Acorda convertibles under pressure; Depomed edges up on debt payment; Gogo goes up

By Stephanie N. Rotondo

Seattle, April 4 – Liquidity in the convertible bond market remained constrained in Tuesday trading, according to one sellside source.

“I think, for the most part, that the [convertibles] universe is overpriced and stale,” he said. “They need a whole bunch of new issues.”

Furthermore, he noted that it was “difficult to make money” in certain on-the-run names, such as Intel – names that trade at a premium and have little volatility in their equity.

“Guys need reasons to move paper,” he remarked. “A lot of names, there’s no reason to move them.

“Occasionally, you get a story like Acorda Therapeutics Inc.,” he conceded. It was reported on Monday that a Delaware court invalidated four of the company’s five patents on its Ampyra multiple sclerosis drug, which could give makers of generic versions of the treatment an opportunity to take market share.

But the news did result in activity in the off-the-run name, with the 1.75% convertible notes due 2021 declining 1.25 points on swap in Monday trading, the trader said.

That downward trend continued into Tuesday’s session.

Meanwhile, Depomed Inc. – another non-generic name – was being eyed, as the company said it had made a $100 million prepayment on its secured debt facility.

The company’s 2.5% convertible notes due 2021 were “bouncing with the stock,” a trader said, seeing the paper around 94.5.

That compared to levels around 93 on Monday.

“There’s a lot of leverage in this one,” the trader said.

Another market source placed the paper in a 93.75 to 94.325 context, which was deemed half a point better.

As for the underlying equity, it gained a quarter, or 2.02%, to close at $12.64.

The company said it planned to refinance the remaining $375 million left under the $475 million debt facility by the end of the year.

Another gainer for the day was Gogo Inc. Its 3.75% convertible notes due 2020 were seen trading with an 86 handle, according to one market source.

That was up 2.5 to 3 points on the day.

Another source called the issue 3.25 points better, trading just shy of 86.

Gogo’s stock was up 74 cents, or 6.78%, at $11.65.

The upward move came as the company said it had inked a deal to provide Airbus’ aircraft with its Wi-Fi connectivity. Last week, Gogo signed a similar deal with Virgin Australia.

Acorda lower again

Acorda Therapeutics’ 1.75% convertibles continued to be under pressure on Tuesday.

At one desk, the issue was called about a point weaker at 80.325. At another shop, the convertibles were seen at 80.625, which was “probably down another half point.”

The stock waned 35 cents, or 1.9%, to $18.05.

“I expect as the stock goes lower, the converts will continue to weaken,” a trader said.

Acorda kicked the week off in the red after it was reported that four of the company’s patents on its Ampyra drug were invalidated.

Ampyra is a key product of Acorda, making up a bulk of its profits, according to one market source. The drug is said to improve walking for MS patients.

In 2017 alone, Acorda has forecast revenue of $535 million to $545 million from Ampyra. However, with the court’s ruling – it did uphold one patent for the extended-release version – it paves the way for makers of generic versions of the drug to steal market share.

It should be noted, though, that the upheld patent is set to expire in July 2018.

Acorda did say in November that it was discontinuing development of Ampyra for an expanded indication of post-stroke walking difficulties.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

Depomed Inc. Nasdaq: DEPO

Gogo Inc. Nasdaq: GOGO

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