Entresto's Patent Lifeline: Can Novartis Stave Off an $8 Billion Generic Tsunami?

The stakes are massive for Novartis (NVS) as it battles to extend the exclusivity of its blockbuster heart failure drug Entresto (sacubitril/valsartan), which generated $7.8 billion in 2023 sales. A partial settlement in its patent litigation with MSN Pharma in June 2025 removed one hurdle to generic competition, but the looming expiration of its second key patent in November 2026—and regulatory pressures from the Inflation Reduction Act (IRA)—create a high-stakes balancing act. Here's why investors should closely watch this patent war and its implications for Novartis' valuation.

The Patent Timeline: A Delicate Dance to Postpone the Inevitable

The June 2025 settlement over the expired "659 patent" (originally expiring January 2025 but extended to July 15, 2025 via pediatric exclusivity) was a strategic retreat. While this allowed MSN to proceed with generic launch plans post-July 16, 2025, Novartis retains a stronger defensive position with its second patent, the "918 patent" (expiring November 9, 2026), which protects Entresto's amorphous solid form. Federal courts have already ruled that MSN's crystalline formulation does not infringe this patent, but Novartis continues to seek injunctions to delay market entry until 2027, arguing that pediatric exclusivity and overlapping patent terms justify further delays.

Why the 2026 Patent Expiry Is a Tipping Point

The 918 patent's expiration in late 2026 is a critical juncture. If generics flood the market by early 2027, Entresto's U.S. sales could plummet 50-70% within months. However, Novartis' aggressive litigation strategy—despite losing key battles—suggests confidence that demand for Entresto will remain robust post-generic entry. The drug's unique mechanism (a first-in-class neprilysin/ACE inhibitor combination) and strong clinical data in reducing heart failure hospitalizations create enduring value. Yet, investors must weigh this against execution risks:- FDA/DOJ Intervention: The Biden administration's focus on drug pricing could lead to expedited generic approvals or challenges to patent validity under the "Hatch-Waxman" framework.- IRA Impact: Starting in 2026, the IRA caps Medicare's share of drug costs at $2,000 annually, which could exacerbate Entresto's price erosion if generics undercut pricing by 90%.

Investment Analysis: Near-Term Volatility vs. Long-Term Sustainability

Risks to Watch:1. 2025-2026 Patent Outcomes: If the Delaware court denies Novartis' final injunction requests, generics could launch by early 2026, pressuring stock. A negative ruling could drop NVS shares 15-20% in short order.2. Pipeline Dependency: Novartis' mid-term growth hinges on Kisqali (breast cancer), Pluvicto (prostate cancer), and iptacopan (rare diseases). Weakness in these therapies would amplify Entresto's decline.

Opportunity in the Long Game:- 2026-2027 Transition: Even with generics, Entresto's global sales (>$3 billion in ex-US markets) and its position as a standard-of-care therapy may slow erosion. A 2026 generic launch would still leave Novartis with 12 months of U.S. exclusivity post-settlement to maximize pricing.- Pricing Power in Emerging Markets: Novartis could leverage its global scale to offset U.S. declines by expanding Entresto's use in Asia and Latin America.

Investment Thesis: Hold for Now, But Prepare for Turbulence

Novartis' stock (currently trading at ~$85) reflects a 15-20% premium to its 2025 EPS estimates, assuming Entresto maintains mid-single-digit sales growth through 2025. Investors should:- Buy the Dip: If shares fall below $75 on near-term litigation losses, the entry point becomes attractive, given the pipeline's potential and Entresto's global staying power.- Avoid Overpaying: A post-generic scenario could cap NVS at $70-80 unless new therapies like iptacopan or Pluvicto deliver blockbuster sales.

Conclusion: A High-Wire Act with Reward for the Bold

Novartis' fight to delay generics is a testament to Entresto's strategic importance. While the patent clock ticks, the company's ability to navigate FDA politics, pipeline progress, and pricing dynamics will determine whether this $8 billion franchise becomes a catalyst for growth—or a drag on shareholder returns. For investors, patience and a focus on post-2026 resilience are key. Monitor court rulings and pipeline data releases closely—this is a story where legal wins and losses could swing valuations by billions.

Final Take: Hold NVS for now, but keep a close eye on the Delaware court's final patent ruling in Q4 2025. A win for generics could trigger a sell-off, but a Novartis victory would extend the party—and the premium—for another year.