SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 13, 2003
ENZON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-12957 22-2372868
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification)
685 Route 202/206, Bridgewater, New Jersey 08807
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code: (908) 541-8600
----------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5. Other Events
Enzon Pharmaceuticals, Inc. (NASDAQ:ENZN) announced today its financial results
for the quarter and fiscal year (FY) ended June 30, 2003. The Company's adjusted
net income for the fourth quarter of FY 2003 was $11.5 million or $0.26 per
diluted share, as compared to adjusted net income of $12.0 million or $0.27 per
diluted share for the fourth quarter of FY 2002. For comparative purposes, the
Company's adjusted net income for the fourth quarter of FY 2003 excludes
approximately $28.3 million in other income related to a fee, net of expenses,
received from the termination of the Company's proposed merger with NPS
Pharmaceuticals, Inc. (NASDAQ: NPSP) and certain tax benefits recorded in both
years. On a GAAP basis, net income for the quarter ended June 30, 2003 was $40.6
million or $0.93 per diluted share, as compared to $20.8 million or $0.47 per
diluted share for the fourth quarter of FY 2002.
For the fiscal year ended June 30, 2003, adjusted net income was $45.4 million
or $1.04 per diluted share, compared to adjusted net income of $33.7 million or
$0.76 per diluted share for the year ended June 30, 2002. Enzon's GAAP net
income was $45.7 million or $1.05 per diluted share, as compared to $45.8
million or $1.04 per diluted share for the year ended June 30, 2002.
Enzon has reported adjusted net income, which excludes the impact of isolated
transactions specific to each of its fourth quarters and year ends. The Company
believes the adjusted net income is more indicative of the underlying operations
of the business and represents a more comparative measure and is relevant to
gaining an understanding of the Company's trends and potential future
performance. A detail of the components of the adjustments is presented later in
this release.
Total revenues for the fourth quarter of FY 2003 increased by $21.5 million or
85 percent, to $46.7 million, as compared to $25.2 million for the fourth
quarter of FY 2002. The increase in revenues was principally due to net sales of
$17.5 million related to the acquisition of the ABELCET(R) business. Enzon
acquired the North American rights and operational assets associated with the
development, manufacture, sales and marketing of ABELCET (Amphotericin B Lipid
Complex Injection) from Elan Corporation, plc (NYSE: ELN) in November 2002.
Combined sales of the three other products marketed by the Company (ADAGEN(R),
ONCASPAR(R), and DEPOCYT(R)) were $8.8 million for the fourth quarter of FY
2003, as compared to $5.5 million for the fourth quarter of FY 2002, an increase
of $3.3 million or 60 percent. The increase was due to increases in sales of
ADAGEN and ONCASPAR, and the commencement of sales of DEPOCYT during the
previous quarter. Enzon licensed the North American rights to DEPOCYT from
SkyePharma PLC (NASDAQ: SKYE) in January 2003. DEPOCYT is an injectable
chemotherapeutic approved for the treatment of patients with lymphomatous
meningitis. Enzon is marketing DEPOCYT through its specialty sales force and
product sales for the quarter were $1.2 million. ADAGEN sales for the fourth
quarter of FY 2003 were $3.8 million, as compared to $3.7 million for the fourth
quarter of FY 2002. Sales of ONCASPAR were $3.8 million for the fourth quarter
of FY 2003, as compared to $1.8 million for the fourth quarter of FY 2002, as a
result of the repurchase of the North American distribution rights from Aventis.
Total royalties for the fourth quarter of FY 2003 were $20.0 million, up 23%
over the third quarter. Total royalties for the quarter are principally made up
of royalties from sales of PEG-INTRON marketed by Schering Plough. Total
royalties for the fourth quarter showed only a modest increase compared to the
same quarter last year due to the launch of Roche's competitive product Pegasys.
