Spark Therapeutics

Spark Therapeutics

Form S-1 Analysis

Benjamin Handler

5/3/17

Table of Contents

Executive Summary……………………………………………...3

Company Description…………………………………………....4

Overview of Technology and Products………………………….6

Voretigene Neparvovec: RPE65-mediated IRD…………..6

SPK-7001(CHM): Choroideremia………………………...8

SPK-9001 (FIX): Hemophilia B…………………………..9

Other Pre-Clinical/Early-Phase Products...………………11

Prospective Summary……...... ……………………...12

Glossary…………………………………………………………15

References………………………………………………………16

Executive Summary

Spark Therapeutics is a revolutionary biotechnology company that creates cures for genetic diseases. The company, headquartered in Philadelphia, PA was initially formed upon the innovation of a product that cures a rare genetic disease that causes blindness. Spark now has a pipeline of products that target additional blindness-causing diseases, hematologic disorders and neurodegenerative diseases. Spark Therapeutics is in collaboration with Pfizer in developing a treatment for Hemophilia B. Spark’s genetic therapy platform technology was developed based on research done with clinical trials at the Children’s Hospital of Philadelphia.

Their most developed product, SPK-RPE65, is in Phase 3 clinical trials and cures inherited retinal dystrophies, which are caused by autosomal recessive mutations in the RPE65 gene (Form S-1, Prospectus Summary; SEC.gov). They are developing a follow-up product called SPK-CHM that would curechoroideremia, which is an x-linked disease that results in visual impairment in males when they become older. Spark is working with Pfizer on their SPK-FIX program, which is working toward a disease for Hemophilia B, which is an inherited genetic blood disorder that affects 28,000 people worldwide (2012 World Federation of Hemophilia Annual Global Survey). Spark Therapeutics is working hard to further develop and commercialize their products and price them appropriately in order to become profitable in the near future.

Description

Spark Therapeutics is a gene therapy company with products in late-clinical stages, which focus on treatments for inherited retinal diseases, liver-mediated diseases, and neurodegenerative diseases. Their mission is “to reawaken healthy biologic processes through the potential one-time administration of gene therapies, and spark a transformation for people affected by rare genetic diseases where no, or only palliative, therapies exist” (Spark Therapeutics website). They do this by “augmenting, replacing, or suppressing the function of a mutated gene. [They] engineer gene therapy vectors using a cutting-edge, proprietary adeno-associated viral (AAV) vector platform, developed through vigorous preclinical testing and evaluated in several clinical trials” (Spark Therapeutics website).

Spark was founded as AAVenue Therapeutics on March 13, 2013 with intellectual property partnerships with the University of Iowa and the University of Pennsylvania. They changed their name to Spark Therapeutics two months later and became incorporated on May 2, 2014 (Form S-1; SEC.gov). Spark was cofounded by its current CEO Jeffrey Marrazzo, current Head of Product Development Strategy Jennifer Wellman, and current CTO J. Fraser Wright in Philadelphia, PA, where Spark has an agreement to collaborate and share resources with the Children’s Hospital of Philadelphia. (Spark Therapeutics website). As of October, 2016 Spark has a collaborative agreement with the University of Massachusetts Medical Center and their gene therapy lab as well. (Sparks website).

The Children’s Hospital of Philadelphia helped launch Spark Therapeutics with $50 million in financing and capital commitment when it was founded in March, 2013 (PR Newswire). In May 2014, Spark raised $72.7 million in financing by distributing Series B shares of convertible preferred stock to investment funds and to the Children’s Hospital of Philadelphia (Form S-1; SEC.gov). Spark Therapeutics filed their S-1 for on December 30, 2014, which was underwritten by JP Morgan and Credit Suisse among others (Form S-1; SEC.gov). A month later, on January 30, 2015 Spark made their initial public offering under the ticker symbol ONCE, where they raised $161 million by selling 7 million shares at $23 per share. The stock price grew 96 percent in one day as it closed at $45 per share the same day (Reuters). Spark Therapeutics entered into a collaborative agreement with Pfizer in December, 2014 to further develop and commercialize Spark’s SPK-FIX program for treating hemophilia B. Pfizer paid Spark $20 million up front, and Spark is eligible to receive $260 million in milestone payments and royalties (Form S-1; SEC.gov). Spark Therapeutics acquired Genable Technologies in March, 2016 for about $15 million in cash and stock (Spark Therapeutics website).

