Kadmon Holdings is a publicly traded biopharmaceutical company (ticker: KDMN) that has just been sold to Sanofi, a much larger biopharmaceutical concern with a global footprint and 100,000 employees. The equity holders of Kadmon are receiving $9.50 a share or $1.9bn in total.
We believe this is good news for the only BDC with exposure to Kadmon: PennantPark Investment (PNNT). The company has been on PNNT’s books in some form since 2010. Of late, though, the BDC only had a small equity stake with a cost of $2.3mn in 252,014 shares. The FMV as of June 2021 was $1.0mn. Now that’s worth $2.4mn, a $1.4mn increase and cash proceeds that can be rolled from a non-income producing to a yielding status.
We had Kadmon rated as underperforming since 2016 (!) with a CCR 3 rating but Non Material giving the sub-$2.0mn valuation. We’ve upgraded the investment to CCR 1 because of the sale and added to the Trending list. That’s because the BDC should book a final realized gain in IVQ 2021 and a higher value than the latest number we have as of June 2021. A small, but satisfying gain for PNNT given that KDMN’s stock price was as low as $3.36 in the last 52 weeks.