Chardan Capital Initiates Coverage on Spark Therapeutics (ONCE) at Neutral

Chardan Capital starts Spark Therapeutics (NASDAQ: ONCE) with a Neutral rating and price target of $45.

Analyst Gbola Amusa commented: We believe Spark has amply shown its clinical capabilities by producing a landmark phase III result on SPK-RPE65 in RPE65-mediated inherited retinal dystrophies, and could potentially be the first company to have a gene therapy product approved in the as-yet-to-mature United States gene therapy market. Our key concern for Spark is that, as the pioneer, Spark will have to wrestle with the US regulator and ultimately payors to establish for the sector the pathway forward for gene therapy approvals and reimbursement. As “pay-for-performance” systems are not yet in place to maximize the value of gene therapy products, we believe the upside case could constrained even if SPK-RPE65 launches in 2017E, as we expect.

In addition, we note that excluding SPK-RPE65, the rest of Spark's pipeline looks uninteresting relative to the pipelines of other AAV-based gene therapy companies we cover; and, as such, given Spark's valuation, we are concerned that the recent equity raise, in addition to offering the possibly negative signal of an insider selling shares (i.e. CHOP), could potentially also be a signal that Spark will turn to M&A to bolster its pipeline.

Finally, we have found weaknesses in Spark's SPK-RPE65 patents (see page 12) that to us potentially mean the only protections for the product might be Orphan Drug Designations and/or ordinary marketing exclusivity, with potential delays to US filing plans possible if Spark tries to shore up its IP.

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