Michael Yee van Jefferies
Spark Therapeutics (ONCE): Fireside chat and discussions on commercial launch and hemophilia outlook - Buy
Rating BUY
Price Target $95.00
Price $86.20
Bloomberg NASDAQ: ONCE
Key Takeaway
We hosted a fireside chat with Spark where we discussed: 1) potential launch and pricing dynamics for Luxturna, 2) pot'l (+) reimbursement discussions in US and EU, and 3) data disclosure for Hemophilia A and B pot'l at ASH. With data update expected at ASH (Dec) and potential approval of the first gene therapy product by January, we believe ONCE will continue to go up into 2018...
Spark received a positive vote today with 16-0 panelists recommending approval (unanimous). Patient testimonies were heartwarming while panel discussions were productive and supportive of Luxturna's U.S. approval, in our view.
Upon approval and some time to ramp new sites, we expect a fairly modest but steady uptake of Luxturna given a rare disease and limited centers to start (email us for *LUX-APP* model detailing monthly ramp in 2018). Using math, we think our 2018 $40-50M USA is theoretically doable based on ~50 pts or 10-12 pts per site in a year, or one pt per month (cons is $70-80M and probably too high but could get adjusted perhaps)......and vs est 100-400+ in USA already known.... Spark's team has been in the field for over a year, informing and educating doctors on the potential introduction of Luxturna. Spark is likely going to start with only 3-5 centers at launch and grow to 8-10 centers. The company believes there could be some “warehouse” of young LCA patients that have already been genotyped and would be immediately eligible for treatment (we estimate "hundreds" are probably out there in US that are known/identified and could be treated in first year). Longer-term, the bigger market of older patients diagnosed with RP will likely need to be genotyped and identified and Spark is working to identify these pts over time to get to "thousands" of pot'l pts over time.
Reimbursement should be ok for Luxturna given not big budget impact in big picture (and coming hemophilia actually could be attractive positive value for payors). We estimate $350-500k per eye x 2 eyes = $750k to $1M per pt). Spark indicated payors are willing to pay a lump sum payment for Luxturna given it is for an ultra-rare disease patient population (<1000 pts). Conversely, in Europe giving the single payor systems, there may be some room for creative pricing that could potentially entail annuity payments. While pricing was not disclosed, Spark noted that to establish a pharmaco-economic value of Luxturna, it is currently looking at direct and indirect costs of blindness, and interestingly, jury settlements for patients that have been blinded due to industrial accidents to help establish a price for their product. On a related topic, Spark noted it was already having early and positive discussions with payors on the economic value of its Hemophilia therapies and payors may see the high value of a one-time drug vs $300-400k per year currently for injections....(and also echoed by docs on our hemophilia panel).
New hemophilia data expected at ASH (Dec 9-12) for SPK-8011 for Factor VIII. Spark noted it has now dosed the second mid dose subject—therefore, four in total have been dosed. Importantly, the abstract for ASH will include already disclosed data from the first three patients treated with SPK-8011. Spark expects to have data for at least 5-7 pts depending on dosing schedule, at ASH. We think "consistency" including 3-4 pts at current cohort showing 20-25% steadily is a positive and suggests Spark has good predictability. We personally would like to see a 3rd cohort dosing up and getting to 40-50% Factor VIII levels to see where they can go given some docs would like options up to 50% in our view....Also, Spark said that the Hem B program is in the process of being transferred to Pfizer (PFE, Hold) to begin the pivotal Phase III program and as a "global" and international company intends to run a global study to support global registrations (and our hemophilia doc panel suggested there is significant opportunity for gene therapy particularly OUS given pot'l dollar savings over the current $300-400k per year drugs).