What's going on?

Swiss pharmaceutical company Roche � the world�s second-biggest � announced on Monday that it was buying US biotech firm Spark Therapeutics for $5 billion in the sector�s latest deal.

What does this mean?

Spark is big on gene therapy, whereby defective genes are replaced with healthy ones. It�s a relatively new technique: the first gene therapy drug � developed by Spark to treat eye disease, and a bargain at $850,000 � was approved in the US just over a year ago. But such treatments could well be the future � and pharma companies are eager to get in on the ground floor.


Spark has a gene therapy treatment for hemophilia in the pipeline � which could fit in nicely alongside a new Roche hemophilia treatment expected to make it billions of dollars annually. Several of Roche�s other big-name drugs are falling off a �patent cliff�, after which the company can no longer sell them exclusively � meaning they�ll soon bring in much less cash.

Why should I care?

For markets: Big risk, big (potential) reward.

Pharma companies typically spend loads of money developing the next �blockbuster� treatments, which they can then sell exclusively for a time � recouping their investment and then some. While Spark�s gene therapy for hemophilia is still in clinical trials, it could well be a blockbuster � but then again, it might never get approved. By buying biotechs, pharma companies are effectively buying innovation without having to put in the legwork. But such shortcuts aren�t cheap: Roche is paying more than double what Spark was worth last week.

The bigger picture: Pharma�s hot.

With a slew of pricey mergers and acquisitions, healthcare stocks were among the best performers of 2018 � and there�s already been another $100 billion of pharma �M&A� in 2019 so far. Just on Monday, slimming-down giant General Electric agreed to sell its bio-pharma business to Danaher for $21 billion, while French pharma company Ipsen announced a $1 billion purchase of a US peer.