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Article by netnet    (11-25-08 06:48 AM)

Filed with the SEC from Nov 13 to Nov 19:

Enzon Pharmaceuticals (ENZN)
DellaCamera Capital Master Fund said it has engaged investment bank Moelis & Co. to explore alternatives for its investment in Enzon. The investor previously said it may consider a "public-consent solicitation" to amend the company's bylaws. It also called for Enzon to take certain actions to increase shareholder value, including looking at an $80 million share-repurchase program, monetizing a minimum of $70 million of the company's royalty streams, and soliciting bids for Enzon's marketed products and royalty segments.
DellaCamera currently holds 3,553,558 shares (7.8%).

BUSINESS OVERVIEW

GENERAL
We are a biopharmaceutical company dedicated to the development, manufacturing and commercialization of important medicines for patients with cancer and other life-threatening conditions. We have a portfolio of four marketed products, Oncaspar ® , DepoCyt ® , Abelcet ® and Adagen ® . Our drug development programs utilize several cutting-edge approaches, including our industry-leading PEGylation technology platform used to create product candidates with benefits such as reduced dosing frequency and less toxicity. Our PEGylation technology was used to develop two of our products, Oncaspar and Adagen, and has created a royalty revenue stream from licensing partnerships for other products developed using the technology. We continue to develop and utilize our Customized Linker Technology TM PEGylation platform that uses linkers designed to release compounds at a controlled rate. We also engage in contract manufacturing for several pharmaceutical companies to broaden our revenue base.
STRATEGY
We continue to pursue the comprehensive long-term strategic plan we developed in 2005. This plan was designed to strengthen our business, build long-term value, and attain our goal of becoming a premier, novel, and fully-integrated biopharmaceutical company with a focus in cancer and other life-threatening diseases. To this end, we are executing a strategy that focuses on the following three phases of corporate priorities for the next several years: (i) investing in our extensive infrastructure that spans research, development, manufacturing, and sales and marketing, (ii) improving our organizational efficiencies and (iii) becoming a recognized leader in oncology and adjacent therapeutic areas.
Our strategy revolves around the following key imperatives:
Investing to maximize the potential of our marketed products. We have placed a significant effort behind improving our top line performance. We are selectively investing in our marketed brands to optimize and broaden their commercial potential. These initiatives include effective market research, life cycle management plans, post-marketing clinical programs, and other new programs to differentiate and extend the utility of our products.
Focusing on innovation. We are cultivating a renewed organizational commitment to innovation by (i) investing in our technological base, (ii) growing our intellectual property estate, and (iii) building a novel research and development pipeline of projects that are strategically focused with promising pathways to regulatory approval. We are committed to making targeted, disciplined investments in areas where we believe we can make a unique contribution and achieve differentiation. For instance, we have extensive know-how and a demonstrated track record in PEGylation, including our Customized Linker Technology™ platform. PEG is a proven means of enabling or enhancing the performance of pharmaceuticals with delivery limitations. We are committed to further evolving the potential of this technology and bringing new PEG product development opportunities forward, both through proprietary and externally-sourced programs.
Maximizing the return on our asset base. We are focused on leveraging our internal resources and infrastructure as a means of broadening our revenue base, improving our operational efficiencies, and generating value. Over the past three years, we have added personnel with significant experience and talent throughout our business and strengthened our cross-functional infrastructure.

Our management team has extensive experience in the pharmaceutical industry, particularly in the development and commercialization of oncology products. In addition, we will seek to increase our co-development and contract manufacturing by leveraging our PEGylation technology platform that has broad clinical utility in a wide array of therapeutic areas and our manufacturing facility that has the capability of formulating complex injectable pharmaceutical products.
Maintaining a high-performance, value-focused corporate culture. We recognize that the successful execution of our long-term plan begins with ensuring that our employees understand the stated goals of the organization and are accountable for making meaningful contributions to our corporate results. We are cultivating a performance-driven culture, focused on delivering on our promises. We have also placed an increased emphasis on measuring and rewarding performance throughout the organization.
Our key initiatives to advance these priorities include:
• To further our goal of establishing a successful franchise of cancer therapeutics, we are executing on a number of programs to optimize the value of our currently marketed cancer products, Oncaspar and DepoCyt. We continue to see adoption of Oncaspar in pediatric and adult cooperative group protocols. In 2007, DepoCyt received full approval from the U.S. Food and Drug Administration (FDA) for lymphomatous meningitis.

• Lifecycle management is being deployed as a critical organizational practice with plans underway for all of our marketed brands. We believe lifecycle management is an essential tool for building sustainability and maximizing value for our products. We continue to evaluate several new means of driving sustainable commercial success for our marketed products, including new therapeutic areas, modes of administration, manufacturing process and supply improvements and delivery mechanisms. Our management has aligned all of our core functions, from research through commercialization, on maximizing the value of our products through integrated lifecycle management programs.

• We continue to rebuild our research and development pipeline. In 2007, we advanced our PEG-SN38 and our HIF-1 alpha antagonist into Phase I human clinical trials. We continue to enroll our recombinant human Mannose-binding Lectin (rhMBL) Phase I/II studies.

• We continue to identify opportunities in our contract manufacturing business to (i) foster new contract manufacturing partnerships, (ii) enhance our current processes, (iii) broaden our manufacturing expertise and infrastructure, and (iv) expand the utilization of our finish and fill capabilities.

• During 2007, we significantly improved our financial condition by successfully monetizing 25% of our future royalties on the sales of PEG-INTRON for proceeds of $92.5 million. The majority of the net proceeds were placed in a restricted account for the purpose of eliminating the outstanding 4.5% convertible subordinated notes due July 1, 2008.
PRODUCTS SEGMENT
Our Products segment includes the manufacturing, marketing and selling of pharmaceutical products for patients with cancer and other life-threatening diseases. We currently sell four therapeutics products, Oncaspar, DepoCyt, Abelcet, and Adagen, through our hospital and specialty U.S. sales force that calls upon specialists in oncology, hematology, infectious disease, and other critical care disciplines.

1) Oncaspar
Oncaspar is a PEG-enhanced version of a naturally occurring enzyme called L-asparaginase derived from E. coli. Oncaspar is used in conjunction with other chemotherapeutics to treat patients with acute lymphoblastic leukemia (ALL). We developed Oncaspar internally and received U.S. marketing approval from the FDA for Oncaspar in February 1994. We licensed rights to Oncaspar for North America and most of the Asia/Pacific region to Rhone Poulenc Rorer, now part of Sanofi-Aventis. In June 2002, we licensed back those rights from Sanofi-Aventis.
L-asparaginase is an enzyme that depletes the amino acid asparagine, which certain leukemic cells are dependent upon for survival. Other companies market unmodified L-asparaginase for the treatment of ALL. The therapeutic value of unmodified L-asparaginase is limited by its short half-life, which requires frequent injections, and its propensity to cause a high incidence of allergic reactions. We believe that Oncaspar offers significant therapeutic advantages over unmodified L-asparaginase, namely a significantly increased half-life in blood allowing fewer injections, and fewer allergic reactions.
In October 2005, we amended our license agreement with Sanofi-Aventis for Oncaspar. The amendment became effective in January 2006 and includes a significant reduction in our royalty rate, with a single-digit royalty percentage payable by us only on those aggregate annual sales of Oncaspar in the U.S. and Canada that are in excess of $25.0 million. Under the amended agreement we made an upfront cash payment of $35.0 million to Sanofi-Aventis in January 2006. We are obligated to make royalty payments through June 30, 2014, at which time all of our royalty obligations will cease.
Since December 2004, we have been focusing on a number of new clinical initiatives designed to potentially expand the Oncaspar label beyond its current indications. Several key initiatives are summarized below.
In November 2005, we received approval from the FDA for a labeling change for Oncaspar allowing for administration via the intravenous route. Intravenous administration provides clinicians with a treatment option that will potentially reduce the number of injections for pediatric cancer patients who require Oncaspar in their treatment regimen. Previously, Oncaspar’s administration was limited to intramuscular administration, which involves injecting the drug directly into the muscle and is often painful to patients.
In July 2006, we announced that the FDA had approved our supplemental Biologics License Application (sBLA) for Oncaspar for use as a component of a multi-agent chemotherapeutic regimen for the first-line treatment of patients with ALL, which we had submitted in November 2005. The FDA approved the new first-line indication for Oncaspar based on data from two studies conducted by the Children’s Cancer Group (CCG), CCG-1962 and CCG-1991, with safety data from over 2,000 pediatric patients. The Children’s Cancer Group is now incorporated under the Children’s Oncology Group (COG).
In 2006, we announced that we had initiated a phase 1 clinical trial of Oncaspar to assess its safety and potential utility in the treatment of advanced solid tumors and lymphomas in combination with Gemzar (gemcitabine HCl for injection). Recently, we reached dose-limiting toxicities in this trial. We are analyzing the data to better understand whether the combination of Oncaspar and Gemzar warrants further development in solid tumors and lymphoma.
In December 2006, we secured the supply of L-asparaginase, the raw material used in the production of Oncaspar. We are investing in the improvement of the manufacturing processes and pharmaceutical properties of Oncaspar. This investment will primarily occur over the next few years.
We manufacture Oncaspar in the U.S.