Research and development expenses for the fourth quarter of FY 2003 increased to
$6.1 million as compared to $5.9 million for the fourth quarter last year. The
increase was due to increased spending related to the Company's single-chain
antibody (SCA) collaboration with Micromet AG and increased spending on the
company's PEG-Camptothecin development program, offset by reductions in certain
expenditures due to the Company's January 2003 decision to suspend its Phase I
PEG-paclitaxel program. Based upon interim data from a Phase II clinical trial
for PEG-Camptothecin in patients with gastric and gastroesophageal cancers,
Enzon is focusing its development program on this indication. The Company
intends to initiate a pivotal study during the first half of calendar 2004 in
gastric and gastroesophageal cancers, in accordance with and subject to FDA
regulations. The Company expects its research and development expenditures to
increase in future quarters, as it continues to invest in the expansion of its
product pipeline and it advances PEG-Camptothecin and ATG-Fresenius S into late
stage clinical trials. During the quarter Enzon licensed the North American
rights to develop and commercialize ATG-Fresenius S, a polyclonal antibody
preparation used for T-lymphocyte suppression in organ transplant patients and
currently marketed by Fresenius in over 60 countries.
Selling, general and administrative expenses for the fourth quarter of FY 2003
increased by $5.4 million or 123 percent to $9.8 million, as compared to $4.4
million for the fourth quarter of FY 2002. This increase was due to a $6.3
million increase in sales and marketing expenditures related to the Company's
current year acquisition of the North American rights to ABELCET, which included
the hiring of a hospital sales force.
Amortization costs for the fourth quarter of FY 2003 were $3.9 million, as
compared to $35,000 for the prior year comparable period. This increase relates
primarily to intangible assets acquired as part of the Company's acquisition of
ABELCET.
Interest income for the fourth quarter of FY 2003 decreased by $3.3 million to
$512,000, as compared to $3.9 million for the fourth quarter of FY 2002. The
decrease was primarily due to a reduction in the Company's interest-bearing
investments resulting from the Company's purchase of the North American rights
to ABELCET in November 2002 for a cash payment of $360 million, as well as a
decrease in interest rates.
During the quarter ended June 30, 2003, the Company recognized other income of
$28.3 related to the mutual termination of its proposed merger with NPS
Pharmaceuticals, Inc. (NASDAQ: NPSP). In accordance with the June 2003 mutual
termination agreement between the two companies, during the fourth quarter of FY
2003 NPS paid a termination fee to Enzon in the form of 1.5 million shares of
NPS common stock. The net termination fee includes $6.2 million in costs
incurred in the quarter related to the proposed merger with NPS.
During the quarter ended June 30, 2003, the Company recognized a net tax benefit
of $439,000, as compared to a net tax benefit of $8.8 million recognized during
the quarter ended June 30, 2002. The net tax benefit recorded during the fourth
quarter of FY 2003 is primarily related to the recognition of certain deferred
tax benefits related primarily to net operating loss carry forwards and tax
credits expected to be utilized in future years, offset by the tax expense
attributable to the NPS termination fee received.
The following table reconciles the Company's adjusted net income to GAAP net
income for the three months and years ended June 30, 2003 and 2002:
Three Months Ended Fiscal Year Ended
06/30/03 06/30/02 06/30/03 06/30/02
-------- -------- -------- --------
Adjusted Net Income 11,480 12,004 45,448 33,683
Add: Termination Fee, net (1) 28,333 -- 26,938 --
Add: Other Income (2) -- -- -- 3,000
Add: Income tax benefit (3) 739 8,760 577 9,123
Less: Write-down of carrying
value of investments (4) -- -- 27,237 --
-------- -------- -------- --------
GAAP Net Income 40,552 20,764 45,726 45,806
======== ======== ======== ========
(1) Income related to the $36 million termination fee paid to Enzon in the
form of 1.5 million shares of NPS common stock, related to the mutual
termination of the proposed merger between Enzon and NPS, offset by $6.2
million this quarter and $7.6 million for the year in costs incurred
related to the proposed merger.
