Morning Commentary: Convertibles rebound; Corium active on buyout; Verastem prices

By Rebecca Melvin

New York, Oct. 12 – Many U.S. convertibles were bouncing back with shares early Friday after a two-day slide that whipsawed the broader markets on Wednesday and Thursday.

Issues like those of Square Inc., Illumina Inc. and Tilray Inc., which were hit hard in recent sessions, were higher on an outright basis. Square’s 0.375% convertibles due 2022 spurted up 25 points. Illumina’s 0.5% notes due 2021 were back up to 136.6 from 132 to 133 on Thursday.

Corium International Inc.’s 5% convertibles due 2025, of which $120 million priced in the first quarter, were very active but little changed at 99.75 despite a 50% surge in the underlying shares after news that health care fund Gurnet Point Capital will acquire the outstanding shares of the Menlo Park, Calif.-based commercial-stage biopharmaceutical company for $12.50 each. Corium will offer to repurchase all of its convertible debt when the deal closes.

Meanwhile, Boston-based cancer drug discovery company Verastem Inc. joined Karyopharm Therapeutics Inc. in pricing new notes this week. Verastem priced $150 million of long 5% convertible notes due 2048 in a registered direct offering on Thursday. The bonds priced cheaply with just a 15% initial conversion premium over the current stock price.

The convertibles are non-callable for four years.

Karyopharm priced $150 million of 3% convertibles due 2025 late Wednesday at the cheap end of coupon talk.

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