Medicines higher in active trade; Depomed deflects Horizon offer; Ctrip off its lows

By Rebecca Melvin

New York, July 7 – The Medicines Co.’s convertibles moved higher in active trade on Tuesday in a continuation of action from Monday when the bonds traded better than the overall space. In the broader markets, stocks swung from sharp losses to gains after the S&P 500 stock index bounced off a technical marker.

The Medicines bonds – of which there are two series – were up on an outright basis, and firmer on swap, after outperforming convertibles on Monday with only a slight contraction on swap, a second trader said.

The big mover in health care, however, was Depomed Inc., the trader noted. Depomed rejected a hostile takeover bid from Horizon Pharma plc, which represented a 42% premium over Depomed’s closing share price on Monday.

Depomed shares surged 39% on Tuesday, and the bonds were up multiple points on swap, a trader said.

Horizon is also a convertibles issuer. It priced $400 million of 2.5% convertibles in early March. Horizon shares were down, but the convertibles were not heard in trade.

China’s internet names were trading lower on an outright basis and were weaker on swap in the first half of Tuesday’s session. But the sector clawed back from its lows in afternoon action after early losses.

“We’re trading all of them. They were all down multiple points,” a New York-based sellsider said. “But they are a bit better now.”

Ctrip.com International Ltd.’s 1% convertibles, or the C tranche, which priced last month, dropped to 93.25 versus a share price of $68.00 in late-day action. That was down on the day but a little bit better than earlier levels, the sellsider said. Shares of the Shanghai-based travel services provider had been down as much as 12% on the day but ended down by less than 1%.

Another big convertibles issuer is Qihoo 360 Technology Co. Ltd. The Qihoo bonds were also lower by multiple points, after being only “a little weaker” on Monday. Shares of the China PC and mobile internet security products provider had also been down 12% in the early going and ended down 7%.

Qihoo’s shares are now well below the level of the “going private” offer that it received June 17.

The moves lower in the shares of the convertibles issues has been in tandem with a slide in China stock markets in general. Since its peak June 12, the Shanghai Composite index and other indices are down more than 25%.

China’s government has attempted to stop the bleeding with various measures. Over the weekend, it suspended initial public offerings and established a market-stabilization fund to spur stock purchases. The Chinese central bank also pledged to provide funding to support brokerages’ margin finance operations that allow investors to borrow cash to buy stocks. On Tuesday, the Shanghai market ended down another 1%.

On June 27, the Chinese central bank had cut interest rates by 0.25% and loosened some banks’ reserve requirements.

Meanwhile, energy issues remained under pressure after crude oil prices slid more than 7% on Monday amid oversupply concerns. Oil prices started the day lower again on Tuesday, but West Texas Intermediate crude oil ended up 0.9% at $53.02 per barrel.

Whiting Petroleum Corp.’s convertibles were very active in Tuesday’s session, a New York-based trader said.

“The bonds have been better for sale with the weakness in oil; however, crude has rebounded and bonds can be better to buy this afternoon. Nevertheless, an interesting way to play the volatility in the oil markets,” the trader said.

Whiting shares pulled higher after early losses to close up $2.19, or 7%, to $31.78 in active trade.

Medicines firmer

Medicines newer 2.5% convertibles due 2022 looked to be up more than 3 points to 118, according to Trace data.

The older Medicines 1.375% convertibles due 2017 moved up a couple of points to 128.

Shares of the Parsippany, N.J.-based health care company were trending higher in active trade and were last up 54 cents, or 1.7%, at $33.30 per share.

The convertibles were firmer on swap.

The stock was up by only about 0.5% in the early going, which was still positive amid such a “tough tape,” a trader said.

“The stock keeps going up after a big move on Monday,” he said, when Mizuho Securities upgraded shares to “buy” from “neutral.”

On Monday the Medicines bonds held in pretty well, a New York-based trader said, calling them down 0.25 point. But on Tuesday they were firmer, the trader said.

Depomed up multiple points

Depomed’s 2.5% convertibles due 2021 were last seen at 155.125 bid, 156.125 offered, with the shares at about $27.00, a trader said. Previously the bonds were around 125.

“The bonds were up points” on swap, a trader said.

Depomed shares ended up $7.98, or 39%, at $28.62.

Horizon Pharma offered to buy the rival drug maker in an all-stock deal valued at $29.25 per share.

Ctrip, China internets down

Ctrip’s 1% convertibles due 2020 traded early in the session at 96.5 versus an underlying share price of $71.53. Later the bonds were 93.25 versus an underlying share price of $68.00, a sellsider said.

“That is better than they were at midday,” the sellsider said.

In Chinese internets everything was lower by multiple points, the sellsider said. But as of midday, when the broader market moved back to the unchanged mark, they were a little bit better.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

Depomed Inc. Nasdaq: DEPO

Horizon Pharma plc Nasdaq: HZNP

The Medicines Co. Nasdaq: MDCO

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

Whiting Petroleum Corp. NYSE: WLL

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.