Novartis shares dropped more than 10% on Tuesday after an experimental treatment for a rare muscle disorder failed a late-stage clinical trial.
The setback pushed the Swiss pharmaceutical company’s stock to its weakest closing level since early January and raised fresh concerns about its long-term growth outlook.
Novartis Drug Trial Misses Primary Endpoint
Novartis said delpacibart etedesiran, also known as del-desiran, failed to meet the primary endpoint in the Phase III HARBOR study.
The drug is being developed to treat myotonic dystrophy type 1, or DM1, a progressive neuromuscular disease for which there are currently no approved treatments.
The 54-week randomized study included 150 patients.
Its main goal was to determine whether del-desiran could improve video hand opening time, a measure used to assess stiffness in the muscles of the hand.
However, the treatment failed to deliver a statistically significant improvement compared with placebo.
Novartis said the drug still showed signs of clinical activity across several secondary and exploratory measures.
The company plans to discuss the results with regulators before deciding on the next steps for the program.
Avidity Acquisition Comes Under Pressure
The failed trial has also renewed questions about Novartis’ $12 billion acquisition of Avidity Biosciences.
Jefferies analyst Michael Leuchten said the impact extends beyond a single unsuccessful study.
According to his estimates, del-desiran represented roughly one-third of the expected peak sales associated with the Avidity transaction.
That means the trial failure could weaken the strategic and financial case behind the acquisition.
Leuchten maintained a “hold” rating on Novartis and kept his CHF110 price target.
Long-Term Growth Targets Face More Scrutiny
The setback has also increased doubts about Novartis’ ability to achieve its longer-term growth ambitions without additional acquisitions.
Management has previously targeted mid-single-digit sales growth beyond 2030.
However, analysts may now question whether that target is realistic following the del-desiran failure.
Further mergers and acquisitions could help support growth, but the latest setback may make investors more cautious about relying on additional large deals.
Novartis Valuation Could Face Pressure
The failed trial may also put pressure on Novartis’ valuation.
According to Jefferies, the company had been trading at more than 16 times expected 2027 earnings.
That compares with a pharmaceutical sector average of less than 13 times.
With one of the company’s key pipeline assets now facing uncertainty, analysts may find it more difficult to justify such a premium valuation.
Leuchten warned that the stock’s earnings multiple could come under further pressure.
He pointed to AstraZeneca as an example of how a major pharmaceutical company can experience a lower valuation following clinical setbacks.
Concerns Spread to Other Avidity Drugs
The failed del-desiran study may also affect investor confidence in other treatments acquired through the Avidity deal.
One of those drugs is delpacibart braxlosiran, or del-brax.
The therapy is being developed for facioscapulohumeral muscular dystrophy.
Phase III data are not expected until 2028, meaning investors could face a long wait before receiving more definitive evidence about the drug’s potential.
Novartis plans to meet with the U.S. Food and Drug Administration to discuss the program following encouraging early-stage biomarker data.
Other Neuromuscular Programs Continue to Advance
Not all of Novartis’ Avidity-related programs have suffered setbacks.
A third therapy, delpacibart zotadirsen, or del-zota, is being developed for Duchenne muscular dystrophy.
The drug recently received FDA Priority Review as Novartis seeks accelerated approval.
It is designed for patients with mutations that are suitable for exon 44 skipping.
The therapy has also received several regulatory designations intended to speed development and review.
These include Orphan Drug, Fast Track and Breakthrough Therapy status from the FDA.
It has also received Orphan Medicinal Product designation in the European Union.
Novartis Maintains Its Sales Outlook
Despite the failed clinical trial, Novartis has kept its existing financial guidance unchanged.
The company continues to expect sales to grow at a compound annual rate of 5% to 6% between 2025 and 2030.
Chief Medical Officer Shreeram Aradhye described myotonic dystrophy type 1 as a particularly complex disease.
He also emphasized that unsuccessful trials remain part of the broader scientific development process.
Investors Reassess the Novartis Growth Story
The market reaction shows how important the Avidity pipeline has become to Novartis’ long-term investment case.
Del-desiran was expected to contribute meaningfully to future sales, and its failure now creates greater uncertainty around the return on the $12 billion acquisition.
At the same time, Novartis still has several other neuromuscular therapies progressing through development and regulatory review.
The company has also maintained its medium-term sales guidance.
Still, investors are likely to focus more closely on future clinical results, the performance of the remaining Avidity assets and whether Novartis can sustain its growth targets without making additional major acquisitions.
