Goldman Sachs downgraded Novartis (SIX:NOVN) to “sell” from “neutral” in a note dated Friday, citing mounting risks from generic competition, stretched valuations, and a muted pipeline.
Shares of the Swiss pharma company were down 2.3% at 03:35 ET (07:35 ET GMT).
The brokerage cut its 12-month price target to CHF94 from CHF95, about 8% below Thursday’s close of CHF101.78.
The U.S.-listed ADR target was trimmed to $118 from $119, implying 7.6% downside from $127.70.
The downgrade follows a period of strong share price performance. Novartis stock climbed to record highs in late August, supported by share buybacks and earnings momentum.
But Goldman said recent gains do not reflect the risks ahead. “Downgrade to Sell, as recent outperformance and multiple expansion do not reflect risks ahead” analysts said.
Valuation was a central concern. Novartis currently trades at around 14 times 2026 earnings, a 7% premium to the sector and a 10% PEG premium.
“In our view, this valuation does not fully reflect the risks ahead, with Entresto generics gaining 35% market share in the first 9 weeks since launching and with the drag from generic competition about to structurally increase,” the brokerage said.
The launch of Entresto generics in the U.S. at the end of July marked a turning point. Fourteen generic versions have entered the market, led by Indian drugmakers such as Ascend Laboratories, Novadoz Pharmaceuticals, and Zydus.
Together they captured about 35% market share by late August, with discounts ranging from 15% to 67% below Novartis’ wholesale acquisition cost.
Goldman estimates Entresto’s U.S. sales will decline 14% in 2025, including an 80% drop in the fourth quarter. Gross margins on Entresto are forecast to fall from about 80% in 2024 to 70% in 2025, 60% in 2026, and 50% in 2027.
“Overall, while Entresto generics are a headwind, there are other offsets, particularly Kisqali growth,” analysts said.
Beyond Entresto, Goldman flagged a broader loss-of-exclusivity challenge. Novartis has about $41 billion in peak sales at risk through 2036, including Cosentyx in 2029, Kisqali in 2031 and Kesimpta in 2031.
Its Phase 2 and Phase 3 pipeline represents $44 billion in potential peak sales, but risk-adjusted estimates shrink that to about $19 billion.
“While LoE risk is well flagged, Novartis has c.$41bn in peak sales potential at risk of LoE, while Ph2/Ph3 pipeline sales could be in the region of $44bn before risk adjustments,” Goldman said.
Revenue growth is expected to slow sharply. After several years of high-single-digit and low-double-digit sales gains, Goldman forecasts growth of 2% in 2026, mid-single-digit rates through 2029, and revenue declines from 2030.
“Given this, we believe that topline growth at Novartis will drop from HSD/LDD across 2023-25 to c.2% in 2026, and then remain at the MSD level for 2027-29 before entering negative growth from 2030 onwards,” analysts said.
Goldman added that the stock’s premium valuation cannot be justified. “So, while we can understand the reasons for the outperformance vs. peers over the past few years, we do not believe that the current multiple adequately reflects the forward risks,” the brokerage said.
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