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) November 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)
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 2, 2006, Enzon Pharmaceuticals, Inc. ("Enzon") issued a press
release reporting certain financial and other information for the quarter ended
September 30, 2006. A copy of Enzon's press release dated November 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
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99.1 Press Release of Enzon Pharmaceuticals, Inc.
dated November 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: November 2, 2006
By: /s/ Craig A. Tooman
--------------------------------
Craig A. Tooman
Executive Vice President, Finance and Chief
Financial Officer
[GRAPHIC OMITTED] FOR IMMEDIATE RELEASE
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Contact: Craig Tooman
EVP, Finance and Chief
Financial Officer
908-541-8777
ENZON REPORTS THIRD QUARTER 2006 RESULTS
-- TURNAROUND MAKES VISIBLE PROGRESS --
BRIDGEWATER, NJ - November 2, 2006 - Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN)
today announced its financial results for the third quarter of 2006. For the
three months ended September 30, 2006, Enzon reported net income of $2.2 million
or $0.05 per diluted share, as compared to a net loss of $5.8 million or $(0.13)
per diluted share.
"We are pleased to report another solid quarter, but more importantly, we are
enthusiastic about the Company's momentum toward rebuilding the pipeline,
maximizing our current brands and recruiting top talent to lead the organization
in achieving the next level of success," said Jeffrey H. Buchalter, chairman and
chief executive officer of Enzon. "Over the past year, we have been able to
leverage and modernize the Company's core asset, PEGylation technology, by
integrating it with novel oncology candidates, setting the stage for a new,
innovative pipeline from the Company."
COMPANY UPDATES:
- - The Company's rhMBL program expands with the approval of an additional
Investigational New Drug (IND) application for use in the prevention and
treatment of severe infections in patients with low levels of MBL
undergoing liver transplant treatment.
- - The Company's Santaris Pharma A/S collaboration, which was established in
July of this year, is on track and the Company anticipates filing an IND
for the HIF-1 alpha antagonist by the end of 2006.
- - The Company expects to have data presented at upcoming medical conferences
on three of its research and development projects. These include: rhMBL,
recombinant human Manose Binding Lectin for immuno-suppressed patients,
Oncaspar(R), a PEG-enhanced version of a naturally occurring enzyme called
L-asparaginase, and PEG-SN38, a PEGylated form of the active moiety of
CPT-11 or Camptosar(R).
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FINANCIAL RESULTS
REVENUES
The following table reflects the revenues generated by product and segment for
each of the three-month periods ended September 30, 2006 and 2005.
Three Months Ended
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(in thousands)
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September 30, September 30,
2006 2005 % Change
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Products
Oncaspar $7,418 $5,789 28%
Depocyt 2,000 2,334 (14%)
Abelcet 8,986 11,113 (19%)
Adagen 6,891 5,940 16%
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TOTAL PRODUCTS 25,295 25,176 n.m.
ROYALTIES 18,705 15,478 21%
CONTRACT MANUFACTURING 1,856 3,393 (45%)
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TOTAL REVENUES $ 45,856 $ 44,047 4%
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PRODUCTS SEGMENT
Sales from the products segment, comprised of Oncaspar(R), Depocyt(R),
Abelcet(R), and Adagen(R), increased slightly to $25.3 million for the three
months ended September 30, 2006, from $25.2 million for the three months ended
September 30, 2005.
Sales of Oncaspar grew to $7.4 million or 28 percent for the three months ended
September 30, 2006, as compared to $5.8 million for the three months ended
September 30, 2005. The growth of Oncaspar is mainly attributable to its
adoption in certain protocols by hospitals and cooperative groups. On July 25,
2006, the Company announced the approval of Oncaspar for the first line
treatment of acute lymphoblastic leukemia (ALL).
Sales of Depocyt, a sustained-release formulation of the chemotherapeutic agent
cytarabine arabinoside or ara-C used for the treatment of lymphomatous
meningitis, decreased to $2.0 million or 14 percent for the three months ended
September 30, 2006, as compared to $2.3 million for the three months ended
September 30, 2005.
