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

Roche Holdings AG Basel ADR RHHBY's announcement regarding an agreement to acquire gene therapy company Spark Therapeutics Inc 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 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 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. BMRN, Sarepta Therapeutics Inc SRPT, PTC Therapeutics, Inc. PTCT, Ultragenyx Pharmaceutical Inc RARE and Solid Biosciences Inc 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."