Novartis delivered a second-quarter profit that outpaced analyst expectations, but the numbers reveal a strategic gamble. Cost controls and one-time benefits masked the deepening impact of patent losses, with the company signaling that heavier spending lies ahead. Main Developments Core operating profit reached $5.94 billion, well above the Visible Alpha consensus of $5.31 billion. Shares climbed 3% following the report. Sales of Entresto, which accounts for roughly 10% of total revenue, plunged 50% to $1.18 billion—worse than forecast—as generic competition intensified in the U.S. market. The heart drug is expected to lose European patent exclusivity from November, though Novartis anticipates a softer decline in the second half. Read also: IEA confirms over 1 billion barrels of emergency oil remain after record drawdown Quarterly sales rose 1% on a constant-currency basis to $14.41 billion, ahead of expectations. That performance was supported by a roughly $100 million U.S. inventory benefit for the psoriasis drug Cosentyx. Background Novartis, valued at about $310 billion after a 14% share gain this year, is navigating its most severe period of patent expiries. Entresto sales had already dropped 42% in the first quarter and are projected to lose $4 billion in 2026 alone. To counter that decline, the company is leaning on newer drugs: Kisqali sales surged 44% to $1.7 billion, Scemblix nearly doubled to $562 million, and Cosentyx grew 12% to $1.82 billion. The $12 billion acquisition of Avidity Biosciences is also being absorbed. Why It Matters The profit beat came largely from cost discipline—core SG&A expenses fell 6% to $3.24 billion—but analysts at Barclays noted that the unchanged 2026 guidance implies a ramp-up in spending from the third quarter. Research and development costs also came in lower than expected, raising questions about whether near-term cuts are sustainable. James Eugene of Verso Investment Management pointed to the muted R&D spending as a key factor behind the beat. The company is betting that pipeline candidates like pelacarsen, remibrutinib, and del-desiran—which analysts estimate could generate $10 billion in peak annual sales—will fuel growth beyond 2030. What's Next Investors will watch trial readouts for those three experimental drugs closely. Meanwhile, Novartis expects higher spending in the second half as it integrates Avidity and launches newer therapies. The company has kept its 2026 outlook steady: low-single-digit sales growth and a low-single-digit decline in core operating profit, both excluding currency effects.