DEFA14A: Novartis to Acquire Avidity Biosciences for $12 Billion

Novartis AG has agreed to acquire Avidity Biosciences' neuroscience pipeline and RNA-targeting platform for $12 billion, while Avidity's early-stage cardiology programs will be spun off into a new publicly traded company, SpinCo.

Summary

• Novartis will acquire Avidity Biosciences for approximately $12.0 billion on a fully diluted basis.
• Avidity stockholders will receive $72.00 per share in cash at closing.
• This cash consideration represents a premium of approximately 46% over Avidity's closing share price of $49.15 on October 24, 2025.
• It also represents a premium of approximately 62% over Avidity's October 24, 2025, 30-day volume weighted average price of $44.42.
• Avidity's early-stage precision cardiology programs and certain collaboration agreements will be separated into a new publicly traded company, SpinCo.
• Avidity stockholders will receive one share of SpinCo for every ten shares of Avidity common stock they hold, or a pro rata cash distribution if SpinCo or its assets are sold to a third party.
• Novartis will gain Avidity's neuroscience programs and pipeline, including three late-stage clinical development programs: del-zota (for DMD), del-desiran (for DM1), and del-brax (for FSHD).
• The transaction is expected to close in the first half of 2026, subject to regulatory and stockholder approvals and the completion of the SpinCo separation.

Sentiment

Score: 8

Explanation: The acquisition offers a substantial premium to Avidity shareholders and provides its key neuroscience programs with the resources of a global pharmaceutical leader. The spin-off also creates additional value for shareholders. While there are integration uncertainties and potential delays, the overall financial and strategic benefits are highly positive.

Positives

• Avidity stockholders will receive a significant premium: 46% over the closing share price on October 24, 2025, and 62% over the 30-day volume weighted average price.
• The spin-off of early-stage precision cardiology programs into SpinCo provides Avidity stockholders with additional value and continued exposure to the proprietary AOC platform.
• Avidity's neuroscience pipeline, including three late-stage clinical programs (del-zota, del-desiran, del-brax), will benefit from Novartis's extensive global resources and infrastructure, potentially accelerating commercialization.
• Novartis expects the deal to increase its compound annual growth rate between 2024 and 2029 from 5% to 6%.
• The acquisition provides Novartis with late-stage assets that are expected to launch in the pre-2030 period, bolstering its growth profile for 2030-2040.
• The acquired muscular dystrophy drugs are a strategic fit for Novartis, allowing the company to leverage its existing sales force for neuromuscular diseases, such as Zolgensma.

Negatives

• The acquisition is expected to dilute Novartis's profitability by 1% to 2% over the next few years.
• There is uncertainty for Avidity employees regarding job roles and integration into Novartis or SpinCo.
• Changes to submission timelines for Avidity's registrational studies are mentioned, which could imply a delay in regulatory approval, even if framed as enabling a more robust data package.
• Potential for disruption from the transactions and impact on relationships with employees, business partners, or governmental entities.
• Risk that the transactions may be more expensive to complete than anticipated.
• Risk of stockholder litigation in connection with the transactions.
• Diversion of management's attention from ongoing business operations and opportunities as a result of the transactions.

Risks

• The conditions to the closing of the Transactions may not be satisfied on the expected timetable or at all, including the receipt of regulatory approvals and the approval of Avidity's stockholders.
• Risks and costs related to the implementation of the separation of SpinCo, including the ability to complete the separation in the anticipated timeframe, or at all, and any changes to the configuration of the businesses included in the separation if implemented.
• The sale of certain of SpinCo's assets pursuant to a third-party right of first negotiation.
• The risk that competing offers or acquisition proposals will be made.
• The effects of disruption from the Transactions and the impact of the announcement and pendency of the Transactions on Novartis and/or Avidity's businesses, including their relationships with employees, business partners or governmental entities.
• The risk that the Transactions may be more expensive to complete than anticipated.
• The risk that stockholder litigation in connection with the Transactions may result in significant costs of defense, indemnification and liability.
• A diversion of management's attention from ongoing business operations and opportunities as a result of the Transactions or otherwise.
• The uncertainties inherent in research and development, including clinical trial results and additional analysis of existing clinical data.
• Regulatory actions or delays or government regulation generally.
• There can be no guarantee that Avidity's investigational products will be submitted or approved for sale or for any additional indications or labeling in any market, or at any particular time.
• There can be no guarantee that Avidity's approach to the discovery and development of product candidates based on its AOC platform will produce any products of commercial value.
• There can be no guarantee that the expected benefits or synergies from the Transactions will be achieved in the expected timeframe, or at all.

