Revance on tap; Collegium Pharmaceutical eyed; Nio in focus; Smart Global improves

By Abigail W. Adams

Portland, Me., Feb. 10 – The convertibles primary market launched the week with two new offerings.

Revance Therapeutics Inc. plans to price $200 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%.

Goldman Sachs & Co. LLC is bookrunner for the Rule 144A offering, which carries a greenshoe of $30 million.

In an overnight deal, Collegium Pharmaceutical, Inc. plans to sell $125 million of six-year convertible notes after the market close on Monday.

There was not a lot of cheapness in the deal, a market source said.

And with Collegium using proceeds to fund the purchase of the Nucynta franchise from Assertio Therapeutics Inc., and Assertio using proceeds from the sale to retire its convertible debt, the new offering was like recycling, sources said.

Meanwhile, the secondary space was off to a slow start on Monday as equities wavered between gains and losses on the latest coronavirus outbreak news.

Nio Inc.’s 4.5% convertible notes due 2024 were in focus with the notes trading down in the high-volume activity after staging a rebound in previous weeks.

Smart Global Holdings Inc.’s 2.25% convertible notes due 2026 continued to improve on both an outright and dollar-neutral basis as stock rebounded during Monday’s session.

Collegium eyed

Collegium Pharmaceutical plans to price $125 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 2.625% to 3.125% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with assumptions of a credit spread of 850 basis points over Libor and a 40% vol., a source said.

Using those assumptions, the deal modeled about 0.31 point cheap at the midpoint of talk.

However, using a vol. of 45%, the deal modeled 2 points cheap. The vol. on the company’s stock is historically much higher, a source said.

The borrow rate on the stock is good, another source said.

There was not a lot of cheapness in the deal, a market source said. However, with new issuance scarce, the deal will most likely do well due to demand.

However, sources pointed to the irony of the use of proceeds from the deal, which will be used to fund the acquisition of the Nucynta franchise from Assertio Therapeutics Inc.

News that Assertio was selling its Nucynta franchise to Collegium on Friday sent Assertio’s long-busted convertible notes soaring.

While quiet on Monday, Assertio’s 2.5% convertible notes due 2021 and 5% convertible notes due 2024 both skyrocketed from the low 70s to the 97 to 98 range in high-volume activity on Friday.

Assertio, formerly known as Depomed, plans to use proceeds from the sale to repay its debt.

“It’s kind of recycling old names,” a market source said. “It’s just this one asset that’s trading hands.”

Nucynta is an opioid pain medication. Collegium and Assertio had previously entered into a sales and marketing agreement surrounding Nucynta but now Collegium is buying the asset outright.

However, Collegium announced that it will not assume any liability related to Nucynta after a certain date, a market source said.

While the opioid liability, or liability related to the role prescription opioid’s have played in the opioid epidemic, will remain with Assertio, the amount of liability the pharmaceutical company is exposed to has never been clear, a source said.

Neither Assertio nor Nucynta have been primary players in the plethora of litigation that has been filed against pharmaceutical companies for their role in the opioid epidemic.

Nio in focus

Nio’s 4.5% convertible notes due 2024 were one of the most active issues in the secondary space on Monday with more than $26 million in reported volume and up to $44 million in estimated volume by the late afternoon, sources said.

The 4.5% notes were coming in after staging a rebound in recent weeks.

The notes traded as wide as 58 during Monday’s session, a market source said.

Nio’s equity traded as low as $3.62 but rebounded into the afternoon and closed the day at $3.87, an increase of 1.57%.

The Shanghai-based electric car manufacturer reported a year-over-year decline in vehicle delivery numbers on Monday.

Nio reported that it had delivered 1,598 vehicles in January, an 11.5% year-over-year decline.

The company cited the coronavirus and the Chinese New Year for the slump in sales figures.

“They’re using every excuse they can find,” a market source said.

Nio’s long-busted 4.5% convertible notes were on the rise in mid-January on reports that it may receive a cash infusion of up to $1 billion from China automaker GAC Group.

The notes traded as high as 67 on the news.

Nio announced on Friday that it had placed $70 million in 0% convertible notes due 2021 with an Asia-based investment fund.

The company also placed $30 million with another Asia-based investment fund in January for a total of $100 million.

“They’re gonna need a lot more than that,” a market source said.

Nio simultaneously announced that it was actively pursuing other financing projects.

Smart Global improves

Smart Global’s recently priced 2.25% convertible notes due 2026 were improving on an outright and dollar-neutral basis their second day in the secondary space.

The 2.25% notes traded up to 103.625 in the late afternoon.

They were pushed out another 0.25 to 0.5 point dollar-neutral, a market source said.

Smart Global stock closed Monday at $29.54, an increase of 5.29%.

The 2.25% convertible notes hit the secondary space on Friday after pricing in an overnight deal.

The notes traded as high as 102.5 on Friday but closed the day around 101 with stock off more than 11%.

Mentioned in this article:

Assertio Therapeutics Inc. Nasdaq: ASRT

Collegium Pharmaceutical, Inc. Nasdaq: COLL

Nio Inc. NYSE: NIO

Revance Therapeutics Inc. Nasdaq: RVNC

Smart Global Holdings Inc. Nasdaq: SGH

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