Amylin shoots up on Bydureon clearance; Ford up ex-dividend; United Continental adds

By Rebecca Melvin

New York, Jan. 27 - Amylin Pharmaceuticals Inc. was a focus Friday among convertibles players pending news regarding whether the San Diego-based biopharmaceutical company and its partner Alkermes plc would receive approval from the Food and Drug Administration for their once-weekly diabetes shot Bydureon.

Approval news came out late in the session, and the Amylin convertibles shot up about 5.5 points to 93.75 bid, 94.375 offered.

Elsewhere, there were some names trading on earnings releases. Ford Motor Co.'s 4.25% convertible senior notes due 2015 were down a handful of points outright along with the underlying shares after the Dearborn, Mich.-based automaker missed fourth-quarter earnings estimates amid weak auto sales overseas and higher commodity costs. But with the stock trading excluding dividend, the Ford bonds were seen up about 0.5 point dollar neutral, a New York-based trader said.

United Continental Holdings Inc.'s convertibles traded higher on a narrower fourth-quarter loss and amid a strong sector move.

The move was part of an overall trend in airlines, which have seen some strong earnings reports this week from the likes of Delta Air Lines Inc. and US Airways Group Inc.

"UAL stock [is] up this week 18%, so the bonds have been trading up in concert with that and all the potential takeover talk," a New York-based analyst said.

The takeover talk is surrounding AMR Corp., which is in bankruptcy, nearing the end of its lease rejection phase and looking ahead to important labor talks next week, the analyst said.

There is the possibility of AMR, the parent of American Airlines, merging with another carrier or reorganizing with private equity.

Delta, US Airways and private equity shop TPG have been named as potential merger partners.

US Airways on Wednesday confirmed that it is studying a potential merger with AMR.

Amylin jumps on drug news

Amylin's 3% convertibles due 2014, which were trading up about a point prior to the drug approval news at 88.75, shot up to 93.75 bid, 94.375 offered after the news.

Those bonds, which are out of the money, don't currently trade against the shares, which were halted pending the news shortly after 2 p.m. ET. But the shares had been drifting higher for several days, an analyst said.

"They are extremely busted. The bonds have a strike [price] at $60 and the stock is at about $12," an analyst said.

But traders were eyeing a potentially huge move in the underlying shares after the approval.

After two unsuccessful tries, Amylin and Alkermes succeeded in their third attempt to get regulatory clearance for Bydureon - a long-acting form of the twice-daily Byetta diabetes shot.

Amylin lost almost have of its market value last October when the FDA rejected Bydureon for a second time and asked for more study on its effect on cardiac rhythms.

An analyst said it would be "a big credit if the news was bad, and a small credit positive if the news was good. However a trader suggested that given the lack of appealing merchandise in the convertible bond market at this point, the positive news would likely be magnified.

Ford gains ex-dividend

Ford Motor's 4.25% convertible senior notes of 2016 traded at 158.77 during the session and was seen marked at 157 bid, 158 offered at the end of the day versus an underlying share price of $12.55.

Shares of the Dearborn, Mich.-based automaker ended down 53 cents, or 4%, at $12.21.

"Ex-dividend, it was up about 0.5 point. The stock was trading ex-dividend," a trader said of the Ford convertibles.

Ford reported lower-than-expected fourth-quarter profit on disappointing results outside North America and rising commodity costs.

Excluding one-time items, Ford's operating profit fell to $1.1 billion, or 20 cents per share, from about $13 billion, or 30 cents per share, a year earlier.

Analysts had been expecting adjusted profit of 25 cents per share.

Ford's losses deepened in Europe during the quarter to $190 million in losses compared to $51 million in losses a year earlier.

For 2012, Ford expects growth in Europe to be hindered by the ongoing sovereign debt crisis and austerity measures.

For the fourth quarter, Ford reported net income of $13.6 billion, or $3.40 per share, buoyed by a one-time tax related gain of $12.4 billion. A year earlier, Ford posted net income of $190 million, or 5 cents per share.

The higher net income was due to an accounting change that Ford said reflects confidence in its long-term profit outlook. The one-time gain resulted in a full-year net income of $20.2 billion, the highest annual growth since 1998.

For the entire year, Ford posted its highest profit since 1998, but that news was overshadowed by the quarterly miss and conservative outlook.

UAL higher dollar neutral

UAL's 4.5% convertibles due 2015 traded at 138.5, which was about 0.25 point to 0.5 point higher on a dollar-neutral basis, market players said.

Shares of the Chicago-based carrier gained $1.39, or 6.4%, to $23.09. UAL posted a narrower fourth-quarter loss of $138 million, or 42 cents per share, compared with a loss of $325 million, or $1.01 a share, a year earlier.

Excluding items, the company said it would have earned $109 million, or 30 cents per share. Analysts surveyed by FactSet expected a profit of 13 cents per share.

Revenue rose nearly 6% to $8.93 billion, matching analysts' expectation and helped by fare increases.

The loss narrowed as the cost of integrating the United and Continental companies fell, the new entity said.

It also said it won't increase the amount of flying it does this year.

United and Continental merged in October 2010.

For all of 2011, the company earned $840 million, or $2.26 per share. That was down from what would have been its full 2010 profit had they been combined of $955 million, or $2.61 per share.

AMR bankruptcy eyed

The value of the convertibles of bankrupt AMR edged up this week and came back some. Last they were at about 29.5, although that had been as high as 32 during the last few days, and that was up from 28 to 29.

Market players were watching the lease rejection process, and eyeing what's ahead for the company as it is scheduled to meet with its unions next week and outline its business plan.

Dramatic cuts may be forthcoming, an analyst said.

"Big things are going to be what's happening with the pension and labor negotiations," the analyst said, and that will affect potential merger plans ahead.

But he said, nothing will be resolved overnight.

Among other airline convertibles, US Airways' convertibles traded at 191 with a 92% delta.

Mentioned in this article:

Amylin Pharmaceuticals Inc. Nasdaq: AMLN

AMR Corp. Pink Sheets: AAMRQ

Ford Motor Co. NYSE: F

United Continental Holdings Inc. NYSE: UAL

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