Avidity Biosciences, Inc. (NASDAQ:RNA) stock surged after announcing a $12 billion all-cash acquisition by Novartis AG (NYSE:NVS), marking one of the largest biotech buyouts of the year.
Analyst Downgrade Matches $72 Per Share Offer
H.C. Wainwright analysts led by Ananda Ghosh downgraded Avidity Biosciences to Neutral from Buy and set a $72 price forecast, matching the cash offer from Novartis AG.
The analysts’ move follows Avidity’s announcement that it will be acquired by Novartis for $72 per share, valuing the company at about $12 billion on a fully diluted basis.
Also Read: Avidity Drug Shows Yearlong Gains In Duchenne Muscular Dystrophy Trial
Deal Premium and Spin-Off Structure
The offer represents a 46% premium to Avidity’s Oct. 24 closing price and 62% to its 30-day VWAP (Volume-Weighted Average Price).
Under the deal, Avidity will spin out its early-stage precision cardiology programs into a new publicly traded company (SpinCo) funded with $270 million in cash. Shareholders will receive equity in SpinCo in addition to the cash consideration.
Strategic Rationale: Strengthening Neuroscience Pipeline
Analysts said the acquisition reflects Novartis’ strategy to strengthen its neuroscience and rare disease portfolio, centered on Avidity’s late-stage AOC pipeline, which includes del-zota for Duchenne muscular dystrophy (DMD), del-desiran for myotonic dystrophy type 1 (DM1), and del-brax for facioscapulohumeral muscular dystrophy (FSHD), underscoring the platform’s potential in muscle and neuromuscular diseases.
The brokerage noted that it shifted to a Neutral stance because it does not expect a competing bid to emerge following the announced deal.
Wainwright’s $72 price forecast reflects an equal weighting of a $92 per share estimate based on a 25× multiple of projected 2034 earnings of $10/share, discounted to 2025 at 12%, and a discounted cash flow value of $51 per share using an 11% discount rate and 2% growth rate.
The analysts noted these assumptions align with typical metrics for early-stage biopharmaceutical companies.
Recent Financial Performance
In August, Avidity reported a second-quarter loss of $1.21 per share, missing analysts’ estimates of a $1.00 loss. The result marked a wider loss compared with 65 cents per share a year earlier. Sales for the quarter rose sharply to $3.85 million, up 88% year over year and well above the $1.46 million consensus estimate.
Price Action: RNA shares were trading higher by 42.41% to $70.00 at last check Monday.
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