Enzon shareholders question management, seek 'legitimate' auction for entire company

By Jennifer Chiou

New York, Jan. 30 - Knott Partners and affiliated funds, which own about 1.8 million shares of Enzon Pharmaceuticals, Inc., criticized Enzon in an open letter to chief executive officer Jeffrey Buchalter, according a news release.

The shareholders expressed their serious concerns about Enzon's management, strategy and share price while proposing four steps the company should take in the immediate future to rebuild its market value and reputation.

In the letter, entities managed by Dorset Management/Knott Partners said that Enzon'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 $17.00 in 2004 to its recent price of approximately $6.60," the investors wrote.

They noted that Buchalter has been "unwilling and/or unable to communicate a strategic vision that investors can support," adding that he is not "accessible."

Management mishandled last year's search for a buyer for certain company assets by restricting the process, the letter alleged, adding that, "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."

The investors urged the company to:

• 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 1 programs for which the company is not receiving an adequate valuation; and

• Prioritize better communication with current shareholders, industry professionals and potential investors.

In other news, on Wednesday, shareholders led by DellaCamera Capital Master Fund Ltd. proposed that the Enzon board of directors form a special committee of independent directors to evaluate strategic and financial alternatives to enhance stockholder value. The investors beneficially own 3,446,558 shares, or 7.6%, of the company's common stock.

Enzon is a Bridgewater, N.J.-based biopharmaceutical company.

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