Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (05-06-08 10:08 AM)

Filed with the SEC from April 24 to April 30:

Enzon Pharmaceuticals (ENZN)
In a letter to the biotech company's board, DellaCamera Capital Master Fund said it's unhappy with the compensation granted to Enzon Chairman and CEO Jeffrey Buchalter. The hedge fund also noted that it's reviewing its voting alternatives on three directors up for election at the company's May 22 annual meeting of shareholders. DellaCamera further called for the resignation of Goran A. Ando, Rolf A. Classon and Victor P. Micati, all members of Enzon's compensation committee. DellaCamera holds 2,579,127 shares (5.8%).

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.

CEO BACKGROUND

Paul S. Davit , age 52, has served as the Company’s Executive Vice President, Human Resources since April 2005. Mr. Davit previously served as Enzon’s Senior Vice President, Human Resources from January 2004 to April 2005, and Vice President, Human Resources from March 2002 to January 2004. Prior to joining Enzon, Mr. Davit ran a human resources consulting practice from September 2001 to March 2002. From July 1998 to September 2001, Mr. Davit worked at Caliber Associates and he spent over 11 years with Rhône-Poulenc Rorer from October 1986 to May 1998, where he served as Vice President of Human Resources for RPR Gencell, Rhône-Poulenc Rorer’s start-up biotechnology division and as Vice President of Human Resources for the North American Pharmaceuticals division. Mr. Davit began his career as a compensation consultant with the Hay Group.
Ralph del Campo , age 55, has served as the Company’s Executive Vice President, Technical Operations since April 2005. Mr. del Campo has over 30 years of diverse industry experience, including serving as Enzon’s Senior Vice President, Technical Operations from October 2002 to April 2005. Prior to joining Enzon, Mr. del Campo was the head of the North American operations of Elan Corporation, plc from May 2000 to September 2002. Mr. del Campo also spent over 17 years in various senior operations management positions at Bristol-Myers Squibb.
Dr. Ivan D. Horak , age 56, has served as the Company’s Executive Vice President of Research and Development and Chief Scientific Officer since September 2005. Prior to joining Enzon, Dr. Horak was employed by Immunomedics, Inc. as Executive Vice President of Research and Development from May 2002 until July 2003, and as Chief Scientific Officer from July 2003 to August 2005. Before joining Immunomedics, Dr. Horak was employed by Pharmacia as a Vice President for Clinical Oncology from November 1999 to May 2002, where he helped direct the global development of oncology compounds, including Camptosar ® for metastatic colorectal cancer. From 1996 to 1999, Dr. Horak held a variety of clinical research positions at Janssen Research Foundation, a subsidiary of the Johnson & Johnson Company, including International Director for Clinical Research and Development, Oncology. Prior to joining Janssen, Dr. Horak spent nine years at the National Cancer Institute where he most recently served as a cancer expert for the Metabolism Branch. In addition to authoring over 60 scientific publications, Dr. Horak is a member of several prominent medical societies and has served on various committees for the American Association for Cancer Research and the International Union Against Cancer. He also serves on the editorial board of the prestigious journal, Cancer Research. He is a fellow of the American College of Physicians. Dr. Horak received his M.D. degree from the University of Komenius, Bratislava, Czechoslovakia.
Craig A. Tooman , age 41, has served as the Company’s Executive Vice President, Finance and Chief Financial Officer since June 2005. He served as the Company’s Executive Vice President, Strategic Planning and Corporate Communications from January 2005 to June 2005, and he retained the duties of that position when he was promoted to his current position. Prior to joining Enzon, from 2002 to 2005, Mr. Tooman served as Senior Vice President of Strategic Planning and Corporate Communications for ILEX Oncology. Before joining ILEX, Mr. Tooman was employed at Pharmacia Corporation where he most recently served as Vice President of Investor Relations. Previously, he served in a variety of management posts of increasing responsibility at Pharmacia and the Upjohn Company, including assignments in finance, marketing and sales in the U.S., Europe and Japan. Mr. Tooman participated in the global merger between Pharmacia and Upjohn, designed award-winning shareholder programs for the merger of Pharmacia and Monsanto, and was responsible for the investment banking associated with the merger of ILEX Oncology and the Genzyme Corporation. Mr. Tooman also assisted with two secondary equity offerings exceeding $2 billion, an initial public offering, and multiple debt and equity financings. Mr. Tooman earned his Masters degree in finance from the University of Chicago.