Spark’s most immediate company strategy is to

“Successfully complete clinical development and obtain marketing approval for SPK-RPE65 in the United States and the European Union, establish a global commercial infrastructure for SPK-RPE65, establish a franchise of gene therapies for additional IRDs, focusing next on the treatment of Choroideremia with SPK-CHM, continue to build a liver-directed gene therapy platform, with an initial focus on our SPK-FIX program for the treatment of hemophilia B in collaboration with Pfizer, advance preclinical neurodegenerative programs into clinical development, and leverage our proprietary manufacturing platform to partner selectively with other pharmaceutical and biotechnology companies (Form S-1, SEC.gov).”

According to NASDAQ, the stock exchange that Spark Therapeutics is traded on, Spark is in the Biotechnology sector, with the subcategory of “Biological Products (no diagnostic substances)” (NASDAQ.com). This implies that Spark’s products are not meant to identify health issues, as Spark’s products are meant to treat them. Spark has products or is developing products in three main areas: inherited retinal diseases (IRDs), liver-mediated diseases, and neurodegenerative diseases.

Technology and Products

Voretigene Neparvovec: RPE65-mediated IRD

Spark Therapeutics’ most advanced product is Voretigene Neparvovec, also called SPK-RPE65, which treats an inherited retinal disease that occurs because of a mutation in the RPE65 gene. (Form S-1; SEC.gov). In their final clinical trial, twenty four children around age three, were tested to see if their drug, Voretigene Neparvovec worked to cure Leber Congenital Amaurosis, which is the inherited retinal disease these kids have that is causing blindness because of the lack of cells in the retina (clinicaltrials.gov). This disease is a non-sex-linked, autosomal recessive disease that causes visual impairment in children, and leads to complete blindness when they grow into adults (Form S-1; SEC.gov). The RPE65 gene for creating cells in the retina is not properly turned on, or the protein that this gene instructs the body to make, is not functioning properly because of a mutation in the gene. Spark Therapeutics makes a gene therapy vector called adeno-associated virus (AAV), which is the platform that makes the new DNA for a normal RPE65 gene. AAV are disarmed, non-hurtful viral vectors that carry DNA into the target cells. In this case, the AAV is a virus carrying the Voretigene Neparvovec, which carries the normal DNA for the RPE65 gene (Form S-1; SEC.gov). The normal gene is then injected into the retina one time through the Voretigene Neparvovec product made by Spark. These trails were conducted at the University of Iowa and at the Children’s Hospital of Philadelphia (clinicaltrials.gov).

The central dogma is crucial to this treatment, which is the pattern of DNA being transcribed to RNA. RNA being translated into a protein. Then protein making the final product. The SPK-RPE65 treatment tries relies on this, as it injects “normal” DNA through their AAV platform. They rely on the correct message from the DNA to go to the RNA, then to proteins. The proteins should create a final product that allows a patient to have normal vision, assuming that Spark has found the corrections and encrypted them into the DNA they are injecting into the retina.

The results show that the children injected with the one time treatment from the clinical trials no longer needed visual aids and were able to walk, carry out classroom activities, and simply live like normal children (Form S-1; SEC.gov). The Voretigene Neparvovec drug has completed Phase 3 clinical trials, and Spark is currently in the process of submitting a Biologics Licensing Application to the U.S. Food and Drug Administration. (Spark Therapeutics website). Spark Therapeutics “estimates that there are approximately 3,500 people with RPE-mediated IRDs in the United States and the five major European markets” (Form S-1; SEC.gov).

This begs the question of just how much Spark should and could charge for this treatment. The fact that there are not so many people with this disease and that is only a one time injection, makes it seem like Spark would need to charge an extremely expensive amount for this treatment. Bloomberg estimates a price of $1 million per injection (Bloomfield; Bloomberg.com). This price tag is coming along with lots of scrutiny. The question eating away at Spark, their investors, and those with the disease remains, what is the price of vision?

