Morning Commentary: Convertibles see tame start to week, Intercept jumps

By Abigail W. Adams

Portland, Me., Aug. 6 – The convertible secondary space saw a tame start to the week with $65 million on the tape early in Monday’s session.

Trading activity was not concentrated with a wide breadth of names seeing trades of $2 million to $3 million, a market source said.

Intercept Pharmaceuticals Inc.’s 3.25% convertible notes due 2023 were slow to trade early Monday even as the stock shot up more than 12%.

In one $1 million trade, the notes were up 4 points outright to 92 versus an equity price of $110, a market source said.

While the notes may have “lagged a little on the move up,” they are largely held by outright accounts, a market source said. With a conversion price of $198.58, the notes still have a decent premium and may not really take off with the stock move, the source said.

Intercept’s stock has been on the rise since Friday after the company reported second-quarter earnings.

Intercept beat analyst expectations with a loss per share of $2.58 versus analyst expectations for a net loss of $2.83.

Intercept’s sales of Ocaliva were on the rise in the second-quarter, reaching $43.2 million from $35.2 million in the first quarter. Goldman Sachs recently upgraded Intercept stock to buy from sell.

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