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Spark Therapeutics Acquisition Sparks Rally in Biotechnology ETFs

This article was originally published on ETFTrends.com.

Biotechnology stocks and sector-specific ETFs climbed Monday after Roche (RHHBY) acquired gene therapy researcher Spark Therapeutics (ONCE).

Among the best performing ETFs of Monday, the Invesco Dynamic Biotech & Genome ETF (PBE) increased 5.4%, SPDR S&P Biotech ETF (XBI) advanced 4.2% and ALPS Medical Breakthroughs ETF (SBIO) gained 3.1%. The biotech ETFs were testing their long-term resistance at the 200-day simple moving average as well. Meanwhile, the iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB) , the largest biotech exchange traded fund by assets, rose 2.0% and also broke back above its 200-day trend line.

Roche announced it will pay $4.8 billion to acquire Spark Therapeutics. Spark stocks surged over 120% in response to the announcement. ONCE makes up 1.5% of XBI's underlying holding and 3.5% of PBE's portfolio.

Spark Therapeutics is so far the only company to have successfully released a gene therapy for a genetic disease in the U.S. after gaining FDA approval for its Luxturna treatment for a rare genetic eye defect.

"Although the price that Roche is paying for Spark seems steep, we see three potential rationales driving the deal," Leerink analyst Joseph Schwartz said in a note to clients, according to Investor's Business Daily. "Attraction to genetic retinal diseases, fortification of hemophilia franchise or appreciation of in-house gene therapy manufacturing capabilities."

The acquisition also sparked a rally in other gene therapy biotechnology stocks as investors were hopeful of further M&A prospects down the road. For instance, UniQure (QURE) jumped 31.3% following the news.

Chardan analyst Gbola Amusa highlighted UniQure's similarities to Spark. The company shows proof-of-concept data for its gene therapies and certain designations from regulators in the U.S. or Europe. UniQure could also be a market leader in hemophilia B.

"We believe the Roche-Spark news supports out (a merger) thesis on UniQure," Amusa said in a report, adding that "hemophilia gene therapy is seemingly of high interest to big biopharma."

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