Spark Therapeutics

Form S-1 Analysis

Benjamin Handler

5/3/17

1

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

2

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

cure choroideremia, 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).

3

Table of products and product phases (Form S1; SEC.gov)

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).

4

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

5

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

6

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;

7

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

8

Where and How the CHM gene is injected. (Information Overload)

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

9

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 hemophilia B 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).

10

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

11

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

12

companies. UniQure’s Glybera 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,

“There can be no assurance that we will not experience problems or delays in

developing new product candidates and that such problems or delays will not

cause unanticipated costs, or that any such development problems can be solved.

Although we intend to leverage our experience with SPK-RPE65, we may be

unable to reduce development timelines and costs for our other IRD gene therapy

development programs. We also may experience unanticipated problems or delays

in expanding our manufacturing capacity, which may prevent us from completing

our clinical trials, meeting the obligations of our collaborations or

commercializing our products on a timely or profitable basis” (Form S-1;

SEC.gov)

Spark Therapeutics is specifically worried that SPK-RPE65 will not get a broad enough

approval from the FDA. This is because they only tested patients that have the LRA disease, but

they are seeking approval to use this treatment for any inherited retinal disease that involves a

mutation on the RPE65 gene (Form S-1; SEC.gov). Another risk factor is the public or societal

acceptance of this treatment. The market might not react well to the inclusion of such a life

changing product, and customers might not buy it. Also, there is always the risk of key

contributors such as scientists, statisticians, analysts, etc, leaving Spark Therapeutics, therefore

causing a delay in product development. Other risks such as lawsuits or break ups with our

13

collaborators such as Pfizer or the Children’s Hospital of Philadelphia, can delay, destabilize, or

halt product development (Form S-1; SEC.gov).

Spark Therapeutics’ future remains unclear and uncertain. That being said, they do have

brilliant minds working on life-saving and life-changing products such has cures for genetically

inherited blindness and hemophilia. It will be a monumental step in the company’s history when

they get there first product approved by the FDA. Revenues from this product will help them

pay back their investors and do more in depth research on other genetic diseases such as Batten’s

and Huntington’s. Although Spark is only four years old and is just considered another one of

those exploratory biotechnology companies that have a high failure rate, I believe that Spark will

be a household name in ten years from now.

*Disclaimer: I have owned shares of Spark Therapeutics (ONCE) stock dating back to early

2016

14

Glossary

Vector- an organism, typically a biting insect or tick, that transmits a disease or parasite from one animal or plant to another.

Rhodopsin- a purplish-red light-sensitive pigment present in the retinas of humans

Opsin- protein that forms part of the visual pigment rhodopsin and is released by the action of light.

Recombinant- rearrangement of genetic material, especially by crossing over in chromosomes or by the artificial joining of segments of DNA

Batten’s Disease- an extremely rare and fatal autosomal recessive neurodegenerative disorder that begins in childhood.

Huntington’s disease- hereditary disease marked by degeneration of the brain cells and causing chorea and progressive dementia.

Hemorrhaging- escape of blood from a ruptured blood vessel

Choroideremia- a condition characterized by progressive vision loss that mainly affects males.

Cofactor- substance (other than the substrate) whose presence is essential for the activity of an enzyme.

Sex-linked- carried by a sex chromosome

Autosomal- a chromosome that is not an allosome (a sex chromosome). Autosomes appear in pairs whose members have the same form but differ from other pairs in a diploid cell

Recessive- relating to or denoting heritable characteristics controlled by genes that are expressed in offspring only when inherited from both parents

Dominant- An allele or a gene that is expressed in an organism's phenotype, masking the effect of the recessive allele or gene when present.

Adeno-associated- a small virus which infects humans and some other primate species

Hematologic- branch of medicine concerned with the study of the cause, diagnosis, treatment, and prevention of diseases related to blood

Neurodegenerative- the progressive loss of structure or function of neurons, including death of neurons

Phase 1/2 trials- Early clinical trials to test the workings of a product

Preclinical- relating to, or concerned with the period preceding clinical manifestations

Phase 3 trials- Later, more decisive trials to prove the working of a product

Choroids- middle layer of the vertebrate eye, between retina and sclera, well vascularised and also pigmented to throw light back onto the retina

Photoreceptors- a specialized type of cell found in the retina that is capable of phototransduction

15

Works Cited

Bloomfield, D., & Kitamura, M. (2015, October 05). Spark's Gene Therapy for Blindness Improved Sight in Trial. Retrieved May 05, 2017

Clinical Trials. (2017, March 24). Safety and Efficacy Study in Subjects With Leber Congenital Amaurosis. Retrieved May 05, 2017

Fidler, B. (2017, February 16). His Gene Therapy Near Approval, Spark CEO Wonders: What Price Vision? Retrieved May 05, 2017

Form S-1. (2014, December 30). Retrieved May 05, 2017

Genetic and Rare Disease Information Center. (2016, January 13). Choroideremia. Retrieved May 05, 2017

NASDAQ. (n.d.). Spark Therapeutics, Inc. Competitors. Retrieved May 05, 2017

Reuters. (2015, January 30). Gene-therapy company Spark Therapeutics shares double in debut. Retrieved May 05, 2017

Rogers, K. (n.d.). Rhodopsin. Retrieved May 05, 2017

Spark Therapeutics Website. (n.d.). Retrieved May 05, 2017.

The Cure For Blindness? Treatment Found That Restores Sight To People With Inherited Eye Disease. (2014, January). Retrieved May 05, 2017

Therapeutics, I. S. (2017, January 04). Spark Therapeutics Announces $15 Million Milestone Payment from Pfizer for Progress in Hemophilia B Gene Therapy Program. Retrieved May 05, 2017

Therapeutics, S. (2013, October 22). Spark Therapeutics Launched with $50 Million in Financing to Advance Late- and Mid-Stage Gene Therapy Programs with Clinical Proof of Concept. Retrieved May 05, 2017

World Federation of Hemophilia. (2013, December). 2012 Annual Survey. Retrieved May 5, 2017.

16