Novartis M&A Strategy Faces Investor Scrutiny After Drug Setbacks

Novartis investors are increasing scrutiny of the Swiss pharmaceutical giant’s acquisition strategy after recent clinical trial failures raised concerns about its drug pipeline and future growth.

The latest setback came when del-desiran, a treatment for muscle-wasting disorders, failed in a late-stage study. It marked Novartis’ second major trial disappointment within days and prompted questions about its $12 billion acquisition of Avidity last year.

Novartis shares plunged 11% in a single session, erasing nearly $30 billion in market value and wiping out the stock’s gains for the year. The decline has increased pressure on CEO Vas Narasimhan as the company prepares for upcoming patent expirations.

Narasimhan has committed more than $30 billion to acquisitions and partnerships over the past three years. Despite the setbacks, Novartis currently has no plans to alter its M&A or business-development strategy, according to a source familiar with the matter.

Some shareholders are calling for greater oversight. Major investor Artisan Partners has urged changes to the board to strengthen supervision of acquisitions while continuing to support Narasimhan. Other investors believe Novartis should prioritize smaller transactions involving late-stage drugs or assets nearing regulatory approval.

Michael Hannig of shareholder DJE Kapital suggested deals worth between $5 billion and $10 billion could help replenish the pipeline, provided Novartis conducts rigorous due diligence on clinical evidence and strategic fit.

Investor confidence in management has not disappeared. Since Narasimhan became CEO in 2018, Novartis shares have risen more than 60%, delivering total returns of roughly 120% when reinvested dividends are included.

The Avidity acquisition also retains potential value. Two additional drugs, del-zota and del-brax, remain under development and could eventually generate revenue.

Attention will now shift to remibrutinib, one of Novartis’ most promising pipeline assets. Detailed late-stage data for the oral drug in relapsing multiple sclerosis are expected at a medical meeting in October. Although two trials met their primary goals, investors will closely examine efficacy, disability progression and safety data.

Strong results could help restore confidence as Novartis works to strengthen its post-2030 growth outlook and prove its dealmaking strategy can deliver.