Exhibit 10.25

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

      EMPLOYMENT AGREEMENT (this "Agreement") dated as of December 5, 2003 (the
"Effective Date"), between Enzon Pharmaceuticals, Inc. (the "Company"), a
Delaware corporation with offices in Bridgewater, New Jersey, and Ulrich Grau,
Ph.D. (the "Executive"), a resident of New York, New York.

      WHEREAS, the Company is a biopharmaceutical company engaged in developing
advanced therapeutics for life threatening diseases; and

      WHEREAS, Executive has extensive experience as an executive of
pharmaceutical companies, and has been employed by the Company since March, 2002
as it's Chief Scientific Officer pursuant to an employment agreement dated as of
March 15, 2002 ("2002 Employment Agreement") (March 15, 2002 is referred to
herein as the "Commencement Date") and an employment agreement dated as of
December 5, 2003 ("2003 Employment Agreement");

      WHEREAS, the Company wishes the Executive to continue to render services
for the Company, on the terms and conditions set forth in this Agreement, and
the Executive wishes to continue to be employed by the Company on such terms and
conditions;

      NOW, THEREFORE, in consideration of the premises, the mutual agreements
set forth below and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

      1. Employment; Effective Date of Agreement. The Company agrees to continue
to employ the Executive, and the Executive accepts such continued employment and
agrees to perform services for the Company, for the period and upon the other
terms and conditions set forth in this Agreement. The provisions of this
Agreement are effective as of the Effective Date. This Agreement supercedes any
prior understandings, agreements, or representations, written or oral, relating
to the subject matter hereof, including, but not limited to, the 2002 Employment
Agreement and the 2003 Employment Agreement, which are hereby terminated.

      2. Term. Unless terminated at an earlier date in accordance with Section 9
hereof, the term of the Executive's employment pursuant to this Agreement shall
be from the Effective Date and shall extend through March 31, 2005, subject to
automatic renewal for an additional twenty-four (24) months, unless either party
hereto receives written notice from the other party no later than January 31,
2005 (a "notice of non-renewal") that such other party does not wish for the
term hereof to continue beyond March 31, 2005, in which event the term hereof
shall end on March 31, 2005 (the period during which the Executive is employed
by the Company pursuant to this Section 2 being the "Term").

      3. Position and Duties.

      (a) Service with Company. During the term of the Executive's employment,
the Executive agrees to perform such employment duties for the Company in an
executive and managerial capacity commensurate with the position of Executive
Vice President and Chief Scientific Officer of the Company. As Executive Vice
President and Chief Scientific Officer, Executive shall have the authority and
duty generally to supervise and direct the research and development activities
of the Company, subject to the control and direction of the Chief Executive
Officer of the Company, the Board of Directors of the Company (the "Board"), or
any duly authorized Committee of the Board

      (b) Performance of Duties. The Executive agrees to serve the Company
faithfully and to the best of his ability and to devote his full time, attention
and efforts to the business and affairs of the Company during his employment by
the Company. Executive will not render or perform services for any other
corporation, firm, entity


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or person which are inconsistent with the provisions of this Agreement. While he
remains employed by the Company, the Executive may participate in reasonable
charitable activities and personal investment activities so long as such
activities do not conflict or interfere with the performance of his obligations
under this Agreement.

      (c)   Executive Representations and Warranties. Executive represents and
            warrants to the Company that his entering into and performing this
            Agreement will not constitute a breach of any employment,
            consulting, non-competition or other agreement to which he is a
            party or any other obligation of Executive. Executive represents and
            warrants to the Company that he has not been debarred under the
            Generic Drug Enforcement Act of 1992 (Sections 306-308 of the
            Federal Food, Drug and Cosmetic Act) nor has Executive received
            notice of action or threat of action of debarment. Executive shall
            comply with the Company's Substance Abuse Policy during the term of
            this Agreement.

      Compensation.

      (a)   Base Salary. As compensation in full for all services to be rendered
            by the Executive under this Agreement, the Company shall pay to the
            Executive, less applicable deductions and withholdings, a ratable
            base salary (the "Base Salary") of Four Hundred Twenty-Five Thousand
            Dollars ($425,000) per year, which Base Salary shall be paid in
            accordance with the Company's normal payroll procedures and policies
            for its senior management. The compensation payable to Executive
            during each year after the first year of the Executive's employment
            shall be established by the Board or the Compensation Committee
            thereof following an annual performance review by the Board, but in
            no event shall the Base Salary for any successive year of the Term
            be less than the Base Salary in effect during the previous year of
            the Term.

