By Abigail W. Adams
Portland, Me., Nov. 6 – New paper from Sarepta Therapeutics Inc. and Insulet Corp. was welcome in a convertibles market that has seen a shortage of new issues.
Both issues performed well in their market debuts, which sources attributed to a combination of well-priced deals, good company reputations and the shortage of new paper.
Sarepta opens strong
Sarepta’s newly priced 1.5% convertible notes due 2024 “opened nicely” in their secondary market debut, with early morning trades 2 to 3 points above par, a market source said.
Sarepta priced an upsized deal of $475 million in convertible notes on the tight end of talk after market close on Wednesday with a 1.5% yield and an initial conversion premium of 40%.
Initial talk placed the deal at $375 million in size with a coupon of 1.5% to 2% and an initial conversion premium of 35% to 40%. The greenshoe was also increased to $95 million from $75 million.
The convertibles from the Cambridge, Mass.-based therapeutics company focused on genetic medicines to treat neuromuscular diseases were “well received” in initial trading, even at the tight end of talk, a market source said.
“There’s some momentum in the name. The pipeline is pretty good and there’s real demand for this paper,” a market source said.
The convertibles opened over 3 points better than their par pricing level and were in the 102.75 to 103 range in early morning trades.
Sarepta stock was down 0.51% at market close, ending the day at $52.17.
Sarepta is in the late trial stages of a new drug that targets a genetic mutation affecting about 8% of patients with a severe form of muscular dystrophy. Sarepta’s stock soared in September after positive results from a clinical trial.
While the drug is not yet on the market, Sarepta has been granted permission to market it in the United States. Sarepta competitor PTC Therapeutics Inc., also a convertibles debt issuer and manufacturer of a drug targeting the same form of muscular dystrophy, does not yet have regulatory approval to market in the United States.
Insulet continues strong
Insulet’s newly priced 1.375% convertibles due 2024 continued to perform well, trading at 101.5 on a hedged basis at market close, a market source said. The notes expanded over 3 points on a dollar-neutral basis, compared to a sell off in the stock during their first day of trading on Wednesday. On Thursday, Insulet stock was up 0.01%, closing at $67.60.
There has been high demand for the upsized $350 million deal, which was oversubscribed multiple times at pricing, sources said.
“It’s a great company and a great offering,” a market source said.
Insulet is a repeat issuer of convertibles and continues to perform well and build out its strategy, increasing investor confidence, a source said. Insulet plans to use proceeds from the new notes to repurchase $63.4 million of the company’s 2% convertibles due 2019.
The repurchase of the 2019 notes will close concurrently with the new issue on Nov. 10.
The Billerica, Mass.-based medical device company specializes in tubeless, wireless insulin pumps and is preparing to take over international distribution for its proprietary Omnipod System.
The future prospects for Insulet continue to look good with competitor Animas Corp., a company in Johnson & Johnson’s diabetes care unit, discontinuing operations and sales and exiting the insulin pump business, a market source said.
Mentioned in this article:
Sarepta Therapeutics Inc.: Nasdaq: SRPT
| Insulet Corp.: | Nasdaq: PODD
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