"The party is over." This remark from David Samra, founding partner of Artisan Partners, may well sum up Novartis's nightmare over the past fortnight.

 

This asset management giant, which ranks among Novartis's top 20 shareholders, was reported by Reuters on September 10 to have unusually publicly gone on the attack, demanding a restructuring of the Swiss pharmaceutical giant's board, the establishment of a dedicated M&A committee, and a thorough overhaul of executive compensation structure.

 

The anger of the major shareholder is not hard to understand. Over the past two weeks, Novartis's stock fell as much as 17% at its lowest, wiping out approximately $36 billion in market value. September 8 in particular was Novartis's darkest day in nearly six years, with the stock plunging 13.93% that day — the largest drop since March 2020.

 

 

But the major shareholder's "palace coup" and the stock crash are merely a microcosm of Novartis's recent decline. What plunged Novartis into the abyss was the high-density collapse of its R&D pipeline.

 

The TREM2-targeting monoclonal antibody VHB937 failed in Phase II; the AAV gene therapy Itvisma's China launch fell through; del-desiran, the core asset from a $12 billion acquisition, fell at the Phase III finish line; the cardiovascular small nucleic acid drug pelacarsen stumbled in Phase III; and the CAR-T therapy had eight trials urgently halted due to three patient deaths...

 

While clinical failure is hardly unusual for a multinational pharmaceutical company with a multi-asset portfolio, for Novartis, this may be "the unbearable weight of being."

 

In July of this year, Vas Narasimhan, who has led the company for eight years, warned that the company would face its largest patent expiration wave in history. At the time, the market viewed three second-half trials — pelacarsen, remibrutinib, and del-desiran — as key to determining growth over the next decade.

 

Analysts estimated that these three drugs had a combined peak annual sales potential exceeding $10 billion, sufficient to offset the patent losses of Cosentyx and Kisqali in the U.S. and Europe around the end of this decade — the two best-selling drugs for Novartis in the first half of 2026.

 

Now, two of the highly anticipated potential drugs have been declared failures. How will Novartis's growth story continue? Facing the major shareholder's interrogation of its acquisition strategy — "If you did a $12 billion deal and it went to zero" — how can Novartis continue its buying spree?

 

Chapter 1: A Season of Troubles

 

Laying out Novartis's recent setbacks along a timeline, the density is striking.

 

On September 17, Novartis announced that its candidate drug for amyotrophic lateral sclerosis (ALS), VHB937 (lifonebart), failed its Phase II clinical trial. The Phase II trial, codenamed ASTRALS, did not meet its primary or secondary endpoints, and the company terminated related R&D programs for the disease.

 

VHB937 is a TREM2 protein stabilizer and activator that acts on microglia — immune cells in the central nervous system responsible for responding to infection, injury, and clearing dead and damaged cells. When the TREM2 protein on the surface of microglia is activated, it can enhance the ability to clear damaged cells and protect motor neurons to improve neuron survival. But in the ASTRALS trial, this theory was not confirmed.

 

This clinical failure is the fourth major clinical setback Novartis has suffered within three weeks.

 

Previously, the company's autoimmune CAR-T therapy clinical trial saw three subject deaths; a cardiovascular drug's Phase III study results fell short of expectations; and the neuromuscular disease candidate del-desiran also had its pivotal clinical trial declared a failure.

 

Among them, the autologous CD19 CAR-T therapy rap-cel (YTB323) was halted mainly in multiple autoimmune-related clinical trials, with development in the oncology field unaffected by this pause.

 

Combined with BMS also pausing patient enrollment in autoimmune disease trials of its autologous CD19-targeted CAR-T therapy zola-cel (BMS-986353) during the same period, analysts believe the main cause of this event was that "rapid manufacturing may have led to enhanced cell expansion and the reported toxicities."

 

What made the major shareholder even more restless were the latter two events. Pelacarsen is an antisense oligonucleotide (ASO), and del-desiran is an antibody-oligonucleotide conjugate (AOC). Both belong to the broad category of small nucleic acid drugs, carrying the key to Novartis's "next decade" of growth.

