Deutsche Bank has downgraded Novartis to Hold from Buy and reduced its price target to 120 Swiss francs from 140 francs, citing a string of clinical setbacks and mounting questions about the returns from recent deals.
Analyst Emmanuel Papadakis framed the move around a second recent clinical miss - a disappointing result for del-desiran in myotonic dystrophy type 1 (DM1) - which followed an earlier unsuccessful readout for pelacarsen. While Papadakis noted that the del-desiran outcome is less important commercially than the pelacarsen setback, he described it as "the first proof point for 2025’s $12bn Avidity acquisition and continues a run of very challenging deal-return metrics."
The analyst warned that the latest miss leaves Novartis exposed to an unresolved revenue shortfall as it approaches the early 2030s, when several major products face patent expiries. Papadakis specifically identified a patent cliff across Cosentyx, Kisqali and Kesimpta as a timing risk that could widen any gap in the company’s product roster.
Market reaction to the del-desiran result was acute - shares fell more than 10% on Tuesday, a move Papadakis described as "somewhat severe." He added that the net impact from recent results on his model will likely be neutral overall, and he still expects the last major 2026 readout, for remibrutinib in hidradenitis suppurativa, to be positive.
Nevertheless, Papadakis argued that it is now more difficult to justify material upside at Novartis’s current valuation - roughly 14 times projected 2027 earnings. He drew a parallel to Rhapsido, pointing out that the ianalumab launch in Sjögren’s disease is likely to proceed slowly, that 2027 contains relatively few meaningful data readouts, and that business development risk has increased.
Context and implications
- The downgrade and lower price target reflect investor concern about clinical program failures and the returns on recent acquisitions.
- Analyst commentary highlights an anticipated revenue gap tied to patent expiries for key products in the early 2030s.
- Near-term expectations include a potentially positive remibrutinib data event in 2026, but broader upside is viewed as limited at current multiples.
Given the combination of recent trial disappointments, an upcoming cluster of patent expiries, and heightened business development risk, Deutsche Bank has chosen a more cautious stance on Novartis until further, more definitive evidence of pipeline or deal-driven value emerges.