(2) The reimbursement of certain legal fees from Nektar Therapeutics
(formerly Inhale Therapeutics), related to the Companies' January 2002
agreement.
(3) Income tax benefit related to the Company's net operating losses and
certain tax credits expected to be utilized and related to the NPS fee
received above.
(4) A non-cash charge of $27.2 million to write down the carrying value of
the Company's investment in Nektar.
Except for the historical information herein, the matters discussed above
include forward-looking statements that may involve a number of risks and
uncertainties. Actual results may vary significantly based upon a number of
factors, which are described in the Company's Form 10-K, Form 10-Q's and Form
8-K's on file with the SEC, including without limitation, Enzon's ability to
clinically advance its PEG-Camptothecin and ATG-Fresenius programs, Enzon's
dependence on Schering-Plough's effective marketing of PEG-INTRON; Enzon's
ability to sustain profitability; risks in obtaining and maintaining regulatory
approval for indications and expanded indications for Enzon's products; market
acceptance of and continuing demand for Enzon's products; timing and results of
clinical trials and the impact of competitive products and pricing. All
information set forth in this item as of August 13, 2003, and the Company
undertakes no duty to update this information.
12. Results of Operations and Financial Condition
On August 13, 2003, Enzon Pharmaceuticals, Inc. issued a press release to report
its results of operations and financial condition for the completed fiscal
quarter ended June 30, 2003. A copy of this press release is included as Exhibit
99.1 to this Form 8-K and incorporated into this Item 12 by reference.
The information in this Item 12, including Exhibit 99.1, is being furnished and
shall not be deemed to be "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liability
of that Section, nor shall such information be deemed to be incorporated by
reference in any registration statement or other document filed under the
Securities Act of 1933 or the Exchange Act, except as otherwise stated in such
filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 13, 2003
By: /s/ Kenneth J. Zuerblis
---------------------------
Kenneth J. Zuerblis
Vice President, Finance and
Chief Financial Office
Exhibit 99.1
[LETTERHEAD OF ENZON PHARMACEUTICALS]
For Immediate Release
PRESS RELEASE
Contact: Kenneth J. Zuerblis
Vice President, Finance & CFO
908-541-8717
Euro RSCG Life NRP
Mark R. Vincent, Media Relations
212-845-4239
ENZON REPORTS FOURTH QUARTER AND FISCAL YEAR RESULTS
Total Quarterly Revenues Increased 85% Over Prior Year to $47 Million
BRIDGEWATER, NJ - August 13, 2003 - Enzon Pharmaceuticals, Inc.
(NASDAQ:ENZN) announced today its financial results for the quarter and fiscal
year (FY) ended June 30, 2003. The Company's adjusted net income for the fourth
quarter of FY 2003 was $11.5 million or $0.26 per diluted share, as compared to
adjusted net income of $12.0 million or $0.27 per diluted share for the fourth
quarter of FY 2002. For comparative purposes, the Company's adjusted net income
for the fourth quarter of FY 2003 excludes approximately $28.3 million in other
income related to a fee, net of expenses, received from the termination of the
Company's proposed merger with NPS Pharmaceuticals, Inc. (NASDAQ: NPSP) and
certain tax benefits recorded in both years. On a GAAP basis, net income for the
quarter ended June 30, 2003 was $40.6 million or $0.93 per diluted share, as
compared to $20.8 million or $0.47 per diluted share for the fourth quarter of
FY 2002.
For the fiscal year ended June 30, 2003, adjusted net income was $45.4
million or $1.04 per diluted share, compared to adjusted net income of $33.7
million or $0.76 per diluted share for the year ended June 30, 2002. Enzon's
GAAP net income was $45.7 million or $1.05 per diluted share, as compared to
$45.8 million or $1.04 per diluted share for the year ended June 30, 2002.
