BioMarin up on drug data; Walter Investment pulls back; convertibles pause for elections

By Rebecca Melvin

New York, Nov. 5 - BioMarin Pharmaceutical Inc. saw its 1.875% convertibles shoot higher on both an outright and dollar-neutral, or hedged, basis on Monday after the Novato, Calif.-based company said phase 3 trial results of its treatment for a rare genetic condition met the primary endpoint of the study.

Moving in the opposite direction, the recently priced Walter Investment Management Corp. convertibles slumped along with a down move in the underlying shares of the Tampa, Fla.-based asset manager and mortgage services and portfolio owner.

Elsewhere, Dendreon Corp.'s convertibles traded at a level that was steady to Friday's price when the paper added 3 or 4 points on the Seattle-based biotechnology company's better-than-expected quarterly loss and improved sales of its prostrate drug. Dendreon shares retraced 7% of its gains to end lower, however.

A123 Systems Inc. was offered at 49.50 on Monday, which was down from the 51.50 at which a print went up for the Waltham, Mass.-based electric car battery maker's convertible paper on Friday. Earlier Friday trades on the A123 convertibles were 47 bid, 48 offered.

One sellsider predicted that the next print of A123 convertibles would be down from the high print.

The convertible primary market was quiet on Monday, but there was an overseas deal from Volkswagen AG for at least €2 billion of mandatories, and back in the U.S., there were issues in the straight bond markets being priced as issuers looked to get things done before Tuesday's elections.

Convertibles issuer Avis Budget Group Inc. was pricing $350 million of senior straight notes under Rule 144A and Regulation S. That paper is callable in 2.5 years at par plus 50% of the coupon.

Overall there was a quiet tone to the market, with many market participants not in and others waiting for election results, a Connecticut-based convertibles analyst said.

Equities ended stronger after a mixed session. The Dow Jones industrial average reversed losses to add 19.28 points to 13,112.44, after dropping nearly 140 points, or 1.1%, on Friday, and the S&P 500 stock index closed up 3.06 points to 1,417.26, and the Nasdaq composite stock index added 17.53 points, or 0.6%, to 2,999.66.

All eyes were on the U.S. presidential election that polls indicate is a neck and neck race between opponents president Barack Obama and governor Mitt Romney.

"The market is very very quiet today. Everyone is just waiting to see what happens," a New York-based trader said.

BioMarin jumps

BioMarin's 1.875% convertibles due 2017 traded up about 50 points on an outright basis to 244.811 versus a share price of $48.53, according to a New York-based trader.

Earlier in the day, the market was called 242.375 bid, 243 offered versus an underlying share price of $48.00.

The second market represented about a 0.75 point expansion on swap, depending on delta, the buysider said. The first market expanded 1 point on a hedged basis.

BioMarin shares surged $11.66, or 31.17%, to $49.07 in heavy trading.

"BioMarin was the name of the day, post the good news," a trader said. "The bonds nuked up dollar neutral on a 92% [delta], so if you were on a 90% delta you made 1 point, but if you were on a 92% you were flat on the day."

Many people came into the day on a 90% delta.

BioMarin reported that a "pivotal" phase 3 study of GALNS met the primary endpoint of change in a six-minute walk distance compared with placebo at 24 weeks in subjects receiving weekly infusions of GALNS.

GALNS is for the treatment of patients with the rare lysosomal storage disorder Mucopolysaccharidosis Type IVA (MPS IVA), also called Morquio A Syndrome.

The primary endpoint of the study, change in six-minute walk distance at 24 weeks, was statistically significant in patients dosed with GALNS at 2 mg/kg every week with a mean increase of 22.5 meters (p=0.0174) over placebo, according to the company's news release.

Patients with Morquio A Syndrome were able to walk further following treatment with the experimental drug.

"The positive results from this pivotal study will help support GALNS as the first therapy available to help the approximate 3,000 people worldwide suffering from MPS IVA - a rare, degenerative, life-threatening genetic condition with no available therapy," said BioMarin chief medical officer Hank Fuchs.

"We are very pleased with the clarity that the MOR-004 study has provided us with...." Fuchs said, adding that in addition to the primary endpoint, there were positive trends toward improvement in other clinically meaningful endpoints, including three-minute stair climb and pulmonary function tests.

The company said that it expects to seek regulatory approval in the first quarter of 2013.

Walter gets whacked

Walter Investment's 4.5% convertibles due 2019 traded at 104.256, which was down 6.5 points on the day, according to Trace data.

Walter shares were down $3.41, or 7.4%, to $42.72.

An East Coast buysider said there did not appear to be an obvious fundamental reason behind the Walter pullback but that it was likely due to a technical move given the run up in shares in recent months.

A second source said that Walter Investment was moving because of news that JPMorgan is buying $70 billion of agency paper from MetLife, and because the paper is much less profitable than subprime paper, the market is reacting negatively.

The source said however that Walter Investment is not significantly involved in this area of this industry.

"It might be a good buying opportunity for WAC bonds," the source said.

The Walter convertibles, which priced Oct. 18, shot up on their debut to the 104 range, and the $265 million deal of senior subordinated notes due 2019 continued to trade well afterwards.

The company priced a concurrent offering of common stock and has also said it's planning a $600 million debt offering.

The company is seen as building a war chest to make real estate portfolio investments and recently won an auction for the mortgage servicing and origination platform assets of Residential Capital LLC in bankruptcy court.

Subsequently, Walter completed the acquisition of Reverse Mortgage Solutions Inc., which was servicing reverse mortgages of about $12.4 billion.

Avis quiet

Avis Budget's 3.5% convertibles due 2014 traded down about 0.875 point early Monday to 124.125, according to Trace data.

Shares of the Parsippany, N.J.-based vehicle rental operator ended down 24 cents, or 1.5%, at $16.22.

Avis planned to sell $250 million of senior notes due 2017 via Bank of America Merrill Lynch, Barclays, Credit Agricole, Deutsche Bank Securities Inc. and RBS Securities Inc. as joint bookrunners, with Scotia Capital (USA) Inc. as a co-manager.

Proceeds of the Rule 144A and Regulation S offering will be used to repay debt.

Mentioned in this article:

A123 Systems Inc. Nasdaq: AONE

Avis Budget Group Inc. NYSE: CAR

BioMarin Pharnaceutical Inc. Nasdaq: BMRN

Dendreon Corp. Nasdaq: DNDN

Walter Investment Management Corp. NYSE: WAC

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