Good luck to you all. I won't be posting anything further for a while, if ever. Billy, wipe that smile off your face.
I would expect the hedge fund guys can push the stock price wherever they want it in the short term. Long term, no.
Regarding the value per share. As I have stated a number of times, Merck says sales are declining at 23%. That is year over year from March 2012 to March 2013. Mr Bad Bill has done research and has posted a reasonable explanation that those high rates of declines should be largely confined to 2012 and should return to the norm of around 10% decline. However, a review of Mercks earnings for the last six months does not confirm that the tide has changed. Their sales numbers for PegIntron, Enzons only real money maker, are as follows -
3rd quarter 2012 165 million
4th quarter 2012 143 million - 13% decline in one quarter
1st quarter 2013 126 million - 12% decline in one quarter
Just on the math, that is a annualized decline rate in sales of 50% in the last six months. That is a collapse in sales. I can't imagine that it would stay at those high decline rates. But, I will leave it to others to explain the reasons and how it might get better. But for now, the numbers are absolutely terrible.
Yes, the pricing is bizarre. The option market in this stock is thin. You are going to be trading with the market maker. I wasn't sure if it would even trade at those prices. I placed a number of small orders at different expirations and prices last week just to check and see if they would trade and if so at what prices. At the bid, ask, halfway, penny under, etc. At some expirations they will trade at the ask and occasionally halfway. I had orders hang all day on 1 cent under the ask on others. The pricing is off. Almost like the market maker did not adjust the program for the dividend. I would not think that is possible. At any rate, I am going to start building a position.
I don't want to give you advice on this. I can tell you what I would do in that situation. There is a safe way to get even.
I would buy the Enzon June 2.5 put options. Last Friday you could buy those for between .10 and .15 cents per share. That will give you the right, but not the obligation, to sell your stock for $2.50 per share to the seller of the put anytime until June 21st. Hold your stock to at least the ex dividend date, June 5th. You will be entitled to the $1.60 dividend. Exercise the puts and force the seller to buy your stock at $2.50. It does not matter what the current stock price is. You will get $2.50. You receive $2.50 on the stock sale and collect the $1.60 dividend. Total of $4.10, less the premium to buy the put of.10 to .15 cents and commissions. You are essentially whole with no risk.
Be aware of a couple things. If the stock price were to go up, you will not profit from the increase. The option contracts sell in lots of 100. You would need to purchase 80 contracts to cover 8,000 shares. The puts will expire on June 21st. You would need to be sure your broker exercises the puts before then. (Forces the sale of your stock at $2.50).
If the stock price starts to fall, the cost to buy the puts will increase. The cost of the puts may increase as we get closer to the ex dividend date, even if the stock price stays the same or goes up.
Hope this helps you. Good Luck.
To anyone else reading. The puts are mispriced. Probably due to the calls having no value. You can do the same thing for a $.90 profit per share at the current stock price of $3.10. Buy the shares, buy the puts, wait a month, collect the dividend, put the shares. You can do the math. Only risk I can see would be if Enzon does not pay the dividend. Unlikely, unless they get sued to prevent the distribution.
Sorry. You asked what my interest in Enzon is. I have the same interest in Enzon as you all do. To make money. I even laid out part of a potential trade.
You will not find any other posts by Ms Thudpucker on any other boards or websites. In my opinion, who or why someone posts in unimportant, as long as they have their facts straight.
And yes, Billy has been a big asset to all. He is obviously doing huge amounts of time consuming research in trying to get to the truth about what is going on here. Not cheerleading.
Here is my thinking on that -
The company is gone. The help. The offices. The intellectual property. They have already made the decision to cease to operate as a viable business. They are now a shell company.
Their only remaining visible valuable asset is the PegIntron royalty stream. (Yes, I know there are some other odds and ends floating around, but little proven value, ie much cash coming in the door).
The wall street guys have taken over this company. They would only care about maximizing their return. The people that cared about Enzon no longer control it and I assume are ticked off and over it. I'm not really comfortable trying to guess what someone else might do, but I can envision 2 fairly obvious scenarios -
1. Reduce expense as much as possible. Almost there now. Remain legally intact and collect the royalties until they expire. If the hedge funds guys haven't bailed out yet, I would assume they would try to devise a way to get their hands on as much of that cash as they can. The "company" has no obligation to distribute anything to the stockholders. But I assume you would get a few cents per share quarterly. They earned 5 cents this past quarter. After all royalties cease, pay the final bills. Distribute any remaining cash to stockholders. File for corporate dissolution. Enzon legally dies. Stock goes to zero and is delisted.
2. Sell the royalty stream and any remaining patents/rights. The obvious buyer is/was Merck. They could get out from under the royalty payments. That has not happened. Sell to a third party. Hasn't happened. They do not appear to be in very strong position to negotiate a good deal. Eventually, they may take the best offer they can get. Collect the money. Pay the final bills. Distribute any remaining cash to stockholders. File for corporate dissolution. Enzon legally dies. Stock goes to zero and is delisted.
