A tale of two tails in genetic medicine

What happened

Novartis announced the buyout of Avidity Biosciences for $12bn, a vote of confidence for the transitory side

Novartis will pay $72 per share in cash, representing a premium of 46% to the closing share price on 10 October 2025 and valuing the entire deal at $12bn. 

Only Avidity Biosciences's Neuromuscular pipeline assets are concerned, showing Novartis specific interest in neurology. The rest of Avidity's assets will be sold or spun off.

Intellia reported a Grade IV adverse event in a patient, a safety signal that keep the permanent side under pressure

Following a Grade IV (i.e. life-threatening) liver toxicity event in a clinical study participant, who was dosed on 30 September, Intellia paused dosing and screening in two related trials to assess causality and risk mitigation. Today >650 patients are enrolled across studies, with ~450 already dosed with nex-z, Intellia's new drug. But 1 in 450 is concerning enough, proof the ~40% drop in share price.

Impact on our Investment Case

Avidity Biosciences was among the earliest convictions in our strategy

We initiated a 2% position in October 2021, to start building exposure to a newly emerging Biotech technology. The Antibody Oligonucleotide Conjugates (AOCs) tech platform is Novartis' primary interest.

AOCs are designed to combine the specificity of antibodies with the precision of RNA therapies, potentially allowing the treatment of previously untreatable genetic neuromuscular diseases. Avidity already demonstrated the first-ever successful targeted delivery of RNA (the biological molecule, not the ticker) into muscle in December 2022. As we explained, it strongly reinforced our thesis.

Avidity's clinical programs feature potential first-in-class, late-stage disease-modifying therapies in

• Myotonic dystrophy type 1 (DM1) - a rare progressive neuromuscular disorder with a poor prognosis and no disease-modifying therapies.
• Facioscapulohumeral muscular dystrophy (FSHD) - a rare hereditary disorder causing relentless loss of muscle function and progressive disability.
• Duchenne muscular dystrophy (DMD), a severe, early-onset disease marked by progressive muscle damage and reduced life expectancy. 
  

Knowing the smallest patient population in DMD is already generating billions in sales at Sarepta with a drug, Exondys, that achieved normal gene function with a meager success rate of <1%, Avidity was sitting on 3 potential blockbusters.

The deal is a no-brainer for Novartis: the move complements 2025’s RNA-related deal flow (e.g., Argo siRNA collaboration) and upgrades Novartis’s capabilities in genetically defined neuromuscular disease. Also, with competition lagging behind, Novartis has ample runway to capitalize on the deal.

M&A remains hot, but premia are trending lower

Capital raises for high-quality, late-stage platforms don’t preclude M&A like most investors feared. Avidity raised ~$700mn at $40/share in September and got a bid six weeks later.

The Avidity acquisition will be the 14th deal in 2025 to exceed $1bn, bringing the aggregate transaction values for such deals to $69bn, up ~100% vs. 2024. 

So far this year, 3 companies among the 14 M&A >$1bn were in our portfolio. To put in perspective the M&A activity, there are "only" 178 listed companies left involved in biotech in the US, with a market cap between $1 billion and $20 billion, so about a 10th got bought already. Except for 2019, this is the best year since 2014.

Nonetheless, as we had previously noted, the "M&A premium" is trending down: in 2023, the average was 119%, in 2024, 77%, and in 2025 69%, with this deal standing at 46%.

The deal confirms the current interest of the market in transitory vs permanent genetic medicine

Stars have been aligning for transitory genetic medicine player, whether the rebound in Arrowhead stock, Sarepta signing an agreement away from "permanent" into "transitory" genetic medicine, Alnylam stellar commercial execution, or Ionis clinical success...

Investors are paying up for controllability. RNA medicines are reversible: if safety flags appear, dosing can be paused and effects fade. Gene editing makes lasting changes, which is powerful when it works, but any serious safety issue carries more weight because there’s no easy “wash-out.”

Execution favors RNA for now. RNA drugs plug into established manufacturing and quality systems, giving clearer timelines and earlier revenue visibility. Gene editing stacks extra components and longer monitoring on top, which can slow scale-up and push cash flows out.

Payers prefer smoother budgets, for now. RNA drugs look like an annuity spread over years, which is easier to adopt and track. One-and-done edits mean extensive upfront checks and more complex contracts in case the benefit does not manifest; they’ll re-rate as durability becomes undeniable and long-term healthcare savings obvious.

Our strategy has been overweighting the transitory side over the last 5 years for these reasons. We see the opportunity primarily in the biotech innovators advancing transitory genetic medicine, while not discarding selective exposure to permanent editing as safety and delivery milestones land.

Not all is lost for the “permanent” side, a path forward exists

First, the field needs a clean safety update and a return to dosing in the Intellia trials. Clear adjudication of events and basic safeguards (premeds, step-up dosing, tighter criteria) would rebuild confidence and show risk can be managed.

Next, a decisive win outside the liver—in muscle, lung, or brain—with strong efficacy at lower doses and only mild side effects. In parallel, simpler, cheaper manufacturing would speed timelines and improve margins.

Finally, payers need financing models that fit one-time therapies into yearly budgets: outcomes-based contracts, multi-year “annuity” payments, and reinsurance. This piece will take the longest to standardize—but it’s the biggest re-rating lever once durability is undeniable and payment models mature.

Bonus for both sides: the FDA supports all genetic medicine

The agency has been steadily lowering execution risk across both transitory and permanent modalities via new programs and clearer playbooks. Its START pilot gives rare-disease sponsors of cell and gene therapies more frequent, problem-solving interactions - accelerating trial design and manufacturing alignment early, when it matters most. 

The FDA has added resources and hit key deliverables to keep review timelines predictable. At the same time, the CMC Development & Readiness Pilot helps sponsors de-risk manufacturing packages for cell and gene therapies ahead of the market authorization application. 

So far, the government shutdown does not seem to have significantly impacted the FDA activity.

On the regulatory side, expedited pathways like RMAT (Regenerative Medicine Advanced Therapy) and Accelerated Approval remain active, with the FDA demonstrating a willingness to bring therapies to patients sooner. 

Net-net: the regulator isn’t “picking winners;” it’s building durable lanes that can lift the entire genetic medicine sector. 

Our Takeaway

Avidity takeout confirms our multi-year thesis on muscle-targeted RNA delivery. Deal quality, not just quantity, is back in biotech M&A. This is not a “buy the acquirer” note, it’s a buy the innovators message: RNAi platforms near term, select gene editing for tomorrow’s convexity. 

For Intellia/CRISPR Therapeutics, safety is the currency of permanence. We expect temporary sentiment pressure on in vivo editing peers until causality and mitigation are clarified.

At atonra, we keep a balanced 65/35 transient/permanent split within genetic medicine, tilted toward de-risked RNA platforms and delivery while maintaining select, data-rich editing exposure for upside as the class matures.