InterMune jumps on Roche buyout news; Illumina in line; Qihoo finds buyers on stock dip

By Rebecca Melvin

New York, Aug. 25 – InterMune Inc.’s 2.5% convertibles of 2018 surged more than 50 points on an outright basis Monday and gained on a dollar-neutral, or hedged, basis, as well as shares skyrocketed 35% on news that Swiss pharmaceutical giant Roche AG is buying the California-based biotechnology company for a 38% premium to shares on Friday.

InterMune’s 2.5% convertibles traded actively at around 229, which was up from 177 last. On a hedged basis, investors gained 6.5 points, if they were on a lighter, 82% delta, a trader said.

Other biotech names were up in sympathy with the deal news as market players anticipate additional companies that may become takeover targets by big pharmaceutical companies.

Illumina Inc.’s 0% convertible due 2019 was also a big trader on the day, but those bonds were seen up in line, or flat, at best, in heavy volume. Another Illumina issue, the 0.5% convertible, was not as actively traded.

InterMune’s 2.5% convertibles of 2018 and the Illumina 0% bonds were really the focus of the day’s trade, sources said.

Elsewhere, Qihoo 360 Technology Co. Ltd.’s convertibles were said to be trading “fine” in the early going, with shares of the Chinese internet company lower after the company reported earnings that beat estimates but disappointed on profit margin.

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