Enzon Reports 2008 Results

BRIDGEWATER, N.J., Feb 19, 2009 (BUSINESS WIRE) --
ENZN | Quote | Chart | News | PowerRating -- Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN | Quote | Chart | News | PowerRating) today announced its financial
results for 2008. For the three months ended December 31, 2008, Enzon
reported a net loss of $0.5 million or $0.01 per diluted share, as
compared to a net income of $0.3 million or $0.01 per diluted share for
the fourth quarter of 2007. For the full year ended December 31, 2008,
Enzon reported a net loss of $2.7 million or $0.06 per diluted share,
compared to a net income of $83.1 million or $1.29 per diluted share for
the full year ended December 31, 2007. The 2008 financial results were
impacted by costs associated with the evaluation of strategic
alternatives and continued improvement in capital structure. In 2007,
the financial results were favorably impacted by the sale of 25 percent
of the Company's future PEG-INTRON royalty for a gain of $88.7 million.

"Enzon continues to improve the fundamentals of the Company, as seen in
the improvement of the balance sheet and operational efficiencies," said
Jeffrey H. Buchalter, chairman and chief executive officer of the
Company. "We remain focused on delivering innovative products for
patients with life-threatening diseases."

2008 Highlights

--
In line with the Company's guidance, revenues from the Products
segment continued to show stability;

--
The Company completed the consolidation of its manufacturing
operations to Indianapolis, Indiana;

--
The Company was successful in repurchasing $76.9 million in
convertible debt;

--
The Company recently announced the termination of the rhMBL phase Ib
clinical program; and

--
The FDA accepted the Company's Investigational New Drug (IND)
application for the Survivin antagonist.

2009 Outlook and Goals

For 2009, Enzon again anticipates relative stability of revenues from
its Products segment. The Company will continue to make strategic
investments in research and development (R&D). R&D expenditures for 2009
are expected to be in the range of $80 million to $90 million. As
previously stated, the Company will be investing in R&D to advance its
clinical pipeline and to modernize and secure the long-term supply of
Adagen and Oncaspar. Approximately 40% of the R&D spending is associated
with the next-generation Adagen and Oncaspar programs. This level of
spending on these supply programs is expected to continue for the next
two years. In addition to commencing the Survivin phase I clinical
program, the Company anticipates advancing two additional programs into
further clinical development, including Phase II studies. The Company
expects to be able to fund the increase in R&D expenses and remain
operating cash flow neutral.

Adjusted Financial Results

For the twelve months ended December 31, 2008, Enzon reported an
adjusted net loss of $4.6 million or $0.10 per diluted share, as
compared to an adjusted net loss of $5.9 million or $0.13 per diluted
share for the full year ended December 31, 2007.

Revenues

The following table reflects the revenues generated by product and
segment for each of the three-month and twelve-month periods ended
December 31, 2008 and 2007.

Three Months Ended Twelve Months Ended
(in millions) (in millions)
December 31, 2008 December 31, 2007 % Change December 31, 2008 December 31, 2007 % Change
Products
Oncaspar $12.1 $11.1 9 $50.1 $38.7 29
DepoCyt 2.5 2.0 24 9.0 8.6 5
Abelcet 6.6 7.7 (14) 26.9 28.9 (7)
Adagen 7.1 7.4 (5) 27.8 24.5 13
Total Products 28.3 28.2 - 113.8 100.7 13
Royalties 15.2 14.5 5 59.5 67.3 (11)
Contract Manufacturing 4.9 5.4 (9) 23.6 17.6 34
Total Revenues $48.4 $48.1 1 $196.9 $185.6 6

Products Segment

Sales from the Products segment, comprised of Oncaspar(R),
DepoCyt(R), Abelcet(R), and Adagen(R),
were relatively stable at $28.3 million for the three months ended
December 31, 2008, from $28.2 million for the three months ended
December 31, 2007. For the twelve months ended December 31, 2008,
product sales increased 13 percent to $113.8 million from $100.7 million
for 2007, which is fully consistent with the guidance provided in 2008.

Sales of Oncaspar, a PEG-enhanced version of L-asparaginase, increased
to $12.1 million or 9 percent for the three months ended December 31,
2008, as compared to $11.1 million for the three months ended December
31, 2007. For the full year, Oncaspar grew 29 percent to $50.1 million
as compared to $38.7 million in 2007. Oncaspar remains the gold standard
of care in the pediatric acute lymphoblastic leukemia (ALL). We continue
to see adoption in the adult and young adult populations.