      (b)   Annual Bonus. Executive shall be entitled to participate in the
            Company's bonus plan for management and any successor bonus plan
            covering management with respect to each fiscal year of the Company
            ending during the Term (the "Bonus Plan"). Under the Bonus Plan, the
            Executive shall be eligible to receive a performance-based cash
            bonus for each fiscal year ending during the Term in an amount, and
            based on individual and/or corporate objectives, targets and factors
            (and evaluation as to the extent of achievement thereof), to be
            established and determined by the Board in its discretion following
            consultation between the Chief Executive Officer and Executive prior
            to, or within sixty (60) days after the commencement of, each fiscal
            year. Under the Bonus Plan for the Executive, (i) the minimum cash
            bonus shall be zero (0), (ii) the target cash bonus shall equal 50%
            of the Base Salary (the "Target Bonus"), and (iii) the maximum cash
            bonus shall equal 82.5% of Base Salary.

      (c)   Participation in Benefit Plans. While he is employed by the Company,
            Executive shall also be eligible to participate in any employee
            benefit plans or programs which may be offered by the Company to the
            extent that Executive meets the requirements for each individual
            plan and in all other plans in which Company executives participate.
            Notwithstanding the foregoing and subject to Section 10(h), the
            Company and Executive acknowledge and agree that, although the
            Company intends to adopt a severance plan or plans for senior
            executives in the near future, it is not intended that Executive
            participate in such severance plan(s), it being understood that
            severance benefits payable to Executive will be governed solely by
            this Agreement. Further, it is understood that the Company may enter
            into individual contractual arrangements with other executives for
            benefits, and that nothing herein shall require the Company to
            provide the same benefits or level of benefits to Employee. The
            Company provides no assurance as to the adoption or continuance of
            any particular employee benefit plan or program, and Executive's
            participation in any such plan or program shall be subject to the
            provisions, rules and regulations applicable thereto.

      (d) Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company's


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normal policies for expense verification. The Company will also bear the cost of
a corporate country club membership for use by Executive during the Term.

      (e)   Stock Options Granted in 2002 at Commencement of Employment with the
            Company. Pursuant to Section 4(e) of the 2002 Employment Agreement,
            Executive was granted options to purchase an aggregate of 150,000
            shares of Common Stock of the Company, subject to the terms of the
            Company's Non-Qualified Stock Option Plan, as amended (the "Option
            Plan"), and the Notices of Option Grant attached to the 2002
            Employment Agreement as Exhibits A-1 and A-2 (copies of which are
            also attached hereto as Exhibits A-1 and A-2). Such options are
            referred to herein as "Initial Options". Except as otherwise
            provided herein, the Option Plan shall govern the terms of the
            Initial Options. Executive acknowledges that he has received and
            reviewed a copy of the Option Plan. The Initial Options vest and
            become exercisable (a) as to 100,000 of such Initial Options, at the
            rate of 20,000 shares per year, commencing on the first anniversary
            of the Commencement Date, provided that any unvested portion of such
            100,000 Initial Options shall immediately vest and become
            exercisable when the last reported sale price of a share of the
            Common Stock is at least one hundred dollars ($100.00) as reported
            on the Nasdaq Stock Market for at least twenty (20) consecutive
            trading days, and (b) as to 50,000 of such Initial Options, on the
            fifth anniversary of the Commencement Date as defined in the 2002
            Employment Agreement, provided such 50,000 Initial Options shall
            immediately vest and become exercisable on the date on which the
            audited financial statements of the Company for a fiscal year are
            issued, which report net annual revenues of not less than Fifty
            Million Dollars ($50,000,000) from the commercial sale of product(s)
            used for organ rejection or autoimmune diseases ("Organ Rejection
            and Autoimmune Products"), provided in the case of each of clause
            (a) and (b) of this paragraph that, except as provided in Section 10
            hereof, Executive is then employed by the Company on a full-time
            basis as its Executive Vice President and Chief Scientific Officer.
            For purposes of this Section "net annual revenues" shall mean the
            Company's revenues for a fiscal year of the Company derived from
            "net sales" of Organ Rejection and Autoimmune Products by the
            Company as well as royalties paid to the Company during such fiscal
            year by any licensee(s) from the sale of Organ Rejection and
            Autoimmune Products. "Net sales" shall mean the proceeds actually
            received by the Company from its sale of Organ Rejection and
            Autoimmune Products to independent, third party customers in bona
            fide, arm's-length transactions less (1) actual allowances for
            returns, damages or otherwise, and discounts, rebates and allowances
            to customers, including cash, credit or free goods allowances; and
            (2) freight or other transportation charges, including insurance,
            actually allowed or paid on account of the delivery of Organ
            Rejection and Autoimmune Products to purchasers thereof; and (3)
            taxes (except income taxes) or duties paid, absorbed or otherwise
            imposed on the sale, including, without limitation, value added
            taxes. The price of the Common Stock that triggers accelerated
            vesting of such options shall be adjusted for stock splits, stock
            dividends and other similar recapitalization events. Except as
            otherwise provided in Section 10 hereof, once such options become
            exercisable they shall remain exercisable until 5:00 p.m. New York
            City time on the tenth (10th) anniversary of the Commencement Date.

