Carl Icahn Takes 15% Stake in Enzon Pharmaceuticals
- By Sydnee Gatewood
After selling out in the second quarter, Carl Icahn (Trades, Portfolio) acquired an even larger position in Enzon Pharmaceuticals (ENZN) on Nov. 28.
Warning! GuruFocus has detected 2 Warning Signs with ENZN. Click here to check it out.
The intrinsic value of ENZN
He bought 6,598,886 shares for an average cost of 41 cents per share. This represents nearly 15% of the company's outstanding shares but only accounts for 0.01% of his total assets managed.
Enzon was formerly a research stage biopharmaceutical company known for its Customized PEGylation Linker Technology. PEGylation is used in the development of drugs to improve characteristics like solubility, reduced dosage, stability and lower toxicity. It now has no clinical operations and very limited corporate operations. Currently, it is surviving off royalty streams from products that incorporate this technology. These products include PegIntron, Sylatron, Macugen and CIMZIA. The company also ran a products and manufacturing division but divested it in 2010.
Management revealed it is expecting to receive a cumulative amount of $21 million in royalty revenues between the beginning of 2016 and 2021. Many expect the company to liquidate after this point. Icahn may be interested in Enzon for this very reason. The company already distributes special dividends throughout the year so its final liquidation may prove to be especially beneficial to shareholders.
The New Jersey-based biopharmaceutical company has a market cap of $19.9 million and an enterprise value of $7.12 million. It has a price-earnings (P/E) ratio of 1.4, a price-book (P/B) ratio of 0.9 and a price-sales (P/S) ratio of 1.9.
GuruFocus ranked the company's financial strength 8 of 10. The Piotroski F-Score of 5 and Altman Z-Score of 68.12 suggest the company is financially stable. The return on invested capital (ROIC) outperforms the weighted average cost of capital (WACC) so the company is creating value as it grows. In addition, the company has no debt.
In contrast, Enzon's profitability and growth was ranked 4 of 10 by GuruFocus. It has an operating margin of 78.3% and a net margin of 149.6%. The return on equity (ROE) and return on assets (ROA) outperform 99% of other biotechnology companies. The return on capital (ROC) outperforms 100% of competitors. Where the company falls short is its three-year revenue growth of -24.3%. This figure underperforms 76% of competitors. Additionally, the company has a one-star predictability rating, which means it is hard to predict future results.
The stock reached its all-time high of $77.94 in November of 2000. Since then, the stock has declined significantly. In April of 2002, the stock was trading around $40 and fell to $28.73 by the end of May that same year. From there, the stock continued its gradual decline with only a few surges throughout the next several years. Within the past six years, the highest price the stock has reached was $12.16 on Dec. 31, 2010. It has been trading under $2 since August 2013.
Icahn has a long history with the company that dates back prior to the first quarter of 2010.
While the company delisted earlier this year, it is still available as an over-the-counter stock. On Thursday, Enzon closed at 45 cents.
Disclosure: I do not own stock in any companies mentioned in the article.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Signs with ENZN. Click here to check it out.
The intrinsic value of ENZN
