Salix surges on takeout rumors; Illumina paper trades actively; PDL BioPharma in line

By Rebecca Melvin

New York, Aug. 19 – Salix Pharmaceuticals Ltd. added a little spice to what was shaping up to be an otherwise boring summer session on Tuesday.

The Salix 1.5% convertibles surged about 30 points on an outright basis and expanded on a hedged basis, following a report after mid-session that Allergan Inc. has approached the Raleigh, N.C.-based drug maker about a possible merger.

The Allergan initiative comes as the Irvine, Calif.-based maker of Botox tries to fend off a hostile takeover from Valeant Pharmaceuticals and as Salix is a month-and-a-half into a deal with a unit of Italy’s Cosmo Pharmaceuticals SpA, which hasn’t closed yet and would involve moving the company’s domicile abroad.

Otherwise, the convertibles market was pretty much a snoozer on Tuesday as the summer hiatus appeared to be firmly set in.

Illumina Inc.’s dual tranches of convertibles were trading actively but more or less independently from the common stock, which swung to losses from gains on Tuesday. Demand was seen from funds and others that desire to own Illumina for its investment-grade rating, rather than for the merits of the company itself, a New York-based trader said. He deemed the trading action “uninteresting,” as well as “silly and boring.”

Elsewhere, PDL BioPharma Inc.’s 4% convertibles due 2018 “traded some,” another New York-based trader said.

The PDL BioPharma 4% convertibles were quoted at 109.75 bid, 110.75 offered with stock around $9.38.

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