Enzon Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091103005919/en

BRIDGEWATER, N.J.--(Business Wire)--
Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) today announced its third quarter
2009 financial results. For the three months ended September 30, 2009, Enzon
reported a net income of $0.1 million or break-even on a diluted per-share
basis, as compared to a net loss of $2.0 million or $0.05 on a diluted per-share
basis for the third quarter of 2008. In the third quarter of 2009, the Products
segment profitability grew 55% as compared to the third quarter of 2008. This
was offset by a decline in revenues and profitability in the contract
manufacturing segment. The Company also experienced a reduction of general and
administrative costs from the third quarter of 2008. In 2008, the Company
incurred expenses in connection with considered strategic initiatives.

"Net sales from our marketed products, in total, remain stable with unit growth
in Oncaspar®, and Adagen®," said Jeffrey H. Buchalter, president and chief
executive officer of Enzon. "The Company continues to identify and implement
cost efficiencies across the organization."

Highlights

* In October 2009, PEGINTRON® received a recommendation for approval as a
treatment in addition to surgery in patients with metastatic melanoma from the
FDA Advisory Committee. Enzon receives royalties on worldwide sales of
PEGINTRON.
* Also in October 2009, CIMZIA® received European approval for the treatment of
adult patients with moderately to severely active rheumatoid arthritis (RA).
Enzon receives royalties on worldwide sales of CIMZIA.
* The Company will present data on its clinical and preclinical pipeline
programs at the upcoming European Organization for Research and Treatment of
Cancer (EORTC) meeting in November.
* The Company filed the Investigational New Drug (IND) Application with the FDA
for the next-generation Adagen program early November.

Revenues

The following table reflects the revenues generated by product and segment for
the three month periods ended September 30, 2009 and 2008.

Three Months Ended
(in thousands)
September 30, 2009 September 30, 2008 % Change
Products
Oncaspar $ 12,495 $ 12,492 -
DepoCyt 2,111 2,201 (4 )
Abelcet 5,654 6,636 (15 )
Adagen 8,358 7,583 10
Total Products 28,618 28,912 (1 )

Royalties 13,665 14,611 (6 )
Contract Manufacturing 2,318 5,267 (56 )

Total Revenues $ 44,601 $ 48,790 (9 )

Products Segment

Net product sales for the three months ended September 30, 2009 were essentially
the same as compared to the same period of 2008. Oncaspar and Adagen experienced
unit growth. However, this quarter`s net sales were adversely impacted by an
accrual made regarding claims for certain prior period chargebacks currently
being disputed by the Company. Oncaspar unit growth is mainly attributable to
the continued use and adoption in new pediatric and adult hospital and
cooperative group protocols. DepoCyt and Adagen tend to fluctuate from quarter
to quarter due to the dynamics of dosing, scheduling and diagnoses of the
products` patient populations. Abelcet continues to be under competitive
pressure. This quarter, net sales were primarily impacted by price and to a
lesser extent volume.

Royalties Segment

PEGINTRON royalties account for the majority of the Company`s total royalty
revenues. During the three months ended September 30, 2009, PEGINTRON royalty
revenue declined due to the impact from foreign exchange. Recently, the Company
had two positive events related to its royalty segment as previously noted.
First, PEGINTRON received a recommendation for approval from the FDA Advisory
Committee for melanoma. Second, the European Commission approved Cimzia, for the
treatment of adult patients with moderately to severely active rheumatoid
arthritis (RA).

Contract Manufacturing Segment

Contract manufacturing revenue for the three months ended September 30, 2009 was
$2.3 million compared to $5.3 million for the comparable period of 2008.
Revenues and earnings were affected primarily due to cancelled shipments and
early discontinuation of processing for a CMO customer scheduled for termination
in early 2010. The Company continues to evaluate new contract manufacturing
opportunities.

Cost of Product Sales and Contract Manufacturing

The Company`s cost of goods sold was $13.6 million for the three months ended
September 30, 2009, compared to $14.5 million for the three months ended
September 30, 2008. This quarter the Company experienced a write-down of
inventories of finished goods and raw materials associated with the contract
manufacturing agreement noted above. Excluding this adjustment, the Company`s
gross margin continues to be favorably impacted as a result of the consolidation
of the manufacturing facilities.

Research and Development

For the three months ended September 30, 2009, research and development expenses
were $15.8 million, relatively unchanged compared to the three months ended
September 30, 2008. We continue our ongoing efforts in our research and
development pipeline, PEG-SN38, the HIF-1 alpha antagonist, Survivin antagonist
and other LNA- and PEGylation- based programs, as well as our next-generation
lifecycle programs for Oncaspar and Adagen. We continue to enroll patients in
our Phase II trial evaluating our PEG-SN38 compound in metastatic colorectal
cancer patients. We also continue to enroll patients in our LNA antagonist Phase
I programs for HIF-1 alpha and Survivin. We will present data on the LNA
compounds, as well as PEG-SN38 at the upcoming EORTC meeting in November. This
quarter 28% of the total research and development costs were associated with
lifecycle programs and the efforts to improve the manufacturing processes and
pharmaceutical properties of Oncaspar and Adagen. As previously stated, the
Company recently filed the IND for the next-generation Adagen program.