Sales of DepoCyt, a sustained-release formulation of the
chemotherapeutic agent cytarabine arabinoside or ara-C, increased to
$2.5 million for the three months ended December 31, 2008, as compared
to $2.0 million for the three months ended December 31, 2007. In the
full year 2008, sales of DepoCyt increased slightly to $9.0 million from
$8.6 million in 2007. Sales of DepoCyt remain stable in a very small
targeted patient population.

Sales in the U.S. and Canada of Abelcet, a lipid complex formulation of
amphotericin B used primarily in the hospital to treat
immuno-compromised patients with invasive fungal infections, for the
three months ended December, 31, 2008 were $6.6 million as compared to
$7.7 million in 2007. For the year ended December 31, 2008, Abelcet
sales were $26.9 million, a 7 percent decline from $28.9 million in
2007. This brand continues to experience competitive pressure from newer
therapeutics in the anti-fungal market.

Sales of Adagen, an enzyme replacement therapy used to treat adenosine
deaminase (ADA) deficiency in patients with severe combined
immuno-deficiency disease, were slightly down from $7.4 million for the
three months ended December 31, 2007 to $7.1 million in 2008. This is a
small, targeted patient population, so quarterly variability is not
uncommon. For the full year of 2008, Adagen sales increased 13 percent
to $27.8 million.

Royalties Segment

Revenues from the Company's Royalties segment for the three months ended
December 31, 2008 were $15.2 million, as compared to $14.5 million for
the three months ended December 31, 2007. For the full year of 2008,
royalties were $59.5 million as compared to $67.3 million in 2007.
Royalties on PEG-INTRON, marketed by Schering-Plough, continue to
comprise the majority of the Company's royalty revenue. As previously
noted, the Company monetized 25 percent of its PEG-INTRON royalty for
$92.5 million in 2007, which has an impact on the fourth quarter of 2007
and beyond. In 2008, the Company began to receive royalties on an
additional product, CIMZIA for the treatment of Crohn's disease.

Contract Manufacturing Segment

The Company's revenues from its Contract Manufacturing segment decreased
to $4.9 million for the three months ended December 31, 2008, as
compared to $5.4 million in the corresponding period of the prior year.
This includes contract manufacturing revenues related to services the
Company provides for customers who require fill and finish of injectable
and inhalation therapy products. For the full year of 2008, contract
manufacturing revenue grew 34 percent to $23.6 million due to an
increase in technology transfer activities, certain one-time
non-commercial services and manufacturing of products for third parties.

Cost of Product Sales and Contract
Manufacturing

In the fourth quarter of 2008, the Company's cost of goods sold
decreased to $13.7 million from $14.1 million in the corresponding
period of the prior year. This decrease is mainly attributable to early
efficiencies from the completion of our manufacturing consolidation. For
the full year of 2008, the cost of goods sold was $61.7 million versus
$55.0 million in 2007. As a percent of sales, the full year cost of
goods sold improved from 46.5% in 2007 to 44.9% in 2008. The cost of
goods sold for the full year of 2008 was impacted by an increase in
costs associated with the amortization of the upfront payment for
securing the raw material used in the Oncaspar production partially
offset by the efficiencies created from the manufacturing consolidation.
As part of the consolidation of our manufacturing facilities, the 2007
costs of good sold was impacted by costs of $1.9 million associated with
validation batches of certain products transferred to the Company's
facility in Indianapolis.

Research and Development

The Company's research and development expenses were $15.6 million for
the three months ended December 31, 2008, as compared to $14.2 million
for the three months ended December 31, 2007. During the quarter ended
December 31, 2008, Enzon was successful in filing an IND for its
Survivin antagonist, which prompted a $1.0 million milestone payment. In
the fourth quarter of 2007, Enzon accepted two additional LNA compounds
triggering $2.0 million in milestone payments. For the full year of
2008, R&D spending was $58.1 million as compared to $54.6 million in
2007. The increase was primarily due to the additional milestones
achieved for the Survivin IND and acceptance of new LNA compounds
licensed from Santaris. The Company recently announced the termination
of its rhMBL program, as this program did not meet the Company's high
threshold set for further development of this compound. The Company is
advancing its Survivin antagonist into Phase I clinical studies as a
result of IND acceptance from the FDA. Enzon is making strategic
investments in research and development to build an innovative oncology
business through the continued development of its current portfolio. As
noted in our 2009 R&D guidance, the Company will continue to make
significant investments in the next generation Oncaspar and Adagen
programs to ensure long-term supply of these critical products to our
patients.