2) DepoCyt
DepoCyt is an injectable chemotherapeutic agent approved for the treatment of patients with lymphomatous meningitis. It is a sustained release formulation of the chemotherapeutic agent, arabinoside cytarabine or ara-C. DepoCyt gradually releases cytarabine into the cerebral spinal fluid (CSF) resulting in a significantly extended half-life, prolonging the exposure to the therapy and allowing for more uniform CSF distribution. This extends the dosing interval to once every two weeks, as compared to the standard twice-weekly intrathecal chemotherapy dosing of cytarabine. We acquired the U.S. and Canadian rights to DepoCyt from Pacira Pharmaceuticals, Inc. (Pacira), formerly SkyePharma, in December 2002.
Lymphomatous meningitis is a debilitating form of neoplastic meningitis, a complication of cancer that is characterized by the spread of cancer to the central nervous system and the formation of secondary tumors within the thin membranes surrounding the brain. Lymphomatous meningitis can affect all levels of the central nervous system, including the cerebral hemispheres, cranial nerves, and spinal cord. Symptoms can include numbness or weakness in the extremities, pain, sensory loss, double-vision, loss of vision, hearing problems, and headaches. Lymphomatous meningitis is often not recognized or diagnosed in clinical practice. Autopsy studies have found higher rates of lymphomatous meningitis than those observed in clinical practice. These autopsy studies suggest that 5% of all cancer patients will develop neoplastic meningitis during the course of their illness.
In a randomized, multi-center trial of patients with lymphomatous meningitis, treated either with 50 mg of DepoCyt administered every 2 weeks or standard intrathecal chemotherapy administered twice a week, DepoCyt achieved a complete response rate of 41% compared with a complete response rate of 6% for unencapsulated cytarabine. In this study, complete response was prospectively defined as (i) conversion of positive to negative CSF cytology and (ii) the absence of neurologic progression. DepoCyt also demonstrated an increase in the time to neurologic progression of 78.5 days for DepoCyt versus 42 days for unencapsulated cytarabine; however, there are no controlled trials that demonstrate a clinical benefit resulting from this treatment, such as improvement in disease-related symptoms, increased time to disease progression or increased survival.
DepoCyt was originally approved under the Accelerated Approval regulations of Subpart H of the Federal Food, Drug and Cosmetic Act, intended to make promising products for life-threatening diseases available to the market on the basis of preliminary evidence prior to formal demonstration of patient benefit. After completing required post-approval trials for DepoCyt, in April 2007, the FDA granted full approval of DepoCyt for treatment of patients with lymphomatous meningitis.
Our sales and marketing programs are structured to enhance the commercial value of DepoCyt by expanding awareness of the symptoms and benefits of treating lymphomatous meningitis, and marketing programs that focus on the positive product attributes of DepoCyt as compared to unencapsulated cytarabine. We are also exploring the potential role of DepoCyt in other cancers that can spread to the central nervous system.
DepoCyt is manufactured in the U.S. by Pacira.
3) Abelcet
Abelcet is a lipid complex formulation of amphotericin B used primarily in the hospital to treat immuno-compromised patients with invasive fungal infections. It is indicated for the treatment of invasive fungal infections in patients who are intolerant of conventional amphotericin B therapy or for whom conventional amphotericin B therapy has failed. Abelcet provides patients with the broad-spectrum efficacy of conventional amphotericin B, while providing significantly lower kidney toxicity than amphotericin B.

We acquired the U.S. and Canadian rights to Abelcet from Elan Pharmaceuticals PLC (Elan) in November 2002. As part of the acquisition, we also acquired the operating assets associated with the development, manufacture, sales and marketing of Abelcet in the U.S. and Canada, including a 56,000 square foot manufacturing facility in Indianapolis, Indiana. In addition to U.S. and Canada distribution rights, we also acquired the rights to develop and commercialize the product in Japan.
Invasive fungal infections are life-threatening, often affecting patients with compromised immune systems, such as those undergoing treatment for cancer, recipients of organ or bone marrow transplants or patients infected with the Human Immunodeficiency Virus (HIV). Invasive fungal infections can be caused by a multitude of different fungal pathogens that attack the patient’s weakened immune system. Effective treatment is critical and can mean the difference between life and death, and often must be initiated even in the absence of a specific diagnosis.
Over the past 20 years, there has been an increase in severe fungal infections largely as a result of advances in medical treatment, such as increasingly aggressive chemotherapy procedures, advances in organ and bone marrow transplantation procedures, and an increase in the population of immuno-compromised patients, namely transplant patients, patients with cancer undergoing chemotherapy, and patients with HIV/AIDS. Immuno-compromised patients are at risk from a variety of fungal infections that are normally combated by an individual’s healthy immune system. For these patients, such infections represent a major mortality risk.
Amphotericin B, the active ingredient in Abelcet, is a broad-spectrum polyene antifungal agent that is believed to act by penetrating the cell wall of a fungus, thereby killing it. In its conventional form, amphotericin B is particularly toxic to the kidneys, an adverse effect that often restricts the amount of the drug that can be administered to a patient. While still exhibiting residual nephrotoxicity, Abelcet is able to deliver therapeutic levels of amphotericin B while significantly reducing the kidney toxicity associated with the conventional drug.
Since 2004, we have experienced increased competitive market conditions for Abelcet, primarily due to the introduction of newer antifungal agents. We are addressing the competitive challenges we are facing through numerous data-driven initiatives designed to stabilize sales of Abelcet.
We manufacture Abelcet in the U.S.
4) Adagen
Adagen is a PEGylated bovine adenosine deaminase enzyme (ADA) used to treat patients afflicted with a type of Severe Combined Immunodeficiency Disease, or SCID, also known as the Bubble Boy Disease, which is caused by the chronic deficiency of ADA. We received U.S. marketing approval from the FDA for Adagen in March 1990. Adagen represents the first successful application of enzyme replacement therapy for an inherited disease. SCID results in children being born without fully functioning immune systems, leaving them susceptible to a wide range of infectious diseases. Currently, the only regulatory approved alternative to Adagen treatment is a well-matched bone marrow transplant. Injections of unmodified ADA are not effective because of its short circulating life (less than 30 minutes) and the potential for immunogenic reactions to a bovine-sourced enzyme. The attachment of PEG to ADA allows ADA to achieve its full therapeutic effect by increasing its circulating life and masking the ADA to avoid immunogenic reactions.
We are required to maintain a permit from the U.S. Department of Agriculture (USDA) in order to import ADA. This permit must be renewed on an annual basis. As of October 6, 2007, the USDA issued a permit to us to import ADA through October 6, 2008.

We sell Adagen on a worldwide basis. We utilize independent distributors in certain territories including the U.S., Europe and Australia. As of December 31, 2007, approximately 90 patients in 17 countries are receiving Adagen therapy. We believe some newborns with ADA-deficient SCID go undiagnosed and we are therefore focusing our marketing efforts for Adagen on new patient identification.
Like Oncaspar, we are investing in the improvement of the manufacturing processes, pharmaceutical properties, and changing the raw material from a bovine-derived source to a recombinant source for Adagen. This investment will primarily occur over the next few years.
We manufacture Adagen in the U.S.
ROYALTIES SEGMENT
An important source of our revenue is derived from royalties that we receive on sales of marketed products that utilize our proprietary technology.

PEG-INTRON is a PEG-enhanced version of Schering-Plough’s alpha interferon product, INTRON ® A, which is used both as a monotherapy and in combination with REBETOL ® (ribavirin) capsules for the treatment of chronic hepatitis C. Under our license agreement with Schering-Plough, Schering-Plough holds an exclusive worldwide license to PEG-INTRON. We continue to receive royalties on Schering-Plough’s worldwide sales of PEG-INTRON. Schering-Plough is responsible for all manufacturing, marketing, and development activities for PEG-INTRON. We designed PEG-INTRON to allow for less frequent dosing and to yield greater efficacy, as compared to INTRON A. PEG-INTRON is marketed worldwide by Schering-Plough and its affiliates. In December 2004, Schering-Plough’s subsidiary, Schering-Plough K.K., launched PEG-INTRON and REBETOL combination therapy in Japan. At that time, PEG-INTRON and REBETOL was the only PEGylated interferon-based combination therapy available in Japan, where an estimated one to two million persons are chronically infected with hepatitis C. In January 2007, Hoffmann-La Roche announced that it received approval for its competing PEGylated interferon-based combination therapy, Copegus (ribavirin) plus Pegasys (peginterferon alfa-2a (40KD)), following fast-track review by the Japanese regulatory agency.
In August 2007, we monetized 25% of our future royalties from the sales of PEG-INTRON for $92.5 million in gross proceeds.
PEG-INTRON is being evaluated in a number of ongoing clinical studies:
1) IDEAL Study — In January 2004, Schering-Plough began recruiting patients in the IDEAL study, which directly compares PEG-INTRON in combination with REBETOL versus Pegasys in combination with COPEGUS in 2,880 patients in the U.S. On January 14, 2008 Schering Plough reported preliminary IDEAL Study Results which showed similar sustained response rates between the two treatments, however fewer patients relapsed following the PEG-INTRON Combination Therapy.

