Novavax loses ground; Pacira trial results disappoint; Medicines’ data positive, bonds flat

By Stephanie N. Rotondo

Seattle, July 25 – Convertible bond investors were zeroing in on the pharmaceutical space on Tuesday amid a flurry of clinical trial reports.

Novavax Inc.’s 3.75% convertible notes due 2023, for instance, declined 5 to 6 points on the day, following a conference call held late Monday to discuss topline data from a phase 2 safety and immunogenicity trial of the RSV F Vaccine in older adults.

While the company tried to present the data as positive, the market did not appear to be as optimistic.

Pacira Pharmaceuticals Inc.’s 2.375% convertible notes due 2022 also fared poorly in Tuesday trading as data indicated its pain relieving drug Exparel did not do as well as hoped.

However, the Medicines Co. announced positive trial results on Tuesday. The news initially gave the company’s stock – as well as its 2.75% convertible notes due 2023 – a boost, though both came in by the bell.

Meanwhile, WebMD Health Corp.’s convertibles remained in focus, though levels were not much changed from Monday, according to a market source.

“They are trading, but they are not going to change,” a trader said. “All the volatility has gone out.”

The source saw the 2.5% convertible notes due 2018 holding around 106, while the 1.5% convertible notes due 2020 continued to straddle 138.

The 2.625% convertible notes due 2023 were also steady, trading around 99.875.

As for the company’s stock, it was unchanged at $66.10.

The name started to jump on Monday on news the online medical information website was being bought out by private equity firm KKR & Co. for $66.50 a share.

That amounted to a 20.5% premium over Friday’s closing share price.

In Monday trading, the convertibles added as much as 16 points on the day, while the company’s equity firmed nearly 20%.

Novavax weakens

Novavax’s 3.75% convertibles traded off on Tuesday, despite the company’s attempt to spin its latest trial results as positive.

The bonds were seen in a 43.75 to 44 range, off 5 to 6 points, according to a market source.

The underlying equity dropped 41 cents, or 27.15%, to $1.10.

The phase 2 results from a study of 300 older adults – that group being one of the most susceptible to RSV infections, as well as infants – indicated that the use of adjuvants helped improve the efficacy of the vaccine.

The results also showed that a double dose helped improve efficacy.

The company is also hoping that it can start a phase 2 efficacy study on the vaccine as a way to treat chronic obstructive pulmonary disease.

But investors were perhaps hoping for more than a plan to move forward after the company’s flop in September. During a conference call then, management had to explain why the vaccine did not perform as well as expected. This time around, the market appeared to want something more substantive.

Pacira plunges

Pacira Pharmaceuticals’ 2.375% convertible bonds lost 6 to 7 points in Tuesday trading as phase 3 studies of its drug Exparel failed to excite investors.

A trader saw the notes trading in a 103.5 to 104 context against a stock price of $42.75.

He said at those levels, the paper was trading at a 55% to 56% delta.

Another market source pegged the notes at 103.75 bid, 104.25 offered.

The company’s shares ended the day down $6.05, or 12.42%, at $42.65.

Exparel’s popularity as a surgical-pain treatment has grown as medical professionals seek new ways to treat pain without using opioids. In the last year, optimism that Exparel’s use could be expanded has helped the company’s stock rally.

But the latest results showed little to no improvement for patients who underwent total knee arthroplasty. However, the results did turn out positive for patients who had shoulder and rotator cuff surgery.

Medicines eyed

Medicines’ 2.75% convertibles “were busy pre-open on trial results,” a trader said Tuesday.

“The stock popped, but pulled back a bit,” he added, seeing the convertibles trade at 111.77 versus a stock price of $42.10.

Another source saw the notes finishing around 107.5 – about unchanged from the previous round-lot trades – though there were highs with a 112 handle.

The stock was up over 8% in early dealings but eventually traded down 49 cents, or 1.25%, to $38.73.

Unlike Novavax and Pacira, the company announced trial results that were largely deemed positive.

The phase 3 trial for its fixed-dose, investigational antibiotic combination – or Vabomere, previously known as Carbavance – was halted early, as interim data showed significant therapeutic benefit.

In viewing the interim results, the independent Data and Safety Monitoring Board concluded that there was no need to continue to study.

Team on tap

The market was waiting for a new $175 million issue of six-year convertible notes from Team Inc. to price on Tuesday.

Ahead of pricing – which was expected after Tuesday’s close – Team’s shares were losing ground, falling $8.32, or 34.98%, to $15.48, in well above-average trading.

As for the new issue, a trader said there was “not a peep” from the gray market.

Price talk in the new issue is for a yield of 4.75% to 5.25% with an initial conversion premium of 37.5% to 42.5%.

J.P. Morgan Securities LLC and BofA Merrill Lynch are running the books.

Proceeds will be used for pay down debt.

In addition to announcing the Rule 144A offering on Monday, Team also provided quarterly guidance. For the second quarter, the company is expecting revenues of $310 million, down from $336 million the year before. Operating loss is forecast between $7 million to $9 million, versus an operating profit of $14 million previously.

Adjusted EBITDA is expected to be $14 million to $16 million, down from $36 million.

Mentioned in this article:

The Medicines Co. Nasdaq: MDCO

Novavax Inc. Nasdaq: NVAX

Pacira Pharmaceuticals Inc. Nasdaq: PCRX

Team Inc. NYSE: TISI

WebMD Health Corp. Nasdaq: WBMD

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