SPK-7001(CHM): Choroideremia

This product is follow-on to the RPE65 mutation treatment. Choroideremia is also an inherited retinal disease. This disease is linked to the X-chromosome that affects males and inhibits nighttime vision and progressive visual impairment with age. This leads to a narrowing field of vision and the ability to see details starts to fade. As those with this disease get older and older, their visual field becomes darker and darker, and peripheral vision is lost. This treatment is currently in the Phase 1/2 stage of clinical trials (Form S-1; SEC.gov).

Choroideremia is a disease that is caused by the loss of cells in the retina and in the choroids, which are the blood vessels in the eyes. The CHM gene is the gene that is responsible for making the choroids in the eyes (Genetic and Rare Diseases Information Center). People with Choroideremia have a mutation in the CHM gene, meaning that DNA with the CHM gene is malfunctioning and is not coding for the protein or product that ensures healthy choroids and retinas.

As seen in the image, the purpose of the treatment is to inject functioning DNA into light sensing cells. Rhodopsin are pigments in the retina that are extremely sensitive to light and allow us to see at night. Rhodopsin is a G-protein coupled receptor. When the cofactor opsin combines with lysine in the seven transmembrane domain, an electrical signal is sent to the brain, which then adjusts the retinas and allows you to see in the dark. (Britannica Encyclopedia). This electrical pathway is obstructed in those with Choroideremia.

Spark Therapeutics is in the early phases of developing their treatment for Choroideremia at the Children’s Hospital of Philadelphia. They are still using their Adeno-Associate Virus (AAV) vector to deliver the normal CHM gene to the choroids and the retina (clinicaltrials.gov). Spark Therapeutics is first and foremost still trying to figure out the correct dosage of this treatment. The safety levels and tolerance levels are still yet to be determined. Once they figure that out, they then need to see if the treatment successfully works. The estimated time of completion is in early 2019 (clinicaltrials.gov). Spark Therapeutics estimates that there are about 12,500 males in the United States and Europe with Choroideremia (Form S-1; SEC.gov).

SPK-9001 (FIX): Hemophilia B

Hemophilia B is a liver-mediated disease and a rare blood disorder that is inherited and made up of mutations in FIX gene. This disorder leads to a deficiency in blood clotting and an increased risk of bleeding or hemorrhaging (Spark Therapeutics website). Very minor injuries can lead to heavy bleeding into the joints, muscles, brain, and other internal organs (Genetic and Rare Disease Information Center). Those with hemophilia B have the lack of Factor IX (FIX) gene expression and therefore have a Factor IX protein deficiency, which is crucial to making the end product that makes blood clot. Spark is trying to use their gene therapy platform to make products that will express certain genes in the liver. “People with hemophilia B typically are reliant on frequent and expensive intravenous infusions of recombinant FIX to facilitate blood clotting. The cost of providing prophylactic FIX treatment to an average adult has been estimated to reach up to $300,000 or more each year.”

Spark Therapeutics is trying to simplify this treatment to a one time injection type of treatment like some of their other products. They are doing this in collaboration with Pfizer to advance the development and commercialization of a potential product. Spark Therapeutics is responsible for the development of this treatment through phase 1/2 trials and Pfizer is responsible for further clinical development of SPK-FIX thereafter (Form S-1; SEC.gov). Specifically, “Pfizer and we (Spark) are developing proprietary, bio-engineered AAV vectors utilizing a high-activity transgene and a treatment protocol designed to mitigate immune responses seen in other hemophiliaB gene therapy trials, including our own, that have limited the duration of efficacy” (Form S-1; SEC.gov).

