Executive Summary / Key Takeaways

• Avidity Biosciences is leveraging its proprietary Antibody Oligonucleotide Conjugate (AOC) platform to develop a new class of RNA therapeutics, aiming to treat diseases previously inaccessible to such therapies by combining antibody specificity with RNA precision.
• The company has advanced three programs into late-stage clinical development for rare neuromuscular diseases (DM1, FSHD, DMD amenable to exon 44 skipping), with positive data supporting planned regulatory submissions starting year-end 2025.
• Recent financial results show significant investment in R&D and G&A to support clinical trials and build commercial capabilities, resulting in increased net losses, but a strong cash position of $1.40 billion as of March 31, 2025, provides runway into mid-2027.
• Avidity faces competition from established players like Sarepta and other RNA therapeutic developers, differentiating itself through the targeted delivery mechanism of its AOC platform, which has shown promising biomarker and functional data in clinical trials.
• Key catalysts include upcoming regulatory updates and topline data readouts in Q2 2025 for del-brax, completion of Phase 3 enrollment for del-desiran in mid-2025, and planned BLA submissions for del-zota (year-end 2025) and del-brax (H2 2026), marking a critical transition towards potential commercialization starting in 2026.

The Evolution of a Pioneer: From Exon Skipping to Targeted AOCs

Avidity Biosciences, Inc., tracing its roots back to Prosensa's founding in 2012, has embarked on a transformative journey in the realm of RNA therapeutics. Initially focused on exon-skipping technology for Duchenne muscular dystrophy (DMD), the company navigated the complexities of clinical development, including a significant partnership with GlaxoSmithKline (GSK) for its lead compound, drisapersen. A pivotal moment arrived in January 2014 when Avidity, then Prosensa, regained full rights to drisapersen and its entire DMD pipeline. This strategic shift empowered the company to take complete control of its destiny, from research and development through to potential commercialization.

The experience gained during this early period, particularly the challenges encountered in the Phase 3 drisapersen trial, provided invaluable insights into the nuances of conducting clinical studies in rare, heterogeneous patient populations and the critical importance of trial design. This historical context directly informs Avidity's current strategic approach, emphasizing rigorous data analysis, proactive engagement with regulatory bodies, and the design of confirmatory studies to support potential accelerated or conditional approvals. The company's commitment to patients was underscored by its initiative to re-dose previously treated drisapersen patients, driven by persistent demand from families and investigators.

Today, Avidity stands as a biopharmaceutical company committed to delivering a new class of RNA therapeutics: Antibody Oligonucleotide Conjugates (AOCs). This represents an evolution from its earlier focus, leveraging the foundational knowledge of RNA modulation while incorporating a sophisticated delivery mechanism. The company's overarching strategy is centered on harnessing the power of its proprietary AOC platform to address the root cause of diseases previously considered untreatable with existing RNA therapies.

The AOC Platform: A Differentiated Technological Engine

At the heart of Avidity's strategy is its proprietary AOC platform. This technology is designed to combine the specificity of monoclonal antibodies (mAbs) with the precision of RNA therapeutics, such as small interfering RNAs (siRNAs) or phosphorodiamidate morpholino oligomers (PMOs). The fundamental concept is to use the antibody component to selectively deliver the oligonucleotide payload to specific cell types or tissues, thereby enhancing uptake and activity where it's needed most and potentially minimizing off-target effects.

The tangible benefits of this targeted delivery mechanism are central to Avidity's investment thesis and competitive positioning. While specific, universally comparable quantitative metrics across all competitor platforms are challenging to ascertain, the company's clinical trial results offer compelling evidence of the platform's potential. For instance, del-zota, an AOC designed to deliver PMO for DMD exon 44 skipping, has shown consistent, statistically significant improvements across key biomarkers, including dystrophin production, exon skipping, and creatine kinase levels in the Phase 1/2 EXPLORE44 trial. This suggests effective delivery of the PMO payload to muscle tissue. Similarly, del-desiran, an AOC targeting DMPK mRNA in DM1, has demonstrated reversal of disease progression across multiple functional endpoints in the MARINA-OLE trial compared to natural history data, implying successful targeted knockdown of the disease-causing mRNA.

Avidity is actively engaged in research and development to expand the application of its AOC platform. Beyond its initial focus on rare neuromuscular diseases, the company is advancing wholly-owned precision cardiology candidates (AOC 1072 for PRKAG2 Syndrome and AOC 1086 for PLN cardiomyopathy). Furthermore, collaborations with partners like Bristol Myers Squibb (BMS) and Eli Lilly and Company (LLY) explore the platform's potential in immunology, cardiology, and other indications outside muscle. While specific target metrics for these emerging areas are not detailed, the strategic intent is clear: to validate and broaden the utility of the AOC platform across a wider range of diseases, thereby expanding the company's potential market opportunity and competitive moat. The "so what" for investors is that this platform represents a potential technological advantage that could yield therapies with improved efficacy, safety, and tissue specificity compared to untargeted RNA approaches or other therapeutic modalities, potentially leading to market leadership in specific indications.

