Sequenom jumps outright, adds on hedge; InterMune adds in line; Endeavour up a point

By Rebecca Melvin

New York, Jan. 9 - A couple of biotechnology issues garnered focus in U.S. convertibles on Thursday as their underlying shares popped on company-specific news. The remainder of the market was pretty quiet ahead of the U.S. December jobs report expected Friday and before new issuance flow has resumed for the new year.

Sequenom Inc.'s 5% convertibles jumped on an outright basis early Thursday and were better on a dollar-neutral, or hedged, basis by about 0.25 point. The bonds were pulled into active trade on positive news that the San Diego-based provider of genetic analysis products was granted patent protection in Europe for its analytical methods for detecting fetal aneuploidy.

After the market close, the company announced that it has signed a second national coverage contract with a leading benefits provider.

InterMune Inc.'s 2.5% convertibles due 2018 also traded actively and moved up in line with the underlying shares, a trader said, after the Brisbane, Calif.-based biotechnology company guided fourth quarter revenues above estimates and said it sees full-year 2014 revenue in line with consensus.

Endeavour International Corp.'s 5.5% convertibles due 2016 firmed about a point as the underlying shares of the Houston-based oil and gas company continued to ride higher on positive production numbers reported on Monday. The company also said on Monday that it plans to refinance its revolving credit facilities.

Archer-Daniels-Midland Co.'s 0.875% convertibles due Feb. 15, 2014 continued to be a focus of trade. The ADM bonds were a little lower in line with the underlying shares early Thursday, or around 102.125 to 102.875, which was down from 103ish Wednesday. The shares were down about 1% at that point, and pared losses for a 0.5% loss.

The ADM bond has a net share settlement feature, which is typical of new issuance in the past two or three years, and which is indicated to trigger a couple of weeks prior to the maturity, according to the indenture. That has implications for the value of the convertible as it shortens the optionality of the bond, a New York-based sellsider pointed out.

The primary market was quiet for another day. There have been no new issues launched or priced in the U.S. market since the new year started six sessions ago. But the U.S. convertibles primary market ended 2013 on a strong note, and traders think that the past week represents a calm before the storm.

"Once it gets going I think we'll get a bunch," a Connecticut-based trader said about new convertible issuance.

Stocks were volatile but ended little changed after the Labor Department said the number of applications for unemployment insurance payments declined by a better-than-expected 15,000 to 330,000 in the period ended Jan. 4. Economists had expected claims to come down to 335,000. Recent labor data points to a stronger labor market, and expectations have grown for a positive December jobs report on Friday.

Sequenom adds on hedge

Sequenom's 5% convertibles changed hands at 92.5 against shares that were up 9% at $2.68 early Thursday. That compared to 88.75 bid, 89.25 offered versus Wednesday's share close at $2.46, a trader said.

It represented an expansion of 0.25 point on a hedged basis, a Connecticut-based trader said.

The Sequenom stock pared some of its initial gain to end up 18 cents, or 7.3%, at $2.64.

Late Wednesday Sequenom announced that the company had received a European patent for its methods of detecting fetal aneuploidy.

After the market close Thursday, the company announced that its subsidiary Sequenom Laboratories has signed a second national U.S. coverage agreement with a benefits provider for its prenatal diagnostic testing services. Sequenom's MaterniT21 Plus test is intended for use in pregnant women at increased risk for fetal chromosomal abnormalities. Sequenom said that the additional coverage contract brings the number of people covered for the test to more than 113 million.

InterMune adds in line

InterMune's 2.5% convertible bonds due 2018 traded up to about 92 from 89ish with the underlying shares jumping 9.5%, or $1.44, to $16.57.

The bonds were said to have risen in line with the underlying shares.

The 2018 convertibles "nuked up on my delta of 40% to 45%; they didn't come in," a trader told Prospect News.

The company, which is focused on treatments for pulmonary, infectious and hepatic diseases, said fourth quarter revenue for its lung disease drug Esbriet was better than expected and it has had strong revenue and that full year revenue was in line with prior guidance.

The unaudited Esbriet revenue for the fourth quarter of 2013 totaled about $25.6 million, compared with $8.2 million in the fourth quarter of 2012, according to a news release.

Unaudited Esbriet revenue totaled about $70.2 million for the full-year 2013, compared with $26.2 million in 2012, the company said. Higher revenues in both the three- and 12-month periods of 2013 were driven by both increased penetration in countries in which Esbriet was launched in late 2011 or 2012 as well as additional launches of Esbriet in European countries and Canada during 2013.

Endeavour firms

Endeavour's 5.5% convertibles due 2016 firmed a point to the 84 bid, 85 offered context from 83 bid, 84 offered.

Endeavour shares added 14 cents, or 2.4%, to $5.97.

They traded up about a point from where they were before, a Connecticut-based trader said, attributing the strength to production figures the company released on Monday.

At that time, Endeavor said that current production from its central North Sea Rochelle field first well is 65 million to 70 million cubic feet of gas per day with an additional 2,500 to 3,000 barrels of oil equivalent per day of liquids production. The first Rochelle well came online in October, and Endeavour has a 44% working interest in the field. Endeavour also reconfirmed its fourth-quarter guidance.

The company also announced on Monday that it plans to refinance its existing revolving credit facilities.

Mentioned in this article:

Archer-Daniels-Midland Co. NYSE: ADM

Endeavour International Corp. NYSE: END

InterMune Inc. Nasdaq: ITMN

Sequenom Inc. Nasdaq: SQNM

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