Gilead drops in line with shares on Express Scripts news; MGM weaker; recent deals trade

By Rebecca Melvin

New York, Dec. 22 – Gilead Sciences Inc.’s convertibles dropped sharply on Monday in tandem with the underlying shares of the Foster City, Calif.-based biopharmaceutical giant after news that pharmacy benefits manager Express Scripts Holding Co. has chosen AbbVie Inc. to be its sole provider of hepatitis C treatment, based on cost benefits.

AbbieVie’s Viekira Pak will become the exclusive option for patients with genotype 1 hepatitis C patients starting Jan. 1. The decision is a blow to Gilead, whose Sovaldi hepatitis C drug was expensive but considered by some to be the better drug, a convertibles trader said.

Gilead’s 1.625% convertibles are quadruple par bonds that fell about 70 points to 408 on Monday.

Also in the biopharmaceutical space, Cubist Pharmaceuticals Inc.’s convertible bonds, which were mixed on a hedged basis earlier this month on Merck & Co.’s takeout of the Lexington, Mass.-based biopharmaceutical company, traded up a point or two in tandem with a 1.7% rise in shares.

Elsewhere, MGM Resorts International’s convertibles were weaker again on Monday as implied volatility continues to erode on their short dated convertibles that are maturing April 2015, the trader said.

The MGM 4.25% convertibles were seen to have changed hands at 113.45 with shares of the Las Vegas-based casino operator down nearly 2% at $19.93.

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