      (f)   Issuance of Additional Options. At the discretion of the Board of
            Directors (or its applicable committee), Executive shall be entitled
            to receive further grants of stock options, subject to the terms of
            the Option Plan or the Company's 2001 Incentive Stock Plan ("2001
            Incentive Stock Plan") or such other equity compensation plans that
            may be adopted by the Company from time to time. Nothing contained
            herein shall be deemed to guarantee Executive any additional grants
            of options, restricted stock, other equity awards or securities of
            the Company.

      (g)   Restricted Stock. Upon execution of this Agreement, Executive shall
            be granted Forty Thousand (40,000) shares of restricted stock,
            subject to the terms of the Restricted Stock Award Agreement
            attached hereto as Exhibit B and the 2001 Incentive Stock Plan.
            Executive acknowledges that he has received and reviewed a copy of
            the 2001 Incentive Stock Plan. At the discretion of the Board of
            Directors (or its applicable committee), Executive shall be entitled
            to receive additional grants of restricted stock, subject to the
            terms of the 2001 Incentive Stock Plan or such other equity


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            compensation plans that may be adopted by the Company from time to
            time. Nothing contained herein shall be deemed to guarantee
            Executive any additional grants of options, restricted stock, other
            equity awards or securities of the Company.

      (h)   Vacation. Executive shall be entitled to vacations in accordance
            with the compensated time off policy of the Company with respect to
            its senior management, in effect from time to time.

5. Noncompetition and Confidentiality Covenant.

(a)   Noncompetition. The "Noncompete Period" shall be:

      (i)   the Term of this Agreement, and

      (ii)  (A) with respect to any activity covered by clause (y) or (z) below,
            the one (1) year period immediately following termination of
            Executive's employment with the Company and (B) with respect to any
            activity covered by clause (x) below, the two (2) year period
            immediately following termination of Executive's employment with the
            Company (whether any such termination covered by clause (A) or (B)
            is with or without Cause or with or without Good Reason, or whether
            such termination is occasioned by the Employee or the Company, or
            whether such termination occurs as a result of the expiration or
            nonrenewal of the Term).

      In consideration for the compensation payable to Executive pursuant to
this Agreement, including without limitation the restricted stock granted to
Executive hereunder, during the Noncompete Period, Executive will not directly,
or indirectly, whether as an officer, director, stockholder, partner,
proprietor, associate, employee, consultant, representative or otherwise,
become, or be interested in or associated with any other person, corporation,
firm, partnership or entity, engaged to a significant degree in (x) developing,
manufacturing, marketing or selling enzymes, protein-based biopharmaceuticals or
other pharmaceuticals that are modified using polyethylene glycol ("PEG"), (y)
developing, manufacturing, marketing or selling single-chain antigen-binding
proteins or (z) any activity which is in competition with or resembles any
proprietary technology, process, or product in which the Company is engaged or
with Executive's participation has been actively planning to be engaged from
time to time during the term of this Agreement. For purposes of the preceding
sentence, to determine whether any entity is engaged in such activities to a
"significant degree", comparison will be made to the Company's operations at
that time. In other words, an entity will be deemed to be engaged in an activity
to a significant degree if the number of employees and/or amount of funds
devoted by such entity to such activity would be material to the Company's
operations at that time. The provisions contained in this Section 5(a) shall
survive the termination of Executive's employment pursuant to Section 9 hereof
or otherwise. In the event Executive breaches any of the covenants set forth in
this Section 5(a), the running of the period of restriction set forth herein
shall be tolled for the period during which the breach exists and recommence
upon Executive's compliance with the terms of this Section 5(a).

(b)   Confidentiality.

