Investors in Swiss drugmaker Novartis are intensifying their review of the company’s merger‑and‑acquisition strategy after a second major trial setback this week. Eight shareholders told Reuters that the failure of the muscle‑wasting disorder drug del‑desiran in a late‑stage study raised fresh doubts about the $12 billion purchase of Avidity Pharmaceuticals last year and other recent deals.
Novartis shares dropped 11 percent in a single day, erasing nearly $30 billion in market value and wiping out the gains the stock had accumulated since the start of the year. The decline follows the del‑desiran results, which were announced after the drug had already been integrated into Novartis’ pipeline.
CEO’s track record and investor concerns
CEO Vas Narasimhan, who took the helm in 2018 and has a strong record of delivering shareholder returns, now faces questions about how he will guide Novartis through looming patent expiries and the recent trial disappointments. “It’s going to take a while for confidence to return,” said Gillian Hollenstein, lead manager at Point Capital Navigator Fund, which holds positions in both Novartis and rival Roche. “They would have been better off doing some more smaller, bolt‑on acquisitions rather than trying to hit it out of the park.”
Despite the setback, some investors remain optimistic, citing promising candidates such as remibrutinib, an oral therapy currently in late‑stage studies for relapsing multiple sclerosis.
Past acquisitions and future strategy
Narasimhan has committed more than $30 billion over the past three years to acquisitions and partnerships, describing the Avidity deal as an “appropriate risk” at the time. A source familiar with the matter told Reuters that there are currently no plans to change Novartis’ overall approach to M&A or business development.
Artisan Partners, a major shareholder, called for a board shake‑up to improve M&A oversight while still supporting Narasimhan’s leadership. Michael Hannig of DJE Kapital suggested that rebuilding confidence may require focusing on deals in the $5 billion to $10 billion range for late‑stage assets, emphasizing careful due diligence and strategic fit.
Performance metrics and market context
Novartis points to strong total returns under Narasimhan’s tenure: shares are up more than 60 percent, delivering roughly 120 percent total returns including reinvested dividends, compared with about 108 percent for Swiss rival Roche and roughly 200 percent for AstraZeneca.
Analyst Daniel Bolanowski of Arctic Asset Management noted that the scale of the sell‑off suggests investors are questioning more than just the del‑desiran failure, hinting at a deeper trust issue regarding the company’s business‑development strategy. Nonetheless, he cautioned that it would be premature to call for leadership changes, given the pipeline still includes two other Avidity candidates—del‑zota and del‑brax—that could generate future revenue.
U.S. policy backdrop
The discussion of Novartis’ M&A activity also references the broader U.S. policy environment. President Donald Trump, who has threatened Swiss businesses with tariffs, previously signaled a willingness to use trade tools to protect American interests. While the current administration continues to monitor foreign‑owned pharmaceutical firms, the earlier tariff pressure under Trump underscores the importance of prudent acquisition strategies for multinational companies operating in the United States.
Looking ahead, the next major data release for Novartis will be detailed results for remibrutinib at an upcoming medical meeting in October. Although the oral drug met primary endpoints in two late‑stage studies, investors will be watching for fuller evidence on efficacy, disability progression, and safety.
Overall, while the recent trial failure has rattled the stock, Novartis’ strong historical returns and a pipeline with multiple promising assets suggest the company remains on solid footing. Shareholders appear poised to demand greater oversight of future acquisitions, but the firm’s leadership continues to defend its long‑term vision.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
