Horizon Pharma contracts as shares drop; Priceline adds in line; Newmont expands slightly

By Rebecca Melvin

New York, Feb. 29 – U.S. convertibles ended the month on a generally trendless note on Monday but with a couple of big movers to the downside in the health care space.

Horizon Pharma plc fell on an outright basis and contracted on swap after the Irish pharmaceutical company disclosed in filed financial statements that it received a subpoena in November requesting information about its patient assistance programs and other aspects of its marketing and commercialization activities, a trader said.

Endo Pharmaceuticals plc’s 1.5% convertible senior notes due 2018, of which there are hardly any left outstanding, looked to have slid by an even greater magnitude as shares dropped 21% after the Dublin-based pharmaceutical company said it will close its women’s health division.

Endo failed to find a buyer for the unit, which has been facing lawsuits related to its vaginal mesh products. The company said the closure will reduce future liability concerns.

Elsewhere, many of the larger, liquid names in trade in U.S. convertibles on Monday were in line with their underlying shares, or flat on a dollar-neutral basis. Priceline Group Inc.’s convertibles were among the more actively traded issues and they were a bit higher on an outright basis along with shares of the Norwalk, Conn.-based internet travel company’s stock, but flat on a swap basis.

Priceline’s 1% convertibles due 2018 traded up 1.5 points to 141.8, and the Priceline 0.35% convertibles due 2020 were up 0.7 point at 120.8, according to Trace data, when shares were about $1,278.21, which was up $24.00, or 1.9%.

Newmont Mining Corp.’s convertibles were up about 0.25 point on a swap basis as the common shares of the Denver-based gold and copper company strengthened along with higher gold prices.

“The bonds are now trading 0.27% yield to maturity,” a New York-based trader said of the Newmont bonds.

Meanwhile, Whiting Petroleum Corp.’s 1.25% convertibles due 2018 traded around 36, which was up about 0.375 point on the day. Whiting shares gained 13 cents, or 3.4%, to $4.01. Earlier this year, the Whiting bonds had been around 60 when the shares were $6.75.

Traders said the session started out very slowly. There was not much activity as portfolio managers looked to place final marks for the month.

The month brought broad-based selling and weakness in the first two weeks and more positive moves in the second part of the month. According to Hedge Fund Research, the convertible arbitrage strategy notched a gain of 0.34% for February and for the year the relative-value strategy is still down 1.47%.

In the broader markets, equities ended near their lows for the session. The Dow Jones industrial average closed down 123.47 points, or 0.7%, at 16,516.50 on Monday. For the month, the Dow eked out a gain of about 0.4%. But the S&P and Nasdaq notched losses for the month, which brought an extra day due to the fact that it is a Leap Year.

For Monday alone, all three indices had been in positive territory intraday. But the S&P 500 stock index ended down 15.82 points, or 0.8%, at 1,932.23 and the Nasdaq stock market lost 32.52 points, or 0.7%, to 4,557.95.

The down move in equities was a notable departure from the current trend of stocks moving in step with oil prices. Stocks ended lower even though the price of West Texas intermediate for April delivery was up 3.4% at $33.90 per barrel. For the month, oil prices are up about 0.5%.

Horizon Pharma contracts

Horizon Pharma’s 2.5% convertibles were quoted at 88.875 bid, 89.875 offered at the end of trading with shares at $17.80. That was down from about 95 previously and represented a hedged, or swap, decline of 2.5 points, a trader said.

Horizon shares closed down $2.63, or 13%, at $17.16.

Horizon disclosed that it received a subpoena in November from the Attorney’s Office for the Southern District of New York requesting documents and information related to its patient assistance programs.

Horizon said that it is cooperating with the investigation and that it may incur significant costs related to the investigation regardless of the outcome.

A similar investigation was made into Valeant Pharmaceuticals International Inc. and it disclosed last October that it had received subpoenas requesting documents related to Valeant’s financial support to patients, drug distribution and drug pricing decisions.

Mentioned in this article:

Endo Pharmaceuticals plc Nasdaq: ENDP

Horizon Pharma plc Nasdaq: HZNP

Newmont Mining Corp. NYSE: NEM

Priceline Group Inc. Nasdaq: PCLN

Whiting Petroleum Corp. NYSE: WLL

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