Ariad tumbles outright on nixed takeout talks; HeartWare shares plunge; Verint up a little

By Rebecca Melvin

New York, Sept. 2 – Ariad Pharmaceuticals Inc.’s convertibles tumbled on an outright basis and were mixed on swap on Wednesday as shares fell 17% on reports that Baxalta Inc. has dropped takeover talks for the Cambridge, Mass.-based oncology company over price.

Ariad’s 3.625% convertibles due 2019 fell to about 109.5 from about 120, according to pricing sources. On a swap basis, one source said the bonds came in, or contracted, about 0.25 point, but a second source said the bonds expanded, depending on delta.

HeartWare International Inc.’s convertibles, which have been very illiquid since an exchange for the paper in May, were seen lower after news that the medical device maker is making an acquisition. HeartWare shares plunged 21% on the news.

Elsewhere, Whiting Petroleum Corp.’s 1.75% convertibles were said to be a little better on improving investor sentiment. Shares of the Denver-based oil and gas company reversed early losses to end up 22 cents, or 1.2%, to $18.39.

Goodrich Petroleum Corp.’s 5% convertibles were not heard to be trading after news that the Houston-based oil and gas exploration and production company is doing an exchange for $55 million of the convertibles.

Goodrich also received a non-compliance notice from the New York Stock Exchange relating to the minimum share price requirement. Shares were last down 0.6% at $0.83.

Verint Systems Inc.’s convertibles were trading a little better during the session ahead of its quarterly results reported after the market close.

The Verint 1.5% convertibles due 2021 traded at 104.25 bid, 104.75 offered versus an underlying share price of $52.00, a Connecticut-based trader said.

The Verint convertibles were seen at 103.65 on Monday and at about 105 on Friday.

Shares of the Melville, N.Y.-based security and surveillance company were down 33 cents, or 0.6%, at $51.67 at the close. And in after-hours trade, the stock fell another $3.28, or 6.35%, to $48.39.

The company posted a loss for the quarter, but the share drop was attributed to mixed forward guidance.

In the broader markets, equities made another drastic swing, this time to the upside by nearly 2%. The S&P 500 stock index added 35.01 points, or 1.8%, to 1,948.86, following a 3% drop on Tuesday.

In economic data, U.S. companies added 190,000 workers to payrolls in August, according to the ADP Research Institute.

The amount missed the average estimate for 200,000 additional workers. Meanwhile, the July reading was revised downward to 177,000 jobs from a previously reported 185,000 increase.

The Labor Department reports non-farm payrolls for August on Friday. The report will be the last major data point before the Federal Reserve meets in the middle of the month to determine whether it should begin raising interest rates that have been held near zero since 2008.

The payrolls number is projected to show 218,000 workers added last month, while the jobless rate is expected to fall to 5.2% from 5.3%.

The CBOE volatility index fell to under 27 on Wednesday from 31.40 on Tuesday and 27 on Monday.

Ariad mixed on swap

Ariad’s 3.625% convertibles due 2019 traded down to about 109.5, which was down from 120 to 120.5 previously, a New York-based source said.

The fall, which was against a share price decline of $1.55, or 17%, to $7.55, represented a contraction of about 0.25 point on a swap basis, the source said.

A second source said the bonds didn’t contract on swap.

“A quarter-point move is nothing to write home about when the stock has moved this much,” the source said, and instead they may have expanded by up to a point depending on delta.

He didn’t say what delta would have yielded a gain on swap.

The outright plunge was precipitated by reports that Baxalta is no longer in discussions to buy Ariad. The news reversed word on Friday that said the two companies had been in talks. The stock jumped on Friday.

HeartWare quiet on stock drop

HeartWare’s 1.75% convertibles due 2021 were indicated to have dropped on Wednesday along with a slide in the common stock of the company located in Framingham, Mass., and Sydney, Australia.

But the bonds were not heard to have traded.

The issue has been particularly illiquid. Part of the 2021 HeartWare convertible was exchanged in May for HeartWare’s 3.5% convertibles due 2017.

One pricing source put the bonds down at 93 from near 102 previously. A second source said he saw the bonds down at 90 bid, 92 offered with the shares at $65.00.

“Some guys will say I’m too low. But although offers were a bit higher, there are no bids,” the source said.

HeartWare shares plunged $16.99, or 21%, to $64.82 in heavy volume after the company announced its acquisition of Valtech Cardio, a privately held company that specializes in the development of surgical and transcatheter valve repair and replacement devices for heart valve diseases. It is based in Or Yehuda, Israel.

The deal is expected to close late this year.

The reason investors were so unreceptive to the deal news may have been because it is going to be dilutive to shareholders or because it represents a move into a new product line, a source said.

HeartWare reported a steep decline in earnings per share in the most recent quarter compared to the same period a year earlier.

Mentioned in this article:

Ariad Pharmaceuticals Inc. Nasdaq: ARIA

Goodrich Petroleum Corp. NYSE: GDP

HeatWare International Inc. Nasdaq: HTWR

Verint Systems Inc. Nasdaq: VRNT

Whiting Petroleum Corp. NYSE: WLL

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