Key Takeaways
- Novartis plunged more than 12% on Tuesday, experiencing its steepest decline since March 2020.
- The del-desiran candidate failed to meet its primary endpoint in the Phase III HARBOR trial for myotonic dystrophy type 1.
- The Swiss pharmaceutical company has now faced three clinical trial disappointments within a seven-day period, including pelacarsen’s failure and a rap-cel trial suspension following three patient fatalities.
- Jefferies analyst Michael Leuchten maintained a “hold” position while cautioning that growth objectives appear increasingly difficult to achieve without additional mergers and acquisitions.
- Despite setbacks, Novartis reaffirmed its 2025-2030 revenue growth forecast of 5-6% compound annual growth rate.
Novartis experienced a devastating blow on Tuesday following the collapse of its del-desiran clinical trial, with shares plummeting over 12% to approximately $112.56, marking the stock’s weakest performance since early January.
The experimental treatment, officially designated as delpacibart etedesiran, failed to achieve its primary endpoint in the Phase III HARBOR clinical study targeting myotonic dystrophy type 1 (DM1), a degenerative neuromuscular condition currently lacking approved therapeutic options. The 54-week study involving 150 participants demonstrated no statistically significant enhancement in video hand opening time when measured against a placebo group.
According to Novartis, the trial showed signals of activity in secondary and exploratory measurements, and the company intends to consult with regulatory authorities to chart the future course for the del-desiran development program.
This unsuccessful trial represents the third disappointment for Novartis shareholders within a single week. Earlier, the pharmaceutical giant announced that its pelacarsen candidate failed to demonstrate a reduction in cardiovascular event risk during late-stage testing. Seven days prior, Novartis halted eight clinical studies of its investigational cell therapy rap-cel following three patient fatalities.
Analyst Raises Red Flags Over Growth Trajectory
Michael Leuchten, an analyst at Jefferies who kept his “hold” recommendation with a CHF110 price objective, indicated the challenges “extend beyond this single trial failure.” He emphasized that Novartis invested $12 billion to acquire Avidity Biosciences in the previous year, with del-desiran alone accounting for approximately one-third of anticipated peak revenue from that transaction.
Leuchten cautioned that the firm’s growth ambitions exceeding 5% post-2030 will probably be viewed as unattainable without additional acquisitions, which he characterized as “once again uncertain.”
He noted that the del-desiran disappointment also undermines confidence in del-brax, another Avidity pipeline candidate targeting facioscapulohumeral muscular dystrophy. Phase III results for del-brax aren’t anticipated until 2028.
Novartis shares currently trade at over 16 times projected 2027 earnings, compared with a sector median below 13 times. Leuchten stated that this valuation premium is now “increasingly difficult to justify” and referenced AstraZeneca as a comparable example, which re-rated to 14 times following its own clinical setbacks.
Pipeline Highlights Remain Despite Recent Struggles
The company’s development pipeline hasn’t completely unraveled. The third Avidity candidate, del-zota for Duchenne muscular dystrophy, recently secured FDA Priority Review status and remains on track.
Novartis also announced encouraging late-stage outcomes last week for remibrutinib, an investigational therapy for relapsing multiple sclerosis, demonstrating a clinically significant delay in disability advancement.
The pharmaceutical company upheld its five-year revenue CAGR projection of 5-6% spanning 2025 through 2030, with Chief Medical Officer Shreeram Aradhye noting that setbacks constitute “an inherent element of scientific advancement.”
Del-zota has secured Orphan Drug, Fast Track, and Breakthrough Therapy designations from the FDA, along with Orphan Medicinal Product status in the European Union.
Novartis announced plans to engage with the FDA regarding del-brax after observing encouraging early-stage biomarker results from the Phase I/II investigation.
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