Regeneron jumps after boosting sales outlook; Beazer launches exchange; iStar unchanged

By Rebecca Melvin

New York, Feb. 13 - Regeneron Pharmaceuticals Inc.'s convertibles on Monday jumped outright and edged higher on a dollar-neutral, or hedged, basis after the Tarrytown, N.Y.-based biopharmaceutical company raised its 2012 outlook for sales of its Eylea eye drug.

Beazer Homes USA Inc. was in focus after the Atlanta-based homebuilder launched offers to exchange its $57.5 million of outstanding 7.5% mandatory convertible notes due 2013 and its 3 million outstanding 7.25% tangible equity units.

The exchange news put a little bit of pressure on the underlying Beazer shares as convertible players sought to get up to full hedge in anticipation of the exchange, a New York-based convertibles trader said.

Otherwise the convertible market was quiet with few catalysts to pull buyside accounts into the market, sources said.

"It was a sleepy Monday," one trader said.

There was a little bit of trade in iStar Financial Inc. with the shares trading up some, but the paper looked pretty much unchanged.

When pressed, one trader said that the market overall was better for sale on Monday, but just barely. Volume was light.

Amgen Inc. was better for sale among the higher-grade issues that were in focus.

In the primary arena, Spain's Pescanova SA has priced an upsized €160 million of seven-year convertible senior notes in a Regulation S deal that was upsized and priced at the cheap end of talk.

Regeneron extends gains

Regeneron Pharmaceuticals' 1.875% convertibles due 2016 traded at 151 bid, 151.5 offered versus an underlying share price of $114.75 on Monday, which was up 13 points outright and up about 0.5 point on a dollar-neutral basis from Friday's trading levels on an 85% delta hedge, a New York-based trader said.

The Regeneron convertibles traded at 138 versus an underlying share price of $101.90 late Friday.

Shares of the Tarrytown, N.Y.-based biopharmaceutical company jumped 12%, or $12.57, to $114.65. During the session the shares had been as high as $116.93.

Regeneron convertibles and shares have been on the rise since the beginning of the year. On Jan. 4, the 1.875% convertibles due 2016 traded at 104 with the shares at about $66.

Behind Monday's sharp move higher was Regeneron's raised forecast for 2012 sales of its key drug Eylea, citing fast adoption of the recently approved drug.

The company now expects Eylea net sales of $250 million to $300 million in the United States in 2012, which is nearly double its previous forecast of $140 million to $160 million.

Eylea received U.S. regulatory approval to treat a common cause of blindness in the elderly, called wet age-related macular degeneration, in November.

Fourth-quarter sales for Eylea were $24.8 million company wide; revenue was $123 million, which was less than the previous year's fourth-quarter revenue of $133.7 million and less than the $132 million analysts expected.

The company also reported a fourth-quarter net loss of $53.4 million, or 58 cents per share, which was wider than the $14.6 million, or 17 cents a share, loss reported for the fourth-quarter of 2011.

Analysts had expected Regeneron to report a loss of 60 cents per share.

Beazer in focus

Beazer shares were under a little bit of pressure on Monday, a convertibles trader said, with the stock closing down 18 cents, or 5%, at $3.45 in heavy volume after the single family homebuilder said it will exchange its 7.5% mandatory notes and 7.25% equity units, both due in 2013, for newly issued shares of its common stock and cash in lieu of fractional shares.

For each $25 principal amount of 7.5% convertible notes tendered, holders will receive 5.7348 shares of common stock.

On Jan. 15, 2013, the mandatory conversion date of the notes, holders would receive up to a maximum of 5.4348 shares per note, depending on the trading price of the company's stock at that time.

The exchange allows holders to receive the maximum number of shares they could receive on the mandatory conversion date plus an additional 0.3 of a share.

As for the 7.25% equity units exchange offer, holders will receive 4.9029 shares of common stock for each unit tendered and accepted.

Each unit is comprised of a prepaid stock purchase contract and a senior amortizing note due Aug. 15, 2013. As of Feb. 13, the amortizing notes have a total principal balance of $8.9 million.

At maturity, holders of the stock purchase contracts would automatically receive up to a maximum of 4.3029 shares per contract, depending on the trading price of the company's stock at that time. The units exchange offer allows holders to receive the maximum number of shares of common stock they could receive at maturity, plus an additional 0.6 of a share of common stock.

Both exchange offers are scheduled to expire at 12 a.m. ET on March 12.

iStar Financial unchanged

iStar's 0%, floating-rate convertibles, which come due later this year on Oct. 1, traded at 93.50 on Monday and were seen at 93.375 bid, 93.50 offered at the end of the session.

Shares of the New York-based commercial real-estate lender traded up on Monday in light volume to $7.26, which was up 30 cents, or 4.3% on the day.

A trader said the paper looked more or less flat.

Pescanova sells upsized deal

Pescanova, a Vigo, Spain-based fishing company, priced its Regulation S deal at the cheap end of talk and doubled its anticipated size to €160 million.

Price talk was for a coupon of 8% to 8.75% with an initial conversion premium of 25% to 30%.

About €53.6 million of proceeds will be used to buy back €43.63 million of its existing 6.75% convertible notes due 2015 and €16.03 million of its existing 5.125% convertible notes due 2017. Remaining proceeds will be used to diversify the company's funding sources and to strengthen its financial flexibility.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Beazer Homes USA Inc. NYSE: BZH

iStar Financial Inc. NYSE: SFI

Regeneron Pharmaceuticals Inc. Nasdaq: REGN

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.