BioMarin As gain on swap, BioMarin Bs in line amid takeout rumors; health care better bid

By Rebecca Melvin

New York, March 27 – BioMarin Pharmaceutical Inc.’s convertibles traded actively and surged on an outright basis on Friday, while on a hedged basis, the BioMarin As were better and the Bs were flat, amid takeout speculation that lifted the underlying shares 11.5%, according to market sources.

Other health care and biotech convertibles were boosted by the BioMarin moves.

“It’s been a pretty crazy week in biotech. It was weak, but it’s bouncing back today with deeper, in-the-money names more of the focus,” a New York-based trader said.

That said, Jazz Pharmaceuticals Inc. was better by about 0.5 point on the day, ending the day at 117.25 versus an underlying share price of $175.42; and Isis Pharmaceuticals Inc.’s convertibles improved by 0.25 point to 0.5 point on swap, ending the day at 115.75 versus an underlying share price of $63.37, according to a New York-based trader. Isis shares were up 3.6%.

Otherwise, the session was very slow, traders said. Yahoo! Inc.’s 0% convertibles due 2018 were trading a bit better after the Sunnyvale, Calif.-based internet company authorized an additional $2 billion in share buybacks through March 2018.

There was no follow through to speak of in SanDisk Corp., which was the name of the day in the convertibles market on Thursday. The SanDisk bonds dropped sharply on an outright basis along with the underlying shares but jumped on a hedged basis after the Milpitas, Calif.-based data storage chip company cut its first-quarter and 2015 revenue outlook and withdrew other forecasts for the same time periods.

On Friday, the SanDisk 0.5% convertible was seen about 0.5 point lower on an outright basis at 100.7, with shares down another 3%. The bonds fell more than 7 points on Thursday.

Stocks, which have fluctuated for much of the week, ended Friday little changed but in positive territory. The S&P 500 stock index gained 4.87 points, or 0.2%, to 2,061.02, the Dow Jones industrial average added 34.43 points, or 0.2%, to 17,712.66, and the Nasdaq composite index, which took a significant hit on Wednesday, ended up 27.86 points, or 0.6%, to 4,891.22.

BioMarin As outperform Bs

The BioMarin 0.75% convertibles due 2018 were seen at 152 bid, 152.75 offered versus an underlying share price of $131.00, a New York-based trader said.

That was up about 14 points on an outright basis and up about a point on swap, depending on one’s delta, the trader said.

The BioMarin 0.75% convertibles were held on about a mid-70% delta coming into the day, and the delta moved up to about 80% after Friday’s stock move, a trader said.

The BioMarin 1.5% convertibles due 2020 surged 18.5 points on an outright basis to 158.25, according to Trace data. That was seen flat, or in line on a swap basis.

The BioMarin 1.5% convertibles were held on a delta of 80% to 85%.

Shares of the Novato, Calif.-based biopharmaceutical company were last up $13.23, or 13%, at $128.78.

Driving the gains were takeout rumors that resurfaced and lifted the stock, a trader said.

Health care and biotechnology stocks have sold off of late, and health care convertibles have been mixed, but on Friday a bid was back in everything, the trader said. “When you have a big index name like BioMarin up 12.8% that has an impact,” the trader said.

“The As opened up a bit, and the Bs nuked straight up,” the trader said.

The trader pointed to a takeout rumor in the form of a blog report that Shire is considering offering to acquire BioMarin. Citing unnamed sources, Betaville blogger Ben Harrington said Shire recently approached BioMarin about a merger deal.

“Health care was better today,” a second New York-based trader said. “Jazz was up on the BioMarin contagion.”

Yahoo! edges up

The Yahoo! 0% convertibles were seen about 0.25 point better, trading between 105 and 110 versus Thursday’s closing share price of $44.47, a trader said.

Yahoo! shares added 63 cents, or 1.4%, to $45.10 on Friday.

“There are a few offers wanted on the Street,” a trader said.

Yahoo! approved a new $2 billion stock buyback program using the proceeds from the public offering of online retailer Alibaba.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Isis Pharmaceuticals Inc. Nasdaq: ISIS

Jazz Pharmaceuticals Inc. Nasdaq: JAZZ

SanDisk Corp. Nasdaq: SNDK

Yahoo! Inc. Nasdaq: YHOO

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