I have said some of this before, so please forgive. I am an active dividend/value investor. I normally invest on the long side via options. ENZN popped up on a screen due to the special dividend. Normally a very bullish thing that a company has extra money to return to investors. I thought it might be a good investment. I did a little due diligence and have recognized what appears to be the opposite. Liquidation.
I spend a fair amount of time researching investments before I spend my money. That includes talking to people on these boards. I do my best to deal in facts, good or bad. This is a great forum to fact check. If I make a big factual error, you guys would take me apart.
This company was a bit of a puzzle. But the options for a good outcome for stockholders narrow with every statement or non-statement this company makes. If there is not a miracle announcement from Enzon soon, I will make a sizable investment that the stock price collapses. I have started to build a position. The puts on this company are significantly underpriced if nothing crazy happens. At todays prices the stock would drop to $1.50 ($3.10-$1.60) or lower on June 5th. On Friday you could buy the $2.50 June put for $.10. At $1.50 stock price, the intrinsic value of that put would be $1.00. That would be a 900% return. That sounds wrong, but it happens. There are some dangers, but for now, I like the risk/reward. Normally the value of the puts will move up to near the value of the dividend by the ex date. These have not moved much.
Be careful. When you BUY a call or put option you cannot lose more than you paid for it. Speculative, but you know what your total risk is up front.
But, when you WRITE a call or put option you are entering a contract that might obligate you to buy or sell shares. Loses on writing calls are unlimited. Loses on writing puts can go up to the value of the stock.
I would stay away from writing anything other than covered calls if you are not 100% certain what you are doing.
Billy, I respect that you deal in facts and not emotion. Just to keep the facts straight
You write -
"Merck didn't report a percentage, that's your calculaiton, let me help with the math: 100X(162-146)/162=22.2%, which to two sig figs is 22%."
This is a quotation from the Merck quarterly report filed on Thursday, page 35 -
"Worldwide sales of PegIntron, a treatment for chronic hepatitis C, declined 23% to $126 million in the first quarter of 2013 driven largely by lower sales in the United States and Japan. The Company believes that the sales decline in the United States was attributable in part to patient treatment being delayed by health care providers in anticipation of new therapeutic options becoming available. Foreign exchange unfavorably affected global sales performance by 3% in the first quarter of 2013."
Their number, not mine.
Merck is the manufacturer of PegIntron. They know how much they sell. They stated 2 days ago in the quarterly report that sales are down 23%. I believe them. They certainly are not happy about having to report lower sales. The outside analysts appear to be behind the curve.
Makes sense if you want to accumulate shares at a lower price. You just have to be willing to buy Enzon at $2.50 no matter what the share price does.
Yes, I agree the sales of PegIntron have been baked into the stock price. But at a 9.4% decline rate, not 23% as reported 2 days ago by Merck. As I stated earlier, Merck is the only seller of PegIntron. I will rely on the reported numbers from Merck as opposed to an estimate by Zacks.
As far as things being baked into the stock price, you yourself had placed a lot of faith in the income that would have been generated by their research into new products. That has all been sold off for less than 1% of the cost to create it, or abandoned. The stock price has not moved much since that announcement on May 6th.
The thing that would concern me if I owned stock in Enzon would be the one line in Mercks statement -
"The Company believes that the sales decline in the United States was attributable in part to patient treatment being delayed by health care providers in anticipation of new therapeutic options becoming available"
That is not something that Merck would want to have to report. It is also not boilerplate. So, in Mercks opinion, doctors are delaying writing prescriptions for PegIntron for Hepatitis C. Potentially a fatal infection, while waiting for something else. I have to assume the drug reps are telling the doctors that something new is coming soon.
Hedge funds. Since the stock is essentially at an all time low, they have all lost money on the shares so far.
As far as put and call options go. In their simplest form these derivatives are nothing more than a way to speculate on stock price movement. Since you are not buying or shorting stock it does not affect share price. If you have money to speculate with, and you think Enzon will go up in the near future you can buy calls. If you think Enzon will go down in the future ($1.60) on June 5th, you can buy puts. There is nothing sinister about it. It will open down $1.60 on June 5th per Nasdaq rules
1. Share price would drop to 1.50. You would lose money and it would take 5 years to do it.
2. Royalties to Enzon are going to be cut approximately 23% due to lower sales. Does not matter why.
3. Hurray. We agree!
4. I am sorry if you have lost money on this. This outfit seems to be either disorganized or dishonest. The Belrose thing. Most companies would have been out there explaining what was going on right after the announcement. You sell off what most investors believe is your major asset and do not say a word. Pretty weak. I do not have anything invested. If nothing changes, I am going to buy puts. The near the money puts are selling for pennies. Unless there is a miracle, there is a chance to make a lot of money on this pig when it collapses on June 5th with a relatively small speculation. On the 2 dollar dividend it dropped about 2.50 in a week. A similar percentage puts you down about 2.00 this time. At current prices it would be down there just above a dollar. You can by the 2.50 puts for about 15 cents.
