David Samra, managing director at Artisan Partners and founding partner of International Value Group, a top 20 Novartis shareholder, has called for significant changes to the Swiss drugmaker's board. Samra criticized successive chairmen for failing Novartis on acquisitions and urged Chairman Giovanni Caforio to improve the team responsible for deals, stating, "The party is over." This demand comes after Novartis's shares experienced a record fall due to back-to-back trial setbacks for key experimental drugs.
Novartis's recent setbacks include the failure of del-desiran, an experimental drug for a muscle-wasting disorder, in a late-stage study, and the prior failure of the heart drug pelacarsen. The del-desiran failure, which occurred in the HARBOR study, was particularly impactful as it was acquired through a $12 billion deal with Avidity. Analysts had estimated peak annual sales of del-desiran to be as high as $3 billion to $3.1 billion, and its failure led to a 9.6% drop in Novartis's shares on Tuesday, wiping approximately 24 billion Swiss francs ($29.6 billion) off its market value.
The trial failures have put immense pressure on CEO Vas Narasimhan's M&A strategy, which aimed to bolster the company's pipeline and offset upcoming patent expiries. Investors are now questioning the rationale behind the Avidity acquisition and the overall effectiveness of Novartis's deal-making process. The company had been relying on del-desiran, pelacarsen, and remibrutinib to drive growth, with del-desiran and pelacarsen alone having an estimated peak annual sales potential of $5 billion. The focus now shifts to remibrutinib to perform well and for Novartis to demonstrate that its broader pipeline can compensate for these lost expectations.
While Novartis reiterated its full-year guidance, expecting sales to grow at a compound annual rate of 5% to 6% between 2025 and 2030, analysts from Jefferies and Barclays express doubts about the company's ability to achieve these targets without successful M&A. The setbacks have also cast a shadow on the market for rival treatments, with shares of companies like Amgen, Dyne Therapeutics, and Sarepta Therapeutics also experiencing declines. The confidence in Novartis's acquisition strategy and its ability to navigate patent cliffs is significantly dented, prompting calls for transparent explanations of how trial risks are being managed and disciplined capital allocation.
