Summary of the Key Points in Plain Language
In September 2026, the global pharmaceutical industry witnessed a major setback: a top-tier company, Novartis, invested heavily in two projects that were touted as “world-first breakthrough drugs.” One of these drugs was a lipid-lowering medication purchased for over $400 million, while the other was a core component of a new technology platform acquired for $12 billion at the beginning of the year. Both drugs reached the final stage of clinical trials, involving thousands of participants, but neither achieved the expected results.
This incident was not just a minor financial loss for Novartis; it fundamentally shook the foundational principles of two entire new therapeutic areas that the industry had been working on for years, with potential revenues in the billions. It also exposed the entire innovation drug industry to the question of “who can create original drugs” and “how to do so.”
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Explanation in 5 Simple Dimensions
1. The First Failure: Billions of Dollars Destroyed a Scientific Belief Held for Decades
The entire cardiovascular field once accepted a common belief: high levels of a substance called Lp(a) in the blood increase the risk of heart attacks and strokes, and reducing this substance through medication would inevitably lead to fewer illnesses. Novartis’ drug successfully lowered Lp(a) levels by 80% in the trials, seemingly eliminating this risk. However, this reduction had no impact on the incidence of heart attacks and strokes. This discovery shattered the long-held belief that high Lp(a) levels directly cause sudden death. As a result, many startups and investors invested billions in this field, only to realize that further reductions (e.g., by 90% or 95%) might not be possible, or that preventive measures might need to start in adolescence. With no clear path forward, capital withdrew, leading to a crisis for the entire industry.
2. The Second Failure: Not Just a Technical Failure, but a Barrier to Financing
The second failed drug was part of a new class of drugs (AOCs) that were seen as the next major breakthrough. These drugs were designed to deliver medication directly to muscle tissues. While the technology was effective and safe, the trial criteria were too stringent, and the drug fell just short of the statistical definition of “effective.” This failure raised the financing barriers for startups in this field, making it almost impossible for them to secure funding.
3. The Harsh Reality of the Innovation Drug Industry
Innovation drug development is highly competitive, and success is measured solely by the final product’s effectiveness. Patients, insurance companies, and buyers are not interested in the efforts, scientific theories, or near-successes along the way. If a drug does not reduce the incidence of diseases, all previous investments are lost. Even if the drug reduces Lp(a) by 80% without side effects, it is worthless if it doesn’t improve patient health. The progress made during development is insignificant if it doesn’t lead to clinical benefits.
4. Why Giants Can Survive, While Startups Fail?
Developing a world-first drug is extremely risky, costing an average of $2.6 billion (about 20 billion RMB) over 12 years, with an 85% failure rate. Only companies with substantial resources, such as Novartis (annual revenue over $50 billion and multiple drug projects), can afford such risks. A small startup with a single project facing clinical failure could face a 80% drop in stock price, leading to layoffs, asset sales, or even bankruptcy. This highlights the need for robust financial foundations and a strategic focus on survival.
5. A Lesson for Chinese Innovation Drug Companies
China’s innovation drug industry is at a critical juncture, transitioning from following established paths to exploring uncharted territories. Novartis’ failure shows that courage alone is not enough; companies need to build resilience and diversify their projects. They must have sufficient cash reserves to withstand multiple failures and investors willing to support them over the long term. To succeed globally, Chinese companies need to become true giants with robust pipelines, strong technologies, and patient capital.
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This analysis provides a clear understanding of the financial and strategic implications of Novartis’ failures for the global and Chinese pharmaceutical industries.