Novartis (NOVN): Goldman Sachs remains Sell on Novartis as 3Q26 is expected to be broadly in line but long-term patent-expiry replacement remains unresolved

Overview

This is a 3Q26 preview for Novartis. Goldman Sachs expects results and FY26 guidance to be broadly uneventful, while investor attention remains centered on whether the pipeline, business development and capital allocation can sustain mid-single-digit growth beyond major patent expiries.

Core views

Novartis shares had recently outperformed the SXDP by about 8%, which Goldman Sachs attributes to a tripling of daily buybacks from 130,000 to 400,000 shares, a possible sentiment rotation away from Roche, and management’s positive comments on achieving long-term growth targets. The institution characterizes the first two drivers as largely technical and argues that longer-term investors still need stronger evidence that Novartis can replace revenue lost in two major patent-expiry waves across 2032-34 and 2034-36. Potential offsets include early pipeline assets, later-stage assets and M&A, but Goldman Sachs assigns limited credit to Phase 1 opportunities because visibility and probability of success are low, and considers it premature to credit unannounced M&A. For 3Q26, Goldman Sachs forecasts constant-currency sales growth of 3.3%, net sales of $14.365bn, core operating income of $5.490bn and core EPS of $2.24. Sales are broadly in line with Visible Alpha consensus of $14.397bn, while core operating income and EPS are each 1% below consensus. Higher other revenue, supported by estimated US Xolair royalties, and lower SG&A are expected to be offset by higher COGS and R&D, including incremental costs related to Avidity, Tourmaline, Anthos and Regulus. The institution expects Novartis to reiterate FY26 guidance for low-single-digit constant-exchange-rate sales growth and a low-single-digit decline in core operating profit, making the quarter less important than the company’s longer-term strategic discussion. Goldman Sachs believes Novartis can achieve its 2025-30 target of 5-6% top-line growth at constant exchange rates and sees 5% growth over 2026-31 as achievable. It expects the latter to be the new target discussed at the November capital-markets event. However, even projected unadjusted sales of $9.5bn for Rhapsido, $4.7bn for ianalumab, $4.5bn for Leqvio and $5.8bn for Fabhalta are viewed as insufficient to sustain mid-single-digit growth through expected generic pressure. The exposure includes Kisqali at $10bn, Cosentyx at $8bn and Kesimpta at $7.5bn in the 2030-34 period, followed by Scemblix at $4.5bn, Leqvio at $4.5bn and Fabhalta at $5.8bn in 2033-36. Forecast revisions are small and reflect FX changes plus product adjustments based on IQVIA prescription trends and company commentary. Net-sales estimates rise by 0.6% annually across 2026-30, while core basic EPS estimates decline by 0.7% in 2026E, narrowing to a 0.2% decline by 2030E. Goldman Sachs is on average 1% below Visible Alpha consensus on sales, core operating income and core EPS over 2026-30E. It raises its Cosentyx estimate to 5% above consensus and places its Pluvicto estimate 4% below consensus. The stock’s 2027 P/E has de-rated after pipeline disappointments, but Goldman Sachs notes that Novartis still trades at a 5% premium to the sector and argues it should trade in line with the sector. The institution sees broadly balanced near-term risk/reward of roughly plus or minus 3-4% after the positive share-price move, while warning that downside could be greater following the 6% gain on the positive press-release day. Its Sell rating and CHF 113 target are based on an equal blend of DCF and P/E valuation: CHF 111 from DCF using a 7.1% WACC and 1% terminal-growth rate, and CHF 114 from applying 13.5x 2027E EPS. The target is raised from CHF 110, while the ADR target remains $136. Key upcoming catalysts include detailed remibrutinib relapsing-multiple-sclerosis data at MSToronto26 on October 21-23, the November 19 Meet Novartis Management event, ianalumab data in first-line ITP, and a Phase 3 remibrutinib hidradenitis-suppurativa readout by year-end. For remibrutinib RMS data, Goldman Sachs identifies a 25-50% annualized-relapse-rate benefit as the relevant bar, expects less than 25% benefit at three-month confirmed disability progression, and believes a 35-45% benefit at six months is needed to be competitive with the CD20 class.

