Morning Commentary: PTC Therapeutics little changed after trial news; overall trading quiet

By Rebecca Melvin

New York, Oct. 16 – U.S. convertibles were ending the week on a quiet note on Friday, with market players watching a developing story in PTC Therapeutics Inc., which announced mixed results of a drug trial that failed to meet goals for all patients but did benefit some patients. The news caused PTC’s stock to plunge briefly overnight but it recovered to trade in positive territory early Friday.

PTC said that its Phase 3 trial of Translarna failed to meet some endpoints but that it would still submit the compound for FDA approval this year as planned.

“It’s weird. The stock was down to 20 bucks and then traded at as much as 38, all pre-open. And now it’s settling in, and the stock is up 50 cents,” a trader said. “It’s a non-event for guys that wanted to play vol. there.”

The stock closed at $31.74 on Thursday.

PTC’s 3% convertibles due 2022, of which $150 million priced in August, were seen likely at 94 bid, 95 offered versus an underlying share price of $32.10. That was little changed on the previous level, the trader said, but he was uncertain of pricing, which wasn’t immediately transparent.

A second trader, “It’s an interesting situation to watch.”

Translama (ataluren) is PTC’s lead product for the treatment of muscular dystrophy and cystic fibrosis and is in phase 3 clinical trials.

Elsewhere, trading was quiet with market players continuing to monitor takeout chatter and potential takeouts particularly in the tech sector.

SanDisk Corp.’s two convertible bond issues were a big feature of trading this past week and those bonds continued to trade sporadically with the overriding trends in place that the SanDisk 1.5% convertibles would outperform in a takeout and the 0.5% paper would underperform.

Also of note to watch was Microchip Technology Inc., a trader said.

In the absence of earnings reports on Friday, market players were looking to next week.

Helix Energy Solutions Group Inc. is expected to report its third quarter results on Monday. Shares of the Houston-based offshore oil service company were weaker on Friday, but the Helix 3.25% convertible changed hands at the high end of its recent range.

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