Sales of Abelcet in the U.S. and Canada, 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 September
30, 2006 were $9.0 million, down 19 percent as compared to $11.1 million for the
three months ended September 30, 2005. The decrease was primarily the result of
expected competition from current and newly launched therapeutics in the
anti-fungal market.
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Sales of Adagen, an enzyme replacement therapy used to treat adenosine deaminase
(ADA) deficiency in patients with severe combined immuno-deficiency disease,
increased 16 percent to $6.9 million for the three months ended September 30,
2006, as compared to $6.0 million for the three months ended September 30, 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
September 30, 2006 were $18.7 million, as compared to $15.4 million for the
three months ended September 30, 2005, an increase of 21 percent. Royalties on
PEG-INTRON, marketed by Schering-Plough, continue to comprise the majority of
our royalty revenue. Schering-Plough has recently indicated that they anticipate
a decline in PEG-INTRON sales in Japan as new patient enrollment moderates and
competition increases.
CONTRACT MANUFACTURING SEGMENT
The Company's revenues from its Contract Manufacturing segment were $1.9 million
for the three months ended September 30, 2006, as compared to $3.4 million in
the corresponding period of the prior year. This includes contract manufacturing
revenues related to services the Company provides for customers who require
injectable products, such as Abelcet for markets outside of Canada and the U.S.
During the quarter, the revenue reconciliation for two contract manufacturing
products resulted in a reduction of revenue of $1.2 million. The timing of
production of another product Enzon manufactures also resulted in lower
revenues.
RESEARCH AND DEVELOPMENT
The Company's research and development expenses were $10.6 million for the three
months ended September 30, 2006, as compared to $5.3 million for the three
months ended September 30, 2005. The increase was attributable to initiation of
programs in 2006. Research and development expenses last year was impacted by
the restructuring that occurred in the second quarter of 2005. Enzon is
committed to investing in research and development to build a leading oncology
business through the continued development of its current portfolio, reinforcing
its position as a scientific leader in PEGylation through its Customized Linker
Technology(TM) platforms and strategic in-licensing of innovative cancer
programs, as demonstrated by the Company's strategic collaboration with Santaris
reported last quarter.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased to $14.3 million for the
three months ended September 30, 2006, as compared to $11.7 million for the
three months ended September 30, 2005. The increase is mainly attributable to
the costs associated with the Company's debt refinancing completed this quarter.
The Company will continue to invest in 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 $184 thousand for the three
months ended eptember 30, 2006, as compared to $3.3 million for the three months
ended September 30, 2005. The decrease is a result of the Abelcet intangible
write-down which occurred in December 2005.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
In August 2006, we paid $8.0 million for worldwide rights to develop and
commercialize certain RNA antagonists. During the third quarter of last year,
the Company paid $10.0 million for the rights to the clinical development of
recombinant human Mannose-Binding Lectin.
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
approximately $1.8 million for the three months ended September 30, 2006, as
compared to other expense of nearly $6.3 million in the same period in the prior
year. In July 2006, the Company completed its debt refinancing by repurchasing
$137.6 million of the 4.5% notes due in 2008, which resulted in a gain of $4.8
million. This gain was offset by the write-off of $1.2 million in deferred
offering costs associated with the 2008 convertible notes repurchased. In 2005,
the Company reported a loss of $3.5 million related to the maturing of 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.
INCOME TAXES
For the three months ended September 30, 2006, the Company recognized a nominal
amount of state and Canadian tax liabilities. For 2006, the estimated effective
annual U.S. income tax rate is nominal due to the Company's projected taxable
income and availability of net operating loss carryforwards.
CASH AND INVESTMENTS
Total cash reserves, which include cash, cash equivalents, short-term
investments and marketable securities, were $240.4 million as of September 30,
2006, as compared to $226.6 million as of December 31, 2005. Positive operating
cash flows for the nine-month period ended September 30, 2006 and cash proceeds
from the sale of Nektar common stock the Company owned contributed to the
increase in cash. Offsetting these cash inflows was the January payment to
Sanofi-Aventis of $35.0 million relating to a reduction of the Oncaspar royalty
rate.
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RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
For the three months ended September 30, 2006, Enzon reported an adjusted net
loss of $1.3 million or $(0.03) per diluted share, as compared to an adjusted
net loss of $2.3 million or $(0.05) per diluted share for the three months ended
September 30, 2005.
