Intercept Pharmaceuticals topical on results, trial data; Hercules Capital unchanged

By Stephanie N. Rotondo

Seattle, July 31 – Trading in the convertible bond market was limited on Monday as July looked to turn the page to August.

However, Intercept Pharmaceuticals Inc.’s paper was on the active side as investors digested earnings that beat expectations and mostly positive trial results.

Though the news was positive overall, the company’s convertibles – as well as its equity – finished the day a little lower.

A trader noted that Hercules Capital Inc.’s 4.375% convertible notes due 2022 were trading, though the “stock barely moved.”

“A dividend should be declared this week, but that shouldn’t affect the price,” he said.

The trader placed the notes in a 102.875 to 103 range. Another market source echoed that level, deeming it unchanged to slightly better.

The underlying equity finished the session up 4 cents, trading at $13.34.

The Palo Alto, Calif.-based specialty finance company is slated to announce its second-quarter results later in the week.

Meanwhile, Trinity Industries Inc.’s 3.875% convertible notes due 2036 were also on the move.

“A dealer made a few sales at $123.25 versus $27.50 on a 70 delta,” a trader said.

The stock was initially seen rising a dime to $27.55. However, the shares ended the day 3 cents weaker at $27.41.

There was no fresh news out on the Dallas-based industrial company, however, to cause the movement.

In the mandatory convertible space, Crown Castle International Corp.’s $1.65 billion of 6.875% series A mandatory convertible preferred stock was admitted to the New York Stock Exchange on Monday.

The ticker symbol is “CCIPrA.”

The mandatories closed at $1,067.23, a gain of 3 cents.

The company’s shares were meantime unchanged at $100.58.

The deal came July 19, with $1.5 billion of the preferreds being sold. A $150 million greenshoe was exercised on July 26, bringing the total amount outstanding to $1.65 billion.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays and RBC Capital Markets LLC ran the books.

Intercept takes a ride

Intercept Pharmaceuticals’ 3.25% convertible notes due 2023 attempted to edge upward on Monday but ultimately closed off 1 to 2 points from the previous week’s trades.

At the close, a market source pegged the paper at 100.75 bid, 101.75 offered, noting that the issue had traded with a 103 handle earlier in the day.

At mid-afternoon, a trader placed the bonds at 103.25 against a stock price of $125.00.

He added that the paper was trading at a 55% delta.

“The stock has moved around some today,” he said.

And move it did, eventually ending the session down $17.90, or 13.26%, at $117.13.

On Monday, the New York-based pharmaceutical company reported second-quarter results that beat expectations.

For the quarter, net loss came to $86.56 million, or $3.46 a share. That compared to a net loss of $77.3 million, or $3.14 a share, the year before.

Revenue was reported at $30.9 million, a gain of $5.5 million year over year.

Analysts polled by FactSet had forecast a loss per share of $3.65 on revenue of $27.5 million.

In addition to the earnings, Intercept also announced that a mid-stage clinical trial for an obeticholic acid therapy in primary sclerosing cholangitis – a rare liver disease – hit its primary endpoint.

However, the company did note that one study patient died during the treatment. While an independent safety committee said the death was not likely due to the treatment, Intercept said it could not be completely ruled out.

Mentioned in this article:

Crown Castle International Inc. NYSE: CCI

Hercules Capital Inc. NYSE: HTGC

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

Trinity Industries Inc. NYSE: TRN

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