Roche have always been a company led by technology and novel approaches to diagnosing and treating diseases with pharmaceuticals. Gene therapy has been a noticeable omission in its technology and therapeutic offering, now addressed by the acquisition of Spark Therapeutics, a US biotechnology company with one of the few approved and marketed gene therapies: Luxturna a treatment for a relatively rare genetic disorder resulting in blindness.
This acquisition makes many points:
Biotechnology and innovative pharmaceutical companies continue to be a source of products and pipeline products for large pharma
Both licensing of development phase products and the acquisition of companies with innovative products are now the main source of novel therapies marketed by pharmaceutical companies. Innovation is less and less the remit of large pharma companies but rather the domain of smaller more innovative companies.
M&A and transactions are a very efficient way of plugging technology and product portfolio gaps
Roche were noticeable in their lack of presence in the gene therapy space, which has now been addressed by this acquisition: “Roche to fully acquire Spark Therapeutics at a price of US$114.50 per share in an all-cash transaction. This corresponds to a total transaction value of approximately US$4.3 billion on a fully diluted basis. This price represents a premium of approximately 122% to Spark Therapeutics’ closing price on 22 February 2019 and a premium of approximately 19% to Spark Therapeutics’ 52-week high share price on 9 July 2018.” History is filled with examples of pharmaceutical companies which transformed their approach to novel therapeutic modalities through acquisition. AstraZeneca famously declared themselves a small molecule chemistry company only, immediately prior to their acquisition of Cambridge Antibody Technology (CAT) and MedImmune.
Gene therapy shows immense promise but raise supply chain issues
As with all disruptive technologies’, gene therapy shows immense promise for the treatment of certain chronic genetic based disorders and has the potential to revolutionise treatment of many, but these therapies will inevitably challenge the current infrastructure and health systems structures. Fundamentally, gene therapies such as CART-T are individual therapies specific to a single patient. Traditionally, pharmaceuticals have been about providing drugs in large quantities which treat a large number of patients. There is no surprise then that gene therapies challenge the traditional pharmaceutical supply chain model, presenting immediate supply chain issues. Globally there is insufficient cGMP gene vector manufacturing capacity available to address the current and near-term demand. This has resulted in extortionary valuations that are being achieved by rare gene therapy manufacturing operations/companies occasionally presented to the market.
Gene therapies also present a very high cost to patients and payers
These treatments which have the potential to effect a cure in specific patients, but initial pricing has been extraordinarily high e.g. Lentiglobin (Bluebird Bio) $2.1m for a 5-year treatment plan ($420,000 per year) and a proposed Zolgensma (Novartis) with a proposed full treatment price of $520,000 (both Lentiglobin and Zolgensma are prices for US patients). These mean exceptionally high treatment costs for a small number of individuals, potentially personalising the payment of treatments. This has the potential to transform patients into paying customers (the corollary of which is that some people in need of treatment will not be able to afford it). It’s clear that there will need to be a significant evolution in both the cost of and ability to pay for these therapies.
Roche has always been a company at the “bleeding edge” of innovation and their acquisition of Spark Therapeutics signals that they intend to continue to back innovation and to be a significant player in the gene therapy arena.