Spark: Down but Not Out!

Spark Therapeutics' drug candidate SPK-8011 to treat hemophilia A remains very promising despite immune responses experienced in 2 out of 12 participants in their phase 1/2 clinical trial

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Maxwell Koobatian
Aug 12, 2018
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Background: Spark Therapeutics (ONCE) is a biotech startup company based in Philadelphia specializing in gene therapy. The technology that Spark Therapeutics is pursuing is derived from the Adeno-associated virus. In summary, if a patient has a genetic mutation causing a disease, the drugs developed by Spark Therapeutics are able to introduce the proper DNA sequence into the patient effectively curing the underlying disease. Their pipeline currently consists of 8 drug candidates and most widely known by their marked drug Luxturna; a one-time administration therapy approved by the FDA for treating retinal dystrophy due to a mutation of the RPE65 gene. This disease is extremely rare and it is believed that only1,000 individuals within the US are eligible for treatment. For those who are diagnosed and treated with Luxturna, it is nothing short of a miracle as it is not only able to stop the disease from progressing, but restores vision loss.

The Next Big Thing: In addition to Luxturna, Spark Therapeutics is aggressively pursuing a gene therapy treatment known as SPK-8011 for the treatment of hemophilia A; a serious and rare inherited hematologic disorder typically affecting males making their blood unable to properly clot. This leads to an increased risk of bleeding and hemorrhaging. Affected patients typically need to undergo regular supplementation of recombinant or plasma concentrate Factor VIII. It is estimated that 20,000 people are affected with haemophilia A in the US and there is currently no cure for this condition.

Recent Developments: In the latest investors call on Aug 7th 2018, it was stated that SPK-8011 will move into phase 3 clinical trials in the 4th quarter of 2018. 12 participants received a single administration of SPK-8011 in 3 different dosing schemes. All participants after 4 weeks of administration had a “97-percent reduction in annualized bleeding rate (ABR) and a 97-percent reduction in annualized infusion rate (AIR)”. These are truly remarkable results. There was one major concern however, which is that 2 participants had an immune response to the treatment and 1 participant needed to be admitted to the hospital. This caught investors off-guard and as a result, Spark Therapeutics lost 27% of its value at the close of Aug 7th. BioMarin (NASDAQ:BMRN), a direct competitor of Spark Therapeutics, popped nearly 8% due to the fact they are also developing a haemophilia A gene therapy known as Valrox. It is also arguable that Valrox is in a stronger position clinically. While both treatments are very effective in treating hemophilia A, Valrox is currently reported to be a safer treatment and currently delivers better results. However, during Spark Therapeutic’s investors call, the immune response that was experienced by the 2 patients is believed to be preventable with a simple course of steroids prior to treatment. In other words, it has yet to be determined if this immune response following treatment of SPK-8011 is anything to be genuinely concerned about. It is also worth noting that Spark Therapeutics is already planning to increase manufacturing capacity anticipating commercialization.

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The Financials and Future: All things considered, Spark Therapeutics is in a very strong position financially. Unlike many biotech startups, Spark Therapeutics has a marketed drug that is first in class and is the only effective treatment for inherited retinal dystrophy. Spark Therapeutics is also able to charge upwards of $425,000 per eye for Luxturna and are also developing payment and access programs to drive market penetration. While only 12 vials of Luxturna were shipped in the latest quarter, this is expected to pick up; especially since Express Scripts (NASDAQ:ESRX) is partnering with Spark Therapeutics on distribution and specialty pharmacy services. Spark Therapeutics also has no debt along with $647 Million of cash, cash equivalents and marketable securities on hand. With a market cap of only $2.19 Billion and promising drug candidates in phase 1/2 aimed to treat Hemophilia A and B, Choroideremia, along with preclinical work being pursued in Leber hereditary optic neuropathy, Pompe disease, CLN2 disease (a form of Batten disease) and Huntington’s disease, it is safe to say that the future of Spark Therapeutics is very bright long term. Lastly, despite stiff competition from BioMarin, SPK-8011 has a bright future if approved and the reported immune responses during phase 1/2 are truly preventable. While it is expected that BioMarin will be able to beat Spark Therapeutics to the market to treat hemophilia after phase 3 completion in 2019, Spark Therapeutics will likely be a fast follower with similar outcomes and (fingers crossed) an optimized steroid regimen eliminating severe immune responses.

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Disclosure: I do not have positions in the stocks mentioned.

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