By Josh Nathan-Kazis and Liz Moyer

The long-anticipated news that Novartis will buy the rare-disease company Avidity Biosciences amounts to yet another bullish sign for the biotech sector, which has been ripping this fall after years in the doldrums.

The Novartis deal, disclosed on Sunday, represents a startlingly positive outcome for Avidity, which Novartis is acquiring for $12 billion.

Novartis will pay $72 per share in cash, a premium of nearly 47% premium over Friday's closing price of $49.15. The closing price is an 88% premium over Avidity's share price before the Financial Times reported in early August that a deal might be in the offing. It is also well above the $40 a share Avidity received via a public stock offering last month.

Those numbers are confirmation that pharmaceutical companies companies are once again willing to sign sizable checks to fill holes in their drug-development pipelines. The deal is also a good sign for biotech investors who had been waiting for the M&A tempo to pick up again.

The SPDR S&P Biotech exchange-traded fund, which trades under the ticker XBI, was up 2.6% on Monday. Dyne Therapeutics, which is developing treatments that could compete with those Avidity is working on, was up 42%. In a note on Sunday, Stifel analyst Paul Matteis called the Novartis deal "highly validating for the space."

The XBI is now up 24% since the start of September, while the S&P 500 is up 6.1%. Worry among investors over the Trump administration's efforts to limit drug prices have eased because Pfizer extracted a favorable deal from the White House. That has helped fuel a gradual improvement in biotech valuations that kicked off in the spring.

A steady pace of deal announcements has only helped the shift in investor sentiment. The Novartis deal is now the largest in a list of recent acquisitions that has included Pfizer's $4.9 billion acquisition of the obesity biotech Metsera in late September, and a $1.5 billion acquisition by Bristol Myers Squibb in early October.

Avidity's experimental medicines use RNA to narrowly target their treatments. Earlier-stage programs in cardiology will be separated into a public company to be run by current Avidity management, while Novartis is focusing on Avidity's neuroscience pipeline.

The neuroscience program includes treatments for three forms of muscular dystrophy, which could become available in the next few years. Novartis already sells Zolgensma, a gene therapy that treats spinal muscular atrophy, a related disorder.

Analysts had expected Avidity's sales to hit $2.4 billion by 2030, according to FactSet. Now, Novartis says the deal will allow it to raise its projected rate of compounded annual sales growth to 6%, from 5% from 2024 to 2029.

On an investor call on Monday, analysts asked if the spinoff of the cardiology assets was to limit any risk of objections to the merger from U.S. antitrust regulators. Novartis executives said that the decision wasn't because of such concerns, but that those programs were already in partnerships with other companies. Avidity said that the spinoff company will continue collaborations with Bristol Myers Squibb and Eli Lilly.

Novartis's American depositary receipt was down 2% on Monday. Avidity was up 43%, to $70.26.

Write to Liz Moyer at liz.moyer@barrons.com

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October 27, 2025 11:16 ET (15:16 GMT)

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