Novartis’ recent dual clinical setbacks have prompted questions from a major shareholder about the board’s oversight of dealmaking.
The call for a board shake-up came from David Samra, managing director at Artisan Partners, an asset management firm and a top 20 investor in Novartis, according to Reuters.
In an interview with Reuters, Samra reportedly urged Novartis Chairman Giovanni Caforio to tighten the leash on how the Swiss pharma strikes deals.
“I think he needs to make changes at the board level,” Samra said, as quoted by Reuters. “One of them should be on improving the team that's doing these deals because clearly they have been uninspiring at best."
Anxieties among Novartis investors spiked this week after the company’s del-desiran, the centerpiece of its $12 billion acquisition of Avidity Biosciences, failed in the rare muscle-wasting disease myotonic dystrophy type 1 (DM1). Although the candidate has not been abandoned altogether, and the Avidity deal came with other antibody-oligonucleotide conjugate assets, analysts raised doubts about the value of Avidity. Investors sent Novartis’ shares down more than 10%, erasing nearly $30 billion from its market cap.
The Avidity deal plays directly into Novartis’ push in RNA therapeutics and neuromuscular disease. Its $12 billion price tag was more surprising, given management’s yearslong emphasis on bolt-on deals that were often framed as falling around or below $5 billion.
Before Avidity, Novartis’ M&A activities fell within that range. The last time Novartis exceeded that mark was in 2019, when it splashed out $9.7 billion to buy The Medicines Company, which also happened to feature RNA therapeutics, or the PCSK9 cholesterol drug Leqvio, to be specific.
In a statement sent to Fierce, Novartis said it continues to take “a disciplined and shareholder friendly approach to capital allocation,” pointing to investments in its existing business, bolt-on deals, dividends and share buybacks.
The company also defended the strength of its pipeline, saying it is “broad and built to deliver innovation across our core therapeutic areas.” Novartis stressed that its sales guidance for both the pre-2030 and post-2030 periods remains unchanged.
While Samra wants Novartis management “to be penalized” for failing a key trial from a costly purchase, he did not blame CEO Vas Narasimhan, saying the chief executive since 2018 has done a “very good job” with the pharma giant, according to Reuters.
The del-desiran flop came on the heels of another major Novartis phase 3 failure, of its Lp(a) candidate pelacarsen in secondary prevention of cardiovascular disease. Novartis obtained the drug in 2023 by paying Ionis $60 million in upfront cash.
Samra also pointed to the Swiss drugmaker’s $2.9 billion acquisition of MorphoSys in 2024. One of the deal’s key assets, myelofibrosis candidate pelabresib, has been laden with a safety signal since the acquisition. With an imbalance in the rate of malignant transformations, Novartis in 2024 admitted that pelabresib’s FDA filing plan was delayed.
“The acquisition track record is not very good,” Samra said, according to Reuters, calling on Novartis’ board to apply greater scrutiny to future deals.
Some of Novartis’ other late-stage acquisitions have paid off. Vanrafia, a kidney disease drug from Novartis’ $3.5 billion acquisition of Chinook Therapeutics, was approved by the FDA last year, and the company is looking to convert the original accelerated approval into a full nod.