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Novartis (SWX:NOVN) Valuation Check After Late-Stage Pipeline Wins and New AI Drug Discovery Deal

Simply Wall St · 1d ago

Novartis (SWX:NOVN) just ticked several boxes for long term investors, pairing strong Phase III data for ianalumab and a broader Itvisma approval with a fresh AI discovery tie up with Relation Therapeutics.

See our latest analysis for Novartis.

These updates land on top of a strong run, with Novartis delivering a roughly 19% year to date share price return and a 24.7% one year total shareholder return. This suggests momentum is still building as clinical and AI driven catalysts stack up.

If breakthroughs like ianalumab and Itvisma are on your radar, it is worth seeing which other drugmakers are quietly strengthening pipelines too, starting with healthcare stocks.

Yet with the shares near record highs and trading only slightly below consensus targets, investors now face a tougher call: is Novartis still a smart entry point, or is the market already pricing in its next leg of growth?

Most Popular Narrative Narrative: 2.4% Undervalued

With Novartis closing at CHF105.98 against a narrative fair value of CHF108.62, the story leans slightly in favor of upside while assuming disciplined execution.

Operational efficiency gains from portfolio streamlining (for example, previous spin offs and exiting non core lines) and productivity improvements are driving core margin expansion and higher free cash flow. This can be reinvested in R&D and shareholder returns, supporting long term earnings and net margin growth. Announced $10 billion share buyback program, in addition to a strong dividend and significant free cash flow, enhances potential EPS growth and return on equity. This could result in rerating of the stock as medium term demand and profitability tailwinds materialize.

Read the complete narrative.

Curious how modest top line growth, rising margins and shrinking share count can still justify a richer future earnings multiple than today? The full narrative unpacks the cash flow math, the valuation reset and the assumptions that make this premium feel acceptable rather than aggressive.

Result: Fair Value of $108.62 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, looming patent cliffs on key drugs and intensifying global pricing pressure could quickly erode margins and undermine the current undervaluation case.

Find out about the key risks to this Novartis narrative.

Build Your Own Novartis Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a custom view in just minutes using Do it your way.

A great starting point for your Novartis research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.