Novartis' Patent Litigation Battle: A Critical Crossroads for Entresto's Dominance and Investor Returns

The legal battle over Novartis' heart failure blockbuster Entresto has reached a pivotal moment, with U.S. courts opening the door to generic competition and reshaping the drug's $7.8 billion revenue stream. For investors, the outcome of this patent litigation saga will determine whether Novartis can preserve its market share—or face a steep earnings decline as generics flood the market.

The Legal Landscape: A Losing Hand for Novartis?

The Delaware District Court's July 11, 2025 ruling was a damning blow. It denied Novartis' request to block MSN Pharmaceuticals from launching its generic version of Entresto, finding no infringement of U.S. Patent No. 11,096,918. The court held that MSN's crystalline formulation of sacubitril/valsartan did not violate the patent, which covers an amorphous solid form of the drug. This decision, combined with the expiration of pediatric exclusivity on July 15, 2025, cleared the path for MSN to enter the market as early as July 16—a full 16 months before the patent's 2026 expiration.

While Novartis won a prior Federal Circuit ruling in January 2025 upholding another Entresto patent (No. 8,101,659), that victory only delayed generics until July 2025. The July 2025 decision, however, is far more consequential. The court's rejection of Novartis' broader claims—including an adverse inference sanction due to its failure to produce a “glassy solid” sample—undermines its ability to leverage remaining patents.

Strategic Patent Litigation: A Narrow Path to Survival

Novartis' legal strategy has been a mix of tactical wins and strategic miscalculations. The Federal Circuit's January ruling highlighted the importance of claim breadth: the patent's language encompassing any “combination” of valsartan and sacubitril (not just the later-discovered complex form) saved it from invalidation. Yet, the Delaware court's focus on formulation-specific claims reveals a critical flaw in Novartis' approach.

Patent litigation in the pharma sector often hinges on narrow technical distinctions. Here, MSN's crystalline formulation sidestepped the '918 patent's scope, exposing the limits of Novartis' intellectual property (IP) strategy. While the company has historically relied on formulation patents to extend exclusivity, this case underscores the risks of overreliance on such claims. Competitors can often bypass them by altering physical forms or dosages, as MSN did.

Market Impact: A 50–70% Revenue Drop on the Horizon

The stakes are enormous. Entresto generated $3 billion in U.S. sales in 2023, accounting for 11% of Novartis' total revenue. Analysts now project a 50–70% revenue decline by 2026 as generics like MSN's product undercut pricing. The current $500-per-prescription price tag could plummet to $20–$30 once generics enter, with Medicare price caps under the Inflation Reduction Act (IRA) adding further pressure starting in 2026.

The timeline is equally critical. MSN's July 2025 launch date aligns with pediatric exclusivity expiration, ensuring no further delays. Even if Novartis appeals, the odds of success are low. The Federal Circuit would need to overturn the Delaware court's technical findings—a high bar given the evidentiary record.

Investor Considerations: A Sell Signal or Hold for Dividends?

For investors, the writing is on the wall. Novartis' stock has already fallen over 2% since the July ruling, with further declines likely as generics hit shelves. Key catalysts include:
- Q4 2025 Earnings: Early signs of revenue erosion will pressure the stock further.
- IRA Negotiations (2026): Medicare's price caps will force Novartis to accept discounts, squeezing margins.
- Patent Expirations: The '918 patent expires in November 2026, ending all avenues for exclusivity.

Analysts project a 20–30% downside for NVS by year-end 2025, with a consensus “Hold” rating. Short sellers may target the stock, given its underperformance relative to peers (down 15% YTD).

Conclusion: The End of Entresto's Golden Era

The Delaware ruling marks the end of Entresto's patent-protected dominance. Even if Novartis wins its appeal—a long shot—the damage is already done. Generics will capture 40–60% of the market by mid-2026, eroding revenue and stock value.

Investors should focus on Novartis' pipeline, including Kisqali (breast cancer) and Pluvicto (prostate cancer), to offset Entresto's decline. However, until these drugs prove their commercial potential, the near-term outlook is bleak.

Investment Advice: Consider taking profits or shorting NVS ahead of Q4 earnings. Long-term investors should assess whether Novartis' pipeline can justify its valuation—or if the company is overreliant on fading blockbusters.

In the cutthroat world of pharma patents, Novartis' Entresto battle serves as a cautionary tale: even the strongest brands can crumble if their IP defenses are breached. For now, generics have won the day—and investors are paying the price.