Fluidigm talk tightened; Medivation jumps on positive trial data; Illumina trades in line

By Rebecca Melvin

New York, Jan. 29 - Fluidigm Corp.'s planned $175 million of convertible bonds, launched before the market open on Wednesday, saw price talk tightened during marketing amid positive investor response to the California-based genomics company's deal.

Back in established issues, Medivation Inc.'s convertibles surged in active trade in tandem with the San Francisco-based drug developer's underlying shares after positive phase 3 trial results for its Xtandi prostate cancer treatment.

Elsewhere, earnings season was in full swing with quarterly reports from many convertibles issuers influencing Wednesday's market action.

Illumina Inc.'s 0.25% convertibles due 2016 traded up in line with the underlying shares of the San Diego-based genetic sequencing company after a positive fourth-quarter earnings report.

WellPoint Inc.'s 2.75% convertibles traded actively but were little changed after the Indianapolis-based health benefits company reported quarterly earnings and revenue that were in line with expectations.

Equities fell sharply, with selling intensifying after news that the U.S. Federal Reserve is extending the taper of its monthly bond-buying program by another $10 billion, based on the view that a pickup in economic activity is on solid footing.

The Fed said it would buy $65 billion in bonds per month starting in February, down from $75 billion. The purchases of both U.S. Treasuries and mortgage bonds will be cut back equally.

The Fed also left its benchmark Fed Funds interest rate near 0%.

The decision came at the conclusion of a two-day policy meeting of the Federal Open Market Committee. It will be the last chaired by Ben Bernanke, who steps down after eight years at the helm. Vice chair Janet Yellen takes his place.

Planned Fluidigm eyed

Fluidigm, a medical technology company focused on genomics and DNA research, launched a $175 million offering of 20-year convertible bonds that was expected to price after the market close on Thursday.

Price talk on the Fluidigm deal was tightened during the session to a fixed 2.75% coupon and a 35% to 40% initial conversion premium. Initially the deal was talked to yield 2.75% to 3.25% with a 30% to 35% initial conversion premium, according to a preliminary term sheet.

Prior to the price talk tightening, the planned deal was looking assuredly cheap, one Connecticut-based source said. But it was difficult to determine specific valuation inputs because the company is acquiring a private company for cash and stock and currently has no debt, the source said.

A credit spread of 550 basis points over Libor was suggested by the underwriters of the deal, and a second source said that a 45% vol. was likely to be used for valuations.

The bond, which was also looking like fairly standard issue for the current primary market, was expected to appeal to both outright and hedged investors.

The registered deal has a $26.25 million greenshoe and was being sold via bookrunner Piper Jaffray & Co.

The notes are non-callable for four years and then are provisionally callable for three years if the closing stock price is greater than 130% of the conversion price for at least 20 days out of 30.

There are investor puts in years seven, 10 and 15, as well as takeover and dividend protection.

About $119.7 million of proceeds will be used to fund the acquisition of DVS Sciences Inc. Remaining proceeds will be used for research and development, commercialization of products, working capital and other general corporate purposes.

South San Francisco, Calif.-based Fluidigm develops, makes and markets integrated microfluidic circuit systems.

Medivation surges

Medivation's 2.625% convertibles due 2017 changed hands at 174.586 around midsession, which was up 14.148 points on the day, according to Trace data.

Medivation shares jumped as much as 15% but pared some of those gains to end up $8.51, or 11%, to $84.29 in active trade.

Spurring the surge was news that Medivation and its partner Astellas Pharma had positive final results from its phase 3 trial involving Xtandi for chemotherapy-naive metastatic prostate cancer patients that had progressed on androgen deprivation therapy.

The companies' Prevail study showed that the Xtandi treatment arm had a 29% reduced risk of death compared to the placebo group, and that Xtandi significantly reduced the risk of radiographic progression or death by 81% compared with placebo treatment.

Following news of the data, Medivation received price target hikes from Credit Suisse and JPMorgan. JPMorgan raised its price target for the company to $101.00, citing the Prevail data and saying that it believes the data strongly favors Medivation's Xtandi prostate cancer treatment over Johnson & Johnson's Zytiga treatment for the same disease.

Mentioned in this article:

Fluidigm Corp. Nasdaq: FLDM

Illumina Inc. Nasdaq: ILMN

Medivation Inc. Nasdaq: MDVN

WellPoint Inc. NYSE: WLP

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