Gilead, United Continental slip; Dendreon, WebMD, GM islands of activity in quiet session

By Kenneth Lim

Boston, April 21 - Gilead Sciences Inc. slipped on a quiet Thursday after the company missed expectations for its first-quarter earnings and as the rest of the convertible market saw spotty trading.

United Continental Holdings, Inc. also lost some altitude after the airline said it lost money in the first quarter under the weight of higher fuel costs.

The convertible market in general saw only thin volumes with bond markets closing early ahead of the Good Friday holiday.

"Mostly the sound of crickets" can be heard, one sellsider said of the market. "It's been pretty slow."

But the market could pick up again once it reopens after the weekend, because companies are in the thick of reporting season, the sellsider said.

"We've got a lot more earnings coming up, so I'm sure there'll be some trading around that," the sellsider said.

Some names seen trading were Dendreon Corp.'s 2.875% convertibles due 2016, which changed hands at 110.5 versus a $40.25 stock price. The common stock closed at $40.89 on Thursday, lower by 0.73%, or 30 cents.

Dendreon is a Seattle-based biotech that recently received regulatory approval for its prostate cancer drug Provenge.

WebMD Health Corp. was a touch lower with its stock, with the 2.25% convertible due 2016 seen at 99.25 against a stock price of $55.30.

WebMD, a New York-based provider of online health information, saw its common stock eased lower by 0.52%, or 29 cents, on Thursday to close at $55.25.

General Motors Co.'s 4.75% series B convertible preferreds traded at 46.80 versus a common stock price of $29.95, up by about a point. General Motors' common stock closed the day at $30.95, up by 3.41%, or $1.02.

General Motors is a Detroit-based automaker.

Gilead slips with stock

Gilead's 1.625% convertibles due 2016 retreated by about 1 point outright on Thursday after the company reported disappointing quarterly results.

The convertibles traded at 112.75 versus a common stock price of $39.50. The common stock closed the day lower by 4.22%, or $1.72.

Gilead, a Foster City, Calif.-based biopharmaceutical company, said late Wednesday that it earned $651.1 million in the first quarter of the year, or 80 cents per share. That was a drop from the $854.9 million, or 92 cents per share, that the company earned in the year-ago period.

The company said the drop was mainly due to a decrease in sales of the flu medication Tamiflu. Excluding items, earnings per share was 87 cents, short of Street estimates of about 97 cents. But Gilead maintained its full-year sales forecast of $7.9 billion to $8.1 billion.

"I haven't looked at it very closely yet, but I can tell you it was way off estimates," a convertible analyst said. "They've singled out Tamiflu and their HIV drugs as the main culprits, but I'll have to take a closer look to see how much that's the case."

The analyst said the company's credit quality nevertheless remains very strong, and there could be opportunities for outrights to pick up the paper if Gilead stock suffers because of the results.

"Looking as an outright, I think it's still a very solid name," the analyst said. "If this is an unusual bump in the road for them, and it looks that way, I think there could be an opportunity here if the converts cheapen up a little."

United Continental lower

United Continental's pre-merger convertibles lost some ground outright on Thursday after the company reported a first-quarter loss.

The old Continental Airlines 4.5% convertibles due 2015 traded at 124.21 outright, while the old UAL Corp. 6% convertibles due 2029 were seen at 260.5 outright.

United Continental common stock closed the day at $20.84, a 0.9% or 19 cent decline.

"They're getting a bit of a look from the market because of earnings," a trader said.

United Continental, the Chicago-based air carrier formed by the merger of United and Continental airlines, said Thursday that it lost $213 million in the first three months of the year on the back of higher fuel costs.

The loss was 65 cents per share, or 41 cents per share when excluding 24 cents per share from expenses related to the merger. Analysts were predicting a pre-charges loss of 48 cents per share.

The trader said the company's loss was not a surprise, and at least the airline beat expectations. But investors should not get carried away.

"They're in a better position than they were before the merger," the trader said. "Having said that, it doesn't take a lot to get into a better position when your previous position was all the way at the bottom. They're still struggling, but at least it looks like there could be some light at the end of the tunnel for them."

Mentioned in this article:

Gilead Sciences, Inc. Nasdaq: GILD

United Continental Holdings, Inc. Nasdaq: UAL

Dendreon Corp. Nasdaq: DNDN

WebMD Health Corp. Nasdaq: WBMD

General Motors Co. NYSE: GM

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.