Dermira convertible tanks on clinical trial failures; Micron eyed as stock breaks out

By Abigail W. Adams

Portland, Me., March 5 – The convertibles primary market was quiet on Monday, and the new paper that priced last week dropped out of focus as longstanding issuances took center stage in secondary market activity.

Liberty Media Corp.’s new 2.125% 30-year exchangeable debentures, which debuted in the secondary market on March 2, were slow to trade on Monday.

The exchangeable debentures, which are exchangeable into either Sirius XM Holdings Inc. common stock, or Liberty’s series C Liberty SiriusXM common stock, were solidified just below par in scattered trading activity.

The notes traded to a low of 99.2 and a high of 99.75 during Monday’s session, according to Trace data. Sirius XM Holdings stock closed Monday at $6.32, an increase of 0.32%.

Dermira Inc.’s 3% convertible notes due 2022 were in focus on Monday with the notes dropping about 25 points on an outright basis as the company’s stock plummeted 65%. The notes would need to have at least a 62% delta to break even, a market source said.

Micron Technology Inc.’s 3% convertible notes due 2043 were active on Monday with the notes gaining about 11 points outright as the Boise, Idaho-based semiconductor company’s stock broke out to its highest point in almost 18 years.

Salesforce.com Inc.’s soon-to-mature 0.25% convertible notes due April 1, 2018 were also active on Monday with the notes solidifying around 180. The 0.25% notes have gained about 8 points outright alongside gains in the stock since the company released strong fourth-quarter and year-end earnings reports on Feb. 28.

Dermira tanks

Dermira’s 3% convertible notes due 2022 tanked alongside the company’s stock on Monday after the Menlo Park, Calif.-based medical dermatology company discontinued the development of its experimental acne treatment after failures in late-stage clinical trials.

The notes dropped about 25 points to solidify around 80 in high-volume trading. Dermira stock closed Monday at $8.59, a decrease of 65.86%. The notes would have to be on a 62% delta to break even, a market source said.

“Those who set their delta at 65% were fine,” the source said.

However, most probably set the delta at 55% prior to the news, the source said.

Dermira announced on Monday that it was abandoning the development of an experimental topical acne treatment that was in late-stage clinical trials. The drug did not meet any of its endpoints in two separate phase 3 clinical trials.

Dermira’s 3% convertible notes traded around 114 for most of February, according to Trace data. Prior to Monday, the notes last traded on March 1 with a closing trade of 105.

Micron breaks out

Micron’s equity-sensitive 3% convertible notes due 2043 jumped about 11 points outright as the semiconductor company’s stock reached a 17 1/2-year high. The 3% notes climbed alongside the stock on Monday to close the day at 180.

Micron stock closed Monday at $52.03, an increase of 5.95%. The closing stock price on Monday is a new 52-week high for the semiconductor company. Micron stock had not traded above $50.00 since September 2000, Market Watch reported.

The 3% convertible notes were trading around 169 on March 2. Micron’s stock surge came as broader equity markets rallied after a four-day losing streak last week.

Micron’s second-quarter ended on March 1 with the second-quarter earnings report expected on March 22. Micron raised its guidance in early February. Earnings per share is expected to be $2.74, a 90 cent increase from the second-quarter of 2017.

Salesforce active

Salesforce.com’s soon-to-mature 0.25% convertible notes continued to attract attention on Monday with the notes solidifying around 180. Salesforce stock closed Monday at $122.50, an increase of 0.48%.

The 0.25% notes have been active and making gains alongside Salesforce.com’s stock since the San Francisco-based cloud computing company released fourth-quarter and year-end earnings reports on Feb. 28.

Salesforce.com reported fourth-quarter revenue of $2.85 billion and revenue for the 2018 fiscal year of $10.48 billion. Fourth-quarter GAAP earnings per share was 9 cents and non-GAAP earnings per share was 35 cents.

GAAP earnings per share was 17 cents and non-GAAP earnings per share was $1.35 for the 2018 fiscal year.

Prior to the earnings report, the 0.25% convertible notes were trading around 172 to 174. The convertible notes mature on April 1, 2018.

Mentioned in this article:

Dermira Inc. Nasdaq: DERM

Liberty Media Corp. Nasdaq: LTRPA

Micron Technology Inc. Nasdaq: MU

Salesforce.com Inc. NYSE: CRM

Sirius XM Holdings Inc. Nasdaq: SIRI

Liberty Sirius XM Group Series C Nasdaq: LSXMK

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