Roche/Spark: FTC Staff Recommends Deal’s Unconditional Clearance

Published on Oct 24, 2019

FTC staff reviewing Roche’s (SWX: ROG) proposed Spark Therapeutics (ONCE) acquisition have recommended the $4.3 billion deal be cleared unconditionally, sources familiar with the matter said.

The staff reached the conclusion after an in-depth investigation that included issuing civil investigative demands, which are similar to subpoenas, to companies involved in hemophilia treatments, and interviewing doctors who are experts in the bleeding disease, sources said.

Staff’s investigation focused on whether the merger would lessen potential competition in hemophilia A therapies, where Roche markets Hemlibra, a potential blockbuster, and Spark is developing a gene therapy pipeline project—SPK-8011—that could effectively eliminate the need for Hemlibra infusions.

The staff recommendation doesn’t mean the FTC’s review is completed—instead, the recommendation will move up to the Bureau of Competition’s front office, which will provide its own recommendation.

The front office’s recommendation, however, rarely diverges from staff’s. Once the front office concludes its review, the decision will move to the commission level, where a majority of the commissioners would then need to vote to close the investigation.

Unconditional clearance would be a hard-won victory for the companies, which signed the transaction on February 22.

Roche and Spark pulled and refiled their HSR notification three times to give staff more time to review the deal during the initial investigative phase but failed to fend off the FTC’s June 7 second request.

The staff’s initiation of an in-depth review forced the companies to revise their guidance for the deal’s close from the first half of 2019 to the end of the year.

An FTC spokesperson declined to comment. Spokespeople for the CMA, Roche and Spark didn’t immediately respond to requests for comment.

CMA. In addition to FTC sign-off, the deal also requires clearance from the UK’s Competition and Markets Authority (CMA), which said this week it would formally open a Phase 1 investigation into the merger.

The authority served an initial enforcement order on June 6 preventing the companies from integrating their operations without CMA’s prior written consent.

Since the initial order, the CMA has been conducting an inquiry that has included issuing questionnaires and conducting interviews with third parties, a source familiar with the matter said.

The CMA is pondering whether the deal is a “killer acquisition,” the source said, a term describing how big pharmaceutical companies buy smaller rivals and then stop developing the acquired company’s pipeline products that could eventually compete with theirs.

It’s possible the CMA review could delay an FTC decision because both enforcers have coordinated their investigations of some deals, most recently Illumina’s (ILMN) troubled bid to buy gene-sequencing competitor Pacific Biosciences (PACB), sources said.

Any delay, however, is likely to be insignificant: CMA has said it would decide on the Phase 1 investigation by December 16, which would allow Roche to meet its goal of closing the merger by year’s end if both the UK enforcer and the FTC clear the deal by that time.

Doctors’ feedback. Two physicians told The Capitol Forum that FTC staff contacted them in August, asking about potential competition between Hemlibra and SPK-8011.

One of the physicians, Dr. Guy Young, director of the Hemostasis and Thrombosis Program at the Children’s Hospital of Los Angeles, said the two treatments would compete somewhat—if SPK-8011 fulfills the promise it has hinted at in patient trials.

“All of those who are eligible to receive gene therapy are eligible to receive Hemlibra,” he said.

Patients would likely favor SPK-8011 over Hemlibra if the gene therapy, as hoped, requires only one injection compared with Hemlibra’s ongoing treatments, doctors said.

Gene therapy could be the “be-all and end-all for all eligible patients,” said Dr. Sanjay Ahuda, Dominic Piunno Endowed Chair in Hemophilia & Bleeding Disorders & director of UH Rainbow Hemostasis & Thrombosis Center at Case Western Reserve University.

But physicians stressed that SPK-8011 would be appropriate for only a subset of hemophiliacs, and wouldn’t be appropriate for children, in particular.

At best, gene therapies like SPK-8011 would “own a market that is 18 and older,” said Dr. Robert Sidonio, a pediatric hematologist/oncologist at Children’s Healthcare of Atlanta, who also spoke with FTC staff attorneys.

Half the patients with hemophilia A are immune to the virus that SPK-8011 uses to deliver the gene therapy, making them ineligible for the treatment, doctors said. Also, some patients develop an inhibitor, which prevents the gene therapy from helping to form clots that stop bleeding, rendering the treatment ineffective.

Spark’s project isn’t the only hemophilia A gene therapy in development. BioMarin’s (BMRN) Valrox leads the hemophilia A gene therapy race, and the company on July 8 announced plans to submit marketing applications for the product to the Food and Drug Administration later this year. Another potential entrant, a collaboration between Pfizer (PFE) and Sangamo (SGMO), disclosed positive results from its own Phase 1/2 study on July 5.