Morning Commentary: Dendreon drops after bankruptcy filing; Salix Pharmaceuticals bounces slightly

By Rebecca Melvin

New York, Nov. 10 – Dendreon Corp.’s 2.875% convertibles dropped more than 15 points in early action on Monday after the Seattle-based biopharmaceutical company announced that it has filed for Chapter 11 bankruptcy protection.

The Dendreon convertibles due 2016 fell to 49. The last trade had been 66, but it had been offered lower in recent weeks with no trades, a trader said.

In the early going, there were buyers but no sellers of the Dendreon bonds, the trader said.

A second trader said that he put the market a bit higher at 50 bid, 60 offered.

Shares fell to $0.25 from $0.94.

Convertible noteholders will either get equity in the reorganized company or, if there is a buyer of the company, they will get cash.

Dendreon had warned in August that its debt load was unsustainable and that it was looking at alternatives, so the filing was not a big surprise, but “the timing was a little bit of a surprise,” the trader said.

The company has enough cash to support operations during its restructuring.

Elsewhere, Salix Pharmaceuticals Ltd.’s 1.5% convertibles due 2019 bounced slightly early Monday, trading at 153.829, according to Trace data, after the bonds plunged to 146 bid, 147 offered from the 200s on Friday.

The Raleigh, N.C.-based specialty drug company posted earnings that missed estimates, and also flagged inventory problems, lowered guidance, and announced that its chief financial officer has resigned.

In the broader markets, U.S. equities were modestly higher but extending gains that afforded the Dow Jones industrial average and the S&P 500 stock index new intraday record highs.

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