Selling, General and Administrative

Selling, general and administrative expenses increased to $19.2 million
for the three months ended December 31, 2008, as compared to $17.8
million for the three months ended December 31, 2007. For the full year
of 2008, the Company incurred expenses of $71.3 million versus $65.7
million in 2007. The 2008 general and administrative expenses were
impacted by the costs associated with the evaluation of strategic
alternatives and improving our capital structure. The alternatives
included a potential spin-off of the biotechnology assets, sale of the
specialty pharmaceutical business which included a consent solicitation
to our debt holders, and a tender offer for a portion of our outstanding
debt. These costs, which include legal, accounting, and professional
fees, were approximately $5.0 million in 2008. Selling expenses were
down 3 percent in 2008, largely due to the realignment of the sales
force. The Company continues to make select investments in selling,
marketing, and other initiatives to support its product sales
performance.

Restructuring Charge

In February 2007, the Company announced plans to consolidate its
manufacturing sites. This consolidation was completed in 2008. For the
full year of 2008, the Company recognized $2.1 million, of which $1.3
million relates to severance costs and approximately $0.8 million
primarily related to accelerated depreciation of manufacturing assets.
In 2007, the Company reported $7.7 million in restructuring charges, of
which $2.2 million related to severance costs related to the
manufacturing consolidation, $0.4 million related to the sales force
realignment and $5.1 million for the write-off of assets that were
decommissioned at the South Plainfield, NJ facility. The Company may
incur future lease termination costs associated with the manufacturing
consolidation.

Gain on Sale of Royalty Interest

As previously stated, during the three months ended September 30, 2007,
the Company sold a 25-percent interest in its future royalty revenues on
sales of PEG-INTRON. The gross selling price was $92.5 million. The gain
on the sale of $88.7 million, after deducting related costs of the
transaction, was recognized in full in our Royalties segment in the
third quarter of 2007.

Other Income (Expense)

Net other income (expense) is comprised of investment income, interest
expense, and other non-operating expenses. The Company reported net
other expense of approximately $0.7 million for the three months ended
December 31, 2008 and 2007. For the full year of 2008 and 2007, net
other expense was $5.5 million. Although the net amount is unchanged,
the Company reduced its interest expense by $4.7 million due to the
repurchase and repayment of the remaining $72.4 million of 4.5 percent
notes due in 2008 and $4.5 million of the 4 percent notes due in 2013.
This decrease in interest expense was offset by the decrease in
investment income.

Cash and Investments

Total cash reserves, which include cash, cash equivalents, short-term
investments, marketable securities, and restricted investments and cash,
were $206.9 million as of December 31, 2008, as compared to $258.2
million as of December 31, 2007. At December 31, 2007, $73.6 million was
held in a restricted cash account for the sole purpose of extinguishing
the remaining outstanding 4.5 percent debt due in 2008. During 2008, the
Company purchased $76.9 million of its convertible notes, including $4.5
million of its 4 percent notes due in 2013.

Reconciliation of GAAP net income
(loss) to adjusted net income (loss)

The following table reconciles the Company's net income (loss) and net
income (loss) per diluted share as determined in accordance with U.S.
generally accepted accounting principles (GAAP) to its adjusted net
income (loss) and net income (loss) per diluted share for the twelve
months ended December 31, 2008 and 2007:

Twelve Months Ended 12/31/08 Twelve Months Ended 12/31/07
(In thousands, except (In thousands, except
per-share data) per-share data)
Net (loss) Per diluted share(3) Net income (loss) Per diluted share(3)
GAAP net (loss) income $(2,715) $(0.06) $83,053 $1.29
Net realized gain related to the repurchase of debt (1) (1,895) (311)
Gain on sale of royalty interest (2) - (88,666)
Adjusted net loss (4) $(4,610) $(0.10) $(5,924) $(0.13)

(1) Adjusted financial results exclude gains related to the repurchase
of the 4.5% and 4% notes at a discount to par (plus accrued interest),
offset by a write-off of related deferred debt offering costs.

(2) Adjusted financial results for 2007 exclude a gain on the sale of a
25% interest in future royalties on sales of PEG-INTRON by
Schering-Plough Corporation of $88.7 million.

(3) Computation of diluted GAAP earnings per share includes certain
contingently issuable shares and the assumed conversion of notes payable
and the add-back of interest expense; no such adjustments are included
in the computation of adjusted diluted loss per share. Per-share
computation of individual reconciling items is not meaningful.

(4) Adjusted net loss and adjusted net loss per diluted share, as the
Company 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 loss and adjusted net loss per share reflecting
adjustments for certain items that the Company deems to be non-recurring.

