Novartis Raises Profit Guidance Despite $1.9bn Drug Trial Charge

ovartis has raised its full-year 2026 core operating income outlook after stronger third-quarter performance, while recognising a $1.9bn impairment charge linked to a setback in the development of an experimental drug.

The Swiss pharmaceutical company now expects core operating income to increase by a low single-digit percentage in 2026, reversing its previous forecast for a low single-digit decline. It maintained its full-year net sales growth forecast at a low single-digit percentage.

Third-quarter core operating income rose 10% at constant exchange rates, supported by higher net sales, according to the company.

However, reported operating income fell 61%, reflecting higher research and development costs and a $1.9bn partial impairment charge for del-desiran, an experimental treatment for myotonic dystrophy.

Drug development setback leads to impairment

Del-desiran was being developed for myotonic dystrophy, a muscle-wasting disease for which the Reuters report says there are no approved treatments.

The programme was one of two consecutive major clinical trial setbacks announced by Novartis in September. Those developments put pressure on the company’s shares, according to Reuters.

Novartis obtained del-desiran through its $12bn acquisition of Avidity Biosciences, announced in October 2025. The impairment highlights the financial exposure pharmaceutical companies can face when acquired drug-development programmes fail to deliver the expected clinical progress.

Core earnings and reported results diverge

The difference between Novartis’ core and reported operating income figures reflects the impact of costs and adjustments that affect reported profitability.

Core operating income provides a view of underlying operating performance using the company’s adjusted measure. Reported operating income captures the broader accounting result, including the impairment charge and higher research and development costs identified by Novartis.

The improved core operating income outlook indicates stronger operating performance than the company previously expected. However, the decline in reported operating income demonstrates the effect that research spending and clinical setbacks can have on financial results.

What the outlook means for the pharmaceutical business

Novartis’ results illustrate the competing financial pressures facing research-led pharmaceutical companies. Higher sales can support operating performance, but drug development requires substantial investment and carries the risk that clinical programmes will not progress as planned.

Acquisitions can add potential treatments to a company’s development pipeline, but their financial value depends partly on future clinical and commercial outcomes. When trial results undermine a programme’s prospects, companies may need to reduce the recorded value of the related asset.

Investors and industry stakeholders will therefore be watching whether Novartis can sustain its improved core operating performance while managing research costs and the consequences of its recent clinical setbacks.

The company has retained its low single-digit net sales growth forecast for 2026, while its revised core operating income guidance signals a more positive outlook for adjusted profitability than previously anticipated.

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