Second Look: Is There Any Real Value Left In Savient? (SVNT, DNDN, SVNT)

Savient Pharmaceuticals, Inc. (NASDAQ: SVNT) already had problems before a fund called Tang Capital accused it of being insolvent this week.  Over the last year this stock has fallen down steadily just like its stock chart was a staircase… Down, level, down again, level, down again, and so on.  A year ago Savient’s share price was $11.00 and it sits at under $2.00 today.

Tang Capital is listed as a creditor and owns some $38.9 million in notes and the firm is opposed to the company supporting a new gout treatment called Krystexxa, which the activist creditor calls a total failure.  There is also the generic and branded Oxandrin that includes doses of the anabolic steroid oxandrolone.

We have highlighted the woes here before, most recently the CEO departure to Dendreon Corporation (NASDAQ: DNDN).  At that time shares were at $2.22 in early February.

The reason that Savient is still surviving is because back in 2009 it priced a 4.4 million share secondary offering at $13.29 per share in a sale through J.P. Morgan and Wedbush Morgan that raised about $57 million before fees.

Savient’s filing claims that Tang’s allegations are without merit.  The December 30, 2011 balance sheet lists roughly $169.7 million in cash and short-term securities, but there is also more than $175 million in long-term debt.  Yahoo! Finance showed that the net tangible assets as being negative at -$8.41 million as of the end of 2011.  The company is burning through cash at more than $10 million per month according to the listed changes in the last two available quarters.

Who and what Tang’s ambition happens to be is unknown because they are a creditor.  The issue is that whether you have high hopes for biotech or not, the balance sheet is now inverted here and that is based on data one quarter back.  The company has an active $100 million shelf registration which was filed almost a month ago, but how the company can raise that much capital remains a severe mystery if you look at the issues.

Savient has a market capitalization rate of only $111 million after another 15% drop today to $1.575 per share.  This was a $2.37 stock on Monday and the 52-week range is now $1.42 to $11.33.

Thomson Reuters expects only $32.2 million in 2012 revenues and almost $62 million in 2012 revenues, with losses expected in both years.

Whether or not the company can survive or not is still a matter of opinion.  What is certain is that this fails probably every bit of suitability requirements for widows and orphans funds.

The company’s partnership page lists:

We have exclusively licensed worldwide rights to the technology related to KRYSTEXXA® and its uses from Duke University and Mountain View Pharmaceuticals, Inc.  Duke University developed the recombinant uricase enzyme and Mountain View developed the PEGylation technology used in the manufacture of KRYSTEXXA.  Mountain View and Duke have been granted U.S. and foreign patents disclosing and claiming the licensed technology and, in addition, Savient owns or co-owns U.S. and foreign patents and patent applications, which collectively form a broad portfolio of patents covering the composition, manufacture and methods of use and administration of KRYSTEXXA.

We depend on third parties to manufacture pegloticase and have entered into commercial supply agreements with third-party manufacturers.

Watson Pharmaceuticals, Inc. (NYSE: WPI) serves as the exclusive U.S. distributor of our authorized generic version of oxandrolone tablets, an Oxandrin® brand equivalent product that we supply to Watson Pharma.

JON C. OGG