Novartis Is Having a Very Bad September—and More Pain Could Be on the Way

Two experimental drugs from Novartis, pelacarsen and del-desiran, failed to meet their primary goals in recent trials. (Photograph by Dominick Reuter/AFP/Getty Images)

Novartis can’t catch a break—and its stock is paying the price.

The Swiss drugmaker’s U.S.-listed stock was pacing toward its steepest drop on record following Novartis’ third clinical setback in a matter of days.

The company announced Tuesday that del-desiran, the centerpiece of a recent acquisition, missed its primary endpoint in a trial for a rare neuromuscular disease. That followed last week’s news that another drug candidate, pelacarsen, had failed to significantly reduce the risk of heart attacks and strokes compared with a placebo. The drugmaker also halted select trials of an experimental cell therapy earlier in September after three patient deaths linked to a rare autoimmune reaction.

These trials were particularly important for Novartis. The drugmaker has grappled with falling sales of its biggest moneymaker, Entresto, and bracing for the expiration of key patents in coming years. And like many sector peers, Novartis has leaned on acquisitions in recent months to bolster its pipeline, which remains under pressure.

Del-desiran, the asset behind the latest trial miss, was one of several late-stage RNA therapies acquired through the $12 billion purchase of Avidity Biosciences in February. The results place greater pressure on CEO Vas Narasimhan, who had framed del-desiran as a potential blockbuster.

The failure also invites scrutiny of the drugmaker’s dealmaking strategy and pushes management’s long-term targets further out of reach. Jefferies analyst Michael Leuchten noted that investors will likely see greater risk in del-brax, another asset acquired in the deal, and warned that management’s goal of mid-single-digit growth through 2030 “will likely be perceived as unattainable” without additional acquisitions.

Novartis is set to host its capital markets day in November, where an upgrade to guidance is “now highly unlikely,” according to Morgan Stanley analyst Thibault Boutherin.

There is one bright spot in the pipeline: remibrutinib, which Wall Street regards as a potential blockbuster. Investors are clearly optimistic: When the drugmaker announced its trial pause on Sept. 1, shares rose anyway as focus shifted past that setback to positive late-stage data for the pill.

But with so much going wrong elsewhere, it may not be the silver bullet Novartis needs.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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