Novartis Just Lost Half Its Best-Seller. Wall Street Shrugged.

Despite the Entresto carnage, the overall numbers looked surprisingly solid. Net sales came in at $14.4 billion, up 3% in dollars and 1% at constant currency. Not exactly fireworks, but well above the consensus estimate of approximately $14.0 billion.

The real surprise was profitability. Core operating income hit $5.94 billion, beating the Street's forecast of $5.31 billion by about 12%. The core operating margin landed at 41.2%, a full 2.4 percentage points above what analysts expected. Core earnings per share came in at $2.41 versus consensus of $2.42, a narrow miss.

So where did the extra profit come from? Lower-than-expected costs on both the sales side and R&D were a big part of the story. Post-Sandoz spinoff, Novartis runs a leaner, higher-margin operation focused purely on innovative medicines. The restructuring is paying dividends (sometimes literally; the company announced a $10 billion buyback in July 2025).

But Jefferies threw some cold water on the celebration. The investment bank noted that more than half of the sales beat came from "phasing in established brands" rather than true underlying demand growth. Translation: some revenue got pulled forward, and Novartis itself expects to give that back in Q3. It's like celebrating a great month of tips, only to realize half of them were from one table that won't be coming back.

The Growth Engines Keeping the Lights On

While Entresto bleeds out, a roster of newer drugs is picking up the slack. Kisqali (breast cancer) grew 43% in Q2. Scemblix (a targeted leukemia therapy) surged 89%. Kesimpta (multiple sclerosis), Pluvicto (prostate cancer), and Leqvio (cholesterol) all contributed meaningful growth.

This is the core of Novartis's post-cliff strategy: don't try to replace one megablockbuster with another single drug. Instead, build a diversified portfolio across four therapeutic areas (cardiovascular/renal, oncology, neuroscience, immunology) so no single patent expiration can sink the ship.

The Kidney Play Nobody's Talking About Enough

Perhaps the most interesting subplot in the earnings story is Novartis's growing dominance in kidney disease, specifically IgA nephropathy (IgAN), a chronic condition where the immune system attacks the kidneys.

Novartis now has two approved drugs for IgAN and a third in late-stage trials:

• Fabhalta (iptacopan), an oral complement inhibitor that reduced protein in the urine (a key marker of kidney damage) by 44% versus 9% for placebo in trials. It also showed meaningful preservation of kidney function over two years.
• Vanrafia (atrasentan), which slowed kidney function decline by about 34% versus placebo over 2.5 years. Crucially, it was approved without a REMS requirement, the burdensome safety monitoring program that rival Travere's competing drug Filspari carries. For nephrologists and patients, no REMS means less paperwork and easier access.
• Zigakibart, an APRIL pathway inhibitor targeting the upstream immune cause of IgAN, currently in Phase 3 trials.

The competitive moat here is structural. Fabhalta targets complement-driven inflammation. Vanrafia addresses blood flow and scarring in the kidney's filtering units. Zigakibart goes after the root immune dysfunction. Three drugs, three different mechanisms, one disease. Rivals like Travere, Vertex, and AstraZeneca are mostly pursuing single-mechanism approaches.

It's the pharmaceutical equivalent of playing chess while your opponents play checkers. If the Phase 3 zigakibart data lands, Novartis could offer sequencing or even combination strategies that no competitor can match.

The Bigger Picture: Can Novartis Outrun the Clock?

The Entresto cliff is a dress rehearsal for what's coming next. Cosentyx and Kisqali face potential patent expirations in the early 2030s. Novartis is betting that its technology platforms (radioligand therapy, RNA therapeutics, gene therapy) and a pipeline with 15-plus potential approvals or pivotal readouts by 2026 will keep revenue growing at 5-6% annually from 2025 through 2030.

That's ambitious. But this quarter showed the playbook can work, at least in the short term. Lose your biggest drug, tighten the belt, lean on the bench players, and keep Wall Street happy enough to not panic.

The real test comes when the phasing benefits fade in Q3 and European generics start chipping away at whatever Entresto revenue remains. Novartis has bought itself time. Whether it's bought enough depends on how many of those pipeline bets actually pay off.

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