10-K: Avidity Biosciences 2025 Annual Report: Novartis Merger & Clinical Progress

Avidity Biosciences reports significant clinical advancements for its AOC pipeline, including positive del-zota data and FDA designations, alongside a pending merger with Novartis AG and a spin-off of its early-stage cardiology programs.

Summary

• Avidity Biosciences is a biopharmaceutical company focused on developing Antibody Oligonucleotide Conjugates (AOCs) to treat diseases previously untreatable with RNA therapeutics.
• The company has three programs in clinical development: del-zota for Duchenne muscular dystrophy (DMD44), del-desiran for myotonic dystrophy type 1 (DM1), and del-brax for facioscapulohumeral muscular dystrophy (FSHD).
• Del-zota for DMD44 received positive pre-BLA meeting feedback from the FDA in October 2025, with a BLA submission planned for 2026 for potential accelerated approval. A Managed Access Program (MAP) was announced in November 2025.
• Topline and functional data from the EXPLORE44 trial for del-zota in September 2025 demonstrated reversal of disease progression, approximately 25% increase in dystrophin production (up to 58% of normal total dystrophin), and over 80% reduction in creatine kinase (CK) levels, with favorable long-term safety.
• Del-zota has been granted Breakthrough Therapy and Rare Pediatric Disease designations by the FDA.
• The global Phase 3 HARBOR trial for del-desiran (DM1) was fully enrolled with 159 participants in July 2025, and 54-week topline data is expected in the second half of 2026. Final results from the Phase 1/2 MARINA trial were published in The New England Journal of Medicine in February 2026.
• Del-brax for FSHD received FDA alignment on accelerated and full approval pathways in June 2025, and the global confirmatory Phase 3 FORTITUDE-3 study was initiated. Topline data from the FORTITUDE biomarker cohort is expected in Q2 2026, with Phase 3 readout and global regulatory submissions expected in 2028.
• On October 25, 2025, the company entered into a Merger Agreement with Novartis AG, under which it will become an indirect wholly-owned subsidiary of Novartis. A pre-closing reorganization will spin off early-stage precision cardiology programs (AOC 1086, AOC 1072) and certain collaboration agreements into a new entity, SpinCo (Atrium Therapeutics, Inc.).
• SpinCo shares will be distributed pro rata to Avidity stockholders (1 share of SpinCo per 10 shares of Avidity common stock) or SpinCo may be sold to a third party. The Merger and Distribution are expected to close in the first half of 2026.
• Net loss for fiscal year 2025 was $684.6 million, an increase from $322.3 million in 2024. Revenue increased to $18.8 million in 2025, primarily due to a $10.0 million milestone payment from Eli Lilly.
• Research and development expenses increased by $255.6 million to $559.2 million in 2025, and general and administrative expenses increased by $119.3 million to $205.5 million, including $35.9 million in merger-related transaction costs.
• Cash, cash equivalents, and marketable securities totaled $1.7 billion as of December 31, 2025, and are expected to fund operations for at least the next 12 months.
• A Manufacturing Services Agreement was entered into with Lonza LTD in August 2025, committing to minimum purchases of approximately $621.6 million of product from 2026-2028.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a highly positive report, driven by significant clinical advancements across all three lead programs, favorable regulatory designations, and a strategic merger with Novartis that validates the company's platform and provides substantial capital. While net losses increased, this is attributable to accelerated R&D in late-stage clinical trials, which is a necessary investment for a biopharmaceutical company nearing commercialization.

Positives

• Completed a positive pre-BLA meeting with the FDA for del-zota (DMD44) in October 2025, establishing a clear path for a planned BLA submission in 2026 for potential accelerated approval.
• Announced a Managed Access Program (MAP) for del-zota in November 2025, providing early access to eligible DMD44 patients in the United States.
• Reported positive topline and functional del-zota data from the EXPLORE44 trial in September 2025, demonstrating reversal of disease progression, statistically significant increases of approximately 25% of normal dystrophin production (up to 58% of normal total dystrophin), and rapid, sustained reductions in creatine kinase (CK) levels by over 80%.
• Del-zota was granted Breakthrough Therapy and Rare Pediatric Disease designations by the FDA, which can expedite development and review.
• The Phase 3 HARBOR trial for del-desiran (DM1) is fully enrolled with 159 participants as of July 2025, indicating significant progress in its clinical development.
• Received FDA alignment on accelerated and full approval pathways for del-brax (FSHD) in June 2025, and initiated the global confirmatory Phase 3 FORTITUDE-3 study.
• Positive topline Phase 1/2 FORTITUDE data for del-brax showed consistent improvement in functional mobility, muscle strength, quality of life, and rapid and significant reductions in DUX4-regulated circulating biomarker (KHDC1L/cDUX) and creatine kinase.
• FDA aligned on the use of cDUX as a surrogate endpoint to support potential accelerated approval of del-brax.
• Received a $10.0 million clinical development milestone payment from Eli Lilly in August 2025, demonstrating successful collaboration progress.
• Maintained a strong liquidity position with $1.7 billion in cash, cash equivalents, and marketable securities as of December 31, 2025, providing funding for at least the next 12 months.
• Successfully remediated a material weakness in internal control over financial reporting as of December 31, 2024, enhancing financial reporting reliability.

