Convertibles mostly quiet; XenoPort surges on takeout news; Allegheny Technologies rises

By Rebecca Melvin

New York, May 23 – XenoPort Inc.’s convertibles and shares burst higher on Monday after news that Arbor Pharmaceuticals LLC has received a commitment for new debt to help fund its acquisition of the Santa Clara, Calif.-based biopharmaceutical company.

XenoPort’s 2.5% convertible senior notes due 2022, of which $115 million priced in February, was indicated up to 92.25 from 77 previously as shares rose $2.48, or 56%, to $6.88.

Under the agreement, XenoPort is being bought for $7.03 per share in cash, or a total equity value of about $467 million. Closing is expected in the third quarter, subject to customary conditions, including the tender of more than 50% of all outstanding shares of XenoPort and review by the U.S. Government under the Hart-Scott-Rodino Antitrust Improvements Act.

Arbor Pharmaceuticals is an Atlanta-based pharmaceutical company currently focused on the cardiovascular, hospital and pediatric markets.

Elsewhere in biotech, Exelixis Inc.’s convertibles gained in tandem with a 7% increase in the underlying shares of the South San Francisco, Calif.-based biotechnology company after positive trial data related to its cabozantinib cancer therapy.

Exelixis announced positive top-line results from the Cabosun randomized phase 2 trial of cabozantinib in patients with previously untreated advanced renal cell carcinoma. The trial met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement for patients using the drug.

Exelixis’ 4.25% convertibles due 2019 were seen higher at 124 from about 118 previously, according to a pricing source. Exelixis’ underlying shares rose 44 cents, or 8%, to $6.00.

The 5.25% convertibles of Lexicon Pharmaceuticals Inc., a small deal of $87.5 million that priced at the end of 2014, also jumped on Monday to about 178, which was in line with shares of the Woodlands, Texas-based biotechnology company, which were up 93 cents, or 7.5%, to $13.37.

Elsewhere, U.S. convertibles were surprisingly resilient despite lackluster share trading and light convertible-trading volume in general amid no real market moving news, market sources said.

“It was slightly better on a super quiet day, but there were no specific trends,” a New York-based trader said.

Forestar Group Inc.'s convertibles traded higher after news on Monday that the Austin, Texas-based real estate, mineral and fiber resources company has begun a cash tender offer of its $220.8 million of 8.5% senior secured notes due 2022. The Forestar 3.75% convertibles due 2020 were indicated up to 90.25, up from 84ish. Shares were up 35 cents, or 3%, to $11.83.

Meanwhile, Allegheny Technologies Inc.’s 4.75% convertibles continued to improve early Monday, extending gains from Friday after the bond put in a weak debut in the convertibles market on Thursday.

Allegheny’s 4.75% convertibles lifted above par, trading at 101.5 last, which was better on the day by 2.5 points, according to Trace data. Allegheny shares were also up, trading higher by 50 cents, or 4.6%, at $11.75 last. On their debut on Thursday, the bonds went out at 98.5 to 99 with shares at $11.25.

And Chesapeake Energy Corp.’s 2.5% convertible notes due 2037 traded up yet again, changing hands at 91.75, which was better by 0.875 point on the day. Shares of the Oklahoma City-based energy company were down at late morning by 2 cents, or 0.5%, at $3.71 last. Three weeks ago – on May 3 – the Chesapeake bonds were seen trading just south of 83.

Molina Healthcare Inc.’s two convertible bonds both traded a little higher on Monday as shares of the Long Beach, Calif.-based Medicaid services company gained about a buck, or 2.2%, to $47.00. Shares ended a little lower than that level, but up on the day at $46.77.

The Molina 1.125% convertibles due 2020 traded at 129.8, which was up 3.725 points, against shares at $47.00, a New York-based trader said. Molina’s 1.625% convertibles due 2044 traded up 0.375 point to 107.6 against the same share price.

But for the most part traders said there was nothing of note that defined the day and they were waiting for Tuesday to see if market activity improves for the next two days ahead of slower trade expected Thursday and Friday ahead of the long holiday weekend for Memorial Day.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Chesapeake Energy Corp. NYSE: CHK

Exelixis Corp. Nasdaq: EXEL

Forestar Group Inc. NYSE: FOR

Lexison Pharmaceuticals Inc. Nasdaq: LXRX

Molina Healthcare Inc. NYSE: MOH

XenoPort Inc. Nasdaq: ZNPT

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