A top investor in Novartis AG (NVS) is reportedly urging a major board shake-up at the Swiss drugmaker, pushing for stronger corporate governance after the stock suffered a record fall following back-to-back clinical trial failures.
Earlier in September, Novartis' Phase 3 HARBOR study of del-desiran for myotonic dystrophy type 1 did not demonstrate statistically significant improvement versus placebo on the primary endpoint of video hand opening time, a novel measure of hand myotonia.
The company's phase 3 Lp(a)HORIZON trial of pelacarsen also did not meet its primary endpoint of reducing the risk of cardiovascular events, a composite of cardiovascular death, non-fatal myocardial infarction, non-fatal stroke, and urgent coronary revascularization requiring hospitalization, compared to placebo.
David Samra, managing director at top-20 shareholder Artisan Partners and founding partner of International Value Group, told Reuters he wants enhanced board-level oversight of company acquisitions.
Pushing For Governance And Oversight Changes
A Reuters report on Thursday highlighted that Samra specifically requested action from Board Chairman Giovanni Caforio, advocating for better board talent and the creation of a dedicated acquisition committee to review potential deals.
He described the current dealmaking team as "uninspiring at best," emphasizing that board members must exercise stronger scrutiny over transactions moving forward.
However, Samra clarified that he does not blame CEO Vas Narasimhan, praising him for doing a "very good job" leading the business.
Addressing Disappointing M&A Deals
Highlighting troubling transactions, Samra cited the 2024 acquisition of German biotech MorphoSys, where investor enthusiasm quickly waned after Novartis wrote down its value just months later.
He also referenced the $12 billion Avidity deal, asserting that management must face financial penalties if an acquisition's value drops to zero, even though promising therapies could still emerge.
Calls To Overhaul Executive Compensation
Samra further pushed the board to reform Novartis' executive compensation structure, noting that current pay models depend too heavily on adjusted performance metrics that exclude writedowns rather than reflecting actual economic outcomes.
Artisan is the first shareholder to demand board reforms publicly, a move that could prompt other investors expressing private M&A concerns to join the push for change.
NVS Stock Price Activity: Novartis shares were up 1.30% at $139.27 during premarket trading Friday, according to market data.
