Late-to-the-game Roche has finally made a move in gene therapy, one of the biopharma industry’s most sought-after and expensive classes of medications. And it's a move that will vault the Swiss drugmaker ahead of the pack.
Roche is shelling out $4.3 billion to take in Spark Therapeutics, securing a leading spot in the hot gene therapy game and building onto its fast-growing hemophilia business.
Roche is acquiring the Philadelphia gene specialist for $114.50 per share, which represents a whopping 122% premium to Spark’s closing price on Friday. Another $500 million of projected net cash is expected at close, Spark said. In return, Roche gets the first FDA-approved gene therapy, Luxturna, and a couple of hemophilia candidates, among others.
The merger has been approved by both companies’ boards and is expected to close in the second quarter. After that, Spark will continue to exist as an independent company within Roche, according to the Swiss drugmaker.
“We see a compelling strategic rationale for Roche to acquire […] Spark for $4.3 billion cash as this is emerging as a key therapeutic modality lacked by the pharma,” Jefferies analysts wrote in a Monday note to clients.
Gene therapies hold great promise as potential cures for hard-to-treat inherited diseases caused by malfunctioning genes, and pharma bigwigs are trying to stake out their territory in the field.
Novartis, with keen ambitions in the field, has ex-U.S. rights to Luxturna, which treats a rare genetic retinal disease, and it shelled out $8.7 billion to snap up Illinois-based AveXis last year. Now, the lead candidate from that takeover, spinal muscular atrophy therapy Zolgensma (AVXS-101), is under FDA review with a decision due in May. Pharma intelligence group EvaluatePharma expects 2024 sales to hit $1.56 billion.
Pfizer has an ongoing collaboration with Spark on hemophilia B gene therapy program SPK-9001. After the New York pharma formed that deal, in 2016 it bought up Bamboo Therapeutics, along with the latter’s recombinant adeno-associated virus-based gene therapy platform. In January, Johnson & Johnson’s Janssen put down $100 million upfront to develop MeiraGTx’s gene therapies for retinal diseases. Sanofi, through its acquisition of Biogen’s blood disorder spinout Bioverativ, has some hemophilia gene therapies in the works, and the French pharma has called developing gene therapies a “cornerstone” of its R&D efforts—despite its decision to pull out of an $845 million Parkinson’s gene therapy partnership with Voyager after it couldn’t persuade the Massachusetts biotech to give up U.S. rights. Voyager just recently partnered with AbbVie and Neurocrine Biosciences instead.
But because gene therapies are one-time treatments, they come with ultrahigh sticker prices—up to $1 million or more. Luxturna itself launched in the U.S. with a sticker of $850,000 per patient. So early players such as Spark and Novartis are exploring alternative payments, including pay-for-performance programs that promise refunds if patients don’t fully respond to the therapy.
With Spark, Roche is betting not just broadly on gene therapy but also more specifically on hemophilia A, a disease where its own Hemlibra is pressing ahead.
“In particular, Spark Therapeutics’ hemophilia A program could become a new therapeutic option for people living with this disease,” Roche CEO Severin Schwan said in a Monday statement.
An antibody drug in a field where factor replacements have been the standard of care, Hemlibra has taken off running. It raked in 224 million Swiss francs ($224 million) in 2018, about half of that in the fourth quarter alone, boosted by an FDA nod in noninhibitor patients in October. Jefferies analysts now predict Hemlibra could reach $5.5 billion in worldwide peak sales.
However, “[g]ene therapies have significant promise for hemophilia A, representing a potential threat to the long-term commercial value of Hemlibra and incumbent factor VIII,” the analysts noted.
Spark’s lead candidate, SPK-8011, could fill that gap for Roche, and it’s expected to start phase 3 this year. But BioMarin’s rival gene therapy valoctocogene roxaparvovec has already entered phase 3, and its average factor VIII levels of 59% of normal—as seen in phase 1/2 two years after infusion—beat out SPK-8011’s 30%. Spark’s stock slid when it unveiled that data last August, which could explain the unusually high premium Roche agreed to pay now. Using its 52-week high on July 9 as a basis, the deal premium drops to 19%, Roche said.
For Luxturna, Leerink analyst Joseph Schwartz argued it “could be a segue to ignite Roche’s ophthalmology business,” even though Spark has only reached 1,000 to 2,000 patients in the U.S. “Judging by Roche's ophthalmology pipeline, an expansion into other forms of retinal diseases seems prudent given the company's reliance on Lucentis,” he wrote in a Monday memo to clients. He noted that Spark also has a phase 1/2 choroideremia therapy, SPK-7001, and a preclinical Stargardt disease candidate “that can further bolster Roche's ophthalmology franchise over the medium-to-long term.”
In addition to Pfizer-partnered SPK-9001 for hemophilia B and SPK-8011, Spark also has SPK-8016 in a phase 1/2 trial in the hemophilia A inhibitor population and SPK-7001 for choroideremia. Other candidates span rare disease areas such as Batten’s, Pompe and Huntington’s.
Moreover, Schwartz also pointed to the manufacturing expertise Roche is getting, as “reliable and scalable manufacturing know-how is essential for any entrant (or competitor) in the gene therapy arena,” he said in the Monday report. Manufacturing could indeed be a huge part of the battle with advanced therapies. Just consider how Novartis has been struggling with its CAR-T cell therapy Kymriah due to production deficiency.
Schwartz contended that bringing manufacturing capabilities in house could come in handy for future expansion plans, as Novartis did with AveXis and Pfizer with Bamboo.
Editor's Note: This story has been updated with information from Joseph Schwartz's note to investors.