Author Topic: ONCE - Spark Therapeutics  (Read 5791 times)

hillfronter83

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ONCE - Spark Therapeutics
« on: April 29, 2019, 11:50:27 AM »
ONCE is a gene therapy biotech that is being acquired by Roche for about $4b ($114.5/share). The deal was originally scheduled to close on 5/3/2019. Now it seems FTC need more time to finish their review. According to the company, they still expect to close the deal in first half 2019 and this delay is "normal". But the price dropped promptly and IRR stands over 30% if the deal closes as expected. FAQ from companyhttps://www.sec.gov/Archives/edgar/data/904566/000095010319005160/dp105565_exa5xviii.htm

I have no insights but the spread seems rich. thoughts?
« Last Edit: April 29, 2019, 04:15:22 PM by Parsad »


roark33

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Re: ONCE merger arbitrage
« Reply #1 on: April 29, 2019, 12:18:54 PM »
Hmm, seems interesting.  Those nickels look shiny, heck they even seem like quarters...

roark33

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Re: ONCE - Spark Therapeutics
« Reply #2 on: April 30, 2019, 07:46:23 AM »
This one does seem really interesting.  Pulling review for the FTC usually just means they pre-empt the FTC asking for more time with a second review, which would delay the process since the second review period is longer.  So, you pull the initial submission and re-submit, then the filing counts as an "initial filing", where the review period is shorter.  I am not sure why they would object to this one.  The one issue with more time is the potential for some sort of Material Adverse Event clause (MAC) to be triggered.  Maybe they are expecting the results from a drug trial in the month of May? 

Tender Offer are usually done fairly quick, so once the FTC approves this, it should be done within 20 business days or shorter. 

Hmmm....any thoughts.


writser

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Re: ONCE - Spark Therapeutics
« Reply #3 on: April 30, 2019, 07:55:07 AM »
Looks like a decent bet, I don't see why this wouldn't close. Small/midcap biotech company with interesting intellectual property and a promising pipeline. Roche being a Swiss buyer shouldn't really pose a security risk and given the size of the acquisition I don't see any competitive issues either. Caveat: of course handicapping regulatory issues is tricky and I have no special insights here. At first glance I wouldn't mind a ~1% / 2% position but my cash position is around 0.2% at the moment due to some other corporate actions :o . So no position for now. Might buy later.
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given2invest

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Re: ONCE - Spark Therapeutics
« Reply #4 on: April 30, 2019, 08:20:15 AM »
I own this and it's sized big for me but I've been wrong and under water.  This article explains what the problems might be:

https://www.biopharmadive.com/news/roches-takeout-of-spark-not-working-like-a-swiss-watch/553566/

That said, I would be super surprised to see this deal get blocked.  The spread is a result of the massive downside if it is blocked and/or if something bad happens in a clinical trial in the meantime.   Arbs are terrified of biotech tenders.

writser

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Re: ONCE - Spark Therapeutics
« Reply #5 on: April 30, 2019, 08:36:34 AM »
Thanks for the link.
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roark33

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Re: ONCE - Spark Therapeutics
« Reply #6 on: April 30, 2019, 09:02:11 AM »
Funny, the article cites AVXS as a deal that went smoothly for NVS, but, it looks like we were all involved in that arb deal last year and that spread was pretty nice.

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/avxs-avexis/20/

People have short memories. 

hillfronter83

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Re: ONCE - Spark Therapeutics
« Reply #7 on: April 30, 2019, 09:38:17 AM »
I own this and it's sized big for me but I've been wrong and under water.  This article explains what the problems might be:

https://www.biopharmadive.com/news/roches-takeout-of-spark-not-working-like-a-swiss-watch/553566/

That said, I would be super surprised to see this deal get blocked.  The spread is a result of the massive downside if it is blocked and/or if something bad happens in a clinical trial in the meantime.   Arbs are terrified of biotech tenders.

Thanks for the link as well. I was wondering why their FAQ mentioned hemophilia. I'll also be super surprised if they block the deal on the basis of antitrust for a phase 1/2 drug. If the anti trust risk is real, it then implies that SPK-8011 has high potential, which should reduce downside.

roark33

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Re: ONCE - Spark Therapeutics
« Reply #8 on: April 30, 2019, 09:41:48 AM »
If you read the background of the merger, there was another fairly serious bidder, maybe Pfizer?  I don't think the break-price would be that low actually.  Roche approached them in December when the market was crashing and biotechs were taking a beating. 

given2invest

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Re: ONCE - Spark Therapeutics
« Reply #9 on: April 30, 2019, 09:43:01 AM »
I own this and it's sized big for me but I've been wrong and under water.  This article explains what the problems might be:

https://www.biopharmadive.com/news/roches-takeout-of-spark-not-working-like-a-swiss-watch/553566/

That said, I would be super surprised to see this deal get blocked.  The spread is a result of the massive downside if it is blocked and/or if something bad happens in a clinical trial in the meantime.   Arbs are terrified of biotech tenders.

Thanks for the link as well. I was wondering why their FAQ mentioned hemophilia. I'll also be super surprised if they block the deal on the basis of antitrust for a phase 1/2 drug. If the anti trust risk is real, it then implies that SPK-8011 has high potential, which should reduce downside.

Yes, you're correct.  Two important things to note:

1) . Most think BMRN is ahead in Hemo A and has the superior Gene Therapy drug!  But who knows.  I believe QURE is indeed ahead in Hemo B.

2)  There was a bidding war for ONCE w/ 2nd bidder topping off at 105.  Now this 2nd bidder might also have anti-trust problems if Roche does but it shows how in demand the company was.  I do not think it would go back to pre deal prices but probably in the 70-80 range, especially as people speculate they just sell to 2nd bidder in a break.