[EARNINGS PREVIEW] Novartis and Roche to kick off Pharma earnings.

• Novartis is to report Q2 and H1 2026 earnings on Tuesday 21st BMO (commonly at 06:00BST).
• Roche is to report H1 2026 earnings on Thursday 23rd at 06:00BST.

Overview:

• Health care has underperformed the broader market over the past few months, printing YTD gains of +0.7% while the STOXX 600 is higher by 7.6%. Many factors have weighed on the sector since the turn of the year: 1) uncertainty over US policy, 2) slow earnings growth, and 3) a weak dollar. However, the outlook for pharma has brightened.
• Since US President Trump has re-entered office, he has pushed for lower drug prices and threatened excessively high tariffs on companies that do not manufacture in the US. Currently, a 100% tariff applies to patented pharmaceuticals and APIs, while a 20% rate is given to companies with approved US onshoring plans and a 0% tariff on those with executed MFN pricing deals. But many large pharma companies have negotiated deals and should benefit from the more stable setup.
• Benefiting the space is the increasing view that AI adoption could bring benefits and the current strengthening of the USD. AI can be used for diagnostics and research, with Novo Nordisk and Sanofi announcing strategic partnerships with OpenAI and Formation Bio. On the USD, 45% of revenue is generated in North America, so a firmer Buck would benefit revenues.
• Goldman Sachs states that the sector remains volatile, with sentiment to be choppy into a risky second half of 2026. Novartis has a number of key phase 3 in the pipeline, notably pelacarsen, del-desiran and remibrutinib, while M&A remains a key theme, the bank adds. Goldman adds that Q2’26 earnings looks neutral with slight misses on top-line figures expected and FY26 guidance likely to be reiterated, outside of Novo Nordisk (expecting a guidance raise).

Novartis Expectations (USD):

• EPS: 2.14 (Citi 2.15, prev. 2.42 Y/Y)
• Revenue: 14.04bln (BofA 13.90bln, prev. 14.05bln Y/Y)
• EBIT: BofA -10% Y/Y (prev. guided “high single to low double-digit decline”)

Roche Expectations (CHF):

• EPS: 10.28 (Citi 10.36).
• Revenue: 30.98bln (Citi 30.3bln)

Guidance & Analyst Commentary:

• For Novartis, both Goldman Sachs and Citi expect guidance to be reiterated. Citi highlights the decline in EPS could be due to the effect of patent expirations of its Entresto, Promacta, Tasinga and increased R&D spending from the recent acquisitions, including Myricx Bio and Avidity. In terms of future outlook, Citi will be assessing Novartis’ confidence on upcoming trial results for pelacarsen, del-desiran and remibrutinib.
• For Roche, Citi focuses on the launch of its new breast-cancer drug, giredestrant. The US FDA is expected to make a decision on its approval by the end of November and, if approved, Citi forecasts the drug could generate USD 14.5bln in peak sales.