      (i) Executive acknowledges that, by reason of his employment by the
Company, he will have access to confidential information of the Company,
including, but not limited to, information and knowledge pertaining to products,
inventions, discoveries, improvements, innovations, designs, ideas, trade
secrets, proprietary information, manufacturing, packaging, advertising,
marketing, distribution and sales methods, sales and profit figures, customer
and vendor lists and relationships between the Company and dealers,
distributors, sales representatives, wholesalers, customers, suppliers and
others who have business dealings with them ("Confidential Information"). The
Employee acknowledges that such Confidential Information is a valuable and
unique asset of the Company and covenants that, both during and after the Term,
he/she will not disclose any Confidential Information to any person or entity,
nor use the Confidential Information for any purpose, except as his duties as an
employee of the Company may require, without the prior written authorization of
the Board. The obligation of confidentiality imposed by this Section shall not
apply to Confidential Information that otherwise becomes generally known to the
public through no act of the Employee in breach of this Agreement or any other
party in violation of an existing confidentiality


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agreement with the Company or which is required to be disclosed by court order
or applicable law.

      (ii) All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, research and development plans and products, and
other property delivered to or compiled by Executive for or on behalf of the
Company or its vendors or customers that pertain to the business of the Company
shall be and remain the property of the Company, and be subject at all times to
its discretion and control. Likewise, all formulae, correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company (and all copies thereof)
that are collected by Executive shall be delivered promptly to the Company
without request by it upon termination of Executive's employment.

      (c)   Proprietary Information. Executive is hereby prohibited from ever
            using any of the Company's proprietary information or trade secrets
            to conduct any business, except for the Company's business while
            Executive is employed by the Company.

      (d)   Survival of Covenants. The provisions contained in Section 5(b) and
            (c) shall survive the termination of Executive's employment pursuant
            to Section 9 hereof or otherwise.

      (e)   Nonsolicitation of Employees. During the Noncompete Period
            (utilizing the period of time reflected in Sections 5(a)(i) and
            5(a)(ii)(B) hereof), Executive shall not, directly or indirectly,
            personally or through others, encourage to leave employment with the
            Company, employ or solicit for employment, or advise or recommend to
            any other person, firm, business, or entity that they employ or
            solicit for employment, any employee of the Company or of any
            parent, subsidiary, or affiliate of the Company. The provisions of
            this Section 5(e) shall survive the termination of Executive's
            employment.

6. Ventures. If, during the term of his employment, the Executive is engaged in
or associated with the planning or implementing of any project, program, venture
or relationship involving the Company and a third party or parties, all rights
in such project, program, venture or relationship shall belong to the Company.
Except as approved by the Board, the Executive shall not be entitled to any
interest in such project, program, venture or relationship or to any commission,
finder's fee or other compensation in connection therewith other than the
compensation to be paid to the Executive as provided in this Agreement and the
consideration payable by the Company to Vivo Healthcare under a purchase
agreement between the Company and Vivo Healthcare relating to the Company's
acquisition of an immunology product under development for organ rejection and
autoimmune diseases, from Vivo Healthcare.

7. Acknowledgment. Executive agrees that the covenants and agreements contained
in Section 5 hereof are the essence of this Agreement; that each of such
covenants is reasonable and necessary to protect and preserve the Company's
interests, properties and business; that irreparable loss and damage will be
suffered by the Company should Executive breach any of such covenants and
agreements; that each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement; that the unenforceability
or breach of any such covenants or agreement shall not affect the validity or
enforceability of any other such covenant or agreement or any other provision of
this Agreement; and that, in addition to other remedies available to it, the
Company shall be entitled to both temporary and permanent injunctions and any
other rights or remedies it may have, at law or in equity, to end or prevent a
breach or contemplated breach by Executive of any such covenants or agreements.

      (a)   Geographic Extent of Executive's Obligations Concerning Section 5.
            Given the nature of the Company's business, the restrictions
            contained in Section 5 cannot be limited to any particular
            geographic region. Therefore, the obligations of Executive under
            Section 5 shall apply to any geographic area in which the Company
            (i) has engaged in business during the Term through its investment
            or trading activities or otherwise, or (ii) has otherwise
            established its goodwill, business reputation or any customer or
            vendor relations.

      (b)   Limitation of Covenant. Ownership by Executive, as a passive
            investment, of less than one percent of the outstanding shares of
            capital stock of any corporation listed on a national securities
            exchange or publicly


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            traded on Nasdaq shall not constitute a breach of Section 5.

