Dendreon adds on sale of royalty interest; Gilead trades on debt offering; Clearwire jumps

By Rebecca Melvin

New York, Dec. 6 - A few names traded actively in the convertibles market on Tuesday on company-specific news, but the overall market was described as very quiet with no general tone due to a lack of paper changing hands.

Dendreon Corp. convertibles were very active, but up only about a point, after the Seattle-based biopharmaceutical company announced the sale of a royalty interest in Merck & Co. Inc.'s hepatitis C drug Victrelis. The move is viewed as credit positive for the struggling biotech.

In the same sector, Gilead Sciences Inc.'s bonds traded actively and were a little better on a dollar-neutral, or hedged, basis early in the session but settled back to about "in line" later after the Foster City, Calif.-based biopharmaceutical company launched a deal for $3.7 billion of senior straight notes in four tranches.

Meanwhile, Clearwire Corp.'s convertibles jumped 6 or 7 points to the low 60s on the Kirkland, Wash.-based wireless network services company's plan to raise nearly $600 million in a stock offering.

Another name that saw some price action was THQ Inc., which dropped nearly 9 points on Monday to the 78 level, according to Trace data. A Cowen analyst cut his rating on the stock to "neutral" from "outperform," citing his expectation that the video game publisher is likely to miss guidance on quarterly results due to underperformance of its uDraw video game.

The prints of the THQ 5% convertibles on Trace data Tuesday appeared to be switching around accounts as the buy and sell prices were the same, a Connecticut-based sellside trader noted.

Overall, the convertible market was quiet, with "no general tone," the trader said, citing the fact that the size of the convertibles universe is shrinking and "nobody is making any money."

But assertions that the convertibles market will remain mute for the rest of December were refuted by one trader, who said that the convertibles market will trade along with the broader markets "if Europe can put some credible plan together."

If such a plan is unveiled later this week, and there is "tightening in the credit market and an improving equity tape, there will be more money coming into converts," he said.

Europe has been the main driver of markets in recent weeks. It seems that contagion is in play, given that Europe's heretofore AAA-rated credits are feeling the pain along with peripheral sovereigns.

Last week when equity markets were rallying on positive developments out of Europe, the convertibles market didn't keep up because it was not liquid enough to move up with more liquid markets, a trader said.

The convertibles market is about $225 billion in size whereas the high-yield market is many times that and more liquid, he said.

"More clarity would help," he said. It would take the broader markets either up or down and that would help convertibles trade.

Dendreon adds a point or so

Dendreon's 2.875% convertibles due 2016 traded around 70 bid, 71 offered, which was up about 0.75 point or a point from previous markets. The convertibles were trading mostly outright and not sensitive to moves in the underlying equity.

Most players thought to have entered the day with about a 10% to 20% delta on the bonds, the New York-based trader said.

"Dendreon is the big news" of the session, a New York-based trader said. "The bonds are better by a point after initially trading up 1.5 points."

A Connecticut-based trader concurred saying the bond was active but didn't really move that much.

Sparking the move was news that the company will sell its royalty interest in Merck's hepatitis C drug Victrelis to a Canadian pension fund for $125 million in an effort to build up cash holdings.

Canada's CPP Investment Board has agreed to buy the royalty rights.

Dendreon has been struggling with disappointing sales and physician acceptance of its Provenge prostate cancer treatment. It withdrew guidance earlier this year.

Gilead settles in line

Gilead Sciences' 0.625% convertibles due 2013, or the B convertibles, traded up to 115.375, which was higher by about 0.625 point outright, according to Finra's Trace data, and predominantly between 114.5 and 115.5. Gilead shares were down about a percentage point, settling down 35 cents, or 0.9%, at $39.80.They traded at 112 versus an underlying share price of $38.05 on Nov. 22.

The Gilead Sciences 1% convertibles due 2014, or the C convertibles, and the Gilead Sciences 1.625% convertibles due 2016, or the D convertibles, were also in trade, but the B convertibles were most active.

"Gilead traded on the heels of the straight debt offering. They've tightened because they are trading to the straight debt," a trader said.

Later they settled back a bit.

"It looks like they got a little bit better on a dollar-neutral basis when the deal was first announced; the market gets guidance on the credit and then it just trades," the trader said.

The Foster City, Calif.-based biopharmaceutical company is offering the three-, five-, 10- and 30-year senior straight notes to help pay for its Pharmasset Inc. acquisition.

Standard & Poor's said it assigned the notes its A- senior secured rating, reflecting its expectation that EBITDA will grow at about a 6% compound rate over the next two years - absent any contribution from Pharmasset's hepatitis C treatment - on steadily increasing demand for Gilead's well-accepted HIV treatments for adults.

Clearwire jumps

Clearwire's 8.25% convertibles gained 6 or 7 points, printing in the low 60s.

"Clearwire is up a bit," a Connecticut-based trader said.

Clearwire shares traded up through the session to end higher by 25 cents, or 11%, to $2.50.

Clearwire said it plans to raise $595 million in two sales of common stock. It will raise $300 million from an offering of class A common shares and $295 million of class B shares in a separate, private transaction.

The equity offerings coming on the heels of the newly inked network agreement with Sprint Nextel give the company, which was close to defaulting on debt payments, more stable finances, analysts agreed.

Mentioned in this article:

Clearwire Corp. Nasdaq: CLWR

Dendreon Corp. Nasdaq: DNDN

Gilead Sciences Inc. Nasdaq: GILD

THQ Inc. Nasdaq: THQI

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