UNITED STATES
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) May 2, 2006
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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 No.) (IRS Identification No.)
of incorporation)
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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)
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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 May 2, 2006, Enzon Pharmaceuticals, Inc. ("Enzon") issued a press release
reporting certain financial and other information for the first quarter of 2006.
A copy of Enzon's press release dated May 2, 2006, is attached as Exhibit 99.1
to this Current Report 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 into any registration statement or other document
filed under the Securities Act of 1933 or the Exchange Act, except as otherwise
stated in that filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
99.1 Press Release of Enzon Pharmaceuticals, Inc. dated May 2, 2006.
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: May 2, 2006
By: /s/ PAUL S. DAVIT
Paul S. Davit
Executive Vice President and Secretary
[GRAPHIC OMITTED][GRAPHIC OMITTED]
ENZON
PHARMACEUTICALS For Immediate Release
===============================================================================
PRESS RELEASE
Contact: Craig Tooman
EVP, Finance and Chief Financial
Officer
908-541-8777
ENZON REPORTS SOLID FIRST QUARTER
New Corporate Strategy Begins to Deliver Results
Bridgewater, NJ - May 2, 2006 - Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) today
announced its financial results for the first quarter of 2006. For the three
months ended March 31, 2006, Enzon reported net income of $21.7 million or $0.50
per diluted share, as compared to a net loss of $(3.1) million or $(0.07) per
diluted share for the three months ended March 31, 2005. The March 31, 2006 net
income included an investment gain of $13.8 million from the sale of shares of
Nektar Therapeutics, Inc. (Nektar) common stock originally acquired as part of a
legal settlement in January 2002.
"The first quarter of 2006 was a very promising start for the year. The new
management team is continuing to maximize the opportunities outlined in our
strategic plan," said Jeffrey H. Buchalter, chairman and chief executive officer
of Enzon. "As you can see, we experienced double digit sales growth for all of
our products this quarter, with significant progress for ONCASPAR. This further
supports our plans for reinvestment toward sustainable growth for the new
Enzon."
Financial Results For the three months ended March 31, 2006, Enzon reported an
adjusted net income of $7.9 million or $0.18 per diluted share, as compared to
an adjusted net loss of $(2.1) million or $(0.05) per diluted share for the
three months ended March 31, 2005.
Highlights from the quarter include:
o Sales of ONCASPAR increased 16 percent compared to the three months
ended March 31, 2005. The Company previously reported in November 2005
that an intravenous route of administration for ONCASPAR was approved
by the U.S. Food and Drug Administration (FDA). In December 2005,
Enzon announced it applied for FDA approval of ONCASPAR as a
first-line treatment for acute lymphoblastic leukemia (ALL).
o The Company has initiated a new clinical program for the use of
ONCASPAR in treating Non-Hodgkin's Lymphoma (NHL) and solid tumors;
the first trial will begin enrolling patients this summer, as
previously reported.
o The Company recorded a gain of $13.8 million and cash proceeds of
$20.2 million as a result of sales of approximately one million shares
of Nektar common stock as noted above.
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Revenues
The following table reflects the revenues generated by product and segment for
each of the three-month periods ended March 31, 2006 and 2005.
Three Months Ended
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(in thousands)
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March 31, 2006 March 31, 2005 % Change
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Products
ONCASPAR $6,416 $5,544 16
DEPOCYT 2,080 1,838 13
ABELCET 10,466 9,054 16
ADAGEN 5,313 4,788 11
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Total Products 24,275 21,224 14
Royalties 17,248 13,630 27
Contract Manufacturing 3,206 4,359 (26)
---------------------- --------------------- ----------------
Total Revenues $44,729 $39,213 14
====================== ===================== ================
Products Segment
Products segment sales, comprised of sales of ONCASPAR, DEPOCYT, ABELCET, and
ADAGEN, increased to $24.3 million for the three months ended March 31, 2006,
from $21.2 million for the three months ended March 31, 2005. The improved sales
are mainly attributable to an increase in volume for all products.
ONCASPAR sales grew to $6.4 million or 16 percent for the three months ended
March 31, 2006, as compared to $5.5 million for the three months ended March 31,
2005. ONCASPAR is a PEG-enhanced version of the enzyme L-asparaginase used in
combination with other chemotherapeutics to treat ALL. As previously reported,
the Company has applied for first-line use of ONCASPAR for the treatment of ALL
and anticipates the FDA will take action during the third quarter of 2006. In
addition, Enzon recently initiated a new clinical program for ONCASPAR in NHL
and solid tumors, and the first trial will begin enrolling patients this summer.
Sales of DEPOCYT, a sustained-release formulation of the chemotherapeutic agent
cytarabine arabinoside or ara-C used for the treatment of lymphomatous
meningitis, increased to $2.1 million or 13 percent for the three months ended
March 31, 2006, as compared to $1.8 million for the three months ended March 31,
2005.
