Sell-Side Picks Top Gene Therapy Takeout Candidates Following Spark Therapeutics Deal

Roche Holdings AG Basel ADR (OTC: RHHBY)'s announcement regarding an agreement to acquire gene therapy company Spark Therapeutics Inc (NASDAQ: ONCE) has sparked a rally in the latter's shares.

The Analysts

• Chardan analyst Gbola Amusa maintained a Neutral on Spark and lifted the price target from $60 to $114.50.
• Credit Suisse analyst Martin Auster maintained a Neutral rating and $47 price target.

Chardan: Uniqure Could Be Next M&A Target

The $4.3-billion deal Roche stitched up with Spark follows Novartis AG (NYSE: NVS)'s $8.7-billion acquisition of another AAV-based gene therapy company, AveXis, at a 72-percent premium to the 30-day volume-weighted average stock price, Chardan's Amusa said in a Monday note. 

The analyst said he is leaving open his still-alpha generative long-Uniqure NV (NASDAQ: QURE)/short Spark trade, which was opened Nov. 7, 2016.

The Roche-Spark news supports Amusa's M&A thesis on Uniqure, which is rated a Buy and was named Chardan's top pick for 2019, the analyst said. The expectation is predicated on the following factors, he said: 

Now that AveXis and Spark have been acquired, Uniqure is the only public company left with an AAV-based gene therapy asset, which has both Breakthrough Therapy and PRIME designations.

Uniqure has the potential to be the market leader in hemophilia B with AMT-061, as it could be of high interest to big biopharma companies.

The low market cap of Uniqure relative to Spark and AveXis before their respective M&A announcements renders it attractive.

Credit Suisse: Big Pharma Views Hemophilia As Significant Value Driver

The deal value offered for Spark implies the "re-emergence of Spark's hemophilia A gene therapy program with a competitive profile and substantial value assigned to additional pipeline programs, such as SPK-3006 for Pompe, and the technology platform," Credit Suisse's Auster said in a note.

The analyst said he expects the deal to strengthen Roche's position in the hemophilia space, which it has recently identified as a significant growth driver.

Credit Suisse sees the deal as likely to increase M&A interest among other gene therapy names in its coverage universe, including BioMarin Pharmaceutical Inc. (NASDAQ: BMRN), Sarepta Therapeutics Inc (NASDAQ: SRPT), PTC Therapeutics, Inc. (NASDAQ: PTCT), Ultragenyx Pharmaceutical Inc (NASDAQ: RARE) and Solid Biosciences Inc (NASDAQ: SLDB).

Among these, the firm views Sarepta as the most likely M&A candidate, given its $10-billion market cap; the deepest gene therapy pipelines in the industry; emerging large-scale manufacturing capacity; and first-mover position with its DMD gene therapy lead program.

The M&A interest in hemophilia-based gene therapy bodes well for BioMarin's risk-reward, with a Phase 2 data readout for its valrox hemophilia A candidate due in the second quarter of 2019, Auster said. 

"We believe valrox currently holds a first-mover position among Hem A gene therapies in development with a 1.5-year-plus potential lead to market."

The Price Action

At last check Monday:

• Spark shares were soaring 120.19 percent to $113.53. 
• Uniqure was jumping 31.4 percent to $54.66.
• Sarepta was advancing 2.44 percent to $143.40. 
• BioMarin shares were rallying 4.31 percent to $91.66.
• Solid Biosciences was gaining 8.7 percent to $9.74.
• PTC shares were moving up 1.49 percent to $33.43.
• Ultragenyx was surging 6.07 percent to $63.45.

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