Convertibles mostly quiet; PTC Therapeutics little changed after trial news; SolarCity, Greenbrier shares down

By Rebecca Melvin

New York, Oct. 16 – Generally light volume remained the trend in U.S. convertibles on Friday as equities edged higher, notching a third-straight week of gains for the major indexes.

Convertibles were not the only debt market that has been on the quieter side lately, market sources say. But almost non-existent new issuance in convertibles for the last month and earnings season that has yet to kick in for issuers of convertible debt contributed to a hushed tone this past week, a convertibles trader said.

PTC Therapeutics Inc. was being eyed on Friday after the South Plainfield, N.J.-based pharmaceutical announced mixed results in a drug trial that failed to meet goals for all patients but did benefit some patients. The news caused PTC’s stock to plunge briefly overnight but it recovered to trade in positive territory early Friday, with gains extending throughout the session for a $3.51, or 11%, gain to $35.25 by the end of the day.

The PTC convertible bond was mostly quiet, but indicated up at 97 at the close. Earlier the paper was quoted at 94 bid, 95 offered.

Elsewhere, market players continued to monitor takeout chatter and potential takeouts, particularly in the tech sector.

SanDisk Corp.’s two convertible bond issues were a big feature of trading this past week and those bonds continued to trade sporadically with the overriding trends in place that the SanDisk 1.5% convertibles would outperform in a takeout and the 0.5% paper would underperform.

Also worth watching was Microchip Technology Inc., a trader said.

Despite generally higher stocks, there was some pressure on convertible issues in certain sectors.

The shares of SolarCity Corp. were down 5%, for example, and the convertibles of the San Mateo, Calif.-based clean energy company were lower by a few points on an outright basis. The SolarCity 1.625% convertibles traded actively at about 75.375 bid, 75.875 offered, which was down from 77.5 bid, 78 offered previously, according to Trace data.

Also nearly 5% lower were the shares of Greenbrier Cos. Inc., and its convertibles were indicated lower. The 3.5% convertibles of the Lake Oswego, Ore.-based railcar company were indicated at 116.5 from 120 previously. Shares fell to $36.51, which was down $1.78, or 4.7%.

In the absence of earnings reports on Friday, market players were looking ahead to reports due out next week.

Helix Energy Solutions Group Inc. was expected to report its third quarter results on Monday. Shares of the Houston-based offshore oil service company fell nearly 10% on Friday but the Helix 3.25% convertible changed hands at the high end of its recent range and then about a point lower at 81. The Helix common stock was down 56 cents, or 9.6% to $5.30.

Amyris Inc.’s 3.5-year, 9.5% convertible senior notes represented the week’s only new deal in the primary market, and that was only $57.6 million in size. The new bonds were not heard trading. But the older Amyris paper, a 6.5% convertible, which will be partially repurchased with proceeds of the new deal, traded at 80.

One trader pointed out that there have been more private convertibles deals in recent years especially in the healthcare space.

“We’re seeing less marketed deals and more private deals, so funds are doing them themselves and boxing out regular convertible players,” he said.

He said that he assumed it was because healthcare has done so well that more funds were joining such firms as Deerfield Management and the Baker Group in private deals.

As for the session on Friday, “the volume on the tape is very small, so it is hard to draw any conclusions,” a New York-based trader said.

Trading has been issue specific and there has been chatter about buyouts and acquisitions, so that has been a theme throughout the week, he said.

PTC Therapeutics eyed

PTC said that its Phase 3 trial of Translarna failed to meet some endpoints but that it would still submit the compound for FDA approval this year as planned.

PTC shares had plunged in after-hours action on Thursday, putting traders on notice of a potentially steep drop on Friday. But shares actually edged higher throughout the session, ending up $3.51, or 11%, to $32.25.

“It’s weird. The stock was down to 20 bucks and then traded at as much as 38, all pre-open. And now it’s settling in, and the stock is up 50 cents,” a trader said. “It’s a non-event for guys that wanted to play vol. there.”

PTC’s 3% convertibles due 2022, of which $150 million priced in August, were indicated higher by about 2 or 3 points at 97 at the close.

Earlier, they were seen to be likely at 94 bid, 95 offered versus an underlying share price of $32.10. That was little changed on the previous level, a trader said, but he was uncertain of pricing, which wasn’t immediately transparent.

At that point the shares of the South Plainfield, N.J.-based pharmaceutical were up only 50 cents, or 1.6%.

A second trader said: “It’s an interesting situation to watch.”

As far as the trial goes, it failed, a trader commented. But for a drug of this type, it almost doesn’t need a trial, he said.

Translama (ataluren) is PTC’s lead product for the treatment of muscular dystrophy and cystic fibrosis and is in phase 3 clinical trials.

Mentioned in this article:

Amyris Inc. Nasdaq: AMRS

PTC Therapeutics Inc. Nasdaq: PTCT

Greenbrier Cos Inc. NYSE: GBX

Helix Energy Solutions Group Inc. NYSE: HLX

Microchip Technology Inc. Nasdaq: MCHP

SolarCity Corp. Nasdaq: SCTY

SanDisk Corp. Nasdaq: SNDK

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