Novartis shares plunge 10% after third disappointment in a week

Novartis Shares plunged on Tuesday after the pharmaceutical giant announced that its drug deldesiran, a drug for the muscle-wasting disease, had failed in late-stage trials.

The company’s shares fell about 10.5% in late afternoon trading as investors reacted to the trial’s third setback in a week. That put stocks on track for their worst trading day since March 2020.

Deldesiran’s results came days after Novartis announced that its peracalcen treatment failed to reduce the risk of cardiovascular events in a late-stage trial, and a week after Novartis said it had paused eight clinical trials of its experimental cell therapy, Lapcell, after three patients died.

Novartis said the global Phase III HARBOR trial testing deldesiran in patients with myotonic dystrophy type 1 did not show that the drug significantly improved patients’ ability to open their hands more than a placebo.

“Novartis is evaluating the entire HARBOR dataset and will work with health authorities to determine the optimal development path for derdesiran,” the company said in a news release.

Del-desiran is one of three antibody-oligonucleotide conjugate therapies added to Novartis’ neuromuscular pipeline when the company acquired Avidity Biosciences for about $12 billion last year.

“Developing treatments for complex diseases like (myotonic dystrophy type 1) remains challenging, and setbacks are part of scientific progress,” Shriram Alladi, Novartis’ president of development and chief medical officer, said in a statement Tuesday.

“As we continue to evaluate the entire HARBOR dataset, we remain committed to identifying the most appropriate development pathway for the Del Digiran program and advancing innovative approaches for people living with (myotonic dystrophy) and other serious neuromuscular diseases.”

Novartis also said on Tuesday that it still expects sales to grow by an average of 5% to 6% a year through 2030.

However, analysts have cast doubt on the company’s outlook following Tuesday’s announcement.

Jefferies’ equity research team said in a note Tuesday morning that Novartis’ growth goals “are likely to be seen as unattainable without further M&A, which is once again in question.”

The Swiss drugmaker also had some positive results in recent tests. The company announced last week that a late-stage study of remibrutinib showed a “clinically meaningful delay in disability progression” in patients with relapsing multiple sclerosis. Remibrutinib is an experimental treatment for multiple sclerosis.

But Jefferies analysts said that despite remibrutinib’s recent success, they expect it will be difficult to “gain confidence” in that trial without Deldesiran and Delbrax. Confidence in Del Brax will not be gained until Phase III data is available in 2028, they said.

“As a result, (business development) and M&A are likely to remain an important part of the story to secure management’s long-term medium-term (single-digit) growth objectives, and management’s ability to execute larger transactions is likely to remain under scrutiny going forward,” the analysts added.

Barclays analysts said the risk (adjusted peak sales opportunity) for Del Desiran and Peracarsen was about $5 billion, but more importantly, they noted that Del Desieran was a test case for Novartis’ $12 billion avidity deal.

The company’s failures call into question its ability to offset future patent expirations through acquisitions and mergers and acquisitions, they said in a note.

“We expect the stock to significantly (underperform) and a 20% sector premium for Novartis could be discussed going forward.”