Selling, General and Administrative

Selling and marketing expenses consist primarily of sales and marketing programs
to support our sales force as well as medical affairs activities. Selling and
marketing expenses for the three months ended September 30, 2009 declined 21
percent from the third quarter of 2008. The decrease reflects the continued
selective spending in the selling and marketing programs. General and
administrative expenses also decreased 28 percent to $7.7 million primarily due
to expenses related to the Company`s proposed strategic initiatives in 2008 and
the initiatives the Company made in the beginning of 2009 to continue to improve
efficiencies.

Restructuring Charge

Given the events in the CMO activities, the Company implemented cost reductions
to minimize the financial impact going forward. This resulted in a reduction of
employees at the Indianapolis facility. For the three months ended September 30,
2009 the Company incurred a total cost of $0.6 million which was a result of the
employee severance and related benefits for affected employees. For the three
months ended September 30, 2008, severance costs associated with the
consolidation of the South Plainfield facility were $0.2 million.

Other Income (Expense)

Other income (expense) for the three months ended September 30, 2009 was a net
expense of $1.4 million, as compared to net expense of $1.9 million for the
three months ended September 30, 2008. Other income (expense) includes: net
investment income, interest expense and other income or expense. Interest
expense was $2.8 million for the three-month period ended September 30, 2009
compared to $3.0 million for the three-month period ended September 30, 2008.
The reduction in interest expense is a result of the elimination of a portion of
the outstanding 4 percent notes.

Income tax (benefit) provision

During the three months ended September 30, 2009 the Company recorded a net tax
benefit of $0.8 million which includes a reimbursement related to certain unused
research and alternative minimum tax credit carryforwards and a reduction of
foreign taxes due to a transfer price adjustment.

Cash and Investments

Total cash reserves, which include cash and investments, were $201.3 million as
of September 30, 2009, as compared to $206.9 million as of December 31, 2008.
The decrease is primarily due the $15.6 million used to the repurchase $20.4
million of our 4 percent notes in 2009 offset by the cash provided by operating
activities.

Adjusted Financial Results

For the three months ended September 30, 2009, there were no adjustments to the
reported net income of $0.1 million or breakeven per diluted share, as compared
to an adjusted net income of $0.7 million or $0.01 per diluted share for the
three months ended September 30, 2008.

The following table reconciles the Company`s net (loss) income and net (loss)
income per diluted share as determined in accordance with U.S. generally
accepted accounting principles (GAAP) to its adjusted net income and net income
per diluted share for the three months ended September 30, 2009 and 2008
respectively:

Three Months Ended
(in thousands, except per-share amounts)
September 30, 2009 September 30, 2008
Net Net income Net Net

income
per diluted share
(loss) income (loss) income

per diluted share (2)
GAAP net income (loss) $ 133 $ 0.00 $ (2,020 ) $ (0.05 )
Adjustment to GAAP net loss:
Add: Costs related to the proposed strategic initiatives (1) - - 2,694 -
Adjusted net income (3) $ 133 $ 0.00 $ 674 $ 0.01

(1) Adjusted financial results for the third quarter of 2008 exclude the costs
related to the Company`s proposed strategic initiatives (spin-off of the
Company`s biotechnology business or sale of the specialty pharmaceutical
business).

(2) Computation of adjusted diluted earnings per share includes certain
contingently issuable shares whereas GAAP loss per share does not. Per-share
computation of individual reconciling items is not meaningful.

(3) Adjusted net income and adjusted net income per share, as Enzon defines
them, may differ from similarly named measures used by other entities, and
consequently, could be misleading unless all entities calculated and defined
such items in the same manner. The Company believes that investors`
understanding of its performance is enhanced by disclosing adjusted net income
and adjusted net income per share reflecting adjustments for certain items that
the Company deems to be non-recurring.