The goal is for Pfizer and Spark to develop a recombinant form of the AAV gene therapy platform that Spark Therapeutics already has and has been using to put new genes in the retina. The new form of this virus will then carry the DNA with the normal FIX gene into liver cells (clinicaltrials.gov). This DNA containing the normal gene for blood clotting will then make RNA, which will make the correct protein for making the essentials that the body needs to clot your blood. Just recently, in January 2017, Spark Therapeutics received a $15 million milestone payment from Pfizer for achieving safety and efficacy as “SPK-9001 has received breakthrough therapy and orphan product designations from the U.S. Food and Drug Administration” (Global Newswire). The CEO, Jeffrey D. Marrazzo said, “We continue to make strong, tangible progress with our hemophilia pipeline, and achievement of this second milestone marks further advancement in the development of our investigational gene therapy for hemophilia B” (Global Newswire).

Other Pre-Clinical/Early-Phase Products

Spark Therapeutic is in the early stages of developing a gene therapy for hemophilia A as well. This is very similar to their hemophilia B treatment, except hemophilia A is caused by a mutation on the factor VIII gene, as opposed to hemophilia B which is a factor IX gene issue (Form S-1; SEC.gov). The treatment SPK-8011, is in early clinical trials and still has safety, dosage, and efficacy flaws. The treatment will use a recombinant version of the Adeno-Associated viral vector (AAV) to carry a normal version of the factor VIII gene into the liver. This will then produce the blood-clotting factor VIII protein if everything goes as planned (clinicaltrials.gov). There is a current treatment in response to bleeding as a result of hemophilia A, but it must be administered 2-3 times a week. Spark is looking treat the problem all together, rather than controlling the damage (Form S-1; SEC.gov).

In March 2016, Spark acquired Genable Technologies. With this acquisition Spark Therapeutics gained the rights to RhoNova, which is a developing treatment in the pre-clinical stages to treat rhodopsin-linked autosomal dominant retinitis pigmentosa, which is an inherited retinal disease that can lead to blindness (Spark Therapeutics website). Using Spark’s AAV vector, they can inject RhoNova into the back of the eye and into the rhodopsin. RhoNova is specifically designed to suppress the expression of the faulty gene. Spark is working to develop a product to couple with RhoNova in order to not only suppress the malfunctioning gene, but to also insert a normally function RHO gene in order to restore normal expression (Spark Therapeutics Website).

Spark Therapeutics is doing further research and experiments to use their AAV gene therapy platform to treat Batten disease and Huntington’s disease. Both of these are neurological disorder that occur in the brain. Batten’s disease is a childhood disorder in the brain that leads to the progressive loss of motor functions such as movement and speech. This is the result of a TPP1 protein deficiency, which is caused by a mutation in the TPP1 gene (Spark Therapeutics website). Huntington’s disease is a fatal genetic disease that leads to the breakdown of nerve cells in the brain. People affected by this disease tend to lose motor, cognitive, and behavioral abilities by about 30-50 years old, which then leads to other fatal health issues such as heart failure (Spark Therapeutics Website). Treatments for both of these diseases are merely experimental as of now, but the future looks bright for Spark if they can develop treatments for these two enigmas.

Prospective Summary

Spark Therapeutics is clearly an innovative company with several potentially life-changing products. That being said, Spark has not made any money in the form of revenue let alone profits just yet, because they have no products currently on the market. On this subject Spark Therapeutics reiterates, “We expect that it could be several years, if ever, before we have a commercialized product candidate. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future” (Form S-1; SEC.gov). Spark must eventually sell their products in order to become profitable.

Right now, the product with the most potential at Spark Therapeutics is their SPK-RPE65 treatment, as it has completed phase 3 trials and they are in the process of preparing it for a submission to U.S. Food and Drug Administration. The next question after receiving FDA approval is figuring out the right price for this product. Spark has been trying to come up with a complex pricing model. A price that is too cheap will see pushback from Spark’s investors looking to make their money back and a price that is too expensive will get criticism from insurance companies and activists. Spark can look at the path used by other gene therapy companies. UniQure’sGlybera treatments cost $1 million and GlaxoSmithKline’s Strimvelis treatment sells for $665,000 along with a money back guarantee (Fidler; Xconomy). This pricing problem may just be the best case scenario for Spark, because that would mean one of their products actually works and was approved by all of the necessary regulatory agencies. There are persistent risk factors that Spark Therapeutics recognizes,