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Article by DailyStocks_admin    (07-07-08 10:11 AM)

Filed with the SEC from June 26 to July 2:

Enzon Pharmaceuticals (ENZN)
DellaCamera Capital Master Fund may consider a "public consent solicitation" to amend Enzon's bylaws to let shareholders have a stronger voice in overseeing the company. DellaCamera also urged Enzon to take certain actions to boost shareholder value, including looking at an $80 million share-repurchase program, monetizing a minimum of $70 million of its royalty streams and soliciting bids for Enzon's marketed products and royalty segments.

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.

CONF CALL

Craig A. Tooman:

Morning, and thank you for joining us today. I'd like to remind you that during today's 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. Furthermore, information discussed on today's call is accurate as of today. We undertake no duty to update.

First let me focus on some quarterly updates and then Jeff can update you on our business and new strategic initiative also announced this morning. This quarter all business segments reported strong results. We were also successful in significantly reducing the outstanding debt balance due in July 2008 to $12.5 million, again, ahead of the required timeline. As you can see from the release, Enzon reported net income of $1.5 million or $0.03 cents per diluted share this quarter as compared to a net loss of $2.8 million or $0.06 cents per diluted share for the three months ended March 2007. Again, the results this quarter were impacted by strong revenues across all business segments.

Sales of the product segment specifically comprised of Oncaspar, DepoCyt, Abelcet, and Adagen, increased 21% to $27.4 million this quarter compared to $22.7 million for the comparable period in 2007. Higher revenues this quarter were mostly attributed to sales from our oncology product, Oncaspar. The increase this quarter benefitted from a $1.2 million international shipment, growth from additional adoption in the AOL market, as well as a price increase. As you will recall we implemented the price increase to offset the increase in raw material cost and the development cost needed to insure long term supply.

Sales of DepoCyt for treatment of lymphomatous meningitis were 2.0 million this quarter, down from 2.4 million for the comparable period in 2007. And sales of Adagen, an enzyme replacement therapy used to treat patients with severe or combined immunodeficiency disease increased to $6.2 million this quarter from $5.1 million in the first quarter of 2007.

I would like to remind you that these products treat a small number of patients, so quarter-to-quarter variability is not at all uncommon.

Sales of Abelcet in U. and Canada was $7 million versus $7.7 million in the quarter ending March 2007. The decline is due to the continued competitive pressure in the antifungal market; however the rate of decline has decreased from prior years.

Revenues from the company's royalty segment decreased 10% this quarter to $14.7 million, as compared to $16.3 million for the same three months last year. The reduction in royalties this quarter was due to the 25% reduction in royalties on sales of PEG-Intron. As you recall, we monetized 27% of the future royalty stream to refinance the 2008 debt. However, we continue to see underlying growth in PEG-Intron.

Additionally in April, Cimzia was approved by the FDA for treatment of moderate to severe Crohn's Disease. The product was developed by UCB and utilized as the company's PEGylation technology, so we are entitled to royalties on its net sales. Due to the revenue lag we implemented in 2006 on royalties we do not anticipate revenues from Cimzia to affect our results until the latter half of 2008.

The company's revenues from its contract manufacturing segment increased to $6.6 million for the three months ended March 31st, 2008; as compared to $2.5 million in the corresponding period in the prior year. This increase was due to the combined results of the timing of shipments to our customers and additional non-routine services provided to our existing customers. It is not anticipated that the level of sales achieved this quarter will continue throughout the year in that segment.

In the first quarter of 2008, the company's cost of goods sold increased to $16.1 million from $11.5 million. The increase is directly attributable to the increase in product and contract manufacturing sales. The margins have remained the same.

The company's R&D expenses were flat at $13.2 million for the three months ended March 31st, 2008 as compared to 2007. We continue to be excited about our ongoing programs in our pipeline which Jeff will update you on shortly. We're also investing our currently marketed products, Oncaspar and Adagen. As we previously stated, these products require some new investment to improve the current manufacturing processes. Our goal is to control the manufacturing process, including the source of raw material, and at the same time enhance the pharmaceutical properties of the products. We are currently transferring the manufacturing process of the raw materials to Enzon. As previously mentioned the investment in these products will be fairly significant in the next couple of years as we improve these products and continue to make them available to patients.

This quarter SG&A decreased to $15.4 million from $17.1 million in the comparable period of 2007. The company continues to make selective investments in the selling and marketing initiatives for our currently marketed products and have been proactive in identifying operational efficiencies such as the realignment of our sales team.