Future Outlook

The transaction is expected to close in the first half of 2026. Novartis anticipates the acquired late-stage assets to launch in the pre-2030 period, contributing to its 2030-2040 growth profile and increasing its compound annual growth rate between 2024 and 2029 from 5% to 6%. SpinCo is expected to continue developing Avidity's AOC platform for cardiovascular diseases as a separate, publicly traded company.

Management Comments

• "We are confident that this transaction with Novartis and the separation of SpinCo is the best path forward to maximize value for our investors and support the global expansion of our neuroscience pipeline."
• "As one of the worlds leading global healthcare companies, Novartis is well-positioned to continue advancing del-zota, del-desiran and del-brax to commercialization."
• "The depth of Novartis expertise, resources and its infrastructure will help ensure that these products reach patients globally most in need as quickly and safely as possible."
• "We are energized by the opportunity ahead to continue building on our groundbreaking AOC platform with the potential to address high unmet need in cardiovascular diseases."
• "Novartis shares our commitment to reaching as many patients as quickly as possible on a global scale. We believe the changes to our submission timelines will enable a more robust data package when we submit to the FDA for approval."
• "Novartis values the work our team has accomplished and recognizes the talent and expertise that have brought us to this important milestone."
• Sarah Boyce, President and Chief Executive Officer of Avidity, stated: "Avidity has expanded the possibilities of what RNA therapeutics can deliver to patients by advancing innovative science and creating an organization with a strong commitment to providing access to our potential medicines. We are confident that this transaction with Novartis maximizes value for our investors and will support the global expansion of our neuroscience pipeline. I am incredibly proud of what we have created in close collaboration with the patient and clinical communities we serve, and I want to thank them and the Avidity team for their commitment and dedication."
• Vas Narasimhan, CEO of Novartis, stated that "two of the three potential drugs in Aviditys late-stage pipeline have the potential to reach annual peak sales of many billions of dollars, while the third would generate between $500mn and $1bn of revenue in its peak year."
• Vas Narasimhan also noted: "These are late-stage assets that we believe can launch in this pre-2030 period. In our minds, we want to both bolster the next five years, importantly, as we know we have [patent] expiries coming in the early 2030s. Everything we can do to bring assets that can launch before then and bolster that 2030 to 2040 growth profile is something were prepared to do."
• Vas Narasimhan further commented that "the drugs to treat muscular dystrophy... were a complete strategic fit because Novartis already sold medicines for neuromuscular diseases, such as Zolgensma, a gene therapy for spinal muscular atrophy. The company would be able to use the same sales force for these drugs."

Industry Context

This acquisition highlights the pharmaceutical industry's ongoing focus on rare diseases and advanced therapeutic platforms like RNA therapeutics. Novartis is actively pursuing M&A to offset upcoming patent cliffs and bolster its pipeline, particularly in neuromuscular and cardiovascular diseases, as evidenced by recent acquisitions of Tourmaline Bio, Anthos Therapeutics, and deals with Regulus Therapeutics and Argo Biopharma. The spin-off strategy allows Avidity's cardiology platform to continue independent development, a common approach for diversified biotech companies to unlock value from non-core or earlier-stage programs.

