Novartis has scrapped another clinical trial, adding to a steady stream of clinical setbacks that has left analysts questioning the drugmaker's long-term growth story.
The drugmaker terminated a mid-stage study for Fabhalta in patients with lupus nephritis, a serious kidney-disease complication occurring when the immune system attacks healthy tissue. Researchers were evaluating the drug's efficacy when added to standard treatment.
A clinical database reviewed by Barron's shows Novartis concluded the study after completing its first phase, enrolling just 81 patients out of an originally planned 240. Novartis has also removed mention of the study from its website, where the original link now leads to an error page.
The Swiss drugmaker did not elaborate on the termination, listing only "strategic considerations" in the database entry. This phrasing typically suggests a shift in pipeline priorities or resource allocation rather than underlying safety or efficacy issues.
That distinction may explain why the drugmaker's American depositary receipts barely reacted to the news. In fact, Novartis ticked up 0.2% to $150.62 on Friday, outperforming the broader market on a day when all three major indexes traded solidly in the red.
Another factor: Fabhalta is already on the market with multiple approved indications. In 2023, the Food and Drug Administration first approved the drug to treat a rare blood disorder called PNH, and it has since gained approval for two distinct kidney diseases.
Analysts also held modest expectations for the broader kidney-disease portfolio. Jefferies analyst Michael Leuchten expressed skepticism toward the franchise as recently as July, singling out Fabhalta and pipeline candidate zigakibart as two reasons for caution.
Still, the termination adds to a growing list of clinical setbacks for Novartis. Last month, the company disclosed that a trial for del-desiran, the centerpiece of a recent acquisition, failed to meet its primary goal in patients with a rare neuromuscular disease.
That announcement came just a week after Novartis revealed that pelacarsen failed to significantly reduce the risk of heart attacks and strokes compared with a placebo in a late-stage study. Earlier in September, the company also halted select trials for an experimental cell therapy following three patient deaths linked to a rare autoimmune reaction.
While the Fabhalta study cancellation may not affect shares immediately, it further clouds the narrative around the drugmaker's long-term growth.
That uncertainty is reflected in Wall Street's split consensus: among 10 firms covering Novartis stock, four rate it a Buy or the equivalent, four are sidelined, and two hold a Sell rating.
It's easy to see why analysts are so divided. Goldman Sachs, one of the most prominent bears, expects a looming wave of patent expirations affecting several key drugs -- what company executives themselves have dubbed the "largest patent expiry" in Novartis's history -- to weigh heavily on earnings momentum.
As Goldman views it, Novartis is entering "a high-risk period of binary catalysts for which the risk is not adequately reflected," particularly given that the stock trades at a premium to its sector peers. For now, analysts are keeping their Sell rating firmly in place.
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