Big Pharma is buying its way out of the patent cliff, while Novartis AG (NYSE:NVS) is trying to out-develop it.
A Record Year for Biotech Deals
The scale of that buying activity appears in this year’s deal totals.
Biotech M&A has hit a record pace in 2026, with deal value reaching $216 billion so far this year, up from $118 billion over the same stretch last year, according to LSEG data. Stifel counts 37 biotechs acquired for at least $1 billion this year, already topping last year’s full-year record of 35, as drugmakers race to buy pipelines ahead of looming patent losses.
Novartis Feels Its Own Patent Cliff
Novartis AG (NYSE:NVS) faces that pressure directly.
Entresto sales fell 50% to $1.18 billion in the second quarter (weaker-than-expected) as generic competition hit its largest market, and the company expects a $4 billion drop from the drug this year. CEO Vas Narasimhan, who has led Novartis for eight years, has called this the largest patent expiry period in the company’s history, with Cosentyx and Kisqali both facing losses around the turn of the decade.
Betting on the Pipeline Instead
Rather than chase acquisitions, Novartis AG (NYSE:NVS)’s Narasimhan is leaning on three late-stage trial readouts due in the second half: pelacarsen for cardiovascular disease, remibrutinib for multiple sclerosis, and del-desiran for myotonic dystrophy type 1. Analysts estimate the three drugs represent more than $10 billion in combined peak annual sales, enough to offset the coming losses if they read out clean.
The Risk in Waiting on Trial Data
That approach carries real risk, as this month’s news elsewhere in the sector showed.
AstraZeneca shares fell after a late-stage nerve-disease drug developed with Ionis missed its main goal in a heart-disease trial, a reminder of how quickly sentiment can turn on a single miss. UBS expects Novartis AG (NYSE:NVS)’s pelacarsen to clear statistical significance around a 12% relative risk reduction, though clinicians may want 15% or higher to call the benefit clearly meaningful.
A Beat Amid Choppy Trading
Novartis AG (NYSE:NVS) beat second-quarter profit expectations even as investors continue to wait for those trial results.
Core operating profit came in at $5.94 billion for the quarter, above the $5.31 billion analysts had projected, according to Visible Alpha estimates cited by Reuters, with core EPS 12% ahead of forecasts. Shares rose as much as 3% on the earnings release, though the gain comes amid uneven recent trading, with the stock up just 4.62% over the past month and down 1.53% in July, even as it holds a 14% gain for the year. Kisqali sales climbed 44%, Scemblix nearly doubled, and Cosentyx grew 12%. BofA kept its Buy rating and CHF 140 target, citing an active run of trial catalysts ahead.
The firm said:
“While the long-standing overhang for investors has been substantial loss-of-exclusivity cliffs through the end of the decade, NOVN sits above our regression analysis as we predict the mid- to late-stage pipeline will shift the balance between new product launches and key off-patent exposure.”
Short Sellers and Valuation
Short sellers are not betting against that story. Novartis AG (NYSE:NVS)’s short float stood at 0.28% as of June 30, 2026, the lowest among its large-cap peers, well below Pfizer Inc. (NYSE:PFE)’s 2.87%, Merck & Co., Inc. (NYSE:MRK)’s 1.27%, and Eli Lilly and Company (NYSE:LLY)’s 1.05%, even after the shorts share count rose 18% from a month earlier to 5.36 million.
The stock is not the group’s most expensive either.
Novartis trades at roughly 17 times forward earnings, above Pfizer Inc. (NYSE:PFE)’s 8.47 but below Merck & Co., Inc. (NYSE:MRK)’s 46.08 and Eli Lilly and Company (NYSE:LLY)’s 32.68. Still, Goldman Sachs analyst James Quigley has said Novartis needs at least two of the three trials to succeed, or the multiple could come under real pressure.
Hedge Funds Sizing Up
Hedge funds are committing more capital despite fewer holders.
Insider Monkey’s database shows 31 of the 1,022 hedge funds it tracks held Novartis AG (NYSE:NVS) shares in the first quarter of 2026, down from 35 of 1,041 the prior quarter, the fewest in five quarters. Fisher Asset Management was the largest holder, which boosted its stake by 86% to $2.12 billion. GQG Partners trimmed its position by 23% to $373.82 million, while Renaissance Technologies cut its stake by 18% to $169.83 million.
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