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CALL PARTICIPANTS
- Head of Business Planning, Analysis and Digital Finance – Nigel Trotman
- Chief Executive Officer – Vas Narasimhan
- Chief Financial Officer – Mukul Mehta
TAKEAWAYS
- Net Sales — $14.4 billion, a 1% increase in constant currency driven by growth drivers and productivity that offset generic erosion in the first half of 2026.
- Core Operating Income — $5.9 billion, remaining flat in constant currency as high demand for priority brands balanced the impact of generic competition.
- Core Operating Margin — 41.2% of net sales, representing a decline of 70 basis points primarily due to incremental costs from the Avidity acquisition and lower gross margins.
- Full-Year 2026 Guidance — Reaffirmed by management, with net sales expected to grow low single digits and core operating income projected to decline low single digits.
- Free Cash Flow — $5.6 billion for the second quarter and $8.9 billion for the first half of 2026, in line with company expectations.
- KISQALI Performance — Sales grew 43% in constant currency to reach over $1 billion in the U.S. for the first time, supported by leadership in the metastatic breast cancer market.
- Kesimpta Growth — Increased 32% in constant currency, reflecting expanded market share in the B-cell and multiple sclerosis markets across the U.S. and Europe.
- PLUVICTO Revenue — Rose 43% in constant currency, with pretaxane metastatic castration-resistant prostate cancer patients now representing over 70% of new U.S. patients.
- LEQVIO Sales — Grew 59% in constant currency, driven by 55% growth in the U.S. and a doubling of market share in China following its inclusion on the National Reimbursement Drug List.
- Scemblix Performance — Increased 89% in constant currency, with U.S. growth of 93% as the company approaches first-line leadership in the second half of 2026.
- Cosentyx Sales — Rose 10% in constant currency, supported by 16% growth in the U.S. and steady demand in hidradenitis suppurativa and intravenous indications.
- Growth Driver Momentum — Priority growth brands collectively grew 36% in constant currency, providing momentum for the second half of the year.
- Capital Allocation — Management paid out $9.1 billion in dividends and repurchased $2.1 billion of shares in the first half of 2026, with $5.6 billion remaining in the current buyback program.
- Phasing Impacts — Second quarter results were positively impacted by one-time phasing items that added approximately one percentage point to net sales and five percentage points to core operating income.
- RLT Infrastructure — Radioligand therapy sites expanded to over 880 in the U.S. and 650 outside of the U.S. to prepare for future pipeline launches.
- Peak Sales Targets — Management maintained peak sales goals of $10 billion for KISQALI, $8 billion for Cosentyx, and $4 billion to $5 billion for LEQVIO.
- DMD Pipeline Milestone — The company achieved its first FDA submission for del-zota for accelerated approval in Duchenne muscular dystrophy exon 44 skipping, with a launch expected in the first half of 2027.
- Urticaria Launch Trajectory — Over 4,000 prescribers and 10,000 patients have been treated with Rhapsido since launch, with 60% of patients starting in the first-line setting.
- H2 2026 Financial Outlook — Net sales are projected to grow mid-single digits in the second half of the year as the business moves beyond the impact of Entresto generic erosion.
- Medicare Part B Share — LEQVIO reached a 23.3% share in the Medicare Part B segment, an increase of 3.6 percentage points year to date.
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RISKS
- Mehta stated, “This is as our sales growth drivers and continued productivity offset the impact of the significant generic erosion that we saw in the first half of this year,” noting the financial headwind from older products losing patent protection.
SUMMARY
**Novartis AG** (NVS +2.88%) returned to net sales growth in the second quarter of 2026, supported by high demand for core therapeutic brands and key pipeline advancements. Management reported that growth drivers successfully offset the impact of generic competition for older products like Entresto. The company reaffirmed its full-year 2026 financial guidance while moving toward multiple regulatory submissions and clinical readouts scheduled for the second half of the year.
- CEO Narasimhan highlighted the expansion of PLUVICTO into 880 sites in the U.S., stating, “a lot of our focus now is getting additional depth in those sites, especially as we prepare now for the HSPC launch.”
