Medidata expands in follow-on trade; Illumina adds after positive report; Citrix on tap

By Rebecca Melvin

New York, April 23 - Medidata Solutions Inc.'s 1% convertibles expanded on a hedged basis early Wednesday even though the underlying shares of the New York-based clinical development software specialist bounced a little after tanking on disappointing earnings on Tuesday, market players said.

Illumina Inc.'s convertibles were higher on an outright and dollar-neutral, or hedged, basis after the San Diego-based gene-sequencing company reported quarterly results that beat estimates and guided higher than consensus estimates for full-year 2014. Illumina shares added 4%.

Tesla Motors Inc.'s convertibles were trading actively and were mostly flat, or unchanged, on a dollar-neutral basis, as shares of the Palo Alto, Calif.-based electric car maker dropped 5%. But the new, longer dated 1.25% convertibles were seen up about 0.25 point on a dollar-neutral basis, a New York-based trader said.

SolarCity Corp.'s convertibles were also in trade and were lower outright, but sources queried didn't know how they performed on a dollar-neutral basis against a 3% drop in the underlying shares of the san Mateo, Calif.-based distributed energy provider.

International Game Technology's 3.25% convertibles, which mature in a week, were unfazed by a 10% drop in the underlying shares of the Las Vegas-based gaming equipment company. The share drop was inspired by the company's earnings report, which was in line with lowered expectations. The convertibles changed hands virtually unchanged at par.

In the primary market, Citrix Systems Inc. launched an offering of $1.25 billion of five-year convertible senior notes after the market close Wednesday that it planned to price after the market close Thursday, a market source said.

Equities snapped a six-session winning streak, ending with fractional losses amid mixed earnings and data reports.

The S&P 500 slipped 4.16 points, or 0.2%, to 1,875.39, the Nasdaq stock market shed 34.49 points, or 0.8%, to 4,126.97, and the Dow Jones industrial average ended little changed, or down 12.72 points at 16,501.65.

Medidata better on hedge

Medidata's 1% convertibles due 2018 were quoted at 107.625 bid, 108.125 offered versus an underlying share price of $41.50, a Connecticut-based trader said.

He said that was up a point on hedge.

On Tuesday, the Medidata bonds were seen at the end of the session at 107 bid, 108 offered with the underlying shares at $40.75. That also represented an expansion, sources said.

Medidata shares were up $3.22, or 8%, at $43.93 Wednesday. On Tuesday, they skidded $11.98, or 22.7%, to $40.71.

Prior to the earnings news, the Medidata Solutions convertibles had been closer to 120 with the stock at $52.69.

Medidata priced the $287.5 million deal of 1% five-year bonds last summer.

Early Tuesday, Medidata reported disappointing earnings that missed estimates. The cloud-based clinical development services company for life sciences organizations reported adjusted earnings at $0.11 per share on revenue of $76.6 million, which missed consensus estimates for profit of $0.16 per share and revenue of $79.5 million.

Illumina expands

Illumina's 0.25% convertibles due 2016 closed at 188.25 bid, 188.75 offered versus an underlying share price of $153.69, a New York-based trader said.

Earlier the trader reported the bonds at 189.5625 bid, 190.0625 offered versus an underlying share price of $155.00, and that represented about a 0.5 point expansion.

"Illumina reported after the close last night, and it has been very active," the trader said.

Illumina reported first-quarter 2014 adjusted earnings of 53 cents per share, which was better than consensus estimates and better than the company's year-earlier earnings.

Including one-time items, the company reported earnings of 40 cents per share, which was a reversal of a loss of 18 cents per share in the first quarter of 2013.

Revenue rose 27% to $420.8 million, propelled by strong demand worldwide for products and solid contributions from the sequencing business, particularly from NextSeq 500 and HiSeq X Ten, the company said in a news release.

In its product business division, which accounts for the lion's share of revenue, Illumina revenue from consumables was up 18% and revenue from instrument sales rose 32%.

In its services and other business division, revenue soared 68% to $56.6 million, driven by growth in extended sequencing maintenance contracts, an increase in genomes processed year over year, revenue from verify services and increased demand for genotyping services.

Illumina also boosted its outlook for full-year 2014 on the back of the strong first-quarter sales and higher demand for HiSeq X Ten. The company now expects adjusted earnings per share of $2.10 per share to $2.15 per share, which is up compared to an earlier range of $2.00 per share to $2.06 per share. Revenue is expected to increase at an annualized growth rate of 21% to 23%, which is up from 15% to 17%.

Illumina shares have been on a roller coaster for the year so far. The stock rose to about $180.00 from around $110.00 through March and then began making a return trip, down to $130.00, before recovering to the $150.00 range.

The stock performance this year is attributed more to fundamentals than to an elusive take-out bid by Swiss drugmaker Roche Holding AG, a trader said.

Teslas mostly flat

Tesla's 0.25% convertibles due 2019, or the A tranche, traded at 92.25, which was down a point outright but little changed on a hedged basis.

Tesla's 1.25% convertibles due 2021 were down on an outright basis by less than a point at 91.25, but that level was better on a hedged basis by 0.25 point, a trader said.

The older Tesla 1.5% convertibles due 2018 traded at about 180, the trader said, which was unchanged on a dollar-neutral basis.

It wasn't clear why Tesla shares fell $10.65, or 5%, to $207.99, the trader said.

"I don't know why they were down today, and I don't know why they were up yesterday," he said.

Citrix Systems to price

Citrix, a Fort Lauderdale, Fla.-based cloud computing solutions company, launched an offering of $1.25 billion of five-year convertible senior notes after the market close Wednesday that was talked to yield 0.25% to 0.75% with an initial conversion premium of 47.5% to 52.5%.

The Rule 144A deal was expected to price late Thursday. The deal has a $187.5 million greenshoe and was being sold via bookrunners J.P. Morgan Securities LLC, Goldman Sachs & Co., BofA Merrill Lynch and RBC Capital Markets LLC.

Deutsche Bank Securities Inc. and Wells Fargo Securities LLC are acting as co-managers.

Proceeds are earmarked for share repurchases and to pay the net cost of a bond hedge.

The company plans to purchase $1.5 billion of common stock.

In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the option counterparties or their respective affiliates expect to purchase shares of Citrix's common stock and/or enter into derivative transactions with respect to Citrix's common stock concurrently with or shortly after the pricing of the notes. This activity could increase or reduce the size of any decrease in the market price of Citrix's common stock or the notes at that time.

The bonds are non-callable for life with no puts. They have takeover protection.

Mentioned in this article:

Citrix Systems Inc. Nasdaq: CTXS

Illumina Inc. Nasdaq: ILMN

International Game Technology NYSE: IGT

Medidata Solutions Inc. Nasdaq: MDSO

Tesla Motors Inc. Nasdaq: TSLA

SolarCity Corp. Nasdaq: SCTY

© 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.