Pipeline Progress and Strategic Execution

Avidity's pipeline is now headlined by three late-stage programs in rare neuromuscular diseases, each leveraging the AOC platform and progressing towards potential regulatory submissions:

• Delpacibart etedesiran (del-desiran) for Myotonic Dystrophy Type 1 (DM1): This program is in Phase 3 development with the global HARBOR trial, which aims to enroll approximately 150 participants aged 16 and older. The primary endpoint is video hand opening time (vHOT), a measure of myotonia. Long-term data from the ongoing MARINA-OLE trial, where participants from the Phase 1/2 MARINA trial are receiving treatment, have shown encouraging signs of reversing disease progression across vHOT, muscle strength, and activities of daily living compared to natural history data. The company expects to complete enrollment in the HARBOR trial in mid-2025 and plans marketing application submissions starting in 2026 in the U.S., EU, and Japan.
• Delpacibart braxlosiran (del-brax) for Facioscapulohumeral Muscular Dystrophy (FSHD): Del-brax is in Phase 1/2 development with the FORTITUDE trial, designed to evaluate safety, tolerability, pharmacokinetics, and pharmacodynamics in 90 participants. The biomarker cohort, crucial for a potential accelerated approval pathway in the U.S., has completed enrollment with 51 participants. Based on dose escalation data, the 2 mg/kg every six weeks dose has been selected for future trials. The company anticipates regulatory alignment on a potential accelerated approval path and the design/initiation of the global Phase 3 trial in Q2 2025, with topline data from the FORTITUDE dose escalation cohorts also expected in Q2 2025. A planned accelerated approval BLA submission is targeted for H2 2026, following topline data from the FORTITUDE biomarker cohort in Q2 2026.
• Delpacibart zotadirsen (del-zota) for DMD amenable to exon 44 skipping (DMD44): Del-zota is in Phase 2 development as part of the EXPLORE44-OLE study. Positive topline data from the completed Phase 1/2 EXPLORE44 trial demonstrated consistent, statistically significant improvements in key biomarkers (dystrophin, exon skipping, creatine kinase) and favorable safety/tolerability. The 5 mg/kg every six weeks dose was selected for future studies. Avidity intends to use data from the EXPLORE44 and EXPLORE44-OLE studies to support its first BLA submission, planned for year-end 2025. Topline and functional data from the EXPLORE44-OLE trial are expected in Q4 2025.

Beyond these late-stage programs, Avidity is advancing its precision cardiology candidates and exploring the AOC platform's potential through collaborations, demonstrating a commitment to pipeline expansion and maximizing the value of its core technology. The company is also actively building its global commercial infrastructure in anticipation of potential product launches starting in 2026, signaling a transition from a pure R&D entity to a commercial-stage biopharmaceutical company.

Financial Performance and Liquidity

Avidity's financial performance reflects its stage of development as a clinical-stage biopharmaceutical company heavily investing in its pipeline. For the three months ended March 31, 2025, the company reported a net loss of $115.8 million, a significant increase from the $68.9 million net loss in the same period of 2024. This widening loss is primarily attributable to a substantial increase in operating expenses, which rose to $133.1 million from $80.7 million year-over-year.

Research and development expenses constitute the largest component of operating costs, increasing by $32.7 million to $99.5 million in Q1 2025 compared to Q1 2024. This surge is driven by the progression of the company's clinical trials (HARBOR, FORTITUDE, EXPLORE44-OLE) and preclinical studies, as well as higher internal personnel costs associated with expanding the R&D team. General and administrative expenses also saw a notable increase of $19.7 million, reaching $33.6 million in Q1 2025, reflecting higher personnel costs and professional fees necessary to support expanded operations and commercial readiness initiatives.

Revenue remains minimal, derived solely from collaboration agreements. Revenue decreased by $2.0 million to $1.6 million in Q1 2025, primarily due to the absence of revenue recognition from the Lilly agreement in the current period and a decrease in revenue from the BMS agreement. Other income, primarily interest earned on cash and investments, increased significantly by $7.4 million to $15.7 million, benefiting from higher interest rates and a larger cash balance.

Despite increasing operating losses, Avidity maintains a strong liquidity position. As of March 31, 2025, the company held $1.40 billion in cash, cash equivalents, and marketable securities. This robust balance sheet is a result of successful capital raising efforts, including public and private placements in prior periods and upfront payments from collaboration agreements like the $100 million received from BMS in November 2023. The company projects that its existing cash resources are sufficient to fund operations for at least 12 months from the filing date of the 10-Q (May 8, 2025), providing runway into mid-2027 based on current operating plans.

Net cash used in operating activities increased to $124.8 million in Q1 2025 from $70.4 million in Q1 2024, consistent with the rise in R&D and G&A expenses. Net cash provided by investing activities was $157.2 million in Q1 2025, largely reflecting the maturity and purchase of marketable securities. Financing activities provided $1.9 million in Q1 2025, a stark contrast to the $389.4 million provided in Q1 2024, which included substantial proceeds from equity offerings. While the current cash position is strong, the company anticipates needing to raise additional capital in the future through equity, debt, or collaborations to support continued development and potential commercialization, highlighting a key financial consideration for investors.

