Deal value: $4.3 billion
Date announced: Feb. 25, 2019
Roche’s $4.3 billion buyout of Spark Therapeutics may not be the largest deal by size in 2019, but it’s definitely one of the most closely watched.
Roche’s rationale is simple. It wants in on the burgeoning gene therapy game, and what's a better buy than Spark, developer of the first FDA-approved gene therapy, Luxturna? The biotech has both the development skill and some commercial know-how to navigate the complex gene therapy market.
A match made in heaven, Spark’s lead pipeline program is SPK-8011, a hemophilia A candidate that Roche is counting on to consolidate its foothold in the blood disorder on top of fast-growing antibody Hemlibra.
“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 said back when the deal was unveiled in February.
No one saw it coming: That very business fit would later get the deal into trouble.
In early April, Roche withdrew and refiled a report to the Federal Trade Commission (FTC), only to do it again a few days later to allow the U.S. antitrust agency more time for its review. And even after a third delay, the Swiss drugmaker still maintained that it was on track to close the deal in the first half of 2019.
Then the two companies dropped the somewhat surprising news that they had received an FTC “second request”—a procedure that indicates additional anticompetition concerns—just as the U.K. Competition and Markets Authority (CMA) opened its own investigation.
What exactly were the antitrust agencies worried about? Industry watchers immediately put their heads together, trying to solve the mystery.
The obvious consensus pointed to the combination of Hemlibra and SPK-8011. But as Jefferies analyst Michael Yee noted at the time, “the hemophilia gene therapy market is probably the most competitive and ‘crowded’ field in gene therapy.” BioMarin’s valoctocogene roxaparvovec, for example, is ahead of the Spark drug in development, and earlier clinical data also suggest it could do better than SPK-8011.
The agencies’ approvals in December finally put an end to months of speculation—and repeated delays in Roche’s tender offer. The FTC and CMA acknowledged they were indeed looking at the two firms’ hemophilia businesses. But after delving into the matter, both realized that Spark’s not the only gene therapy player in the field, and as the CMA put it, its candidates “are not currently considered to hold any particular clinical or commercial advantages over those being developed by other suppliers.”
Roche really fought hard to win over Spark. The gene therapy specialist was originally only looking for a co-development and co-promotion partner for its hem A projects. But even after Spark’s stock was hit hard when SPK-8011’s phase 1/2 data appeared inferior to those posted by BioMarin’s rival drug, Roche found itself in a bidding war for a full-on buyout. It eventually jacked up its proposal from the original per-share price of $70 to $114.50. That offer represented a hefty 122% premium over Spark’s closing price before the deal announcement.
As the deal closed on Dec. 17, Roche is going to play catch-up to BioMarin—which has already filed its version for European approval—in hopes of repeating Hemlibra’s success.