Horizon Pharma drops; Clovis in focus; Anacor, Depomed slip; Chesapeake extends gains

By Rebecca Melvin

New York, April 12 – Horizon Pharma plc’s convertibles fell along with the underlying shares on Tuesday after the Ireland-based pharmaceutical company lowered guidance for its first- and second-quarter sales and earnings forecasts, although full-year sales and earnings guidance was confirmed.

Traders were also watching Clovis Oncology Inc.’s convertibles, but neither the bonds nor the shares were traded for the majority of the session as shares were halted pending news. The Boulder, Colo.-based biotechnology company was meeting with a panel of federal regulators Tuesday morning to discuss its New Drug Application for rociletinib.

That FDA panel voted against approving Clovis’ lung-cancer drug given current data. But the shares, which initially dropped 18% upon opening after 2 p.m. ET, ended down only 5%, or 82 cents, to $14.24 at the end of the session.

The Clovis 2.5% convertibles due 2021, which had spent the majority of the session untraded, dropped only 2.5 points to 61 from 63.62, according to Trace data.

Elsewhere, in the health care space, most names were down amid what appeared to be profit-taking following big gains last week on the heels of the Allergan plc-Pfizer Inc. merger break up, traders said.

Anacor Pharmaceuticals Inc.’s 2% bonds were down nearly 6 points on an outright basis to 112.8, according to Trace data. Those bonds, which priced less than two weeks ago, had traded up to more than 120 last week.

“Allergan is coming off, and they are coming off with momentum players taking some money off the table. The bond has done extremely well,” a trader said of Anacor.

Depomed Inc.’s 2.5% convertibles, which also gained last week, fell 4.3 points to 103.

In addition, the energy sector received a boost from higher oil prices, which rose to their highest level in more than four months amid expectations that oil producers Saudi Arabia and Russia were going to be able to negotiate production freezes to alleviate the current global oil market glut. West Texas Intermediate crude oil for May delivery rose $1.81, or 4%, to $42.17 per barrel.

Whiting Petroleum Corp.’s 1.25% convertibles jumped to more than 68 from 63.75.

Chesapeake Energy Corp.’s convertibles extended gains along with the underlying share after the Oklahoma City-based natural gas company announced on Monday that it has amended its $4 billion revolving credit facility agreement, granting relief of some debt covenants and allowing the company to continue to borrow at unchanged levels.

Chesapeake’s 2.5% convertibles due 2037 traded up nearly 8 points to 78 after jumping about 10 points on Monday.

“It will be interesting to see how that goes,” a New York-based trader said of Chesapeake.

Elsewhere, Violin Memory Inc.’s 4.25% convertibles fell to below 30 from about 43 as shares of the Santa Clara, Calif.-based computer data storage company fell 1.7 cents, or 3.8%, to $0.42. A year ago, the Violin Memory stock was at $4.00.

Horizon Pharma drops

Horizon Pharma’s 2.5% convertibles due 2022 dropped to 80 and ended higher at 81.6, which was down from about 93, according to Trace data, but the convertibles were not trading actively, a New York-based trader said.

Horizon shares dropped $4.80, or 26%, to settle at $13.42.

Horizon’s new sales guidance for the first and second quarters was well below estimates. But full-year 2016 net sales and earnings guidance was confirmed. The 2016 full-year net sales guidance was $1.025 billion to $1.050 billion, and full-year 2016 adjusted EBITDA guidance was $505 million to $520 million, representing 37% and 41% growth at the midpoints, respectively, the company said.

At late morning, a trader said, “Today is quiet. It feels like there is a little bit of profit-taking in the health care space, but not a lot,” a trader said.

Clovis panel decision eyed

Clovis’ 2.5% convertibles due 2021 traded last at 61, which was down from a little more than 63, according to Trace data. But the Clovis convertibles didn’t trade until after 2 p.m. ET, which was shortly after the company released news about a negative regulatory panel decision about its New Drug Application for its lung cancer drug, rociletinib.

Clovis closed down 82 cents, or 5.4%, to $14.24. But that level was well above inter session lows.

While the shares were halted, one trader had expected that the shares would drop below $10.00 per share.

After a meeting on rociletinib, the U.S. Food and Drug Administration’s Oncologic Drugs Advisory Committee recommended that the FDA wait and see results from Clovis’ ongoing phase 3 trial before making a decision on approval of the treatment, according to the Clovis news release.

“We are disappointed with today’s outcome, as we believe in the strength of the data we presented for rociletinib,” Clovis president and chief executive Patrick Mahaffy said in the release.

The company pledged to work with the FDA to evaluate the best path forward as it continues to review its application.

The FDA set a target action date of June 28. The phase 3 trial is expected to be complete in late 2018.

Chesapeake extends gains

Chesapeake’s 2.5% convertibles due 2037 traded up about 8 points to 78.5 at the end of the session Tuesday. On Monday, the 2.5% bonds had gained 10 points from about 60 to 70.

Chesapeake’s 2.25% convertibles due 2038 rose to about 52 on Tuesday, which was up from 46 on Monday and 41 on Friday. Chesapeake shares surged $1.55, or 34%, to $6.05, which extended a 74-cent, or 20%, gain on Monday.

“It will be interesting to see how that goes,” a New York-based trader said of Chesapeake.

Chesapeake announced on Monday that it has maintained its $4 billion borrowing limit with amendments to its secured revolving credit facility agreement. Under the agreement, which matures in 2019, Chesapeake had to pledge additional assets as collateral.

Among other things, Chesapeake has gained leverage ratio covenant relief until September 2017, and the interest coverage ratio covenant was reduced to 0.65x through March 2017. The next scheduled borrowing base redetermination review has been postponed and lenders have agreed not to exercise their interim redetermination right until June 2017.

Mentioned in this article:

Anacor Pharmaceuticals Inc. Nasdaq: ANAC

Chesapeake Energy Corp. NYSE: CHK

Clovis Oncology Inc. Nasdaq: CLVS

Depomed Inc. Nasdaq: DEPO

Horizon Pharma plc Nasdaq: HZNP

Violin Memory Inc. Nasdaq: VMEM

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