Unsettled investors: Novartis shares plunge after quarterly figures

For the second time this week, the market responded to a Novartis announcement with a share price decline. After Monday's announcement of the $12 billion acquisition of Avidity was met with skepticism, the stock experienced a significant drop of over four percent on Tuesday, slipping below the 100-franc mark.

It was investors' reaction to the pharmaceutical company's communication regarding its quarterly results. While the company met or slightly exceeded analysts' expectations in some cases, such as sales, Novartis disappointed with its core operating profit – a key figure that adjusts for certain factors.

The question of how quickly sales of the important heart medication Entresto and, to a lesser extent, those of Promacta and Tasigna will collapse due to generics is causing increasing uncertainty.

In the third quarter, Entresto faced competition from cheaper copycat products for the first time. This impacted profitability more than expected. However, the full effect will likely not be felt until the fourth quarter. Last year, Entresto was by far Novartis's top-selling product, with revenues of nearly $8 billion.

Novartis intends to compensate for the loss in sales with new products. These are also expected to come from other companies, which is why CEO Vas Narasimhan has already made several acquisitions. On Tuesday, Novartis completed the $1.4 billion acquisition of Tourmaline Bio, whose product is intended to complement the cardiovascular disease segment.

The acquisition of Avidity has yet to go through. Novartis management is convinced that the biotech company's drugs will contribute to sales in the coming years and generate several billion euros, especially after 2030.

However, this first requires successful trial data for the acquired drug candidates. Avidity brings expertise in rare muscle diseases – conditions for which there is a significantly smaller number of potential patients than, for example, heart disease.

The company maintained its outlook for the full year 2025. However, Novartis management refrained from revising the forecast upward, as it had done in previous quarters.

The CEO had little new to say about the talks with the US government regarding price reductions and tariffs. "We are continuing to hold discussions, and things are going well," Narasimhan said in a conference call. An update will be provided as soon as anything becomes clear.

Novartis is currently investigating whether other medications, in addition to the psoriasis drug Cosentyx, could be sold directly online. This distribution channel is intended to eliminate intermediary costs and enable lower prices for patients.

Potential pharmaceutical tariffs are not a concern for the company's management at the moment. Because Novartis has been exporting large quantities of medicines to the US in recent months, stocks there should be sufficient until the second half of 2026.