Flexion, Neurocrine add deals to calendar; Tesla, InterDigital little moved ahead of earnings

By Stephanie N. Rotondo

Seattle, April 25 – The convertible bond market’s new issue space started to flow on Tuesday, with two new deals added to the calendar.

Both Rule 144A deals are expected to price after the market closes on Wednesday. Also notable was the fact that the new issues will mark the first convertible deal for both issuers.

Flexion Therapeutics Inc. announced plans to sell $125 million of seven-year convertible senior notes with the initial yield talked at 3.125% to 3.625% and an initial conversion premium of 30%.

Wells Fargo Securities LLC, BMO Capital Markets and RBC Capital Markets are running the books.

Meanwhile, Neurocrine Biosciences Inc. said it was offering $450 million of seven-year convertible senior notes with price talk at a 2.5% to 3% yield and an initial conversion premium of 37.5% to 42.5%.

Barclays and Jefferies LLC are the bookrunners.

In addition to being both pharmaceutical companies’ inaugural convertible issue, both carry similar terms. Flexion is provisionally callable after year three, while Neurocrine can be called after year four – both only if the stock hits a 130% price hurdle.

For its part, Flexion plans to use proceeds to further its Zilretta drug development, assuming it receives approval from the Food & Drug Administration. Neurocrine will meanwhile use the funds for general corporate purposes.

Ahead of the announcements of the new issues, Flexion’s stock was trading off a quarter to $25.96, while Neurocrine’s shares were up $1.84, or 3.55%, at $53.62.

Flexion is also scheduled to report earnings on May 4.

Secondary livens up

A convertible bond trader said there was “a little bit more activity” in the secondary space on Tuesday.

“I assume it is guys trying to get out of stuff,” he added. With stocks tearing higher, that has resulted in “low volatility and slow accretion” for convertible debt.

“It hurts valuations,” he said.

And in fact, there wasn’t a lot of price movement among convertible issues, the trader pointed out.

Tesla Inc., for instance, was on the active side, but only up about a point as investors prepare for the company’s earnings release next week.

The 2.375% convertible notes due 2022 were initially holding in a 110.25 to 110.75 context, according to a market source. However, toward the end of the day, the paper had traded up to 110.625 to 111.625.

The 1.25% convertible notes due 2021 meantime closed around 103.5. The convertibles were around 102.375 at mid-morning.

The company’s stock, on the other hand, was continuing its climb above the $300-mark, rising $5.76, or 1.61%, to $313.79.

Elsewhere, a trader said he saw InterDigital Inc.’s 1.5% convertible notes due 2020 moving around a bit.

“I haven’t seen them trade in forever,” he remarked, placing the paper in a 135 to 135.25 range in early dealings.

That was up about 6 points outright.

But like Tesla, the convertibles gained ground in afternoon trading, eventually closing with a high of 106.

The underlying equity ticked up 15 cents to $90.45.

The Wilmington, Del.-based mobile technology research and development company is slated to announce earnings prior to Thursday’s open.

And, Iconix Brand Group Inc.’s 1.5% convertible notes due 2018 were little moved in early trading, with a trader placing the paper at 95.875.

At that level, he noted, the issue trades with a 6.4% yield.

“That’s nice for less than one year paper,” he said.

A second source also called the convertibles unchanged, though he placed the issue at 96.

Iconix’s shares were moderately better, though there was no fresh news to help the equity improve.

The stock added just 3 cents, closing at $7.35.

Mentioned in this article:

Flexion Therapeutics Inc. Nasdaq: FLXN

Iconix Brand Group Inc. Nasdaq: ICON

InterDigital Inc. Nasdaq: IDCC

Neurocrine Biosciences Inc. Nasdaq: NBIX

Tesla Inc. Nasdaq: TSLA

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