Negatives

• Incurred significant operating losses, with net loss increasing to $684.6 million for fiscal year 2025 from $322.3 million in 2024, and an accumulated deficit of $1.6 billion as of December 31, 2025.
• Expect to incur significant losses for the foreseeable future as research and development activities, manufacturing, and commercialization efforts continue to increase expenses.
• General and administrative expenses increased substantially by $119.3 million in 2025, partly due to $35.9 million in transaction-related costs associated with the Novartis merger.
• One participant discontinued from the EXPLORE44-OLE study for del-zota due to a hypersensitivity event, highlighting potential safety risks.
• The value of SpinCo Common Stock, if distributed, may not be as anticipated, and current stockholders will not participate in any further upside to the portion of the business acquired by Novartis.
• The pendency of the Merger and Distribution could cause substantial disruptions, create uncertainty, and adversely affect the ability to recruit and retain employees, as well as relationships with business partners.
• Restrictions on business activities are in place while the Merger Agreement is effective, potentially preventing the pursuit of advantageous business opportunities without Novartis's consent.
• A termination fee of $450 million would be payable to Novartis under specific circumstances if the Merger Agreement is terminated, which could strain available cash.
• Litigation has arisen in connection with the Merger or Distribution, which could be costly and divert management's attention and resources.

Risks

• The pending transaction with Novartis may not be completed within the anticipated timeframe or at all, which could adversely affect business, financial results, and operations.
• The pendency of the Merger and Distribution could cause substantial disruptions in, and create uncertainty surrounding, the business, potentially affecting employee retention and relationships with collaborators, vendors, customers, and regulators.
• Restrictions on business activities while the Merger Agreement is in effect could prevent the pursuit of business opportunities or effective responses to competitive pressures.
• A termination fee of $450 million may be required to be paid to Novartis under specific circumstances if the Merger Agreement is terminated, which would use available cash.
• Significant direct and indirect costs will continue to be incurred as a result of the pending transaction with Novartis.
• Litigation related to the Merger or Distribution could be costly, time-consuming, and divert management's attention, potentially harming the business.
• Provisions in the Merger Agreement could discourage potential competing acquirers or result in lower competing proposals.
• The value of SpinCo Common Stock may not be as anticipated, and if the Merger is consummated, stockholders will not participate in any further upside to the business acquired by Novartis.
• The company has a limited operating history, has incurred significant operating losses since inception, and expects to incur significant losses for the foreseeable future, with no guarantee of profitability.
• Substantial additional financing will be required to achieve goals, and failure to obtain necessary capital on acceptable terms could force delays, reductions, or termination of development programs or commercialization efforts.
• The company has only three product candidates in clinical development, with all others in preclinical or discovery stages, and failure to successfully develop, obtain regulatory approval for, and commercialize these candidates would materially harm the business.
• Difficulties or delays in the commencement or completion, or the termination or suspension, of ongoing and planned clinical trials could result in increased costs, delay revenue generation, and adversely affect commercial prospects.
• Use of product candidates could be associated with side effects, adverse events, or other safety risks, potentially delaying or precluding approval, causing trial suspension, limiting commercial labels, or resulting in other negative consequences.
• Difficulties in enrolling patients in clinical trials, particularly for genetically defined, rare muscle disorders with limited patient pools, could delay or adversely affect clinical development activities.
• Product candidates are subject to extensive, costly, and time-consuming regulation and compliance, which may cause unanticipated delays or prevent regulatory approvals.
• Reliance on third parties for the manufacture of product candidates increases the risk of insufficient quantities or unacceptable costs, potentially delaying or impairing development or commercialization.
• Interim, topline, and preliminary data from preclinical studies and clinical trials may change as more patient data become available and are subject to audit and verification procedures.
• The AOC platform is unproven, and there is no certainty of developing commercially valuable products or that competing technological approaches will limit commercial value or render the platform obsolete.
• Preclinical and clinical development is a lengthy, expensive, and uncertain process, and early results are not necessarily predictive of future outcomes.
• Reliance on third parties to conduct preclinical studies and clinical trials carries risks of unsatisfactory performance.
