Artisan Partners Demands Novartis Board Changes After Costly Trial Setbacks

Artisan Partners, a top-20 shareholder in Novartis, has publicly called for changes to the Swiss pharmaceutical giant's board, citing a poor track record on acquisitions and a need for improved corporate governance after two major clinical trial setbacks this week.

Shareholder Demands Board Overhaul

David Samra, a managing director at Artisan Partners, told Reuters on Thursday that the company's deal oversight process requires reform. "The party is over," Samra said, urging Novartis Chairman Giovanni Caforio to make changes at the board level. He specifically criticized the team responsible for acquisitions, calling their performance "uninspiring at best."

Artisan, the first investor to publicly demand board changes, also called for reforms to Novartis's compensation structure. Samra argued it relies too heavily on adjusted performance metrics that exclude writedowns from failed deals, rather than reflecting "real economic outcomes."

Trial Failures Trigger Scrutiny

The activist stance follows a sharp decline in Novartis's stock. Key recent events include:

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• A drug acquired through the $12 billion takeover of Avidity failed a late-stage study for a muscle-wasting disorder.
• The news on Tuesday sent Novartis shares down more than 10%, erasing nearly $30 billion from its market capitalization.
• This followed a 3% stock drop on Monday after disappointing results for its heart drug, pelacarsen.

Samra told Reuters that a history of poor deals has destroyed shareholder value, also pointing to the 2024 acquisition of German biotech MorphoSys, which Novartis wrote down months after the transaction closed. "If you do a $12 billion deal and it goes to zero, the management needs to be penalised for that," he said.

Novartis Responds

While criticizing the board, Samra expressed support for CEO Vas Narasimhan, stating he had done a "very good job" running the business and that the issue lies with board-level scrutiny of M&A.

In a statement, Novartis said its financial guidance remains unchanged by the recent setbacks and that it maintains a broad pipeline of medicines. The company affirmed its commitment to a "disciplined and shareholder friendly approach to capital allocation," including value-creating acquisitions and returning capital to shareholders. Following reports of Artisan's demands, Novartis shares were trading over 1.6% higher in pre-market activity Thursday.