Key Takeaways
- Novartis (NOVN) shares fell over 3% in early trading after its top-selling heart drug, Entresto, saw sales growth stall in the third quarter of 2025 due to generic competition in the U.S. market.
- Sales of Entresto declined by 1% year-on-year at constant currencies in Q3 to $1.88 billion, a significant slowdown from the 22% growth recorded in the second quarter. U.S. sales of the drug specifically dropped 13% to $798 million.
- Despite the generic headwinds, Novartis reported an 8% increase in total Q3 revenue to $13.9 billion, largely offset by strong performance from newer growth drivers like Kisqali, Kesimpta, Pluvicto, and Scemblix.
- The company is actively pursuing a "deal spree," including a recent $12 billion acquisition of Avidity Biosciences, to bolster its drug pipeline and mitigate the impact of patent expirations.
Swiss pharmaceutical giant Novartis (NOVN) experienced a decline in its share price following the release of its third-quarter 2025 earnings, which revealed a significant impact from generic competition on its blockbuster heart failure drug, Entresto. The company's shares fell more than 3% in early Tuesday trade as investors reacted to the stalled sales growth of its former top-seller.
Entresto (sacubitril/valsartan), a crucial therapy for heart failure and hypertension, saw its sales growth come to a halt in the third quarter, registering a 1% decline year-on-year at constant currencies to $1.88 billion. This marks a sharp contrast to the 22% sales increase observed in the second quarter. The erosion was particularly pronounced in the U.S. market, where Entresto's sales dropped 13% to $798 million after MSN Pharmaceuticals launched the first generic version in late July.
The launch of generic Entresto followed a U.S. federal judge's decision in July 2025 to deny Novartis' request for a preliminary injunction to prevent generic versions from entering the market. This ruling emphasized the priority of public access to affordable, life-saving treatments. The company is still engaged in litigation with a generic manufacturer and the FDA to protect its intellectual property.
Despite the challenges posed by generic erosion, Novartis' overall third-quarter performance showed resilience. The company reported an 8% rise in total revenue to $13.9 billion, primarily driven by the strong uptake of newer drugs such as breast cancer treatment Kisqali, multiple sclerosis drug Kesimpta, prostate cancer therapy Pluvicto, and leukemia treatment Scemblix. These growth drivers largely offset the negative impact of increasing generic competition, which also affected other drugs like Promacta (down 36%) and Tasigna (down 47%). Sales of Cosentyx, an inflammatory and autoimmune disease treatment, also saw a slight dip due to a one-time rebate adjustment and pricing discounts.
In response to the looming patent cliff for key drugs, Novartis has been on an aggressive acquisition spree, committing up to $30 billion this year to bolster its drug pipeline. This includes the recent $12 billion agreement to acquire Avidity Biosciences, aimed at expanding its growth portfolio. The company reaffirmed its 2025 guidance, anticipating net sales to grow by a "high single-digit" percentage and adjusted operating income to increase in the "low-teens" percentage.
However, some analysts remain cautious. Goldman Sachs downgraded Novartis to "sell" in September, citing mounting risks from generic competition and stretched valuations. The brokerage estimated that Entresto's U.S. sales could decline by 14% in 2025, including an 80% drop in the fourth quarter. The ongoing shift in the pharmaceutical landscape highlights the critical importance for major drugmakers to innovate and strategically acquire new assets to counteract the inevitable impact of patent expirations.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.