Medicines convertibles in focus on buyout; Intercept expands; Liberty Media improves

By Abigail W. Adams

Portland, Me., Nov. 25 – The convertible secondary space was quiet on Monday despite equities again breaking out to record highs on positive news from the trade front.

While trade war news propped up the overall market, Monday was a strong day for the biotech space with merger and acquisition news buoying several small-cap biotech companies.

Trading activity focused on Medicines Co.’s convertible notes following news a long-speculated buyout by Novartis had come to pass.

The notes were trading at a slight discount to their takeout price. However, two of the company’s three tranches improved on a dollar-neutral, or hedged, basis, sources said.

Outside of Medicines, volume was light and was expected to remain light for the remainder of the week due to the approaching Thanksgiving holiday on Thursday.

Liberty Media Corp.’s newly priced 2.75% exchangeable notes due 2049 remained one of the top volume movers in the secondary space with the notes improving on a dollar-neutral basis.

Intercept Pharmaceuticals Inc.’s convertible notes were making gains on an outright and dollar-neutral basis after the Food and Drug Administration expedited the review of a product in the company’s pipeline.

Medicines buyout eyed

Medicines’ convertible notes were in focus on Monday following news of a highly anticipated buyout of the company by Novartis.

The convertible notes will disappear as part of the all-cash transaction, a market source said.

Medicines’ 2.75% convertible notes due 2023 saw the heaviest volume of the three tranches. The notes jumped more than 26 points outright to a 172 handle.

The notes gained about 1 point on a dollar-neutral basis, a market source said.

The 2.5% convertible notes due 2022 rose almost 40 points to 250. They improved about 2 points dollar-neutral.

Medicines’ most recently priced 3.5% convertible notes due 2024 were not actively traded. However, the notes were up to triple par, a market source said.

The convertibles were largely unchanged on a dollar-neutral basis.

While Monday marked a large move for the convertible notes, they were still trading at a slight discount to their takeout price, a source said.

The 3.5% tranche, which priced about one year ago, is the smallest and least liquid of Medicines’ convertible notes with $172 million outstanding.

The 2.5% convertible notes have $400 million and the 2.75% convertible notes have $402.5 million outstanding, according to Trace data.

News broke early Monday that Novartis would acquire Medicines, the maker of the cholesterol medication inclisiran, for $85.00 a share plus convertible debt for a total of $9.7 billion.

Medicines stock jumped on the news and traded as high as $84.10 before closing the day at $83.75, an increase of 22.17%.

Medicines stock and convertible notes surged earlier in the month on speculation a buyout of the company was near at hand.

Intercept gains

News of Medicines’ buyout helped buoy the overall biotech space with several small cap biotech companies the major benefactors, a market source said.

While a mid-cap company, Intercept Pharmaceuticals’ stock and convertible notes were trending upwards alongside the general sector and due to company-specific news.

The convertible notes gained on both an outright and dollar-neutral basis after the FDA granted priority review for a product in the pharmaceutical company’s pipeline.

Intercept’s 3.25% convertible notes due 2023 traded up about 1.5 points outright to 93.125 in the mid-afternoon.

They were improved about 0.5 point on a dollar-neutral basis, according to a market source.

The 2% convertible notes due 2026 traded up about 6 points outright to a 111 handle. They gained 0.25 point dollar-neutral.

Intercept stock traded as high as $100.00 and as low as $93.11 before closing the day at $96.34, an increase of 8.38%.

Stock popped after the FDA granted priority review for Intercept’s New Drug Application for obeticholic acid, a treatment for NASH, and set a date in March 2020 to review the application.

Intercept is in the running to be the first biotech company to receive FDA approval for a treatment for NASH, which is a fatty liver disease, sources said.

Liberty Media gains

Liberty Media’s newly priced 2.75% exchangeable notes due 2049 continued to make gains their second day in the secondary space.

The 2.75% notes traded up to 101.125 on Monday.

The notes gained 0.5 point on a dollar-neutral basis, a market source said.

The notes were among the few issues to see more than $10 million in reported volume during Monday’s session.

While the notes initially rose to 101 on their market debut last Friday, they closed the day closer to par.

Sirius XM Holdings Inc. stock, which the notes are exchangeable into, closed Monday at $6.85, an increase of 0.66%.

Mentioned in this article:

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

Medicines Co. Nasdaq: MDCO

Sirius XM Holdings Inc. Nasdaq: SIRI

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