Novartis

Company Update: 
Fortunes haven’t been favouring Novartis of late. After late-last week’s cardiovascular failure in late-stage trials, the firm has announced that its investigational drug del-desiran did not meet phase III goals to treat a rare neurological disorder. Del-desiran (along with two other late-stage drug candidates) came from the $12bn Avidity Biosciences acquisition in 2025. This means that the firm would now recognise a sizeable impairment in its books.

The firm’s track record of delivering on its R&D is now taking a beating. While R&D setbacks are a part and parcel of the innovative pharma business and Novartis remains a quality firm, the back-to-back late-stage failures are likely to cloud the sentiment in the near-term. Therefore, we recommend re-entering Novartis at 15-20% lower share price levels. The firm has maintained its mid-term sales CAGR of 5-6% over 2025-30.

For today, we expect a 3-4% negative share price reaction.

Expert Opinion:
Novartis reminds me (mutatis mutandis)  of Roche a few years back: a stock beloved by the market with high valuations and promising R&D pipeline.  Yet Roche suffered massive profit taking after the R&D pipeline failed to deliver what was expected. Market sentiment can shift quite quickly and we would take chips off the table on Novartis, which is, after Lonza, the most expensive stock (on PE27 of our universe).  We think Roche (diversified) and Novo are probably offering a better risk reward profile at this stage.




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