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 loss and adjusted net
loss per diluted share for the three months ended September 30, 2006 and 2005:
Three Months Ended
(in thousands, except per-share amounts)
--------------------------------------------------------------
September 30, 2006 September 30, 2005
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Net
income Net
Net (loss) per loss per
income diluted Net diluted
(loss) share Loss share
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GAAP net income (loss) $ 2,238 $ 0.05 $ (5,766) $ (0.13)
Net adjustments to GAAP:
- - Net realized gain related to the (3,569) (0.08)
repurchase of debt (1)
- - Net realized loss related to the sale - - 3,460 0.08
of NPS common stock (2)
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Adjusted net loss (3) $ (1,331) $ (0.03) $ (2,306) $ (0.05)
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(1) The Company's adjusted financial results for the third quarter of 2006
exclude a gain related to the repurchase of the 4.5% Notes at a price of
$965 (plus accrued interest) for each $1,000 principal amount of notes
tendered, offset by a write-off of related debt offering costs.
(2) The Company's adjusted financial results for the September quarter of 2005
exclude a net-of-tax realized loss of $3.5 million related to the maturing
of 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 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 income (loss) and adjusted net income (loss) per diluted 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 November 2, 2006 at 9:00am E.S.T. All
interested parties may access the call by using the following information:
Domestic Dial-In Number: (866) 585-6398
International Dial-In Number: (416) 849-9626
Access Code: Enzon
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 November 2, 2006, at approximately 12:00 p.m.
E.S.T. This rebroadcast will end on November 9, 2006, at approximately 11:59
p.m. E.S.T. The rebroadcast may be accessed using the following information:
Domestic Dial-In Number: (866) 245-6755
International Dial-In Number: (416) 915-1035
Access Code: 80421
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 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. The Company also engages in
contract manufacturing opportunities with third parties to improve its
efficiency. 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 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 and our quarterly reports on
Form 10-Q. 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.
(Financial information to follow)
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
THREE MONTHS ended September 30, 2006 and 2005
(In thousands, except per share data)
(Unaudited)
September 30, September 30,
2006 2005
------------------------ ----------------------
Revenues:
Product sales, net $ 25,295 $ 25,176
Royalties 18,705 15,478
Contract manufacturing 1,856 3,393
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Total revenues 45,856 44,047
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Costs and expenses:
Cost of product sales and contract manufacturing 12,141 11,964
Research and development 10,599 5,319
Selling, general and administrative 14,299 11,697
Amortization of acquired intangible assets 184 3,348
Acquired in-process research and development 8,000 10,000
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Total costs and expenses 45,223 42,328
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Operating income 633 1,719
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Other income (expense):
Investment income, net 2,831 1,632
Interest expense (5,912) (4,946)
Other, net 4,813 (3,059)
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1,732 (6,373)
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Income (loss) before income tax provision 2,365 (4,654)
Income tax provision 127 1,112
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Net income (loss) $ 2,238 $ (5,766)
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Earnings (loss) per common share - basic $ 0.05 $ (0.13)
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Earnings (loss) per common share - diluted $ 0.05 $ (0.13)
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Weighted average shares - basic 43,590 43,486
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Weighted average shares - diluted 43,590 43,486
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 2006 and December 31, 2005
(In thousands)
(Unaudited)
September 30, December 31
2006 2005
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Assets
Current assets:
Cash and short-term investments $ 169,985 $ 164,518
Accounts receivable, net 11,798 14,087
Inventories 18,381 16,014
Other current assets 6,211 12,596
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Total current assets 206,375 207,215
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Property and equipment, net 37,576 34,978
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Other assets:
Marketable securities 70,458 62,059
Amortizable intangible assets, net 63,093 34,154
Other long-term assets 6,873 2,939
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140,424 99,152
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Total assets $ 384,375 $ 341,345
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Liabilities and Stockholders' Deficit
Current and other liabilities $31,087 $31,315
Notes payable 397,642 394,000
Stockholders' deficit (44,354) (83,970)
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Total liabilities and stockholders' deficit $ 384,375 $ 341,345
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Common shares outstanding 43,877 43,787
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