Novartis (NOVN.S): Multiple disconnected from the risks - remain Sell

Research evidence excerpt

Novartis (NOVN.S): Multiple disconnected from the risks - remain Sell

Goldman Sachs Novartis (NOVN.S)

c.16x 2027 EPS, this suggests to us that the market believes that Novartis can grow

revenues at mid-single digits for the foreseeable future, in line with management’s

ambitions. However, in our view, the current pipeline is insufficient to deliver this

growth and while free cash flow is strong ($15-18bn per annum - we note a relatively

high dividend commitment c.$8bn), supporting deal capacity, the market already

appears to be giving credit that Novartis can fill the pipeline shortfall, which we

believe is very generous. In addition, the current valuation does not reflect the near

term risk to pipeline readouts, which include (in order of our expectations through

3Q’26) HORIZON (pelacarsen), HARBOUR (del-desiran) and REMODEL (remibrutinib

in MS). If we de-risk all three read outs on success, our DCF would increase to

CHF125 (+CHF11) - which is 1% downside to current levels, and if all three trials are

not successful, our DCF would move to CHF99 (-CHF15), which is 21% downside to

current levels; highlighting to us that across the board success will be required to

justify the current share price.

n 2Q’26 Preview - GSe sits -1%/-2% vs. Visible Alpha Consensus Data for 2Q’26

Group net sales/core operating income, respectively; we expect guidance to be

reiterated. We model 2Q’26 constant currency (cc) sales decline of -2.8% and

corresponding revenue of $13,860m, -1% below Visible Alpha Consensus Data at

$13,934mn, and in-line with Novartis’ 2Q’26 guidance of a low single-digit cc decline

on net sales. In terms of earnings, we forecast a core operating income decline of

-12.4% to $5,223m, which sits broadly in-line with the company’s high single-digit to