 

The former precisely targets apolipoprotein(a), a component of Lp(a) — a cardiovascular target affecting approximately 20% of the global population, heavily bet on by pharmaceutical companies including Novartis, Eli Lilly, and Amgen. Before the results of Novartis's Lp(a)HORIZON study were announced, Lp(a) was almost the most perfect story in the cardiovascular field.

 

Novartis spent over $400 million cumulatively through strategic collaboration and exercising options to acquire full rights to pelacarsen from Ionis. In previous Phase II studies, the drug had reduced Lp(a) levels by 72%–80%, almost achieving "deep silencing."

 

The Phase III study involved lasted 6.5 years, enrolled 8,323 people across 42 countries, and Novartis invested enormous time and resource costs. But this potential drug, with peak sales forecasts as high as $3–6 billion, ultimately came up empty.

 

The Phase III failure of the AOC drug del-desiran became the last straw that broke Novartis's back. To acquire this asset, Novartis acquired Avidity Biosciences for approximately $12 billion in 2025 — the largest acquisition by Novartis in nearly a decade. On the day the clinical failure was announced, Novartis's stock plunged 13.93%.

 

Beyond the above, in China, another recent Novartis development that drew attention was the failed launch of the AAV9 vector-based gene therapy — intrathecal injection Onasemnogene Abeparvovec (OAV101, Zolgensma, brand name: Itvisma).

 

According to the drug notification information published on the NMPA website on September 14, Onasemnogene Abeparvovec (acceptance number: JXSS2500106) was listed, meaning the application was not approved or the company voluntarily withdrew. Regardless of the reason, this marketing application has concluded, and a future launch would require a new application.

 

 

Onasemnogene Abeparvovec is the core asset Novartis acquired through its $8.7 billion acquisition of AveXis in 2018. It had previously been approved in the U.S. and Europe, and is the world's first and only one-time gene replacement therapy for spinal muscular atrophy (SMA).

 

Chapter 2: A Critical Window of Transition

 

The five events erupting in concentrated fashion come precisely as Novartis faces its largest patent expiration wave in history, further compressing the window for old-to-new transition.

 

Novartis management explicitly stated in its 2025 financial report that the company is facing the largest patent expiration wave in its history, with sales of just three products — Entresto, Revolade, and Tasigna — set to decline by $4 billion in the U.S. market alone.

 

The first-half financial report clearly reflects this impact. Entresto's second-quarter sales fell 51% at constant exchange rates to $1.18 billion; Tasigna dropped 58% to $142 million. In the first quarter, sales of Entresto, Tasigna, and Promacta had already declined 42%, 59%, and 66% year-over-year, respectively.

 

Volume data better illustrate the problem: in the first half, volume growth contributed 18 percentage points, but generic competition directly dragged down 14 percentage points, and pricing factors subtracted another 3 percentage points.

 

But the real structural risk has not yet arrived. Novartis's other two pillars — Cosentyx and Kisqali — have patent expirations in 2029 and 2031, respectively, and Kesimpta, ranked third on Novartis's sales list, also faces patent expiration in 2031.

 

Novartis Product Pipeline Patent Expiration Table

 

Overall, among Novartis's five best-selling new drugs in the first half of this year — Cosentyx ($3.390 billion), Kisqali ($3.211 billion), Kesimpta ($2.588 billion), Entresto ($2.486 billion), and Pluvicto ($1.293 billion) — four of them (excluding Pluvicto) will all face generic competition around 2030.

 

BioPharma Dive described this situation as "one of the most formidable patent cliffs in the pharmaceutical industry."

 

This severe situation requires Novartis to fill the massive gap left by expiring patents with growth from new products within the next three to five years.

 

Chapter 3: An Unusual Acquisition

 

Facing the patent cliff, Novartis's chosen response strategy is not passive defense, but rather using M&A as a lever and platform technology as a fulcrum to proactively restructure its growth curve.

