Healthcare flies higher as out-of-favor sector enjoys resurgence; DepoMed, BioMarin improve

By Rebecca Melvin

New York, April 7 – Healthcare convertibles continued to be better bid on Thursday as a rebound in that sector spilled over into a third day, a New York-based trader said.

“Healthcare is absolutely flying,” the trader said, estimating that in the last two or three days, central healthcare names in the convert space have added about a point a day on a dollar-neutral, or swap, basis.

Those names included Tesaro Inc., Horizon Pharma plc, Jazz Pharmaceuticals plc and DepoMed Inc. among others on Thursday, the trader said. But liquidity remained tight, and the rally was on thin volume, he added.

There was some obvious investor reaction to the news that Pfizer Inc. and Allergan plc scrapped their $160 billion merger plan in the face of new U.S. Treasury Department rules that discourage corporate tax inversions. But for the most part, reasons posited for the recovery in healthcare were indefinite, such as market fickleness.

“What is going on is that the sector has underperformed for a while, and some of the unloved ones are tending to bounce the most, a trader said.

There are not as many sellers as buyers, however, and trading is light.

BioMarin Pharmaceutical Inc. was also a name in focus on Thursday. Shares of the San Rafael, Calif.-based pharmaceutical company, maker of a drug for a rare, genetic muscular dystrophy disease, were lower by nearly 2% at $87.64 in the early going, but the BioMarin 0.75% convertible notes due 2018 were notably higher at 120 to 121, up from 117 to 120 previously.

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