Amylin rises after earnings beat; ProLogis up outright, lower on hedge on merger talk

By Rebecca Melvin

New York, Jan. 27 - Amylin Pharmaceuticals Inc.'s 3% convertibles were higher by about a point outright after the San Diego-based drug discovery company posted a quarterly loss that beat estimates.

ProLogis' 3.25% convertibles were a bit higher outright, but down on a hedged basis, after word that the Denver-based real estate investment trust is in merger talks with competitor AMB Property Corp.

The ProLogis convertibles were down 2 points on a hedged basis, according to a New York-based sellside desk analyst. But not everyone agreed. Another New York-based sellsider said that the ProLogis 3.25% convertibles were up 0.75 point dollar neutral, using a 50% hedge.

Symantec Corp. was active in trade Thursday and higher one day after the Mountain View, Calif.-based electronic security company reported a lower profit that beat estimates.

"It looks like Symantec was the trade du jour," a West Coast-based sellsider said, adding that about $90 million of bonds traded, or about 10% of total volume.

Nielsen Holdings NV's new 6.25% mandatory convertibles, which debuted on Wednesday, traded slightly to the upside, changing hands at 54.40 versus a share price of $25.70, compared to a closing market of 54 bid, 54.5 offered versus a share price of $25.60 on Wednesday.

The mandatory preferred shares of General Motors Co. changed hands at 55.80 versus a share price of $37.90 during the session and ended the day at 56.81, which was up 91 cents, or 1.63%.

Amylin higher by a point

Amylin's 3% convertibles due 2014 traded at 90.125 on Thursday and also at 89.875, which was up 1.375 point, according to Trace data.

One sellsider reported a trade in the Amylin 3% convertibles at 90.5 versus a share price of $16.25, and a third source put the paper at 89.25 bid, 90 offered early in the day, compared to 88.5 on Wednesday.

The sellside analyst called that move up about a point.

The weak, high-yield convertible trades mostly outright and is considered busted because of the out-of-the-money conversion price of $61.07.

"It's really just a bond, but people like the credit," a West Coast-based sellsider said.

Amylin's 2.5% convertibles, which mature in April, have been steady at around par.

But earnings pushed shares up $1.17, or nearly 8%, to $16.44.

Amylin posted a fourth-quarter loss of $19.2 million, or 13 cents per share, compared to a loss of $50.3 million, or 35 cents per share, a year earlier.

Revenue was down to $174.2 million, from $185.5 million a year earlier; and Byetta sales fell to $126.4 million from $163.7 million a year earlier.

The company's narrower net loss was attributed to lower costs, including the elimination of employee bonuses, which offset the weaker sales of its Byetta diabetes drug marketed with Ely Lilly.

The stock and convertibles took a hit in October when the U.S. Food and Drug Administration declined to approve a longer-acting version of Byetta, known as Bydureon, until more data is gathered regarding its potential impact on the heart.

Amylin said Wednesday that the FDA indicated that it will approve a study designed to show the drug's effect on heart rates, and the Bydureon application will be resubmitted to regulators.

A New York-based sellside analyst said that Byetta sales were stronger than anticipated and that the company did a good job cutting expenses to preserve liquidity.

"It looked like a very solid beat," the analyst said of the earnings. And with the letter received from the FDA, it "gives confidence that they are on a good track to initiate the next generation of the diabetes product and on the right track to commercialize next year."

Piper Jaffray raised its rating on the shares early Thursday, but Hapoalim Securities cut the stock to hold.

ProLogis comes in on hedge

ProLogis' 3.25% convertibles traded at 114 versus a share price of $15.50, which was higher outright compared to 111.5 versus a share price of $14.70 on Wednesday but 2 points lower on a hedged basis, according to a New York-based sellside desk analyst.

A second analyst concurred that the ProLogis 3.25% convertibles were up outright but came in hedged.

But a third New York-based sellside trader said that on a 50% hedge, the paper was up 0.75 point to a point. The other ProLogis convertible issues were all up about 0.25 point, the trader said.

Merger talk helped boost ProLogis' credit, and with the credit improving but the stock up, the paper's performance on a hedged basis could have gone either way.

"Yes, with the potential merger, the credit tightened about 50 basis points," the trader said. "Although I think the market is not factoring in the decrease in vol. going forward."

All in all, he said the paper seemed too rich to him.

Shares of the Denver-based industrial REIT jumped $1.17, or 8%, to $15.87 in very active trade.

The company, which is the largest warehouse operator, confirmed late Wednesday that it's in talks with San Francisco-based AMB Property Corp. about a possible merger.

The companies hope to capitalize on synergies since both companies operate in North America, Asia and Europe.

The potential merger was described as a merger of equals, in which the two companies "would combine in an all-stock, at-market transaction, based on the unaffected trading prices of the two companies' stock prior to media reports of a possible merger," according to a news release.

Symantec active, gains

Symantec's 1% convertibles due 2013 traded at 117.5 versus the closing share price of $17.91 on Thursday, which was up 2 or 3 points from Wednesday's levels, with the shares not moving that much.

The Symantec 0.75% convertibles due 2011 traded up 0.5 point to 105.5. But these shorter-dated notes, which mature in June, don't have much of a story left.

It's the slightly longer dated Symantec 1% convertibles that accounted for about two-thirds of volume in the name on Thursday and which have a little bit of delta and which are more interesting, given two more years left to maturity.

"I'm sure they aren't cheap," a sellsider said, referring to the fact that the 1% convertibles are trading with parity just below 94 and with a 25% premium.

"At that price, there is essentially no yield to maturity, and people are playing it for the option," he said.

The Symantec common shares have bounced around a bit and foundered amid speculation of a potential takeover.

"I traded it last summer, and then left it alone when it ran up as quickly as it did," the sellsider said of the convertible bonds.

The rating agencies deemed Symantec to be investment grade in the middle of last year, and that opened up interest in the name to crossover players looking for money market yield, the sellsider noted.

"They were unrated before, and a whole constituent of investors couldn't be involved, but now those [investors] that can live with a very low, money-market type yield" can be involved, he said.

For the quarter that ended Dec. 31, Symantec earned $132 million, or 17 cents per share, compared with $301 million, or 37 cents per share, in the third quarter of fiscal 2010.

Excluding one-time items, the company earned 35 cents per share, which was better by 2 cents than what analysts had expected.

Revenue rose 4% to $1.6 billion, which was in line with analysts' expectations, and up from $1.55 billion in revenue last year.

The company also said recent acquisitions are doing better than it anticipated. The VeriSign Inc. security business bought last year had $48 million in revenue in the quarter.

For the current quarter, Symantec expects earnings of 15 cents or 16 cents per share, or 35 cents or 36 cents excluding items, on $1.59 billion to $1.61 billion of revenue.

Symantec also announced a $1 billion share buyback plan.

Mentioned in this article:

Amylin Pharmaceuticals Inc. Nasdaq: AMLN

General Motors Co. NYSE: GM, GM-PB

ProLogis NYSE: PLD

Nielsen Holdings BV Nasdaq: NLSN

Symantec Corp. Nasdaq: SYMC

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