Motorola gains with stock on CEO departure; BioMarin steady after drug canceled

By Ronda Fears

Nashville, Sept. 22 - For the most part, traders said the sharp slide in stocks sidelined convertible players. The Morgan Stanley Convertible Conference this week in Colorado also was a factor in the slow trading volume.

In the primary arena, however, activity picked up somewhat as three deals emerged. While the three together total just $450 million, it was more than the convert market has seen in a day for over six weeks.

Early Monday, MemberWorks Inc. launched $75 million of seven-year convertible notes talked to yield 5.25% to 5.75% with a 30% to 35% initial conversion premium for pricing after the close Wednesday.

MemberWorks shares closed down $1.84, or 5.5%, to $31.59.

For Tuesday's business, Doral Financial Corp. and CKE Restaurants Inc. are on tap.

Doral is pitching $300 million of perpetual convertible preferreds, talked to yield 4.25% to 4.75% with a 30% to 35% initial conversion premium. The stock ended off 14c, or 0.29%, to $48.07.

CKE plans $75 million of 20-year convertible notes talked to yield 4.0% to 4.5% with a 23% to 27% initial conversion premium. The company plans to use the proceeds to retire a portion of its 4.25% convertible due 2004, and take out the remainder by replacing its existing $100 million senior credit facility with a new $150-$175 million facility and drawing down those funds.

CKE shares closed down 16c, or 2.04%, to $7.69.

Volume in trading was nothing spectacular, either, dealers said, as stocks took a dive along with the dollar.

"We didn't see a lot today, and that was good in that it means at least there wasn't a massive sell-off," said one trader.

The unexpected resignation of Motorola Inc. chief executive Christopher Galvin did lift convertibles tied to the name, however. The markets had the weekend to ponder the development, as the news hit the tape late Friday.

Several analysts upgraded the stock, and dealers said the general line of thought was that it will be more likely that Motorola would make some divestitures, in the way of asset sales or spin-offs, with Galvin's departure.

Galvin and Motorola announced after the markets closed Friday that he would retire when a successor is named. His grandfather founded the company and his father built it into a technology powerhouse.

Motorola's 0% converts were essentially unmoved by the news, traders said, but the Liberty Media Group 3.5% exchangeable due 2031, which converts into Motorola shares, was bid up 1.75 points to 76.25 bid, 78.25 offered.

The stock closed up 97c, or 8.75%, to $12.06.

Otherwise, there were a few inquiries in several biotech names involved in the Morgan Stanley conference, as well as the UBS Global Life Sciences Conference.

"The stock market was against us today," in terms of biotech issues, said one sellside trader.

"But we got a lot of calls on biotechs. Any cheapening will generate some interest, probably, because a lot of this paper was considered pretty rich."

BioMarin Pharmaceuticals Inc. was one of particular note, since the company also had a major announcement early Monday. The company, which develops enzymes for life-threatening diseases, canceled a drug program that had been in phase III development; its Neutralase is intended to reverse anticoagulation by heparin in primary coronary artery bypass surgery.

"It was clear the product was not going to work," said Frederic D. Price, chief executive of BioMarin, at the UBS conference.

"We're not going to try to resurrect the program or to spend any more money on it."

However, as a result of the program's cancellation, along with those expenditures, he said the company revised its outlook positively.

For 2003, he said, the company now expects the net loss to improve to $76-$78 million from $81-$83 million and cash burn to improve to $74-$78 million from $80-$84 million.

For 2004, he said, the company now sees the net loss improving to $68-70 million and cash burn declining to $69-73 million.

"We [BioMarin] absolutely believe we're on track for profitability in 2006," Price added.

The BioMarin 3.5% convertible due 2008 was "steady at about 85," according to one dealer. The stock dropped 66c, or 7.68%, to $7.93.

Some activity was also noted in Amylin Pharmaceuticals Inc., Ligand Pharmaceuticals and Serologicals Corp., other traders said.

Yellow Corp. also was mentioned, ahead of its presentation at the Morgan Stanley conference later this week. The trucking concern was higher, bucking the downward trend in the market. The new 5% convert due 2023 was up 2 points to 120.75 bid, 121.75 offered as the stock rose $1.16, or 3.68%, to $32.67.

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