Consolidation of our manufacturing operations in our Indianapolis, Indiana site is on schedule. The company incurred $1.3 million this quarter compared to $600,000 for the three months ended March 31st, 2007. We anticipate all operations from our South Plainfield, New Jersey site to transfer to the Indiana facility this year in line with our original guidance.

Now turning to our cash position, total cash reserves which include cash and cash equivalents, short term investments and marketable securities; were $198.8 million as of March 31st, 2008 as compared to $258.2 million at the end of last year. The reduction in cash was due to the purchase of $59.9 million of our 2008 convertible notes as I just mentioned. As of March 31st, 2008, $14.5 million was held in a restricted account for the purpose of eliminating the remaining outstanding 2008 notes.

There has been interest in our exposure to auction rate securities in the past and I am very pleased to report that we have been successful in reducing our auction rate securities this quarter to only $7 million, minimizing our exposure.

In summary this quarter Enzon reported very solid earnings as all business segments performed well. And I will now turn the call over to Jeff who will update you on the pipeline and the various segments we reported earlier today. Jeff?

Jeff Buchalter

Good morning everyone and thank you for joining us today. 2008 has already been a productive year at Enzon. As Craig mentioned, we delivered strong product revenues on all our converted products and we're extremely successful in eliminating a large portion of the 2008 debt. We're also continuing to enroll patients aggressively in our clinical trials. And finally, also announced today, the Enzon Board of Directors has approved the spin-off of the biotech business into a separate independent company.

First let me focus on some quarterly updates and then turn to our new strategic initiative. As Craig stated, this quarter all of our business segments reported strong results. I'm particularly please that our products continue to perform well. The stabilization and identification of growth opportunities for our marketed products was one of my top priorities when I arrived at Enzon.

Let me focus on our pipeline. We continue to be very excited about all of our ongoing programs. The recombinant and [inaudible] in our NBO program continues to enroll patients in two clinical trials. One for the prevention of severe infections in MBL deficient individuals undergoing high dose chemotherapy and one from liver transplant surgery. Additional PK and PD analysis confirm that the weekly schedule results in the functional normalization of compliment pathway, an important finding. As a reminder our target enrollment is 50 patients for each of these randomized studies.

We have made great progress in accelerating enrollment in our multiple myeloma trial. An additional 10 patients have been enrolled bringing the total treated to 35 in this study. We expect to complete enrollment in this clinical trial by the end of this year. An abstract, summarizing our early clinical data from the multiple myeloma study will be published at the upcoming ASCO meeting in Chicago.

To better understand whether rhMBL therapy replacement therapy provides clinical benefit to MBL deficient patients with multiple myeloma, we have also been collecting data from a contemporary match control group of patients who do not receive MBL therapy. Patients that are not MBL deficient were matched against the current patients in our clinical trial who are MBL deficient. For those variables that are most predictive for overall complications and specifically for infections after high dose chemo therapy. This match control data will provide additional information that will allow us to compare treated patients versus untreated patients. A more complete data set from these studies will be submitted to the ICAC meeting later this year in October.

Our liver transplant study has increased enrollment with an additional five patients treated for a total of 17 to date. As you recall enrollment in this study is a function of organ donor availability and its successful transplant. We opened one new site and plan to open two additional sites shortly. To date we have not reported or seen any serious adverse events and patients continue to do well on this study. We expect to complete enrollment of the liver transplant study in the second half of next year.

Turning to Oncaspar, the clinical development program. We announced the closure of our Phase I combination trial of Oncaspar and Gemzar in patients with solid tumors and lymphoma. Based on the inability to find an adequate dose for the specific combination of Oncaspar and Gemzar, we determined that it was appropriate time to close this study. It is our management philosophy to discontinue programs that do not achieve the results we expect. This decision is not a reflection of Oncaspar’s potential nor does it imply the product may not offer patients a benefit in other forms of cancer. In fact, outside investigators continue to be interested in continuing to explore new uses for Oncaspar in solid tumors. As noted, Oncaspar continues to show solid growth and our outlook for this product continues to be very positive.

PEG-SN38. Investigators for our two Phase I clinical trials evaluated patients with solid tumors and lymphomas continues to be very enthusiastic and enroll patients as quickly as the protocol allows. In the first study, PEG-SN38 is administered once every three weeks. In this study we have completed five cohorts and treated 24 patients. At the highest dose we have now reached dose limiting toxicity in two patients. In contrast to Camptosar where GI toxicity is the most frequently dose limiting factor, in this every three week schedule febrile neutropenia was dose limiting. This toxicity can be managed very effectively with available growth factors which could allow for more dosing flexibility with this schedule of PEG-SN38. We are excited to report that within this heavily pretreated patient population, several patients have received five up to six cycles of PEG-SN38. One patient has been on the study for 148 days or seven cycles. We are expanding the number of patients at the maximum tolerated dose to gain more experience and data from the Phase I study will be presented at ASCO.

