Major Novartis Shareholder Artisan Partners Demands Board Changes After Trial Setbacks

A major shareholder in Novartis is calling for a shake-up of the Swiss drugmaker's board, citing poor corporate governance and a flawed M&A strategy following recent clinical trial setbacks that triggered a record drop in the company's stock.

David Samra, a managing director at Artisan Partners, told Reuters that Chairman Giovanni Caforio needs to act after a series of disappointing deals. Artisan Partners is one of Novartis's 20 largest shareholders, according to LSEG Workspace data.

Catalyst for the Call

The demand for change follows a difficult week for Novartis. The company's shares plunged more than 10% on Tuesday, wiping out nearly $30 billion in market value, after a key drug failed a late-stage study. The drug, intended to treat a muscle-wasting disorder, was the centerpiece of Novartis's $12 billion acquisition of U.S. firm Avidity.

This setback came just one day after the company's stock fell 3% when trial results for its heart drug, pelacarsen, also disappointed investors. In a statement, Novartis said its financial guidance remained unchanged and that it maintains a "broad" pipeline of medicines.

Scrutiny on M&A and Governance

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Samra placed the blame squarely on the board's oversight of acquisitions, not on CEO Vas Narasimhan, who he said has done a "very good job" running the business. "If you do a $12 billion deal and it goes to zero, the management needs to be penalised for that," Samra said, arguing that the board has failed to exercise sufficient scrutiny.

He pointed to a history of value-destructive deals, also citing the 2024 acquisition of German biotech MorphoSys, whose value was written down by Novartis only months after the deal closed. Samra also urged the board to overhaul the company's compensation structure, which he claims relies too heavily on adjusted performance metrics that exclude writedowns and don't reflect "real economic outcomes."

Company Position

Novartis responded by reiterating its commitment to a disciplined capital allocation strategy. In a statement, the company said it would continue "pursuing value-creating bolt-ons, and returning capital to shareholders through a growing annual dividend and share buybacks."

The public pressure from a significant investor like Artisan could encourage other shareholders to voice similar concerns, increasing the pressure on Novartis's leadership to address its M&A track record and governance practices.