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Enzon Pharmaceutical (ENZN)-December update

December 18, 2010

Enzon (ENZN) recently announced “..the initiation of Phase I clinical studies, in collaboration with the National Cancer Institute (NCI), for two of the Company’s novel oncology product candidates, EZN-2968 and EZN-2208 (PEG-SN38)”, and the share price moved to the upper end of this year’s fairly tight trading  range ($9.00-$12.40). What’s going on? Are we any closer to the value in this company being realized? 

To answer that let’s look at what, if anything has happened since my initial writeup of last September. The 3rd quarter Q showed a decrease in the company’s ongoing loss, down to $.14 a share as well as cash/investment balances of $8.12/share. It also contained a statement that the company has suspended its earlier initiative to monetize the royalty stream from PEGINTRON (remember, this was a big part in my investment thesis; I expected the monetization to happen before the end of this year and act as a catalyst for realizing value). After the quarterly release in November Carl Icahn increased his investment in the company to 9.7%. Then, in December, the company announced that it was reducing its workforce as a result of its decision to cut back on operating expenses. All of this points to the transformation of the company into less of an operating entity and more of a liquidating fund. Ownership of ENZN would seem to confirm this; a large portion of ownership is concentrated in the hands of hedge funds that would probably like to see value realization sooner rather than later.

 Hedge Fund Ownership estimates

Baupost 17.8%
Iridian 11.0%
Icahn 9.7%
Renaissance 6.7%
Aristeia Capital 6.7%
Blackrock 6.5%
Della Camera 5.9%
Int. Core Strategies 5.2%
Sub total 69.5%

Given the almost flat price of shares this year it seems that Mr. Market either doesn’t see the underlying value in the company, or simply doesn’t have much interest in this kind of self liquidating investment. Well, I guess there’s another possibility; Maybe he’s just not paying any attention (But you are, right?). I think patience is the key here. The downside seems to be covered and the company seems to be moving in the right direction for value realization. Maybe 2011 will be the year!

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