Novartis shares fell 0.8 percent to 110.86 Swiss francs in early Wednesday trading, extending losses after dropping 3 percent on Monday and 11 percent on Tuesday, with no sign of stabilization.
The pharmaceutical giant disclosed two consecutive clinical setbacks at the start of the week. On Monday, it reported the failure of Pelacarsen, a cholesterol medication, followed on Tuesday by the collapse of Del-Desiran, viewed as a flagship candidate for treating a rare muscle disorder.
Indications are mounting that investors are rotating capital away from Novartis toward local rival Roche. A Royal Bank of Canada analyst, in a Wednesday study, assigned Novartis a "Sector Perform" rating while upgrading Roche participation certificates to "Sector Outperform."
The recent disappointments in Novartis' pipeline have increased pressure on its development outlook, the analyst wrote. Projected revenue growth now appears ambitious and would require near-flawless further pipeline progress or acquisitions to achieve, the report stated. The analyst set a 120-franc target price for Novartis stock.
Roche's pipeline, by contrast, remains undervalued by the market, the analyst said, pointing to the breast cancer drug Giredestrant as capable of reaching $14 billion in peak sales. Ongoing core business should also accelerate, the expert added.
While Roche's valuation is elevated, it is warranted given the quality of the company, the analyst wrote. The target for Roche participation certificates stands at 400 francs, well above the current level of 348 francs.
