Morning Commentary: Avadel prices tightly allocated deal; convertibles trading volume light

By Abigail W. Adams

Portland, Me., Feb. 14 – In a tightly allocated overnight deal, Avadel Pharmaceuticals plc priced $125 million of five-year convertible notes before the market open Wednesday at par with a coupon of 4.5% and an initial conversion premium of 20%.

There has been little trading activity of the new paper and not much is expected due to the tight allocation, a market source said. “The deal was done when it was announced,” the source said.

Pricing came in line with talk for a fixed coupon of 4.5% and at the cheap end of talk for an initial conversion premium of 20% to 25%.

The notes were sold through subsidiary Avadel Finance Cayman Ltd.

The terms of the deal were “optically very attractive,” another market source said.

The Dublin, Ireland-based specialty pharmaceutical company’s American Depositary Shares were taking a beating early Wednesday. The depositary shares were down 13.24% to $7.80 early in the session.

The stock’s decline was no surprise, a market source said. “It looks like they priced it appropriately. The stock was going to get hit. There are a lot of shares for sale,” the source said.

Concurrently with the offering, Avadel will repurchase $18 million of the company’s ADS at a purchase price of $8.99, the closing price on Feb. 13, according to a company news release.

The share buyback “was an unbelievable deal,” a market source said.

Avadel expects the full-scale commercial launch of Noctiva in the second quarter of 2018, which is the only FDA-approved treatment for nocturia, the overproduction of urine at night.

The company is also in phase 3 clinical trials for a treatment for excessive daytime sleepiness and cataplexy, the sudden loss of muscle tone brought on by strong emotions, which affects narcolepsy patients.

Meanwhile, trading volume continued to be light in the convertible space amid volatility in the equity markets. Western Digital Corp.’s 1.5% convertible notes due 2024 continued to dominate trading early in Wednesday’s session.

The 1.5% notes were trading in the 101.5 range early in Wednesday’s session with stock at $83.18, an increase of 0.25%.

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