Hologic gains ahead of results; buybacks lift PDL; Sybase eases; Mylan up on earnings

By Kenneth Lim

Boston, July 31 - Hologic, Inc. gained slightly on Friday ahead of its earnings call when the new week begins, while PDL BioPharma, Inc. rose on news that the company had bought back convertibles on the open market.

The market in general was typically quiet for a Friday, but the newly issued Sybase, Inc. paper eased slightly on a weaker stock.

Mylan Inc. remained active, moving up slightly as its earnings report overcame concerns about quality control.

Convertibles probably ended the month slightly better outright, a sellside desk analyst said Friday.

"I think guys are probably up a couple percent," the analyst said.

The past week has seen buyers charge into distressed and high-yield convertibles on the sense that some of them may have been oversold, the analyst said.

"For the most part a lot of the move has been in distressed names, which have been up in the past days," the analyst said. "A lot of the names that have been trading at 20 to 30 the past few months are now 50 to 60."

But one sellside trader said that Friday saw some slight easing in the buying, and distressed names were better for sale.

"Outright guys are stepping back from that," he said.

Hologic up as earnings beckon

Hologic's 2% convertible due 2037 was up about a point outright on Friday ahead of the company's Monday earnings announcement.

The convertible traded at 77 against a stock price of $14.75. Hologic common stock closed at $14.69, down by 0.27% or $0.04.

"They have earnings Monday, I think people were buying ahead of that, maybe hoping to sell on good news," a convertible trader said.

Hologic is a Bedford, Mass.-based maker of medical equipment focused on the healthcare needs of women.

The company has an earnings conference call scheduled for Monday after the markets close.

PDL BioPharma better on buybacks

PDL BioPharma's two series of convertibles were slightly better Friday after the company said it repurchased notes on the open market during the second quarter.

"They were active on news they bought back bonds," a sellsider said.

The PDL BioPharma 2% convertibles due 2012 were seen trading at 93 against a stock price of $8.75, while the 2.75% convertibles due 2023 changed hands at 107 against the same stock price.

PDL BioPharma common stock slipped 6.05% or $0.53 to close at $8.23.

The Fremont, Calif.-based biotechnology patents and royalty assets management company on Thursday reported second-quarter net profit of $77.2 million, or 47 cents per share, which beat Street estimates for 43 cents per share.

In a conference call with analysts, PDL BioPharma chief financial officer Cris Larson said the company's views on buying back more convertibles versus paying dividends to shareholder has changed since the second quarter.

"During the second quarter, our stock prices trended up significantly, so that has changed," Larson said. "As a result of the change in the conversion ratio as well as the change in the stock price, it is changing somewhat the way in which we look at both of the nodes at this time."

Sybase holds steady

Sybase's new 3.5% convertibles due 2029 remained well above par but eased from its initial highs on Friday, trading at 104.75 against a common stock price of $35.625. The new paper was seen at 104 on its secondary market debut on Thursday.

The old Sybase 1.75% convertible due 2025 was seen at 144.75.

Sybase common stock closed at $35.80, lower by 0.28% or $0.10.

The company is a Dublin, Calif.-based wireless software company.

"Those were active, but they came in about 0.75 point from yesterday," a sellside trader said.

Sybase priced the new notes on Thursday at the rich end of talk to yield 3.5% to 4% with an initial conversion premium of 30% to 35%. The deal size was raised to $350 million from $250 million.

There is a $50 million greenshoe, which is unchanged from the original amount.

Of the proceeds, $70 million will be used to buy back common shares, and the remainder to repurchase the company's existing 1.75% convertible subordinated notes due 2025.

Mylan up on earnings

Mylan's 1.25% convertible due 2012 was slightly better on Friday, trading at 91 versus a $13.40 common stock.

The common stock closed at $13.19, up by 0.46% or $0.06.

Mylan is a Canonsburg, Pa.-based generic drug maker.

"Mylan's better," a convertible trader said. "I think they reported good results, I think some of the concerns about those alleged violations were overdone initially, and whatever's left is already priced in. But the bottom line is their results were good."

Mylan on Thursday posted net earnings of $58.1 million, or 19 cents per share, which was slightly better than analysts' estimates.

On Monday, the Food and Drug Administration said it was investigating a news report that alleged quality control violations at a Mylan plant. The company on Tuesday said FDA inspectors had determined that the allegations were unfounded, but the FDA refuted that statement, saying it had not formed any conclusions yet.

Mylan chief executive Robert Coury reaffirmed the company's statement during an earnings call.

"It's great for us," the trader said. "Volatility's up because they're doing a he-said, she-said."

Mentioned in this article:

Hologic, Inc. Nasdaq: HOLX

PDL BioPharma, Inc. Nasdaq: PDLI

Sybase, Inc. NYSE: SY

Mylan Inc. Nasdaq: MYL

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