Teva convertibles rise on swap; Fluidigm, Illumina pressured; Tesla bounces; DISH heavy

By Stephanie N. Rotondo

Seattle, Oct. 13 – Health care convertible bonds remained in focus on Thursday, with Teva Pharmaceutical Industries Ltd. leading the way.

A trader said the 0.25% convertible notes due 2026 were “the number one trader” for the session, as the debt gained ground.

The trader said the convertibles were a point better on swap and up 3 points over the last week.

“These bonds were trading under parity and are now 10 points over,” he said.

And with earnings season underway, preliminary third-quarter results have been pushing around health care convertibles this week.

That continued on Thursday, as Fluidigm Corp. posted results that failed to excite investors.

As for Illumina Inc. – which reported early results late Monday – it was “a bit heavy” as well, according to a trader. He saw the 0% convertible notes due 2019 losing half a point on swap.

Away from health care, a trader said Tesla Motors Inc.’s 1.25% convertible notes due 2021 “bounced a bit,” rising 0.25 point on swap.

Another market source placed the issue in an 84 to 84.5 context.

DISH Network Corp.’s 3.375% convertible notes due 2026 were meantime trading busily but were also deemed “a bit heavy.”

A trader said the debt was off 0.25 point on swap, with another source seeing the issue at 110.5 to 111.5.

Meanwhile, a trader said Macquarie Infrastructure Corp.’s convertible issues – the 2% convertible senior notes due 2023 and the 2.875% convertible notes due 2019 – were “trading against each other” early Thursday.

He said “somebody” bought the 2% convertibles at 99.94, then turned around and sold the 2.875% convertibles at 115.85. Another party then bought the 2.875% notes at 115.125 and sold the 2% convertibles at 100.1.

“That’s a $15.20 debit on one and a $15.91 credit on the other,” he noted.

He was not sure what was moving the paper around, however.

The New York-based company sold $350 million of the 2% convertibles on Oct. 7.

Teva up on swap

Teva Pharmaceutical Industries’ 0.25% convertible notes due 2026 were trading up on swap on Thursday.

A trader said the paper has been gaining ground all week.

A market source pegged the convertibles as high as 118.5, which compared to previous levels around 116.5.

As for the stock underlying the debt, it was up 16 cents at $44.28.

On Wednesday, the Jerusalem-based pharmaceutical company said it had launched Rajani, an oral contraceptive that is the generic equivalent to Bayer Healthcare’s Beyaz.

The generic version adds to Teva’s catalog of nearly 600 drugs.

Fluidigm, Illumina weaken

Fluidigm’s convertible bonds were trading down outright in the wake of disappointing preliminary results.

A trader said the 2.75% convertible notes due 2034 were trading at 55, which was down 5 to 6 points outright.

The equity was off $2.39, or 33.97%, at $4.66.

Late Wednesday, the South San Francisco-based maker of biological research equipment said its preliminary results showed a 23% decline in revenue at $22.2 million.

Analysts polled by Thomson Reuters had predicted revenue of $29.25 million, which would have been better than the $28.6 million seen in 2015.

Instrument revenue declined 39% to $9.2 million from the year before. The weakness was due to lower-than-expected sales of the company’s Helios systems.

Given the unexpectedly soft earnings, Fluidigm suspended its full-year guidance.

Also in the medical instrument arena, Illumina’s 0% convertibles were also heavier on swap, as investors continued to react poorly to the company’s initial quarterly results.

With the bonds trading with a 98 handle, the stock was up $1.06 at $137.24.

The San Diego-based biotechnology company said late Monday that it expects to report revenue of $607 million for the quarter. While that is a gain of 10% year over year, it fell short of the company’s $625 million to $630 million forecasts.

The company also noted that its sequencing instruments sales were down 26%.

And therein lies the problem, according to several analyst reports. In the genetic sequencing arena, Illumina already dominates the market, with 80% to 90% of market share. That means there are fewer new clients for the company to tap.

On top of that, Illumina has rapidly produced better sequencing instruments, putting the higher-end models out as fast as possible. With the older models ranging in price from $690,000 to $900,000, many sequencing laboratories either don’t see a need to buy the newer models or simply don’t have the capital necessary to purchase the product – at $6 million to $10 million a pop.

And while the newer model is more cost efficient – it costs less than $1,000 to sequence an entire genome – most labs are opting to send their specimens out to labs that already have the newer system.

There are also few competitors in the sequencing sector, with Pacific BioSciences being the main rival. But even its system cannot do what Illumina’s instruments can, focusing instead on smaller sequences, like those of viruses and bacteria.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Fluidigm Corp. Nasdaq: FLDM

Illumina Inc. NYSE: ILMN

Macquarie Infrastructure Corp. NYSE: MIC

Tesla Motors Inc. Nasdaq: TSLA

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

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