- Management expect a standalone multibillion dollar potential for ianalumab in Sjögren’s disease, with Narasimhan noting, “the drug has a clean safety profile, will err on the side of trialing the drug in patients.”
- CEO Narasimhan attributed the U.S. first-line leadership goal for Scemblix to its superior medicine profile, expecting to reach this leadership share in the second half of 2026.
- The company is engaging with the FDA regarding updated biomarker data for del-brax in FSHD, with Narasimhan stating, “we believe we have reason to have the discussion with the FDA and to make the case… for an accelerated filing.”
- Management noted that KISQALI outpaced the CDK4/6 market, reaching 79% share in the early breast cancer segment in Germany as it expands globally.
- CFO Mehta confirmed that H2 2026 core operating income is expected to grow mid to high single digits as the company moves past the primary impact of U.S. generic erosion.
INDUSTRY GLOSSARY
- CDK4/6: Cyclin-dependent kinase 4 and 6 inhibitors, a class of drugs used to treat certain types of breast cancer by blocking specific enzymes.
- mCRPC: Metastatic castration-resistant prostate cancer, a stage of prostate cancer that has spread and no longer responds to hormone-lowering treatments.
- HSPC: Hormone-sensitive prostate cancer, a stage of prostate cancer that still responds to hormone therapy.
- CSU: Chronic spontaneous urticaria, a skin condition characterized by the sudden appearance of itchy hives.
- CIndU: Chronic inducible urticaria, hives triggered by specific external physical stimuli like cold, heat, or pressure.
- ESSDAI: EULAR Sjögren’s Syndrome Disease Activity Index, a clinical scale used to measure systemic disease activity in Sjögren’s patients.
- RLT: Radioligand therapy, a precision cancer treatment that delivers radiation directly to targeted cancer cells.
- siRNA: Small interfering RNA, a technology used to silence specific genes involved in disease progression.
- DMD: Duchenne muscular dystrophy, a genetic disorder characterized by progressive muscle degeneration and weakness.
- ARPI: Androgen receptor pathway inhibitor, a type of hormone therapy used to treat prostate cancer. Conference Call Transcript
Operator Good afternoon, and welcome to the Novartis Q2 2026 results release conference call and live webcast. Please note that during the presentation, all participants will be in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions by pressing star one and one at any time during the conference. Please limit yourself to one question and return to the queue for any follow-ups. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Mr. Nigel Trotman, Head of Business Planning, Analysis and Digital Finance. Please go ahead, sir.
Nigel Trotman Thank you, Sharon. Good morning and good afternoon, welcome everyone to our Q2 2026 conference call. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company’s Form 20-F and its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission.
Before we get started, as a reminder, please kindly limit yourselves to one question at a time and we will cycle through the queue as needed. With that, I will hand over to Vas. Vas Narasimhan Thank you, Nigel. Thanks everyone for joining today’s conference call. Moving to slide four. As you saw in the results we released earlier today, Novartis delivered strong performance across our priority brands and launches while advancing the pipeline, allowing us to return to growth in the second quarter. The business grew 1% in constant currencies in USD, we had flat core operating income at $5.9 billion.
Mukul will go through the numbers in more detail later on in the call, we are reaffirming our full year guidance for 2026. We also had some important pipeline highlights, which I will talk about more during the course of the conference call, including updated KISQALI OS data, the del-brax biomarker data in FSHD, as well as some other regulatory milestones we were able to deliver over the course of the quarter. Moving to slide five. Our growth drivers continued a strong trajectory in quarter two. They were up 36% in constant currencies. Some of the highlights include strong performance from KISQALI, Cosentyx, Scemblix, solid performance from PLUVICTO, and strong performance as well from LEQVIO.
Overall taken together, these growth drivers are performing strongly. We believe that gives us momentum going into the second half of the year as we now move beyond the Entresto patent expiry and set us up well to deliver on our midterm growth guidance. Moving to slide six. KISQALI was up 43% in constant currencies on the quarter. We outpaced the CDK4/6 market. We had strong performance in the U.S. and outside the U.S. In the U.S., we were up 39%, reaching over $1 billion in sales for the first time. We continued our metastatic breast cancer leadership with an increasing share in first line.