Enzon has reported adjusted net income, which excludes the impact of
isolated transactions specific to each of its fourth quarters and year ends. The
Company believes the adjusted net income is more indicative of the underlying
operations of the business and represents a more comparative measure and is
relevant to gaining an understanding of the
Company's trends and potential future performance. A detail of the components of
the adjustments is presented later in this release.
"We are pleased to report solid earnings and continued strong execution on
those elements designed to transform our business from a royalty-based specialty
pharmaceutical company to a fully integrated, biopharmaceutical company with a
robust pipeline and accelerated revenue growth," commented Arthur J. Higgins,
Enzon's chairman and chief executive officer.
Total revenues for the fourth quarter of FY 2003 increased by $21.5
million or 85 percent, to $46.7 million, as compared to $25.2 million for the
fourth quarter of FY 2002. The increase in revenues was principally due to net
sales of $17.5 million related to the acquisition of the ABELCET(R) business.
Enzon acquired the North American rights and operational assets associated with
the development, manufacture, sales and marketing of ABELCET (Amphotericin B
Lipid Complex Injection) from Elan Corporation, plc (NYSE: ELN) in November
2002.
Combined sales of the three other products marketed by the Company
(ADAGEN(R), ONCASPAR(R), and DEPOCYT(R)) were $8.8 million for the fourth
quarter of FY 2003, as compared to $5.5 million for the fourth quarter of FY
2002, an increase of $3.3 million or 60 percent. The increase was due to
increases in sales of ADAGEN and ONCASPAR, and the commencement of sales of
DEPOCYT during the previous quarter. Enzon licensed the North American rights to
DEPOCYT from SkyePharma PLC (NASDAQ: SKYE) in January 2003. DEPOCYT is an
injectable chemotherapeutic approved for the treatment of patients with
lymphomatous meningitis. Enzon is marketing DEPOCYT through its specialty sales
force and product sales for the quarter were $1.2 million. ADAGEN sales for the
fourth quarter of FY 2003 were $3.8 million, as compared to $3.7 million for the
fourth quarter of FY 2002. Sales of ONCASPAR were $3.8 million for the fourth
quarter of FY 2003, as compared to $1.8 million for the fourth quarter of FY
2002, as a result of the repurchase of the North American distribution rights
from Aventis.
Total royalties for the fourth quarter of FY 2003 were $20.0 million, up
23% over the third quarter. Total royalties for the quarter are principally made
up of royalties from sales of PEG-INTRON marketed by Schering Plough. Total
royalties for the fourth quarter showed only a modest increase compared to the
same quarter last year due to the launch of Roche's competitive product Pegasys.
Research and development expenses for the fourth quarter of FY 2003
increased to $6.1 million as compared to $5.9 million for the fourth quarter
last year. The increase was due to increased spending related to the Company's
single-chain antibody (SCA) collaboration with Micromet AG and increased
spending on the company's PEG-Camptothecin development program, offset by
reductions in certain expenditures due to the Company's January 2003 decision to
suspend its Phase I PEG-paclitaxel program. Based upon interim data from a Phase
II clinical trial for PEG-Camptothecin in patients with gastric and
gastroesophageal cancers, Enzon is focusing its development program on this
indication. The Company intends to initiate a pivotal study during the first
half of calendar 2004 in gastric and gastroesophageal cancers, in accordance
with and subject to FDA regulations. The Company expects its research and
development expenditures to increase in future quarters, as it continues to
invest in the expansion of its product pipeline and it advances PEG-Camptothecin
and ATG-Fresenius S into late stage clinical trials. During the quarter Enzon
licensed the North American rights to develop and commercialize ATG-Fresenius S,
a polyclonal antibody preparation used for T-lymphocyte suppression in organ
transplant patients and currently marketed by Fresenius in over 60 countries.
Selling, general and administrative expenses for the fourth quarter of FY
2003 increased by $5.4 million or 123 percent to $9.8 million, as compared to
$4.4 million for the fourth quarter of FY 2002. This increase was due to a $6.3
million increase in sales and marketing expenditures related to the Company's
current year acquisition of the North American rights to ABELCET, which included
the hiring of a hospital sales force.
