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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.
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
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.
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.
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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