Key facts
- Novartis investors are scrutinizing the company's M&A strategy after recent drug trial failures.
- Artisan Partners, a major shareholder, is calling for a board shake-up to improve M&A oversight.
- Novartis shares fell 11% after a muscle-wasting disorder drug acquired for $12 billion failed a late-stage study.
- The company's stock had previously dropped 3% following disappointing results from a heart drug trial.
- CEO Vas Narasimhan's M&A strategy, which has involved over $30 billion in acquisitions and partnerships in three years, faces increased investor concern.
- There are currently no plans to change the company's approach towards M&A or business development.
Novartis investors are increasing their scrutiny of the Swiss drugmaker's dealmaking strategy following two significant drug trial setbacks, which have raised concerns about the company's pipeline and future growth.
Artisan Partners, a major Novartis shareholder, has called for a shake-up of the board to address oversight of mergers and acquisitions. The firm's portfolio manager, David Samra, stated that successive chairmen have failed Novartis on acquisitions and that the company needs to improve its oversight of deals.
Novartis shares slumped 11% in one day this week, wiping nearly $30 billion off its market value, after the muscle-wasting disorder drug del-desiran failed a late-stage study. This drug was acquired as part of Novartis' $12 billion takeover of U.S. firm Avidity. The company's stock had already declined 3% a day earlier following disappointing results from its heart drug pelacarsen.
CEO Vas Narasimhan, who has committed more than $30 billion in the last three years on acquisitions and partnerships, faces investor concern over how he plans to steer Novartis through looming patent expiries. Some investors suggested that smaller, bolt-on acquisitions might have been a better strategy than large-scale deals.
Despite the setbacks, some analysts and investors maintain confidence in Novartis' management and pipeline, pointing to other promising drugs like remibrutinib. They note that drug development has inherent risks and that the scale of the recent share sell-off might suggest a "deeper trust issue" about business development rather than just the value of del-desiran. Novartis' shares have risen more than 60% since Narasimhan took over as CEO in 2018.