Comparison to Industry Standards

• Novartis's acquisition spree, including Tourmaline Bio ($1.4bn), Anthos Therapeutics (up to $3.1bn), Regulus Therapeutics (up to $1.7bn), and Argo Biopharma (up to $5.2bn collaboration), demonstrates a strategic focus on bolstering its pipeline against patent expiries, aligning with broader industry trends of large pharma acquiring innovative biotechs.
• The $12 billion valuation for Avidity, representing a 46% premium over its recent closing price, is a substantial valuation for a biotech focused on rare diseases, reflecting the high potential of its late-stage RNA therapeutic pipeline (del-zota, del-desiran, del-brax) and its differentiated RNA-targeting delivery platform.
• The spin-off of early-stage assets into SpinCo is a common strategy in the biotech sector to unlock value from non-core or earlier-stage programs, allowing the acquiring company to focus on late-stage assets while providing existing shareholders with continued exposure to the spun-off entity's potential.
• Novartis's CEO Vas Narasimhan's comments on the potential for "many billions of dollars" in peak sales for two drugs and "$500mn to $1bn" for a third indicate a high-value assessment of Avidity's pipeline, comparable to blockbuster drug expectations in the pharmaceutical industry.
• The strategic fit with Novartis's existing neuromuscular disease portfolio (e.g., Zolgensma for spinal muscular atrophy) allows for leveraging existing sales forces and infrastructure, a common synergy sought in pharmaceutical M&A to maximize efficiency and market penetration.

Management Changes

Corporate Governance

Legal Proceedings

• Risk that stockholder litigation in connection with the Transactions may result in significant costs of defense, indemnification, and liability.

Related Party Transactions

• The separation of SpinCo includes certain assets that trigger a right of first negotiation with an existing collaboration partner of Avidity. Discussions, if any, with this partner will occur confidentially.

Stakeholder Impact

• **Shareholders**: Will receive $72.00 cash per share and consideration for SpinCo (either shares or cash from a sale), representing a significant premium.
• **Employees**: Face uncertainty regarding job roles and integration into Novartis or SpinCo. Avidity management states Novartis values their talent and commitment to transparency regarding future organizational structure. Employee benefits for 2025 remain unchanged, with 2026 benefits and 401(k) details to be communicated. Equity compensation (RSUs, stock options) will vest and be paid out at closing, including SpinCo consideration.
• **Patients**: Avidity's neuroscience programs (del-zota, del-desiran, del-brax) are expected to benefit from Novartis's global resources and infrastructure, potentially accelerating commercialization and global reach. Changes to submission timelines are intended to enable a more robust data package for FDA approval.
• **Collaboration Partners**: An existing collaboration partner has a right of first negotiation regarding certain assets transferred to SpinCo.
• **Local Policymakers and Officials**: Avidity emphasizes its continued presence in the San Diego biotech community through SpinCo.

Next Steps

• Avidity and Novartis will assemble an integration planning team.
• Avidity will continue to operate as a separate and independent company until the transaction closes.
• SpinCo will be established and led by Kathleen Gallagher as CEO and Sarah Boyce as Chair of the Board.
• Novartis, Avidity, and SpinCo intend to file relevant documents with the SEC, including a preliminary and definitive proxy statement by Avidity.
• Avidity stockholders will vote on the transaction.
• Regulatory approvals must be obtained.
• The separation of SpinCo must be completed.
• The current ESPP purchase period will be accelerated to no later than November 18, 2025, with no new purchase period thereafter.
• Avidity's 2025 year-end performance management and annual compensation review processes will continue as planned.
• Avidity will continue to set 2026 corporate and individual goals.
• Avidity will continue hiring in line with its business priorities.
• Avidity's budget process will continue.
• Communication with external stakeholders (KOLs, accounts, suppliers, patient advocacy groups, vendors, partners) is ongoing.
• Submission timelines for registrational studies will be adjusted to enable a more robust data package.

Key Dates

Recommendation

The acquisition by Novartis at a substantial premium (46% over recent closing, 62% over 30-day VWAP) provides immediate and significant value to Avidity shareholders. The additional spin-off of the cardiology pipeline into SpinCo offers further upside potential, allowing shareholders to retain exposure to Avidity's innovative AOC platform in a new entity. This dual benefit structure, combined with Novartis's commitment to advancing the neuroscience pipeline, makes this a highly attractive outcome for investors.

Keywords

Avidity Biosciences, Novartis, Acquisition, Merger, Spin-Off, SpinCo, RNA Therapeutics, Neuroscience, Cardiology, Rare Diseases, DMD, DM1, FSHD, del-zota, del-desiran, del-brax, Biotech, Pharmaceuticals, AOC platform, Regulatory Approval, Stockholder Value