Avidity Biosciences, Inc. (NASDAQ: RNA) jumped 32.6% on June 12, securing its spot as the top performing U.S. stock on the day for all stocks with a market capitalization of at least $100 million.  Avidity is a biopharmaceutical company that is developing a new class of RNA therapeutics.  (RNA is a molecule that is present in most living organisms and viruses.  RNA carries genetic information, or DNA, to the part of cells where proteins can be produced.)

On June 12, Avidity announced positive trial results from its AOC 1200, or del-brax, therapy.  Del-brax is designed to treat Facioscapulohumeral Muscular Dystrophy (FSHD), a disease for which there is no currently approved therapy.  FSHD is caused by the abnormal expression of the DUX 4 protein in a person’s muscle cells.  The trial results showed unprecedented and consistent reductions of more than 50% in these expressions, together with trends of functional improvement and favorable tolerability levels in people living with this disease.  All trial participants (who did not receive a placebo) showed at least a 20% reduction in DUX 4 regulated genes.

Avidity’s four-month long del-brax trial, called FORTITUDEô, included 39 adult participants afflicted with FSHD.  It was a placebo-controlled, double blind study.

One of the most common forms of muscular dystrophy, FSHD is an insidious, inherited disease.  It entails the progressive and variable loss of muscle function, which is accompanied by significant pain, fatigue, and disability.  The onset of this disease frequently occurs in a patient’s teenage or adult years.  Many of those afflicted experience a steady loss of independence; about 20% become wheelchair dependent.

Avidity estimates that 16,000 to 38,000 U.S. citizens are afflicted with FSHD and, of course, many more on a worldwide basis.  The FSHD Society believes that Avidity’s calculations are conservative.  It estimates that one in every 8,000 people is affected by FSHD, or 870,000 people globally.

Regardless of which patient population figure is correct, the opportunity for Avidity could be enormous if del-brax continues to show excellent results.  According to the consulting firm Oliver Wyman, the average cost of treating a rare disease patient in the U.S. can reach $100,000 per year in a third of the cases.  The high price of rare disease drugs, also called orphan drugs, is due to the small populations of patients they treat.  Orphan drugs are generally defined as therapies intended to treat conditions that affect fewer than 200,000 people in the U.S.

So, it is possible that at some point Avidity’s annual revenues from del-brax alone could be in the $2 billion range (20,000 patients times $100,000 revenue per patient).  After today’s run-up, Avidia’s stock market capitalization is around $3.7 billion, and its enterprise value is around $2.8 billion after factoring in the company’s cash balance of $916 million as of March 31, 2024.  Avidia believes that its current cash position will fund all its development efforts into late 2026.

(After the close on June 12, Avidia announced plans to sell $300 million of stock in an underwritten public offering.  These additional funds would push its funded level well past late 2026.)

All this implies that the ratio of Avidia’s enterprise value to a ballpark estimate of its future del-brax revenue is about 1.4x, a low figure for a potential extremely fast-growing stock.  Note too that this calculation factors in no contribution from any other therapy that Avidia is developing. 

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