A failed clinical trial wiped nearly $30 billion from Novartis's market value this week after shares fell 11% in a single session, erasing all the gains the stock had made since the start of the year. The drug that failed, del-desiran, was being tested for a muscle-wasting disorder in what is called a late-stage study, meaning the final major round of testing before a company can ask regulators to approve a treatment for real-world use. It was the second major setback for Novartis in just days.
Eight shareholders told Reuters that the del-desiran result raised questions about last year's $12 billion Avidity acquisition and the company's broader dealmaking approach. The logic behind buying another company to expand a drug pipeline is to gain access to experimental treatments faster than internal research would allow. When acquired drugs fail in late-stage testing, investors who paid a premium for that pipeline have reason to ask whether the price was justified.
Why cheaper drug alternatives are not arriving on schedule
A separate report adds a structural problem to the broader pharmaceutical picture. The Association for Accessible Medicines, a trade group representing generic drugmakers, found that 90% of widely used biologic medicines facing patent expiration by 2034 have no lower-cost alternative currently in development, according to the Wall Street Journal. Biologics are medicines produced inside living cells rather than made through chemical synthesis. They tend to be among the most expensive drugs on the market and often generate billions in annual sales.
When a biologic's patent expires, rival manufacturers can legally produce a biosimilar. In plain terms, a biosimilar is the generic equivalent for this class of medicine. The Association for Accessible Medicines estimates that with 118 biologic drugs set to go off patent, the absence of those competitors could cost American patients and payers nearly $200 billion in savings over the next decade.
Part of the reason those alternatives are scarce: biosimilar uptake has dropped sharply in recent years, according to the association, dimming drugmakers' interest in developing them. The competitive opening that patent expiration is supposed to create may close without producing the lower prices it was designed to deliver.