5. FYI, I do not believe this message board has any influence on the stock price. 85% of the stock is owned by institutions, 5% by insiders. They don't care what we think. Only 10% is retail with a total of only about 1000 positions.
1. There are 43 million shares out. If they earned 50 million dollars that would give you a price per share value of $1.16. You would not even break even, much less make any money. Plus, there is no guarantee of how much of that would make it back to the stockholders. I would not trust this company after the Belrose deal.
2. The sales figures from Merck are worldwide - down 23%. Total sales is what matters. Merck is the only company that can sell PegIntron.
3. I really have doubts about Belrose deal. It does not pass the smell test. Enzon had invested over 100 million dollars in that technology and sold it for less than a million. They already had some of it licensed and sold those rights to Belrose for 2 cents a share. Why allow another company to get in the middle of that deal if they expected to make money?
4. I do not think it is a conservative investment at all when Merck is putting out those kind of declining sales figures. You have to hope one of those other products may or may not hit at some point in the future. But that is not conservative investing, that is speculation.
5. I would expect there will be generic PegItron available in the next few years if there is still a market for it.
Enzons 10k is out. They earned 5 cents for the quarter. The bad news is that they have announced what some of us have suspected. They have ceased all operations other than collecting the royalties on their old products. The entire company now consists of 10 people. They have vacated their offices and manufacturing facility. It is officially a dead company.
The really bad news concerns those royalties. They collect roughly 95% of their royalties on one product. PegIntron. Merck has the exclusive worldwide rights to manufacture and distribute PegIntron. Sales are rapidly declining.
The following is from Mercks 1st quarter 2013 earning statement, page 35 -
"Worldwide sales of PegIntron, a treatment for chronic hepatitis C, declined 23% to $126 million in the first quarter of 2013 driven largely by lower sales in the United States and Japan. The Company believes that the sales decline in the United States was attributable in part to patient treatment being delayed by health care providers in anticipation of new therapeutic options becoming available"
It appears a replacement for PegIntron will be available very soon.
In any event, Enzons patents on PegIntron expire this year and 2015 anyway.
Sorry to be the bearer of bad news, but the facts are what they are.
Not that I'm a big believer in conspiracies, but to answer that question, I think you have to know who Belrose is. I suspect that trail leads to a dead end in an attorneys office in Delaware. Or maybe, that IP is really only worth 2 cents a share. Probably never know.
Funny. Unfortunately, Enzon shareholders won't be getting much of that milk. If Belrose is just a few months old, it almost certainly was created for this. How would they be in the loop to buy this IP. Almost has to be a friend of a friend, insider kind of thing? BTW, I actually have a cow named Bessie.
No matter when you buy, If you are holding the stock at the end of the day on June 4th you will get the dividend. The following morning the stock will go down $1.60. You cannot get the dividend and avoid the stock dropping the next day. No free lunches.
If Enzon believed they are going to get significant payments from Hisun, why would they put some other company in the middle of the deal for 2 cents a share?
BBilly, I would like your thoughts on this from todays 8k. They sold PEGylation, PEG-SN38 and LNA. I went back and read your prior posts as you suggested. I know you believed that this technology might have been their "Ace in the Hole". It appears they sold it for less than 2 cents a share and some undefined future payments.
I see the company is now down to about a dozen people. There does not appear to be a company or promising technology left to sell. Just a stream of income that will be decreasing every year. Why would anybody buy that income stream unless they get it dirt cheap?
As I stated before, it seems clear they have no intention of staying in business. Just a shell company collecting the remaining royalties. It feels like the end of the road for Enzon. Have I missed something important?
From todays 8K -
"On April 30, 2013, pursuant to the terms of an asset purchase agreement entered into on the same date (the “ Agreement ”), Enzon Pharmaceuticals, Inc. (the “ Company ”) completed the sale of all of its right, title and interest in its Customized PEGylation Linker Technology platform and related assets to Belrose Pharma Inc. (“ Belrose ”). The assets sold include (i) intellectual property and know-how associated with the PEGylation platform (including certain patents), (ii) patents and know-how related to PEG-SN38, (iii) patents and know-how associated with certain of the Company’s internal clinical programs and (iv) certain related supplies and equipment. In addition, the Company assigned to Belrose the Company’s existing license agreement with Zhejiang Hisun Pharmaceutical Co., Ltd. Under the Agreement, the Company also agreed to sell all of its right, title and interest in the Locked Nucleic Acid (LNA) Technology platform and related assets to Belrose at a second closing, provided that prior to July 15, 2013, the Company enters into an agreement with Santaris Pharma A/S (“ Santaris ”) to resolve any contractual obligations"..