Novartis Faces Shareholder Demand for Board Reorganization Following Consecutive Phase 3 Failures of Del-desiran and Pelacarsen
Failure to Meet Primary Endpoint for Del-desiran, Key Asset in Major M&A
Del-desiran (formerly AOC 1001), a key asset from Avidity Biosciences acquired by Novartis (NVS) for $12 billion in February 2026, failed to meet its primary endpoint in the Phase 3 HARBOR trial. The drug failed to demonstrate improvement in video Hand Opening Time (vHOT) for patients with Myotonic Dystrophy Type 1 (DM1), dealing a critical blow to pipeline reliability. Immediately following the clinical failure, Novartis's stock plummeted by over 10%, erasing approximately $30 billion in market capitalization. The roadmap for Novartis's expansion of RNA therapeutics, aimed at capturing the $2.5 billion DM1 market that previously lacked clear treatments, now faces inevitable revision.
Sequential Clinical Setbacks for Cardiovascular Drug Pelacarsen and Decline in R&D Credibility
Compounding the situation, pelacarsen, a dyslipidemia treatment acquired with a $60 million upfront payment to Ionis Pharmaceuticals (IONS), also failed in its Phase 3 (Lp(a)HORIZON) trial. Although pelacarsen significantly lowered lipoprotein(a) [Lp(a)] levels, it failed to demonstrate a reduction in Major Adverse Cardiovascular Events (MACE) risk among 8,323 patients with cardiovascular disease. As consecutive clinical failures occur in massive indications with potential annual revenues exceeding $10 billion, investor skepticism regarding the late-stage pipeline has reached its peak. This result clearly illustrates the structural risk that single biomarker inhibition may not translate into actual clinical benefits.
Activist Shareholder Artisan Partners Demands Overhaul of Board and Business Development Teams
Facing these successive failures, David Samra, Managing Director at Artisan Partners (APAM), one of Novartis’s top 20 shareholders, has strongly urged a reform of board governance. Samra pressured Board Chair Giovanni Caforio to reorganize the board and completely replace the Business Development (BD) team, holding him accountable for permitting reckless acquisition deals. While supporting CEO Vas Narasimhan's day-to-day management capabilities, he specifically highlighted the board's failure to exercise due diligence and oversight in controlling overvalued transactions. As a major shareholder has publicly raised the issue of board responsibility, the governance conflict carries the risk of escalating into a proxy battle at the general shareholders' meeting.
Bad News from Delayed MorphoSys Acquisition and Novartis' Guidance Defense
The accumulated anger of shareholders is also intertwined with the bad news regarding pelabresib, a myelofibrosis treatment drug from MorphoSys, which was acquired for $2.9 billion in 2024. The FDA's New Drug Application (NDA) for pelabresib, a BET inhibitor, has been delayed for an extended period due to a safety signal regarding the risk of leukemic transformation. Novartis officially clarified that its long-term sales guidance for 2030 remains intact and that it will continue its strong shareholder return policy. However, the market is not easily dismissing the criticism that this vicious cycle of failing late-stage clinical trials despite paying high premiums is due to structural blind spots in governance.
As Novartis faces critical Phase 3 failures and regulatory delays despite pouring massive capital into the acquisitions of Avidity ($12 billion) and MorphoSys ($2.9 billion), Wall Street's valuation models for mega-M&A are facing intense downward pressure. In the short term, the failure to prove the efficacy of del-desiran has allowed Dyne Therapeutics' Phase 1/2 pipeline, DYNE-101, to emerge as the most promising first-in-class candidate in the $2.5 billion Type 1 Myotonic Dystrophy (DM1) market. In the medium to long term, pelacarsen's failure to prevent MACE has cast doubt on mechanistic efficacy across the $10 billion Lp(a) market, which includes Amgen's Phase 3 candidate olpasiran and Eli Lilly's lepodisiran. Artisan Partners' demand for board reform simultaneously threatens to severely constrain Novartis's future external technology acquisition strategy and demonstrates that governance risk serves as a direct catalyst for big pharma stock discounts.