Roche-Spark deal review in U.K. unnerves M&A watchers—and they were spooked already

Despite the meager news in the CMA advance, market watchers’ interest has boomed as other megamergers have received the same—if not greater—level of scrutiny from patient groups and politicians. For good reason, too: One blocked merger on antitrust grounds could spell trouble for other deals.

When it comes to highly publicized M&A deals, no marriage has been more delayed—and scrutinized—than Roche’s pending $4.8 billion pick up of Spark Therapeutics. So much so that even a small administrative advance in the UK has triggered headlines.

On Wednesday, the UK’s Competition and Markets Authority (CMA) opened the public comment period for its antitrust investigation of the deal. It’s hardly an escalation of the CMA’s initial enforcement order from June that helped push Roche to delay the merger deadline back to April 30, 2020, but enough to snag attention in major news outlets.

Take AbbVie and Allergan’s $63 billion merger, for instance. Earlier this month, a legion of public interest groups asked the FTC to step in and investigate the deal on claims both companies had engaged in "anticompetitive conduct" in the past and could do so in the future.

The groups, which include Families USA, Doctors for America, and Public Citizen, specifically cited both companies’ use of price hikes, controversial rebate deals and aggressive patent enforcement strategies to hinder competition for megablockbusters like AbbVie’s Humira and Imbruvica and Allergan’s Botox.

So far, those critiques haven’t gained ground with the FTC, but Allergan has said it will be forced to hive off two drugs—candidate brazikumab and Zenpep—to pass muster. Analysts don’t predict regulators will cast undue scrutiny on the deal outside of the selloffs, but they admit anything could happen with a more rigid focus on keeping competition in the market.

One deal where the FTC has played a heavy hand is Bristol-Myers Squibb’s $74 billion acquisition of Celgene. In a demand that left analysts scratching their heads, the FTC ordered Celgene to divest its $1.6 billion-per-year psoriasis med Otezla on the middling grounds of an overlap with a Bristol investigational candidate. Analysts were puzzled over the demand, particularly because Otezla lacks the "star power" of its market rivals—not the least of which is Humira.

"We believe this is a (potential) read-through that the FTC is being tougher on regulating competition," Jefferies analysts said in a note to investors in June.

Amgen eventually agreed to pick up Otezla in a $13.4 billion deal in August, which some analysts called savvy despite concerns the buyout would spark FTC pushback of its own: The drugmaker already markets blockbuster TNF inhibitor Enbrel.

So far, the CMA has not said that its investigation would push the Roche-Spark deal back further as its U.S. counterpart, the Federal Trade Commission, continues a review of its own. The comment period will stay open until Oct. 11.

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