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Apr 24, 2013

Enzon Gives Up Hope to Sell

  • Enzon Pharmaceuticals said yesterday it ended its strategic review of a possible sale of the company or its assets, after concluding it couldn’t interest would-be buyers in its royalty portfolio.

    Instead, the company board of directors approved a $1.60 special dividend per share, to be paid June 4 to holders of shares as of May 7. About $70 million would be distributed to shareholders through the special dividend.

    Enzon also said it intended to maximize revenues from royalties going forward, and distribute the excess cash through periodic dividends to shareholders.

    Enzon’s revenues consist of royalties on seven products, the majority of which come from sales of PegIntron (Peginterferon alfa-2b), the hepatitis C virus drug made by Merck & Co. Enzon’s royalties on PegIntron were $38.5 million last year, exactly the same as 2011.

    While the company did not disclose numbers, Merck reported separately that PegIntron sales dipped last year to $653 million from $657 million in 2011. A long-term recovery is unlikely for Enzon, since its U.S. royalties on Merck sales of the drug end in 2016, followed by the end of royalties in Europe (2018) and Japan (2019).

    Another of the seven products is the anemia drug Omontys® (peginesatide), which generated $300,000 in royalties for Enzon last year, the first year the company recorded royalty revenue on the product. In 2014, Enzon loses U.S. rights to collect royalties on Omontys sales, since the drug uses technology licensed by the company to Nektar Therapeutics, which in turn granted third-party licenses to the marketers of that and four other drugs.

    On February 23, Omontys marketer Affymax and its development and commercialization partner Takeda Pharmaceutical voluntarily recalled all lots of the drug. That action followed at least five patient deaths linked to the once-monthly intravenous treatment for anemia due to chronic kidney disease in adult patients on dialysis. FDA adverse reports for the drug listed 12 deaths in all, The Wall Street Journal later reported, but since cause of death was not specified, it was unclear how many of the 12 actually resulted from Omontys use.

    "The recall of Omontys from the market and recent declines in PegIntron revenues adversely impacted interest in a possible acquisition of the company's royalty portfolio, leading the board of directors to conclude that a distribution of Enzon's cash and ongoing royalty revenues was in the best interest of Enzon's shareholders,” Alex Denner, Enzon’s chairman, said in a statement. “This direction, which followed an exhaustive review of alternatives, returns what the board believes is the greatest value to shareholders."

    Enzon finished 2012 with a 1.5% gain in royalty revenues, to $41.5 million from $40.9 million in 2011. Nearly all of that gain came from a 65% increase in royalties on Cimzia® (certolizumab pegol), a drug marketed by UCB for Crohn’s disease and rheumatoid arthritis.

    Enzon said in December it had hired Lazard Frères to conduct the review, during which the company said it “substantially suspended” all clinical development activities, with a goal of conserving capital and maximizing value returned to shareholders. Three months later on March 21, the company disclosed in a filing with the U.S. Securities and Exchange Commission that it would slice its workforce by more than one-third, from 19 to 12 employees by the end of the first quarter “in an effort to continue to cut ongoing operating expenses.” Enzon took $1.3 million in charges against Q1 earnings.

    The company’s workforce was as large as 43 employees as of December 31, before the company carried out a previous round of job cuts costing $1.4 million in charges against Q4 earnings, according to its 10-K annual report filed with SEC.


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