      (c)   Blue Pencil Doctrine. If the duration or geographical extent of, or
            business activities covered by, Section 5 are in excess of what is
            valid and enforceable under applicable law, then such provision
            shall be construed to cover only that duration, geographical extent
            or activities that are valid and enforceable. Executive acknowledges
            the uncertainty of the law in this respect and expressly stipulates
            that this Agreement be given the construction which renders its
            provisions valid and enforceable to the maximum extent (not
            exceeding its express terms) possible under applicable law.

      (d)   Disclosure. Executive shall disclose to any prospective employer,
            prior to accepting or continuing employment, the existence of
            Section 5 of this Agreement and shall provide such prospective
            employer with a copy of Section 5 of this Agreement. The obligation
            imposed by this subsection 7(d) shall terminate two years after the
            end of the Term.

8. Intellectual Property and Related Matters.

      (a) Disclosure and Assignment. Executive will promptly disclose in writing
to the Company complete information concerning each and every product,
invention, discovery, practice, process or method, whether patentable or not,
made, developed, perfected, devised, conceived or first reduced to practice by
Executive, either solely or in collaboration with others, during the Term, or
six months thereafter, whether or not during regular working hours, relating
either directly or indirectly to, or useful in, any aspect of the business,
products, practices or techniques of the Company ("Developments"). Executive, to
the extent that he has the legal right to do so, hereby acknowledges that any
and all of the Developments are the property of the Company and hereby assigns
and agrees to assign to the Company any and all of Executive's right, title and
interest in and to any and all of the Developments. At the request of the
Company, Executive will confer with the Company and its representatives for the
purpose of disclosing all Developments to the Company as the Company shall
reasonably request during the period ending one year after the Term.

      (b) Limitation on Section 8(a). The provisions of Section 8(a) shall not
apply to any Development, for which no equipment, supplies, facility or trade
secret information of the Company was used and which was developed entirely on
Executive's own time, unless (a) the invention relates (i) directly to the
business of the Company, or (ii) to the Company's actual or demonstrably
anticipated research or development, or (b) the invention results from any work
performed by Executive for the Company.

      (c) Assistance of Executive. Upon request by the Company and without
further compensation therefor, but at no expense to Executive, Executive will do
all lawful acts, including but not limited to, the execution of papers and
lawful oaths and the giving of testimony, that in the opinion of the Company,
may be necessary or desirable in enforcing the Company's intellectual property
and trade secret rights, and for perfecting, affirming and recording the
Company's complete ownership and title thereto.

      (d) Records. Executive will keep complete, accurate and authentic
accounts, notes, data and records of the Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon the earlier of its request or the conclusion
of his employment, Executive will promptly surrender same to it.


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      (e) Copyrightable Material. All right, title and interest in all
copyrightable material that Executive shall conceive or originate, either
individually or jointly with others, and which arise out of the performance of
this Agreement, will be the property of the Company and are by this Agreement
assigned to the Company along with ownership of any and all copyrights in the
copyrightable material. Upon request and without further compensation therefor,
but at no expense to Executive, Executive shall execute all papers and perform
all other acts necessary to assist the Company to obtain and register copyrights
on such materials in any and all countries. Where applicable, works of
authorship created by Executive for the Company in performing his
responsibilities under this Agreement shall be considered "works made for hire,"
as defined in the U.S. Copyright Act.

      (f) Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by Executive that arises out of the performance of his
obligations or responsibilities under this Agreement or any related material or
information shall be the property of the Company, and all rights therein are by
this Agreement assigned to the Company.

      (g) Survival. The obligations imposed by this Section 8 on Executive shall
survive termination of this Agreement pursuant to Section 9 or otherwise.

9. Termination of Employment.

      (a) Grounds for Termination. Executive's employment pursuant to this
Agreement shall terminate prior to the expiration of the Term in the event that
at any time:

            (i)   Executive dies,

            (ii)  Executive becomes disabled (as defined below), so that he
                  cannot perform the essential functions of his position with or
                  without reasonable accommodation,

            (iii) The Board elects to terminate Executive's employment for
                  "Cause" and notifies Executive in writing of such election, or

            (iv)  The Board elects to terminate Executive's employment without
                  "Cause" and notifies Executive in writing of such election.

      If Executive's employment is terminated pursuant to clause (i), (ii) or
(iii) of this Section 9(a), such termination shall be effective immediately. If
Executive's employment is terminated pursuant to subsection (iv) of this Section
9(a), such termination shall be effective 30 days after delivery of the notice
of termination; provided, however, that the Company may elect to make such
termination effective immediately, in which case Executive's employment shall
terminate immediately upon delivery of the notice of termination, but the
Company shall continue to pay him his salary during such 30-day period and the
last day of such 30-day period shall be deemed to be the date of termination of
his employment for purposes of any pro rata calculations and determination of
post-termination periods under this agreement.

