Isis adds on hedge after drug data disappoints; LinkedIn adds outright, on hedge

By Rebecca Melvin

New York, Feb. 3 – Convertibles trading was driven mostly by company-specific news on Tuesday as equities and crude oil prices rose.

Convertibles in the biopharmaceutical sector were firm despite the generally “the soft tape” that saw shares in the industry weak, a biotech convertibles trader said.

But Isis Pharmaceuticals Inc.’s convertibles traded down on an outright basis with a decline in the stock shares, but were better on a hedged basis after the Carlsbad, Calif.-based gene-based drug developer announced that its experimental antisense drug ISIS-PTP1B Rx may have only marginal glucose lowering capabilities, the trader said.

The Isis convertibles dropped by about 5 points on an outright basis, but expanded about 0.5 point on a dollar-neutral, or hedged, basis.

“Our tape is a little soft today,” he said. “There may have been a little rotation [out of the sector], as the market is up, in general,” he said. Nevertheless biotech convertibles looked firm and Isis, which accounted for the lion’s share of trading in the sector, was strong.

Shares of Salix Pharmaceuticals Ltd. bucked the general down trend, jumping on takeover rumors that Valeant Pharmaceuticals International Ltd. and Shire plc are mulling bids for the Raleigh, N.C.-based specialty drug company, a trader said.

Salix’s 1.5% convertibles due 2019 were seen up at 219 with its shares higher by more than 5% at $140.50. The Salix 3.75% convertibles, which are less frequently traded, were seen in a 303 context.

Elsewhere, LinkedIn Corp.’s convertibles were better on an outright basis and the bond ticked up on swap after Goldman Sachs added the Mountain View, Calif.-based business-oriented social networking service to its Americas conviction buy list and raised its price target on the shares to $280.00 from $250.00.

The LinkedIn 0.5% convertible senior notes due 2019 were at 106.70 bid 107 offered against an underlying share price of $229.81, a Connecticut-based trader said.

That was better by 0.125 point on a swap basis, he said. On an outright basis, that level compared to 104.75 bid, 105.25 offered with the underlying shares at $222.00 late Monday.

Beleagured Molycorp Inc. saw a bit of trading in its convertible bonds, which edged up as shares of the Greenwood Village, Colo.-based rare earths company surged again following news on Monday that rare earths production at its Mountain Pass, Calif. facility had risen in the fourth quarter.

The Molycorp 6% convertibles traded to as high as 14 from 11 or 12; and the Molycorp 5.5% convertibles, which trade less frequently than the 6% bond, changed hands at 15 on Tuesday, according to Trace data.

Molycorp shares gained 32 cents, or 68% to $0.80.

The U.S. convertibles primary market remained quiet on Tuesday.

Isis expands after disappointing data

Isis’ 1% convertibles due 2021 were seen at 116.375 bid, 117.125 offered with the underlying shares at $64.25 late in the session, a trader said.

That was down on an outright basis by about 5 points, but better on a hedged basis by about 0.5 point, assuming a delta of about 83%.

Early in the session, the bonds were quoted at 115 bid, 115.5 offered versus an underlying share price of $63.50, which was down on an outright basis by 6 points as they headed into the day’s opening at 121.

Isis shares sank as much as 10% in the early going, but pared losses to end the session down just $3.97, or 6%, at $64.70.

The bonds fell on an outright basis with lower shares after the Carlsbad, Calif.-based gene-based drug developer announced that its experimental antisense drug ISIS-PTP1B Rx achieved statistically significant reductions in body weight and hemoglobin A1c (HbA1c) for type 2 diabetic patients compared with a placebo at 36 weeks.

The diabetes drug may only have marginal glucose lowering, and investors were hoping for something more positive, a trader said.

“The phase 2 results at first read do not look as competitive as some were hoping,” the trader said.

But Isis has a broad pipeline of some 33 drugs, so concern over this one drug was limited, the trader said.

“There is a lot of faith in their pipeline,” the trader said, surmising that the bonds, which have richened up of late were appealing to outright buyers on the pullback.

LinkedIn improves

LinkedIn’s 0.5% convertible senior notes due 2019 traded at 106.70 bid 107 offered against an underlying share price of $229.81, a Connecticut-based trader said.

That was better by 0.125 point on a swap basis, he said.

LinkedIn shares strengthened in the session and ended up $8.19, or 3.7%, to $232.76.

The Mountain View, Calif.-based business-oriented social networking service is expected to report quarterly results on Thursday.

Goldman Sachs raised its target price on shares of the company by $30.00 to $280.00 and upgraded its rating on the stock to “conviction buy” from “buy.”

Also J.P. Morgan raised its price target on LinkedIn stock to $253.00 from $244.00.

Mentioned in this article:

Isis Pharmaceuticals Inc. Nasdaq: ISIS

LinkedIn Inc. Nasdaq: LNKD

Molycorp Inc. NYSE: MCP

Salix Pharmaceuticals Ltd. Nasdaq: SLXP

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.