2) COPILOT Study — PEG-INTRON is being evaluated for use as long-term maintenance monotherapy in cirrhotic patients who have failed previous treatment.

3) ENDURE Study — In January 2006, Schering-Plough announced that it was initiating a large multinational clinical trial, to evaluate the use of low-dose PEG-INTRON maintenance monotherapy in preventing or delaying hepatitis disease progression.

4) PROTECT Study — In May 2006, Schering-Plough announced the initiation of a large multicenter clinical trial in the U.S. to evaluate the safety and efficacy of PEG-INTRON and REBETOL combination therapy in liver transplant recipients with recurrent hepatitis C virus infection. The trial is targeted to enroll 125 patients in the U.S.

5) EPIC3 Study — In October 2006, Schering-Plough reported data from EPIC3, a large ongoing clinical study, showing that retreatment with PEG-INTRON and REBETOL combination therapy can result in sustained virologic response in patients with chronic hepatitis C who failed previous treatment with any alpha interferon-based combination therapy, including peginterferon regimens.

6) Schering-Plough Corporation announced on January 31, 2008, that the FDA accepted the PEG-INTRON sBLA for review and has granted Priority Review status for the adjuvant treatment of patients with Stage III melanoma. Based on this Priority Review status, the FDA reviews the application with the goal of taking action within six months of the sponsor’s submission of the sBLA. The application will be discussed by the FDA Oncology Drugs Advisory Committee on March 12, 2008. PEG-INTRON was also filed with the EMEA in Europe in the fall of 2007.

7) Finally, PEG-INTRON is being evaluated in several investigator-sponsored trials as a potential treatment for various cancers, including several earlier stage clinical trials for other oncology indications.
We have out-licensed our proprietary PEG and single chain antibody, or SCA, technologies on our own and through agreements with Nektar Therapeutics, Inc. (Nektar) and Micromet AG (Micromet). Effective January 2007, we terminated our agreement with Nektar. Under the original 2002 agreement, Nektar had the lead role in granting sublicenses for certain of our PEG patents and we receive royalties on sales of any approved product for which a sublicense has been granted. While we will continue to receive royalties on sales of products already on the market, or those for which sublicenses were previously granted, Nektar will only have the right to grant any additional sublicenses to a limited class of our PEG technology. We have the right to use or grant licenses to all of our PEG technology for our own proprietary products or those we may develop with co-commercialization partners. Currently, we are aware of five third-party products for which Nektar has granted sublicenses to our PEG technology: Hoffmann-La Roche’s Pegasys; OSI Pharmaceuticals’ (OSI) Macugen ® (pegaptanib sodium injection); Cimzia (formerly CDP870), owned by UCB, a Belgium-based biopharmaceutical company; Affymax and Takeda Pharmaceutical’s Hematide™; and an undisclosed product of Pfizer’s that is in early-stage clinical development. Pegasys is currently being marketed for the treatment of hepatitis C and Macugen is currently being marketed through a collaboration between OSI and Pfizer for the treatment of neovascular (wet) age-related macular degeneration, an eye disease associated with aging that destroys central vision.
Cimzia is an anti-TNF-alpha PEGylated antibody fragment. A Biologics License Application (BLA) was filed with the FDA for CIMZIA for the treatment of Crohn’s disease on February 28, 2006. CIMZIA was approved in Switzerland for the treatment of Crohn’s disease in September 2007. The European Medicines Agency adopted a negative opinion in the treatment of patients with Crohn’s disease. UCB submitted an appeal requesting re-examination of the opinion. A decision is expected during the first half of 2008. The Marketing Authorization Application was based on the pivotal PRECiSE studies involving over 1,500 patients with Crohn’s disease. The US regulatory application for the treatment of rheumatoid arthritis was submitted and accepted in January 2008. Filing in Europe is planned for the first half of 2008. UCB completed a Phase II re-treatment study in psoriasis with patients who had relapsed during the off-treatment period of the initial Phase II study. Results show that the majority of the re-treated patients are able to recapture response and the re-treatment was well tolerated.
Hematide is a synthetic peptide-based erythropoiesis-stimulatin g agent being evaluated by Affymax and Takeda Pharmaceutical in two phase 2 clinical trials for the treatment of anemia associated with chronic kidney disease and of anemic cancer patients undergoing chemotherapy. In October 2007, Affymax announced that the first patient was dosed in the Phase 3 clinical program to treat anemia in chronic renal failure patients.
We receive a royalty from medac Gmbh (medac), a private company based in Germany, on sales of Oncaspar KH recorded by medac.


CEO BACKGROUND



Pursuant to the provisions of the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated By-laws, as amended, the Board of Directors is comprised of three classes of directors, designated Class I, Class II and Class III. One class of directors is elected each year to hold office until the third annual meeting of stockholders after such election and until successors of such directors are duly elected and qualified. The Governance and Nominating Committee has recommended to the Board, and the Board also recommends, that the stockholders elect the Class III director nominees at this year’s Annual Meeting to serve until the 2011 Annual Meeting and until their successors are duly elected and qualified. The proxies solicited by this Proxy Statement cannot be voted for more than three nominees at the Annual Meeting. The nominees for election to the office of director, and certain information with respect to their backgrounds and the backgrounds of non-nominee directors, are set forth below. It is the intention of the persons named in the accompanying proxy card, unless otherwise instructed, to vote to elect the nominees named herein as Class III directors. In the event that any nominee named herein is unable or unwilling to serve as a director, discretionary authority is reserved to the Board of Directors to vote for a substitute. The Board of Directors has no reason to believe that any nominee named herein will be unable to serve if elected.


Class III Director Nominees for Election at the 2008 Annual Meeting

Rolf A. Classon , age 62, has served as a director of the Company since January 1997. Mr. Classon is chairman of Hillenbrand Industries, a provider of health care and funeral services, and served as its interim chief executive officer from May 2005 until March 2006. From 2002 to 2004, Mr. Classon served as Chairman of the Executive Committee of Bayer Healthcare AG, the healthcare division of Bayer AG, a global healthcare and chemicals company, and, from 1995 to 2002, Mr. Classon served as an Executive Vice President of Bayer Corporation and President of Bayer Diagnostics. From 1991 to 1995, Mr. Classon was an Executive Vice President in charge of Bayer Diagnostics’ Worldwide Marketing, Sales and Service operations. From 1990 to 1991, Mr. Classon was President and Chief Operating Officer of Pharmacia Biosystems A.B. Prior to 1991, Mr. Classon served as President of Pharmacia Development Company Inc. and Pharmacia A.B.’s Hospital Products Division. Mr. Classon currently serves as a director of Auxilium Pharmaceuticals, Millipore Corporation, Hillenbrand Industries, PharmaNet Development Group, Inc. and Eurand N.V.

Robert LeBuhn , age 75, has served as a director of the Company since August 1994. Mr. LeBuhn is a private investor. He is a Trustee and Chairman of the Geraldine R. Dodge Foundation, a Trustee and Secretary of All Kinds of Minds, a Trustee of Executive Service Corp., and a Trustee of the Aspen Music Festival and School and President of its National Council.

Robert C. Salisbury , age 64, has served as a director of the Company since May 2005. In 1998, Mr. Salisbury retired from Pharmacia & Upjohn, Inc., where he had most recently served as Executive Vice President and Chief Financial Officer. Previously, Mr. Salisbury served as Executive Vice President, Finance and Chief Financial Officer at The Upjohn Company. Mr. Salisbury first joined The Upjohn Company in 1974 and over a career of more than 20 years, he served in various management posts in finance and strategic planning.
The Board of Directors recommends a vote FOR Messrs. Classon, LeBuhn and Salisbury as Class III Directors (Proposal No. 1 on the Proxy Card).
Continuing Class I Director Serving Until the 2009 Annual Meeting

Phillip M. Renfro , age 62, has served as a director of the Company since January 2005. Mr. Renfro has been a consultant and part-time in-house counsel for various companies since his retirement at the end of 2006. Mr. Renfro was a partner at the law firm of Fulbright & Jaworski, L.L.P. from 1984 until his retirement at the end of 2006. Prior to joining Fulbright & Jaworski, Mr. Renfro was Chief Executive Officer of Resco International, an international oilfield service company and Vice President and General Counsel of Weatherford International, one of the largest international oilfield service companies in the United States, from 1977 to 1983. Mr. Renfro currently serves as a director of GlobalSCAPE, Inc., a public company engaged in developing and marketing secure file management software.
Continuing Class II Directors Serving Until the 2010 Annual Meeting

