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It looks as though Enzon Pharmaceuticals, the first company to successfully commercialize protein PEGylation, finally buckled under the pressure exerted by Carl Icahn, one of its major shareholders.  As I mentioned in a previous post, Carl recently started buying large blocks of Enzon stock to gain a controlling interest in the company to maximize shareholder value. To accommodate Icahn’s "vision" and demands, Jeff Buchalter, Enzon’s Chairman and CEO has decided to spin out a new biotechnology company.  According to an Enzon press release, the new company (to be named later) will get Enzon’s core technology (PEGylation) and its entire preclinical pipeline (i.e.; their RNA antagonist oncology portfolio). Enzon will also invest $150m in the new venture.

So, what does Enzon get out of the deal? It retains ownership of a small, aging manufacturing facility and a portfolio of nominally-performing specialty pharma drugs. I think comments made by Eben Tessari, a financial analyst who follows Enzon, sums up of the essence of the proposed spin out.  He writes: “Maybe I’m way off here but it seems to me in analyzing this deal that the new company gets all the goodies while Enzon is left with a manufacturing plant and a stable of marginal drugs (zero out of four therapies have over $50m a year in revenue). Now, I don’t mean to imply that I think Enzon is a bad company - hell, they’ve managed to make more profit this quarter than any pharma company I’ve ever worked for - I’m just saying they are selling their future based on the advice of a man notorious for breaking up companies and wringing every last dime out of a shakeup.”

Not surprisingly, Jeff Buchalter, the brains behind the deal, thinks it will provide Enzon shareholders with the value that they demand. “By separating these unique businesses into two focused companies, the opportunities for both the specialty pharmaceutical business and the biotechnology business could be substantially enhanced and greater value could be created than under the current structure. Operating separately will allow each company to benefit from greater strategic and managerial focus and appeal to their own unique shareholders. The separation will enable the two businesses to compete more effectively in their respective markets and optimize their business goals, research initiatives and capital requirements. We look forward to creating this opportunity for the shareholders,” said Buchalter.

Jeff, who learned how to turn around failing companies from his former boss Fred Hassan (turn around specialist and current CEO of Schering Plough) ought to know a little something about value. According to SEC filings, last year Jeff made $773,558 (base salary) with $1,162,500 in bonuses for a total cash compensation of about $2 million. In addition, Jeff received just over $3.1 million in equity bringing his total 2007 compensation package to approximately $5.2 million —almost 3 times the amount received by any other Enzon executive.  Not that there is anything wrong with that!!!!!!!!!!!!

Until next time….

Good Luck and Good Job Hunting (try Enzon’s spin out, they are flush with cash)!!!!!!

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A federal judge ruled that Amgen Inc. must defend itself against charges that it misled investors about safety concerns with its flagship anemia drug, Aranesp.

A US district court judge dismissed charges against five of nine Amgen officers and directors but left plaintiffs 30 days to amend their complaint in order to include those defendants. The investors, led by Connecticut Retirement Plans and Trust Funds, assert that positive statements made by company officials regarding the safety of Amgen's two anemia drugs, Aranesp and Epogen, were knowingly at odds with clinical studies that had raised concerns.

The plaintiffs assert, according to court filings, that they unknowingly purchased artificially inflated shares, between April 2004 and May 2007. In one instance, during its fourth-quarter 2006 conference call, Amgen announced results of a clinical trial that tested Aranesp in 939 patients with anemia from cancer. The Food and Drug Administration, according to court filings, described the study as "demonstrat(ing) significantly shorter survival rate in cancer patients receiving (anemia drugs) as compared with those (sic) receiving transfusion support."

Describing the results of the study during the conference call, Roger Perlmutter, a defendant and executive vice president of research and development, said, "We did not see a statistically significant adverse affect of Aranesp on overall mortality in this patient population, and so we conclude that the risk/benefit ratio for Aranesp in these extremely ill patients with anemia secondary to malignancy is, at best, neutral and perhaps negative."

Sounds misleading to me! It is unfortunate that companies compromise their scientific integrity and corporate reputation simply to boost their stock price in the short term. I think companies are slowly learning that if they are dishonest or disingenuous with the American public that the public will soon lose confidence in them and their products. This, in turn, will lead to a decrease in sales and ironically a reduction in company stock price. As the old adage goes “Honesty is always the best policy!”

Until next time….

Good luck and Good Job Hunting!!!!!!!!!!!!

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