Amortization costs for the fourth quarter of FY 2003 were $3.9 million, as
compared to $35,000 for the prior year comparable period. This increase relates
primarily to intangible assets acquired as part of the Company's acquisition of
ABELCET.
Interest income for the fourth quarter of FY 2003 decreased by $3.3
million to $512,000, as compared to $3.9 million for the fourth quarter of FY
2002. The decrease was primarily due to a reduction in the Company's
interest-bearing investments resulting from the Company's purchase of the North
American rights to ABELCET in November 2002 for a cash payment of $360 million,
as well as a decrease in interest rates.
During the quarter ended June 30, 2003, the Company recognized other
income of $28.3 related to the mutual termination of its proposed merger with
NPS Pharmaceuticals, Inc. (NASDAQ: NPSP). In accordance with the June 2003
mutual termination agreement between the two companies, during the fourth
quarter of FY 2003 NPS paid a termination fee to Enzon in the form of 1.5
million shares of NPS common stock. The net termination fee includes $6.2
million in costs incurred in the quarter related to the proposed merger with
NPS.
During the quarter ended June 30, 2003, the Company recognized a net tax
benefit of $439,000, as compared to a net tax benefit of $8.8 million recognized
during the quarter ended June 30, 2002. The net tax benefit recorded during the
fourth quarter of FY 2003 is primarily related to the recognition of certain
deferred tax benefits related primarily to net operating loss carry forwards and
tax credits expected to be utilized in future years, offset by the tax expense
attributable to the NPS termination fee received.
The following table reconciles the Company's adjusted net income to GAAP
net income for the three months and years ended June 30, 2003 and 2002:
Three Months Ended Fiscal Year Ended
06/30/03 06/30/02 06/30/03 06/30/02
-------- -------- -------- --------
Adjusted Net Income 11,480 12,004 45,448 33,683
Add: Termination Fee, net (1) 28,333 -- 26,938 --
Add: Other Income (2) -- -- -- 3,000
Add: Income tax benefit (3) 739 8,760 577 9,123
Less: Write-down of carrying value of
value of investments (4) -- -- 27,237 --
-------- -------- -------- --------
GAAP Net Income 40,552 20,764 45,726 45,806
======== ======== ======== ========
(1) Income related to the $36 million termination fee paid to Enzon in the form
of 1.5 million shares of NPS common stock, related to the mutual termination of
the proposed merger between Enzon and NPS, offset by $6.2 million this quarter
and $7.6 million for the year in costs incurred related to the proposed merger.
(2) The reimbursement of certain legal fees from Nektar Therapeutics (formerly
Inhale Therapeutics), related to the Companies' January 2002 agreement.
(3) Income tax benefit related to the Company's net operating losses and certain
tax credits expected to be utilized and related to the NPS fee received above.
(4) A non-cash charge of $27.2 million to write down the carrying value of the
Company's investment in Nektar.
The management of Enzon will be hosting a conference call today, August
13, 2003 at 5:00 PM EDT. All interested parties can access the live call using
the following information:
Domestic Dial-In Number 866-254-5941
International Dial-In Number 612-332-7515
Access Code 693724
Enzon's conference call will also be webcast in a "listen only" mode via
the Internet at http://www.vcall.com. Additionally, for those parties unable to
listen at the time of Enzon's conference call, a rebroadcast will be available
following the call on August 13, 2003 at approximately 10:15 PM EDT. This
rebroadcast will end on August 20, 2003 at midnight. The rebroadcast may be
accessed using the following information:
Domestic Dial-In Number 800-475-6701
International Dial-In Number 320-365-3844
Access Code 693724
Enzon Pharmaceuticals is a biopharmaceutical company dedicated to the
discovery, development and commercialization of therapeutics to treat
life-threatening diseases. The company has developed or acquired a number of
marketed products, including PEG-INTRON, marketed by Schering-Plough, and
ABELCET, which is marketed in North America by Enzon. Enzon's product-focused
strategy includes an extensive drug development program that leverages the
Company's PEG modification and single-chain antibody (SCA(R)) technologies.
