Morning Commentary: Teva bonds move higher in active trade; Endo International weighs on drug sector

By Rebecca Melvin

New York, May 6 – Teva Pharmaceutical Industries Ltd. was in focus in the convertibles space early Friday as the Teva 0.25% convertibles, or the C bonds, gained in active trade with shares of the Petach Tikva, Israel-based pharmaceutical company trading down, a New York-based trader said.

“It’s a busy Friday; the Teva Cs are ripping,” the trader said, attributing the gain to outright buyers.

Teva is scheduled to report quarterly results next week.

The Teva 0.25% convertibles due 2026 were quoted at 125.5 bid, 126 offered versus a share price of $50.50.

The bonds were seen up 2 points. Teva shares were last down $2.87, or 5%, to $51.00.

Traders were also eyeing Endo International plc, which is not a convert issuer, as shares of the Dublin-based specialty pharmaceutical company plunged $10.00, or 39%, to $161.23.

Endo reported a disappointing first-quarter loss and cut full-year guidance. It lost $133.9 million, or 60 cents per share, for the first quarter, compared to a loss of $75.7 million, or 43 cents per share, in the year-earlier period.

Adjusted earnings were $1.08 per share, which was a few cents better than many analysts expected, however.

Endo reported revenue of $963.5 million, which was up from $714.1 million in revenue in the year-earlier period but below estimates for revenue of $964.4 million.

Looking ahead, the company cut its full-year estimates to $4.50 per share to $4.80 per share for earnings, which was lower than $5.85 to $6.20 per share previously expected; and revenue was cut to $3.87 billion to $4.03 billion, which was down from $4.32 billion to $4.52 billion previously expected.

Analysts had been expecting earnings of $5.68 per share on revenue of $4.3 billion.

The company blamed its lowered forecast on increasing competition and regulatory delays.

Influencing the broader markets was the April U.S. jobs report. The Labor Department said that non-farm payrolls rose by 160,000 jobs last month and the unemployment rate held steady at 5%. That was lower than the 195,000 jobs to 200,000 jobs that many economists had been expecting. And it was the lowest increase in many months.

The disappointing report led many market observers to take the potential for a June Federal Reserve rate hike off the table.

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