That’s a compelling headline, right? That’s the subject line of one of the most popular teaser emails I’ve seen recently — at least, as measured by the number of eager Gumshoe readers who’ve forwarded it on to me.
The teaser is for George Huang’s FDA Report, a newsletter that hasn’t been around that long (we have only one subscriber review so far, you can see it here). From teasers I’ve seen over the past year or so, it seems that the newsletter is mostly focused on fairly short-term trades around FDA approvals and other events in the biotech space, including short and options trades.
So what are they teasing as “what could be the single best investment opportunity of 2010…?”
Let’s find out, shall we?
The core of the argument here is that this is a biotech company that’s selling off a large part of its business for cash, and Huang believes they’ll be using this cash to issue a large special dividend to shareholders. Here’s how they describe it:
“In short, a very small New Jersey company has indicated to the SEC its intent to offer what could go down as the LARGEST stock dividend in U.S. market history….
“So you could get 100% of your investment back in a single day… and you’d still own your shares, essentially free of charge.
“On the low end, we estimate you could receive a 60% dividend… and of course, would still retain ownership of your shares.
“Overall, we believe this could be the absolute best and safest investment opportunity of 2010. It’s a situation in which you have the potential to safely earn 60% to 100% in total… with very little risk.
“And I haven’t even told you the most incredible part…
“Because the company is very small and this deal is complicated, few people in the investment world know about it. (Those who do have literally invested millions for the chance to capitalize on the opportunity.)
“In other words, there is a way for you to possibly get in on this opportunity BEFORE the enormous dividend is announced to the general public.
“Believe me, when this information does go public, the share price will likely shoot up as investors clamor to take advantage of such a large one-day windfall.”
So that’s the backdrop — this is a small company in New Jersey, with a potential big dividend. Can we get some more specifics?
Indeed we can … here’s some more about the deal …
“You likely haven’t heard of this company…
“But in the world of healthcare, the firm is considered a true pioneer, having perfected a niche drug to treat a severe immune deficiency syndrome and another to treat a common type of cancer in children.
“It is these drugs – plus two other specialty medications – that are central to a recent deal signed between this New Jersey-based company and a European drug maker that specializes in marketing niche drugs.
“The details of the contractual agreement – inked just a few weeks ago – were filed with the SEC on November 9th, 2009.
“It’s a complicated deal, involving about $27 million based on sales milestones, and future royalty payments too.
“But what’s most important for you to know is that there will be a $300 million UP FRONT cash payment from the sale of a portion of the New Jersey company’s business, including the four drugs.
“In other words, the firm is selling four potentially profitable drugs… for about $300 million in cash.Are you getting our free Daily Update
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“Relative to the N.J.-based company’s size, $300 million is a HUGE payment… almost two-thirds of market cap…
“Better still, the SEC filing also disclosed that the company’s Board of Directors ‘is evaluating options to return most of the value of this sale to shareholders.’
“In other words… they have committed to paying a huge special dividend, but have yet to make an official announcement to the investing public.”
That word “committed” is probably a bit strong, but they back it up by saying that Carl Icahn usually gets his way — and he’s been the bane of underperforming, shareholder-ignoring biotechs for years, turning many of them into big winners. They go on to describe a few of the deals Icahn has had a hand in, and the muscle he brings to the table — examples include Biogen Idec, ImClone, and Amylin.
We even get a few specifics about Icahn’s interest in this teased company:
“So far, Mr. Icahn has poured $34 million into the New Jersey company we’ve been following – that’s 7% of the shares outstanding. He also has options exposure to another 7% of the business.
“In January 2009, Icahn proposed that Mulligan and Denner, the same two men he’d worked with on the ImClone deal, be elected to the New Jersey firm’s Board.
“Shortly afterward, the three men began negotiations with a European niche drug maker… and in November, they signed an agreement to sell the company’s four specialty drugs for $300 million in cash.”
OK, so I’m sure there are a good number of folks out there who could identify this one given the meaty pile of clues we’re gnawing on here, and some folks over at the forum have started to discuss it as well, but this is Enzon Pharmaceuticals (ENZN — click here to see a free instant trend analysis of ENZN, going gangbusters at the moment).
And yes, Carl Icahn owns close to 7% of the company — actually a bit closer to 6% now, and has owned these shares for quite a while, I think the announcement of his first big position came about two years ago, and at the time his interest helped stabilize the shares … though not for long, the financial crisis hit ENZN ver