Novartis breaks ground on Texas RLT site, but valuation and LOE risks keep thesis cautious

What happened

Novartis broke ground on a new radioligand therapy manufacturing site in Denton, Texas, the fifth such US facility, as part of its $23 billion US manufacturing and R&D investment plan announced in April 2025. The site, expected to become operational in 2028, aims to bring RLT production closer to patients across the southern US and reinforces the company's leadership in scaling radioligand therapies. While the expansion supports the long-term growth narrative for Pluvicto and other RLT assets, the DeepValue report maintains a POTENTIAL SELL rating, citing a premium valuation (19.5x P/E, 14.5x EV/EBITDA) and near-term risks from Entresto generic erosion and margin dilution from acquisitions. The market already prices in substantial pipeline success, and this incremental news does not alter the immediate earnings outlook. Management's guidance of 5–6% constant-currency sales CAGR and 40%+ margins by 2029 remains dependent on flawless execution, which the current stock price largely reflects.

Implication

The Denton facility strengthens Novartis's vertical integration in RLT, a key growth driver, but the $23B capex and R&D spend will pressure margins in the near term. Investors should wait for FY2026 guidance to confirm that Kisqali, Kesimpta, and Pluvicto growth offsets Entresto erosion and that margins can sustain above 38%. Until then, the current entry point does not offer a margin of safety.

Thesis delta

The news reinforces the long-term growth narrative embedded in the bull case (e.g., Pluvicto scaling) but does not change the base case probability; the near-term risk-reward remains skewed to the downside at current levels, as the market already discounts this expansion.