Key Takeaways
- Novartis shares plunged more than 12% Tuesday, marking the company’s steepest single-day decline since March 2020.
- Del-desiran, an experimental treatment for myotonic dystrophy type 1, failed to meet its primary goal in the Phase III HARBOR study.
- The Swiss pharmaceutical company has now faced three consecutive clinical trial disappointments within seven days, including pelacarsen’s failure and rap-cel trial suspension.
- Analyst Michael Leuchten from Jefferies maintained a “hold” stance, expressing concern that growth objectives may be unattainable without additional mergers and acquisitions.
- Despite setbacks, Novartis reaffirmed its projected annual sales growth of 5-6% compound annual growth rate through 2030.
Shares of Novartis experienced a significant decline Tuesday following disappointing results from a pivotal clinical study, with the stock tumbling over 12% to approximately $112.56āthe lowest price point recorded since the beginning of January.
The investigational medication, scientifically designated as delpacibart etedesiran, did not achieve the primary objective in the Phase III HARBOR clinical study targeting myotonic dystrophy type 1 (DM1), a degenerative condition affecting muscles and nerves that currently has no approved therapeutic options. The 54-week clinical investigation involving 150 participants demonstrated no statistically significant enhancement in video-measured hand opening speed when compared against placebo.
According to the pharmaceutical company’s statement, researchers detected signals of biological activity in secondary and exploratory outcome measures. Novartis indicated it will collaborate with regulatory authorities to establish the appropriate path forward for the del-desiran development program.
This disappointing outcome represents the third consecutive blow to the company within a seven-day period. Earlier in the week, Novartis announced that pelacarsen, another experimental therapy, failed to demonstrate a reduction in cardiovascular complications during late-stage testing. Additionally, seven days prior, the company suspended eight ongoing studies of rap-cel, an investigational cellular therapy, following three patient fatalities.
Analyst Raises Red Flags About Future Prospects
Michael Leuchten, an analyst with Jefferies who continues to recommend a “hold” position with a CHF110 price objective, emphasized that the challenges “extend far beyond this single unsuccessful trial.” He noted that Novartis committed $12 billion to acquire Avidity Biosciences in the previous year, with del-desiran accounting for approximately one-third of anticipated peak revenue projections from that acquisition.
Leuchten further cautioned that achieving the company’s stated growth objective exceeding 5% beyond 2030 will likely appear unattainable absent additional corporate acquisitions, which he characterized as “increasingly uncertain once again.”
The analyst also indicated that confidence in del-brax, another pipeline candidate from the Avidity acquisition designed to treat facioscapulohumeral muscular dystrophy, has been undermined by del-desiran’s failure. Results from del-brax’s Phase III clinical program aren’t anticipated until 2028.
Shares of Novartis currently command a valuation exceeding 16 times projected 2027 earnings, compared to an industry median below 13 times. Leuchten suggested this premium valuation is becoming “increasingly difficult to justify” and referenced AstraZeneca as a comparable case, noting its multiple contracted to 14 times following similar disappointing outcomes.
Bright Spots Remain in Development Pipeline
Despite recent setbacks, the company’s entire research portfolio hasn’t collapsed. Del-zota, the third asset acquired from Avidity and developed for Duchenne muscular dystrophy treatment, recently secured FDA Priority Review status and maintains forward momentum.
The pharmaceutical giant also disclosed encouraging Phase III outcomes last week for remibrutinib, an investigational therapy for relapsing forms of multiple sclerosis, demonstrating clinically significant postponement of disability worsening.
Management upheld its five-year compound annual growth rate projection of 5-6% spanning 2025 through 2030, with Chief Medical Officer Shreeram Aradhye characterizing clinical disappointments as an inherent “component of scientific advancement.”
Del-zota has secured multiple regulatory designations including Orphan Drug status, Fast Track approval, and Breakthrough Therapy recognition from the FDA, along with Orphan Medicinal Product classification within the European Union.
The company announced intentions to schedule regulatory discussions with the FDA regarding del-brax, citing encouraging preliminary biomarker findings from Phase I/II research.
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