Jeffrey H. Buchalter , age 50, has served as the Company’s President and Chief Executive Officer since December 2004, and as Chairman of the Company’s Board of Directors since September 2004. Having held several key positions at a number of multinational pharmaceutical companies, Mr. Buchalter has more than 20 years of industry experience. Prior to joining the Company, Mr. Buchalter served as President and Chief Executive Officer of ILEX Oncology, Inc. from January 2002 through December 2004 after serving as President from September 2001 through December 2001. During his tenure at ILEX, Mr. Buchalter led the company’s transformation from a drug development contract research organization to a product-driven pharmaceutical company, with a high quality oncology franchise and established commercialization expertise. ILEX Oncology was acquired in December 2004 by Genzyme Corporation for $1.1 billion. Throughout his career, he has directed the development and commercialization of a number of innovative pharmaceutical products which meet the needs of healthcare professionals and patients worldwide. As Group Vice President and Head of the Worldwide Oncology Franchise at Pharmacia Corporation from 1997 to 2000, Mr. Buchalter was pivotal in strategically building the company’s global oncology franchise through new product approvals and launches, as well as the 1999 acquisition of Sugen, Inc., a transaction that enhanced Pharmacia’s drug discovery and development capabilities as well as its oncology pipeline. Before joining Pharmacia, Mr. Buchalter held positions at Wyeth (formerly American Home Products) and Schering-Plough Corporation. From 1993 to 1997, as Group Director for the women’s healthcare business of American Home Products, Mr. Buchalter played a key role in the life cycle management of its multibillion-dollar drug PREMARIN ® (conjugated estrogens tablets, USP), and helped to develop and commercialize the hormone replacement therapy PREMPRO TM (conjugated estrogens/medroxyprogeste rone acetate tablets). While at Schering-Plough Corporation in the late 1980s and early 1990s, he led the launch of INTRON ® A (interferon alpha-2b), one of the first cytokines to be approved for hairy cell leukemia. Among his career honors, Mr. Buchalter received the American Cancer Society’s Joseph F. Buckley Memorial Award for commitment to cancer control and involvement in the oncology pharmaceutical field. Additionally, former President George H.W. Bush invited him to serve as a collaborating partner in the National Dialogue on Cancer. Mr. Buchalter has been a strong proponent in accelerating the development of novel new therapeutics for children diagnosed with cancer. He has been invited to participate in a selective panel of experts addressing this global challenge. Mr. Buchalter received his B.S. in finance from Seton Hall University, and an M.B.A. in marketing from Temple University. Mr. Buchalter also serves as a member of the Board of Directors of TopoTarget A/S, a publicly held Danish biopharmaceutical company, and as Chairman of the Board of Directors of MacroGenics Inc., a private, venture-backed biotechnology company.

Goran A. Ando , M.D., age 59, has served as a director of the Company since November 2004. From April 2003 through July 2004, he served as Chief Executive Officer of Celltech Group plc., a biopharmaceutical company now part of UCB, S.A. Prior to joining Celltech in April 2003, Dr. Ando served in various senior posts at Pharmacia Corporation, a global pharmaceutical company now part of Pfizer, Inc., commencing in 1995. In his most recent role at Pharmacia, Dr. Ando was Executive Vice President and President of R&D and also had executive responsibilities for IT, manufacturing nd business development. Prior to his most recent role with Pharmacia, Dr. Ando held various executive positions, including Executive Vice President & Deputy Chief Executive Officer, Pharmacia AB, Sweden; Executive Vice President, Worldwide Science & Technology, Pharmacia & Upjohn, UK; and Chairman, Pharmacia & Upjohn AB, Sweden. Prior to joining Pharmacia, Dr. Ando held various senior positions with Glaxo Ltd., Bristol Myers International Group, and Pfizer International. Dr. Ando currently serves as a director at public companies NicOx SA, Novo Nordisk A/S and Inion Oy, and at private companies Novexel SA, S*BIO Pte Ltd., Bio*One Capital Pte Ltd., Novo A/S and EUSA Pharma Inc.

Victor P. Micati , age 68, has served as a director of the Company since November 2004. Mr. Micati is a retired senior executive of Pfizer Inc. In 1999, Mr. Micati retired from Pfizer where he most recently had served as Executive Vice President of the Pharmaceutical Group of Pfizer and Vice President of Pfizer Inc. Mr. Micati first joined Pfizer in 1965 and over a 34-year career served in numerous capacities, including: President of European Operations; Executive Vice President of Pfizer Europe; Senior Vice President, Pharmaceuticals; Vice President of Pharmaceutical Development, Pfizer International; and Vice President of Marketing, Pfizer Laboratories. Mr. Micati also served as a member of the Pfizer International Board of Directors. Mr. Micati is currently a consultant to the pharmaceutical industry and is a member of the Board of Trustees of the Monterey Institute of International Studies.
There are no family relationships among any of the Company’s directors or executive officers.

DIRECTORS’ NOMINATION

Process for Identifying and Evaluating Nominees. The Charter of the Governance and Nominating Committee specifies the process for nominating persons for election to the Board. The committee will solicit nominations for new directors and screen the list of potential new directors submitted to it by other directors or any other sources and decide whether the assistance of a search firm is needed, and if so, choose the firm. After a review of board candidates and after considering the advice of the Chairman of the Board and the Chief Executive Officer, the committee will designate which candidates, if any, are to be interviewed. Such candidates will be interviewed by the chairman of the Governance and Nominating Committee, the Chairman of the Board and the Chief Executive Officer and may be interviewed by other directors of the Company. After the interviews are completed, the committee will recommend to the Board which individuals it approves as nominees for membership on the Board. Current directors standing for reelection are not required to participate in an interview process.
Criteria for Board Membership. The Charter of the Governance and Nominating Committee does not set forth the specific criteria for identifying and recommending new candidates to serve as directors; however, candidates may be interviewed by the Governance and Nominating Committee to evaluate the following, among other qualifications it may deem appropriate:
• experience as a director of another publicly-traded corporation, experience in industries or with technologies relevant to the Company, accounting or financial reporting experience, or such other professional experience that the Governance and Nominating Committee may determine to qualify an individual for Board service;
• business judgment and temperament, ethical standards, view of the relative responsibilities of a director and management, independent thinking, articulate communication and intelligence; and
• any other factors as the Governance and Nominating Committee deems appropriate, including judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members, and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board.
Stockholder Nominees. The Governance and Nominating Committee will consider written proposals from stockholders for nominees for director. Any such nominations should be submitted to the Governance and Nominating Committee, c/o the Secretary of the Company, and should include the following information: (a) all information relating to such nominee that is required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) the names and addresses of the stockholders making the nomination and the number of shares of Common Stock that are owned beneficially and of record by such stockholders; and (c) appropriate biographical information and a statement as to the qualification of the nominee. This information should be submitted not less than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. The manner in which the committee evaluates potential directors will be the same for candidates recommended by the stockholders as for candidates recommended by others.
On January 11, 2008, DellaCamera Capital Management, LLC and certain of its affiliates (“DellaCamera”) delivered a notice to the Company nominating three candidates to stand for election to the Board of Directors at the 2008 Annual Meeting.
Following discussions between the Company and DellaCamera, on February 11, 2008, the Company and DellaCamera entered into a letter agreement pursuant to which the Company agreed that on or before May 31, 2008, it will increase the size of the Board by one and add a new independent director selected by the Company to fill the newly created directorship, and DellaCamera agreed to withdraw its nomination of three candidates to stand for election to the Board.


MANAGEMENT DISCUSSION FROM LATEST 10K


Results of Operations
Effective December 31, 2005, we changed our fiscal year-end from June 30 to December 31. The discussion and analysis that follows covers our results of operations and cash flows for the three years ended December 2007, 2006 and 2005. Because of the change in fiscal year, the full-year 2005 information was compiled from our Transition Report on Form 10-K for the six months ended December 31, 2005, our Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and our Quarterly Report on Form 10-Q for quarter ended March 31, 2005. Quarterly data were not audited.
Summary-level overview year ended December 31, 2007 compared to 2006
Total revenues of $185.6 million were unchanged in 2007 compared to 2006. Products segment revenues remained constant as a group. A reduction in 2007 fourth-quarter royalty revenues from PEG-INTRON due to the sale of a 25% interest therein was offset by a rise in contract manufacturing revenues for the year. Income before tax for the year ended December 31, 2007 was $85.0 million compared to $22.1 million in 2006. Major operating factors contributing to the rise were the gain on the sale of the royalty interest of $88.7 million partially offset by $7.7 million of restructuring costs. Company-wide spending on research and development rose approximately $13.0 million in 2007 compared to 2006, but acquired in-process research and development expenditures of $11.0 million experienced in 2006 were not repeated in 2007. Other major effects include: $7.0 million of legal costs related to securing the supply of Oncaspar raw material in 2006, not incurred in 2007; a $13.8 million gain on sale of equity securities in 2006 not recurring in 2007 and lower interest expense in 2007 of $4.7 million compared to 2006, due to the refinancing and repurchases of our debt.
Summary-level overview year ended December 31, 2006 compared to 2005
Total revenues rose $29.1 million for the year ended December 31, 2006 to $185.7 million from $156.6 million in full year 2005. The largest component of total revenues is product sales which grew by 7% in the year ended December 31, 2006 to $101.0 million. Total revenues reflect four full quarters of royalties in 2006 versus approximately three quarters in 2005 contributing to a higher increase than actual growth in royalty activity. There was a one-quarter deferral of royalty revenue in 2005 to improve the recognition process. Income before tax for the year ended December 31, 2006 was $22.1 million as compared to a loss before income tax of $312.5 million for the twelve months ended December 31, 2005. Our financial results in 2005 were significantly impacted by the write-down of intangible assets and goodwill totaling $284.1 million. The one-quarter deferral in royalty revenue recognition in 2005 also affected comparisons of operating results.
Further discussion of these and other revenue and profitability fluctuations is contained in the segment analyses that follow.
The percentage changes throughout this Management’s Discussion and Analysis are based on thousands of dollars and not the rounded millions of dollars reflected throughout this section. Following is a reconciliation of segment profitability to consolidated income (loss) before income tax (millions of dollars):

