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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) November 3, 2005
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ENZON PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-12957 22-2372868
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(State or other jurisdiction (Commission file Number) (IRS Identification No.)
of incorporation)
685 Route 202/206, Bridgewater, New Jersey 08807
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 541-8600
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communication pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[_] Pre-commencement communication pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b)
[_] Pre-commencement communication pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On November 3, 2005, we issued a press release to report our results of
operations and financial condition for the quarter ended September 30, 2005. A
copy of this press release is included as Exhibit 99.1 to this Form 8-K and is
incorporated by reference into this Item 2.02.
The information in this Item 2.02, 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.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated November 3, 2005
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: November 3, 2005 By: /s/ Craig Tooman
---------------------------------------
Craig A. Tooman
Executive Vice President,
Finance and Chief Financial Officer
Exhibit 99.1
Enzon Reports First Quarter Results
Pharmaceutical Writers/Business Editors/Biotech Writers
BRIDGEWATER, N.J.--(BUSINESS WIRE)--Nov. 3, 2005--Enzon
Pharmaceuticals, Inc. (Nasdaq: ENZN) today announced its financial
results for the quarter ended September 30, 2005, the first quarter of
Enzon's six-month transition period ending on December 31, 2005. In
January 2005, Enzon announced a change in its fiscal year end from
June 30 to December 31.
For the three months ended September 30, 2005, Enzon reported a
net loss of $5.8 million or $0.13 per diluted share. The Company's
financial results include investments related to the Company's ongoing
initiatives to reshape its business, including a $10.0 million charge
related to the previously announced acquisition of the rights to
recombinant human Mannose-binding Lectin (rhMBL).
"Over the past several months, Enzon's senior leadership team has
rapidly advanced our goal of operating as a stronger, more focused
organization that is aligned on delivering long-term value," said
Jeffrey H. Buchalter, Enzon's chairman and chief executive officer.
"We have made significant progress toward overcoming the near-term
challenges we face, while simultaneously capitalizing on the intrinsic
strengths that exist at Enzon today. Recent strides include refocusing
our research and development investments, including acquiring the
exciting oncology opportunity rhMBL, and better supporting our
marketed brands through a number of new initiatives. We have also
further strengthened our research and development organization with
new leadership."
The Company provided a summary of recent business developments,
including:
-- In September 2005, the Company deepened the pharmaceutical
expertise of its executive management team with the
appointment of Dr. Ivan Horak to the position of executive
vice president of Research and Development and chief
scientific officer. Having held a number of senior medical and
scientific positions in the pharmaceutical industry as well as
the National Cancer Institute, Dr. Horak is a long-standing
leader in the oncology community and brings an impressive
background in drug development to Enzon.
-- In September 2005, Enzon advanced its objective of
strengthening its product pipeline with promising clinical
development opportunities by acquiring exclusive worldwide
rights, excluding the Nordic countries, for the development,
manufacture, and marketing of rhMBL from the Danish biotech
company NatImmune A/S. Mannose-binding Lectin (MBL) is a
naturally occurring human plasma protein that plays a key role
in the immune system's first-line defense against infections.
This program represents an exciting opportunity for Enzon to
offer a clinical benefit to cancer patients undergoing
chemotherapy who are MBL-deficient and susceptible to serious
infections.
-- In line with its commitment to drive growth by investing in
its marketed brands, Enzon recently amended its agreement with
members of the Sanofi-Aventis Group for its oncology product,
ONCASPAR(R) (pegaspargase). The amendment, which will become
effective in January 2006, includes a significant reduction in
Enzon's royalty rate. The Company believes there is a strong
growth opportunity for ONCASPAR and it is committed to
investing in programs designed to optimize that potential.
Mr. Buchalter commented further, "Looking ahead, we have defined a
clear set of priorities for the remainder of 2005 and 2006. We will
continue to focus our resources on five key strategic areas: growing
our top line and investing in our commercial operations;
reestablishing Enzon as a scientific leader in PEGylation; rebuilding
our research and development pipeline; maximizing the return on our
asset base; and establishing a high-performance, value-focused
culture. We remain confident in the opportunities we see in each of
these areas to build a stronger Enzon that is capable of delivering
solid growth and increased value over the long term."
Financial Results
For the three months ended September 30, 2005, Enzon reported a
net loss of $5.8 million or $0.13 per diluted share, as compared to a
net loss of $0.9 million or $0.02 per diluted share for the three
months ended September 30, 2004. Enzon's financial results for the
three months ended September 30, 2005, include investments related to
the Company's ongoing initiatives to reshape its business for the
future, including the $10.0 million charge for in-process research and
development related to its acquisition of rhMBL. Additionally,
financial results for the quarter ended September 30, 2005 were
negatively impacted by a decline in product sales associated with its
intravenous antifungal product ABELCET. The Company's financial
results for the quarter ended September 30, 2005 were favorably
impacted by increased sales of Enzon's other marketed products, ADAGEN
and ONCASPAR, increased royalties related to Schering-Plough's
PEG-INTRON and Eyetech's MACUGEN, and the timing of expenditures
related to internal research and development programs and sales and
marketing initiatives.
