Biotech names eyed; Wright Medical convertibles up; Exact Sciences reaches new heights

By Abigail W. Adams

Portland, Me., Aug. 28 – The convertibles primary market remained dormant on Tuesday with hopes for new deal activity ahead of the Labor Day weekend fading.

With new deals doubtful, August will be the first in several months where new deal volume has trailed 2017.

However, new deal volume has already outpaced last year for the quarter with $6.07 billion pricing over 19 deals compared to $4.95 billion in 18 deals in the third quarter of 2017.

And sources are expecting an active pipeline of deals in September.

Meanwhile, trading volume in the secondary space picked up on Tuesday after a slow start to the week.

With no new paper entering the space, several outstanding issuances returned to focus.

Wright Medical Group NV’s 1.625% convertible notes due 2023 were volume leaders on Tuesday with the notes climbing on both an outright and dollar-neutral basis after the medical device company priced a secondary offering.

Exact Sciences Corp.’s 1% convertible notes due 2025 reached its highest outright price and was expanded slightly dollar-neutral as the medical diagnostic company’s stock again broke out to a new 52-week high.

Cree Inc.’s 0.875% convertible notes due 2023 dropped back down to par but held onto their dollar-neutral expansion after an analyst downgrade on Tuesday.

While trading volume was light, Ionis Pharmaceuticals, Inc.’s 1% convertible notes due 2019 dropped several points outright alongside stock after the FDA rejected one of the company’s products.

Wright Medical in focus

Wright Medical Group’s 1.625% convertible notes due 2023 were volume leaders on Tuesday with the notes climbing on an outright and dollar-neutral basis after the company priced a secondary equity offering.

The notes were seen trading at 102.625 early in Tuesday’s session. They were seen at 103.5 bid, 104.5 offered in the afternoon.

The notes were up another 0.5 point dollar-neutral on Tuesday after also expanding on Monday as Wright Medical Group’s stock slid.

The stock closed Tuesday at $28.28, an increase of 5.56%. The stock dropped 4% on Monday.

Wright Medical Group priced $449 million, or 18,248,932 shares of common stock, after the market close on Monday at $24.60 per share.

The pricing occurred the same day the deal was announced. With pricing occurring quicker than anticipated “the credit was hanging in,” a market source said.

Proceeds from the secondary offering will be used to fund Wright Medical’s acquisition of Cartiva Inc.

The company was upgraded to a “buy” by Needham on Tuesday with a price target set at $30.00, due to the benefits from the acquisition.

Exact Sciences’ new heights

Exact Sciences’ 1% convertible notes due 2025 reached their highest outright price since hitting the market and saw a slight dollar-neutral expansion on Tuesday as stock again broke out to a new 52-week high.

The 1% convertible notes were seen at 120.5 bid, 121 offered on Tuesday.

The notes were up another 0.25 point to 0.5 point dollar-neutral and were trading with a 75% to 80% delta, according to a market source.

Exact Sciences’ stock again reached new heights with sentiment toward the company continuing to warm in the wake of a new sales and marketing agreement with Pfizer.

The stock closed Tuesday at $75.11, an increase of 4.09%.

Exact Sciences’ 1% convertible notes and stock also broke out last week after the sales agreement for the company’s flagship product Cologuard was announced.

The notes gained 24 points outright and expanded 3 points dollar-neutral last week on the news.

Prior to the announcement, the notes were trading around 95, levels the notes dropped to after the company released its second-quarter earnings in early August.

Exact Sciences’ 1% convertible notes have had a volatile existence and seen large gains and losses based on news surrounding Cologuard, a colorectal cancer screening product that is Exact Sciences’ only product in the market.

Exact Sciences initially priced $690 million of the 1% notes in January at 98.75 and priced a $218.5 million add-on at 106.5 in June.

Cree holds

Cree’s 0.875% convertible notes due 2023 saw a fresh round of trading activity on Tuesday with the notes dropping back to par as stock dropped after a price target downgrade.

While the 0.875% convertible notes were down about 2 points outright, they were moving largely in line on a dollar-neutral basis.

The notes maintained their 0.75 point to 1 point dollar-neutral expansion, a market source said.

Cree stock closed Tuesday at $45.36, a decrease of 4.06%.

Cree’s recently priced 0.875% convertible notes rose on both an outright and dollar-neutral basis on Monday.

However, the notes traded down on Tuesday after a Goldman Sachs analyst dropped their price target for Cree to $44 while maintaining their neutral rating.

Deutsche Bank initiated coverage of Cree with a hold rating and a price target of $47.00.

Ionis drops outright

Ionis Pharmaceuticals’ 1% convertible notes due 2019 were dropping alongside stock on Tuesday after the FDA rejected one of the company’s products.

While trading volume was light, the 1% notes were down more than 7 points outright.

They were seen trading around 101 in the late afternoon and closed the day at 100.84, sources said.

The notes were largely unchanged dollar-neutral. Ionis stock closed Tuesday at $45.17, a decrease of 15.88%.

If the notes drop below par, they will become more attractive to buyers, a market source said.

Ionis stock got hammered after the company announced the FDA had rejected its joint application with affiliate Akcea Therapeutics to market the drug Waylivra for a genetic disease that causes fat accumulation in the blood.

Mentioned in this article:

Cree Inc. Nasdaq: CREE

Exact Sciences Corp. Nasdaq: EXAS

Ionis Pharmaceuticals, Inc. Nasdaq: IONS

Wright Medical Group NV Nasdaq: WMGI

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