Avidity Biosciences, Inc. (RNA): A Bull Case Theory

Group 1 - Avidity Biosciences, Inc. is being acquired by Novartis in a straightforward deal with no overlap between the two businesses, expected to close in the first half of 2026, although there is timing uncertainty due to a small "SpinCo" component [2][5] - The SpinCo contains approximately $270 million in cash and rights from collaborations, with partners covering all R&D expenses, leaving SpinCo responsible mainly for administrative costs [3] - The valuation suggests that the SpinCo could be worth $2–3 per share, and if the main deal closes at $40 per share, the cash portion would be valued at $70.3 per share, providing an annualized return of 6.8% while effectively receiving the SpinCo for free [4] Group 2 - The market may be undervaluing the acquisition deal due to capital reallocation in biotech funds and timing uncertainties, but with Novartis as a credible buyer, it represents a low-risk opportunity with potential upside [5] - Avidity Biosciences, Inc. is not among the 30 Most Popular Stocks Among Hedge Funds, with 26 hedge fund portfolios holding RNA at the end of Q2, down from 28 in the previous quarter [7] - While acknowledging the potential of RNA as an investment, the company believes certain AI stocks offer greater upside potential and less downside risk [7]