novartis's diverse portfolio, along with its commitment to innovation and strategic partnerships, positions the company for continued success in the competitive healthcare market.
Novartis AG Earnings Call Summary
Earnings Call Date:Feb 04, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 28, 2026
Earnings Call Sentiment Positive
Overall the call is Positive. Novartis reported strong full-year execution — record free cash flow, achievement of a 40.1% core margin two years early, multiple blockbuster product performances, and meaningful pipeline progress with numerous upcoming pivotal readouts. Near-term headwinds are material (largest-ever generic/patent expiries in 2026, Q4 gross-to-net and LOE impacts, Avidity-related margin dilution, and some trial uncertainties such as lower-than-expected event rates for pelacarsen and limited FDA-requested liver monitoring for remibrutinib). Management provided a cautious 2026 outlook (H1 weakness, full-year low-single-digit sales growth) but reiterated mid-term confidence (5%–6% CAGR to 2030 and return to 40%+ margin by 2029). Taken together, the positives around cash generation, portfolio momentum and pipeline execution outweigh the near-term operational and regulatory challenges.Q4-2025 Updates
Positive Updates
Full-Year Sales and Margin Achievement
Full-year 2025 sales grew 8% (high single-digit). Core operating income rose 14% and Novartis achieved a 40.1% core margin (target reached two years early). Core operating income reached approximately $21.9 billion.
Record Free Cash Flow and EPS Growth
Free cash flow reached an all-time high of $17.6 billion (up 8% year-over-year). Core EPS increased 17% to $8.98.
Strong Performance from Priority Brands
Multiple priority brands delivered high growth: Kisqali up 57% (FY) to $4.8B with 44% Q4 growth (54% excluding U.S. RD adjustments, U.S. 62%); Kesimpta up 36% to $4.4B; Scemblix reached blockbuster status with 87% Q4 growth and 41% NBRx share; Pluvicto grew 42% constant currency to $2B (U.S. pre-taxane sales +75%); Leqvio grew 57% FY (46% Q4) and reached blockbuster status; Cosentyx grew 8% to $6.7B.
Pluvicto and RLT Scale-up
Pluvicto showed dynamic uptake (PSMAfore launch) with PSMA share of 16% in the setting and over 790 treatment sites in the U.S.; new manufacturing sites coming online (California, Florida, Japan, China) to expand capacity for radioligand therapy launches.
Successful New Product Launches and Early Commercial Momentum
Rhapsido U.S. launch showed encouraging early results with >2,000 HCP starts in sampling/bridge program and strong demand from allergists/dermatologists; Itvisma (gene therapy) approved in U.S. with broad label and multi-blockbuster potential estimated >$3B.
Pipeline Progress and Pivotal Readouts
Met the majority of 2025 R&D milestones and positioned for seven pivotal readouts in 2026 (pelacarsen, remibrutinib, ianalumab, DUX4 interim, others), demonstrating active pipeline execution and replacement power for future growth.
Pelabresib MANIFEST Results and Regulatory Path
Pelabresib Phase III 96-week MANIFEST data showed deep, durable spleen responses, sustained symptom and anemia improvements, comparable safety to ruxolitinib and fewer deaths/progressions; agreement with EU to file in 2026 and plan for new Phase III in U.S./China/Japan.
Capital Allocation and Shareholder Returns
Completed $15B buyback in early July and launched a new up-to-$10B program (≈$7.7B remaining). Proposed dividend CHF 3.70 per share (6% increase in CHF, double-digit in USD), continuing long track record of dividend growth. R&D investment >$10B (+8% YOY).
Long-Term Growth Confidence
Company reaffirmed 5%–6% sales CAGR for 2025–2030 and expects to return to 40%+ core margin by 2029, signaling confidence in mid-term trajectory despite near-term headwinds.
Negative Updates
Q4 and Near-Term Sales Impact from Generics and Gross-to-Net
Q4 2025 sales declined 1% due to gross-to-net adjustments and loss of exclusivity impacts (Entresto LOE and U.S. generic entries including Promacta and Tasigna). Excluding R&D out-of-period adjustments underlying Q4 sales would have been +3%.
2026 Guidance and First-Half Weakness
2026 guidance calls for low-single-digit sales growth and low-single-digit decline in core operating income. First half 2026 expected to see sales decline low single digit and core operating income decline low double digit due to the largest GX (generic) impact in company history and tough prior-year comparisons.
Avidity Transaction Dilution and Funding Costs
Avidity deal expected to dilute core margin by 1–2 percentage points in 2026 and increase core net financial expenses to ~ $1.7 billion due to anticipated debt funding, pressuring near-term profitability.
Pelacarsen Trial Uncertainty (HORIZON Event Rates)
HORIZON trial event rates are lower than modeled, creating uncertainty on timing/readout sensitivity. Lower-than-expected event rates could reduce statistical power or require interpretation of smaller relative risk reductions (original powering was ~20%–25%).
Remibrutinib Labeling Discussion and Liver Monitoring
FDA requested limited liver monitoring for remibrutinib given class safety signals from competitors, which could affect label/usage even though Novartis reports no liver signals in its studies to date and plans to advocate for minimal monitoring.
Protocol Amendment and Delay for Zigakibart
Zigakibart Phase III protocol amended to align UPCR and interim eGFR readouts, delaying the eGFR readout to first half 2027 to optimize label positioning; this pushes back the timeline for a potential full approval.
Q4 Noise from One-Time R&D Adjustments
Quarterly results contained U.S. R&D out-of-period adjustments that impacted reported growth and contributed to an apparent miss relative to consensus on specific products (e.g., Kisqali), obscuring underlying momentum.
