PTC Therapeutics up on regulatory nod; market quiet; response to energy bankruptcies muted

By Rebecca Melvin

New York, April 15 – PTC Therapeutics Inc.’s convertibles rose in line with their underlying shares on Friday after news that the South Plainfield, N.J.-based pharmaceutical company’s drug, Translarna, has been granted preliminary approval for use in some patients in England.

Translarna is sold in the European Union, after the bloc approved it for use in 2014. But it is not currently used in the United Kingdom, and in February, the company was dealt a blow when U.S. regulators rejected the company’s marketing application for the drug, saying evidence to support its use was not efficacious enough.

The PTC Therapeutics bonds were indicated up at 43 on Friday from 38 previously. In February, the bonds had fallen to about 55.5 from 81.

The health care sector in convertibles remained stronger overall, despite profit-taking early in the week and mostly mixed trading action in subsequent days. But the tone is better with a stronger bid since the Pfizer Inc. and Allergan plc merger deal broke apart last week.

Elsewhere, convertibles were trading quietly. Traders have said that little by way of new issuance contributes to a lack of focus for the space. Meanwhile, several bankruptcies among convertibles issuers this week did little to spur market action.

“Nothing has changed,” a Connecticut-based trader said of the market despite news on Friday that Goodrich Petroleum Corp. has filed for reorganization under Chapter 11 bankruptcy and SunEdison Inc. confirmed that is has entered into confidentiality agreements with certain lenders regarding proposed debtor-in-possession financing, a precursor to bankruptcy.

The Goodrich Petroleum convertibles “don’t trade anymore; they are at zero,” the trader said. The SunEdison convertibles were trading a little lower, backing down to 4 bid, 5 offered after having risen to about 6.5 on Thursday.

On Thursday, news that Energy XXI Ltd. filed for Chapter 11 spurred activity in the 3% convertible due 2018, but there was no change in pricing as those bonds were already trading below 1.

On Wednesday, Peabody Energy Corp., the St. Louis-based coal producer, filed for Chapter 11 bankruptcy protection to little effect in the convertibles market.

Traders said the filings were expected well in advance and price moves had occurred in the months and weeks prior to the filings. Asked where market players were looking for the next shoe to drop, one trader said, “SunEdison still has to file.”

PCT Therapeutics jumps

PTC Therapeutics’ 3% convertibles were indicated up to about 43 at the end of the session, from 38 previously, but the bonds had not traded actively, market sources said. PTC shares rose $2.39, or 43%, to $8.92.

When the bonds dropped to 55.5 in February, the stock had plunged $17.42, or 62%, to $10.84.

“It hasn’t traded much. It is difficult to find offers,” a trader said on Friday.

PTC Therapeutics announced that England’s National Institute for Health and Care Excellence has recommended Translarna for Duchenne muscular dystrophy, building on its use already in the European Union.

The NICE has recommended Translarna, a protein restoration therapy, for ambulatory patients five years and older with nonsense mutation Duchenne muscular dystrophy.

Overall, the health care sector has lagged the rest of the convertibles market, a trader said. “The sector was due to catch up, and it has recovered some. But there are still political headwinds.”

SunEdison trades lower

SunEdison’s 2.375% convertibles slipped back to 4 or 5 from 6.

Shares of the Maryland Heights, Mo.-based solar energy company fell 21.5 cents, or 37% to $0.37.

SunEdison said that on March 17 certain of its first- and second-lien lenders entered into confidentiality agreements under which information regarding the company was provided in connection with proposed DIP financing transactions. Under certain of such agreements, the company has agreed to publicly file the information.

In the filing, the company said significant energy market headwinds began to build in the third quarter of 2015. These headwinds were felt sharply in targeted emerging markets, including Brazil and China. There were growing merger and acquisition obligations and yieldco yields limited access to capital markets. There was also the possibility of a negative audit opinion and the related 10-K filing release delays.

Management responded by reducing operating expenditures and restructuring solar materials; there was also a headcount reduction in countries the company was planning to exit, including Japan. There was also litigation and negotiation regarding termination of the proposed Vivint Solar Inc. merger, the presentation materials in the filing said.

SunEdison disclosed last month that the U.S. Justice Department was investigating the company and that it was providing information to the Securities and Exchange Commission over financial statements to investors regarding its cash statements. In February, the company delayed filing its financial statements over concerns about the accuracy of its information and began the internal investigation.

Mentioned in this article:

Energy XXI Ltd. Nasdaq: EXXI

Goodrich Petroleum Corp. NYSE: GDP

Peabody Energy Corp. NYSE: BTU

PTC Therapeutics Inc. Nasdaq: PTCT

SunEdison Inc. Nasdaq: SUNE

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