A summary of financial highlights for the quarter ended September
30, 2005 include:
-- North American ABELCET sales for the three months ended
September 30, 2005, were $11.1 million, as compared to $16.5
million for the three months ended September 30, 2004. The
decline from the prior year is due to competitive market
conditions in the intravenous antifungal market, as previously
reported by the Company.
-- Combined sales of ONCASPAR, ADAGEN, and DEPOCYT were $14.1
million for the three months ended September 30, 2005, versus
$11.0 million for the three months ended September 30, 2004.
The increase was primarily attributable to growth in sales of
ADAGEN and ONCASPAR.
-- Royalties of $15.2 million for the three months ended
September 30, 2005, as compared to $10.1 million for the three
months ended September 30, 2004, a 50% increase driven by
Schering-Plough's December 2004 launch of PEG-INTRON
combination therapy in Japan, and to a lesser extent the
January 2005 launch of MACUGEN(R) in the U.S.
-- $228.7 million in total cash reserves, which include cash,
cash equivalents, short-term investments, and marketable
securities, as of September 30, 2005, compared to $225.1
million as of June 30, 2005. The increase in cash reserves for
the three months ended September 30, 2005 is due to proceeds
from the sale of an equity-based investment partially offset
by cash used in operating activities and capital expenditures.
Adjusted Financial Results
On an adjusted basis, the Company reported an adjusted net loss of
$2.3 million or $0.05 per diluted share for the three months ended
September 30, 2005, versus an adjusted net loss of $0.1 million or
breakeven on a diluted per share basis for the three months ended
September 30, 2004. Enzon's adjusted financial results for the
three-month periods ended September 30, 2005 and 2004 exclude
non-operating expenses related to an equity investment in NPS
Pharmaceuticals Inc. common stock and a financial instrument that the
Company formed to reduce its investment risk associated with such
investment, as these expenses are outside of the Company's normal
course of business. The Company received the common stock under a June
2003 merger termination agreement with NPS. In August 2005, this
financial instrument expired and the Company received cash proceeds of
$7.5 million from the sale of its remaining shares of NPS common
stock.
Enzon has reported adjusted financial results because the Company
believes they are representative of the underlying operations of its
business and are relevant to gaining an understanding of the Company's
trends and potential future performance. A table reconciling the
Company's adjusted financial results to its financial results
calculated in accordance with U.S. generally accepted accounting
principles (GAAP) for each of the three-month periods ended September
30, 2005 and 2004 has been included later in this release.
Revenues
Combined product sales for the Company's four internally marketed
products (ABELCET, ADAGEN, DEPOCYT, and ONCASPAR) decreased to $25.2
million for the three months ended September 30, 2005, compared to
$27.5 million for the three months ended September 30, 2004. The
decrease in product sales was attributable to a decline in North
American sales of the Company's intravenous antifungal product,
ABELCET. ABELCET sales were impacted by competitive conditions in the
intravenous antifungal market. For the three months ended September
30, 2005, North American sales of ABELCET were $11.1 million versus
$16.5 million for the three months ended September 30, 2004. Partially
offsetting the decrease in ABELCET sales were increased sales of
ADAGEN and ONCASPAR for the three months ended September 30, 2005, as
compared to the three months ended September 30, 2004.
Sales of ADAGEN, an enzyme replacement therapy used to treat a
type of severe combined immunodeficiency disease, increased to $6.0
million for the three months ended September 30, 2005, as compared to
$4.3 million for the three months ended September 30, 2004.
ONCASPAR sales grew to $5.8 million for the three months ended
September 30, 2005, as compared to $4.4 million for the three months
ended September 30, 2004. ONCAPSAR is a PEG-enhanced version of the
enzyme L-asparaginase used in combination with other chemotherapeutics
to treat acute lymphoblastic leukemia. Sales of DEPOCYT, a
sustained-release formulation of the chemotherapeutic agent cytarabine
arabinoside or ara-C used for the treatment of lymphomatous
meningitis, remained fairly consistent with the prior year, coming in
at $2.3 million for each of the three-month periods ended September
30, 2005 and 2004.
In addition to product sales, Enzon's revenues also include
royalties on a number of products that utilize its proprietary
PEGylation technology, including Schering-Plough's PEG-INTRON.
