Ariad Pharmaceuticals jumps on Takeda takeover news; AMAG paper suffers; Nabors deal on tap

By Stephanie N. Rotondo

Seattle, Jan. 9 – The pharmaceutical space was in focus in the convertible bond market on Monday.

Ariad Pharmaceuticals Inc.’s 3.625% convertible notes due 2019 were making big moves early Monday on news the company was being bought out by Takeda Pharmaceuticals Co. Ltd.

A trader said the convertibles were up 97 points, trading with a 255 handle.

“They are trading at parity,” he said, adding that the underlying stock had jumped $10 in early dealings. That equaled a more than 72% increase from Friday’s close.

Takeda is taking over Ariad in an all-cash tender offer, offering $24.00 a share. That represents a 75% premium over Friday’s closing share price.

All told, the deal is valued at $5.2 billion. Takeda expects to see an additional $170 million to $180 million in sales in 2018 from the purchase.

Meanwhile, AMAG Pharmaceuticals Inc.’s 2.5% convertible notes due 2019 were moving the other direction on a flurry of less-than-positive news.

A trader said the converts were at 109.583 versus a stock price of $23.00.

“The stock is off $12,” the trader noted.

Another market source pegged the issue around 109 as well.

The equity declined $12.70, or 35.57%, to $23.00.

AMAG first made headlines when it was announced that the company had inked an exclusive agreement with Palatin Technologies to develop and commercialize Palatin’s Rekynda in North America.

Rekynda is an investigational drug for the treatment of hypoactive sexual desire disorder in pre-menopausal women. The product has already wrapped two successful phase 3 trials and is expected to hit the Food and Drug Administration’s desk in early 2018.

Though adding the candidate could be good for AMAG’s bottom line, it will come with a hefty price tag, including a $60 million up-front payment and an additional $380 million if certain regulatory and sales milestones are hit.

Secondly, the company came out with preliminary fourth-quarter results that were not quite up to analysts’ expectations.

Non-GAAP revenue for the quarter is expected to be between $150 million and $155 million. Analysts are forecasting revenue of $154 million.

For the year, revenue is expected to be between $546 million to $551 million. That also fell short of market predictions.

As for 2017, however, expectations for revenue of $625 million to $675 million were more in line with forecasts.

But then, Raymond James – as well as Zacks – downgraded AMAG’s equity, citing concerns about the company’s Makena autoinjector drug.

Makena has been AMAG’s primary source of growth and cash flow, but it loses its orphan drug status in February 2018. Additionally, AMAG said it was nixing a comparative pain study for the autoinjector, which was expected to set Makena apart from its generic comparables.

Company management is slated to present at the JPMorgan Healthcare Conference at 2:30 p.m. ET on Tuesday.

Nabors in the market

Nabors Industries Ltd. said its subsidiary Nabors Industries Inc. is offering $500 million of exchangeable senior unsecured notes due 2024.

There is a $75 million over-allotment option.

Holders can put the notes during certain periods and in certain circumstances. Conversions will be settled with cash, common stock, or a combination thereof, at the company’s option.

Proceeds will be used to prepay the remaining balance of the subsidiary’s unsecured term loan due 2020, as well as to pay the cost of the capped call transactions. Any remaining proceeds will be used for general corporate purposes, including to repay or repurchase other debt.

The company is a wholly owned subsidiary of Hamilton, Bermuda-based Nabors Industries Ltd., an oil and gas drilling contractor.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Ariad Pharmaceuticals Inc. Nasdaq: ARIA

Nabors Industries Ltd. NYSE: NBR

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