Products Segment

Year ended December 31, 2007 compared to 2006
Net product sales of $100.7 million for 2007 are largely unchanged on an aggregate basis from the total reached in 2006, however, the composition of sales by product reflects some significant shifts. Sales of our lead oncology agent, Oncaspar, grew $7.8 million or 25% for the year ended December 31, 2007 to $38.7 million compared to 2006. The growth in volume of Oncaspar during 2007 was approximately 12%. The U.S. Food and Drug Administration (FDA) approved Oncaspar for the first-line treatment of patients with acute lymphoblastic leukemia (ALL) in July 2006. The increase in Oncaspar sales is attributable to the continued transition to its first-line use and the adoption of protocols in pediatric and adult patients some of which call for dosage regimens that will include a greater number of weeks of Oncaspar therapy. There was also an April 1, 2007 price increase. Sales of DepoCyt, for treatment of lymphomatous meningitis, and Adagen, for the treatment of severe combined immuno-deficiency disease, tend to fluctuate from period to period due to their small patient bases. Sales of DepoCyt increased to $8.6 million or 4% in 2007 from $8.3 million last year whereas sales of Adagen decreased 3% in 2007 to $24.5 million from $25.3 million in 2006. As noted last year, Adagen sales in 2006 were somewhat elevated due to a newly negotiated distributor contract and that distributor adjusting inventory levels in line with industry norms. Both DepoCyt and Adagen were impacted by an April 1, 2007 price increase. In April 2007, the FDA granted full approval of DepoCyt. Originally, DepoCyt was conditionally approved under the FDA’s Sub Part H regulation. Abelcet, our intravenous antifungal product, experienced sales in the U.S. and Canada that were 21% lower for the year ended December 31, 2007 at $28.9 million than the $36.5 million recorded for the year ended December 31, 2006 due to continued competition from the numerous therapeutics in the anti-fungal market.
Year ended December 31, 2006 compared to 2005
Net product sales of $101.0 million in the year ended December 31, 2006 represented 7% growth over net product sales of $94.2 million in the year ended December 31, 2005. The growth was primarily attributable to volume increases of approximately 20% each for Oncaspar and Adagen. The continued decline in sales of Abelcet was more than offset by growth in our other products. Sales of Oncaspar grew to $30.9 million or 27% for the year 2006 compared to $24.4 million in 2005. The growth of Oncaspar was mainly attributable to its continued adoption in certain protocols by hospitals and cooperative groups. On July 25, 2006, we announced the approval of Oncaspar for the first line treatment of patients with ALL. Sales of DepoCyt increased to $8.3 million in 2006 from $7.9 million in 2005 due to pricing. Abelcet sales in the U.S. and Canada declined 12% in 2006 compared to 2005 in the face of continued competition from current and new therapeutics in the anti-fungal market. Adagen experienced growth in sales of 25% from $20.4 million in 2005 to $25.3 million in 2006. The increase was primarily the result of a newly negotiated contract with our distributor and the distributor’s establishment during the fourth quarter of 2006 of inventory levels in line with industry norms.

Cost of product sales
In 2007, cost of products sold rose as a percentage of net sales to approximately 41% from 38% in 2006.
In December 2006, we entered into supply and license agreements with Ovation for the active ingredient used in the product of Oncaspar. A resulting license fee of $17.5 million caused a $2.3 million increase in 2007 amortization expense charged to Oncaspar cost of products sold. In 2008, the raw material component of the Oncaspar cost of goods will increase, as we start to sell product that has been manufactured using the active ingredient purchased through the new supply agreement with Ovation. Higher supplier costs of materials and negative production variances contributed to lower Adagen and Abelcet margins, respectively, in 2007. Also, the ongoing transfer of production of Oncaspar and Adagen from our South Plainfield, New Jersey facility to our Indianapolis, Indiana facility, discussed under restructuring below, resulted in $1.9 million of cost related to required production test batches to validate the new production processes and assure continued product quality and stability.
In the year ended December 31, 2006, cost of products sold as a percentage of net sales remained relatively stable overall at 38% when compared to the year ended December 31, 2005. Oncaspar royalty costs were significantly reduced in 2006 by $5.3 million due to the January 1, 2006 negotiated lowering of royalties with Sanofi-Aventis. Offsetting this, in part, was a $4.1 million increase in amortization resulting from the intangible that arose from the $35.0 million payment made to Sanofi-Aventis in connection with the royalty reduction. Some inventory write-offs were also experienced in relation to Oncaspar, but other production costs were lower as a percent of sales resulting in a net improvement in margins for the product. Abelcet costs were favorably affected by the December 2005 write-down of related intangibles and the consequent lowering of amortization expense in 2006 as compared to 2005. Also, Abelcet inventory write-off losses experienced in 2005 were not repeated in 2006. These improvements in Abelcet cost of sales were largely offset by lower margins in Adagen due to the write-off of certain batch failures. DepoCyt margins remained relatively unchanged.
Research and development expenses
Products segment research and development spending increased by 50% in 2007 to $11.0 million from $7.3 million in 2006. Our existing marketed products are in the later stages of their respective life cycles. For this reason, research and development spending related to marketed products has been directed largely towards securing and maintaining a reliable supply of the ingredients used in their production — primarily in the production of Oncaspar and Adagen. In August 2006, we initiated a phase I clinical trial of Oncaspar to assure its safety and potential utility in the treatment of advanced solid tumors and lymphomas in combination therapy. As announced in February 2008, the Oncaspar solid tumor trial in combination therapy reached dose-limiting toxicities. The data are currently being analyzed to better understand whether the combination of Oncaspar and Gemzar warrants further development in solid tumors and lymphoma. Research and development spending on marketed products is expected to continue.
Selling and marketing expenses
Selling and marketing expenses consist primarily of salaries and benefits for our sales and marketing personnel, as well as other commercial expenses and marketing programs to support our sales force. Also included in selling and marketing expenses are the costs associated with our medical affairs function, including a medical science liaison group.
Selling and marketing expenses declined 6% to $31.9 million in 2007 when compared to $34.1 million in 2006, due primarily to lower promotional costs this year. In late 2007, we realigned our sales territories to improve the efficiency of our sales force. We continue to make selective investments in selling, marketing and medical affairs.