Royalties increased to $15.2 million for the three months ended
September 30, 2005, as compared to $10.1 million for the three months
ended September 30, 2004. The increase in royalties was mainly driven
by higher sales of PEG-INTRON in Japan as a result of the December
2004 launch of PEG-INTRON combination therapy. In addition, the
increase in royalties was also attributable to the January 2005
introduction of Eyetech's MACUGEN(R) in the U.S. Under a 2002
agreement between Enzon and Nektar Therapeutics, Nektar provides
Eyetech with PEGylation technology for use in MACUGEN and the Company
receives a share of Nektar's royalties.
Research and Development
The Company's research and development expenses decreased to $5.3
million for the three months ended September 30, 2005, as compared to
$10.0 million for the three months ended September 30, 2004. This
decrease was attributable to the discontinuation of a number of
programs that did not meet the Company's criteria for continued
investment. Enzon is committed to investing in research and
development as it advances its objective of reshaping its business to
deliver long-term value, including reestablishing Enzon as a
scientific leader in PEGylation and rebuilding its development
pipeline.
Selling, General and Administrative (SG&A)
Selling, general and administrative expenses decreased to $11.7
million for the three months ended September 30, 2005, as compared to
$12.2 million for the three months ended September 30, 2004. The
decrease is largely due to the timing of investments in sales and
marketing programs. The Company remains committed to investing in new
sales, marketing, and other initiatives to further its objective of
reshaping its business to deliver long-term value, including improving
its top line performance and investing in its commercial operations.
In-Process Research and Development
In-process research and development was $10.0 million for the
three months ended September 30, 2005, due to the recognition of an
up-front payment payable in accordance with a license agreement that
the Company formed in September 2005 with the Danish biotech company,
NatImmune A/S. Under the agreement, Enzon obtained the exclusive
worldwide rights, excluding the Nordic countries, for the development,
manufacture, and marketing of rhMBL, a protein therapeutic under
development for the prevention of severe infections in MBL-deficient
individuals undergoing chemotherapy. In accordance with the agreement,
Enzon made an upfront payment of $10.0 million to NatImmune in October
2005.
Net Other Expense:
The Company reported $6.4 million in net other expense for the
three months ended September 30, 2005, as compared to net other
expense of $5.6 million for the three months ended September 30, 2004.
Net other expense for each of the three-month periods ended September
30, 2005 is comprised of investment income, interest expense, and
other non-operating expenses.
Investment income increased to $1.6 million for the three months
ended September 30, 2005 from $0.8 million for the three months ended
September 30, 2004 due to an increase in interest rates and
interest-bearing investments.
Interest expense remained relatively consistent coming in at $4.9
million for the three months ended September 30, 2005, as compared to
$5.0 million for the three months ended September 30, 2004. Interest
expense pertains to the Company's outstanding convertible subordinated
notes.
Other non-operating expense for each of the three-month periods
ended September 30, 2005 and 2004 is primarily related to the NPS
common stock that the Company received under a June 2003 merger
termination agreement, as well as the financial instrument the Company
formed to reduce its exposure associated with such shares, as
discussed earlier in this release. Other expense was $3.1 million for
the three months ended September 30, 2005 versus $1.4 million for the
three months ended September 30, 2004 primarily due to changes in the
fair value of the common stock and financial instrument. In August
2005, the Company sold its remaining 375,000 shares of NPS common
stock and the financial instrument matured.
Cash and Investments
The Company's total cash reserves, which include cash, cash
equivalents, short-term investments, and marketable securities,
totaled $228.7 million as of September 30, 2005 compared to $225.1
million as of June 30, 2005. This increase was attributable to cash
proceeds of $7.5 million received during the three months ended
September 30, 2005 from the sale of 375,000 shares of NPS common
stock, received as part of a June 2003 merger termination agreement
discussed earlier in this release. The increase was offset in part by
cash used in operating activities and capital expenditures for the
three months ended September 30, 2005.
Reconciliation of GAAP net loss to adjusted net loss
The following table reconciles the Company's GAAP net loss and net
loss per diluted share to its adjusted net loss and net loss per share
for the three months ended September 30, 2005 and 2004:
Three Months Ended
(in thousands, except per share
amounts)
------------------------------------
9/30/05 09/30/04
----------------- -----------------
Net Net Net Net
loss loss per loss loss per
diluted diluted
share share
------------------------------------
GAAP net loss ($5,766) ($0.13) ($939) ($0.02)
Adjustments to GAAP net loss(1):
Loss related to the sale of NPS
common stock, net of tax 4,316 0.10 347 0.01
(Gain) loss related to the
change in fair value of a
financial instrument, net of
tax (856) (0.02) 529 0.01
------------------------------------
Adjusted net loss(2) ($2,306) ($0.05) ($63) $--
====================================
(1) The charges excluded from Enzon's adjusted financial results for
the three months ended September 30, 2005 and 2004 have been
discussed in greater detail earlier in this press release. For
purposes of calculating the adjusted net loss and adjusted net
loss per share for the three months ended September 30, 2005, the
adjustments are not tax-effected based on the Company's full
valuation allowance against its deferred tax assets. For purposes
of calculating the Company's adjusted net loss and adjusted net
loss per share for the three months ended September 30, 2004, the
adjustments have been tax-effected using a tax rate of 40% based
on the Company's estimated tax liability for the fiscal year ended
June 30, 2005.
