Roche Holding AG’s $4.8 billion bid for Spark Therapeutics Inc. raises the stakes further in the bidding for makers of therapies that promise to treat rare, debilitating diseases by correcting inborn flaws in DNA.
Purchasing Philadelphia-based Spark will put Roche near the front of the pack with Basel-based neighbor Novartis AG in developing the promising new area of medicine, and highlights growing enthusiasm for a field that’s become the focus of a flurry of deals.
Roche is entering gene therapy after Novartis agreed last year to pay $8.7 billion for AveXis Inc. and the Zolgensma DNA therapy that treats — and may cure — spinal muscular atrophy, a rare muscle disease that’s the leading genetic cause of death in infants. Spark will give Roche a chance to make up ground in a field where single treatments may command more than $1 million. It may also shield off an asset that rivals like Novartis may have coveted, according to Pierre Corby, an analyst Oddo BHF.
“The price paid represents a very good opportunity for Roche to gain a foothold in gene therapy and to offer itself — at a more than reasonable price — a platform that has already been validated,” Corby said in a note to clients.
Roche will pay $114.50 a share for the biotechnology company, a 122 percent premium to the biotechnology company’s Friday close. While the price is rich, Spark shares were trading above $90 as recently as last year. Roche said its offer was a 19 percent premium to Spark’s 52-week intraday high.
Roche was little changed in Zurich trading. Ipsen fell 2.9 percent in Paris.
The Spark deal is part of Roche’s shift away from cancer treatments, where it’s long been the world’s biggest player. The company is grappling with competition from cheaper copies, known as biosimilars, for a trio of aging drugs in Europe and North America that accounted for almost half of its pharmaceutical sales last year. To do so, it’s branching out into new areas including multiple sclerosis and hemophilia.
Hemlibra, Roche’s treatment for hemophilia A, treats the largest group of patients with the disorder and won U.S. regulatory approval in October, taking the Swiss drugmaker further onto turf that’s been occupied by Shire Plc and Bayer AG. Bristol-Myers Squibb Co.’s planned takeover of Celgene Corp. threatens to rob Roche of its top spot in the world of cancer drugs, but Roche isn’t giving up on the oncology space: Perjeta is among the company’s fastest growers and Tecentriq has performed well in several new studies.
Plugging a Gap
The deal for Spark will give Roche Luxturna, a gene therapy for eye disease. The biotech also offers four products in clinical trials, along with early-stage development programs in rare disorders including Huntington’s disease. Its experimental treatment for hemophilia A complements Hemlibra, Morgan Stanley analysts led by Mark Purcell said in a note Monday.
Roche broke into the hemophilia market in the last two years with Hemlibra, an antibody that mimics the action of the clotting factor needed to stop bleeding. The deal adds to Roche’s hemophilia franchise while giving access to the only platform “with a proven track record for getting gene therapy to the market, ” Stefan Schneider, an analyst at Vontobel Research, said in a note to clients.
Investors have long questioned whether Roche could compete long-term in hemophilia without having a gene therapy. Spark’s treatment could be an important new option for people with the disease, Roche Chief Executive Officer Severin Schwan said in Monday’s statement.
“We will continue to invest in this space,” he said in a telephone interview. Roche can “provide Spark with enough resources to do what they are good at, but we will also keep looking at whether there are potentially new interesting technologies or assets we can complement our portfolio.”
Entangled Companies
The deal adds another twist to the entanglement of Roche and Novartis: Spark has a licensing agreement from a 2018 deal that gives Novartis the rights to sell Luxturna outside the U.S. Roche sells Lucentis, another eye-disease drug, in the US, while Novartis has the rights in the rest of the world. Novartis also holds a stake in Roche worth about $12.9 billion.
Luxturna treats an inherited form of blindness by injecting a working version of a gene called RPE65. In patients suffering from that condition, the working genes can help restore sight. After Luxturna was approved by U.S. regulators in 2017, Spark said it would charge $425,000 per eye for the treatment.
The value of the one-time treatments that carry the potential for cure is still is a matter of debate. The Institute for Clinical and Economic Review, a Boston-based group that assesses the value of drugs, said last week that Zolgensma gene therapy for a potentially deadly muscle disease would be cost-effective at a price of as much as $1.5 million. The company has said the treatment would be worth as much as $4 million to $5 million.
Recent pharmaceutical deals have come with rich valuations. Acquirers paid an average 45 percent premium in takeovers of listed pharmaceutical and biotechnology companies announced over the past five years, data compiled by Bloomberg show. Ipsen SA’s $1.3 billion planned acquisition of Clementia Pharmaceuticals Inc., announced Monday, represents a premium of 77 percent to Clementia’s 30-day volume-weighted average stock price.
Still, some drugmakers have shied away from the field. GlaxoSmithKline Plc sold off its seldom-used Strimvelis gene therapy for an immune disorder to Orchard Therapeutics last year.
Roche’s deal for Spark actually looks more expensive than Novartis’s AveXis purchase when comparing enterprise value to expected future sales, Sam Fazeli of Bloomberg Intelligence said. Even so, Roche can well afford the price, especially given Spark portfolio’s potential in the world of hemophilia.
