Clovis jumps outright, on swap; Medicines, Horizon Pharma trade; Asian internet names eyed

By Rebecca Melvin

New York, April 13 – Clovis Oncology Inc.’s convertibles surged on an outright basis and opened up on a dollar-neutral basis in active trade on Monday as shares of the Boulder, Colo.-based biotechnology company jumped following a Goldman Sachs upgrade that included the opinion that the company has increased M&A prospects, traders said.

Also in the health care space, the Medicines Co.’s convertibles traded actively amid news that the company’s intravenous blood clot preventer is likely to be approved by the U.S. Food and Drug Administration.

The Medicines bonds have been “very resilient,” a trader said, adding that market players had not been involved in the name with the preannouncement in mind.

Horizon Pharma plc’s convertibles changed hands at 126 during the session when shares were essentially unchanged. After the market close, the Dublin, Ireland-based specialty pharmaceutical company announced a secondary stock offering for 12 million shares, and shares slipped in after-hours action.

On Friday, Horizon announced that its Actimmune treatment for a degenerative neuro-muscular disorder received fast track designation from the FDA.

Horizon priced its $400 million offering of 2.5% convertibles in early March. The secondary stock offering was seen as coming fast on the heels of the convertible deal.

“They are really packing in the dry powder,” a trader said.

Several Asian internet names were active in trade that represented follow-through on the back of strength last week.

These bonds had put in gains of between 0.5 point and 2 points on swap across the sector in tandem with strong Asian stock markets on Thursday.

Ctrip.com International Ltd.’s 1.25% convertibles due 2018 were trading around 110 with the underlying shares up fractionally. The bonds were up about as much as half a point on an outright basis from Friday.

Ctrip shares faded into the close and ended down 5 cents at $63.00.

SINA Corp.’s 1% convertibles due 2018 were trading around 93, which was in line with their previous level. The bond, which trades mostly outright, was not pressured by the Shanghai-based social media company’s sharply lower stock price, a New York-based sellsider said.

SINA shares were down $2.40, or 6.4%, at $35.11 at midday and closed at $35.38.

There was also little bit of Qihoo 360 Technology Co. Ltd. trading. The Qihoo 1.75% convertibles due 2021, or the B tranche, were seen trading up at 84, according to Trace data, and a market source put the level “in and around 85.” On Friday the Qihoo Bs were 82 to 84.

Qihoo shares were up around 3.5% at midday but ended higher by just 0.5% at $59.83.

Clovis expands on swap

Clovis Oncology’s 2.5% convertibles were quoted at 158.625 bid, 159.375 offered at the close by one trader and at 158.5 bid, 159.5 offered by a second trader, with shares at $87.49.

That was a jump of about 17 or 18 points on an outright basis, and it was up 0.5 point to a point on a dollar-neutral, or hedged, basis.

Clovis shares jumped $10.09, or 13%, to $87.49.

Goldman Sachs upgraded the company to “buy” from “neutral” and raised its price target to $117.00 from $68.00.

Goldman said it is raising its M&A rank for Clovis to 1 from 2 given its increased confidence in the differentiated profile of Rociletinib, its pipeline lung cancer drug, and the likelihood that this drug will demonstrate better efficacy than the current standard of care for T790M+ lung cancer patients.

Based on a review of historical M&A in the cancer space, Goldman notes that acquisitions tend to occur after a drug is approved and prior to new data for expanded indications. For Roci, “both of these data points will likely occur in the next 12 months.”

Goldman anticipates a mid-2015 filing for FDA approval and a first-quarter 2016 launch, and it raised its adjusted peak sales for Roci and sees a higher probability of a takeout.

Last week, Clovis’ Rucaparib ovarian cancer drug was designated breakthrough treatment for the treatment of advanced ovarian cancer in some patients by the FDA.

The FDA designation applies to Rucaparib when it’s used as a stand-alone treatment in women who have already received chemotherapy and who carry the BRCA gene mutation, which significantly increases the risk of breast and ovarian cancer.

The stock made its gains on Monday on the back of a strong run last week but came in slightly at the end of the session along with the broader markets.

Mentioned in this article:

Clovis Oncology Inc. Nasdaq: CLVA

Ctrip.com International Ltd. Nasdaq: CTRP

Horizon Pharma plc Nasdaq: HZNP

The Medicines Co. Nasdaq: MDCO

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

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