Sales of ABELCET in the U.S. and Canada for the three months ended March 31,
2006 were $10.5 million, up 16 percent as compared to $9.1 million for the three
months ended March 31, 2005. The Company anticipates increased competition from
new therapeutics entering the market later this year.
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Sales of ADAGEN, an enzyme replacement therapy used to treat adenosine deaminase
(ADA) deficiency in patients with severe combined immunodeficiency disease,
increased 11 percent to $5.3 million for the three months ended March 31, 2006,
as compared to $4.8 million for the three months ended March 31, 2005. This
market has a very small number of patients so quarter-to-quarter variability is
not uncommon.
Royalties Segment
Revenues from the Company's Royalties segment for the three months ended March
31, 2006 were $17.2 million, as compared to $13.6 million for the three months
ended March 31, 2005. This increase primarily represents revenue received on
increased sales of a number of products that utilize the Company's proprietary
PEGylation technology, including Schering-Plough's PEG-INTRON. The January 2005
launch of MACUGEN in the U.S. and the December 2004 launch of PEG-INTRON
combination therapy in Japan contributed to the comparative increase in sales.
The sales of these products were not yet fully reflected in the March quarter of
2005 due to the recent entry of these products into the associated markets. As
previously announced, the Company expects competition for both PEG-INTRON
combination therapy in Japan and MACUGEN to increase later this year.
Contract Manufacturing Segment
The Company's revenues from its Contract Manufacturing segment were $3.2 million
for the three months ended March 31, 2006, as compared to $4.4 million in the
corresponding period of the prior year. This includes contract manufacturing
revenues related to services the Company provides for a number of customers who
require injectable products, such as ABELCET for markets outside of Canada and
the U.S. The decrease in revenue was mainly attributable to the timing of
availability of raw materials from a third party, which delayed the production
and resulting revenues of one of the products Enzon manufactures.
Research and Development
The Company's research and development expenses were $7.0 million for the three
months ended March 31, 2006, as compared to $12.7 million for the three months
ended March 31, 2005. The Company's research and development expenses for the
three months ended March 31, 2005 included a non-recurring charge of $5.0
million related to the termination of the development and commercialization
partnership for MARQIBO with Inex Pharmaceuticals. Enzon is committed to
investing in research and development as it advances its objective of delivering
long-term value, including reinforcing its position as a scientific leader in
PEGylation through its Customized Linker Technology(TM) platforms and rebuilding
its development pipeline.
Selling, General and Administrative
Selling, general and administrative expenses increased to $15.8 million for the
three months ended March 31, 2006, as compared to $13.7 million for the three
months ended March 31, 2005. The increase is mainly due to salaries and
benefits, finance, accounting and legal fees. The Company will continue to
invest in new selling, marketing, and other initiatives to further its objective
of delivering long-term value, including improving its top-line performance by
investing in its commercial operations.
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Amortization of Acquired Intangible Assets
Amortization expense decreased by $3.1 million to $0.2 million for the three
months ended March 31, 2006, as compared to $3.3 million for the three months
ended March 31, 2005. This improvement was due to the impairment write-down of
ABELCET-related intangible assets recorded in the quarter ended December 2005.
Other Income (Expense)
Net other income (expense) is comprised of investment income, interest expense,
and other non-operating expenses. The Company reported other income of $10.7
million for the three months ended March 31, 2006, as compared to other expense
of $5.4 million in the same period in the prior year. The improvement resulted
primarily from the gain of $13.8 million from the sale of Nektar shares.
Income Taxes
For the three months ended March 31, 2006, the Company recognized a nominal
amount of state and Canadian tax, whereas in the quarter ended March 31, 2005, a
tax benefit of $1.8 million was recognized using a 37 percent effective tax
rate. For 2006, the estimated effective annual U.S. income tax rate is zero due
to the uncertainty around the Company's ability to utilize its net operating
loss carryforwards.
Cash and Investments
Total cash reserves decreased to $213.8 million as of March 31, 2006, as
compared to $226.6 million as of December 31, 2005. The net decrease in cash
reserves was the result of a $35.0 million payment to Sanofi-Aventis related to
the previously announced reduction of the royalty rates that the Company pays on
ONCASPAR sales. This was offset, in part, by a cash inflow of $20.2 million in
proceeds from the sale of Nektar shares. Cash reserves include cash, cash
equivalents, short-term investments, and marketable securities.
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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 three months ended March 31, 2006 and
2005:
Three Months Ended
(in thousands, except per-share amounts)
-----------------------------------------------------------
March 31, 2006 March 31, 2005
--------------------------- ----------------------------
Net income
per Net
diluted loss per
Net share Net diluted share
income loss
-------------- ------------ ------------ ---------------
GAAP net income (loss) $21,708 $0.50 $(3,125) $(0.07)
Adjustments to GAAP net loss:
Investment gain related to the sale of Nektar
common stock (1) (13,844) (0.32) - -
Loss related to the sale of NPS common stock,
net of tax (2) - - 983 0.02
-------------- ------------ ------------ ---------------
Adjusted net income (loss) (3) $7,864 $0.18 $(2,142) $(0.05)
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(1) The Company's adjusted financial results for the first quarter of 2006
exclude a gain related to the sale of approximately 1.0 million shares of Nektar
common stock.
