Roche outbid competing biopharma to secure Spark deal
- A small bidding war significantly hiked up the price Roche paid for Spark Therapeutics, according to details on the deal's background revealed in a new filing with the Securities and Exchange commission
- The document described how Spark's path to being acquired began last May, when the gene therapy developer was looking to optimize its hemophilia A programs by finding a collaborator. Spark's search began with three candidates "reasonably likely" to have an interest in such a partnership: Roche, and two other global biotechnology and pharmaceutical companies referred to as Party A and Party B.
- Roche, however, was more interested in an acquisition. The Swiss pharma submitted an unsolicited, non-binding proposal on Dec. 14 to buy Spark at $70 per share and another bid of $73 per share on Jan. 26. Yet Spark's board of directors thought those offers were too low. Another contender, Party C, emerged as deal talks continued, presenting a higher $75 per share offer. On Feb. 22, Roche and Party C submitted their best and final offers. Roche's proposal of $114.50 per share ultimately won out against Party C's $105 per share bid.
Spark's pipeline of gene therapies target several areas where Roche has a strong foothold, namely retinal disease and hemophilia. Roche was evidently comfortable paying a hefty premium to get its hands on those therapies; the $114.50 per share offer, which the companies announced Feb. 25, was nearly 120% higher than Spark's stock value a few days before.
Yet Roche wasn't the only interested suitor. Party C, another global biotechnology and pharmaceutical company, submitted three offers to acquire Spark over the course of February.
Additionally, Party B on Feb. 8 submitted a collaboration proposal for Spark's hemophilia A program that included a $450 million upfront payment. The hemophilia A program includes two candidates: SPK-8011, which is in late-stage testing, and SPK-8016, which is in early- to mid-stage testing.
As Spark executives considered doing some kind of deal, they reached out to a select group of potential collaborators or buyers. As one example, Spark decided against reaching out to Party B regarding a potential sale because the biotech wanted to "avoid disruption" of negotiations around a potential hemophilia A collaboration.
But there were other reasons as well. Spark cited too the "likelihood that Party B would not be interested in the other parts" of its business and the "uncertainty that Party B would have the ability to consummate a transaction of this size and nature or the ability to move quickly and efficiently in a process to explore such a transaction," for why it kept Party B in the dark regarding a takeover.
Spark decided that if it was going to reach out to other parties about a potential acquisition, then those parties needed to be in a position to finance such a deal and also have an interest in gene therapy — and, in particular, its applications to hemophilia A.
About a month after Roche's Dec. 14 unsolicited offer, Spark told the Swiss pharma giant that it likely wouldn't consider a proposal where Spark shares weren't valued "well into the $80s" at the least.
Over the entire dealmaking process, Roche went from offering $70 per share, to $73 per share, to $91 per share on Feb. 22, to $114.50 also on Feb. 22. Party C, meanwhile, went from offering $75 per share on Feb. 4 to $85 per share on Feb. 22 and then $115 per share also on Feb. 22.
Spark's Chief Business Officer Dan Faga on Feb. 12 called another unnamed party that was on the company's list of potential suitors but had been determined an ill fit due to a perceived lack of interest in Spark's hemophilia A portfolio. On that call, the party "in a different context, confirmed its lack of interest in hemophilia A," according to the biotech's filing.
That several companies were interested in either working with Spark in hemophilia or buying the biotech outright reflects growing interest from the top ranks of the industry in gene therapy. Last year, Novartis bought AveXis and its spinal muscular atrophy treatment for $8.7 billion and, just this week, Biogen bought Nightstar Therapeutics for just under $1 billion.
On Thursday, Roche commenced its tender offer for all shares of Spark Therapeutics per the deal terms announced on Feb. 22.
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