Novartis Navigates Entresto Generic Entry Amidst Strategic Portfolio Shift

Entresto Generics Enter U.S. Market, Impacting Novartis Revenue

Novartis (NVS) faces a significant shift in its cardiovascular portfolio following the official launch of Entresto generics in the United States in July 2025. This development, which materialized after Novartis's appeals and requests for preliminary injunctions against generic manufacturers like MSN Pharmaceuticals were rejected, was largely anticipated but fell short of a more favorable scenario that would have extended U.S. market exclusivity into late 2026.

Deconstructing the Financial Mechanics

Entresto was Novartis's top-selling therapy in 2024, generating $7.82 billion globally and $4.05 billion in the U.S., accounting for 11% of the company's total revenue. U.S. net sales alone constituted just below 9% of Novartis's total Q2 2025 revenues, representing slightly more than 50% of global Entresto sales. Analysts project a substantial 50–70% sales decline for Entresto by 2026, as generic competition is expected to reduce prescription prices from approximately $500 to as low as $20–$30. This financial pressure is compounded by the Inflation Reduction Act (IRA), which introduces Medicare price caps on high-priced medications, potentially further squeezing margins. The expiration of pediatric exclusivity on July 15, 2025, also accelerated generic market entry, with a U.S. federal judge denying a preliminary injunction on July 16, 2025, on the grounds that Novartis had not demonstrated "irreparable harm."

Strategic Reorientation and Growth Drivers

In response to the generic competition, Novartis is actively reorienting its cardiovascular business strategy, which includes trimming its workforce through layoffs of hundreds of U.S. employees. Despite these challenges, Novartis management has expressed confidence in its ability to maintain growth, projecting mid- to high-single-digit sales growth and high-single to low-double-digit core operating income growth for 2025. The company plans to offset the revenue loss through the strong performance of newer drugs and a robust pipeline. CEO Vas Narasimhan has indicated that sales from newer drugs are set to make up for the loss.

Key growth drivers expected to contribute significantly include: Cosentyx (immunology), Kesimpta (multiple sclerosis), Kisqali (breast cancer), Pluvicto (prostate cancer), Leqvio (cholesterol management), and Scemblix (CML). Additionally, Fabhalta and Vanrafia have received approvals and target significant markets. Novartis also aims to leverage its global scale to expand Entresto's use in ex-U.S. markets, where it expects to maintain exclusivity through the remainder of the decade, specifically until November 2026 in the EU and June 2030 in Japan. The company is focusing on four core therapeutic areas: cardiovascular-renal-metabolic, immunology, neuroscience, and oncology, with anticipated growth in East Asian markets.

Broader Market Implications and Valuation Context

"The rapid entry of generic Entresto underscores the increasing challenges faced by pharmaceutical companies with blockbuster drugs nearing patent cliffs, particularly with the added pressure of regulatory changes like the IRA," notes a recent analysis. This event highlights the critical importance of pipeline diversification and strategic litigation in maintaining market share and revenue. Novartis has been proactive in business development, committing $17.23 billion in M&A and licensing deals this year. Notable transactions include the $1.4 billion acquisition of cardiovascular biotech Tourmaline Bio and licensing deals with Argo Biopharmaceutical and Arrowhead Pharma, totaling $7.56 billion in potential value. CFO Harry Kirsch emphasized the pursuit of "value-creating bolt-on deals."

While the stock has delivered a total return of around 18% since October 2024 and 49% since October 2023, the current valuation for Novartis is near historical highs, potentially limiting near- and medium-term upside. This trend is observed within a broader market context where the S&P 500's Shiller PE ratio stood at just under 40 as of October 16, 2025, a level considered historically extreme and previously preceding significant market downturns.

Looking Ahead

The ability of Novartis to effectively manage the impact of Entresto generic competition will hinge on the sustained performance of its newer growth drivers and the strategic success of its bolt-on acquisitions. While the company expects to maintain mid-single-digit revenue growth through the Entresto erosion period, its late-stage pipeline is considered thin, with few major catalysts anticipated before 2027. Investors will closely monitor the financial contributions from the new portfolio, the execution of ex-U.S. market strategies for Entresto, and any further strategic M&A activities to gauge Novartis's long-term trajectory in an evolving pharmaceutical landscape.