Horizon Pharma jumps outright, adds on hedge; health-care bid remains strong; Intel active

By Rebecca Melvin

New York, March 30 – Horizon Pharma plc’s exchangeable bonds jumped on an outright basis and expanded on a dollar-neutral basis on Monday after news that the Dublin, Ireland-based specialty pharmaceutical company has agreed to buy Hyperion Therapeutics for $46.00 per share in cash, or about $1.1 billion.

The health care space had other M&A news on Monday, including Teva Pharmaceutical Industries Ltd.’s bid to buy Auspex Pharmaceuticals Inc. for $101.00 per share, or about $3.5 billion in cash, which represented a 42% premium over Auspex’s Friday closing share price.

Teva's 0.25% convertibles due 2026 were seen trading at 144 and 148.73, according to Trace data, which was little changed compared to 144 and 148 on Friday.

In all, there were four big transactions in health care announced on Monday. Cellular Dynamics International has agreed to be acquired by Tokyo-based FujiFilm Holdings for $16.50 a share, or about $307 million.

Cellular Dynamics is not a convert issuer, but the deal holds interest to those looking at the space, an analyst said.

In additional health insurance company news, UnitedHealth Group Inc. said it is buying Catamaran Corp., a benefits manager, for $61.50 per share in cash, or about $13 billion.

The M&A news helped maintain the bid in health care convertibles that resurfaced on Friday. BioMarin Pharmaceutical Inc.’s convertibles surged outright and were mixed on hedge on Friday and continued to see some trading action on Monday as market players maintain a watchful eye on the takeover target.

On Friday, there was chatter that Shire plc may be weighing a bid for BioMarin, and shares jumped 11.5%.

“If people think it’s going to get taken out at $170.00, it still has a lot of room left in it; the stock is at $130.00 right now,” an analyst said of BioMarin.

Meanwhile, Retrophin Inc. shares jumped 10.5% after Nomura Securities initiated coverage on the San Diego, Calif., biopharmaceutical company and established a $31.00 target price for the shares.

Retrophin shares rose to $24.16, and the company has a small convertible bond issue, which wasn’t known to have traded on Monday but which was garnering attention.

Topping the Trace volume tape were Intel Corp.’s convertibles, which were mixed in busy trade, that was related to the M&A chatter on Friday when there were reports the chip giant is in talks to buy Altera Corp., a New York-based trader said.

Elsewhere, American Realty Capital Properties Inc. was also getting a look after the real estate investment trust released fourth-quarter and full-year results. The company reported quarterly adjusted diluted funds from operations (FFO) of $0.22 on revenues of $418.8 million. In the prior year, ARCP reported FFO of $0.25 on revenue of $85.26 million. The large difference was attributed to an increase in gross assets and the inclusion of revenue from Cole Capital, which was not part of 2013’s results.

American Realty Capital’s shares swung higher but ended lower.

Empire State Realty Trust Inc., New York-based office REIT, was also on radar screens after the company issued $350 million of straight notes, a trader said.

Stocks rallied. The S&P 500 stock index gained 25.22 points, or 1.2%, to 2,086.24, the Dow Jones industrial average added 263.65 points, or 1.5%, to 17,976.31, and the Nasdaq composite index rose 56.22 points, 1.2%, to 4,947.44.

Horizon Pharma expands

Horizon Pharma’s 2.5% exchangeables due 2022 traded up to 115.25 bid, 115.75 offered versus an underlying share price of $24.95, a Connecticut-based trader said. The convertibles were last in the 105ish range.

Horizon Pharma shares were up about 14% for a portion of the session before climbing to up by 18%, or $3.97, to $25.78.

The gain represented a 0.375 point expansion on a dollar-neutral, or hedged, basis on a light delta, a Connecticut-based trader said.

On a heavier delta of about 70%, the paper expanded by a point, an analyst said.

Horizon Pharma priced $400 million of the exchangeables on March 5.

The bonds didn’t trade that actively and the action was more outright than anything else.

The bonds have been difficult to find, and given that the company is now involved in an accretive acquisition, scarcity is expected to remain an issue.

“You are talking an incremental $100 million EBITDA,” an analyst said.

Horizon Pharma also has a 5% convertible note due 2018 of which there is $28.7 million outstanding. But those were not seen as significant as it is likely the company will buy the rest back as soon as it can.

Teva little changed

Teva's 0.25% convertibles due 2026 were seen trading at 144 and 148.73, according to Trace data, which was little changed compared to 144 and 148 on Friday.

Shares of the Petach Tikva, Israel-based generic drug maker ended up 54 cents, or 0.9%, to $62.52.

Of the Teva existing convertible, one analyst said there isn’t much upside potential in the convertible.

“I look at it in terms of who are they going to buy,” an analyst said.

Retrophin shares surge

Retrophin 4.5% convertible notes due 2019 were not seen to have traded on Monday but were quoted at 153.5 bid, 157.5 offered versus an underlying share price of $25.15.

Shares ended at $24.16, up $2.29, or 10.5%.

Shares gained on Nomura’s pick up of coverage in the name, sources said.

The $40 million bond issue is illiquid and physically settled but likely to see some action in the near term, an analyst said.

The name “is finally getting some sponsorship on the Street,” he said.

The current price for the convertible is cheap, but market players are not familiar with it, he said.

This company, which has a pipeline as well as existing drugs, should earn $90 million to $100 million in revenue this year, he said.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Empire State Realty Trust Inc. Nasdaq: ESRT

Horizon Pharma plc Nasdaq: HZNP

Intel Corp. Nasdaq: INTC

Retrophin Inc. Nasdaq: RTRX

Teva Pharmaceutical Industries Ltd. Nasdaq: TEVA

© 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.