Spark Therapeutics files for an IPO

Spark Therapeutics Inc., which hopes to turn decades of gene-therapy research at Children's Hospital of Philadelphia into commercial cures for diseases, has filed papers to conduct an initial public stock offering.

In its S-1 filing with the Securities and Exchange Commission, Spark said it had applied to trade on the Nasdaq global market under the symbol "ONCE." The ticker symbol refers to the hope Spark's medicine will cure, not simply treat, some genetic diseases, including types of blindness and hemophilia.

The pharmaceutical industry has plenty of fledgling companies with a few employees, one potential drug, and some venture-capital funding. Spark's model is very different, if not unique, in that Children's scientific research, manufacturing technology, and key personnel formed the basis of what is now a for-profit company, though it has no revenue yet.

When the company was formed in October 2013, Children's committed $50 million. Besides the cash, the reputation of the hospital and its researchers lent the new enterprise "leverage" when it sought other investors and secondary licensing deals, chief executive officer Jeffrey D. Marrazzo said.

"To bottle that up, a corporate format made more sense than a licensing transaction, which you see more frequently between academic organizations and outside parties," Marrazzo said in June. "We had plenty of interested parties, but we thought this was a unique confluence of things that presented a chance for CHOP to capitalize on the value more than it might have traditionally."

Spark operated from Children's offices until September, when it moved to the University City Science Center on Market Street. With about 50 employees now, Spark agreed to create 67 jobs in exchange for a $150,000 state grant and $201,000 in job-creation tax credits.

According to the SEC filing, Children's holds 53.44 percent of Spark shares. Children's CEO Steven Altschuler is chairman of the board of Spark.

In May, Spark collected $72.7 million in a second round of financing. Investors included funds managed by or affiliated with Sofinnova Ventures, Brookside Capital, Deerfield Management, Rock Springs Capital, T. Rowe Price Associates, Wellington Management, two other health-care investment funds, and Children's.

Sofinnova's 11.45 percent stake is the second largest. Anand Mehra, a general partner of Sofinnova, is a Spark board member.

Spark's potential treatment for one genetic cause of blindness, SPK-RPE65, is in the third, and typically final, phase of clinical trials, with data due in the second half of 2015. It received both "breakthrough therapy" and "orphan product" designations from the U.S. Food and Drug Administration, which means a quicker path through the approval process and greater market exclusivity.

Spark will have to plow relatively new ground on reimbursement from insurance companies used to paying for treatments vs. cures. As drugmaker Gilead has learned with its high-priced cure for hepatitis C, that's not always easy. But Spark suggested in the S-1 filing that its exclusivity in the market might allow it time to cure a "substantial portion" of the current patients at a higher price than it might once the exclusivity disappears.

Last month, Spark signed a licensing deal with Pfizer Inc. for continued research and development of a gene-based treatment for hemophilia B. That deal gives Spark $20 million up front, up to $260 million in milestone payments, and royalties based on net sales.