Leading pharmaceutical company's unique strategy in tens of billions of dollars in M&A deals

On October 25, 2025, Novartis, a Swiss pharmaceutical giant, signed a Merger Agreement and Plan with Avidity Biosciences, a pioneer in the field of RNA therapy, with the goal of significantly strengthening and expanding its neuroscience pipeline. However, instead of acquiring the entire company, Novartis designed a unique and wise transfer mechanism that was a conditional merger, forcing Avidity to separate its early-stage, non-core medical development programs into a new company (SpinCo) before the acquisition was [1]completed.

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The redemption price is set at $72 in cash per share, which is approximately 46% higher than Avidity's closing price on October 24, 2025. The total value of equity reaches about 12 billion USD, with an estimated enterprise value of about 11 billion USD.

This unusually high valuation not only reflects Avidity's current market value, but also Novartis' clear recognition of the future value of its  Antibody Oligonucleotide Conjugates (AOCs™) technology platform.

AOCs™ are breakthrough technologies that allow RNA molecules to be delivered to pathological tissues in a selective manner. This is seen as a major challenge in the previous generation of RNA therapy. Avidity has demonstrated its ability to deliver RNA to muscle tissue, opening the door to the treatment of rare inherited neuromuscular diseases.

By investing heavily in this platform, Novartis is not only acquiring a company, but also acquiring a  core competency that has the potential to extend to tissues and cell types other than muscle, including heart tissue and immune cells, as Avidity announced. It's clear that this is an in-depth pricing driver, putting an emphasis on the technology's scalability potential.

In this transaction, Novartis focused on acquiring the remaining assets of the company after the merger (the remainder of Avidity after the divestment), namely programs that are already in late clinical development and have the potential to become "first-in-disease". These are the most valuable and core assets of the transaction that both buyers and sellers expect from the profits that these programs bring. The selection of these programs shows that Novartis wants to immediately integrate risk-screened assets into its product portfolio, in line with its established strengths in commercializing therapies for hereditary neuromuscular diseases.

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Novartis' truly unique strategy lies in its trading structure. This is a conditional merger contingent on the completion of the divestment. This mechanism is implemented through a Separation and Distribution Agreement (SDA), with Bryce Therapeutics, Inc., as the divesting entity. The details of this transaction can be described as follows:

The above table is described in detail as follows:

Firstly, enterprise reorganization and divestment

To ensure Novartis acquired only the core portion, including selected programs, Avidity had to perform a restructuring of the businesses in the system before closing. This structure consists of two stages.

Stage 1: Business separation and asset delimitation

Avidity will split into 2 companies: SpinCo (Bryce Therapeutics, Inc.) and RemainCo (part bought by Novartis)

• Bryce Therapeutics, Inc., the divested company will take on all assets and liabilities related to early-stage precision cardiology programs. These programs include AOC 1086 and AOC 1072, which target rare inherited cardiomyopathies.
• Bryce Therapeutics, Inc. will also take over assets that trigger negotiating priority with an existing Avidity cooperative partner, along with certain other cooperative agreements.
• The existing company - RemainCo (the part bought by Novartis) will retain all the remaining assets and liabilities that are also the AOCs™ platform and the portfolio of end-stage neuromuscular products.

Stage 2: Divestment

Following the restructuring, Avidity must take one of the following two actions prior to  the Effective Time of Merger ⁶:

• Divestment distribution: Distribution to existing shareholders of Avidity at the rate of 1 SpinCo share for every 10 outstanding Avidity shares.
• Sale to an authorized third party: Complete the sale of SpinCo to a third party if the terms of the Merger Agreement and SDA are satisfied.

Second, financing the spin-off company

The crux of this structure is the financing of SpinCo to ensure the independence and immediate operability of the new entity.

• Starting capital: SpinCo is expected to be funded in cash of $270 million (minus SpinCo's existing cash and marketable securities). This funding gives Bryce Therapeutics the resources to pursue early-stage precision cardiology programs independently.
• Dual benefits for Avidity shareholders: Not  only do shareholders receive a large cash payout ($72.00 per share) at[2] a 46% premium for Avidity stock, but they also retain a stake in SpinCo. This allows them to reap solid returns from the M&A deal while maintaining the growth potential from Avidity's more adventurous early-stage cardiology programs. SpinCo. SpinCo is expected to be listed on the Nasdaq, US.

Managing legal risks and executing transactions

This complex transaction requires risk management mechanisms and strict enforcement commitments, which is evident in the closing conditions and termination fee mechanism.

Mechanism of closing trades

The SDA agreement offers two options to complete the divestment of SpinCo, providing a dual financial benefit to Avidity shareholders:

Option 1: Spin-Off Distribution: Avidity shareholders receive cash ($72.00 per share) from Novartis, WHILE also receiving SpinCo shares at the rate of 1 SpinCo share for every 10 Avidity shares they hold. SpinCo is expected to be listed on the Nasdaq and continue to operate as an independent company.

Option 2: Sell to an Authorized Third Party: Instead of distributing the shares, SpinCo can be sold to a third party, and Avidity shareholders will receive a corresponding cash distribution from the proceeds of that sale.

In either case, SpinCo will be funded with $270 million in cash (after deducting cash, cash equivalents and existing marketable securities) to ensure its financial viability for future independent operations.

Risk allocation and termination

Novartis' commitment to this deal is evident in the Reverse Termination Fee mechanism.

The significantly higher reverse termination fee indicates Novartis' willingness to shoulder legal and antitrust risks, which is a strategic move to reassure Avidity of the certainty of closing the deal.

Handling of stock and warrant interests

The disposal of existing stock interests is set up for easy conversion to SpinCo cash and share interests.

Option shares and restricted shares: All outstanding options and restricted stock, whether vested or not, will be vested in their entirety immediately prior to the Effective Date. Holders will receive a cash payment based on the agreed Merger Price.

SpinCo allocation: Holders of options and restricted shares will also receive 1 SpinCo share for every 10 underlying Avidity shares, if the Divestment Transaction is completed.

Warrants: Each outstanding Warrant will be able to receive the same amount of Merger proceeds that the holder would receive if they exercised such Warrants immediately prior to the Effective Date.

This mechanism ensures that all equity stakeholders benefit from Novartis' high cash valuation, while not being deprived of SpinCo's growth potential.

Operational Transformation Management and Intellectual Property

The Separation and Distribution Agreement (SDA) goes into the intricate operational details to ensure that both the split entity and the entity that exists after the split can operate independently immediately after the separation. Since both asset classes (Neuromuscular and Cardiovascular) are built on the same  core AOCs™ platform  , intellectual property (IP) management is paramount.

License agreement: The conclusion of a License Agreement is a prerequisite for the closing of the transaction. This agreement delimits the ownership and use rights of the IP between the two legal entities after separation. RemainCo (Novartis) retains control of the core AOC platform, but must license the necessary use to SpinCo to continue its cardiovascular programs.

Transition services agreement (TSA): The SDA also requires the signing of a Transition Services Agreement. The TSA stipulates the necessary support services that RemainCo will provide to SpinCo for a limited period of time after the separation, including IT Support Services and Facility Access Services. This manages operational transformation risk.

Novartis' acquisition of Avidity Biosciences for $12 billion is an important case study in the field of biotech M&A. Novartis' strategy goes beyond mere acquisitions, but rather a skillful combination of strategic acquisitions and portfolio optimization using a Merger-Spin-Off structure. Through this structure, Novartis has achieved three strategic objectives at the same time: (1) Acquisition of the Breakthrough Technology Platform; (2) Minimize R&D risks; (3) Harmonizing shareholder interests.