Avidity Biosciences, Inc. (NASDAQ:RNA) is a biopharmaceutical company at the forefront of developing a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs). The company's proprietary AOC platform aims to combine the specificity of monoclonal antibodies with the precision of RNA therapeutics to target the root cause of diseases previously untreatable with such therapeutics.

Business Overview

Avidity's advancing and expanding pipeline currently has three programs in clinical development. Delpacibart etedesiran, or del-desiran, is designed to treat people with myotonic dystrophy type 1 (DM1) and is currently in Phase 1/2 development with the ongoing MARINA open label extension study. The company is on track to initiate the global Phase 3 HARBOR trial of del-desiran this quarter. AOC 1020 is designed to treat people living with facioscapulohumeral muscular dystrophy (FSHD) and is currently in Phase 1/2 development with the FORTITUDE trial. AOC 1044 is designed for people with Duchenne muscular dystrophy (DMD) and is currently in Phase 1/2 development with the EXPLORE44 trial.

Financials

In the first quarter of 2024, Avidity reported revenue of $3.5 million, up from $2.2 million in the same period last year. This increase was primarily due to revenues recognized under the company's research collaboration agreement with Bristol Myers Squibb, which was entered into in November 2023. However, the company's net loss for the quarter widened to $68.9 million, compared to a net loss of $52.4 million in the prior year period, as research and development expenses increased by $19.1 million to $66.8 million.

For the full year 2023, Avidity reported annual revenue of $9.6 million and a net loss of $212.2 million. The company's operating cash flow for the year was negative $119.1 million, while free cash flow was negative $123.3 million. As of March 31, 2024, Avidity had cash, cash equivalents, and marketable securities of $915.9 million, which the company believes will be sufficient to fund its operations for at least the next 12 months.

Recent Developments

Avidity's lead candidate, del-desiran, has demonstrated promising results in the ongoing MARINA open label extension study. In March 2024, the company shared new long-term data showing reversal of disease progression across multiple endpoints, including myotonia, muscle strength, and patient-reported activities of daily living, over one year compared to a matched population from the END-DM1 natural history study. With over 265 infusions totaling 61.1 patient-years of exposure as of the January 2024 data cutoff, del-desiran has also demonstrated favorable long-term safety and tolerability.

In the second quarter of 2024, Avidity plans to share preliminary data in approximately half of the study participants in the Phase 1/2 FORTITUDE trial of AOC 1020 in FSHD. In the second half of 2024, the company intends to share 5 mg/kg cohort data from the Phase 1/2 EXPLORE44 trial of AOC 1044 in people living with DMD44.

Liquidity

Avidity's financial position remains strong, with a current ratio of 12.47 and a quick ratio of 12.47 as of March 31, 2024, indicating the company's ability to meet its short-term obligations. However, the company's high research and development expenses have resulted in negative operating and free cash flows, with a cash conversion cycle of -3,516.79 days.

The company's return on assets and return on equity stood at -0.24 and -0.38, respectively, as of the latest quarter, reflecting the capital-intensive nature of Avidity's business and the ongoing investments required to advance its pipeline. The company's debt ratio of 0.01 and debt-to-equity ratio of 0.01 suggest a conservative capital structure, with the majority of the company's financing coming from equity.

Risks and Challenges

Avidity's stock price has seen significant volatility, with a price-to-earnings ratio of -15.74 and a price-to-book ratio of 4.33 as of the latest quarter. The company's high research and development expenses, coupled with the inherent risks associated with drug development, have contributed to the stock's valuation.

Outlook

Despite the challenges, Avidity remains committed to advancing its AOC platform and pipeline. The company's collaboration with Bristol Myers Squibb and its existing partnership with Eli Lilly and Company provide additional validation of its technology and potential revenue streams. As Avidity continues to report data from its ongoing clinical trials and advances its pipeline, investors will closely monitor the company's progress and its ability to translate its scientific innovations into commercial success.