Novartis is betting its next decade on three experimental drugs, and analysts say the Swiss drugmaker needs at least two of them to work or its stock valuation, already the richest in the sector, starts to look very hard to defend.

The stakes are not abstract. Novartis reported quarterly results Tuesday, but investors are barely looking at them. All the attention is on three clinical trial readouts expected before the end of the year, for drugs targeting cardiovascular disease, multiple sclerosis, and a rare genetic disorder. Together, analysts estimate those three drugs represent more than $10 billion in potential annual sales at their peak.

Why the timing matters so much

Novartis is heading into what its own chief executive, Vas Narasimhan, has called the largest patent expiry period in the company's history. Two of its biggest earners, the psoriasis and arthritis drug Cosentyx and the breast cancer therapy Kisqali, are both set to lose patent protection around the turn of the decade. When that happens, cheaper generic versions flood in and branded sales collapse. Meanwhile, Entresto, its heart medication, is already losing ground to generics and sales are expected to fall by $4 billion this year alone.

That is the cliff Novartis is trying to build a bridge over. The three trial drugs are the bridge. If the math works out, strong results replace lost revenue and the company grows through the patent crunch. If it doesn't, the company faces a prolonged period of shrinking sales with little to fill the gap.

The most watched drug is pelacarsen, which lowers a protein in the blood called lipoprotein(a), or Lp(a), that is linked to higher risk of heart attacks and strokes. What makes it commercially interesting is that nothing currently on the market targets Lp(a). If pelacarsen works and gets to market first, it would enter a completely open field. As Sven Borho of investment firm OrbiMed put it: "It will be big because you're going to be on it for the rest of your life."

But the threshold for success is narrow in ways that matter beyond investors. UBS analysts expect the drug could reach statistical significance at around a 12% reduction in relative risk of heart events. Clinicians, however, may want to see 15% or more before they consider the result clearly meaningful enough to prescribe it widely. A result that is technically a "success" but lands below what doctors find compelling could be treated by the market more like a failure.

The valuation problem

Novartis shares have risen about 11% this year and roughly 25% over the past twelve months. That has pushed the stock to about 16 times its expected future earnings, the highest multiple in its peer group. That premium only makes sense if the growth actually materialises.

Goldman Sachs analyst James Quigley put it plainly: "If two of those fail, that 16-times multiple looks very, very vulnerable."

Some analysts warn that much of the optimism from a successful outcome is already baked into the share price, which means good trial results may produce relief rather than a surge. The real risk is asymmetric: strong results hold the current price, weak results could hit it hard.

Barclays analyst James Gordon flagged that investors will be watching "management's body language" around the readouts closely, including the specific language executives use when talking about "clinically meaningful" benefits. In drug development, that phrase carries weight. It signals whether a result is large enough that actual doctors, patients, and insurers will act on it.

For patients who might one day take one of these drugs, that distinction matters too. A cardiovascular treatment that clears a statistical bar but underwhelms clinicians may never make it to a doctor's prescription pad, regardless of what the trial technically shows. The science and the business case have to line up. In the second half of this year, Novartis finds out whether they do.