Biotech names eyed after Medivation takeout news; BioMarin convertibles add with shares

By Rebecca Melvin

New York, Aug. 22 – Convertibles traders were eyeing U.S. biotechnology-sector convertibles on Monday after Pfizer Inc. said that it has agreed to buy Medivation Inc. for about $14 billion, or $81.50 per share, representing a 21% premium to Medivation’s most recent common-share price.

Medivation, which makes one of the market’s leading prostate cancer drugs, Xtandi, is a former convertibles issuer but has no convertible issue currently outstanding. News of the takeover agreement signaled the potential that other buyout agreements may follow suit, which could impact the pricing of the convertible paper of those companies.

Potential candidates for follow-on M&A activity are other oncology companies such as Incyte Corp., Clovis Oncology Inc., Array BioPharma Inc., Tesaro Inc. and Exelixis Inc., a convertibles trader said.

Of the convertibles of those companies, the Clovis and Array convertibles that currently trade below par were seen as most worthwhile to dig in to, according to the trader.

One biotechnology name not on the oncology short list, but which was trading on Monday, was BioMarin Pharmaceutical Inc., and that company’s two series of convertibles bonds were higher on an outright basis, and looking about in line on a dollar-neutral, or hedged, basis, along with a gain in the underlying shares of the San Rafael, Calif.-based company. A third BioMarin convertible was indicated higher but not seen to have traded.

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