Internal research and development efforts are complemented by strategic
transactions that provide access t additional products, projects, and
technologies. Enzon has several drug candidates in various stages of
development, independently and with partners.
Except for the historical information herein, the matters discussed in
this news release include forward-looking statements that may involve a number
of risks and uncertainties. Actual results may vary significantly based upon a
number of factors, which are described in the Company's Form 10-K, Form 10-Q's
and Form 8-K's on file with the SEC, including without limitation, Enzon's
ability to clinically advance its PEG-Camptothecin and ATG-Fresenius programs,
Enzon's dependence on Schering-Plough's effective marketing of PEG-INTRON;
Enzon's ability to sustain profitability; risks in obtaining and maintaining
regulatory approval for indications and expanded indications for Enzon's
products; market acceptance of and continuing demand for Enzon's products;
timing and results of clinical trials and the impact of competitive products and
pricing, All information in this press release is as of August 13 , 2003, and
the Company undertakes no duty to update this information.
This release is also available at http://www.enzon.com
# # #
(Financial statements to follow)
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended June 30, 2003 and 2002
(Unaudited)
June 30, June 30,
2003 2002
-------- --------
Revenues:
Net sales $ 26,260 $ 5,500
Royalties 20,024 19,640
Contract revenue 394 75
-------- --------
Total revenues 46,678 25,215
-------- --------
Costs and expenses:
Cost of sales 10,662 1,855
Research and development expenses 6,083 5,878
Selling, general and administrative expenses 9,785 4,347
Amortization of acquired intangibles 3,923 35
-------- --------
Total costs and expenses 30,453 12,115
-------- --------
Operating income 16,225 13,100
-------- --------
Other income (expense):
Investment income, net 512 3,861
Interest expense (4,957) (4,957)
Other income, net 28,333 --
-------- --------
23,888 (1,096)
-------- --------
Income before taxes 40,113 12,004
Tax provision (benefit) (439) (8,760)
-------- --------
Net income $ 40,552 $ 20,764
======== ========
Basic earnings per common share $ 0.94 $ 0.48
======== ========
Diluted earnings per common share $ 0.93 $ 0.47
======== ========
Weighted average number of common shares
issued and outstanding - basic 43,264 42,982
======== ========
Weighted average number of common shares issued
and outstanding and dilutive potential common
shares outstanding 43,609 43,840
======== ========
-more-
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended June 30, 2003 and 2002
(Unaudited)
June 30, June 30,
2003 2002
--------- ---------
Revenues:
Net sales $ 68,006 $ 22,183
Royalties 77,589 53,329
Contract revenue 811 293
--------- ---------
Total revenues 146,406 75,805
--------- ---------
Costs and expenses:
Cost of sales 28,521 6,078
Research and development expenses 20,969 18,427
Selling, general and administrative expenses 30,571 16,545
Amortization of acquired intangibles 9,211 142
Write-down of carrying value of investments 27,237 --
--------- ---------
Total costs and expenses 116,509 41,192
--------- ---------
Operating income 29,897 34,613
--------- ---------
Other income (expense):
Investment income, net 8,942 18,681
Interest expense (19,828) (19,829)
Other income, net 26,938 3,218
--------- ---------
16,052 2,070
--------- ---------
Income before taxes 45,949 36,683
Tax provision (benefit) 223 (9,123)
--------- ---------
Net income $ 45,726 $ 45,806
========= =========
Basic earnings per common share $ 1.06 $ 1.07
========= =========
Diluted earnings per common share $ 1.05 $ 1.04
========= =========
Weighted average number of common shares
Issued and outstanding - basic 43,116 42,726
========= =========
Weighted average number of common shares
issued and outstanding and dilutive potential
common shares outstanding 43,615 44,026
========= =========
###