AMAG Pharmaceuticals tumbles outright on earnings miss; Priceline edges up; Ctrip in line

By Rebecca Melvin

New York, Nov. 3 – AMAG Pharmaceuticals Inc.’s convertibles plunged on an outright basis in active trade on Tuesday after the Waltham, Mass.-based specialty pharmaceutical company reported quarterly results that missed estimates. AMAG common shares fell 23%.

On a hedged basis, the AMAG convertibles expanded about a point on a heavy delta of 90%, according to one trader, while on a lighter delta of about 85%, the bonds were seen to have contracted about 0.625 point, a second trader said.

AMAG guided full-year estimates for its largest drug, Makena, lower, although total full-year revenue remained in line with previous expectations.

AMAG was the most actively traded name among health care convertibles, but the Medicines Co. was also in focus as the underlying common shares of the Parsippany, N.J.-based health care company jumped 10% after reporting earnings that missed estimates, but revenue that beat expectations.

Medicines reported on divestitures and the stock gained, so there were a lot of inquiries in the name, the trader said, adding that the convertible bonds rose in line with shares.

Elsewhere Priceline Group Inc.’s convertibles were active, with the Priceline 0.3% convertibles last quoted at 130.75 versus an underlying share price of $1,471.50. That represented a slight gain on a swap basis.

“Depending on delta, it was up a little, like about three teenies,” a New York-based analyst said.

Ctrip.com International Ltd. was trading in line on a swap basis, but lower on an outright basis, as shares of the Shanghai-based travel services company slipped. The securities were taking another breather between outsized gains notched following news of its Qunar merger.

The Ctrip 1.25% convertibles due 2018 traded at 134 to 135, which was down from 135 to 136 on Monday.

In general there was some better buying activity among outright players as equities trended higher throughout the session, while things were quieter for hedged players, an analyst said.

A second trader, who focuses mainly on health care names, said that the secondary market remained quiet for the second day this week, and barring new issue activity, he expected things to remain quiet.

“It’s been quiet since month end, and there are only a few more weeks for calendar, so we’ll see what happens; but there is not a lot of volume in health care,” he said.

In general, small cap health care stocks have pushed up recently, but bond prices have not kept pace, a trader said. For example, Fluidigm Corp. shares surged last week by 62%, but the bonds moved up only about 9.5%.

With the Fluidigm shares at $11.95, the bonds are at about 68.75 bid, 69.75 offered, the trader said.

Last week with shares lower the bonds were at 63.

“That is still lagging,” he said of Fluidigm, adding that the jury is still out on whether equity players are right or the bond players are right. If the share price remains around the current level, the trader thought the bonds would pull higher.

“The last time the stock was around $12.00, the bonds were in the mid-70s. If the stock remains here, I think the bonds will move up,” he said.

Meanwhile, Tesla Motors Inc.’s shares lagged ahead of the electric car maker’s quarterly earnings report that was released after the market close. The bonds were little changed in thin trade during the session. But shares popped in after-hours action for a 10% gain.

The Tesla 0.25% convertibles, or the A tranche, due 2019 changed hands during the session at 90.42, and the Tesla 1.25% convertibles, or the B tranche, due 2021 traded at 88.15. Both prices were at the low end of their previous ranges, according to Trace data.

The Tesla 1.5% convertibles due 2018 were not seen in trade but were last at 177.47, according to Trace data.

Tesla shares closed down $5.44, or 2.5%, to $208.35.

AMAG drops outright

AMAG’s 2.5% convertibles due 2019 were quoted at 134.625 bid, 135.625 offered versus an underlying share price of $31.40 in the last hour of trading on Tuesday. The bonds had previously been around 160.

AMAG shares fell $9.55, or 23%, to $31.61 in heavy volume on Tuesday.

The AMAG convertibles were very active, traders said.

One trader had the bonds up about a point on a swap, or hedged, basis. But a second trader saw them lower on swap by 0.625 point.

Going into the session on a delta of 85% made the bonds contract, while going in on a heavier delta saw them expand, a trader said. He moved his delta lower to an 83% after the earnings news.

AMAG reported a third-quarter loss of $20.6 million on revenue of $96.2 million.

Excluding one-time items, the company earned $42.3 million, or $1.02 per share, which was short of the consensus estimate of $1.18 per share.

AMAG also lowered its full-year sales outlook for Makena, a drug acquired in its Lumara Health purchase. Makena sales are now expected to be between $250 million and $260 million per year, which is down from $260 million and $285 million expected previously.

Cash earnings will be between $165 million and $180 million, which is down from $180 million and $195 million, the company said.

“AMAG was the big trader and that was about it,” a market source said.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Ctrip.com International Ltd. Nasdaq: CTRP

Fluidigm Corp. Nasdaq: FLDM

Medicines Co. Nasdaq: MDCO

Priceline Group Inc. Nasdaq: PCLN

Tesla Motors Inc. Nasdaq: TSLA

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