Anything Positive At Enzon?

| About: Enzon Pharmaceuticals, (ENZN)
Enzon (NASDAQ:ENZN), under pressure to sell its assets by major investor Carl Icahn, will be slicing off its workforce by approximately 48% by June 2012. This will reduce its operating costs by about $6 million, . The cut-offs should leave the company with around 50 employees, from the current workforce of around 90 employees. This is expected to “more closely align its resources with the company’s research and development activities” of the company.
This is not the first time Carl Icahn, of Icahn Enterprises, has showed his investor rights over the company. Last November, the company sold the Sigma-Tau Pharmaceuticals unit. Before that, in January 2010, the company sold the specialty pharmaceutical business unit. In May this year, it discontinued the treatment of its PEG-SN38 (EZN-2208) clinical program for treatment of metastatic colorectal cancer ((mCRC)). Just for record, the PEG-SN38 (EZN-2208) clinical program cost the company around $18 billion, highest in the 'cost of production' budget. It seems the company is all set to reduce its operating budget.

Here are a few stats from the Q2 report of 2011 to help gain a brief overview of the company:

  1. The royalties income dropped down to $9.2 million from $10.6 million same period last year. Revenues from contracted research and development, which was mainly supported by the specialty business, declined to a meager $231,000 from $2.6 million same period last year. This is probably due to the discontinuation of the specialty business unit.
  2. Total operating expenses went down to $15.6 million compared to $18.8 million in the same period last year. But does decline in operating expenses matter, in case of a declining revenue? I don't think so.
  3. Total loss of continuing operations was recorded at $7 million, compared to $5.6 million same quarter last year.
  4. In the balance sheet, I see a rise in the short-term investments section, against a drop in the marketable securities section.
The company is just trying to stay afloat with the easiest available straw in hand. It seems it is growing smaller instead of growing bigger! It definitely is trying to make proper use of money and realign its business-- not just to the research and development part, but to grapple with its tumbling financial health.
Now, let's take a look at the FY2010 annual report, shall we?
I see around $397 million as cash and cash equivalents in 2010, up from $50 million in 2009. But ironically, there is a consistent decrease in other assets, including investments. Is the company not being able to utilize its capital properly? That's what worries me.
However, it must be noted that the annual return percentage of the company is around 15.48%, better than that recorded in the NASDAQ Pharmaceutical Index. Its operating margin of -1.5% is at least better than (-)146.34% of Micromet Inc. (NASDAQ:MITI) and (-)647.47% of Agenus Inc. But still it doesn't match up with 3.59% of Merck & Co. (NYSE:MRK) and 49.84% of Gilead Sciences (NASDAQ:GILD). Although the financial statements of these companies would reveal what these companies are doing right and what others are doing wrong, it can be summed up that Enzon still needs to catch up with the benchmark set by some of the big boys out there.
So, right now, I don't really see any good thing about Enzon. Maybe other investors will have a few good opinions about it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.