(2) The Company's adjusted financial results for the first quarter of 2005
exclude a pretax realized loss of $4.0 million and an offsetting unrealized gain
of $2.4 million related to a financial instrument the Company formed to reduce
its investment risk associated with 1.5 million shares of NPS Pharmaceuticals,
Inc. (NPS) common stock received in June 2003. The Company received the common
stock under a merger termination agreement with NPS.
(3) Adjusted net income (loss) and adjusted net income (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. The Company believes that investors'
understanding of its performance is enhanced by disclosing adjusted net income
(loss) and adjusted net income (loss) per share reflecting adjustments for
certain items that the company deems to be non-recurring.
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Conference Call and Webcast
Enzon will be hosting a conference call today, May 2, 2006 at 4:30 p.m. E.D.T.
All interested parties may access the call by using the following information:
Domestic Dial-In Number: (800) 762-4885
International Dial-In Number: (480) 248-5089
Access Code: 827825
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 telephone rebroadcast will be
available following the call from May 2, 2006, at approximately 9:45 p.m. E.D.T.
This rebroadcast will end on May 9, 2006, at approximately 11:59 p.m. E.D.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: 827825
About Enzon
Enzon Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to the
development and commercialization of therapeutics to treat patients with cancer
and adjacent diseases. Enzon's specialized sales force markets ABELCET(R),
ONCASPAR(R), ADAGEN(R), and DEPOCYT(R) in the United States. In addition, Enzon
also receives royalties on sales of PEG-INTRON(R), marketed by Schering-Plough
Corporation, and MACUGEN(R), marketed by OSI Pharmaceuticals and Pfizer Inc.
Enzon's product-driven strategy includes an extensive drug development program
that leverages its proprietary technologies, including a Customized Linker
TechnologyTM PEGylation platform that utilizes customized linkers designed to
release compounds at a controlled rate. Enzon also utilizes contract
manufacturing opportunities to broaden its revenue base and enhance its
organizational productivity. 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, 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.
Among the factors that could cause actual results, events or developments to
differ materially are decisions by regulatory authorities regarding whether and
when to approve our regulatory applications as well as their decisions regarding
labeling and other matters that could affect the commercial potential of Enzon's
products. 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 transition report on Form 10-K for the six-month
period ended December 31, 2005. 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 undertakes no duty to
update this information.
(Financial information to follow)
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months ended March 31, 2006 and 2005
(In thousands, except per share data)
(Unaudited)
March 31, March 31,
2006 2005
--------------------- ----------------------
Revenues:
Product sales, net $24,275 $21,224
Royalties 17,248 13,630
Contract manufacturing 3,206 4,359
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Total revenues 44,729 39,213
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Costs and expenses:
Cost of product sales and contract manufacturing 10,549 9,024
Research and development 7,003 12,665
Selling, general and administrative 15,838 13,658
Amortization of acquired intangible assets 189 3,339
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Total costs and expenses 33,579 38,686
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Operating income 11,150 527
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Other income (expense):
Investment income, net 15,816 1,116
Interest expense (4,881) (4,957)
Other, net (241) (1,572)
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10,694 (5,413)
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Income (loss) before income tax provision (benefit) 21,844 (4,886)
Income tax provision (benefit) 136 (1,761)
--------------- ---------------
Net income (loss) $21,708 $(3,125)
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Earnings (loss) per common share - basic $0.50 $(0.07)
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Earnings (loss) per common share - diluted $0.50 $(0.07)
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Weighted average shares - basic 43,524 43,490
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Weighted average shares - diluted 43,524 43,490
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2006 and December 31, 2005
(In thousands)
(Unaudited)
March 31, December 31, 2005
2006
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Assets
Current assets:
Cash and short-term investments $154,306 $164,518
Accounts receivable, net 14,035 14,087
Inventories 16,991 16,014
Other current assets 7,340 12,596
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Total current assets 192,672 207,215
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Property and equipment, net 35,008 34,978
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Other assets:
Marketable securities 59,515 62,059
Amortizable intangible assets, net 67,131 34,154
Other long-term assets 2,490 2,939
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129,136 99,152
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Total assets $356,816 $341,345
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Liabilities and Stockholders' Deficit
Current and other liabilities $24,139 $31,315
Notes payable 394,000 394,000
Stockholders' deficit (61,323) (83,970)
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Total liabilities and stockholders' deficit $356,816 $341,345
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Common shares outstanding 43,747 43,787
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