Transocean convertibles in focus; primary quiet; biotech sector firm; Caesars active

By Abigail W. Adams

Portland, Me., April 12 – The primary market in the convertibles space is in an “earnings-related period of quietness,” a market source said, with no new deals pricing this week.

However, there are some big deals in the pipeline that could happen after earnings are reported, the source said.

While there has been no new paper to spur trading volume, the market continued to firm with the convertible notes of names in the biotech space improving.

AMAG Pharmaceuticals Inc.’s 3.25% convertible notes due 2022 jumped about 2 points outright and were seen up 0.5 point to 0.75 point dollar neutral on Thursday, a market source said.

Exact Sciences Corp.’s 1% convertible notes due 2025 and Insmed Inc.’s 1.75% convertible notes due 2025 were also seen slightly improved on an outright basis on Thursday and up dollar neutral depending on the delta used, market sources said.

Pacira Pharmaceuticals Inc.’s 2.375% convertible notes due 2022 also remained strong on Thursday after a 1-point dollar-neutral expansion earlier in the week, a market source said.

Transocean Inc.’s 0.5% convertible notes due 2023 remained in focus in the secondary market on Thursday.

The notes have been the major volume movers in the convertibles space since Tuesday following an upswing in the price of crude oil.

Caesars Entertainment Corp.’s 5% convertible notes due 2024 were also active on Thursday with the notes up about 4 points outright.

While trading volume continued to be light, there was a wide scope of trading activity, with small trades in several different names, a market source said.

European buyers were active in the space on Thursday and eyeing names in the tech sector, a market source said.

Biotech firms

The biotech tape continued to firm on Thursday with no apparent macro events spurring the strength of the sector, a market source said.

“The fundamental side is fine,” a market source said. “There’s nothing really pointing to why the broader market is stronger.”

Amag Pharmaceuticals’ 3.25% convertible notes were up about 2 points outright on Thursday to trade around 108. Amag stock closed Thursday at $21.70, an increase of 2.36%.

The notes were seen up about 0.5 to 0.75 point dollar neutral, a market source said.

Exact Sciences’ 1% convertible notes were also seen improved on an outright basis on Thursday. The notes were seen trading in a range of 92.5 to 95, according to Trace data. Exact Sciences stock closed Thursday at $45.64, an increase of 7.74%.

Some sources saw the notes up about 0.75 point dollar neutral. However, the notes may have been contracting dollar neutral if they were on a 40% or lower delta, a market source said.

Exact Sciences’ 1% convertible notes have struggled since experiencing a sell-off in mid-January due to positive clinical results from a rival product released by a competitor.

Exact Sciences priced $600 million of the seven-year convertible notes at 98.75 on Jan. 11 with the greenshoe of $90 million later fully exercised.

While Exact Sciences notes were seen as improved, only about $5 million bonds were seen on the tape on Thursday, a market source said.

Insmed’s 1.75% convertible notes were also seen up about 0.75 point dollar neutral with about a 60% delta, a market source said. The notes were up about 2 points outright with most trades in the 91.5 to 92 range.

Insmed’s stock closed Thursday at $23.85, an increase of 3.47%. Insmed’s 1.75% notes, which also priced in mid-January, have struggled since volatility struck the equity markets.

The 1.75% notes traded in the 85 to 88 range in early April, their lowest outright prices since the notes hit the market.

Pacira Pharmaceuticals’ 2.375% convertible notes were maintaining their strength after expanding earlier in the week. The 2.375% notes were seen at 95.75 bid, 96.25 offered during Thursday’s session.

Pacira stock closed Thursday at $34.55, a decrease of 3.09%. The 2.375% notes were seen expanded about 1 point amid the volatility in Pacira stock on April 9.

The volatility was caused by uncertainty related to FDA approval of the expanded use of Pacira’s drug Exparel, which was confirmed on April 9.

Pacira stock has been on the rise for most of the week. While down on Thursday, its stock is up 17% since the approval was announced.

Transocean in focus

While trading activity in the secondary space was not concentrated into a single area on Thursday, Transocean’s 0.5% convertible notes remained a major volume mover in the space.

More than $22 million bonds were seen on the tape by mid-afternoon, a market source said.

The notes were seen trading in a range of 124 to 125 on an outright basis early on Thursday as Transocean stock dropped 1.79% to $10.98. The notes traded just north of 126 by market close.

Transocean stock closed the day at $11.10, a decrease of 0.72%.

While down early Thursday, the barrel price of West Texas Intermediate crude oil for May 2018 delivery continued to rise, closing the day at $67.14, an increase of 0.10%.

While down on Thursday, the price of crude oil has rallied over the past week, climbing $3 since Monday.

Crude oil reached its highest price on Wednesday since December 2014.

Caesars active

Caesars Entertainment’s 5% convertible notes were active on Thursday with the notes gaining about 4 points outright as stock climbed.

The notes traded as low as 173.7 and as high as 176 before closing at 174.886, according to Trace data.

Caesars stock closed Thursday at $11.30, an increase of 3.67%. Caesars’ convertible notes have been active this past week with company stock also experiencing above-average trading volume.

Caesars’ chief executive officer was recently awarded $29.4 million for helping the company emerge from bankruptcy in 2017.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Ceasars Entertainment Corp. Nasdaq: CZR

Exact Sciences Corp. Nasdaq: EXAS

Insmed Inc. Nasdaq: INSM

Pacira Pharmaceuticals Inc. Nasdaq: PCRX

Transocean Inc. NYSE: RIG

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