Major Novartis shareholder seeks board shake-up after trial setbacks

• Artisan Partners' David Samra specifically urged Chairman Giovanni Caforio to overhaul the board team overseeing M&A deals, stating 'the party is over' and calling the acquisition track record value-destroying
• The muscle-wasting drug from Novartis' $12 billion Avidity takeover failed its late-stage trial Tuesday, with Samra arguing management should be penalized when deals 'go to zero'
• The investor praised CEO Vas Narasimhan's operational performance but criticized the board's compensation structure for relying too heavily on adjusted metrics that exclude writedowns rather than reflecting 'real economic outcomes'

Summary

Artisan Partners, a top-20 shareholder in Novartis (NOVN.S), is demanding a board shake-up following recent clinical trial failures and poor acquisition performance. David Samra, managing director at Artisan Partners, publicly called for Chairman Giovanni Caforio to overhaul the board's deal oversight team, marking the first public investor criticism of this nature.

Key Setbacks:

• Novartis' $12 billion acquisition of U.S. firm Avidity failed when a muscle-wasting disorder drug failed a late-stage trial
• Heart drug pelacarsen delivered disappointing results, causing a 3% stock decline
• The 2024 acquisition of German biotech MorphoSys was written down within months

Main Concerns:

Samra criticized Novartis' "uninspiring" M&A track record, arguing that successive deals have destroyed shareholder value. He stated, "If you do a $12 billion deal and it goes to zero, the management needs to be penalized for that." Artisan also urges compensation structure reforms, claiming current metrics rely too heavily on adjusted performance measures that exclude writedowns rather than reflecting actual economic outcomes.

Management Assessment:

While the setbacks test CEO Vas Narasimhan (who has led since 2018), Samra absolved him of blame, crediting him for doing a "very good job" running the business. Instead, he focused criticism on board-level oversight of acquisitions.

Company Response:

Novartis maintained that its financial guidance remains unchanged and emphasized its "broad" pipeline of medicines and disciplined acquisition approach.

Market Implications:

This public shareholder activism signals growing investor frustration with pharmaceutical M&A strategies and could pressure other drugmakers to improve deal scrutiny and governance practices.