ONCE - Spark Therapeutics

[given2invest]

In English:  Roche is not required to divest any Hemo assets, either from Spark or Roche, to close the transaction.  If FTC requires a divestiture, Roche can walk.

[Haasje]

Thanks for your help :) Much appreciated! Roche can walk only in case of a FTC demand of Hem A divestitures or of any pipeline asset?

 

 

[given2invest]

Thanks for your help :) Much appreciated! Roche can walk only in case of a FTC demand of Hem A divestitures or of any pipeline asset?

 

Only in case FTC demands a divestiture of Hemo A pipeline or commercial asset is my understanding.

 

They can't walk if something happens in a Spark trial, etc.

[Guest roark33]

I do think this is the reason for the spread, whether it is a good reason or not, that's another question. 

[given2invest]

It's 10000000% the reason for the spread.  I didn't know that was the exercise we were doing.  FTC is taking longer than usual and giving people pause.

[Haasje]

It seems unlikely to me the FTC will ask for divestitures on these Hemo A assets that are stage 1/stage 2. It is possible but it seems rather far-reaching. The fact Roche singled out the hemo A pipeline assets do suggests they may walk if it happens. Break price is ~50% down... I like the potential annualized. If closing probabilities are 93%-97% there's good expected value here but I'm surely not going to go big here :) If you think it is below 93% I think it quickly becomes a position you don't want to have.

[given2invest]

I'm huge in this but I do a lot of arb and am also a bit crazy.

[writser]

Define "huge"? Percentage-wise of course, if you would.

[given2invest]

Define "huge"? Percentage-wise of course, if you would.

 

30% position.  But I look at position sizing rather different than most people on here.  I look at everything "after tax" as I have plenty of realized and unrealized gains.  So if it were to go to 0, I'd lose ~14% after tax of my entire portfolio (Cali 53% short term blended tax rate).   

[Guest roark33]

Given the multiple bidders and the changed market environment since December when the parties were discussing the terms of the deal, I do not think the true break price is 50% lower, but who knows. 

[given2invest]

It is not, unless something bad happens w/ one of the trials (really the Hemo A trial).  It's more likely break is 60-80.

[Haasje]

Nasdaq Biotech ETF is a bit down from date of acquisition (~4%)

 

What do you think odds of closure are?

 

If break would be 60-80 this becomes a very good investment. I'm not convinced yet but I'll explore downside some more because that's a big difference with the base break price.

[Foreign Tuffett]

Define "huge"? Percentage-wise of course, if you would.

 

30% position.  But I look at position sizing rather different than most people on here.  I look at everything "after tax" as I have plenty of realized and unrealized gains.  So if it were to go to 0, I'd lose ~14% after tax of my entire portfolio (Cali 53% short term blended tax rate). 

 

Conversely, isn't your upside here also truncated by the big tax bill you will have to pay if the transaction closes? 

 

[given2invest]

Define "huge"? Percentage-wise of course, if you would.

 

30% position.  But I look at position sizing rather different than most people on here.  I look at everything "after tax" as I have plenty of realized and unrealized gains.  So if it were to go to 0, I'd lose ~14% after tax of my entire portfolio (Cali 53% short term blended tax rate). 

 

Conversely, isn't your upside here also truncated by the big tax bill you will have to pay if the transaction closes?

 

Of course.  What do you mean big though?  It's 114.50-cost basis X 53%.  I'm not taxed on the entire 114.50. 

[Foreign Tuffett]

Define "huge"? Percentage-wise of course, if you would.

 

30% position.  But I look at position sizing rather different than most people on here.  I look at everything "after tax" as I have plenty of realized and unrealized gains.  So if it were to go to 0, I'd lose ~14% after tax of my entire portfolio (Cali 53% short term blended tax rate). 

 

Conversely, isn't your upside here also truncated by the big tax bill you will have to pay if the transaction closes?

 

Of course.  What do you mean big though?  It's 114.50-cost basis X 53%.  I'm not taxed on the entire 114.50.

 

I understand. By "big" I meant a high % of the realized gain.

[SHDL]

I'm sure everyone who owns this already knows, but the FTC put out a second request for info and apparently UK regulators are now looking into this as well:

 

https://www.ft.com/content/aa626e68-8b46-11e9-a24d-b42f641eca37

 

The spread has now seriously widened, and I could not resist the urge to buy a few shares.

[given2invest]

I sold a few weeks ago but not because I thought this wouldn't clear; it was because had a big drawdown and couldn't take the hit if it broke.  Just got lucky.  The fact they got a 2nd request is a big deal.  Options market still says 2/3 chance closes by end of year but that means its 15 up 30 down (according to options market).  The 2nd bidder at 105 might not be there anymore, especially if they have the same anti-trust issues Roche is having. 

 

It's still likely to clear.  But this wasn't supposed to be so difficult. 

[SHDL]

But this wasn't supposed to be so difficult.

 

Yes, it seemed like there was quite a bit of capitulation, especially early in the morning, for this reason.

[Guest roark33]

Looks like FTC is giving the acquisition the green light.  Still a small spread.  Would assume timeline would be pretty fast at this point.