Enzon Pharmaceuticals
(NDAQ: ENZN) shares rose today after activist investor Carl Icahn
disclosed a 6.93% stake and suggested that the pharmaceutical company
explore strategic alternatives in a Schedule 13D filing
with the SEC. The billionaire financier insisted that management
conduct a comprehensive review of strategic transactions that could
enhance shareholder value. In particular, Icahn suggested the company
consider monetizing certain assets like royalty streams and
under-performing products through either a spin-off or sale of the
company as a whole.
Not surprisingly, shares rose today on news of Carl Icahn’s
involvement as many coat-tail investors tried to buy a stake next to
the legendary activist. However, many analysts also see potential in
Icahn’s involvement. Recently, the company swung to a profit on lower
expenses and improved revenues. The bulk of its earnings came from the
gain on the sale of its Nektar equity assets of $13.8 million and a
$6.7 million gain from the repurchase of 4.5% convertible notes at
discount to par. But notably, operating income also came in at $870,000
compared to a loss of $11.64 million in 2006.
Carl Icahn also has had a lot of success in the biopharmaceutical
industry. Some of his other successes include ImClone (NDAQ: IMCL)
which is up substantially, MedImmume which was acquired, and Biogen
(NDAQ: BIIB) which recently put itself up for sale. Many are
speculating that the activist investor will try to unlock value by
cashing in on royalty streams to fund share buybacks that should
increase EPS and subsequently the stock’s price (assuming the multiple
remains the same). This activist strategy has worked in countless other
cases and should unlock value in this case as well.
In the end, this is great news or Enzon shareholders as it could
mean substantial value being unlocked over the short term. However, a
lot depends on management willingness to explore these alternatives as
any proxy battle could be both expensive and drawn out. Luckily, Carl
Icahn is well known (and feared) among corporate circles so management
should agree to at least consider the options. Combined, these factors
make ENZN a stock worth watching!
Related Companies
Nektar Therapeutics (NKTR)
Pfizer Inc. (PFE)
Gilead Sciences Inc. (GILD)
Johnson & Johnson (JNJ)
Genzyme Corporation (GENZ)
Biogen Idec Inc. (BIIB)
OSI Pharmaceuticals Inc. (OSIP)