Conference Call and Webcast

Enzon will be hosting a live conference call today, November 3, 2009 at 10:00 am
Eastern Time (ET). All interested parties may access the call by using the
following information:

Domestic Dial-In Number: (877) 397-0272
International Dial-In Number: (719) 325-4861
Access Code: Enzon

The call will also be available via live audio webcast at the following site:
http://investor.enzon.com/eventdetail.cfm?eventid=74303. Listeners should go to
the website at least fifteen minutes before this event to download and install
any necessary audio software. For those unable to attend the live audio webcast,
a replay will be available beginning approximately one hour after the event.
Additionally, a telephonic rebroadcast will also be available following the
call. The rebroadcast will begin on Tuesday, November 3, 2009 at approximately
12:00 pm Eastern Time (ET) and end on Tuesday, November 10, 2009 at
approximately 12:00 am Eastern Time (ET). It may be accessed using the following
information:

Domestic Dial-In Number: (888) 203-1112
International Dial-In Number: (719) 457-0820
Replay Passcode: 6129874

About Enzon

Enzon Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to
developing, manufacturing and commercializing important medicines for patients
with cancer and other life-threatening conditions. The Company has a portfolio
of four marketed products, Oncaspar, DepoCyt, Abelcet and Adagen. Enzon`s drug
development programs utilize several cutting-edge approaches, including its
industry-leading PEGylation technology platform and the Locked Nucleic Acid
(LNA) technology. Enzon`s PEGylation technology was used to develop two of its
products, Oncaspar and Adagen, and has created a royalty revenue stream from
licensing partnerships for other products developed using the technology. Enzon
also engages in contract manufacturing for several pharmaceutical companies to
broaden its revenue base. Further information about Enzon and this press release
can be found on the Company`s web site at www.enzon.com.

Forward Looking Statements

There are forward-looking statements contained herein, which can be identified
by the use of forward-looking terminology such as the words "believes,"
"expects," "may," "will," "should," "potential," "anticipates," "plans," or
"intends" and similar expressions. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause actual
results, events or developments to be materially different from the future
results, events or developments indicated in such forward-looking statements.
Such factors include, but are not limited to the timing, success and cost of
clinical studies; the ability to obtain regulatory approval of products, market
acceptance of, and continuing demand for, Enzon`s products and the impact of
competitive products and pricing.A more detailed discussion of these and other
factors that could affect results is contained in our filings with the U.S.
Securities and Exchange Commission, including our annual report on Form 10-K for
the period ended December 31, 2008.These factors should be considered carefully
and readers are cautioned not to place undue reliance on such forward-looking
statements.No assurance can be given that the future results covered by the
forward-looking statements will be achieved. All information in this press
release is as of the date of this press release and Enzon does not intend to
update this information.

Enzon Pharmaceuticals, Inc. and Subsidiaries

Consolidated Statements of Operations

Three Months ended September 30, 2009 and 2008

(In thousands, except per-share amounts)

(Unaudited)

September 30, September 30,

2009 2008
Revenues:
Product sales, net $ 28,618 $ 28,912
Royalties 13,665 14,611
Contract manufacturing 2,318 5,267
Total revenues 44,601 48,790
Costs and expenses:
Cost of product sales and contract manufacturing 13,557 14,473
Research and development 15,805 15,654
Selling, general and administrative 13,669 18,253
Amortization of acquired intangible assets 167 167
Restructuring charges 634 249
Total costs and expenses 43,832 48,796
Operating income (loss) 769 (6 )
Other income (expense):
Investment income, net 1,148 1,268
Interest expense (2,750 ) (3,025 )
Other, net 175 (94 )
(1,427 ) (1,851 )
Loss before income tax (658 ) (1,857 )
Income tax (benefit) provision (791 ) 163
Net income (loss) $ 133 $ (2,020 )

Earnings (loss) per common share - basic $ 0.00 $ (0.05 )
Earnings (loss) per common share - diluted $ 0.00 $ (0.05 )
Weighted average shares - basic 45,276 44,464
Weighted average shares - diluted 45,765 44,464

Enzon Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

September 30, 2009 and December 31, 2008

(In thousands)

(Unaudited)

September 30, December 31,
2009
2008

Assets
Current assets:
Cash and short-term investments $ 110,513 $ 144,184
Accounts receivable, net 15,199 11,692
Inventories 17,061 16,268
Other current assets 7,626 5,281
Total current assets 150,399 177,425
Property and equipment, net 40,623 44,585
Other assets:
Marketable securities 90,791 62,678
Amortizable intangible assets, net 52,514 60,654
Other assets 3,348 3,911
146,653 127,243
Total assets $ 337,675 $ 349,253

Liabilities and Stockholders` Equity
Current liabilities:
Accounts payable and accrued expenses $ 29,740 $ 33,144
Notes payable - 2,950
Total current liabilities 29,740 36,094

Notes payable 250,050 267,550
Other liabilities 4,482 3,948
Total liabilities 284,272 307,592

Stockholders` equity 53,403 41,661
Total liabilities and stockholders` equity $ 337,675 $ 349,253

Common shares outstanding 45,404 45,032

Enzon Pharmaceuticals, Inc.
Craig Tooman, 908-541-8777
EVP, Finance and Chief Financial Officer

Copyright Business Wire 2009