We also sustained our early breast cancer, NBRX and TRX leadership with 58% of new patients now from our exclusive N0 and N1 nodal populations. We also continue to grow our total prescriber base up 16%, and we see future growth continuing to be driven by these exclusive KISQALI early breast cancer segments. Outside of the U.S., we were up 49% with continued metastatic leadership. Our growth was accelerating in our EBC launches. We are now approved in 76 countries and reimbursed in 42. As you can see in the chart in case study in Germany, we have reached 79% EBC NBRX share. We are having similar performance in other key markets.
Overall, we are pleased with the trajectory for KISQALI and remain confident in our $10 billion peak sales goal. Moving to slide seven. We are announcing today also updated six-year follow-up data, demonstrating that KISQALI showed clinically meaningful OS in that broadest at-risk EBC population. That data will be presented at an upcoming congress. This is the six-year pre-specified landmark data for IDFS as well as for OS. The IDFS benefit continues over time and continues to strengthen the case for use in the broadest at-risk EBC population. Safety remained consistent with the known profile of KISQALI. We believe this data underscores the value of dual inhibition with KISQALI and endocrine therapies across all subgroups.
We will look forward to providing the full details of this data, as I mentioned, at an upcoming medical congress. Moving to slide eight. Kesimpta had another strong quarter up 32%, continuing to increase its share across our key markets. In the U.S., we were up 32% in quarter two, increasing our TRX share in both B-cell and MS markets. Importantly, we are growing our NBRX share ahead of our competitors in the first line and first switch segments, which are our targets by segments for this medicine. Outside of the U.S., also very good performance. We are seeing strong growth in Europe, as well as sustained NBRX growth in our top international markets.
We see a continued opportunity in these international markets given that two-thirds of patients remain treated with older therapies, not on B-cell therapies. This is a clear opportunity for expansion over time. We also continue to progress our next generation evidence and continue the life cycle management for Kesimpta. Our ongoing phase III with a once every two month dose Kesimpta for maintenance dosing is on track for a 2027 readout. Moving to slide nine, PLUVICTO grew 43%, and this is driven primarily by our PSMA-positive population and the pre-taxane mCRPC. We also see now acceleration outside of the U.S. In the U.S., pre-taxane is now driving over 70% of new patients.
We continue to focus on use after the first ARPI. This is our largest segment, and we believe we now will have the opportunity to drive further growth given that the NCCN guidelines have been updated to remove routine use of a second ARPI in this setting. We continue to expand our sites, over 880 sites now providing PLUVICTO, and a lot of our focus now is getting additional depth in those sites, especially as we prepare now for the HSPC launch. Outside of the U.S., strong growth, 83% growth in new patients with accelerating adoption in Europe and launch momentum in Japan and China.
The number of sites now that are providing RLT outside of the U.S. is over 650. This sets us up well as well for our future RLT pipeline, where we’re excited to continue to progress beyond Pluvicto and Lunafara, hopefully into additional cancer types in the coming years. The next wave of growth for Pluvicto will be the expected approval in quarter three in HSPC. This will increase the eligible patient pool by 75%, give us a strong foundation for further growth. Two-thirds of the patients in the PSMA-addition population are with healthcare providers that currently use Pluvicto today or with established referral patterns, so we think we have a strong base for rapid adoption.
We continue to progress the pipeline. We presented promising launch results for our Actinium PSMA in mCRPC. This medicine is now being studied in the post-Pluvicto setting, in the post-chemo setting, and as well in the first-line mCRPC setting in combination with ARPI. An opportunity here to life-cycle manage Pluvicto for the longer term. Moving to slide 10, LEQVIO had a strong quarter, growing 59%, driven by strong demand we saw across the globe. In the U.S., we were up 55% in quarter two. We outpaced the advanced lipid-lowering market. This was driven by monthly TRX growth of 49%, demonstrating LEQVIO’s differentiated profile, strong persistency.
