- Roche is acquiring Spark Therapeutics in a multi-billion dollar deal that underscores big pharma's growing appetite for new technologies like gene therapy.
- Spark, which secured the first ever U.S. approval for a gene therapy targeting an inherited disease, will sell for $114.50 per share — a roughly 120% premium to its closing price on Feb. 22. Accounting for $500 million worth of projected net cash expected at close, the deal's total value sits at approximately $4.8 billion.
- The Wall Street Journal was the first to report on Feb. 23 about a potential deal. There was, however, at least one other bidder for Spark, according to the Journal. Investment bank Jefferies suspected the other bidder was either Pfizer or Novartis since both have partnerships in place with Spark.
Commercial gene therapy only recently turned from a lofty scientific ambition into a realized market. Spark's Luxturna (voretigene neparvovec) was a key milestone in that transition, having secured Food and Drug Administration approval for an inherited retinal disease in late 2017.
The industry now sees many more applications for gene therapy, and is investing heavily in the space. In the past month alone, AbbVie inked a deal with Voyager Therapeutics focused on Parkinson's disease gene therapies while Johnson & Johnson signed a licensing agreement for a gene therapy developer's inherited retinal disease portfolio.
There have also been several gene therapy acquisitions. One of the biggest came last April, when Novartis acquired AveXis and its spinal muscular atrophy treatment for $8.7 billion.
Roche's latest purchase adds to the list and may spark more deals too, according to Wall Street analysts. Maury Raycroft of Jefferies wrote in a Feb. 25 investor note that the Spark takeout could boost dealmaking prospects for Sangamo Therapeutics, Abeona Therapeutics, Ultragenyx Pharmaceutical, and Intellia Therapeutics, among others.
"Our views on gene [therapy] are consistent — given advancements in manufacturing, de-risking on dosing safety + efficacy, fast development times for rare disease and favorable regulatory environment, the space is appealing and differentiated as a growth investment," Raycroft wrote.
Gene therapy developers rise on Spark takeout
|Opening price Feb. 25||Closing price Feb. 22||Percent Change|
SOURCE: Market data
Spark's pipeline is broken down into three main components: neurodegenerative diseases, retinal diseases, and hemophilia and lysosomal storage disorders. While Roche gave few details about the rationale for the Spark acquisition, SVB Leerink analyst Joseph Schwartz guessed that it could have centered on those latter two pipeline components, given some of the challenges facing the Swiss pharma's portfolio.
In hemophilia, Roche's Hemlibra (emicizumab) has already become a disruptive force. Its strong efficacy profile and once-a-week dosing is threatening sales for some of the sector's biggest brands like NovoSeven and Feiba. But Hemlibra's position isn't cemented; rivals are quickly advancing hemophilia gene therapies that could be problematic for Hemlibra because of their potential one-time administration.
Spark has two hemophilia gene therapies in late-stage testing that may prove complementary to Hemlibra, according to Schwartz. One targets hemophilia A while the other, named SPK-9001, targets hemophilia B and is partnered with Pfizer.
Currently, Spark is set up to receive a low-teen percentage on future net sales of SPK-9001. Schwartz noted that Roche may run into trouble if it tries to rejigger partnership terms with Pfizer, due to the "lucrative" nature of the hemophilia market. "Having initiated a Ph.3 study for SPK-9001, [Pfizer] may be reluctant to re-negotiate or lose the asset," Schwartz wrote in a Feb. 25 note.
In ophthalmology, Roche's blockbuster Lucentis (ranibizumab) still achieves double-digit growth in the U.S. Yet the drug, which holds approvals across a range of eye diseases, is seeing increased competition in the market for wet age-related macular degeneration treatments.
Since Lucentis is responsible for all of Roche's ophthalmology revenue, branching into the areas where Spark is working, such as choroideremia and Stargardt disease, helps diversify Roche's pipeline. Though Luxturna hasn't been a huge earner, the path Spark forged with regulators and payers as it developed the therapy should make the approval and coverage processes easier for future inherited retinal disease gene therapies.
"Luxturna could be a segue to ignite Roche's ophthalmology business," Schwartz wrote.
Roche intends to pay for Spark shares entirely with cash. The drug giant ended 2018 with 6.7 billion Swiss francs (about $6.7 billion) in cash and equivalents, according to its annual filing.
Spark and Roche expect their deal to close in the second quarter, at which point the biotech will continue to operate out of Philadelphia as an independent company within the Roche Group.