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Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: Icebrg who wrote (7275)	1/9/2004 6:18:43 PM
From: Biomaven	Respond to of 10280

Of course the fact that they had some trouble selling the extra bonds (in the face of a slightly higher stock price to boot) indicates that SEPR might have gotten just too good a deal on them in the first place. Good strength here the last few days - could be that the counterparty to the hedge SEPR set up finally went to the market to cover their position. (Didn't seem to me that the volume around the date of the offering was enough to cover the extra shares the hedge required). Peter

To: Icebrg who wrote (7275)	1/10/2004 9:57:04 AM
From: quidditch	Respond to of 10280

Erik, <Some good news there in combination with a generally positive biotech atmosphere and those bonds will have been sold.> With the imminence of fundamental news and technical factors surrounding the offering the c. notes, it's hard for me to dope out what is going on and the apparent inconsistency between the extension of the exercise period for the green shoe and the strong price action. As you note, in the overallotment option: $50 million of Series A Notes [$200 million issued, due 2008] are convertible at $31.89 per share (24% conversion premium based on the closing sale price of $25.72 of Sepracor common stock on December 8, 2003); and $100 million of Series B Notes [$400 million issued, due 2010] are convertible at $29.84 per share (16% conversion premium based on the closing sale price of $25.72 of Sepracor common stock on December 8, 2003. Also, from the PR: <<In connection with the call spread transaction, the Company has purchased call options on 19.7 million shares of Sepracor stock, with a strike price of $29.84 per share. Simultaneously, the Company has sold an equal number of call options to the initial purchaser or their affiliates at strike prices ranging from $40.00 per share to $65.00 per share. All of these options have staggered expiration dates ranging from 6 months to two years from the date of the offering. In connection with this transaction, the initial purchasers in the proposed Convertible Senior Subordinated Note offering or their affiliates and a third party will purchase up to eight million shares of Sepracor’s common stock in secondary market transactions concurrently with, prior to and possibly after pricing of the notes....>> I wonder: (i) if there is a sense that estorra will be approved near term, whether the QIBs in offering or other potential purchasers are making their bets on the stock, and eschew the higher exercise prices implicit in purchasing additional notes; (ii) since SEPR sold call options covering 19.7 million shares to the initial purchaser or its affiliates, whether the u/w has been distributing these options around as well, diminishing the appetite for the other derivative offered in the green shoe; (iii) as Peter notes, perhaps the counterparty(ies) to the company's purchase of call options is beginning to cover its obligation (and presumably hedging that position); or (iv) purchasing of a portion of the eight million SEPR shares in the secondary market is just now kicking in (I wonder which institution is this third party). quid