      (b) "Cause" Defined. "Cause" shall mean (i) the willful engaging by
Executive in illegal conduct or gross misconduct which is demonstrably and
materially injurious to the Company, (ii) Executive's refusal to attempt to
perform his obligations to the Company hereunder (other than any such failure
resulting from illness or incapacity), which refusal is demonstrably and
materially injurious to the Company, (iii) Executive's breach of his obligations
under this Agreement, which breach is demonstrably and materially injurious to
the Company, or (iv) the failure of Executive to maintain his immigration status
with the U.S. Immigration and Naturalization Service or the Executive's failure
to maintain valid employment authorization to provide services to the Company.
For purposes of this Section 9(b), no act or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that Executive's action of omission
was in the best interest of the Company. Notwithstanding the foregoing, with
respect to the definitions of Cause set forth in


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clauses (i), (ii) and (iii) above, Executive shall not be deemed to have been
terminated for Cause unless and until the Company delivers to Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (not including Executive if
he shall then serve as a director) at a meeting of the Board called and held for
such purpose (after reasonable notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board) finding that, in
the good faith opinion of the Board, Executive engaged in conduct set forth
above and specifying the particulars thereof in reasonable detail.

      (c) Termination by Executive for Good Reason. Executive's employment
pursuant to this Agreement may terminate prior to the expiration of the Term in
the event Executive has a "Good Reason" to terminate his employment, which shall
mean the following:

            (i) Any material adverse change in Executive's status or position as
      an officer of the Company, including, without limitation, any material
      adverse change in Executive's status or position as a result of a
      diminution in Executive's duties, responsibilities or authority as of the
      Effective Date (or any status or position to which Executive may be
      promoted after the Effective Date) or the assignment to Executive of any
      duties or responsibilities which are inconsistent with Executive's status
      or position, or any removal of Executive from or any failure to reappoint
      or reelect Executive to such position; provided, however, that none of the
      foregoing shall be deemed to have occurred as long as Executive remains
      the Company's most senior research and development executive; or

            (ii) The material breach by the Company of its obligations under
      this Agreement; or

            (iii) A reduction in Executive's annual Base Salary as the same may
      be increased from time to time; or

            (iv) The relocation of the Company's principal executive offices to
      a location more than thirty-five (35) miles from the location of such
      offices (other than a relocation that results in the location of the
      offices in closer proximity to New York City) or the Company requiring
      Executive to be based anywhere other than the Company's principal
      executive offices, except for required travel substantially consistent
      with Executive's business obligations.

      Prior to the Executive being permitted to terminate his employment for
Good Reason, the Company shall have sixty (60) days to cure any such alleged
breach, assignment, reduction or requirement, after Executive provides the
Company written notice of the actions or omissions constituting such breach,
assignment, reduction or requirement.

      (d) "Change of Control" Defined. "Change of Control" means the following:

            (i) "Board Change" which, for purposes of this Agreement, shall have
      occurred if, over any twenty-four month period, a majority of the seats
      (other than vacant seats) on the Company's Board were to be occupied by
      individuals who were neither (A) nominated by at least one-half (1/2) of
      the directors then in office (but excluding, for purposes of determining
      directors then in office, any director whose initial assumption of office
      occurs as a result of either an actual or threatened election contest, or
      other actual or threatened solicitation of proxies or consents by or on
      behalf of a Person (as defined herein) other than the Company or its board
      of directors); nor (B) appointed by directors so nominated, or

            (ii) the acquisition by any individual, entity or group (within the
      meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
      1934 (the "Exchange Act"), (a "Person") of beneficial ownership (within
      the meaning of Rule 13d-3 promulgated under the Exchange Act) of a
      majority of the then outstanding voting securities of the Company (the
      "Outstanding Company Voting Securities"); provided, however, that the
      following acquisitions shall not constitute a Change of Control: (A) any
      acquisition by the Company, or (B) any acquisition by any employee benefit
      plan (or related trust)


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<PAGE>

      sponsored or maintained by the Company or any corporation controlled by
      the Company, or (C) any public offering or private placement by the
      Company of its voting securities; or

            (iii) a consolidation of the Company with another entity, or a
      merger of the Company with another entity in which neither the Company nor
      a corporation that, prior to the merger, was a subsidiary of the Company
      shall be the surviving entity; or

            (iv) a merger of the Company following which either the Company or a
      corporation that, prior to the merger, was a subsidiary of the Company,
      shall be the surviving entity and a majority of the Outstanding Company
      Voting Securities is owned by a Person or Persons who were not "beneficial
      owners," as defined in Rule 13d-3 of the Exchange Act, of a majority of
      the Outstanding Company Voting Securities immediately prior to such
      merger; or

            (v) a voluntary or involuntary liquidation of the Company; or

            (vi) a sale or disposition by the Company of at least 80% of its
      assets in a single transaction or a series of transactions (other than a
      sale or disposition of assets to a subsidiary of the Company in a
      transaction not involving a Change of Control or a change in control of
      such subsidiary).

