Invitrogen drops, but gains on hedge; Amkor steadies after fall; Nektar weaker

By Rebecca Melvin

Princeton, N.J., Oct. 28 - After a week of earnings news that hurt many convertibles players, eyes were focused Friday on what the first week of November will bring and many hoped that it won't be more of the same, traders and holders said.

"The last week has been a mini bloodbath," an outright holder said. Biotechnology paper, in particular, has taken a beating that continued on Friday.

But for next week, Oil States International Inc. was expected to report earnings after the close on Monday, and after the record-breaking quarterly report from Exxon Mobil Corp., there were expectations that Oil States will post strong numbers as well.

On Friday Oil States' 2.375% convertibles were quiet at about 120.5 bid, 121.5 offered, a sellside trader reported.

Also reporting will be Charter Communications Corp., which like Oil States has a conference call scheduled Tuesday.

Friday's session was fairly active, with "stuff for sale" early in the session but with some firming later on, traders said.

Invitrogen Corp. convertibles were actively traded, with its stock dropping after its third-quarter earnings news. But a couple of its convertible issues were better by 0.5 point to 1 point, traders said.

"Whether it was rates or negative perception is difficult to say," a sellside convertibles trading desk director said of the market. "But the market was up more than 100 points today; where did all that negativity go?" He called the convertibles market "quite sloppy, especially at the end of the week."

Invitrogen earnings, outlook drop

The 3.25% and 1.5% Invitrogen convertibles were lower outright Friday but gained on hedge as its stock fell after the maker of tools and cultures used in drug development and production reported a 15% drop in net profit due to an acquisition-related charge.

"They opened up about 0.75 of a point today," a Connecticut-based arbitrage player said via e-mail of the big convertible issuer's 3.25% and 1.5% paper.

"I think in a good market they would have done substantially better than that," he added.

Invitrogen also has 2% convertibles, which are out of favor because they don't have cash takeover protection, and they came in a little bit, traders said. Meanwhile, the 2.25% Invitrogen convertible paper "amounts to mostly a cash substitute with a way out-of-the-money, one-year call," the buysider said.

Carlsbad, Calif.-based Invitrogen posted third-quarter net profit of $23.9 million, or 42 cents a share, compared with $28.2 million, or 51 cents a share, in the year-ago period.

Excluding items, Invitrogen earned 80 cents a share, which was below analysts' estimates.

In addition, Invitrogen, citing dilution related to acquisitions, lowered its full-year 2005 forecast for earnings in the range of $3.42 to $3.35 per share from its previous range of $3.50 to $3.53 a share.

Invitrogen's 1.50% convertibles traded down more than 6 points to about 82.5, compared to trades on Wednesday at 89.125.

Invitrogen stock fell $9.02, or 12.74%, to $61.76.

Amylin stock, convertibles steadier

The convertibles of Amylin Pharmaceuticals Inc. firmed slightly after falling sharply on Thursday on its third-quarter results.

"The growth stuff is just being taken out and shot when they don't perform," an outright holder said.

San Diego-based Amylin posted a much wider-than-expected loss for the third quarter of $69.5 million, or 65 cents per share, compared with a loss of $34.1 million, or 36 cents a share, a year earlier. Revenue, however, nearly doubled to $25.9 million from $13.4 million. But the figure still fell short of estimates.

A problem was lower-than-expected sales of the company's Type 2 diabetes drug Byetta. The company has a collaborative profit-sharing arrangement for the marketing of Byetta with Eli Lilly & Co. Going forward, the company said it expects some inventory build in the retail, institutional and retail channels but gave no sales guidance.

Amylin has amended its collaborative agreement with Alkermes for the development of Exenatide LAR, the once-weekly version of Byetta in phase II development, so that Amylin will now be responsible for the commercial manufacturing of Exenatide LAR. Its expanded role in Exenatide LAR has caused onlookers to expect Amylin will likely require additional financing.

Amylin's 2.25% issue due 2008 traded Friday at 116.965, little changed compared to Thursday when it was quoted at 116.875, which was off 11 points outright.

The 2.5% convertibles due 2011 traded at 113.439, flat to higher compared to Thursday when there was a 9 to 10 point drop on the day.

Amylin shares extended a decline, albeit at a slower pace, closing down 35 cents, or 1%, at $33.52. On Thursday the shares fell $4.12, or 10.84%, to $33.87.

Nektar sags on drug news

The convertibles of Nektar Therapeutics Inc. were also seen weaker after news that its new Exubera drug will be getting a longer review from the U.S. Food and Drug Administration. The FDA is delaying by three months its decision on the first inhalable form of insulin while it reviews chemistry data on the diabetes treatment.

A decision on whether Exubera could be marketed had been expected this week after an advisory panel voted last month to recommend approval for the two major types of diabetes.

In addition to Nektar the drug is being developed by Pfizer Inc. and Sanofi-Aventis SA.

Amkor eyed after financing plan

The convertibles of Amkor were weaker, too, even though its shares were up 2.8% on Friday. Nevertheless, the bonds, particularly the 5.75s, have their fans, sources said.

"With [James Kim] buying the deal I'm more confident than I otherwise would have been," said a buyside source, referring to an unconventional development this week in which the company said it planned to place $100 million of convertible subordinated notes entirely subscribed by Amkor's chairman and chief executive officer, James Kim.

"That makes me interested. There were credibility issues for awhile and now there's a little security," he said.

A sellside trader said that the 5.75% issue, which matures in June 2006, has a yield of 10% to 11% for less than eight months.

Nevertheless, the 5.75s, which had been trading pretty steady in the 97 area on Thursday, traded on Friday at 96.125.

The 5% convertibles, which are due in 2007, had been at 89 to 90 and traded Friday at 88.25. Amkor shares closed up 24 cents, or 2.8%, at $5.14.

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