Conference Call and Webcast

Enzon will be hosting a conference call February 19 at 10:00 am ET. All
interested parties may access the call by using the following
information:

Domestic Dial-In Number: (877) 407-9210
International Dial-In Number: (201) 689-8049
Access Code: Enzon

Enzon's conference call will also be webcast in a "listen only" mode via
the Internet at http://www.investorcalendar.com.
Additionally, for those parties unable to listen at the time of Enzon's
conference call, a telephone rebroadcast will be available following the
call from February 19, 2009, at approximately 12:00 p.m. ET. This
rebroadcast will end on February 26, 2009, at approximately 12:00 p.m.
ET. The rebroadcast may be accessed using the following information:

Domestic Dial-In Number: (877) 660-6853
International Dial-In Number: (201) 612-7415
Account Number: 286
Access Code: 313033

About Enzon

Enzon Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to
the development, manufacturing, and commercialization of important
medicines for patients with cancer and other life-threatening
conditions. Enzon has a portfolio of four marketed products, Oncaspar(R),
DepoCyt(R), Abelcet(R) and Adagen(R). The
Company's drug development programs utilize several cutting-edge
approaches, including its industry-leading PEGylation technology
platform used to create product candidates with benefits such as reduced
dosing frequency and less toxicity. 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 the
Company's revenue base. Further information about Enzon and this press
release can be found on the Company's web site at www.enzon.com.

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 on Forms 10-K and 10-Q with the U.S. Securities
and Exchange Commission. 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 December 31, 2008 and 2007
(In thousands, except per-share amounts)
(Unaudited)
December 31, December 31,
2008 2007
Revenues:
Product sales, net $28,242 $28,144
Royalties 15,232 14,465
Contract manufacturing 4,937 5,451
Total revenues 48,411 48,060
Costs and expenses:
Cost of product sales and contract manufacturing 13,684 14,127
Research and development 15,600 14,175
Selling, general and administrative 19,189 17,818
Amortization of acquired intangible assets 167 166
Restructuring charge (275) 904
Total costs and expenses 48,365 47,190
Operating income 46 870
Other income (expense):
Investment income, net 1,400 3,286
Interest expense (3,090) (4,050)
Other, net 1,024 40
(666) (724)
(Loss) income before income tax benefit (620) 146
Income tax benefit 154 122
Net (loss) income $(466) $268
(Loss) earnings per common share - basic $(0.01) $0.01
(Loss) earnings per common share - diluted $(0.01) $0.01
Weighted average shares - basic 44,608 44,039
Weighted average shares - diluted 44,608 44,708

Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
Twelve Months ended December 31, 2008 and 2007
(In thousands, except per-share amounts)
(Unaudited)
December 31, December 31,
2008 2007
Revenues:
Product sales, net $113,789 $100,686
Royalties 59,578 67,305
Contract manufacturing 23,571 17,610
Total revenues 196,938 185,601
Costs and expenses:
Cost of product sales and contract manufacturing 61,702 54,978
Research and development 58,089 54,624
Selling, general and administrative 71,310 65,723
Amortization of acquired intangible assets 667 707
Restructuring charge 2,117 7,741
Total costs and expenses 193,885 183,773
Gain on sale of royalty interest - 88,666
Operating income 3,053 90,494
Other income (expense):
Investment income, net 5,967 10,918
Interest expense (12,681) (17,380)
Other, net 1,250 954
(5,464) (5,508)
(Loss) income before income tax provision (2,411) 84,986
Income tax provision 304 1,933
Net (loss) income $(2,715) $83,053
(Loss) earnings per common share - basic $(0.06) $1.89
(Loss) earnings per common share - diluted $(0.06) $1.29
Weighted average shares - basic 44,398 43,927
Weighted average shares - diluted 44,398 72,927

Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2008 and 2007
(In thousands)
(Unaudited)
December 31, December 31,
2008 2007
Assets
Current assets:
Cash and short-term investments $144,901 $163,960
Restricted investments and cash - 73,592
Accounts receivable, net 11,692 14,927
Inventories 16,268 22,297
Other current assets 5,281 6,401
Total current assets 178,142 281,177
Property and equipment, net 44,585 45,312
Other assets:
Marketable securities 61,961 20,653
Amortizable intangible assets, net 60,654 68,141
Other assets 3,911 5,074
126,526 93,868
Total assets $349,253 $420,357
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $33,144 $33,091
Notes payable 2,950 72,391
Total current liabilities 36,094 105,482
Notes payable 267,550 275,000
Other liabilities 3,948 3,302
Total liabilities 307,592 383,784
Stockholders' equity 41,661 36,573
Total liabilities and stockholders' equity $349,253 $420,357
Common shares outstanding 45,032 44,200

SOURCE: Enzon Pharmaceuticals, Inc.

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

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