By Ronda Fears
Nashville, Tenn., Jan. 16 - Invitrogen Corp.'s 2.25% convertible due 2006 is recommended by Bear Stearns & Co. convertible analysts, as the issue has cheapened since pricing about six weeks ago. The issue sold in early December at par against a stock price of $65, which works out to an implied spread of 420 basis points that would be consistent with a BB- credit using a volatility of 35%.
However, Yaw Debrah, head of convertible research at Bear Stearns, noted in a report Wednesday that the current convertible price of 93.625 versus $58.40 for the stock would imply a credit spread of 508 basis points, a spread widening of 88 basis points. The Bear Stearns analyst estimates Invitrogen's credit profile at BB- based on the company's moderate revenue base and market capitalization, which is linked to the burgeoning genomic industry. The convertible is not rated.
Positives for Invitrogen, the report said, are its leading position in the life science tool marketplace, the company's profitability, unlike the majority of genomic companies, and the company's deep and broad product offering were also considered. On the negative side is the company's reliance on academic and biotechnology research budgets that are subject to fluctuations, rapid technological change in the marketplace that the company must stay ahead of and the company's rapid growth and the need to quickly and properly integrate acquisitions.
All told, Invitrogen's liquidity appears to provide ample operating cushion, Debrah said. The assessment is based on several assumptions, including gross margin improvement in 2002 to 58.7% from 55% in 2001, a positive operating margin of 14.5% following a negative 25.2% in 2001, capital expenditures of about $50 million in 2002 compared with around $40 million in 2001 and an increase in working capital by about $20 million for the year.
Invitrogen 2.25% convertible due
$500 million, not rated
| Convertible Price: | 93.625
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| Common Price: | $58.40
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| Conversion Price: | $86.099
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| Convertible Premium: | 38.03%
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| Convertible Ratio: | 11.6146
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| Current Yield: | 2.4%
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| Yield to Maturity: | 3.68%
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| Yield Pickup: | 2.4%
|
| Call: | Dec. 20, 2005, at par
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