• Significant competition from major pharmaceutical, specialty pharmaceutical, and biotechnology companies, academic institutions, and governmental agencies.
• Difficulties may be encountered in managing growth and expanding operations successfully.
• Recently enacted legislation (e.g., Inflation Reduction Act, One Big Beautiful Bill Act) and future healthcare reform measures may increase the difficulty and cost of commercializing product candidates and affect pricing.
• Success depends on the ability to protect intellectual property and proprietary technologies, and failure to obtain or maintain broad patent protection could allow competitors to commercialize similar products.
• Unstable market and economic conditions, including inflation and financial institution liquidity risk, may have serious adverse consequences on business, financial condition, and stock price.
• Product liability lawsuits could result in substantial liabilities and require limiting commercialization.
• Failure to comply with reporting obligations for adverse medical events could result in sanctions.
• Business operations are subject to risks from pandemic and epidemic diseases.
• Exposure to litigation, government investigations, and enforcement actions could result in significant penalties and reputational harm.
• Misconduct by employees and independent contractors could lead to regulatory sanctions and harm reputation.
• Strategic transactions could impact liquidity, increase expenses, and distract management.
• Ability to use net operating loss carryforwards and other tax attributes may be limited by ownership changes.
• Information technology systems or those of third parties may fail or suffer security breaches, disrupting product development programs.
• Business disruptions from natural or manmade disasters could seriously harm future revenue and financial condition.
• Subject to U.S. and foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws, with potential for criminal liability and other serious consequences for violations.
• The evolving regulatory framework for AI Technologies could limit their use or increase compliance costs.
• Use of open source software could impose limitations on the ability to commercialize product candidates.
• Intellectual property rights may not address all potential threats, and patents could be found invalid or unenforceable.
• Inability to protect intellectual property and proprietary rights throughout the world due to varying laws and enforcement.
• Changes in U.S. patent law could diminish the value of patents.
• Claims challenging the inventorship of patents and other intellectual property could lead to loss of valuable rights.
• Inability to protect the confidentiality of trade secrets could harm business and competitive position.
• Inability to obtain necessary rights to product components and processes for the development pipeline through acquisitions and in-licenses.
• Involvement in lawsuits to protect or enforce patents and other intellectual property rights could be expensive, time-consuming, and unsuccessful.
• Inadequate protection of trademarks and trade names could impede name recognition and adversely affect business.

Future Outlook

The company plans for a Biologics License Application (BLA) submission for del-zota (DMD44) in 2026 for potential accelerated approval. Topline 54-week data from the global Phase 3 HARBOR study for del-desiran (DM1) is expected in the second half of 2026. Topline data from the FORTITUDE biomarker cohort for del-brax (FSHD) is anticipated in the second quarter of 2026, with Phase 3 FORTITUDE-3 readout and global regulatory submissions expected in 2028. The merger with Novartis AG and the distribution of SpinCo are expected to close in the first half of 2026. Expenses and operating losses are projected to increase as the company continues its research and development activities, advances preclinical programs, conducts clinical trials, utilizes third-party manufacturing, hires additional personnel, and protects its intellectual property. Existing cash, cash equivalents, and marketable securities are expected to fund operations for at least the next 12 months.

Management Comments

• "Our mission is to profoundly improve peoples lives by revolutionizing the delivery of RNA therapeutics."
• "We are executing on our mission by focusing on our three strategic pillars: a disruptive and broad AOC platform, an advancing and expanding pipeline, and building an agile and diverse company."
• "We believe that a larger safety database and longer efficacy data at 54 weeks will increase the likelihood of demonstrating a treatment effect in a slowly progressing disease on multiple endpoints." (Regarding the protocol amendment for the Phase 3 HARBOR trial)
• "We believe that our AOCs have the potential to increase the production of dystrophin in people with DMD for two reasons. First, based on recent advances in the understanding of the splicing process and placement of skipping agents on pre-mRNA described in published literature, we have screened for and identified PMOs with optimized skipping activity. Second, the mAb targeting TfR1 allows for more efficient delivery to muscle cells, therefore allowing for better uptake of the PMO."
• "Our management assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are reasonably likely to have a material adverse effect on us... determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on us."

