No way to preview this that I can see so hope it comes out organized.
2013 2014 2015 2016 2017 2018 2019 M$
US 7 7 7 3.5
EUROPE 10.9 10 9 8 7 3
JAPAN 8.4 7 6 5 4 3 1
ROW 12.1 11 10 9 8 7 3
Sales 38.4 35 32 25.5 19 13 4 167
10% dis 1 0.9 0.81 0.73 0.66 0.6 0.53
NPV 38.4 31.5 25.92 18.615 12.54 7.8 2.12 137
Even with the bogus 44m share number that puts us at $3.11 (minimum).
Good analysis. Have you factored in tax? Usually the house take a cut. No idea about tax on royalties. And I guess any sale of the assets won't happen until after June 1, the date when the convertible notes mature. They don't want the shares to be diluted if they can make big money off the sale. It seems there is enough margin of safety here to buy at $3.29. After the dividend your cost will be $1.69 per share. If you are right in that the NPV is around $4.71 before tax and expenses and let's take a 40% haircut and it's $2.83 and that's 67% over the cost. So for $1.69 you have a good chance getting $2.83 back and an option for the potential profits from a probable sale of the assets, most likely the phase 2 P-38.
The above analysis is purely a PEGINTRON royalty income npv estimate, period the end.
There are other income streams to boot, $10-30m npv is my rough estimate, but this estimate has not been as well modeled as the PEGINTRON estimate (it could be more, there are many fledgling streams that are not well spelled out in the latest 10K).
As for taxes, there are $150m in accumulated losses, and roughly another $50m in accumulated tax credits. I'm not enough of an tax accountant to know how all these elements will play out if the whole enterprise stays intact going foward and operates like a shareholer cash machine. Which is the current trajectory as I understand it. But income versus tax credits looks like a wash to me.
IP at $0 pps value is clearly wrong but so be it.
Finally, how much should it cost to collect royalties, keep the books and make the dividend transfers per year, $3m, okay, high to me, but let's say that's it, $15m for the five years. Okay, knock off the the other too boot royalty items to pay for oversight. Leaves the $3.11 and and the current cash. All in all the pps should be at least ~$4.61 right now, and until June 5th, for the cash machine model, imo.
Again, presuming IP is $0, and there aren't any significant unaccounted for assets.
You don't think that new drugs won't cut into Enzon's royalty stream MORE than you predict here? There's a great deal of hep c competition about to hit the market. In fact, some say the effects are already being felt since many people are simply waiting for new drugs, unwilling to deal with side affects of Pegintron. thoughts?
My read is that in the shorter term (next 2 yrs) treatments with pegintron as a component have taken their hit in sales (due to treatment terms being cut in half or more), nevertheless markets population-size-wise are still growing, so all in all I have sales flat to down modestly (8%) next couple of years. As the newer treatments you speak of kick in they will have genotype issues as I understand it, and some residual (and not insignificant) market share will persist for the older regimens for some time to come.
I believe, from what I have been able to findout, that my numbers are realistic and a little on the conservative side, but I am by no means an expert in this market and welcome others who have better information (e.g., there are numerous sales forcasts availabe for $4-5K, etc.) to please offer a more informed estimate.
badbilly: thanks for fighting with the YMB env., to try to answer this vital question. I personally could not derive much (due to there being 7 years and only about 4 #s cited in the "table rows"), except for the $3.11 NPV of the stream.
Now to my big question for you: how CERTAIN/RISKY are such future sales, given the competititve environment for the disease/drug(s)?
It appears that the $1.60 special div will almost exhaust the net cash, and if the NPV of the dividend stream is really only ~$3 (maybe not certain even at that), then I guess I can understand some holders taking their $$ and running, between $4 and $3.40
I saw other posters here recently guesstimating $6 per share, not the above $4.60. Would be interested to hear the background to this. Apologies for my ignorance....
$3.11 is real, conservative imo, today's value of the cashflow (not including other royalty componets, net npv $10-30m for them), add the in-hand cash, the $70M after note payoff (not including the $16m paid/ or not paid to a ghost, i.e., not adding in that $.40 in) That adds up to $4.71 in pps value today, minimum, pre dividend
That's it, nothing more or less, this should be the unmanipulated pps, minimum.
( Note,dd in the $.40 and we're over $5.)
As for the IP: ENZON was a leader in pegalytaion technolgy in the early to mid 2000's, but difficult to know whether this technology had run it's course, the core staff had lost it's touch, or whether Icahn's bean counters couldn't take the technical risk necessary to keep the lead.
Wichever the case a downward spiral occured, no 'big' licensing deals, or renewals. So what the value of the $200m in R&D expenditures over the last 5 years and the over 50 active patents in the IP portfolio is hard to assess. Merck it seems to me is the best target for some kind of deal. $150m in accummulated losses, worth ~$50m to someone like Merck, and the new Peg Platform, has to be worth something $10-50m to them, or combined (tax writeoff plus tech) another $1-2 per share for us (minimum).
Bottom line $5.70, minimum, likely upwards of $7.
What's the motive to hide or delay this? Buy at $3.50 and sell at $7, an additonal 5-10 million shares, adds up to $25m pretty nicely.
The risk for us is two major players pushing the IP out the backdoor and string together a series of handoff sales to game the system. But then they'd get slammed in the investment press imo. To Icahn it wouldn't matter, his way of doing business doesn't depend on other investors, or at least retails, but Klarman, it's another kettle of fish, he depends on other investors, following his lead. Screwing investors is not good for his business model imo.
If Klarman dumps, get out, if not, ride, imo.
So no two ways about it, there is definitely a major disconnect in the stock price.
I bought more this morning. I'm going to wait a couple more days and if the shares are lower, I'll pick up some more.