David Einhorn's new Special Situation Stock
August 17, 2010
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RELATED TICKERS: FURX
, PPDI.DL
This morning I singled out Furiex Pharma (FURX) as one of the two new David Einhorn positions that I planned on doing more research on. I am now comfortable enough to add it to my CAPS portfolio, but not yet in real-life. Here's what I have been able to find out thus far.
FURX is a recent spin-off of Interesting spin-off of Pharmaceutical Product Development (PPDI) with nearly as much cash on its balance sheet as its market cap.
The theory here is that such a small spin-off of such a large company was likely unwanted by many large investors and hence sold, creating an undervalued security.
Furthermore, like is the case with many spin-offs, significant insider ownership at FURX aligns management with shareholders.
The company is burning cash, so this is far from a pure asset play.
It currently owns the rights to royalties from two drugs with potential milestone payments worth as much as $14.40/share. Some companies on the street believe that the value of these royalties, the cash on FURX's balance sheet, and its product pipeline are worth as much as $30 to $36/share.
Now I can see why Einhorn is interested in this situation. Is anyone out there familiar with Furiex? I am interested enough in this one to begin the second level of deeper digging that I do on companies that I am considering buying in real life.
Kudos to Farukh Farooqi for his excellent and timely from my perspective update on the company on Seeking Alpha today:
Furiex Pharma's Cash Will Likely Run Out Before Investors Feel Secure
Deej
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