(2) Adjusted net loss and adjusted net loss 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.
Conference Call and Webcast
Jeffrey H. Buchalter, Enzon's chairman and chief executive
officer, will be hosting a conference call today, November 3, 2005, at
10:00 a.m. E.S.T. All interested parties may access the call by using
the following information:
Domestic Dial-In Number: 877-260-8898
International Dial-In Number: 612-332-0228
Access Code: 799754
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 from Thursday,
November 3, 2005, at approximately 3:15 p.m. E.S.T. This rebroadcast
will end on Thursday, November 10, 2005, at 11:59 p.m. E.S.T. 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 799754
About Enzon
Enzon Pharmaceuticals, Inc. is a biopharmaceutical company
dedicated to the development and commercialization of therapeutics to
treat patients with cancer and other life-threatening diseases.
Enzon's specialized sales force markets ABELCET(R), ONCASPAR(R),
ADAGEN(R), and DEPOCYT(R) in North America. In addition, Enzon also
receives royalties on sales of PEG-INTRON(R), marketed by
Schering-Plough Corporation, and MACUGEN(R), marketed by Eyetech
Pharmaceuticals and Pfizer Inc. Enzon's product-driven strategy
includes an extensive drug development program that leverages its
proprietary technologies, including a next-generation PEGylation
platform that utilizes linkers designed to release compounds at a
controlled rate. Enzon complements its internal research and
development efforts with strategic initiatives, such as partnerships
designed to broaden its revenue base or provide access to promising
new technologies or product development opportunities. 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 that are not
based on historical fact, including without limitation statements
containing the words "believes," "may," "plans," "will," "estimate,"
"continue," "anticipates," "intends," "expects," 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 discussed above. Such factors include
the risk that PEG-INTRON may not continue to be successfully marketed
in Japan, as well as those described in Enzon's Form 10-K and Forms
10-Q on file with the SEC. These factors should be considered
carefully and readers are cautioned not to place undue reliance on
such forward-looking statements. All information in this press release
is as of November 3, 2005 and the Company undertakes no duty to update
this information.
Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months ended September 30, 2005 and 2004
(In thousands except per share amounts)
(Unaudited)
September 30, September 30,
2005 2004
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Revenues:
Product sales, net $25,176 $27,527
Manufacturing revenue 3,393 2,513
Royalties 15,209 10,115
Contract revenue 269 299
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Total revenues 44,047 40,454
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Costs and expenses:
Cost of product sales and
manufacturing revenue 11,964 10,901
Research and development 5,319 9,974
Selling, general and administrative 11,697 12,199
Amortization of acquired intangible
assets 3,348 3,358
In-process research and development 10,000 --
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Total costs and expenses 42,328 36,432
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Operating income 1,719 4,022
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Other income (expense):
Investment income, net 1,632 770
Interest expense (4,946) (4,957)
Other, net (3,059) (1,411)
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(6,373) (5,598)
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Loss before income taxes (4,654) (1,576)
Income tax provision (benefit) 1,112 (637)
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Net loss ($5,766) ($939)
============== ==============
Basic loss per common share ($0.13) ($0.02)
============== ==============
Diluted loss per common share ($0.13) ($0.02)
============== ==============
Weighted average number of common shares
issued and outstanding - basic 43,486 43,470
============== ==============
Weighted average number of common shares
issued and outstanding and dilutive
potential common shares outstanding 43,486 43,470
============== ==============
Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 2005 and June 30, 2005
(In thousands)
(Unaudited)
September 30, June 30,
2005 2005
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Assets
Current assets:
Cash and short-term investments $153,367 $158,747
Accounts receivable, net 28,235 25,638
Inventory 16,021 15,679
Other current assets 5,283 11,989
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Total current assets 202,906 212,053
Property and equipment, net 33,020 33,214
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Other assets:
Marketable securities 75,321 66,384
Other long-term assets 334,290 339,210
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409,611 405,594
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Total assets $645,537 $650,861
============== ==============
Liabilities and Stockholders' Equity
Current and other liabilities $45,088 $48,359
Notes payable 399,000 399,000
Stockholders' equity 201,449 203,502
-------------- --------------
Total liabilities and stockholders'
equity $645,537 $650,861
============== ==============
Common shares outstanding 44,869 44,236
============== ==============
CONTACT: Enzon Pharmaceuticals, Inc.
Craig Tooman, 908-541-8759
EVP, Finance and Chief Financial Officer
or
Susan M. Mesco, 908-541-8777
Director, Investor Relations