AMR launches convertible; Amgen, MannKind, Nektar active in trade; Sonic, Kodak richen

By Rebecca Melvin

New York, Sept. 21 - Convertibles had a pretty quiet session on Monday - which is typical of recent Mondays - as prices stabilized, particularly among distressed and high-yield names, and players waited for more supply.

"Mondays have been dead. Maybe people are holding off if they think new issues are coming," a New York-based sellside trader said, noting that new launches have frequently occurred at the beginning of the week after markets close.

True to form, AMR Corp. launched an offering of $250 million of five-year convertible senior notes after the markets' close, which was seen pricing after the close on Tuesday.

The registered AMR deal was talked to yield 6.5% to 7% with an initial conversion premium of 15% to 20%, a syndicate source said.

Although it was "not a real active day" in the secondary market, there was some trading, especially among biotechnology companies.

Amgen Inc. traded a little lower despite a higher stock price amid news that a phase 3 trial of its denosumab drug successfully delayed bone metastases in cancer patients.

MannKind Corp. convertibles gained and expanded some amid shares that climbed 12% in high volume after positive comments that the Valencia, Calif.-based biopharmaceutical company shows promise commercializing its products, a sellsider said.

Nektar Therapeutics Inc. also popped after it said it licensed a pair of experimental pain treatments to AstraZeneca plc in a deal valued at about $1.12 billion.

In general, convertibles prices stabilized, a New York-based sellside trader said, noting that some distressed and high-yield names had fallen starting Friday by about a point from their high levels.

But Sonic Automotive Inc., which priced 5% convertibles late last week, was its paper trade and even richen a little, according to a sellsider.

Eastman Kodak Co.'s 7% convertibles, which also priced late last week, also richened.

And Concord, N.H.-based gold mining concern Jaguar Mining Inc., which priced an issue of 4.5% convertibles on Sept. 10, saw the paper reported in trade at 99.625 versus a share price of $9.11.

AMR to price

Fort Worth-based AMR plans to price $250 million of five-year convertibles, which are non-callable for life, and talked to yield 6.5% to 7% with a premium of 15% to 20%. The notes are guaranteed by unit American Airlines.

AMR also planned a concurrent offering of 30 million shares of common stock.

Citigroup Global Markets Inc., Morgan Stanley & Co. Inc. and UBS Investment Bank are joint bookrunners of the deal, proceeds of which will be used for general corporate purposes.

AMR said in its prospectus that its ability to become profitable and continue to fund its obligations on an ongoing basis will depend on a number of risk factors, many of which are beyond its control, such as spikes in jet fuel prices and terrorist attacks.

"We incurred significant losses in 2001-2005, which materially weakened our financial condition. We lost $893 million in 2005, $781 million in 2004, $1.2 billion in 2003, $3.5 billion in 2002 and $1.8 billion in 2001," the prospectus read. "Although we earned a profit of $456 million in 2007 and $189 million in 2006, we lost $2.1 billion in 2008 (which included a $1.1 billion impairment charge), and $765 million in the six months ended June 30, 2009.

"Because of our weakened financial condition, we are vulnerable both to the impact of unexpected events (such as terrorist attacks or spikes in jet fuel prices) and to deterioration of the operating environment (such as a deepening of the current global recession or significant increased competition)."

Amgen steady to lower

Amgen's 0.125% convertibles due 2011 traded last at 100, which was unchanged from Friday's close, against a share price of $62.31, which was up 2.5%.

Amgen's 0.375% convertibles due 2013 were last at 99.25, which was down 1.5 points from Friday's close.

The Thousand Oaks, Calif.-based biotech stalwart announced detailed results from a phase 3 trial evaluating denosumab administered subcutaneously versus Zometa (zoledronic acid) administered as an intravenous infusion in the treatment of bone metastases in advanced cancer patients with solid tumors (not including breast and prostate cancer) or multiple myeloma.

For the primary endpoint of this study, the median time to first on-study skeletal related event (fracture, radiation to bone, surgery to bone, or spinal cord compression) was 20.6 months for those patients receiving denosumab and 16.3 months for those patients receiving Zometa, which is statistically significant for non-inferiority, the company's news release stated.

"It is encouraging to see denosumab's efficacy in this broad cancer population. There is no need for renal monitoring or dose adjustments due to renal impairment," said David Henry, clinical professor of Medicine, Pennsylvania Hospital in Philadelphia.

"Furthermore, the positive results of this study, combined with the convenience of a monthly subcutaneous injection and without the flu-like symptoms associated with Zometa administration, make this an exciting potential treatment option for advanced cancer patients," Henry stated.

MannKind expands

MannKind's 3.75% convertibles due 2013 traded at about 80, compared to offers at 75 on Friday with the stock at about $10.

Shares of the biotech, which focuses on therapeutics for diseases such as diabetes and cancer, surged $1.26, or 12%, to $11.47 on Monday.

"They moved up heavier than their implied delta. They should have moved on a 55 or 60," a New York-based sellside trader said.

MannKind is a "sort of semi distressed pharmaceutical name, but some equity shop made some favorable comments, that they have a good shot of commercializing its products," another sellsider said.

The hope is that they will partner with some Big Pharma name, a third sellsider said.

The company is a maker of nasal delivery of insulin, which has met with some skepticism in the marketplace.

"It got better on the day - traded at 80, which is up 5 points from Friday," a sellsider said.

Meanwhile, Nektar's 3.25% due Sept. 28, 2012 traded up 5 points as well to about 87.5.

Shares of the San Carlos, Calif.-base biopharmaceutical company jumped $1.11, or 13%, to $9.57, after the company and AstraZeneca announced that they have entered into an exclusive worldwide license agreement for two drug development programs: NKTR-118, a late stage investigational product being evaluated for the treatment of opioid-induced constipation, and the NKTR-119 program, an early stage program that is intended to deliver products for the treatment of pain without constipation side effects.

Both programs were developed by Nektar using its proprietary small molecule advanced polymer conjugate technology platform.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

AMR Corp. NYSE: AMR

Eastman Kodak Co. NYSE: EK

MannKind Corp. Nasdaq: MNKD

Nektar Therapeutics Nasdaq: NKTR

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