Competitive Landscape

Avidity operates in the highly competitive biopharmaceutical landscape, specifically targeting rare diseases where several established and emerging players are vying for market share. Key direct competitors in the rare neuromuscular disease space include Sarepta Therapeutics (SRPT), Wave Life Sciences (WVE), and PTC Therapeutics (PTCT), among others. These companies utilize various therapeutic modalities, including exon-skipping oligonucleotides, gene therapies, and small molecules.

Sarepta Therapeutics holds a significant position in the DMD market with approved exon-skipping therapies and a gene therapy. Sarepta has demonstrated strong revenue growth and is moving towards profitability, backed by an established commercial infrastructure. Wave Life Sciences is also developing oligonucleotide-based therapies for neuromuscular diseases, focusing on stereopure chemistry. PTC Therapeutics has therapies for genetic disorders, including a treatment for a specific subset of DMD patients approved in Europe.

Avidity's competitive positioning is primarily anchored in its differentiated AOC platform. While competitors like Sarepta and Wave utilize oligonucleotide approaches, Avidity's technology aims to improve targeted delivery, particularly to muscle tissue, which is crucial for neuromuscular diseases. The positive biomarker and functional data from Avidity's clinical trials suggest that the AOC approach can achieve effective delivery and therapeutic impact. For instance, the statistically significant improvements in dystrophin and exon skipping observed with del-zota highlight the platform's ability to reach the target tissue and modulate RNA effectively. This targeted delivery could potentially offer advantages in terms of efficacy, lower required doses, or reduced systemic side effects compared to untargeted approaches.

However, Avidity faces significant challenges from its competitors' scale, established market presence, and financial resources. Sarepta, with approved products and a commercial footprint, has a substantial lead in market access and revenue generation. While Avidity's technology offers a potential edge, translating this into market share will require successful clinical outcomes, regulatory approvals, and effective commercial execution. The patent landscape, particularly concerning oligonucleotide chemistry and exon skipping, also presents a competitive dynamic, as evidenced by historical patent interference proceedings involving Prosensa (now Avidity) and Sarepta. Avidity's strategy to build its own global commercial infrastructure indicates its intent to compete directly upon potential approval, rather than relying solely on partnerships for market access in its core rare disease areas.

Risks and Challenges

Investing in Avidity Biosciences, like other clinical-stage biopharmaceutical companies, involves significant risks. The most prominent risk is the inherent uncertainty of drug development. Despite promising clinical data to date, the company's product candidates may fail to demonstrate sufficient efficacy or safety in ongoing or future clinical trials, or may not receive regulatory approval. The outcome of the ongoing Phase 3 HARBOR trial for del-desiran and the potential accelerated approval pathways for del-zota and del-brax are critical determinants of the company's future success.

The company has a limited operating history and has incurred substantial operating losses since inception, a trend expected to continue as R&D expenses remain high. While the current cash position is strong and provides runway into mid-2027, Avidity will require significant additional funding to complete clinical development, build commercial capabilities, and support potential product launches. The ability to raise this capital on favorable terms, or at all, is not guaranteed and could force delays or termination of development programs.

Competition is intense, and even if approved, Avidity's product candidates may face challenges gaining market acceptance against established therapies or other emerging treatments. Pricing and reimbursement dynamics for rare disease therapies are complex and could impact future revenue potential. Manufacturing of AOCs is also a complex process, and ensuring reliable and scalable supply will be crucial for commercial success.

Furthermore, the company's reliance on its proprietary AOC platform means that any unforeseen issues with the technology's broader applicability or manufacturing could impact the entire pipeline. Intellectual property protection is vital, and the company's ability to maintain and enforce its patents against competitors is subject to legal challenges.

External factors such as inflationary pressures and geopolitical events could also impact operations and financial results. The success of collaboration agreements depends on the performance of partners and the achievement of milestones, which are not entirely within Avidity's control.

Conclusion

Avidity Biosciences is at a pivotal juncture, transitioning from a research and early clinical-stage company to one with multiple late-stage programs poised for potential regulatory submissions and commercialization. The core of its investment thesis lies in the differentiated Antibody Oligonucleotide Conjugate (AOC) platform, which offers a novel approach to targeted RNA delivery with promising results demonstrated in clinical trials for rare neuromuscular diseases like DM1, FSHD, and DMD.

While the company faces significant financial demands from its expanding clinical pipeline and commercial readiness efforts, leading to increased operating losses, its strong cash position provides a solid foundation for the near term. The upcoming catalysts, including key data readouts and planned BLA submissions starting year-end 2025, represent critical milestones that could validate the platform and unlock significant value. The competitive landscape is challenging, with established players and other innovative approaches, but Avidity's targeted delivery technology offers a potential competitive advantage. The company's strategic focus on advancing its lead programs, expanding the pipeline into precision cardiology, and building commercial capabilities positions it for potential growth. However, successful execution in clinical trials, navigating regulatory pathways, securing future funding, and effectively competing in the market are essential for realizing the full potential of the AOC platform and delivering on the promise of a new class of RNA therapeutics for patients with high unmet needs.