Insmed eyes deal; secondary market ‘not moving’; Exact Sciences, optic companies lose footing

By Abigail W. Adams

Portland, Me., Jan. 22 – The government shutdown did not stop the primary market on Monday. Insmed Inc. announced plans to price $300 million in seven-year convertible notes after market close Tuesday.

Price talk is for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Goldman Sachs & Co. LLC, Morgan Stanley and Leerink Partners are joint bookrunners for the registered deal, which carries a $45 million greenshoe.

The notes are non-callable for four years then provisionally callable subject to a 130% hurdle.

There is a contingent conversion until Oct. 15, 2024, according to the preliminary prospectus.

The Bridgewater, N.J.-based biopharmaceutical company focused on treatments for rare diseases plans to use proceeds to support the development of its ALIS treatment for nontuberculous mycobacteria lung disease.

Insmed hopes to launch the ALIS treatment in the United States this year, according to a company news release.

While the primary market was active, the secondary market started the week off at a crawl. There was limited trading activity throughout Monday’s session with only $290 million in trading volume in play by late afternoon.

“The market is not really moving. The stock market is not really moving. It’s just sitting flat,” a market source said, early in the session. “It really takes the fun out of it when nothing moves.”

The lack of action extended to even the new paper that entered the market in recently priced deals over the past two week. However, Exact Sciences Corp.’s recently priced 1% convertible notes due 2025 continued to attract attention.

After showing signs of a rebound late last week, the 1% convertible notes slumped back into the 96 to 97 range.

Lumentum Holdings, Inc.’s 0.25% convertible notes due 2024 were among the most actively traded of Monday’s session with 11 trades by late afternoon, according to a market source.

The notes tumbled about 5 points as the underlying equity underwent a sell off amid rumors that Apple may cut back production of its iPhone X.

The equity sell-off also hit optical component makers Finisar Corp. and II-VI Inc., with the convertible notes of both companies losing ground on an outright basis.

Exact Sciences slump

Exact Sciences’ $690 million deal, which priced on Jan. 11 with an issue price of 98.75, hit the market strong on its debut but dropped about 5 points on its third trading day last Wednesday to the 96 to 97 range.

The notes showed signs of recovery on an outright basis and broke par in scattered trades last Thursday and Friday. However, Exact Sciences’ notes closed Friday’s session around 97.

The notes remained in the 96 to 97 range in scattered trading throughout Monday’s session. The notes traded to a low of 96.875 and a high of 97.96 before ending the day at 97.482, according to Trace data.

Exact Sciences stock closed Monday at $47.87, a decrease of 1.28%. Shortly after pricing the 1% notes, Exact Sciences stock underwent a sell off.

The sell off was triggered when a Taiwan-based competitor released positive results in a clinical study.

iPhone X suppliers tumble

The convertible notes of several optical component makers were down on Monday as their stock underwent a sell off amid speculation Apple will cut back production of its iPhone X.

Lumentum’s 0.25% convertible notes dropped 5 points on an outright basis.

The notes began Monday with a high of 108, but ended the session with a low of 105.4, according to Trace data.

Lumentum stock ended the day at $45.2, a decrease of 7.47%. The Milpitas, Calif-based telecommunications equipment company is Apple’s primary supplier of 3-D sensor devices used for facial recognition to unlock screens in the iPhone X, Investor’s Business Daily reported.

While not as large a supplier as Lumentum, II-VI’s 0.25% convertible notes due 2022 also dropped about 5 points on an outright basis.

The Saxonburg, Pa.-based electronic component manufacturer’s notes were trading in a range of 121 to 124 before closing the day at 122.

The notes were trading in the 126 to 127 range last week. II-VI stock closed Monday at $48.4, a decrease of 8.59%.

Of all three iPhone X suppliers, Finisar was the least affected by the sell off. The 0.5% notes due 2033 dropped 2 points to end the day at 99.3 in scattered trades, according to Trace data.

The notes had been in the 101 to 102 range.

The Sunnyvale, Calif.-based optical communications company’s 0.5% notes due 2036 reflected no change. The struggling notes remained in the 93 to 94 range. Finisar stock closed Monday at $20.22, a decrease of 2.22%.

Both of Finisar’s 0.5% notes received a boost in mid-December when Apple announced it had awarded Finisar $300 million to open a plant in Texas to ramp up production of laser chips to be used in the iPhone X.

Mentioned in this article:

Exact Sciences Corp. Nasdaq: EXAS

Finisar Corp. Nasdaq: FNSR

II-VI Inc. Nasdaq: IIVI

Insmed Inc. Nasdaq: INSM

Lumentum Holdings, Inc. Nasdaq: LITE

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