Novartis Beats Q3 EPS and Lifts Full-Year Outlook Despite $1.9B Impairment Hit

Novartis (NVS) on Tuesday, October 27, reported third-quarter core EPS of $2.46, up 9% from a year earlier, and raised its full-year profit outlook despite a $1.9 billion impairment tied to a failed late-stage trial. Core EPS topped the $2.28 consensus compiled by Investing.com by $0.18, while net sales of $14.52 billion, up 4%, fell slightly short of the $14.6 billion estimate. Figures are from the Novartis Q3 release.

The guidance change is on profit, not sales. Novartis now expects 2026 core operating income to be in line with last year or grow by a low single-digit percentage at constant currencies, up from a prior forecast of a low single-digit decline, and kept its call for low single-digit sales growth. Jefferies analysts said the upgrade suggests about 300 basis points of consensus profit upgrades at the midpoint.

Underlying profitability drove the raise. Core operating income rose 11% to $6.04 billion and the core margin widened 2.3 percentage points to 41.6%. Growth brands led: Kisqali sales rose 37% at constant currencies, Kesimpta 22%, Scemblix 67% and Leqvio 63%.

Reported results told a different story. Operating income fell 59% and net income dropped 70% to $1.2 billion, mainly because of a $1.9 billion partial impairment of del-desiran, a myotonic dystrophy type 1 candidate from the Avidity acquisition that missed its primary endpoint in the Phase III HARBOR study. Reuters reported about $2.2 billion in charges in total, including a $300 million write-off of the failed heart drug pelacarsen. Free cash flow fell 18% to $5.1 billion.

Investors initially looked past the charges: the Swiss-listed shares rose 2% according to Investing.com, and Reuters had them up 1.5% at 10:40 GMT. Points to watch include whether consensus estimates move up as Jefferies expects, the remaining value of del-desiran after a partial rather than full write-down, and follow-through on positive Phase III remibrutinib data in relapsing multiple sclerosis.