Spark Therapeutics Inc. told BioWorld there was "not much more we can say beyond the press release" and the company wasn't offering executive interviews, but the buyout by Roche Holding AG generated vigorous buzz on Wall Street as pundits tried to guess which gene therapy firm might be next for a takeover in the space.

Shares of Philadelphia-based Spark (NASDAQ:ONCE) took quite a ride, closing Monday at $113.48, up $61.92, or 120 percent, on word that Roche, of Basel, Switzerland, is paying $114.50 per share in an all-cash deal valued at about $4.8 billion that includes about $500 million of projected net cash. Spark will operate as an independent firm inside Roche after the deal is complete, probably in the second quarter of this year. Both boards have unanimously given their nods.

The transaction echoes an agreement in April 2018 by another Basel, Switzerland-based big pharma, Novartis AG, to pay $8.7 billion for Chicago-based Avexis Inc., with a gene therapy in the pipeline for spinal muscular atrophy. In 2017, Novartis gained the first U.S. marketing clearance for a gene therapy with the FDA go-ahead for Kymriah (tisagenlecleucel) for certain pediatric and young adult patients with a form of acute lymphoblastic leukemia. (See BioWorld, Aug. 31, 2017, and April 10, 2018.)

Last year, Spark launched Luxturna (voretigene neparvovec-rzyl) in the U.S., a one-time gene therapy for individuals with an inherited retinal disease due to mutations in both copies of the RPE65 gene, and has gained European marketing authorization for the product. The firm is moving along with its hemophilia A franchise, pushing SPK-8011 into phase III trials and SPK-8016 into phase I/II experiments. Roche, for its part, sells Hemlibra (emicizumab -kxwh), a prophylactic treatment for people with hemophilia A with or without factor VIII inhibitors. Spark aims to have two more investigational gene therapies ready for the clinic this year, including SPK-3006 for Pompe disease. (See BioWorld, Dec. 20, 2017.)

Anticipation rose over the weekend with a published report that the deal was in the works, and Mizuho analyst Difei Yang said Monday that the Roche offer "properly values Spark," noting that the arrangement carries a termination fee of $144 million for Roche should Spark decide to back out.

Jefferies analyst Maury Raycroft said Roche is "likely primarily" taking over Spark for its hemophilia A program, "which could be viewed as a positive" for Richmond, Calif.-based Sangamo Therapeutics Inc., but he sounded cautious. "We would wait to see if another bidder is confirmed and revealed," he wrote in a report. Sangamo is developing an adeno-associated virus-based gene therapy for hemophilia A, along with a genome editing treatment for hemophilia B that uses its zinc finger nuclease technology. "We note [that] neither company has commented on another bidder," he said. Sangamo and Pfizer Inc., of New York, are collaborating to develop SB-525 in hemophilia A; Pfizer also has a relationship with Spark in hemophilia B. "The SB-525 program has been relatively stealthy to date," he said. "Though Sangamo has emphasized it is taking a more deliberate approach to safety/dose escalation, the Street appears to view the program as too far behind. We believe first-mover/best-in-class advantages in hemophilia A gene therapy are still to be disclosed," he said, conceding that Roche may be acquiring Spark for reasons beyond the bleeding-disorder program.

Spark 'widely shopped'

Luxturna could be such a reason. Judging by Roche's ophthalmology pipeline, an expansion into other forms of retinal diseases seems prudent given the company's reliance on wet age-related macular degeneration (AMD) therapy Lucentis (ranibizumab), in the view of SVB Leerink analyst Joseph Schwartz. "The competitive landscape in wet AMD is intensifying from approved agents," such as Tarrytown, N.Y.-based Regeneron Therapeutics Inc.'s Eylea (aflibercept) and other potentially long-acting agents from the likes of Novartis, as well as a would-be curative gene therapy in RGX-314 from Regenxbio Inc., of Rockville, Md., any of which could "constrain the economic viability of Lucentis," he said. "Despite Spark's struggles to identify eligible patients for Luxturna, with an estimated prevalence of 1,000-2,000 patients in the U.S. and an $850,000 per year (for both eyes) price tag, Luxturna could be a segue to ignite Roche's ophthalmology business."

Spark also has SPK-7001 for choroideremia and a Stargardt's disease candidate that "can further bolster Roche's ophthalmology franchise over the medium-to-long term," he said in a report.

J.P. Morgan's Cary Kasimov said the deal "clearly has positive read-through to the entire sector, where the potential of M&A to drive sentiment has been an overarching theme," and means "investor focus on gene therapy stocks will remain heightened for the foreseeable future." The transaction "has read-through to all gene therapy companies, but arguably none more so than Biomarin; we suspect the implications are a net positive, insomuch as the company is not getting close to $5 billion in credit for its gene therapy capabilities." San Rafael, Calif.-based Biomarin Pharmaceutical Inc. and Spark are "expected to provide important updates around midyear for their respective hemophilia A development programs," he noted, though the former has been more specific on timing, with data coming in June or July on the late-stage asset valoctocogene roxaparvovec (formerly BMN-270). Spark, with SPK-8011, "is also expected to provide an update sometime this summer, with longer follow-up, steroid prophylaxis, and commercial suspension manufacturing material." Kasimov said he did not expect another bidder for Spark to surface. "We suspect this was already widely shopped," he said, pointing out in a report that the premium to be paid by Roche is already high.

Centerview Partners and Cowen are acting as financial advisor to Spark and Goodwin Procter LLP is serving as legal counsel. Citi is financially advising Roche, with Davis Polk & Wardwell LLP providing legal guidance.

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