Roche (RHHBY) To Acquire Spark Therapeutics For $4.8 Billion

Roche Holding (SIX:ROG) AG (OTC:RHHBY) announced that it has entered into a definitive agreement to acquire Philadelphia-based gene therapy company Spark Therapeutics, Inc. (NASDAQ:ONCE) at a price of $114.50 per share in an all-cash transaction. This price represents a premium of about 122% to Spark Therapeutics’ closing price on Feb 22, 2019. The total value of the deal is $4.8 billion. The boards of both the companies have unanimously approved the deal. Under the terms of the merger agreement, Roche will promptly commence a tender offer to acquire all of the outstanding shares of Spark Therapeutics’ common stock. Following completion of the tender offer, Roche will acquire all remaining shares at the same price of $114.50 per share through a second step merger. The transaction is expected to close in the second quarter of 2019.

Acquiring Spark Therapeutics will also give Roche the access to some hemophilia products, which will broaden its drug-development pipeline. Roche will get access to the former’s novel gene therapy, SPK-8011 for the treatment of hemophilia A, which is expected to start phase III in 2019. Spark Therapeuticsalso has SPK-8016 in a phase I/II study, which is aimed at addressing the hemophilia A inhibitor population. Roche already sells Hemlibra, a drug against hemophilia A. With the acquisition, Roche will also get to add Luxturna to its portfolio. Luxturna is a one-time gene therapy product indicated for the treatment of patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy, and currently marketed in the United States by Spark Therapeutics and elsewhere by Novartis (NYSE:NVS) .

Spark Therapeutics' hemophilia A program could become a new therapeutic option for people living with this disease.

Additional candidates in Spark Therapeutics’ portfolio include SPK-9001, an investigational gene therapy for the potential treatment of hemophilia B in phase III and SPK-7001 for choroideremia in phase I/II. The portfolio also includes SPK-3006 for Pompe disease and SPK-1001 for CLN2 disease (a form of Batten disease). Both the candidates are expected to be ready for clinical development in 2019, and additional preclinical programs for Huntington`s disease and Stargardt disease.

With this deal, Roche plans to shift from cancer treatments as it faces stiff competition for its products. Stiff competition from biosimilars looms large for some of Roche’s key drugs. Novartis has already launched its bisomilar version of Rituxan/MabThera in Europe. Amgen (NASDAQ:AMGN) also obtained FDA approval for a biosimilar version of Avastin for treatment of five types of cancers including lung cancer, colorectal cancer, glioblastoma, renal cell carcinoma and cervix cancer.

Zacks Rank

Roche carries a Zacks Rank#3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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