Valeant woes cast a pall over convertible biotech/health care; energy shows resilience

By Rebecca Melvin

New York, March 15 – A wave of selling hit the U.S. convertibles biotech/health care sector on Tuesday on the heels of Valeant Pharmaceuticals International Inc.’s news bombshell that it is in danger of events of default tied to the delay of its annual report filing.

The Laval, Quebec-based drug company had previously announced that it was delaying its 2015 10-K report due to a review of accounting matters by an ad hoc committee of the company’s board of directors.

Valeant said on Tuesday that it believes its liquidity is sufficient to cover credit agreements and bond indentures that could be affected by specific reporting requirements. But it also cut its 2016 sales and earnings outlook, and shares plunged 51%.

While Valeant is not a convertibles issuer, problems facing the company affect other companies in the convert space.

Horizon Pharma plc’s convertibles and common shares fell on Tuesday. The Irish pharmaceutical company was subpoenaed in November for information about its patient assistance programs and other aspects of its marketing and commercialization activities.

The convertibles of Dublin-based Endo Pharmaceuticals plc were also hit, although there are very few bonds of the 2018 bond issue left outstanding.

Meanwhile, the usual energy suspects were under watch, including Whiting Petroleum Corp., which was a touch weaker, and the convertibles of Chesapeake Energy Corp., which were essentially unchanged.

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