New convertibles from Flexion, Neurocrine jump over par post-pricing; Synchronoss suffers

By Stephanie N. Rotondo

Seattle, April 27 – Newly priced issues from Flexion Therapeutics Inc. and Neurocrine Biosciences Inc. were dominating trading on Thursday, according to one New York-based sellside source.

Both deals – which priced late Wednesday – were doing well upon the break.

The Flexion deal came upsized from $125 million and with an initial conversion premium of 30%. Its yield came in the middle of the 3.125% to 3.625% price talk.

Wells Fargo Securities LLC, BMO Capital Markets and RBC Capital Markets were the bookrunners on the Rule 144A deal.

Neurocrine’s new issue came richer than the 2.5% to 3% yield talk. The initial conversion premium of 42.5% was on the rich side of the 37.5% to 42.5% talk.

Barclays and Jefferies LLC were the joint bookrunners.

Meanwhile, Synchronoss Technologies Inc.’s 0.75% convertible notes due 2019 got beaten down – along with the company’s stock – after it was announced that the chief executive officer and chief financial officer were leaving their posts in order to “pursue other interests.”

Additionally, the Bridgewater Township, N.J.-based technology company downwardly revised its first-quarter guidance to levels well below what analysts were expecting.

Flexion’s new deal firms

Flexion’s $175 million of 3.375% convertible senior notes due 2024 traded all the way up to a 105 to 105.25 context on Thursday, after pricing late Wednesday.

The convertibles were seen at 103 bid, 103.5 offered in early dealings.

The underlying stock managed to firm by the end of the day, rising 34 cents, or 1.65%, to $20.94. At mid-morning, the equity had declined 1% to $20.40.

The deal includes a $26.25 million over-allotment option, upsized from $18.75 million.

The issue is non-callable for three years and is provisionally callable after that, but only if the stock hits a 130% price hurdle.

The initial conversion rate will be 37.3413 shares of common stock per $1,000 principal amount of notes for an initial conversion price of about $26.78 per share of common stock.

Conversions will be settled in cash, stock, or a combination.

Proceeds will be used for the commercialization and manufacture of Zilretta – also known as FX006 – if approved, and product pipeline development, as well as working capital and general corporate purposes. Flexion may also use some of the funds to in-license, acquire or invest in complementary businesses, technologies, products or assets.

Flexion is a Burlington, Mass.-based specialty pharmaceutical company focused on the development and commercialization of novel, local therapies for the treatment of patients with musculoskeletal conditions, beginning with osteoarthritis.

Neurocrine pops post-pricing

Like Flexion, Neurocrine’s $450 million of 2.25% convertible senior notes due 2024 fared well in Thursday trading.

The bonds traded up to 104 bid, 104.5 offered by the end of the day. That compared to a 103.375 to 103.75 context at mid-morning.

The company’s shares were up 31 cents at $53.59.

The Rule 144A deal includes a $67.5 million greenshoe.

The convertibles carry a contingent conversion feature. The initial conversion rate is 13.1711 shares per $1,000 principal amount of notes, which is equivalent to an initial conversion price of $75.92 per share, a 42.5% premium to the stock’s closing price of $53.28 on Wednesday.

Additionally, the convertibles are provisionally callable after four years, assuming the stock hits a 130% price hurdle.

Conversions will be settled in cash, common stock or a combination.

Proceeds will be used for general corporate purposes, which may include commercialization expenses, clinical trial and other research and development expenses, capital expenditures, working capital and general and administrative expenses.

Neurocrine is a San Diego-based biotechnology company focused on neurologic, psychiatric and endocrine related disorders.

Synchronoss sinks

The departures of its top executives, as well as a downward revision of quarterly results, put massive pressure on Synchronoss Technologies’ convertible debt, as well as its equity, on Thursday.

At one desk, a trader said the 0.75% convertibles were down 9 points outright at 84.75 bid, 85.25 offered. Another market source saw the bonds finishing even lower, dropping 10 points to 83.875.

As for the stock, it dropped $11.33, or 46.02%, to $13.29.

Synchronoss announced on Thursday that Ronald Hovsepian, CEO, and John Frederick, CFO, will be leaving the company. Chairman and founder Stephen Waldis will take over as CEO, a role he has held before. Lawrence Irving will replace Frederick as CFO.

Like Waldis, Irving has been in that position previously.

And if the surprise management shake-up wasn’t enough, the company also said that it was lowering its first-quarter revenue guidance by $13 million to $14 million.

Previously, Synchronoss had forecast revenue of $173 million to $178 million. Analysts polled by FactSet had expected to see revenue of $175.5 million.

The company said it was “disappointed” with its first quarter. Investors were obviously of the same mind, particularly as the company had just wrapped an $821 million acquisition of Intralinks Holdings Inc. in December.

Mentioned in this article:

Flexion Therapeutics Inc. Nasdaq: FLXN

Neurocrine Biosciences Inc. Nasdaq: NBIX

Synchronoss Technologies Inc. Nasdaq: SNCR

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