COMPENSATION

Components of the Compensation Package
The compensation package for each of the Named Executive Officers as well as other officers who are members of our executive staff consists of four elements: (1) base salary, (2) annual performance-based incentive, (3) stock incentive programs, and (4) various other benefits. In addition, members of our executive staff may have entered into employment agreements with us, and may be entitled to receive change of control and severance payments, or to participate in our executive deferred compensation plan. More specific information on each of these elements follows.
The elements of the compensation package are determined and allocated with consideration of comparisons to biopharmaceutical industry companies of comparable market capitalization, revenues, therapeutic focus and business model, including a selected subset of companies included in the Nasdaq Biotechnology Index (the “Compensation Peer Group”). The Compensation Peer Group, which will be periodically reviewed and updated by the Compensation Committee consists of companies against which the Compensation Committee believes Enzon competes for talent and stockholder investment. The companies comprising the Compensation Peer Group are: Alkermes Inc., Celgene Corp., Cephalon Inc., Genta Inc., Human Genome Sciences Inc., Icos Corp., Ligand Pharmaceutical, Medarex Inc., Medimmune Inc., Millennium Pharmaceuticals, Nektar Therapeutics, Neurocrine Biosciences Inc., OSI Pharmaceuticals Inc., PDL Biopharma Inc., Sepracor Inc., Telik Inc., Vertex Pharmaceuticals Inc. For comparison purposes, the Company’s annual revenues ranked at the 50 th percentile of companies comprising the Compensation Peer Group (based on 2005 revenues). The committee generally sets target compensation for the Company’s executive officers between the 50 th and 75 th percentiles of compensation paid to similarly situated executives of the companies comprising the Compensation Peer Group.
Each element of the compensation package and the allocation of such elements are proposed by management and reviewed and approved by the Compensation Committee, and, at the discretion of the Compensation Committee, in consultation with Mercer Human Resource Consulting, the outside compensation experts retained by the Compensation Committee.
Base Salary
The Compensation Committee aims to set base salaries at levels that are competitive with those paid to senior executives at companies included in the Compensation Peer Group. The Compensation Committee believes that this is necessary to attract and retain the executive talent required to lead the Company, since we compete with a large number of companies in the biopharmaceutical industry, including large pharmaceutical companies, for executive talent. Salaries are reviewed annually and in connection with promotions. Industry, peer group and national survey results are considered in making salary determinations to align our pay practices with other companies in the pharmaceutical and biotechnology industries. In addition to survey results, individual job performance is also considered in setting salaries. Our Chief Executive Officer conducts performance reviews of members of executive management and makes recommendations to the Compensation Committee on salary, including salary increases, based on his judgment of the individual’s performance. The Compensation Committee reviews these recommendations independently and approves, with any modifications it considers appropriate, the annual salary and salary increases.
The Compensation Committee reviewed base salaries following the fiscal year ended December 31, 2005, and effected salary increases in January 2006.

Annual Performance-Based Incentive Compensation
We maintain an incentive program that provides an opportunity for officers and employees to earn a cash incentive based upon the performance of both the Company and the individual. The incentive potential is stated as a percentage of the officer’s and employee’s base salary and varies by position, and for those officers with employment agreements will be at least equal to the percentage required by such employment agreements. Corporate and individual performance goals are set at the start of the fiscal year and are based on business criteria specified in this program. Actual incentives are calculated at the end of the fiscal year based on goal performance. All executive management had the same Company goals for the periods covered by this report. The Company goals were based on annual product revenues, operational project milestones and pipeline development. These targets were developed to be consistent with, and promote the achievement of, the objectives of the Company’s long-term strategic plan and the Company’s focus on developing a platform for long-term sustainable growth. Individual goals and weightings for each participant varied, depending on the participant’s position and areas of responsibility and the participant’s effect on the Company’s performance. Targets were developed with the expectation that their achievement would be attainable but ambitious. Individual performance was further measured by a review of how well the individual has displayed the Company’s corporate values that focus on five key operating principles – people, passion, performance, pride, and a steadfast commitment to delivering on promises.
Following the completion of the benchmarking study performed by Mercer Human Resource Consulting in April 2006, the Compensation Committee determined and set the target and range of potential incentive levels for each executive officer for fiscal years 2006 and 2007 as set forth in the table below.