Company Guidance
Novartis guided 2026 full-year sales to grow low single‑digit and core operating income to decline low single‑digit (reflecting a 1–2 percentage‑point core‑margin dilution from the Avidity deal expected to close in H1 2026), with core net financial income/expense around $1.7 billion and a core tax rate of ~16.5%; they expect H1 2026 sales to decline low single‑digit and core operating income to decline low double‑digit (Q1 also facing a headwind from a +2% gross‑to‑net in the Q1‑25 base), with a rebound in H2 to mid‑single‑digit sales growth and mid‑to‑high‑single‑digit core operating income growth, a positive FX sensitivity (late‑Jan rates) of roughly +2–3 percentage points to sales and +1 point to core operating income, a 5–6% sales CAGR for 2025–2030, and a plan to return to 40%+ core margin by 2029.Novartis AG Financial Statement Overview
Summary
Strong fundamentals with steady revenue expansion, consistently high gross margins (~73–75%), and meaningfully improved operating profitability into 2024–2025. Free cash flow is robust and stepped up in 2025, though leverage has been rising and operating cash flow has trailed net income (coverage <1.0), adding some quality/financial-risk offsets.Income Statement
Revenue has expanded steadily from 2022–2025, with 2025 showing a strong acceleration versus prior years. Profitability is a clear strength: gross margins are consistently ~73–75% and operating profitability improved meaningfully into 2024–2025, with 2025 showing strong operating and net margins. The main weakness is volatility in net income and margins across the period (notably an unusually high 2021 net margin versus more normalized levels afterward), which reduces earnings consistency despite the strong recent trajectory.86
Very Positive
Balance Sheet
The balance sheet is solid with sizeable equity and strong shareholder returns (return on equity is high in 2023–2025). However, leverage has been building: total debt and debt relative to equity increased into 2024–2025, which adds financial risk and reduces flexibility compared with earlier years. Overall, it remains manageable for a large pharma, but the direction of leverage is a watch item.74
Positive
Cash Flow
Cash generation is robust and improving: operating cash flow and free cash flow rose across the period, with a particularly strong step-up in 2025 and healthy free-cash-flow growth. Free cash flow tracks net income well (generally around ~0.78–0.92x), supporting earnings quality. The key weakness is that operating cash flow is consistently below net income (coverage below 1.0 each year), indicating some reliance on non-cash earnings or working-capital timing, even though free cash flow remains strong.82
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 57.13B | 51.72B | 46.66B | 43.46B | 43.97B |
| Gross Profit | 42.86B | 38.90B | 34.19B | 31.88B | 32.24B |
| EBITDA | 23.96B | 20.71B | 18.25B | 14.68B | 30.91B |
| Net Income | 14.65B | 11.94B | 14.85B | 6.96B | 24.02B |
Balance Sheet | |||||
| Total Assets | 115.49B | 102.25B | 99.94B | 117.45B | 131.79B |
| Cash, Cash Equivalents and Short-Term Investments | 11.58B | 13.35B | 13.96B | 18.61B | 28.11B |
| Total Debt | 37.01B | 31.26B | 26.35B | 27.91B | 31.02B |
| Total Liabilities | 68.97B | 58.12B | 53.20B | 58.03B | 63.97B |
| Stockholders Equity | 46.10B | 44.05B | 46.67B | 59.34B | 67.66B |
Cash Flow | |||||
| Free Cash Flow | 18.43B | 13.80B | 11.71B | 11.56B | 12.10B |
| Operating Cash Flow | 20.05B | 17.62B | 14.46B | 14.24B | 15.07B |
| Investing Cash Flow | -5.11B | -7.51B | 5.60B | 1.47B | 4.21B |
| Financing Cash Flow | -15.57B | -11.74B | -14.28B | -20.56B | -16.26B |
Novartis AG Technical Analysis
Positive
127.68
Price Trends
118.37
Positive
111.18
Positive
104.27
Positive
Market Momentum
3.18
Positive
61.18
Neutral
47.42
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CH:NOVN, the sentiment is Positive. The current price of 127.68 is above the 20-day moving average (MA) of 125.88, above the 50-day MA of 118.37, and above the 200-day MA of 104.27, indicating a bullish trend. The MACD of 3.18 indicates Positive momentum. The RSI at 61.18 is Neutral, neither overbought nor oversold. The STOCH value of 47.42 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CH:NOVN.
Novartis AG Risk Analysis
Novartis AG disclosed 26 risk factors in its most recent earnings report. Novartis AG reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Novartis AG Peers Comparison
UnderperformOutperform
Sector (51)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | CHF240.57B | 27.22 | ― | 3.18% | 7.62% | -18.33% | |
78 Outperform | CHF283.97B | 20.28 | ― | 2.88% | 4.77% | -11.07% | |
73 Outperform | CHF283.97B | 11.94 | 31.98% | 2.94% | 4.77% | -11.07% | |
72 Outperform | CHF31.96B | 38.35 | 4.50% | 0.44% | 0.39% | -12.46% | |
70 Outperform | CHF33.77B | 40.71 | ― | 0.09% | 6.22% | ― | |
56 Neutral | CHF35.31B | 39.77 | ― | 0.75% | 5.93% | 29.83% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% |
* Healthcare Sector Average
CH:NOVN
Novartis AG
124.82
28.78
29.97%
CH:ROG
Roche Holding AG
351.50
58.49
19.96%
CH:LONN
Lonza Group Ltd
514.60
-52.04
-9.18%
CH:ALC
Alcon
64.38
-17.47
-21.35%
CH:GALD
Galderma Group AG
154.90
53.69
53.05%
CH:RO
Roche Holding Ltd
362.20
49.74
15.92%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.