Depomed convertible notes recover from day’s lows; Vitamin Shoppe loses ground

By Stephanie N. Rotondo

Seattle, May 10 – Wednesday’s trading session was all about fresh earnings and upcoming new convertible bond deals, according to market sources.

Depomed Inc. released its first-quarter results late Tuesday, reporting a 14% wider net loss on lower sales.

That didn’t bode well for the company’s 2.5% convertible notes due 2021, which were initially seen down at least 4 to 5 points on the day. But as the day wore on, the convertibles recovered a bit.

The company’s equity even managed to end on a positive note.

However, that was not the case for Vitamin Shoppe Inc., as its 2.25% convertible notes due 2020 – along with its stock – were under pressure in the wake of an earnings miss.

Meanwhile, the primary market was waiting for new issues from Dermira Inc. and Becton, Dickinson & Co. to price, which was expected after the market closed.

Details on both deals had not emerged as of 6:45 p.m. ET.

Dermira said late Tuesday that it was offering $250 million of convertible senior notes due 2022. Becton, for its part, said on Monday that it was selling $2.25 billion of mandatory convertible preferred stock.

Price talk on Dermira is 2.75% to 3.25%, with an initial conversion premium of 25% to 30%.

Leerink Partners and Cowen & Co. are the joint bookrunners.

Talk on Becton’s $50-par convertible preferred sale is for a yield of 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC are the bookrunners.

Ahead of pricing, both companies were seeing their stock sell off.

Dermira’s shares ended down $4.89, or 15.21%, at $27.27. Becton was off 90 cents at $179.76.

Depomed dips, recovers

Depomed’s 2.5% convertibles were in retreat on Wednesday as the company reported less-than-stellar first-quarter results.

However, the bonds did manage to rally a bit by the bell, though they still ended a touch weaker on the day.

At the bell, a market source saw the notes straddling 88.5, which was called 0.5 to 1 point lower.

But at mid-morning, a source pegged the paper closer to 85, adding that the paper had traded to lows around 83.

As for the company’s equity, it initially traded downward, sliding over 5% by mid-morning. By the end of business, the shares were seen trading into positive territory, rising 12 cents, or 1.09%, to $11.08.

For the quarter, the Newark, Calif.-based specialty pharmaceutical company posted a net loss of $26.7 million, or 43 cents per share.

On an adjusted basis, EPS was 7 cents.

Total revenue declined to $90.45 million from $104.8 million the year before.

As Depomed’s numbers have gotten worse, the company did lay out several steps it plans to take in order to turn things around. That includes repositioning its salesforce to focus on the products that are performing better and reducing its overall staff size by 30 people.

The actions will result in a one-time charge of $5 million in the second quarter.

Vitamin Shoppe weakens

Vitamin Shoppe’s 2.25% convertible notes were in decline on Wednesday, as the North Bergen, N.J.-based vitamin and supplements retailer reported earnings that were worse than expected.

At one desk, a source saw the convertibles falling about 6.5 points to trade around 80. Another source placed the paper at 78.25, which was a decline of nearly 7 points.

The underlying stock didn’t perform so hot either, losing $6.30, or 33.16%, to close at $12.70.

Net income per share came to 35 cents. On an adjusted basis, EPS was 36 cents.

Revenue was $316.7 million, down from $336.8 million the previous year.

The weakness in revenue was attributed to a 6.3% decline in same-store sales. Additionally, website sales dropped 9.1%.

Analysts polled by Thomson Reuters had forecast adjusted EPS of 58 cents on revenue of $326.7 million.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Depomed Inc. Nasdaq: DEPO

Dermira Inc. Nasdaq: DERM

Vitamin Shoppe Inc. NYSE: VSI

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