Novartis CEO Signals Ongoing Big-Money M&A Moves with $12B Avidity Buy

Novartis AG (SWISS: NVS), the Swiss pharmaceutical heavyweight, isn't planning to slow down on big acquisitions anytime soon. CEO Vas Narasimhan recently told CNBC that the company has "adequate firepower" to continue pursuing deals that enhance its growth, dismissing the idea that large M&A moves in pharma can ever really be "done." The recent $12 billion agreement to acquire U.S.-based Avidity Biosciences underscores this mindset.

The deal marks Novartis' largest purchase in a decade and gives it access to Avidity's promising drug pipeline, with two of Avidity's lead candidates expected to hit the market before 2030 and generate multi-billion dollar sales. Narasimhan emphasized the strategic fit, highlighting the company's strong cash flow-nearly $20 billion annually-to support such big-ticket investments and drive future growth.

Despite some headwinds from generics eroding revenues for key drugs like Entresto, Promacta, and Tasigna in the U.S., Novartis managed to post a 7% rise in third-quarter net sales to $13.9 billion. Operating income jumped 27% to $5.46 billion, a slight beat on analysts' expectations. This growth was fueled by high double-digit revenue gains from oncology drugs such as Kisqali, Pluvicto, and Scemblix, plus the multiple sclerosis medication Kesimpta.

Looking at the stock, Novartis shares dipped around 3.4% at the start of trading Tuesday, even though the share price has climbed roughly 17% since January. That's well ahead of the Swiss Market Index's 8% gain, showing some investor confidence despite challenges.

Still, Novartis is contending with external market pressures including potential drug pricing reforms in the U.S. President Donald Trump's push to lower medicine costs led recent pharma big hitters Pfizer and AstraZeneca to enter "most favored nation" (MFN) agreements, linking U.S. drug prices with lower prices abroad. Analysts at UBS suggest similar arrangements might soon apply to Novartis, which said last month it plans to eliminate pricing disparities between the U.S. and other industrialized countries.

In an environment that's increasingly focused on cost containment and tariff renegotiations, Novartis also confirmed it expects to avoid the impact of a 100% tariff on branded drugs thanks to its massive $23 billion investment in U.S. manufacturing facilities. This move could shield its earnings from tariff risks that have rattled other pharma companies' outlooks.

Driving growth through acquisitions appears to be Novartis' playbook as it navigates patent cliffs and pricing pressures. Acquiring more than 35 companies in the last year alone demonstrates a clear tactical shift to fortified innovation and pipeline diversity.

The company's steadfast approach to M&A, backed by solid free cash flow, hints that this won't be the last blockbuster deal Novartis pulls off anytime soon. How it balances that with evolving global pricing policies and competitive threats remains one of the more interesting variables in pharma stock plays.