The demand is being driven with increasing depth in the priority health systems that we’re targeting. The most important segment for us remains the Medicare Part B segment, where we see 23.3% share. That’s up 3.6% year to date, we see an opportunity for continued expansion. I think even with orals launching, our opportunity remains for driving strong growth in the segment that wants infrequently administered, physician-administered medicines for lipid lowering in the United States, we see this as an attractive and growing segment that supports our peak sales potential in the U.S. and beyond. Outside of the U.S., NRDL inclusion is unlocking significant demand. You saw that in quarter one and continues in quarter two.
Our market share has doubled now versus the pre-NRDL share we were previously seeing. We also see sustained growth in Europe and Japan. Overall, pleased with our performance. We keep generating additional data for LEQVIO. Three world studies demonstrated that inclisiran LEQVIO improves adherence and persistence compared to other advanced lipid-lowering therapies. We also have the V-CHALLENGE head-to-head study of inclisiran versus bempedoic acid to prevent MACE. Lastly, we’re on track as well for our two outcome studies to read out in 2027 for LEQVIO. Moving to slide 11, Scemblix had a very strong quarter, 89% constant currency growth driven by both U.S. and ex-U.S. performance. In the U.S., we had 93% growth in the quarter.
This is driven by sustained leadership across all lines. Importantly, we now expect to reach first-line NBRX leadership share in the second half of the year. You can see steady improvements in that first-line NBRX share. Outside of the U.S., we’re primarily still driven by the third line and beyond performance with 75% NBRX share across our key markets. Importantly for future growth, we’re seeing early line adoption now starting to pick up. We are now approved in 65 countries outside of the U.S. In Japan, we’ve already reached first-line NBRX leadership, as you can see in the lower chart. In Germany, our early NBRX first-line share is already up to 15%.
We’re very excited for the trajectory of Scemblix and to continue to be a growth driver long into the future. With Cosentyx, we had a solid quarter, 10% constant currency growth, in part driven by some one-timers with still strong underlying growth. When you look at in the U.S., we were up 16%. You can see that NHS, we’re steady in our NBRX share in the high 40s, and we expect that to continue. We see steady demand growth in HS and IV. Underlying growth in the U.S. is around the mid-single digits as we’ve guided to in the past. Outside of the U.S., continued solid growth in Europe.
We do see additional challenges in China with more competition, but we’re able to manage that to maintain the overall global performance of the brand. We’re excited by the phase III REPLENISH-PMR polymyalgia rheumatica data, which we recently published and presented at EULAR. It showed very strong data with sustained remission at 52 weeks that was twice as high in patients treated with Cosentyx versus placebo. We’re anticipating FDA approval for that indication in the second half and remain on track for the $8 billion peak sales guidance that we’ve previously provided. Moving to slide 13, Rhapsido continues its strong launch trajectory with phase III CIndU data now available to support our broader potential in urticaria.
First starting with the CSU launch, we see continued solid U.S. uptake, over 4,000 prescribers, over 10,000 patients treated. 60% of those patients are treated in the first-line setting. We see steady expansion in our patient access. We have 2 of the 3 major PBMs now covering remibrutinib, Rhapsido, with PA to label. In the second half, we expect steady expansion in that access with an effective bridge and sample program in place. We don’t expect an inflection per se. We think this will be steady expansion. We want to ensure that we’re disciplined in how we approach getting reimbursement given the multiple indications we hope to secure for remibrutinib over time.
Outside of the U.S., we see good traction in China. Launches are ongoing across Europe and the Middle East, and we’ll see further expansion in the second half post the EMEA, Japan, and Swiss approvals. Importantly, in chronic inducible urticaria, we presented our REMIND data supporting remibrutinib as the first targeted therapy for chronic inducible urticaria. We had early and broad efficacy with onset as early as week 2 in the 2 additional largest subtypes, consistent 12-week responses versus placebo. We’re on track for the FDA approval in SD, which is the most common CIndU subtype, two-thirds of CIndU patients. We’ll have global filings across all 3 subtypes later this year.
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