Convertibles secondary tone improves; Ares Capital dominates trading; biotechs strong

By Abigail W. Adams

Portland, Me., Jan. 7 – The tone of the convertibles secondary space continued to improve on Monday with the market in general up 0.5 point to 0.75 point, according to a market source.

Names in the biotech space were the outperformers with several names rising several points.

Positive news and the J.P. Morgan health care conference, which launched on Monday, were buoying the overall biotech space, which got crushed in the fourth quarter, a market source said.

Insmed Inc.’s 1.75% convertible notes due 2025 made large gains on an outright and dollar-neutral basis on Monday after preliminary sales figures from its recently approved drug beat analyst expectations.

DexCom Inc.’s 0.75% convertible notes due 2022 and 0.75% convertible notes due 2023, Alder Biopharmaceuticals Inc.’s 2.5% convertible notes due 2025 and Exact Sciences Corp.’s 1% convertible notes due 2025 were also posting gains on an outright and dollar-neutral basis.

Outside of the biotech sector, Ares Capital Corp.’s convertible notes continued to dominate trading with holders switching from the specialty finance firm’s soon-to-mature convertible notes to the longer duration paper.

Micron Technology Inc.’s 3% convertible notes due 2043 were also active and making gains during Monday’s session.

Insmed expands

Insmed’s 1.75% convertible notes due 2025 made large gains on an outright and dollar-neutral basis as stock soared Monday after the biotech company released preliminary sales figures from its recently approved drug Arikayce.

The 1.75% notes jumped more than 12 points outright and expanded 3.5 points dollar-neutral, a market source said.

The notes shot up to 83.25 early in the session and were trading just shy of 86 versus an equity price of $20.81 later in the afternoon, sources said.

More than $10 million of the bonds were on the tape.

Insmed stock closed Monday at $21.28, an increase of 43.3%.

Stock soared after Insmed’s preliminary sales figures for Arikayce, a recently approved drug to treat a rare lung disease, beat expectations, a market source said.

Insmed reported sales of $9.8 million for Arikayce in the fourth quarter, according to a company news release.

Insmed stock plunged after Arikayce was approved in September due to a black box warning which investors feared would limit sales.

Biotech on the rise

The biotech sector was the outperformer of a strong session on Monday with several other names also posting large outright and dollar-neutral gains.

Alder Biopharmaceuticals’ 2.5% convertible notes due 2025 rose more than 5 points outright and 2 points dollar-neutral, sources said.

The 2.5% convertible notes were seen changing hands at 85.375 versus a stock price of $11.38 on Monday with more than $7 million of the bonds on the tape.

While Alder’s convertible notes were making gains, stock closed Monday at $11.16, a decrease of 5.18%.

Dexcom’s 0.75% convertible notes due 2022 were up more than 10 points outright and were improved dollar-neutral, a market source said.

The notes were changing hands at 143.8 versus a stock price of $130.15.

Dexcom, a manufacturer and distributor of glucose monitoring systems for diabetes, saw its 0.75% convertible notes due 2023 rise 6 points outright.

They were seen changing hands at 106.125 in the mid-afternoon.

Dexcom stock closed Monday at $129.97, an increase of 11.81%.

Exact Sciences’ 1% convertible notes due 2025 rose almost 10 points outright and expanded about 0.5 point dollar-neutral after a 0.5 point dollar-neutral expansion the previous week, according to a market source.

The notes were changing hands at 122.375 versus an equity price of $74.71 with about $8 million of the bonds on the tape.

Exact Sciences stock closed Monday at $75.37, an increase of 14.81%.

Ares Capital dominates

Ares Capital’s convertible notes continued to see heavy trading volume on Monday as they have since last week with one issue quickly approaching maturity.

Ares Capital’s 4.375% convertible notes due Jan. 15, 2019 saw more than $20.5 million of the bonds on the tape. They continued to change hands at around par, a market source said.

Ares Capital’s 3.75% convertible notes due 2022 were also active with more than $14 million of the bonds on the tape. The notes were also trading around par.

The trading activity was attributed to holders switching from the soon-to-mature notes to the longer-dated paper, which is investment grade.

Micron active

Micron’s 3% convertible notes due 2043 were active and making gains on an outright basis alongside stock.

The 3% notes were up a little more than 4 points outright. They were changing hands at 118.5 versus an equity price of $34.21 with $12 million of the bonds on the tape by the late afternoon.

Micron stock closed Monday at $34.00, an increase of 3.98%.

Micron was on the rise following an analyst upgrade from BMO with the price target raised to $50.00 from $32.00.

Mentioned in this article:

Alder Biopharmaceuticals Inc. Nasdaq: ALDR

Ares Capital Corp. Nasdaq: ARCC

DexCom Inc. Nasdaq: DXCM

Exact Sciences Corp. Nasdaq: EXAS

Insmed Inc. Nasdaq: INSM

Micron Technology Inc. Nasdaq: MU

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