Industry Context

StockSavvy.ai notes that Avidity Biosciences is positioned at the forefront of RNA therapeutics with its Antibody Oligonucleotide Conjugates (AOCs), a novel approach combining monoclonal antibodies and RNA therapies. The company's focus on rare neuromuscular diseases like DMD, DM1, and FSHD addresses areas with high unmet medical needs and limited approved treatments, offering significant market potential. The pending acquisition by Novartis AG underscores the strategic value of Avidity's platform and pipeline, reflecting a broader industry trend of consolidation and investment in innovative drug delivery technologies, particularly in the gene and RNA therapy space. The spin-off of early-stage cardiology programs into SpinCo allows for focused development in both core neuromuscular and emerging precision cardiology areas, potentially unlocking further value. Competition is intense, with numerous companies pursuing similar mechanisms (e.g., Dyne Therapeutics, Sarepta Therapeutics, Vertex Pharmaceuticals) and alternative approaches like gene therapy and CRISPR, highlighting the need for Avidity's continued innovation and successful clinical execution.

Comparison to Industry Standards

• For DMD treatment, Avidity's del-zota aims to restore dystrophin up to 58% of normal, which compares favorably to currently approved unconjugated PMO-based oligonucleotide therapies (e.g., Sarepta's EXONDYS 51, VYONDYS 53, AMONDYS 45; Nippon Shinyaku's VILTEPSO) that have demonstrated mean increases in dystrophin of 1% to 6% in clinical trials. Del-zota's approach of producing near full-length dystrophin is believed to offer better functional benefit than the significantly shorter versions delivered via gene therapy (e.g., Sarepta's ELEVIDYS).
• For DM1 treatment, there are currently no approved therapies. Avidity's del-desiran is in Phase 3, competing with DYN-101 (Dyne Therapeutics, antibody fragment-linked ASO in registrational trial), tideglusib (AMO Pharma, GSK3-inhibitor in late-stage), PGN-EDODM1 (PepGen Inc., peptide conjugated ASO in Phase 2), SRP-1003 (Sarepta/Arrowhead, peptide conjugated ASO in Phase 1/2), VX-670 (Vertex/Entrada, EEV-conjugated PMO in Phase 1/2), and SAR446268 (Sanofi, AAV-based gene therapy in Phase 1/2). Avidity's long-term data from MARINA-OLE showing reversal of disease progression across multiple endpoints (vHOT, muscle strength, ADLs) compared to natural history data positions it strongly.
• For FSHD treatment, there are no approved therapies. Avidity's del-brax is the first investigational therapy designed to directly target DUX4. Competitors include RO7204239 (F. Hoffmann-La Roche AG, monoclonal antibody against latent myostatin in Phase 2), ARO-DUX4 (Arrowhead/Sarepta, RNAi therapeutic in Phase 1/2a outside U.S.), EPI-321 (Epicrispr Biotechnologies, gene-modulating therapy in Phase 1/2), and Restem-L (Restem, LLC, UMPC therapy in Phase 1/2a). Avidity's positive topline Phase 1/2 FORTITUDE data showing consistent improvement in functional mobility, muscle strength, quality of life, and biomarker reductions (KHDC1L/cDUX, CK) indicates a promising profile.
• Avidity's AOC platform, combining mAbs with oligonucleotides (siRNAs, PMOs), aims to overcome delivery limitations of traditional oligonucleotide therapies. This approach is distinct from unconjugated oligonucleotides and gene therapies, offering targeted delivery to muscle and potentially other tissues. Other companies developing conjugates with oligonucleotides for extra-hepatic delivery include Alnylam Pharmaceuticals, Inc., Aro Biotherapeutics Company, Dyne Therapeutics, Ionis Pharmaceuticals, Inc., Sarepta Therapeutics, PepGen, PeptiDream Inc., Entrada Therapeutics, Inc. and Bicycle Therapeutics plc, as well as gene therapy and CRISPR approaches.