The aggregate spending on selling and marketing expense of $34.1 million during the year ended December 31, 2006 remained relatively constant compared to $33.9 million in the same period of 2005. Oncaspar expansion due to the first line approval for ALL announced in July 2006 was a key focus. We also supported a repositioning of Abelcet during 2006.
Amortization of acquired intangibles
Amortization expense of approximately $0.7 million in 2007 and $0.8 million in 2006 was principally related to Abelcet intangible assets. During the quarter ended December 31, 2005, we recognized an impairment write-down of nearly all Abelcet-related assets amounting to $133.1 million (see write-down of goodwill and intangibles below). This write-down significantly reduced periodic amortization expense in the year ended December 31, 2006 from $13.4 million in the twelve months ended December 31, 2005.
Write-down of goodwill and intangibles
The majority of our intangible assets prior to 2006 had been acquired in November 2002 with the acquisition of Abelcet. By late 2004 and into 2005, Abelcet sales had declined from historical levels and a long-term strategic plan completed in November 2005 indicated that it was unlikely sales would recover to prior levels. In light of this impairment indicator, we engaged an independent valuation specialist, Duff and Phelps, to assist us in determining the fair value of the Abelcet asset group and test for impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Initial testing disclosed that the future undiscounted net cash flows to be generated by the asset group were insufficient to cover the carrying value of the Abelcet-related intangibles. The fair value of these intangible assets was then calculated and a non-cash impairment charge was recognized in the Products segment for the excess of carrying amount over fair value in the aggregate amount of $133.1 million during the quarter ended December 31, 2005.
Effective in the quarter ended December 31, 2005, we changed the manner in which we manage and evaluate the performance of our operations which resulted in a change to our business segmentation and the identification of our related reporting units. This new segmentation necessitated the allocation of our existing goodwill to the newly identified reporting units on a relative fair-value basis. Further, we considered the historical declining performance of the Abelcet products and the impairment recognized of the related intangible assets to be indicators that our Products segment goodwill may be impaired. With the assistance of Duff and Phelps, we determined the fair value of our reporting units, to assist us with the allocation of our goodwill and estimate the fair value of currently marketed product intangibles. The allocation process resulted in the Products segment being assigned $144.0 million of goodwill. The ensuing testing to estimate the implied fair value of this goodwill disclosed that it was impaired in its entirety. Accordingly, a non-cash impairment loss related to goodwill was recorded in the amount of $144.0 million in the Products segment during the quarter ended December 31, 2005.
Restructuring
During the first quarter of 2007, we announced plans to consolidate our manufacturing operations in our Indianapolis, Indiana location. This action was taken as part of our continued efforts to streamline operations. All operations at our South Plainfield, New Jersey facility are expected to be transferred to our Indianapolis facility in 2008, resulting in the incurrence of certain restructuring and exit costs. Among these costs will be employee severance and related benefits for affected employees estimated to be $3.5 million. These amounts are expected to be paid in 2008 upon the successful transfer of production to our Indianapolis facility and closure of our South Plainfield facility. Severance charges and related benefits of $2.2 million have been recognized through December 31, 2007. We expect to incur other costs during 2008 related to the relocation of goods and equipment, which will be recognized when costs are incurred.

Certain assets consisting primarily of manufacturing equipment that will not be transferred to the Indianapolis facility, nor continue to be used in manufacturing at the South Plainfield facility were decommissioned during 2007. Accordingly, we recognized the remaining depreciation totaling $5.1 million on these assets during 2007.
In the three months ended June 30, 2007, $1.9 million, the cost of required validation batches at our Indianapolis facility for both Oncaspar and Adagen, was expensed and included in cost of product sales. There were no charges for validation batches during the other quarters of 2007.
We may experience costs associated with the lease termination or the subleasing of the South Plainfield facility. Such costs will be incurred and recognized when we cease use of the property in 2008. However, we do not know at this time what the final use or disposition of the leased South Plainfield facility will be.
Additionally, during 2007, we recognized $0.4 million of employee severance and related benefits when we combined our previous two specialized sales forces into one sales team. This, in addition to severance costs of $2.2 million and equipment write-downs of $5.1 million associated with the manufacturing consolidation, discussed above, brought total 2007 restructuring charges to $7.7 million.




MANAGEMENT DISCUSSION FOR LATEST QUARTER


Overview

We are a biopharmaceutical company dedicated to the development, manufacturing and commercialization of important medicines for patients with cancer and other life-threatening conditions. We operate in three business segments: Products, Royalties and Contract Manufacturing. We have a portfolio of four marketed products, Oncaspar, DepoCyt, Abelcet and Adagen. Our drug development programs utilize several cutting-edge technologies, including our PEGylation Customized Linker Technology TM and the LNA, or Locked Nucleic Acid, technology, to create product candidates with benefits such as reduced dosing frequency and less toxicity. Our PEGylation technology was used to develop two of our products, Oncaspar and Adagen, and has created a royalty revenue stream from licensing partnerships for other products developed using the technology. Enzon also engages in contract manufacturing opportunities for several pharmaceutical companies to broaden the Company’s revenue base.

On May 7, 2008, we announced that the Board of Directors has authorized a plan to spin-off our biotechnology activities in a transaction that would result in two independent public companies. The newly independent biotechnology business would be engaged in research and development based on our PEGylation and the Locked Nucleic Acid technologies, among others, to develop therapeutics for cancer and other life-threatening diseases. We plan to contribute $100.0 million in cash and securities and $50.0 million in the form of an interest-bearing term note as well as certain operating assets and liabilities to the newly created company. We would retain the currently marketed products, Oncaspar, DepoCyt, Abelcet and Adagen, the rights to current and future royalty revenues from existing licenses, including PEG-INTRON, Pegasys, Macugen, Cimzia and Hematide, certain deferred tax assets, including net operating loss carryforwards and our manufacturing facility in Indianapolis, Indiana. Our outstanding convertible notes would remain an obligation of Enzon. Completion of the spin-off is subject to numerous conditions, including final approval by the Board of Directors and the effectiveness of a registration statement with the SEC. The Company continues to work with the SEC towards finalizing the registration statement on Form 10 under the name Evivrus, Inc.

On August 11, 2008, we announced we were exploring strategic alternatives for our specialty pharmaceuticals business. These alternatives included, among other things, selling the entire specialty pharmaceuticals business, or selling one or more of our marketed products, Oncaspar, DepoCyt, Abelcet and Adagen, and our Indianapolis, Indiana manufacturing facility. As announced on November 5, 2008, the potential sale of the specialty pharmaceuticals business has been negatively impacted by the external financial markets, effectively eliminating this alternative from further consideration at this time.

Results of Operations

Three-Month and Nine-Month Periods Ended September 30, 2008 and 2007


Overview

Following is a reconciliation of segment profitability to consolidated (loss) income before income tax (millions of dollars).

We do not allocate certain corporate income and expenses not directly identifiable with the respective segments, including exploratory and preclinical research and development expenses, general and administrative expenses, investment income and interest expense. Research and development expenses are considered corporate expenses unless they relate to an existing marketed product or a product candidate enters Phase III clinical trials at which time related research and development expenses would be chargeable to one of our operating segments. Depreciation and income taxes are not allocated to the segments.

The 16 percent growth in net product sales for the three months ended September 30, 2008 compared to the same period of 2007 was attributable primarily to higher revenues from our oncology product, Oncaspar, and our treatment for immunodeficiency disease, Adagen. Oncaspar unit sales were essentially unchanged for the quarter. For the nine months ended September 30, 2008, product sales grew by 18 percent, led by Oncaspar and Adagen. The year-to-date increase in Oncaspar revenues is primarily attributable to a price increase effective in the first quarter of 2008 necessitated by significantly higher raw material cost and expenses related to the development of manufacturing process improvements and technology transfer. See discussions below in cost of sales and research and development regarding increased production costs and production process enhancements. The growth in sales of Oncaspar reflects its adoption in certain patient treatment protocols by hospitals and cooperative groups. Adagen sales in 2008 were favorably affected by a first-quarter price increase. Sales of DepoCyt, for treatment of lymphomatous meningitis, and Adagen tend to fluctuate from quarter-to-quarter. Abelcet, for treatment of invasive fungal infections, continues to experience competitive pressures in the marketplace, although the rate of sales decline has moderated recently.

Cost of sales

Cost of sales of marketed products for the three months ended September 30, 2008 decreased to $10.4 million, or 36 percent of sales, compared to $11.2 million, or 45 percent of sales, for the comparable three-month period of 2007. This was primarily due to unfavorable Abelcet manufacturing variances experienced during the third quarter of 2007. On a nine-month period-to-period basis, cost of products sold as a percentage of sales declined from approximately 43 percent to 41 percent. Cost of products sold as a percentage of sales declined from approximately 41 percent of sales to 39 percent of sales in the same nine-month comparison after excluding two separate charges each for $1.9 million in the second quarter of 2008 and 2007. Included in the second-quarter of 2008 amount was $1.9 million of accelerated amortization associated with a $5.0 million licensing milestone payment that was triggered during that quarter. The remaining $3.1 million of this milestone payment will be recognized in cost of sales over its remaining life of 6 years. The second-quarter 2007 cost of sales includes a $1.9 million charge for test batches produced in connection with the transfer of production of Oncaspar and Adagen from our South Plainfield, New Jersey facility to our Indianapolis, Indiana facility. Production of such batches is necessary in order to validate the new production processes and assure the continued quality and stability of the Oncaspar and Adagen products. The gross margin on sales of Oncaspar was lower during the nine months ended September 30, 2008 compared to the same period in 2007 due to the timing of the effects of raw material price increases arising from a December 2006 supply agreement. The full effect of this cost increase was not reflected in cost of products sold until the latter half of 2007. The gross margin on Oncaspar showed a one percentage point improvement in the quarter ended September 30, 2008 compared to the same period last year.

Research and development

Research and development spending with respect to marketed products, primarily Oncaspar and Adagen, rose 179 percent from $1.6 million in the third quarter of 2007 to $4.5 million in the third quarter of 2008. On a year-to-date basis research and development expenses rose from $7.6 million to $11.7 million or 53 percent. As previously disclosed, we are investing in the next generation of L-asparaginase and recombinant adenosine deaminase enzyme (ADA). We will also invest during the next few years to enhance and secure the supply of Oncaspar and Adagen. We intend to continue to increase efforts to improve the manufacturing processes and pharmaceutical properties of both Oncaspar and Adagen.

