Novartis AG (NYSE:NVS) has suffered a major setback after its experimental drug del-desiran failed a late-stage trial for myotonic dystrophy type 1, a rare muscle-wasting disease with no approved treatments. The drug failed to show a statistically significant improvement over placebo on the trial’s primary endpoint, video hand opening time. Del-desiran was one of the key assets acquired through Novartis’ $12 billion acquisition of Avidity Biosciences, making the failure particularly damaging to investor confidence in the company’s acquisition-led pipeline strategy.
The setback came just days after Novartis AG’s cholesterol drug pelacarsen also failed a major late-stage study. The two failures have increased pressure on CEO Vas Narasimhan as Novartis seeks to replace revenue from established medicines such as Entresto ahead of future patent expirations. The company nevertheless reaffirmed its target of 5%-6% annual sales growth through 2030.
Novartis Still Has Multiple Paths to Reignite Growth
Novartis AG still has the scale, cash generation, and diversified commercial portfolio to absorb setbacks in individual drug programs. Although del-desiran failed its late-stage trial in myotonic dystrophy, the failure does not necessarily invalidate Novartis’ broader pipeline or the other therapies acquired through Avidity. The company is evaluating the full dataset and plans to engage with regulators, leaving some possibility that the program could have a future depending on the underlying data and trial interpretation.
More importantly, the setback comes alongside a potentially important positive catalyst in remibrutinib. The drug recently succeeded in a late-stage multiple-sclerosis study, and additional data in another indication are expected later this year. Reuters notes that analysts see remibrutinib as potentially capable of generating billions of dollars in peak annual sales, making it increasingly important to Novartis’ growth strategy.
Novartis AG also reaffirmed its expectation for 5%-6% annual sales growth through 2030. While investors may now question how achievable that target is, the guidance indicates that management does not currently see the two trial failures as fundamentally changing its near-term financial outlook. The company’s existing marketed medicines and financial strength provide a cushion while it works to replenish growth ahead of major patent expirations.
Pipeline Failures Threaten Novartis’ 2030 Growth Ambitions
The biggest concern is that Novartis AG has now suffered two major late-stage setbacks in only a few days. Pelacarsen failed to reduce cardiovascular events in its trial, while del-desiran missed its primary endpoint in myotonic dystrophy. Together, the failures remove two important potential growth drivers and significantly increase the burden on the remaining pipeline.
The del-desiran failure is particularly damaging because Novartis acquired Avidity for $12 billion, with del-desiran viewed as one of the transaction’s major potential value drivers. Barclays analysts had previously estimated peak annual sales of about $3.1 billion for the drug and assigned it a 60% probability of success. The failure therefore raises questions not only about the drug but also about the effectiveness of Novartis’ acquisition-led approach to rebuilding its pipeline.
The timing is also problematic. Novartis AG is preparing for declining revenue from Entresto as it approaches patent expirations, meaning the company needs successful new medicines to offset future pressure. With pelacarsen and del-desiran now failing, considerably more weight falls on remibrutinib and other pipeline candidates. Reuters reported that analysts believe Novartis’ 5%-6% annual sales-growth target through 2030 could now be viewed as increasingly difficult to achieve, while concerns about growth after 2030 are likely to return.
Conclusion
Novartis AG’s investment story has clearly become more challenging. The back-to-back failures of pelacarsen and del-desiran have weakened confidence in the pipeline, raised questions about its acquisition strategy and placed greater pressure on remibrutinib to deliver. However, the company still has a strong commercial base, significant financial resources and other pipeline opportunities that can potentially support growth. The key issue now is whether those remaining assets can compensate for the lost blockbuster potential. Overall, the news shifts the risk-reward balance toward the bearish side in the near term, while successful remibrutinib results and stronger performance from the broader pipeline could restore investor confidence.
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This article is originally published at Insider Monkey.
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