Roche has agreed to buy Spark Therapeutics for $4.8 billion, the latest strong signal that major pharmaceutical companies are ready to gamble on the promise of gene therapy despite its uncertain commercial prospects.
The Swiss pharma giant will pay $114.50 per share, in cash, for Spark (NASDAQ: ONCE), a 122 percent premium to the gene therapy developer’s $51.56 per share closing price on Friday. Both boards have approved the deal, which should close in the second quarter.
The acquisition is the latest sign of the continuing momentum for gene therapy, which has taken decades to begin to fulfill its promise. Gene therapy developers use a modified virus or “vector” to deliver healthy genes into a cell to replace faulty or missing ones. The hope is these treatments can provide long-lasting, if not permanent benefits through a single procedure. But despite the billions of dollars poured into gene therapy research and startups in the ‘90s, it took years of ups and downs for the first products to get to market.
So far, they’ve struggled commercially. The first commercial gene therapy in the Western World, UniQure’s (NASDAQ: QURE) Glybera, approved in Europe in 2012, was a bust. GlaxoSmithKline (NYSE: GSK) sold off the second, Strimvelis, to Orchard Therapeutics in a restructuring; sales disappointed as well. Spark’s Luxturna, the first-ever gene therapy approved in the U.S., generated $27 million in 2018.
Roche is betting that the future is more lucrative for Spark and for gene therapy, and it isn’t alone. Novartis (NYSE: NVS) paid $8.7 billion to buy AveXis last year to get its hands on what should be the next approved gene therapy, for spinal muscular atrophy (Novartis also bought European rights to Luxturna in 2018). Companies like Sarepta Therapeutics (NASDAQ: SRPT), Amicus Therapeutics (NASDAQ: FOLD), and others have been acquiring gene therapy programs over the past few years. With products for hemophilia, SMA, Duchenne muscular dystrophy and more nearing approvals, the FDA has even recently announced long-term plans to accommodate the surge in expected approval filings for gene therapies.
Roche is now in the mix, gambling not just on Luxturna, but the future of gene therapy by acquiring Spark and its experimental treatments for hemophilia, Choroideremia, Pompe disease, and more. In a statement, Roche CEO Severin Schwan specifically pointed to Spark’s hemophilia A program, which, while showing promise in clinical testing, trails a rival program from BioMarin Pharmaceutical (NASDAQ: BMRN) currently in late-stage testing. Spark is also developing a hemophilia B program, though it splits rights to the drug with Pfizer (NYSE: PFE). Both would be appealing to Roche: recently approved hemophilia drug emicizumab (Hemlibra) is one of the company’s key growth drivers, and gene therapy poses a significant long-term threat.
“We see a compelling strategic rationale” for the deal, wrote Jefferies analyst Peter Welford, noting that gene therapy is “emerging as a key therapeutic modality lacked by” the company.
Indeed, in acquiring Spark, Roche is buying a pioneer. Spark came from work that began at the Children’s Hospital of Philadelphia in gene therapy’s dark days, when safety issues clouded the field. A gene therapy delivery tool that scientific founder and gene therapy veteran Katherine High (pictured, left, with Spark CEO Jeff Marrazzo) had previously been studying in hemophilia unsuccessfully was instead applied to a rare form of childhood vision loss. That program, Luxturna, became the foundation of Spark, and it went on to win the first-ever U.S. approval of a gene therapy in January 2018.
In winning that approval, Spark also became the first gene therapy developer to wrestle with the field’s big uncertainties and commercial questions: How does a gene therapy last? What if it wears off? And can it succeed commercially in a healthcare system not set up to cover one-time treatments that promise long-lasting effects? Spark’s $425,000-per-eye price for Luxturna, and its deal with New England insurer Harvard Pilgrim Health Care on a plan that included rebates tied to the drug’s durability set the tone for the field’s other emerging players, like BioMarin, Bluebird, and Novartis. Some have already talked up annuity-based payment plans for gene therapy, and payouts tied to durability.
Spark has also developed its own manufacturing capabilities, including the first and only FDA and E.U. licensed facility to manufacture commercial scale adeno-associated viruses, which are used to deliver all of the company’s gene therapy products. But in today’s statement, Spark’s longtime CEO Jeff Marrazzo acknowledged the need for Roche’s help to help broaden the reach of gene therapy.
The “needs of patients and families living with genetic diseases are immediate and vast,” Marrazzo said. “With its worldwide reach and extensive resources, Roche will help us accelerate the development of more gene therapies for more patients for more diseases and further expedite our vision of a world where no life is limited by genetic disease.”
Here’s more on gene therapy and Spark’s role in its advancement.