Shares of Swiss pharmaceutical heavyweight Novartis AG tumbled more than 9% in European trading on September 8, marking their worst single-day performance since March 2020. The selloff came after a brutal week in which three separate clinical programs failed, shaking investor confidence in the company's pipeline prospects.
The latest blow arrived with the announcement that del-desiran, a candidate drug for muscular dystrophy, had missed its primary endpoint in a Phase 3 trial. That disappointment followed the failure of pelacarsen, a cardiovascular treatment, to reduce the risk of cardiovascular events in another late-stage study. Adding further strain, the experimental cell therapy rap-cel had already been paused across eight clinical trials following the deaths of three patients.
The cascade of setbacks has prompted a reassessment of Novartis' pipeline strength and its ability to sustain long-term growth. Despite management reaffirming its projection of 5% to 6% annual sales growth through 2030, analysts at Jefferies have warned that this target is "highly likely to be seen as unattainable" unless the company pursues further acquisitions to close the gap.
Phase 3 Failure for del-desiran Puts $12 Billion Acquisition to the Test
Novartis stated that the Phase 3 HARBOR study showed no significant improvement in hand opening and closing abilities for patients receiving del-desiran compared to those on a placebo, meaning the trial failed to achieve its main efficacy goal. The company said it would continue analyzing the full dataset and discuss next steps with regulatory authorities.
Notably, del-desiran is a core asset that Novartis acquired through its roughly $12 billion purchase of Avidity Biosciences last year. This late-stage failure has now placed the strategic value of that substantial acquisition under renewed market scrutiny.
Barclays analysts have pointed out that both del-desiran and pelacarsen were widely expected to generate combined peak sales of approximately $5 billion. With the development of these two drugs now facing significant hurdles, the company's future growth trajectory may be constrained. Barclays anticipates that Novartis' stock will significantly underperform its peers, and its current valuation premium of around 20% over comparable companies could narrow as a result.
Jefferies also expressed skepticism, suggesting that market confidence in the pipeline is unlikely to recover until data for del-desiran and del-brax materialize. Given that del-brax Phase 3 results may not be available before 2028, mergers and acquisitions (M&A) and business development efforts are likely to remain essential to achieving Novartis' medium- to long-term growth targets. As such, the company's capacity to execute major deals in the future will face closer investor examination.
remibrutinib Delivers Positive News, Yet Pipeline Pressures Persist
There have been some bright spots for Novartis recently. Just last week, the company announced positive results from a Phase 3 trial of remibrutinib, an experimental drug for multiple sclerosis, showing a clinically meaningful delay in disability progression.
However, with three clinical setbacks within a single week, the encouraging performance of one drug is unlikely to compensate for the broader pipeline gaps. For investors, the key questions now are whether Novartis' existing research and development efforts can drive future growth, and whether the company can consistently bolster its growth engine through new acquisitions.
As core projects stumble, the dual-pronged strategy of combining internal R&D with external M&A that Novartis has relied on to sustain medium-term growth is facing much stricter market validation.