Novartis booked $1.9 billion partial impairment on Avidity's del-desiran

Q3 charge and guidance

Novartis reported third-quarter results on 27 October 2026, including a $1.9 billion partial impairment on del-desiran, one of three clinical-stage antibody oligonucleotide conjugates (AOCs) it acquired with Avidity Biosciences. The charge reflects the additional time and resources Novartis expects to need for another study after the drug failed a Phase 3 trial in myotonic dystrophy type 1.

Novartis also booked a $300 million charge for pelacarsen, its cholesterol-lowering drug, bringing total charges from two failed late-stage programs to about $2.2 billion. Operating income fell 61% in the quarter. Net sales rose 4% to $14.52 billion, as Kisqali, Kesimpta, Scemblix and Leqvio offset generic competition to Entresto, Promacta and Cosentyx.

Novartis raised its full-year guidance from a previously expected low single-digit decline to either flat or low-single-digit growth, it said, while keeping its low single-digit sales growth forecast. Reuters reported the upgrade covered core operating income.

What HARBOR showed

HARBOR enrolled nearly 160 patients with myotonic dystrophy type 1. Del-desiran pairs an antibody targeting transferrin receptor 1, found on muscle cells, with an siRNA payload meant to destroy the mRNA for a disease-causing protein called DMPK. It failed to significantly improve hand opening time, measured by video, the trial's primary endpoint.

Novartis said it saw "evidence of clinical activity" in secondary and exploratory measures, without sharing the data behind that claim. It plans to meet regulators on next steps.

Reuters reported that the estimated value of the drug was cut from an original $7.48 billion because of development delays. Chief financial officer Mukul Mehta said in an interview that Novartis still expects del-desiran to succeed, unlike pelacarsen, which was written off entirely.

When the HARBOR failure was disclosed in September, Novartis shares fell 12% before the opening bell, a drop that also reflected the pelacarsen failure.

The Avidity deal

Novartis agreed in October 2025 to pay $72.00 a share in cash, about $12 billion on a fully diluted basis. The price was a 46% premium to Avidity's 24 October 2025 close of $49.15, and about 62% over the 30-day volume weighted average price of $44.42. Novartis put the enterprise value at about $11 billion. The takeover closed in February 2026.

The purchase raised Novartis' expected 2024-2029 sales compound annual growth rate to 6% from 5%. The Avidity deal included three late-stage AOCs: del-desiran, del-brax and del-zota. Del-brax met its primary biomarker endpoint in a Phase 1/2 study in facioscapulohumeral muscular dystrophy, the FORTITUDE study, and Novartis is enrolling patients in a Phase 3 trial. Del-zota is under priority review at the FDA for Duchenne muscular dystrophy.

Pressure on M&A

Narasimhan said the write-down did not change Novartis' conviction in AOCs. Del-desiran's failure "does not change our conviction around [AOCs] and their ability to address neuromuscular disease," he said on the call. He described the Avidity deal as having "hit a bump".

Artisan Partners, among Novartis' 20 largest shareholders, called for a board shake-up to improve oversight of acquisitions on 10 September 2026. The firm's David Samra told Reuters that "the party is over" and urged chairman Giovanni Caforio to change the team overseeing dealmaking. Novartis shares fell 11% in a single day, wiping out nearly $30 billion in market value and all of the stock's 2026 gains.

Narasimhan said the setbacks were part of drug development and that some in the market had overreacted. "We don't need to change our M&A strategy," he told journalists. Mehta said free cash flow should surpass $20 billion in the next five years, leaving room for bolt-on acquisitions in the $2 billion range.