      Transactions in which the Executive is part of the acquiring group do not
constitute a Change of Control.

      (e) "Disabled" Defined. As used in this Agreement, the term "disabled"
means any mental or physical condition that renders Executive unable to perform
the essential functions of his position, with or without reasonable
accommodation, for a period in excess of 180 days.

      (f) Surrender of Records and Property. Upon termination of his employment
with the Company, Executive shall deliver promptly to the Company all records,
manuals, books, lists, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof that relate in
any way to the business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of the Company,
including, but not limited to, all documents that in whole or in part contain
any trade secrets or confidential information of the Company, which in any of
these cases are in his possession or under his control.

10. Effect of Termination.

      (a) Termination Without Cause or for Good Reason or Upon the Company's
Notice of Non-Renewal.

      In the event the Company terminates Executive's employment as the
Company's Executive Vice President and Chief Scientific Officer without Cause
pursuant to Section 9(a)(iv) hereof, Executive terminates his employment for
Good Reason pursuant to Section 9(c) hereof, or the Company provides a notice of
non-renewal of the Term under Section 2 hereof,

            (i) Executive shall receive cash payments equal to his annual Base
      Salary at the time of such termination;

            (ii) Executive shall receive a cash payment equal to the Target
      Bonus (based on the Base Salary at the time of such termination) which
      would have been payable for the fiscal year which commences immediately
      following the date of termination;

            (iii) if Executive, and any spouse and/or dependents ("Family
      Members") has medical and dental coverage on the date of such termination
      under a group health plan sponsored by the Company, the Company will
      reimburse Executive for the total applicable premium cost for medical and
      dental coverage under the Consolidated Omnibus Budget Reconciliation Act
      of 1986, 29 U.S.C. Sections 1161-1168; 26 U.S.C. Section 4980B(f), as
      amended, and all applicable regulations (referred to collectively as
      "COBRA")


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<PAGE>

      for Executive and his Family Members for a period of up to eighteen (18)
      months commencing on the date of such termination; provided, that the
      Company shall have no obligation to reimburse Executive for the premium
      cost of COBRA coverage as of the date Executive and his Family Members
      become eligible to obtain comparable benefits from a subsequent employer;

            (iv) Executive shall receive cash payments equal to any unpaid Base
      Salary through the date of termination;

            (v) Executive shall receive a cash payment equal to a pro rata
      amount of the Target Bonus (based on the Base Salary at the time of such
      termination) for the fiscal year during which termination occurs;

            (vi) all options to acquire shares in the Company held by the
      Executive which have not vested at the time of such termination of
      employment, will terminate as of the date of such termination of
      employment and will be of no further force or effect; provided however
      that (A) with respect to the Initial Options to purchase 100,000 shares
      which become exercisable on a five-year vesting schedule, a pro rated
      portion (based on the portion of the year between anniversaries of the
      Commencement Date during which Executive is employed by the Company) of
      the tranche of unvested options which were scheduled to vest on the
      anniversary of such Commencement Date immediately following the date of
      such termination shall vest, (B) with respect to the Initial Options to
      purchase 50,000 shares which become exercisable on the fifth anniversary
      of the Commencement Date, subject to acceleration upon the achievement of
      an annual net revenue milestone, a pro rated portion (based on number of
      full months elapsed following the Commencement Date to the date of
      termination divided by 60) shall vest as of the date of termination of
      employment, (C) with respect to all other option awards, a pro rated
      portion (based on that portion of the year between the prior vesting date
      or the award date and the next vesting date during which the Executive is
      employed by the Company) of those options scheduled to vest on the next
      vesting date shall vest; and (D) all of the options which are exercisable
      at the date of termination of employment shall remain exercisable after
      such termination in accordance with the terms of the relevant plans and
      granting instruments.

            (vii) Executive shall continue to be entitled to any deferred
      compensation and other unpaid amounts and benefits earned and vested prior
      to Executive's termination.