 

Over the past two years, Novartis has been one of the most active acquirers among multinational pharmaceutical companies, signing more than 10 transactions with cumulative payments exceeding $23.3 billion.

 

 

Novartis's M&A strategy is clear and restrained: on one hand, continuously enriching its early-stage R&D pipeline through early-stage deals with individual amounts not exceeding $2 billion; on the other hand, actively seeking late-stage assets with potential launches within the next five years.

 

Under this strategy, the Avidity acquisition stands out as particularly unusual. Decided by Novartis CEO Vas Narasimhan, it exceeded the scope of small bolt-on acquisitions, with a rare transaction value of $12 billion — Novartis's largest acquisition in nearly a decade.

 

Avidity's SEC filing disclosed more transaction details: on July 2, 2025, Novartis's Global Head of Corporate and Business Development contacted Avidity's CFO, proposing that the Novartis CEO and Avidity CEO discuss the possibility of an acquisition, and made three successive bids during July, continuously raising acquisition terms.

 

The transaction then went through multiple rounds of negotiation, at one point breaking down over due diligence matters. During this period, Avidity contacted seven other potential buyers and received no competing bids. Novartis still raised its price multiple times, ultimately closing at $12 billion in cash — from first contact to final signing, Novartis's cumulative bid increase was approximately 38%.

 

Additionally, Novartis's 2025 compensation report disclosed an annual assessment form that listed signing 17 bolt-on BD and licensing, M&A transactions under pipeline and R&D productivity goals (10% weighting), specifically naming the pending Avidity acquisition.

 

This means the number of signed transactions was quantified as an assessable KPI, directly participating in the calculation of executive annual bonuses. The report also confirmed that the CEO's actual payout ratio for 2025 annual incentives was 180% of target, at the higher end of the 0–200% range.

 

This institutional design invisibly encouraged aggressive M&A behavior: as long as pipelines are bought, a "grand vision" can be sold to the capital markets in the short term. Even if clinical failure years later causes the asset to go to zero, the massive impairment would only fall on book goodwill, not affecting current-period executive bonuses — this institutional loophole ultimately left shareholders bearing all the downside risk.

 

Chapter 4: The Loosening of M&A Credibility

 

From this, it is even easier to understand the anger of the major shareholder presented at the beginning.

 

Samra explicitly stated that successive chairmen have failed Novartis on acquisitions, that the company needs to change how it oversees transactions, and urged Novartis Chairman Giovanni Caforio to take action. "I think he needs to make changes at the board level. One of them should be improving the team responsible for these transactions, because clearly their performance has been mediocre at best."

 

Beyond the $12 billion Avidity acquisition, he specifically mentioned Novartis's 2024 acquisition of German biotech company MorphoSys as a disappointing deal.

 

After completing the acquisition for €2.7 billion, Novartis wrote down approximately $800 million in value within just a few months, then decided in November 2024 to close MorphoSys's sites in Germany and the U.S., affecting 330 jobs.

 

"The track record is not very good," Samra said, arguing these deals destroyed value. Samra also urged the board to thoroughly overhaul Novartis's compensation structure, saying it relies too heavily on adjusted performance metrics that exclude write-downs, rather than reflecting "true economic results."

 

David Samra, founding partner of Artisan Partners, was not the only shareholder going on the attack. In Reuters' subsequent reporting, eight shareholders expressed similar doubts.

 

Daniel Bolanowski, portfolio manager at investor Arctic Asset Management, said the scale of the stock sell-off indicates that investors are questioning not just the value of del-desiran, but also a "deeper trust issue" in the business's development.

 

Novartis responded in a statement that the recent setbacks have not changed its financial guidance, that the company has a "broad" drug pipeline, and that it continues to adopt a "prudent and shareholder-friendly" capital allocation approach by investing in organic business, seeking value-creating bolt-on acquisitions, and returning capital to shareholders through growing annual dividends and share buybacks.