Stock Incentive Programs
The Compensation Committee believes that stock incentive programs such as stock options directly link the amounts earned by officers with the amount of appreciation realized by our stockholders. Restricted stock, restricted stock units and stock options also serve as a critical retention incentive. Stock incentive programs have always been viewed as a major means to attract and retain highly qualified executives and key personnel and have always been a major component of the compensation package, consistent with practices throughout the pharmaceutical and biotechnology industries. Our stock incentive programs are structured to encourage key employees to continue in our employ and motivate performance that will meet the long-term expectations of stockholders. In determining the size of any option or restricted stock or restricted stock unit award (“Incentive Stock Grants”), the Compensation Committee considers the individual’s past performance and potential and the position held by the individual.
The Compensation Committee generally considers and makes Incentive Stock Grants to officers and any other employee once a year coinciding with annual performance reviews. Incentive Stock Grants may also be granted at other times during the year in connection with promotions or for new hires or as special performance awards. Option grants to members of executive management are made under our 1987 Stock Option Plan and our 2001 Incentive Stock Plan with the exercise price equal to the last reported sale price of our Common Stock on the date of grant and expire ten years after the date of the grant. Vesting on most Incentive Stock Grants occurs over a three to five year period, which is designed to encourage retention.
The amount and combination of equity grants, as well as the vesting period, is determined by the Compensation Committee with the intention of providing performance incentive and retention.
Other Benefits
The Compensation Committee believes that all employees should have the opportunity to acquire or increase their holdings of our common stock. Our 2007 Employee Stock Purchase Plan was adopted by the Board in January 2007, subject to shareholder approval at the 2007 Annual Meeting. If the 2007 Employee Stock Purchase Plan is approved, all eligible employees, including executive officers, who choose to participate in the 2007 Employee Stock Purchase Plan will have deductions made by us from their compensation to purchase our common stock semi-annually on March 31 and September 30 of each year, at a purchase price equal to 85% of the reported last sale price of our common stock on either the first or last day of each six-month offering period, whichever is less.
Executive officers participate in various medical, dental, life, disability and benefit programs that are generally made available to all employees.

MANAGEMENT DISCUSSION FROM LATEST 10K

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 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. Enzon also engages in contract manufacturing for several pharmaceutical companies to broaden the Company’s revenue base.
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.

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, depreciation, investment income, interest income, interest expense or income taxes. Research and development expense is considered a corporate expense unless it relates to an existing marketed product or a product candidate enters Phase III clinical trials at which time related costs would be chargeable to one of our operating segments.

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.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations
Three Month and Nine Month Periods Ended September 30, 2007 and 2006
Overview
During the three months ended September 30, 2007, we sold a 25% interest in our future royalty revenues on sales of PEG-INTRON. The gross proceeds were $92.5 million. The gain on the sale of $88.7 million, after deducting related costs of the transaction, was recognized in full in our Royalties segment in the third quarter of 2007. While product sales declined 2% from the comparable three- and nine-month periods of 2006, cost of sales rose during the respective periods due in part to higher amortization expense related to the license of the raw material used in the production of Oncaspar and the expensing of validation batches in the first six months in connection with the transfer of production to our Indianapolis facility. Total spending on research and development rose from the comparable nine-month period although moderating during the most recent three-month period. Restructuring costs incurred in 2007 and gains in 2006 on an investment sale and refinancing of debt also affected period-over-period comparison. More detailed analysis of each of these income and expense items is provided below.