Management Changes

Corporate Governance

Legal Proceedings

• Not currently subject to any material legal proceedings.
• Lawsuits have been filed challenging aspects of the proposed Merger or Distribution or otherwise related to the Merger or the Distribution, which could be costly and divert management's attention and otherwise materially harm the business.

Related Party Transactions

• Employment agreements have been entered into with each of the named executive officers, detailing compensation and severance benefits.
• Indemnification agreements are in place with each director and executive officer, requiring the company to indemnify them to the fullest extent permitted by Delaware law.
• Stock options, restricted stock units, and performance stock units have been granted to executive officers and directors as part of their compensation.
• An investor who was a principal owner (more than 10% of voting interest) purchased 2,121,213 shares of common stock for $35.0 million in a private placement on March 4, 2024, at an arm's length price.

Stakeholder Impact

• **Shareholders**: Will receive $72.00 per share in cash from the Novartis merger and shares of SpinCo common stock (1 per 10 Avidity shares), providing a significant near-term return but foregoing future upside from the acquired business. The value of SpinCo shares is uncertain.
• **Employees**: May experience uncertainty regarding their roles following the Merger and Distribution, potentially affecting retention and motivation. Equity awards are a key component of compensation and retention.
• **Patients**: The Managed Access Program for del-zota offers early treatment access for eligible DMD44 patients. The advancement of multiple product candidates into late-stage clinical trials offers hope for new disease-modifying therapies for DM1, FSHD, and DMD, addressing high unmet medical needs.
• **Collaboration Partners (Eli Lilly and Company, Bristol-Myers Squibb Company)**: Certain collaboration agreements will be transferred to SpinCo as part of the pre-closing reorganization, potentially altering future interactions with the post-merger Avidity entity.
• **Creditors**: The strong cash position of $1.7 billion and the pending merger with Novartis likely reduce immediate credit risk.
• **Suppliers/Manufacturers (Lonza LTD)**: The Manufacturing Services Agreement with Lonza LTD involves significant minimum purchase obligations ($621.6 million from 2026-2028), providing a stable revenue stream for Lonza but a substantial commitment for Avidity.

Next Steps

• Submit Biologics License Application (BLA) for del-zota (DMD44) in 2026 for potential accelerated approval.
• Release 54-week topline data from the global Phase 3 HARBOR study for del-desiran (DM1) in the second half of 2026.
• Release topline data from the FORTITUDE biomarker cohort for del-brax (FSHD) in the second quarter of 2026.
• Anticipate Phase 3 FORTITUDE-3 readout and global regulatory submissions for del-brax (FSHD) in 2028.
• Close the merger with Novartis AG and complete the distribution of SpinCo in the first half of 2026.
• Continue to conduct ongoing research and development activities and advance preclinical programs toward clinical development.
• Utilize third-party manufacturers for product candidates and related raw materials.
• Hire additional personnel to support increased research and development activities and commercial readiness initiatives.
• Protect and enforce intellectual property rights globally.
• Meet minimum purchase obligations of approximately $621.6 million under the Manufacturing Services Agreement with Lonza LTD from 2026-2028.

Key Dates

Recommendation

The pending acquisition by Novartis at $72.00 per share, coupled with the distribution of SpinCo shares, offers a clear and substantial near-term return for current shareholders, representing a significant premium over the market price prior to the merger announcement. The robust clinical pipeline, particularly the positive del-zota data and its Breakthrough Therapy designation, along with the advancement of del-desiran and del-brax into late-stage trials, validates the underlying AOC platform and its potential. While the company is currently unprofitable, the increased R&D spend is a necessary investment for a biopharmaceutical company with multiple promising candidates nearing regulatory submission. The strategic spin-off of early-stage cardiology programs allows for focused development and potential future value creation from SpinCo. The strong cash position further de-risks operations. The combination of a guaranteed cash payout, a spin-off with future potential, and a validated, advancing pipeline makes this a compelling investment.

Keywords

Biopharmaceutical, RNA therapeutics, Antibody Oligonucleotide Conjugates, AOCs, Duchenne Muscular Dystrophy, DMD, Myotonic Dystrophy Type 1, DM1, Facioscapulohumeral Muscular Dystrophy, FSHD, del-zota, del-desiran, del-brax, Clinical trials, Regulatory approval, FDA, EMA, Novartis merger, SpinCo, Precision cardiology, Orphan drug, Breakthrough therapy, Rare Pediatric Disease, Intellectual property, Financial results, Research and development, Manufacturing, Corporate governance