Novartis Shares Plunge After Second Major Drug Trial Failure in a Week

Novartis (NOVN) shares plunged on Tuesday after the company announced its experimental drug for a muscle-wasting disorder failed a late-stage clinical trial. This marks the second significant pipeline setback for the Swiss pharmaceutical giant in as many days, raising investor concerns about its future growth drivers.

Double Setback Hits Pipeline

Novartis reported that its drug candidate, del-desiran, did not meet its primary endpoint in the Phase III HARBOR study. The trial was evaluating the drug's effectiveness in treating myotonic dystrophy type 1, a genetic disorder with no approved treatments. According to the company, the drug failed to show a statistically significant improvement over a placebo.

The announcement came just a day after Novartis shares fell more than 3% following the failure of a different experimental drug for cholesterol in a major study. The back-to-back disappointments involve two of the three key assets investors were counting on to fuel growth as the company faces patent expirations for older blockbuster drugs like Entresto.

Investor Confidence Shaken

The market reaction was severe, with Novartis shares falling about 9%, wiping out approximately 24 billion Swiss francs ($29.6 billion) in market value in one of its worst trading days on record. The negative results also created a ripple effect across the sector:

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• Shares of Dyne Therapeutics (DYN) fell 30% in U.S. premarket trading.
• Sarepta Therapeutics (SRPT) shares dropped 15.5%.

Both companies are also developing treatments for muscular dystrophy. Analysts at Barclays had previously estimated peak annual sales for del-desiran could reach $3.1 billion, assigning it a 60% chance of success after it showed promise in an earlier Phase II trial.

Pressure Mounts on CEO Strategy

The trial failures place increased scrutiny on CEO Vas Narasimhan and his strategy of using major acquisitions to rebuild the company's drug pipeline. Del-desiran was a key asset acquired through the $12 billion purchase of Avidity. James Eugene, an analyst at Novartis shareholder Verso Investment Management, told Reuters the drug "should have been a 'must win' for the company," and that the failure would dent confidence in its acquisition strategy.

With two of three key pipeline hopes now unsuccessful, the pressure shifts to the company's remaining major candidate, the anti-inflammatory drug remibrutinib. Despite the setbacks, Novartis reiterated its full-year financial guidance and its long-term forecast for sales to grow at a compound annual rate of 5% to 6% between 2025 and 2030.