Oncaspar continues to demonstrate solid sales growth both for the quarter and the nine-month period ended September 30, 2007, while Abelcet sales are down both on a quarterly as well as a year-to-date basis leading to a 2% reduction in sales overall for both period comparisons.
Oncaspar volume growth was approximately 20% in the comparison of third-quarter 2007 to the third quarter of 2006 and approximately 13% for the nine-month period comparisons. The U.S. Food and Drug Administration (FDA) approved Oncaspar for the first-line treatment of patients with acute lymphoblastic leukemia in July 2006. The increase in Oncaspar sales is attributable to an increase in volume reflecting the continued transition to the first line use of Oncaspar and the adoption of protocols in pediatrics and adult patients that call for dosage regimens that will include a greater number of weeks of Oncaspar therapy and an April 1, 2007 price increase. Sales of DepoCyt, for treatment of lymphomatous meningitis, and Adagen, for treatment of severe combined immuno-deficiency disease, tend to fluctuate from quarter to quarter due to their small patient bases. On April 1, 2007, we increased the price of these products which had a positive impact on quarter and nine-month sales compared to prior periods. In April 2007, the FDA granted full approval of DepoCyt. Originally, DepoCyt was approved under the FDA’s Sub Part H regulation. Abelcet sales volumes in the U.S. and Canada, continue to decline due to continued competition from newer generation antifungal products coupled with some contraction of the overall intravenous antifungal market. Abelcet declined 25% and 27% for the three- and nine-month periods ended September 30, 2007, respectively when compared to the same periods in the preceding year. We anticipate continued Abelcet competition.
Cost of sales
In the three months ended September 30, 2007, cost of products sold of $11.2 million as a percentage of sales rose to 45% compared to 37% ($9.2 million) for the same period in the prior year. This contributed to a corresponding nine-month period rise in cost of sales as a percentage of sales from 36% of sales to 43%. The initiation of the transfer of production of Oncaspar and Adagen from our South Plainfield facility to our Indianapolis facility involves the production of a number of test lots in order to validate the new production processes and assure the continued quality and stability of product. These test production batches totaling $1.9 million in the three months ended June 30, 2007 are unsaleable and were expensed as part of cost of sales. In addition, substantially higher supplier costs of materials for Adagen, negative production variances in the third quarter for Abelcet and increased amortization expense associated with the Oncaspar-related intangible asset acquired in December 2006 to secure the supply of L-asparaginase, all contributed to higher cost of sales.
Research and development
Research and development spending on marketed products, primarily Oncaspar and Adagen, dropped slightly from $2.0 million in the third quarter of 2006 to $1.8 million in the third quarter of 2007 while increasing from $4.3 million to $8.0 million for the corresponding nine-month periods. The year-to-date rise in product-related research and development expense was due to the ongoing formulation enhancement of Oncaspar and Adagen as well as Oncaspar life-cycle management.
Selling and marketing
Overall, spending on selling and marketing in 2007 remained relatively unchanged from 2006 levels.
Amortization of acquired intangible assets
Amortization expense of $0.1 million for the three months ended September 30, 2007, and $0.5 million for the nine months ended September 30, 2007 was essentially unchanged from the corresponding periods of 2006. Amortization of intangible assets has been provided over their remaining estimated lives ranging from 1-14 years on a straight-line basis.
Restructuring
During the first quarter of 2007, we announced plans to consolidate 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 in an estimated range of approximately $3.5 million to $4.0 million, all of which relate to the Products segment. These amounts will be paid in 2008 upon the successful transfer of production to our Indianapolis facility and closure of the South Plainfield facility. Severance charges of $0.4 million and $1.7 million have been recognized in the quarter and year-to-date periods ended September 30, 2007, respectively. We expect to incur other costs related to the relocation of goods and equipment, and we will recognize such costs as incurred.
In the three months ended June 30, 2007, $1.9 million, the cost of 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 third quarter of 2007. In the aggregate, including employee and validation costs, we anticipate incurring costs in connection with this restructuring plan in the range of $8.0 million to $10.0 million, a portion of which has and will be classified as cost of product sales.
During the third quarter 2007, we modified our original product transfer and validation plan, resulting in commencement of the decommission of certain assets earlier than originally expected at the South Plainfield facility. These assets consist primarily of manufacturing equipment that will not be transferred to the Indianapolis facility, nor will it continue to be used in manufacturing at the South Plainfield facility. Accordingly, we fully recognized the remaining depreciation totaling $5.1 million on these assets during the third quarter of 2007.
We may experience costs associated with lease termination or sublease 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.

Total royalty revenue of $18.2 million for the three months ended September 30, 2007 was 3% lower than the $18.7 million during the comparable three-month period ended September 30, 2006. Total royalties for the nine months ended September 30, 2007 decreased 2% to $52.8 million as compared to $53.9 million during the comparable nine-month period ended September 30, 2006.
Growth in sales of PEG-INTRON, from which we derive the majority of our royalty revenue, largely offset the effects of competition for Macugen in the U.S.
During the quarter ended September 30, 2007, we sold a 25% 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% 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, is $88.7 million. The $15.0 million contingent gain will be recognized when and if the contingency is removed and collection is assured. As a result of the sale, future royalties from PEG-INTRON are expected to be reduced by approximately 25%.
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.

Revenues
Contract manufacturing revenue for the three- and nine-month periods ended September 30, 2007 was $3.8 million and $12.2 million, respectively. This compares to $1.9 million and $10.2 million for the comparable periods of 2006. The increase in contract manufacturing revenue in the three months ended September 30, 2007 was primarily attributable to the resolution, during the quarter ended September 30, 2006 of an annual revenue reconciliation related to two contracts that resulted in a reduction of revenue of $1.2 million. It is not uncommon for the timing of shipments to cause quarter-over-quarter fluctuations.

st of sales
Cost of sales for contract manufacturing fluctuates significantly from period to period because of the nature of the business, the timing of production lots and the resultant levels of cost absorption. Further complicating analysis in the three months ended September 30, 2006 was the above-mentioned revenue reconciliation adjustment which lowered revenues of $1.2 million with no corresponding reduction in cost of sales. This had approximately a three percentage point adverse effect on cost of sales as a percent of sales for the nine months ended September 30, 2006. Elevated costs in the first quarter of 2007 due to start-up of production related to a newly negotiated agreement contributed to the higher nine-months 2007 cost of sales.
Non-U.S Revenue
During the three months ended September 30, 2007, we had export sales and royalties on export sales of $20.0 million, of which $11.5 million were in Europe. This compares to $16.7 million of export sales in the comparable three-month period of 2006, of which $9.2 million were in Europe.
We had export sales and royalties on export sales of $56.6 million and $34.0 million, of which $48.6 million and $27.3 million were in Europe, for the nine months ended September 30, 2007 and 2006, respectively.

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1091 Views