| June 14, 2019

Regulatory Demands Further Delay Roche’s Acquisition Of Spark Therapeutics

Nqaba Matshazi

Nqaba has been working as an investigative journalist for the last 10 years. He has written for various media outlets across the world. Nqaba has been working as an investigative journalist for the last 10 years. He has written for various media outlets across the world.
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Swiss drugmaker, Roche was hoping to tie up the acquisition of gene therapy firm, Spark Therapeutics for $4.8 billion by the second quarter of this year, but a request for additional information and documentary material from the U.S. Federal Trade Commission (FTC) may have put paid to those hopes.

Both companies stated that, in spite of the second request, they remained committed to the deal and were “working cooperatively and expeditiously with the FTC in connection with its review.”

 

In a media release, the two companies said that due to the “second request” from the FTC, the offer for purchase waiting period, which was due to end on June 14, had now been extended to July 31.

“The effect of the Second Request is to extend the waiting period until 10 days after Roche has substantially complied with the Second Request, unless the waiting period is terminated earlier by the FTC or the parties have entered into a timing agreement with the FTC,” the statement said.

More uncertainty lies ahead

The transaction could face further turbulence since the United Kingdom’s Competition and Markets Authority (CMA) has opened its own investigation to obtain more information about Roche’s proposed acquisition of Spark.

“The investigation will determine whether the CMA considers it has jurisdiction over the acquisition; and, if so, whether the CMA considers that the acquisition may be expected to result in a substantial lessening of competition in the UK such as to warrant a more detailed review,” the two companies said.

Furthermore, the companies said that, pending the outcome of the investigation, “the CMA has issued an Interim Enforcement Order that would become effective upon the closing of the transaction and would require Roche to hold separate the Spark business. The parties are working cooperatively with the CMA and will continue to do so.”

Roche agreed to acquire Spark in February of this year, with the view that the deal would close by the end of June but, so far, the transaction has been pushed back at least three times, raising questions about whether it will ever be concluded.

In May it was announced that Roche was postponing the refiling of its pre-merger notification and report form to the FTC for the third time because the federal agency said it needed more time to complete its evaluation.

The FiercePharma website reported that, in the biopharma sector, it was uncommon for the FTC to stall this much for a deal that was worth less than $5 billion. However, the website said Roche had insisted that such a delay “is not unusual in a transaction of this type.”

Further complicating the deal is that, in April, some Spark shareholders filed lawsuits against the transaction, claiming that the company’s shares had been undervalued.

Exploring the transaction

Under the terms of the agreement, Roche was to begin a tender offer to acquire all outstanding shares of Spark Therapeutics’ common stock at a price of $114.50 per share in cash. The closing of the tender offer will be subject to a majority of Spark Therapeutics’ outstanding shares being tendered.

Once the tender offer was complete, Roche would then acquire all remaining shares at the same price of $114.50 per share through a second step merger.

If the deal is closed, Spark will continue its operations in Philadelphia as an independent company within the Roche Group.

Despite all these hurdles, Roche and Spark still expected the deal to close in the first half of this year, but the FTC Second Request may mean that is no longer possible.

Spark is a tempting proposition for Roche because the Swiss drugmaker was to include the latter’s experimental gene therapy for hemophilia A, as well as its platform to develop other treatments for genetic diseases, into its portfolio.

When the transaction was first announced, Roche Chief Executive Officer, Severin Schwan, expressed optimism that the Philadelphia-based firm’s expertise in the entire gene therapy value chain could offer important new opportunities for the treatment of serious diseases.

“In particular, Spark’s hemophilia A program could become a new therapeutic option for people living with this disease. We are also excited to continue the investments in Spark’s broad product portfolio and commitment to Philadelphia as a center of excellence,” Schwan said at the time.

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