February 2019 Performance
I was able to squeak out a gain in February despite the negative
performance in Constellation Brands, which is the second largest position in
the portfolio. Investors didn’t like what they heard with Constellation Brands (Ticker: STZ) at
the CAGNY conference and sold off the stock. I didn’t hear anything concerning
with Constellation Brands during the CAGNY conference other than a slight down
tick in beer growth, which is expected. I like the fact they are
focusing on returning ~ $4.5 billion to investors through share buy backs and
dividends over the next 3 years. Constellation Brands is a money making machine
with significant upside if Canopy Growth works out.
In terms of the merger arb game, I’ve been building a position (long
common and short puts) in Spark Therapeutics (Ticker: ONCE), which is being acquired by Roche (Ticker: RHHBY) for $114.50 in cash via a tender offer. This deal should close in early April.
I see no antitrust issues so this one should be smooth sailing with a closing within
~ 45 days of announcement.
The way the market is rocketing up, I just hope I can keep pace. I’m
not going to chase anything, but just continue to focus on high probability arb
plays and let my growth stocks do their thing.
2019 Performance = +11.37% with the running monthly returns as follows:
January +7.4%
January +7.4%
February +3.7%
18 Comments:
Can you list your portfolio stocks?
Thanks
The current holdings are as follows: AAPL, BABA, MA, QGEN, SNY, STZ and V.
ONCE: any news? Odd it’s trading up to 114.
ONCE: I'm wondering as well...
ONCE: FDA commissioner leaving, delay in other gene therapy approval. Value of Approved meds went up?
ONCE: shouldn’t the tender offer have started by now?
ONCE: Roche expects to launch the tender within 10 biz days of deal announcement. So probably this Friday...
Looks like the tender launched today.
Hopefully no bumps till apr 3
ONCE: how can they mess up HSR filing.
They didn’t mess up the filing. The regulators needed additional time for the review so they did a “pull and refile”, which resets the clock for another 15 days. The regulators aren’t given much time to review a tender offer filing. Spark does name Roche as a competitor in the 10K for hemophilia A, but it also names many other competitors as well… This additional time should resolve any questions the regulators may have. This is a very competitive market. I would be surprised if there was a second request.
From Spark’s 10K:
SPK-FVIII. The standard of care for moderate to severe hemophilia A is intravenously administered factor VIII protein or its derivatives. The main competitors with product candidates under development, or approved, to treat hemophilia A include BioMarin Pharmaceutical Inc., Ultragenyx Pharmaceuticals, Inc., in collaboration with Bayer HealthCare, Shire PLC, uniQure N.V., Sangamo Biosciences, Inc. in collaboration with Pfizer, Telethon Institute for Gene Therapy in collaboration with Bioverativ, Inc., Novo Nordisk A/S, Roche Holding AG, and Sanofi.
ONCE: Thanks for the clarification. So they can receive early HSR termination anytime now?
Yes, HSR early termination can be received prior to 4/2. The current HSR deadline is 4/2 (11:59 PM).
Roche does not have a gene replacement therapy product for hemophilia A. Their main product for this field is intravenous recombinant factor VIII which needs to be injected regularly. Spark's solution is gene replacement therapy and it seems like Biomarin's product is the most advanced and most direct competitor for factor VIII both in phase 3 FDA review.
Pfizer and Uniqure are most advanced competitors in Factor XI (hemophilia B) for Spark.
Others are starting their gene therapies as well in earlier stages.
I agree with money turtle there is more than enough competition in the field.
ONCE: was hoping for FTC approval in 15 days. Have you seen pull and refile application get HSR early termination or it goes full 30 days
From what I've experienced, the "pull and refile" goes a full 30 days. We'll know next week, but I can't even imagine how this merger is anti-competitive. Roche definitely plans to develop Sparks gene therapy for hemophilia, not trash it. And lots of strong competitors in the hemophilia gene therapy space.
Are you involved in VSM? The board is accepting Merck into negotiation
No, not familiar with the VSM deal.
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