Novartis' stock price plummeted nearly 10% after three consecutive failed trials in a week, marking its biggest single-day drop since March 2020.

Swiss pharmaceutical giant Novartis has suffered a rare series of clinical setbacks.

On September 8, Novartis' European stock price fell by more than 9%, marking its largest single-day drop since March 2020. Three consecutive setbacks in clinical trials within a week became the key factor eroding market confidence: the newly announced failure of the Phase III trial of the muscular dystrophy drug del-desiran; the previous failure of the Phase III trial of the cardiovascular drug pelacarsen to reduce the risk of cardiovascular events; and the suspension of eight clinical trials for the experimental cell therapy rap-cel due to the deaths of three patients.

A string of bad news is causing the market to reassess Novartis's pipeline strength and its medium- to long-term growth potential. While the company reiterated its expectation of maintaining an average annual sales growth rate of 5% to 6% until 2030, Jefferies believes this target "is likely to be considered unattainable" unless Novartis further fills the growth gap through acquisitions.

Del-Desiran Phase III project fails, its $12 billion acquisition facing a "litmus test".

Novartis stated that the Phase 3 HARBOR study showed that patients receiving del-desiran did not experience a significant improvement in hand opening and closing ability compared to the placebo group, therefore the primary efficacy endpoint was not met. The company said it will continue to evaluate the complete data and discuss future development pathways with regulatory agencies.

More importantly, this drug was one of Novartis' core assets acquired last year after its approximately $12 billion acquisition of Avidity Biosciences. This failed Phase III trial has led the market to reassess the strategic value of this massive acquisition.

Barclays points out that del-desiran and pelacarsen were initially highly anticipated by the market, with the two drugs potentially generating peak sales of approximately $5 billion combined. However, with setbacks in the development of these two drugs, Novartis' future growth potential may be compressed. The bank expects Novartis' stock price to significantly underperform the market, and its current valuation premium of approximately 20% over its peers may also narrow as a result.

Jefferies also believes that market confidence in Novartis' pipeline will be difficult to restore until the del-desiran and del-brax data are released. In particular, del-brax data is not expected to be released until 2028 at the earliest, meaning that mergers and acquisitions and business expansion will remain important means for Novartis to achieve its medium- to long-term growth goals, and the company's ability to pursue large-scale transactions in the future will be subject to more rigorous scrutiny.

Remibrutinib is showing positive signs, but it's struggling to withstand pipeline pressure.

Novartis has had some good news recently. Last week, the company announced positive results from the Phase 3 trial of its experimental multiple sclerosis drug remibrutinib, demonstrating clinically meaningful effects in delaying disability progression.

However, after three clinical trials failed within a week, positive progress on a single drug is still insufficient to fill the pipeline gap . For investors, the bigger question is whether Novartis' existing R&D pipeline can support future growth, and whether the company can continuously supplement new growth drivers through acquisitions.

With core projects suffering setbacks, Novartis' strategy of maintaining medium- to long-term growth through "internal R&D + external mergers and acquisitions" is now facing more rigorous market scrutiny.

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