In the second study, PEG-SN38 is administered weekly for three weeks every four weeks. We have completed enrollment in the fourth cohort and will start enrolling for the next cohort this month. We have treated a total of 14 patients on this weekly schedule. The weekly schedule has been well tolerated and several patients have received multiple cycles of PEG-SN38. We have seen patients with prolonged stable disease. One patient in the study has been on for over 200 days. We have been able to give more cumulative PEG-SN38 to patients in this schedule and still have not observed dose limiting toxicities. Remember, native SN-38 was originally insoluble and too toxic to safely administer to patients. Our results thus far, even though it is too early to assess efficacy demonstrates that our customized PEGylation technology is working with the small molecule.

Between these two studies we have treated 38 patients with a variety of cancers such colon cancer, gastric, breast cancer, ovarian cancer and a number of others. We expect to complete the Phase I program in the second half of this year and initiate a Phase II program later this year.

Now I will turn to the RNA targeting agent HIF-1 alpha and it is our first clinical target using a third generation of oligonucleotides or locked nucleic acid. We initiated two Phase I studies using a weekly and daily schedule and continue to see good biology and safety on both of these studies. We have completed four dose escalations and enrolled in 13 patients in the weekly study. In this study, four patients have been on HIF-1 alpha antagonist for an extended period of time. Some patients actually had growing cancers at the prime of enrollment and have since had stable disease. It is important to note that some patients who have progressed through other approved therapies have been now treated with HIF-1 alpha therapy for a longer period of time. We continue to have one patient on the study for more than 400 days without a serious adverse event.

In the second study with the daily schedule we have completed three dose escalations and enrolled 9 patients. One patient has been on this study for seven cycles or 187 days. HIF-1 alpha therapy has been well tolerated with no related drug serious adverse events reported with either the weekly or the daily administration. And approximately one-third of the patients enrolled on the study are still on the study. Based on the safety profile of the compound, the FD has released its enrollment constraints and enrollment should speed up once approved the ROBs. These data while early are extremely encouraging. We will submit an abstract from the first study at the EORTC meeting in October of this year.

As we progress in all of our clinical programs, as I have promised and that we have done you will continue see updates throughout this year and at major medical meetings such as ASCO and EORTC.

Now let me turn to the strategic initiative we announced this morning. The Enzon Board of Directors approved the plan to spinoff the bio-technology portion of the business into its own independent company. This plan enables the unique businesses to strategically focus their efforts on optimizing their respective business goals, compete effectively in their respective markets and appeal to their unique own shareholder base. Each company will have its own independent board of directors and management. Upon completion of the spin-off, I will transition to the new biotech company and lead the efforts of that new organization as the Chairman, President and CEO, and Craig Tooman will assume the role of President and CEO of Enzon Pharmaceuticals.

I would like to take a minute to acknowledge Craig’s tremendous contribution to Enzon over the past three plus years as Chief Financial Officer. He has brought significant value to shareholders and employees during this period. And has been a loyal and trusted colleague. I am pleased that Enzon’s Board of Directors have also recognized Craig’s effort and named him to replace me as the next President and CEO of Enzon. Under Craig’s I am confident Enzon will continue to deliver value to all of its stakeholders.

Now turning back to the details related to our strategic initiative. The new biotech company will include the customized PEGlinker technology, the locked nucleic acid technology, PEG-SN38, DL, HIF-1 alpha as well as all of the LNA targets we have been talking about. The company will also be capitalized with about a 115 million in cash, which would last two to three years of burn.

The existing specialty business will retain the current four marketed products Oncaspar, Abelcet, DepoCyt, and Adagen as well as the manufacturing facility in Indianapolis and the current royalties to include the newly approved Cimzia and future royalties to Hematide.

The completion of this spin-off is subject to a number of conditions including the filing of a registration statement with the Securities and Exchange Commission, final approval from the Board of Directors, and final evaluation of the taxable status of the transaction. We look forward to creating and optimizing this opportunity for all of our shareholders.

In conclusion we are off to a great start in 2008. We continue to make good progress on advancing our pipeline and our products are growing and stable as we had given guidance early in the year. We look forward to updating you as the year progresses. We continue to be strategic and proactive in managing our business and further capitalize on the value of our assets. With that operator we will now take questions.

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