Selling and marketing expenses

Selling and marketing expenses consist primarily of expenses related to sales and marketing personnel, other commercial expenses and marketing programs to support our sales force as well as medical education. Selling and marketing expenses for the three months ended September 30, 2008 were $7.6 million, down 2 percent from $7.7 million in the third quarter of 2007. On a year-to-date, basis selling and marketing expense decreased 5 percent to $22.1 million in 2008 from $23.3 million for 2007. In both periods, the reduction in selling and marketing expense reflects the effects of the sales force realignment that took place in late 2007. Also included in selling and marketing expenses are the costs associated with our medical affairs program, which is continuing to expand, offsetting to some degree the savings from the sales force realignment.

Restructuring

During the first quarter of 2007, we announced plans to consolidate our manufacturing operations in our Indianapolis location. This action was taken as part of our continued efforts to streamline operations. The transfer of operations at our South Plainfield facility to our Indianapolis facility is essentially complete, resulting in the incurrence and full accrual of certain employee severance and facility exit costs. Among these costs were employee severance and related benefits for affected employees of approximately $3.7 million. Payment of these amounts has commenced and is expected to continue into 2009. Severance charges and related benefits of $2.2 million had been recognized through December 31, 2007. An additional $1.5 million of severance costs were recognized during the first nine months of 2008.

A reassessment of the estimated time to complete the manufacturing consolidation resulted in shortening the amortization period for leasehold improvements at South Plainfield resulting in an accelerated amortization charge of $226,000 in the first quarter of 2008 and $246,000 in the second quarter of 2008 included in restructuring expense. In addition, certain assets consisting primarily of manufacturing equipment that will not be transferred to the Indianapolis facility, nor continue to be used in manufacturing at the South Plainfield facility have been identified and written off. We recognized the remaining depreciation totaling $5.1 million on assets decommissioned during the third quarter of 2007 and additional write-downs of $147,000 and $204,000 during the second and third quarters of 2008, respectively.

During 2007, $1.9 million, the cost of required validation batches at our Indianapolis facility for both Oncaspar and Adagen, was expensed and included in cost of product sales. There have been no such charges for validation batches during 2008.

We may experience additional restructuring charges associated with the lease termination or the subleasing of the South Plainfield facility. When we cease use of the property, a determination will be made as to the appropriate accounting. Such costs may be incurred and recognized when we terminate the lease or enter into an unfavorable sublease. As of the date of this report, we do not know what the final disposition of the leased South Plainfield facility will be.

Revenues

PEG-INTRON royalties account for the majority of our total royalty revenues. In August 2007, we sold a 25 percent interest in our future PEG-INTRON royalties as described below. During the three months ended September 30, 2008, PEG-INTRON royalty revenue declined 26 percent compared to the prior year third quarter, in line with the sold interest. Combined royalties from Pegasys and Cimzia in the third quarter of 2008, represented an increase of approximately $0.8 million over the corresponding quarter of 2007 due to timing of shipments. The increased royalties moderated the overall decline in third-quarter royalty revenues to 20 percent. For the nine months ended September 30, 2008, the period-over-period decline in royalty revenues was 16 percent. Royalties on PEG-INTRON decreased by 20 percent in the first nine months of 2008, despite the sale of the 25 percent interest in the royalty stream indicating strong underlying performance of the product.

During the quarter ended September 30, 2007, we sold a 25 percent interest in future royalties payable to us by Schering-Plough Corporation on net sales of PEG-INTRON occurring after June 30, 2007. The purchaser of the 25 percent interest will be obligated to pay an additional $15.0 million to us in the first quarter of 2012 if it receives a certain threshold level of royalties on sales of PEG-INTRON occurring from July 1, 2007 through December 31, 2011. The gain on the sale of the royalty interest, net of related costs, was $88.7 million. The $15.0 million contingent gain will be recognized when and if the contingency is removed and collection is assured.

Costs and expenses

Current royalty revenues do not require any material specific maintenance costs. At some point in the future, costs associated with initiation of new outlicensing agreements that could result in our receipt of a royalty stream and, if necessary, costs necessary to maintain the underlying technology may be charged to the Royalties segment.



CONF CALL

Craig Tooman - Executive Vice President of Finance and Chief Financial Officer

Good morning and thank you for joining us today. I would like to remind you that during the conference call we will be making forward-looking statements that represent the Company's intentions, expectations, or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's press release and the Company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. Those factors include but are not limited to timing, success, and cost of clinical studies, our ability to obtain regulatory approval of products, market acceptance of, and continuing demand for our products, and the impacts 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 SEC, including our annual report on form 10K for the period ended December 31, 2007. Furthermore, our information discussed on today's call is accurate as of today, and we do not intend to update it.

Again, this quarter, all business segments reported strong results. This broad-based revenue increase is a real reflection of some of the longer term planning efforts at Enzon. It is also very gratifying to have extinguished the Company's debt burden due in 2008 in its entirety on July 1. You will recall that we inherited a $400 million debt burden when we first arrived at Enzon in 2005 and strategically financed the Company over the last two years.

As you can see from today's release, Enzon reported a net loss of $1.7 million or $0.04 per diluted share this their quarter compared a net loss of $2 million or $0.04 for the three months ended June, 2007. Our results for this quarter are quite a bit better than expectations. I'll highlight a few reasons for this. As I mentioned, revenues were very solid again this quarter. Sales of the product segment comprised of Oncaspar, DepoCyt, Abelcet and Adagen increased 17% to $29.2 million this quarter compared $25 million for the comparable period in 2007.

Higher revenues this quarter were mostly attributed to sells from our oncology product, Oncaspar. We continued to see additional adoption in the ALL market in both the pediatric and adult settings. Oncaspar is growing nicely both in units and dollars and our sales and marketing team have a nice platform for sustainable growth with this brand. Sales of DepoCyt for lymphomatous meningitis were $2.4 million this quarter, up from $2.1 million for the comparable period in 2007. And sales of Adagen, enzyme replacement therapy used to treat patients with severe combined immune efficiency disease, increased to $7 million this quarter from $6.6 million in the second quarter of 2007. Sales of Abelcet in US and Canada this year were relatively stable at $6.6 million. Given the competitive antifungal market we are encouraged by the early stabilization of Abelcet.

Revenues from the Company's royalty segment decreased 18% this quarter to $15 million as compared to $18.3 million for the same three-month period in 2007. Our royalty revenues continue to perform quite well from the previous year when you factor in the sale of 25% of the royalty interest in PEG-INTRON which occurred in August of 2007. Again, royalties were down 18%, but we sold 25% of the PEG-INTRON royalty. The revenues from the other products from which we received royalties also continued to perform well, and we expect to add royalties from Cynzia by the fourth quarter.

The Company's revenues from the contract manufacturing segment increased to $6.6 million for the three months ended June 30, 2008 as compared to $5.9 million in the corresponding period of the prior year. This increase was due to the timing of shipments to our customers. However, we do continue to see positive results from our ongoing efforts to better utilize our manufacturing operations.

In the first quarter of 2008, Company's cost of goods sold increased to $1704 million from $15.3 million, included in the second quarter of 2008 were amortization costs of $1.9 million, related to a $8 million sales milestone in connection with our 2007 amendment to our Oncaspar license. This payment will not be made until January of 2009. However, since we have determined that it is likely that we will achieve this milestone, we started amortizing this cost.

Going forward, the additional amortization from this agreement will be approximately $125,000 per quarter, through 2014, which is the end of the agreement. Also included in the COGS in 2007 we incurred validation costs of $1.9 million in the second quarter related to certain production batches, associated with the consolidation of our products from the South Plainfield, New Jersey, location to the facility in Indianapolis. Excluding these costs in both years, which are equal in magnitude, the gross margin was relatively unchanged from year to year.

The Company's R&D expenses decreased to $14.1 million for the three months ended June 30, 2008. This decrease is primarily the result of startup expenses incurred in 2007, including the purchase of Clinical Drug Supply. This quarter's expenses included $2 million in milestones we achieved related to the L&A platform. We continue to be excited about our ongoing programs in our pipeline which Jeff will update you on shortly. You should continue to expect higher R&D spending in the second half, as we continue our planned investment in the next generation of Oncaspar and Adagen and the pipeline advances.

This quarter, SG&A increased to $18.1 million from $16 million in the comparable period in 2007. This increase was mostly attributed to costs incurred from the proposed spinoff of a biotechnology company. These costs will continue until the transaction is complete, which we expect in the fourth quarter of 2008. The Company also continues to be selective in its selling and marketing investments for our current marketed products.

Consolidation of our manufacturing operations in our Indianapolis, Indiana site is on schedule and has gone smoothly. The Company incurred $900,000 for this quarter compared to $800,000 for the three months ended June 30, 2007. These costs include employee severance for those affected by the consolidation. We anticipate all operations will be transferred from our New Jersey site to the Indianapolis site by the end of this year. As you know, these transitions are fairly complex and our manufacturing team has done an admirable job executing this.

