Morning Commentary: Halozyme convertibles in focus on missed guidance, notes redemption

By Abigail W. Adams

Portland, Me., Jan. 11 – The convertibles primary market remained dormant early Wednesday although more deals are expected with demand for new paper strong and equity markets continuing to rally.

However, the market may be waiting for the results of the Consumer Price Index report on Thursday, which will largely determine whether the rally in equities will have staying power, a source said.

Equity indexes saw a strong start to Wednesday’s session.

However, they pared their gains with selling pressure setting in as the session progressed.

The Dow Jones industrial average was up 17 points, or 0.04%, the S&P 500 index was up 0.26%, the Nasdaq Composite index was up 0.49% and the Russell 2000 index was up 0.37% shortly before 11 a.m. ET.

There was $87 million in reported convertibles trading volume about one hour into the session with the JPMorgan health care conference continuing to generate news that moved the convertible notes in the biotech sector.

Halozyme Therapeutics Inc.’s 1% convertible notes due 2028 saw heavy volume with the notes down alongside stock on forward guidance that missed expectations.

The 1% convertible notes were down 7 points outright with stock off 10%.

The notes were changing hands at 110 versus a stock price of $49.81 early in the session, according to a market source.

There was $7 million in reported volume.

Halozyme’s stock traded down to $49.66, a decrease of 11.18%, shortly before 11 a.m. ET.

Stock was under pressure after Halozyme issued revenue guidance that fell short of expectations.

Halozyme also announced that it would redeem the remaining outstanding amount of its 1.25% convertible notes due 2024 on March 17.

The notes are convertible up until their redemption date at a conversion price of $23.79 with the principal amount to be settled in cash and any excess to be settled in cash, shares or a combination of both, the company said in a press release.

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