Novartis shares fell nearly 10.5% in late afternoon trade on Tuesday after the Swiss pharmaceutical giant reported that its del-desiran drug failed in a late-stage trial for myotonic dystrophy type 1, the company's third clinical setback in a week.
The sell-off put Novartis on track for its worst trading day since March 2020.
Del-desiran is an antibody oligonucleotide conjugate therapy included in Novartis's neuromuscular pipeline through last year's approximately $12 billion acquisition of Avidity Biosciences. The global phase III HARBOR study failed to demonstrate that the drug significantly improved patients' ability to open their hands faster than a placebo.
"Novartis is evaluating the full HARBOR dataset and will engage with health authorities to determine the most appropriate development path for del-desiran," the company said in a release. Shreeram Aradhye, president of development and chief medical officer, added that "developing therapies for a complex disease like [myotonic dystrophy type 1] remains challenging, and setbacks are part of scientific progress."
The result follows closely on the heels of two other disappointments. Days earlier, Novartis announced that its pelacarsen drug failed to reduce cardiovascular event risk in a late-stage trial. A week before that, it paused eight clinical trials of an experimental cell therapy called rap-cel after three patients died.
Despite the string of setbacks, Novartis maintained its long-term sales growth guidance, expecting 5% to 6% annual growth on average until 2030.
Analysts were less sanguine. The equity research team at Jefferies wrote in a Tuesday morning note that the growth target "will likely be perceived as unattainable without further M&A, which is now questionable again." Jefferies analysts said confidence in the pipeline would remain elusive without del-desiran and del-brax, noting that data on del-brax is not expected until Phase III results emerge in 2028. "Business development and M&A likely remain a key part of the story for securing management's longer-term mid-single-digit growth aspiration, with management's ability to conduct larger deals now likely to remain under scrutiny," they wrote.
Barclays analysts estimated that del-desiran and pelacarsen together represented around $5 billion in risk-adjusted peak sales opportunities. More critically, they noted, del-desiran served as a test case for the Avidity acquisition, and its failure casts doubt on both the deal and Novartis's ability to offset upcoming patent expiries through mergers and acquisitions. "We expect shares to materially underperform, and Novartis' 20% sector premium may now be debated," Barclays said in a note.
Novartis did report a bright spot last week: a late-stage trial of remibrutinib, an experimental multiple sclerosis treatment, showed a clinically meaningful delay in disability progression.
