Roche Buys Spark Therapeutics for $4.8 Billion

Roche is striving to catch up in the field in gene therapy that it has it searching for small biotech companies to stay relevant in a science field making a difference, gene therapy. They aren’t afraid to spend a good amount of money either, news broke that Roche is acquiring gene therapy company Spark Therapeutics for $4.8 billion. Roche decision to purchase Sparks comes from pharma rivals like Novartis doubling down in gene therapy with ambition to lead.  The first gene therapy to be approved by the Food and Drug Administration, Spark Therapeutics’ Luxturna comes with a price tag of $850,000 dollars or $425,000 per eye for a cure of an inherited retinal disease.

Sparktx’s shareholders come off as winners, as Roche agrees to pay $114.50 per share. A gain of more than twice the closing price on Feb 22. Their goal is to tap in and increase their portfolio in rare diseases, neurodegenerative disorders, hemophilia, and etc. Roche has been looking at this kind of opportunity for some time, and believe that Spark therapeutics may be the right team to invest in.

As Roche faces competition from biosimilars in Avastin, Herceptin, and Rituxan, Roche is looking for  ways to increase the size of their drug portfolio as its leading drugs’ patents are expiring. That being said, Roche was quite late to the immune-oncology game that was a bit problematic for them. But with the Spark purchase, Roche has the platform needed to commercialize gene therapies. Obviously there are still risks, such as the one that they might end up being beaten by some of the rivals if they come up with a higher price.

The gene therapies are using engineered viruses to deliver genetic material to the defective cells. The idea here is to try and cure the defective cells even if the condition was inherited. Luxturna is sold by Spark in the US, and it targets the Leber congenital amaurosis that causes blindness for 1 in 200000 people. Spark had around $51.6 million in revenue for the first nine months after releasing their product. They also struck a deal with Pfizer in the hemophilia B gene therapy market.

The Spark acquisition is a right move from Roche, as the Spark shares are 30% higher this year indicating a bright future for this small company. They did face some hurdles last year when 2 out of 12 patients had an unwanted immune response. Even with these hurdles Roche is satisfied with the miracles Spark therapeutics is bringing to families around the world.

Roche is already selling Hemlibra that targets hemophilia A, so it might seem like a conflict to have Spark work on something from hemophilia B. That being said, these are complementary solutions according to the Roche representatives and many patients will need either one of them or both solutions. However, the industry is quite crowded, and despite having 2 solutions, Roche will have to deal with competitors like Uniqure NV, BIomarin Pharma, Sangamo Therapeutics and many others which already have gene therapies in the works at this time.

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