Shares of Spark Therapeutics (ONCE) were skyrocketing 120.1% as of 11:33 a.m. EST on Monday. The huge jump came after Roche Holdings (RHHBY 1.57%) announced that it was acquiring Spark for $114.50 per share in an all-cash transaction valued at $4.8 billion.
This deal can be considered a win-win-win proposition. Spark Therapeutics shareholders definitely win with an immediate huge gain. Even investors who bought at the biotech's all-time high share price in July 2018 will receive a return of 24% in only seven months.
Spark Therapeutics itself is also a winner. The biotech is so far the only company to have successfully launched a gene therapy for a genetic disease in the U.S. after winning FDA approval for Luxturna for treating a rare genetic eye disease in December 2017. But fully commercializing a new innovative therapy and continuing to develop new products can stretch a small company's resources. As one of the biggest healthcare companies in the world, Roche brings resources to the table that Spark didn't have on its own.
Spark Therapeutics CEO Jeffrey D. Marrazzo acknowledged this fact. Marrazzo said that Roche's "worldwide reach and extensive resource" would help Spark Therapeutics "accelerate the development of more gene therapies for more patients with more diseases and further expedite our vision of a world where no life is limited by genetic disease."
And this deal is also a big win for Roche. The Swiss healthcare giant hasn't been bashful about gobbling up smaller players to fortify its position in promising technologies. Roche already owned a stake in Foundation Medicine when it forked over another $2.4 billion last year to buy the rest of the genomic testing company.
What did Roche like about Spark? Roche CEO Severin Schwan stated, "Spark Therapeutics' proven expertise in the entire gene therapy value chain may offer important new opportunities for the treatment of serious diseases. In particular, Spark's hemophilia A program could become a new therapeutic option for people living with this disease."
It's important to note that Schwan didn't even mention Luxturna in his comments. That's not to say that Roche wasn't excited to pick up the gene therapy. However, Roche sees a bigger picture for Spark's role in treating genetic diseases -- and that's why the company was willing to pay such an attractive price.
Check out the latest Spark earnings call transcript.
Technically, Roche's acquisition of Spark Therapeutics isn't a done deal. Although both companies' boards of directors have approved the buyout, a majority of Spark's outstanding shares will have to be tendered. Roche and Spark also have to hold off until the antitrust regulation waiting period ends. But those are all likely to be formalities. The acquisition should be pretty much a slam dunk.
Spark Therapeutics won't disappear after the transaction closes. Spark said that it will continue to operate as an independent company within the Roche umbrella and will maintain its operations in Philadelphia. But the deal leaves investors with one less promising biotech stock to buy with the potential to generate a huge return in a short time.