New Pernix trades up; ServiceNow adds on swap after earnings; Mylan eyed amid merger talk

By Rebecca Melvin

New York, April 17 – Pernix Therapeutics Holdings Inc.’s newly priced 4.25% convertibles traded up on their debut in the secondary market on Friday after the Morrisville, N.J.-based specialty pharmaceutical company priced an upsized $130 million of the six-year notes at terms that were mixed compared to talk.

The bond, which priced at the cheap end of coupon talk and beyond the rich end of initial talk on the premium, were seen at 103.75 bid, 104.25 offered versus a share price of $8.45 in the early going.

Established issues were weighed down with the broader markets, which were lower amid a combination of international concerns including the Greek debt woes and weak earnings reports.

ServiceNow Inc.’s convertibles fell on an outright basis, but expanded on a dollar-neutral basis, in active trade after the San Diego, Calif.-based cloud-based IT services company reported earnings that were essentially in line with expectations but guided lower for the current quarter.

Depending on one’s hedge, the bonds opened up 0.5 point to about 1.25 points. The shares fell 11.5%.

Other names in the cloud computing sector also dropped on an outright basis.

PROS Holdings Inc.’s 2% convertibles due 2019 were seen dropping below par to about 99 from 106 as shares of the Houston-based provider of pricing and margin software tumbled 15% to $23.10.

Workday Inc.’s 0.75% convertibles were seen down about 5 points to 120 with shares of the Pleasanton, Calif.-based cloud-based computing company lower by 6% to $84.37.

The Workday 1.5% convertibles were not heard in trade.

Elsewhere there was follow-on trading in SanDisk Corp., whose convertibles slipped a little further in line with the underlying shares of the Milpitas, Calif.-based data storage chip maker after its quarterly results missed estimates.

More health care deal chatter put Mylan NV’s in-the-money convertibles in the spotlight after a report that Israel-based Teva Pharmaceutical Industries Ltd. is weighing a takeover bid of the rival generic drugmaker. The Mylan 3.75% convertibles due in September traded up to 521 from around 500, according to Trace data.

Pernix trades up

Pernix Therapeutics’ 4.25% convertibles traded up out of the chute to about 103 with the underlying shares up about 2%. Later the bonds were quoted at 103.75 bid, 104.25 offered versus an underlying share price of $8.45.

A syndicate source said the bonds were up at 104.5 bid, 105 offered versus a share price of $8.50. But later the shares came off so presumably the bond traded a bit lower, as well.

The Pernix shares ended positive by a penny at $8.35.

The $130 million deal was upsized by $10 million from initial talk.

Due to the small deal size and the probability that allocations were made before it came to market, the deal was not widely traded, sources said.

The 4 (2) Regulation D deal has Rule 144A trading capabilities, however.

Pricing came at the cheap end of initial talk for a 3.75% to 4.25% coupon but at the rich end of 35% to 37.5% premium talk, which was revised upward during marketing from 27.5% to 32.5%.

Jefferies & Co. was lead placement agent and BMO Capital Markets was also a placement agent of the deal.

The notes are convertible under certain conditions. They are non-callable for four years and then are provisionally callable if shares exceed 130% of the conversion price. Investors will be compensated for interest in the event of an early call via a make-whole table.

Gross proceeds of $80.9 million are expected to be used to finance the cash consideration of its previously announced acquisition of the Zohydro ER franchise, about $8.3 million will be used to pay related fees and expenses, up to $2.2 million will pay for a previously announced consent solicitation of the company’s 12% senior secured notes due 2020 and remaining proceeds will be for working capital and other general corporate purposes, including acquisitions or investments.

Concurrently with the new notes offering, the company entered into an agreement with holders of its 8% convertible senior notes due 2019, representing about $65 million of the issue, to remove restrictive covenants in the 2019 notes indenture and to convert the notes for 2,338.129 shares of common stock.

Pernix shares fell 16% on Thursday after the deal was launched and the company cut its full-year 2015 net sales guidance and business outlook.

Pernix expects net sales for the three months ended March 31 of between $32 million to $35 million, compared with $19 million for the same period in 2014.

Results were hindered by lower Treximet prescription volume, a reduction in channel inventory related, in part, to lower prescription volume, adjustments to gross-to-net discounts and delays in Treximet patient sample deliveries to the field sales force, according to a release.

The company now expects net sales for 2015 in the range of $220 million to $240 million. The guidance includes and assumes the impact of first-quarter results and positive volume growth for Treximet beginning in the second quarter 2015.

ServiceNow adds on swap

ServiceNow’s 0% convertibles due 2018 fell 7 points on an outright basis to 119.75, according to Trace data, in the early going. At the close, the bonds were seen at 118.25 bid, 119.25 offered with the underlying shares at $73.00.

The shares actually closed down $9.55, or 11.5%, at $73.29.

On a 75% delta, the paper added about 0.5 point, a New York-based trader said. He said the delta was now about 70% after Friday’s stock move.

A second trader said that the bonds expanded a point to 1.25 points on a 77% to 78% delta.

“I think 78% was the right delta,” a New York-based trader said.

ServiceNow reported a loss of $58.1 million, or 38 cents per share, which was wider than a net loss of $43 million, or 30 cents per share, in the year-earlier period.

Excluding items the result beat estimates, however, with income of $2 million, or 2 cents a share, compared to a loss of $11 million, or 8 cents per share, in the first quarter of 2014. The Street was looking only for break even on earnings.

Revenue was $212 million for the quarter, which was better than $210.8 million expected.

But investors worried that growth is slowing for the cloud software company. It guided current quarter revenue to $237 million to $242 million. At the midpoint, that misses a $241.9 million consensus estimate. But it raised the low end of its full-year revenue outlook to $970 million to $1 billion, which represents year-over-year growth of between 42% and 47%, but for which the midpoint is below the $990 million forecast.

Mentioned in this article:

Mylan NV NYSE: MYL

Pernix Therapeutics Holdings Inc. NYSE: PTX

PROS Holdings Inc. NYSE: PRO

SanDisk Corp. Nasdaq: SNDK

ServiceNow Inc. NYSE: NOW

WorkDay Inc. Nasdaq: WDAY

© 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.