Analysis framework

Goldman Sachs compares its bottom-up earnings forecasts with Visible Alpha consensus, incorporates prescription-trend data, management commentary and FX updates, evaluates pipeline and patent-expiry timing against long-term growth targets, and values the shares using an equal-weighted DCF and P/E approach.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Bottom-up discounted-cash-flow valuation

  Goldman Sachs estimates a CHF 111 per-share value using a 7.1% WACC and 1% terminal growth rate, then blends it equally with its multiples valuation.

• Valuation methodsP/E and PEG Valuation

  P/E multiple valuation

  The report applies 13.5x 2027E EPS to derive a CHF 114 per-share multiples valuation and argues the stock should trade in line with the sector rather than at a premium.

• Industry AnalysisProduct life cycle

  Portfolio replacement analysis around patent expiries

  The report tests whether sales from pipeline and marketed products can offset successive loss-of-exclusivity waves and preserve mid-single-digit growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Novartis (NOVN.S)

  Primary covered company; Goldman Sachs is Sell rated.

  Strengths

  The report sees 5-6% 2025-30 constant-currency sales growth and 5% growth over 2026-31 as achievable; recent buybacks and potential pipeline assets support sentiment.

  Weaknesses

  Pipeline setbacks have weakened confidence in long-term targets, and projected pipeline sales are viewed as insufficient to offset 2032-36 patent-expiry exposure.

  Comparison

  The shares trade at a 5% premium to the sector, while Goldman Sachs believes they should trade in line with the sector.

  Risks

  Positive earnings momentum, stronger franchise sales, unexpected pipeline success, and favorable business-development or buyback decisions are upside risks to the Sell view.

• Novartis ADR (NVS)

  ADR representation of the primary covered company.

  Comparison

  Goldman Sachs' ADR target is $136 versus a reported price of $145.71.

Key data

• 3Q26 net sales forecast$14.365bn3.3% constant-currency growth; broadly in line with Visible Alpha consensus of $14.397bn.
• 3Q26 core operating income forecast$5.490bn0.6% growth and 1% below consensus of $5.563bn.
• 3Q26 core EPS forecast$2.241% below consensus.
• FY26 guidance expectationLow-single-digit CER sales growth; low-single-digit CER core operating-profit declineGoldman Sachs expects guidance to be reiterated.
• 12-month price targetCHF 113 / $136 per ADRCHF target raised from CHF 110; implies approximately 7% downside from current levels.
• 2027E valuation multiple13.5x P/EUsed in Goldman Sachs' multiples valuation.

Impact & implications

Goldman Sachs views the upcoming management event and clinical data as more consequential than 3Q26 earnings because they may clarify whether Novartis can defend its medium-term growth algorithm through the 2030s. Until pipeline replacement, loss-of-exclusivity mitigation and capital-allocation plans become more credible, it sees valuation support as limited.

Risks

• Ongoing positive earnings momentum could exceed Goldman Sachs' expectations.
• Sales from key franchises could be stronger than anticipated.
• Unexpected pipeline success could improve the long-term outlook.
• Business-development activity, share buybacks or other capital-allocation decisions could support the shares.

What to watch

• Detailed remibrutinib RMS data at MSToronto26 on October 21-23, including safety, annualized-relapse-rate benefit and confirmed-disability-progression outcomes.
• The November 19 Meet Novartis Management event for the medium-term growth target and post-2030 replacement strategy.
• Management commentary on pelacarsen, del-desiran, Entresto loss of exclusivity, Pluvicto uptake and potential Lutathera generic entry.
• Ianalumab first-line ITP data and the Phase 3 remibrutinib hidradenitis-suppurativa readout expected by the end of 2026.