 

Overall, the clinical failure of del-desiran has raised investors' trust cost for Novartis's M&A targets and strategy, making the market scrutinize clinical evidence, competitive routes, and transaction prices more carefully when the next large deal appears, rather than simply accepting management's judgment of asset value.

 

Chapter 5: How to Play the Next Card?

 

And this increased trust cost will only be borne by Novartis.

 

For MNCs, low internal R&D efficiency and high costs force them to turn to external innovation. Biotech has become the main body of early-stage R&D, and this has become an unstoppable trend in global pharmaceutical innovation and R&D.

 

According to the growth commitments given by Novartis management, the company will maintain 5%–6% compound growth from 2025 to 2030, and claims profits will return to growth in 2027.

 

Under such targets, combined with the arrival of the largest patent expiration wave in history, Novartis cannot reduce its reliance on external innovation just because of the Avidity setback — on the contrary, it will need M&A even more in the coming years.

 

Of course, Novartis is not "out of cards to play." The next major test is detailed data on remibrutinib in relapsing multiple sclerosis, expected to be presented at a medical conference in October.

 

On September 1, Novartis already announced positive top-line results from the Phase III REMODEL-1/-2 trials of remibrutinib in relapsing multiple sclerosis (RMS). The two studies enrolled nearly 2,000 patients in total. Remibrutinib was significantly superior to the active comparator teriflunomide in reducing annualized relapse rate, and showed superiority on all key secondary endpoints in each trial. More critically, no liver safety signals were found for remibrutinib.

 

Although this oral drug met the primary objectives of both late-stage studies, investors are still awaiting more comprehensive evidence on efficacy, disability progression, and safety.

 

Additionally, the acquired Avidity has not been completely judged a failure. Beyond the clinically failed del-desiran, two other late-stage pipelines — del-zota has received FDA priority review, and del-brax continues to advance regulatory communications based on positive early data — the entire antibody-oligonucleotide conjugate (AOC) platform still retains considerable value.

 

However, it must be said upfront: if del-zota and del-brax encounter further problems, market doubts about this $12 billion acquisition will escalate from "one asset failed" to "the entire deal failed," and doubts about Novartis's M&A team capabilities will multiply.

 

In summary, Novartis's past problem was how many external assets were needed to fill the growth gap after 2030. Now the problem has an additional layer: the patent cliff is still approaching, the company still needs to keep buying, but Avidity has placed a higher burden of proof on the next large acquisition.

 

Novartis may increasingly need to acquire, but it has increasingly less room to buy wrong.

 

After all, the patent expiration timetable will not be delayed because of clinical failures. The generic competition for Cosentyx, Kisqali, and Kesimpta around 2030 will still arrive on schedule.

 

But the Avidity lesson has already shown that if the core asset of a $10 billion-plus deal fails, the loss is not just cash — it is also board credibility, shareholder patience, and market trust in management.

Novartis needs to buy, but the room left for it to "buy wrong" is getting smaller and smaller.

 

References:

1. Reuters, Exclusive-Major Novartis shareholder calls for board shake-up after drug trial setbacks

2. Reuters, Novartis investors turn spotlight on M&A after trial setbacks

3. Endpoints News, Novartis' TREM2 drug fails Phase 2 ALS trial

4. DealForma, What is big pharma buying?

5. Novartis, US Securities & Exchange Commission Form 20-F 2025

6. 21st Century Business Herald, Novartis First-Half Financial Report: Revenue and Profit Both Decline, Can New Drug Surge Offset the Patent Cliff?

7. BioPharma Dive, Novartis climbs on upbeat drug sales as key readouts loom

8. BiG BioInnovation, Core Asset Phase III Failure, Novartis M&A Performance Subject to Collective Wall Street Scrutiny

9. Sanjuban Pharma Commentary, $12 Billion Acquisition Phase III Failure, Novartis Major Shareholder Publicly Questions Board — Reviewing the Avidity Deal: Seven Potential Buyers All Declined to Bid