Investors Specify Concerns and Propose Remedies to Enzon CEO Jeffrey Buchalter and the Board of Directors
NEW YORK, Jan. 30 /PRNewswire/ -- On January 28, 2009, Knott Partners and affiliated funds, which own approximately 1.8 million shares of outstanding common stock of Enzon Pharmaceuticals, sent the following letter to the company. The letter, addressed to Enzon CEO Jeffrey Buchalter as well as the Board of Directors, expresses the investor group's serious concerns about Enzon's management, strategy and share price. It proposes four steps the company should take in the immediate future to rebuild its market value and reputation.
The full text of the letter to Enzon Pharmaceuticals is below. For more information, please contact Pat Eaton-Buettner at Knott Partners at (516) 364-0303 or PBuettner@knottpartners.com.
Dear Mr. Buchalter:
Entities managed by Dorset Management/Knott Partners are significant shareholders of Enzon Pharmaceuticals ("Enzon" or the "Company"), currently owning approximately 1.8 million shares of common stock. We write to express our concerns regarding the direction of the Company.
Over the past five years, ENZN's stock price has been a huge disappointment to shareholders. While we applaud certain of management's initiatives, such as monetizing part of the royalty stream and licensing pharmaceutical programs, the stock has declined from a high of more than $17 in 2004 to its recent price of approximately $6.60 (after plunging below $4 last November). At the same time, the Company's board has seen fit to compensate management very handsomely over this same time period.
In our opinion, Enzon continues to trade at a deep discount to its actual value as a consequence of multiple missteps by management. A non-exhaustive list includes:
- CEO Jeff Buchalter has been unwilling and/or unable to communicate a strategic vision that investors can support.
- Mr. Buchalter has also been one of the least accessible CEOs of a small biopharmaceutical company that we have ever come across. This has been evidenced by a paucity of meetings with investors, lack of presence at institutional investor conferences, and an apparent disinterest in responding to inquiries from shareholders and sell-side analysts. As a result, we believe that the market does not appreciate the value of the Company's clinical programs.
- Management mishandled last year's search for a buyer for certain Company assets by restricting the process. We believe all options should have been left on the table with potential buyers, including the sale of the entire Company, or the sale of the specialty pharmaceuticals business with or without the royalty stream.
- Management compensation is well out of line with the Company's stock price performance.
- The idea of spinning off the biotech R&D entity was flawed from the beginning, given market conditions which afford little value to Phase I programs. This is particularly true when management has not done nearly enough to explain and justify these programs to potential investors.
Steps must be taken to remedy these past missteps, improve the Company's business and prospects, and ultimately elevate shareholder value. Among other things, we believe that Enzon's current board should consider the following steps to increase shareholder value:
- Institute an aggressive share buyback plan in addition to the recently completed tender offer for a portion of the Company's convertible debt.
- Hold a legitimate auction for the entire company or, at minimum, the entire specialty pharmaceutical business.
- License out one or more of the current Phase I programs for which the Company is not receiving an adequate valuation.
- Prioritize better communication with current shareholders, industry professionals, and potential investors.
We would recommend the above steps be taken immediately if not sooner. We intend to hold management and the board of directors accountable for these items, as well as any additional management missteps. We will take whatever measures are necessary to protect and enhance shareholder value. We are available to discuss these matters further at your convenience.
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