Dendreon jumps on better Provenge sales; three Equinix convertibles add; Kodak lower

By Rebecca Melvin

New York, Jan. 5 - Dendreon Corp.'s convertible bonds jumped about 4 points in outright trade on Thursday after the Seattle-based biotech announced better-than-expected fourth-quarter sales of its Provenge prostate cancer drug.

Equinix Inc.'s three convertible bonds moved up by about a point to 1.5 points on a dollar-neutral, or hedged, basis as the stock moved 4% higher amid no particular news, a New York-based sellsider said.

Eastman Kodak Co. was active, but languishing, having traded at 26, which was flat to lower compared to the previous 26 bid, 28 offered range.

The Kodak bonds have been consistent in that range this week amid headlines about the probability of a bankruptcy from the cash-strapped digital photography company, a Connecticut-based trader said. And Moody's Investors Service weighed in on Thursday with a downgrade of all of Kodak's debt.

Meanwhile, the convertibles of Cemex SAB de CV continued to creep higher as they have been doing in recent sessions as the bonds right themselves after being slammed last year and floundering at depressed levels.

The Cemex 4.875% 2015 convertibles of the Mexican cement producer were up a couple of points against a higher common stock, a New York-based trader said.

"The bonds are now getting back to where they should be," he said.

The convertible bond market overall was pretty quiet, compared to what might be expected for the fourth trading session of the year, market sources said.

"There is not a lot volume," a trader said. "It's usually not this quiet in the beginning of the year, but people want to see what's going on."

Often, January trading is active as market players look to put on positions that they might hold for the remainder of the year. But not only convertibles, but stocks and fixed income desks have been quiet this past week amid a wait-and-see approach to what is happening with the European debt crisis.

"None of the problems are fixed yet. The euro is not fixed yet, and that's what everyone is fixated on," the trader said.

Europe weighed on the equity markets on Thursday for the first time this year amid worries about the ability of Europe's financial institutions to raise capital.

Unicredit, Italy's largest bank, slid for the second day after announcing a bigger-than-expected discount on a rights offering to raise $9.8 billion to meet new European capital requirements.

In contrast to headaches in Europe, U.S. economic data was upbeat. Jobless claims fell by 15,000 to a seasonally adjusted 372,000 for the week ended Dec. 31, according to the Labor Department. It marked the eighth time in the past nine weeks that new claims have come in below 400,000.

In addition Automatic Data Processing's monthly hiring report showed 325,000 new private-sector jobs were created in the United States in December, outpacing the 175,000 of jobs that economists had expected.

Additionally, the Institute for Supply Management's non-manufacturing reading on the U.S. service sector showed activity rose in December.

Dendreon jumps 4 points

Dendreon's 2.875% convertibles due 2016 traded around 74 outright on Thursday, which was higher by about 4 points from previous levels. Late trades were 74.25.

The bonds are trading mostly outright, which means they are not overly sensitive to moves in the underlying equity.

But they are tied somewhat "sentiment-wise," a Connecticut-based trader said, indicating that the 50% plus stock surge during the session influenced the bond's move.

Shares of the Seattle-based biotech ended 40% higher at $10.62 - they had been up as much as 54% - after the company reported higher-than-expected fourth-quarter revenue from its Provenge prostate-cancer drug.

Gross Provenge revenue was $82 million for the fourth quarter, up 25% from the third quarter and above the consensus estimate of $72 million.

The fourth quarter also saw a double-digit jump in the number of clinics offering Provenge infusions.

Dendreon said better reimbursement practices and improved sales executive and physician education were behind increased sales.

For 2012, the company expects "modest quarter over quarter growth," Dendreon president and chief executive Mitchell Gold said.

Provenge is among a new class of drugs that uses patients' own cells to stimulate the body's immune system to fight cancer.

However, the treatment is extremely costly at $93,000 for a month-long course, and growth has slowed because doctors were not getting reimbursed in a timely manner, burdening the clinics financially.

On Thursday, Dendreon said more than 590 sites are offering infusions of Provenge as of the end of the fourth quarter, a 39% jump from about 425 sites reported to have the drug at the end of the third quarter.

The last big move in Dendreon convertibles was a 1 point plus move in early December when the company said it will sell its royalty interest in Merck's hepatitis C drug Victrelis to a Canadian pension fund for $125 million in an effort to build up cash holdings.

Equinix adds

Equinix's 2.5% convertibles due 2012 were seen last at 104.25 bid, 104.75 offered on Thursday, against a price on the shares of the Redwood City, Calif.-based data center service provider of $104.75.

Equinix's 3% convertibles due 2014 were at 113.375 bid, 114.375 offered, and Equinix's 4.75% convertibles due 2016 were marked 144 bid, 145 offered at the end of the session.

Equinix shares rose during the session, closing near their highs at $104.75, which was up $3.85, or nearly 4%, on the day.

"The whole Equinix complex was significantly higher," a New York-based trader said. "Across the complex, the converts were up 1 point to 1.5 points on average with the common up $3.85."

It wasn't clear what was spurring gains. "The common move was a kind of an event," the trader said, adding that many traders started off the day on a 25% hedge.

A second New York-based sellsider said that given that the Equinix 2.5% convertibles mature in April, "there is not a lot to do there."

He said he considered the Equinix 3% the most interesting issue as the Equinix 4.75% convertibles were said to have weak takeover protection.

Kodak drifting lower

Kodak's 7% convertible notes due 2017 traded at 26 on Thursday, which was at the low end of the previous range of 26 bid, 28 offered.

Shares of the Rochester, N.Y.-based company fell 5 cents, or 11%, on Thursday to $0.42 in heavy volume after Moody's Investors Service downgraded all of Kodak's debt.

There were plenty of headlines on the company's probability of bankruptcy all week, market sources said.

"Kodak, once a proud company, is probably going to file Chapter 11. It's a classic case of advance technology killing an older company that wasn't able to adapt fully," a New York-based sellsider said.

Moody's said it lowered all ratings including the corporate family and probability of default to Caa3 from Caa2, the senior unsecured to Ca from Caa3, the senior secured to Caa1 from B3 and the speculative grade liquidity rating to SGL-4 from SGL-3.

Moody's said the downgrade reflected the heightened probability of a bankruptcy in the near term as a result of deteriorating liquidity.

"They've been drifting lower," a trader said of the Kodak convertibles' move this past week.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

Dendreon Corp. Nasdaq: DNDN

Eastman Kodak Co. NYSE: EK

Equinix Inc. Nasdaq: EQIX

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