Enzon Misses Estimates – Analyst Blog

During the first quarter of 2010, Enzon (ENZN) reported earnings per share of 29 cents compared with a loss of 25 cents in the first quarter of 2009. However, adjusting for the businesses sold and other one-time expenses, the company reported a loss per share of 20 cents compared with a loss of 34 cents in the year-ago quarter. The Zacks Consensus Estimate for the quarter indicated a loss of 15 cents.

 

In January 2010, Enzon sold its specialty pharmaceutical business to Sigma-Tau Pharmaceuticals for $300 million, besides another $27 million based on certain milestones. Enzon is also eligible to receive royalties of 5%−10% on incremental net sales above a 2009 baseline amount from its four marketed specialty pharmaceutical products through 2014. The manufacturing facility in Indianapolis, Indiana and the contract manufacturing segment are also part of the sold business.

 

Enzon reported revenues of $58.16 million during the quarter compared with $13 million in the first quarter of 2009. Barring $12.9 million of royalty revenues, the company generated the balance from the sale of its specialty pharmaceutical business.

 

Royalty revenues declined marginally to $12.9 million from $13.1 million in the year-ago quarter. Enzon earns a majority of its royalty revenues from the sales of Pegintron, marketed by Merck (MRK). The company is trying to focus on its development pipeline completely and is evaluating options for the possible sale of its Pegintron royalty stream.

 

Enzon also provided an update on its pipeline. The company is working on PEG-SN38, its lead pipeline candidate, a pegylated form of SN38 (EZN-2208). Enrollment in the phase II study of the drug, to treat patients with metastatic breast cancer, has already begun. In February 2010, Enzon began a phase I study of PEG-SN38 in various pediatric cancer patients.

 

Enzon exited the first quarter with $ 497.5 million of total cash reserves, which include cash, cash equivalents, short-term investments and marketable securities, up from $199.7 million as on December 31, 2009. The substantial increase in cash balance is due to the receipt of approximately $300 million in January 2010 related to the sale of the business. The company also repurchased $5.8 million of its common stock.

 

We have an Outperform rating on the stock.