PAR Technology convertible notes expand; Intercept down outright, up on hedge; biotechs active

By Abigail W. Adams

Portland, Me., April 11 – With the exception of one small deal, the convertibles primary market was quiet throughout the week with new issue activity expected to slow down as the space enters into earnings season.

Trading volume in the secondary space was light on Thursday with $79 million on the tape early in the session and a little over $300 million on the tape by the late afternoon.

While new paper from PAR Technology Corp. was active early in the session, trading activity slowed into the afternoon.

However, the notes saw a large dollar-neutral, or hedged, expansion on their market debut.

Intercept Pharmaceuticals Inc.’s 3.25% convertible notes due 2023 dropped below par on an outright basis but expanded on hedge as the stock tanked following the release of additional data from one of the company’s clinical trials.

While there was no clear theme to Thursday’s session, the convertible bonds of biotech companies were active with stocks in the sector in general down across the board.

Neurocrine Biosciences Inc.’s 2.25% convertible notes due 2024 and Dexcom Inc.’s 0.75% convertible notes due 2022 were among the names in the biotech sector that saw some action on Thursday.

With new issue activity slowing down, focus has begun to shift toward the earnings season with volatility spikes expected to stir activity in the secondary space, sources said.

PAR trades up

PAR Technology priced an upsized $70 million of five-year convertible notes after the market close on Wednesday with a coupon of 4.5% and an initial conversion premium of 32.5%.

The deal priced at the midpoint of talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 30% to 35%, according to a market source.

The initial size of the deal was for $60 million.

The new paper traded up out of the gate. It was seen at 104.375 about one hour into Thursday’s session and climbed to 104.75 shortly before 12 p.m. ET, sources said.

The 4.5% notes expanded 3 points dollar-neutral, a market source said.

The notes were moving on about a 70% delta.

PAR Technology stock traded as high as $23.03 during Thursday’s session but closed the day at $22.71, an increase of 5.38%.

Stock took a hit during bookbuilding on Wednesday, dropping as much as 17% in intraday trading.

The stock drop on Wednesday helped lift the convertible notes on their secondary market debut, the source said.

While the new paper was active early in the session, it did not trade in the afternoon, sources said.

There were about $13 million of the bonds on the tape less than one hour into Thursday’s session and $15 million shortly before noon ET.

However, the notes did not trade after that.

While activity surrounding the notes came to a standstill Thursday afternoon, they still saw decent trading volume given the size of the deal, sources said.

Intercept expands

Intercept Pharmaceuticals’ 3.25% convertible notes due 2023 dropped below par on an outright basis but saw a large expansion dollar-neutral on Thursday as stock tanked following the release of additional data from one of the company’s clinical trials.

The 3.25% convertible notes dropped about 4 points outright. They were changing hands at 98.5 early in the session and were down to 98 by the late afternoon, sources said.

The notes were expanded 1 point dollar-neutral, a market source said.

The notes were trading on a 60% delta but dropped to a 40% to 45% delta on Thursday, a source said.

Intercept stock traded as low as $102.66 during Thursday’s session but closed the day at $104.75, a decrease of 13.2%.

The bonds saw more than $8 million in reported volume during Thursday’s session.

The 3.25% convertible notes have been active throughout the week in anticipation of the release of data.

While the data about the company’s phase 3 study of a treatment for NASH was positive, investors were less than impressed.

The data was good but not great and Intercept is not the only biotech company with a treatment for NASH in the pipeline, a market source said.

NASH, or nonalcoholic steatohepatitis, is a chronic, progressive liver disease that occurs when excessive amounts of fat build up in the liver, damaging hepatocytes.

Biotech active

While there was no clear theme to Thursday’s session with volume light, several off-the-run biotech names saw renewed attention in the secondary space.

Dexcom’s 0.75% convertible notes due 2022 were again active with stock wavering between gains and losses throughout the session.

The 0.75% notes were changing hands around 133.375 early in Thursday’s session. They were not active into the afternoon.

Dexcom stock traded to a high of $121.45 and a low of $117.48 within the first hour of trading on Thursday. However, stock closed the day at $119.30, an increase of 0.35%.

Neurocrine Biosciences’ 2.25% convertible notes due 2024 also saw some action. The 2.25% convertible notes were changing hands at 139.375 early in the session, according to a market source.

They dropped almost 4 points as the session progressed and were quoted at 134 by market close.

Neurocrine stock closed Thursday at $86.28, a decrease of 5.43%.

Mentioned in this article:

Dexcom Inc. Nasdaq: DXCM

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

Neurocrine Biosciences Inc. Nasdaq: NBIX

PAR Technology Corp. NYSE: PAR

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