Novartis $12 bln deal for Avidity sparks mid-cap biotech rally

Shares of Avidity Biosciences, a small developer of therapies for rare diseases including Duchenne muscular dystrophy, jumped more than 40% yesterday, October 27, to an all-time high. Investors reacted to news that Switzerland’s Novartis plans to acquire the company at a premium to the market. The move sends a signal to investors in small-cap biotech: pharma majors increasingly prefer to buy externally developed assets rather than build them in-house. More transactions can be expected in the coming months, Noble Capital Markets said in a post.

Shares of Avidity surged more than 42% yesterday to $70 apiece, the highest close in the company's history. Its market value reached $10.2 billion.

The rally followed reports of a potential takeover by Novartis. The deal values Avidity at $12 billion, or $72 per share – about 46% above the October 24 close, the last trading day before the announcement.

The acquisition is expected to close in the first half of 2026. It has been approved by the boards of both companies and now awaits regulatory approval and a vote by Avidity shareholders.

Avidity develops RNA-based neurobiology drugs that, according to the company, are designed to deliver directly to muscle tissue. It also has cardiology programs.

Under the deal terms, Novartis will acquire Avidity’s three neuroscience programs – for Duchenne muscular dystrophy, myotonic dystrophy type 1, and facioscapulohumeral muscular dystrophy. All are progressive disorders that lead to muscle weakening. Novartis will also gain access to the company’s proprietary RNA platform.

Avidity’s cardiology programs will be transferred to SpinCo, currently a subsidiary, which is expected to become a separately listed public company at an initial valuation of $270 million. Shareholders of Avidity will receive compensation for the separation in either SpinCo shares or cash – if SpinCo or its assets are sold, the press release said.

For Novartis, the acquisition expands its footprint in rare diseases – a space drawing heightened investor interest due to high unmet medical need, Noble wrote.

The Swiss drugmaker has been active in this segment. In 2018 it bought AveXis, the developer of Zolgensma – currently the only approved gene therapy for spinal muscular atrophy. In 2024, Novartis acquired Kate Therapeutics, another gene-therapy developer focused on muscle disease. This year, it has acquired Anthos Therapeutics and Regulus Therapeutics. Collectively, these deals strengthen its position in genetic and cardiovascular medicine, Noble added.

The transactions allow Novartis to diversify revenue ahead of looming patent expirations on flagship products and to position itself in next-generation therapies that could define the coming decade of biotech innovation, the analysts said.

For investors in small-cap biotech, the deal confirms a structural trend: pharma giants are increasingly buying assets rather than developing them internally, Noble noted. This implies more large-cap takeovers in the months ahead as incumbents race to secure the next wave of breakthrough drugs.

The AI translation of this story was reviewed by a human editor.