Why Spark Therapeutics Soars Up to 120% Today – The Fool Motley

What happened

Actions of Therapeutic Spark (NASDAQ: ONCE) soared to 120.1% at 11:33 am EST Monday. The huge jump came after Roche Holdings (NASDAQOTH: RHHBY) announced the acquisition of Spark for $ 114.50 per share, as part of a fully cash transaction valued at $ 4.8 billion.

So what

This agreement can be considered a win-win-win proposition. The shareholders of Spark Therapeutics are definitely winners with a huge immediate gain. Even investors who bought high biotech in July 2018 will receive a 24% return in just seven months.

Source of the image: Getty Images.

Spark Therapeutics is also a winner. Biotech is to date the only company to have successfully launched gene therapy for a genetic disease in the United States after obtaining the FDA's approval for Luxturna to treat a rare genetic eye disease in December 2017. But fully market a new innovative treatment and continue to grow new products can deplete the resources of a small business. As one of the largest healthcare companies in the world, Roche brings to the table resources that Spark did not have on its own.

Jeffrey D. Marrazzo, CEO of Spark Therapeutics, acknowledged this fact. Marrazzo said Roche's "global reach and extensive resources" would help Spark Therapeutics "accelerate the development of more gene therapies for more patients with more diseases and accelerate our vision of world where no genetic disease limits life ".

And this deal is also a big win for Roche. The Swiss health giant has not hesitated to engulf smaller players to strengthen its position in promising technologies. Roche already had a stake in Foundation Medicine when it had disbursed an additional $ 2.4 billion last year to buy the rest of the genomic testing company.

What did Roche like about Spark? Severin Schwan, CEO of Roche, said, "The proven expertise of Spark Therapeutics throughout the gene therapy value chain could offer significant new opportunities for the treatment of serious diseases."

It is important to note that Schwan did not even mention Luxturna in his comments. This is not to say that Roche was not enthusiastic about embarking on gene therapy. However, Roche sees the image of Spark's role in the treatment of genetic diseases – and that's why it was ready to pay such an attractive price.

Now what

Technically, the acquisition of Spark Therapeutics by Roche is not done. Although the boards of directors of both companies have approved the repurchase, a majority of the outstanding shares of Spark will be the subject of an offer. Roche and Spark must also wait until the end of the waiting period provided for in the antitrust regulations. But these are all likely to be formalities. The acquisition should be pretty much a slam dunk.

Spark Therapeutics will not disappear after the closing of the transaction. Spark stated that it would continue its activities as an independent business under the aegis of Roche and that it would remain in Philadelphia. However, the agreement leaves investors with a less promising biotech action, which can generate huge returns in a short time.

Keith Speights has no position in the mentioned actions. The Motley Fool has no position in any of the actions mentioned. Motley Fool has a disclosure policy.