Avidity Biosciences stock rocketed Wednesday on a report Novartis made an attempt to buy the rare disease-focused biotech company.
The small biotech company has three drugs in clinical testing that target different forms of muscular dystrophy. In late 2024, Avidity Chief Executive Sarah Boyce told Investor's Business Daily that two of those could be "multibillion-dollar drugs."
For Novartis, the potential deal would be one of the biggest under Chief Executive Vas Narasimhan. Avidity's market cap is approaching $6 billion after the Financial Times first reported the rumored deal, citing people familiar with the matter.
Representatives of both companies declined to comment in response to inquiries from IBD.
Avidity Biosciences shares surged 26.1% to 48.26. Shares broke out of a cup-with-handle with a buy point at 35.29 on July 25. The move Wednesday sent Avidity Bio stock flying above a profit-taking zone, MarketSurge research shows.
How Avidity Is Targeting Genetic Diseases
Avidity Biosciences is working to silence problematic genes tied to rare diseases. The technology has long worked in liver diseases, but no one has really cracked the code in muscular conditions, Boyce said in a September 2024 interview.
The company is using this method in the hopes of targeting myotonic dystrophy type 1 and FSHD, or facioscapulohumeral muscular dystrophy.
It's also working to target Duchenne muscular dystrophy. In this condition, patients' bodies don't make enough, or any, of the dystrophin protein necessary for muscle health. Avidity wants to make a drug that produces a full version of that protein.
Sarepta Therapeutics makes treatments for Duchenne muscular dystrophy, including a gene therapy called Elevidys. But Elevidys has faced some setbacks, including a brief pause on shipments following several patient deaths.
Novartis Is Facing Generic Competition
For Novartis, biotech buyouts could help stave off sales losses for Entresto. The heart failure drug is expected to lose patent protection in the U.S. this year. That will open it up to generic competition.
Xolair, which treats asthma attacks and allergic reactions, and autoimmune diseases drug Cosentyx are also expected to face generic competition in the near term.
During the second quarter, Cosentyx brought in $1.63 billion in sales, missing forecasts for $1.75 billion, according to FactSet. Cosentyx is Novartis' second biggest moneymaker behind Entresto. The latter generated $2.36 billion in sales, beating forecasts for $2.3 billion.
The two drugs generated more than 28% of second-quarter sales.
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