Spark, Novartis tie up in gene therapy licensing deal worth up to $170M

Intent to focus on the first-ever gene therapy to launch in the U.S., Spark Therapeutics has licensed voretigene neparvovec to Novartis for development and commercialization for the rest of the world. In return, the newly commercial company is set to receive up to $170 million. 

Through the deal, Novartis will pay Spark $105 million upfront and another $65 million in milestones based on European approval and sales in "certain markets," Spark said in an announcement. The biotech is also eligible for royalties on sales outside of the U.S.

Spark plans to use proceeds from the deal to invest in its pipeline and develop more gene therapies, chief business officer Dan Faga said in a statement. According to Jefferies analyst Michael Yee, $25 million of the milestones are contingent on EMA approval, while $40 million are based on initial sales in markets that "seem very reasonably high probability events." In a note to investors, Yee wrote that EMA approval is expected in the third quarter of this year. 

Approved as Luxturna in the U.S., Spark's gene therapy treats an inherited form of vision loss that can result in blindness; it was the first med of its kind to win a U.S. marketing license in the same year that Novartis won the first-ever U.S. cell therapy approval for its CAR-T cancer drug Kymriah. 

Luxturna is Spark's only approved product and works by delivering a gene called RPE65 into a patient's retinal cells, which produce a protein to restore vision loss. 

In addition to the challenges that accompany a biotech's first launch, Spark will also be blazing a path with its Luxturna because of its high price. The drug costs a staggering $850,000, so Spark has introduced a multifaceted strategy to ensure its med is affordable.

First, the company is offering rebates based on the drug's effectiveness. Spark is also contracting directly with commercial payers or their specialty pharmacies, rather than treatment centers, and is working with the Centers for Medicare & Medicaid Services on ways to collect payments over multiple years.   

In Novartis, Spark gets a partner with a global presence and expertise in ophthalmology. Yee wrote Wednesday that it's a "very nice" deal that "may speak to the opportunity that Novartis sees for this drug over time."  The analyst and his team estimate that Spark's royalties will be in the mid-twenties percentage wise, which he said is a "very attractive/strong royalty level relative to other biotech drugs." Spark also entered a separate deal to manufacture and supply the med for Novartis. 

The deal makes sense from Novartis' perspective as well, according to Yee. The Swiss drugmaker likely "sees meaningful commercial opportunity here to add to the portfolio," he wrote, and "has resources to grow awareness, diagnosis, and distribution around the world better than expected from Spark."

Further, Novartis possibly sees the deal as an "opportunity to jump start payment discussions with EU regional authorities on the next generation of therapies (e.g., gene therapy and cellular therapy)," which could benefit other drugmakers in the field, the analyst wrote. Yee wrote that he's expecting evidence-based pricing for the med in Europe.

Novartis is already in the midst of its own U.S. launch for cell therapy Kymriah and is working to win European approval for the drug. Kymriah is FDA-approved to treat r/r B-cell acute lymphoblastic leukemia and is under consideration as a treatment for relapsed/refractory diffuse large B-cell lymphoma. Like Luxturna, it's a one-time treatment carrying a high price tag: Kymriah costs $475,000 in its original indication with a money-back guarantee for certain patients who don't respond.