The Company reported other expenses of $2 million as compared net expense of $1.8 million in the same period of last year. The change was mostly due to the reduction in interest expense and investment income, which was impacted by the purchase of $59.9 million of our outstanding debt in the first quarter of 2008. In July, we repaid the remaining 2008 debt balance of $12.5 million, as I mentioned we are very pleased with this strategic accomplishment.

Now turning to our current cash position. Total cash reserves which includes cash, short-term investments, restricted cash, and marketable securities, were $205.9 million as of June 30, 2008. This compared to $258.2 million at the end of last year. The reduction in cash was primarily due to the purchase of $59.9 million of our 2008 convertible notes, as just mentioned. We had $14.6 million remaining in our restricted cash account at the end of June to repay the bond, which was used in July.

Now I would like to provide some updates on a proposed spinoff transaction. As you know on July 30, we filed the Form 10 with the SEC, which provides information regarding the new biotechnology company. Typically it takes the SEC two months or so to complete the review process. In this document, we provided some additional insight as to the taxable nature of the transaction. Confirmation on the capitalization of the new company, composition of the Board of Directors and management as well as the strategy for the new company.

First let me update you on the tax status. This transaction will be taxable. There were several reasons for this decision. First, the Company currently has a reasonably high tax basis in the assets, which it will spin off. Secondly, as a taxable transaction, it provides both companies the flexibility they need to maximize the assets they will manage. Regarding the capitalization as previously stated, we have agreed to fund the company with $150 million in cash. However, we will fund $100 million at the close of the transaction and deliver a promissory note for a subsequent payment of $50 million. And this will provide both companies the capital needed to operate in the short term without relying on the markets for immediate financing. Jeff will update you on the new company's strategy in a minute.

In summary this, quarter was a very strong one for the Company with very good execution on many fronts. Our revenue growth was strong, extinguishing all of our remaining 2008 debt, was also a great milestone for the Company. In addition we continue to advance our proposed spinoff transaction with the filing of our Form 10.

I'll now turn the call over to Jeff to update you on the pipeline and additional details for the new biotechnology company. Jeff?

Jeff Buchalter - Chairman, Chief Executive Officer

Good morning, everyone. Thank you for joining us today. Thank you, Craig. Enzon continues to execute our business plan aimed at driving the business enhancing shareholder value. We continue to deliver strong revenues on our promoted products. As Craig mentioned in July we were successful in eliminating all of the 2008 debt. Finally we're continuing to generate data from our clinical trials as seen in the 2008 Afsco meeting and plan for additional major medical meetings later this year. As Craig mentioned, our Form 10 was filed with the SEC on July 30 providing additional details regarding the new biotech company, Evivrus. Evivrus continues to focus on strategy and oncology innovation.

We'll continue to invest in our technological base and advancing on novel research and development pipeline of projects that are strategically focused with promising pathways to regulatory approval. As indicated in our proposed ticker symbol we are focusing on transforming hope into reality for cancer patients with novel and innovative new cancer therapeutics. Evivrus will be committed to making targeting discipline investment in areas we believe we can make unique contribution and achieve differentiation. We're committed to further evolving the potential of our PEG and L&A technologies and bringing new product developments opportunities forward, both through proprietary and externally sourced programs.

Now let me update you on the programs that will comprise the Evivrus pipeline as well as our life cycle program for Oncaspar. Our clinical pipeline continues to advance across all of the programs. Our level of excitement has not diminished since our last update. In fact we remain very encouraged with the progress and results from this exciting, albeit early stage pipeline. The Recombinant Human Mannose- Binding Lectin or RHMBO program continues to our patients in two trials, one for the prevention of severe infections in MBO deficient individuals with multiple myeloma undergoing high dose chemotherapy and one for MBO deficient individual undergoing a liver transplant.

At this time, 40 patients have been enrolled in the multi-myeloma trial. We expect to complete enrollment in the study by the end of the year. To better understand the clinical benefit of RHMBO replacement therapy, we are collecting data from a contemporary match control group of patients with multiple myeloma treated at the same cancer center. Each patient in the clinical trial had four patients that were matched for factors most predicted for overall complications and in particular for infectious complications after high-dose chemotherapy.

We observed that fewer patients in the clinical trial were hospitalized compared to the match controls. These preliminary results are encouraging and suggested MBO deficient patients treated with Recombinant Human MBL had similar or fewer infection complicates than the control group with normal MBO levels. Two poster presentations summarizing clinical data from the multiple myeloma study and the match control group will be presented at the fall ICCAT meeting in Washington.

Our liver transplant study continues to enroll slowly and to date treatment has been well tolerated by all patients. As you will recall, enrollment in this trial is a function of organ donor availability and successful transplant. In order to increase enrollment we've opened four additional sites. We still expect to complete enrollment of the study in the second half of 2009.

Turning to the improved version of Oncaspar, this program offers many advantages, including securing the continued supply of Oncaspar as well as extending our development and marketing rights globally. We continue to move forward with transferring the enhanced manufacturing process for the raw material Alasparet to our contract manufacturer. We recently opened a pivotal study, developed by the Children's Oncology Group and Enzyme, to evaluate the next generation Oncaspar in patients with higher risk acute [lymphocytic] leukemia or ALL.

We have also recently received a positive opinion from the European committee for orphaned medicinal products for the improved version of Oncaspar. This committee is responsible for reviewing applications and recommending drug designation to the EMEA. Orphan drug designation creates favorable conditions for the development of the drugs including market exclusivity for up to 10 years following approval and benefits including reduced regulatory submission fees. When we receive a formal approval for the European orphan decision we will communicate that publicly. As previously stated the life cycle programs for Oncaspar and Adagen will continue over the next three years.

Moving on now to the PEG-SN38 program. In the first study, PEG-SN38 is administered once every three weeks at the maximum tolerated dose of PEG-SN38 alone with completed accrual of patients. At this time, five patients have continued on PEG-SN38 [administered] for longer than four months, including patients previously treated with Camptosar. As previous we mention in contrast to Camptosar, where Gi toxicity is the most limiting factor, [febrol neutropenia] was the dose limiting side effect of PEG-SN38 in this Q3 weeks schedule.

As many of you know, neutropenia can be addressed clinically by administering a Granulocyte Colony-Stimulating Factor or GCSF to patient. This allows us flexibility to now escalate the dose of PEG-SN38 even higher to prevent the occurrence of very low white blood cells. We amended the protocol to enable the evaluation of higher doses of PEG-SN38 in patients receiving GCSF after administration of PEG-SN38. This protocol amendment has now been approved by the various FRB's and additional dose escalation is proceeding in the trial.

In the second study, PEG-SN38 is administered weekly for three weeks every four weeks. We've completed enrollment in the fourth dose cohort and are enrolling patients in the fifth dose cohort. So far we've treated 15 patients on the weekly schedule. The weekly schedule has been well tolerated. Several patient receiving multiple cycles of PEG-SN38 and three patients receiving treatment for longer than three month including a patient continuing treatment over nine months. In this study, we have not seen a dose-limiting toxicity which is very encouraging since the dose actually exceeds that of the other trial. The results of this study will be presented at the October EORTC Meeting in Geneva.

Now let me update you on RNA targeting agents. As you know we have two ongoing Phase I studies evaluating the HIF-1 alpha antagonist using a weekly and daily schedule. Between the two studies, 34 patients have been treated including patients with renal cell cancer, colorectal cancer, (inaudible) cancer and a variety of other tumor types. We are seeing stable diseases, stable disease in a number of patients with little or no toxicity. In our weekly study, we've treated 18 patients and continue to dose escalate and treatment has been well tolerated at the higher doses. Three patients have been on treatment for more than 100 days, and one patient received therapy for more than 400 days with no cumulative toxicity, seen in any of the patients.

To results of this study will be presented at the EORTC Meeting in October. In the second study with the daily schedule, we're enrolling at the fifth dose level and currently have treated 16 patients. In this study, one patient received treatment for more than 180 days. Again, the drug was very well tolerated at the higher doses.

We are now moving our next LNA target toward clinical development. Survivin is heavily overexpressed in many cancers. We're evaluating the importance of this target in the preclinical setting to better understand its mechanism of the action or whether this problem is what something we wanted to advance. The combination of our now robust preclinical data and the confidence that LNA knocks down the target in a clinical setting from the hip-1 alpha program supports moving our Survivin, LNA program toward an I&D at the beginning of the year adding another novel and innovative drug to our pipeline.

We continue to progress with advancing our peg-linker program and expect to present additional results this year. I believe this technology given the advances we're making and delivering novel new molecular entities such as [olga-nucleotydes] will reevaluate the this technology platform for a broader range of pharmaceuticals. There is more work to be done but we are making good progress in this area.

In conclusion, we had a solid quarter in terms of top-line revenues, operationally and advancing our R&D programs. We're delivering the results we promised in a well-executed plant. Enzon continued to drive initiatives to expand our current business in advance the pipeline for the benefit of patients, as well as all of our shareholders.

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