            (viii) All shares of restricted stock awarded to Executive under
      Section 4(g) shall fully vest.

      (b) Termination for Cause. In the event the Company terminates Executive's
employment as the Company's Executive Vice President and Chief Scientific
Officer for Cause pursuant to Section 9(a)(iii) hereof, (i) Executive shall be
entitled to receive payment of his Base Salary through the date of termination,
(ii) Executive shall continue to be entitled to any deferred compensation and
other unpaid amounts and benefits earned and vested prior to Executive's
termination, (iii) all options to acquire shares in the Company held by the
Executive which have vested prior to the date of Executive's termination of
employment shall remain exercisable after such termination in accordance with
the terms of the relevant plans and granting instruments, (iv) all options
granted to Executive that have not vested prior to the date of Executive's
termination of employment will terminate as of the date of such termination and
will be of no further force and effect; and (v) all shares of restricted stock
awarded to Executive that have not vested prior to the date of Executive's
termination of employment shall be forfeited.

      (c) Death. In the event Executive's employment with the Company is
terminated as a result of Executive's death, (i) Executive's estate or
Executive's duly designated beneficiaries shall be entitled to payment of his
Base Salary through the date of Executive's death; (ii) Executive's estate or
Executive's duly designated beneficiaries shall be entitled to a pro rata amount
of the Target Bonus (based on the Base Salary at the time of death) for the
fiscal year in which he dies; (iii) all options to acquire shares in the Company
held by the Executive which have not vested at the time of Executive's death
will continue to vest in accordance with their terms and shall remain
exercisable (together with any options which had previously vested), until the
earlier of (A) one year from the date of death and (B) the end of the remaining
exercise term of such options; (iv) all shares of restricted stock


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<PAGE>

awarded to Executive shall fully vest; and (v) Executive's estate or Executive's
duly designated beneficiaries shall continue to be entitled to any deferred
compensation and other unpaid amounts and benefits earned and vested prior to
Executive's death. If Executive's Family Members have medical and dental
coverage on the date of such termination under a group health plan sponsored by
the Company, the Company will reimburse such Family Member for the total
applicable premium cost for medical and dental coverage under COBRA for such
Family Members for a period of up to twenty-four (24) months commencing on the
date of such termination; provided the Company shall have no obligation to
reimburse such Family Members for the premium cost of COBRA coverage as of the
date they become eligible to obtain comparable benefits from another employer.

      (d) Disability. Upon termination of Executive's employment as the
Company's Executive Vice President and Chief Scientific Officer on account of
Executive's disability pursuant to Section 9(a)(ii) hereof, (i) Executive shall
be entitled to payment of his Base Salary through the commencement of long term
disability payments to Executive under any plan provided or paid for by the
Company, (ii) Executive shall be entitled to a pro rata amount of the Target
Bonus (based on the Base Salary at the time of such termination) for the fiscal
year in which his employment is terminated, (iii) Executive shall be entitled to
all compensation and benefits to which Executive is entitled pursuant to the
Company's disability policies in effect as of the date of Executive's
termination, (iv) all options to acquire shares of the Company held by the
Executive which have not vested at the date of termination of employment will
continue to vest in accordance with their terms, and shall remain exercisable
(together with any options which had previously vested), until the earlier of
(A) one year from the date of such termination of Executive's employment and (B)
the end of the remaining exercise term of such options, (v) all shares of
restricted stock awarded to Executive shall fully vest; and (vi) Executive shall
continue to be entitled to any deferred compensation and other unpaid amounts
and benefits earned and vested prior to Executive's termination. If Executive
and his Family Members have medical and dental coverage on the date of such
termination under a group health plan sponsored by the Company, the Company will
reimburse Executive for the total applicable premium cost for medical and dental
coverage under COBRA for Executive and his Family Members for a period of up to
eighteen (18) months commencing on the date of such termination; provided the
Company shall have no obligation to reimburse Executive and his Family Members
for the premium cost of COBRA coverage as of the date they become eligible to
obtain comparable benefits from another employer.

      (e) Voluntary Resignation or upon Executive's Notice of Non-Renewal. In
the event Executive voluntarily terminates his employment with the Company, or
the Executive's employment terminates following Executive having provided the
Company with a notice of non-renewal of the Term under Section 2 hereof, (i)
Executive shall be entitled to receive payment of his Base Salary through the
date of termination, (ii) Executive shall continue to be entitled to any
deferred compensation and other unpaid amounts and benefits earned and vested
prior to Executive's termination, (iii) all options to acquire shares of the
Company held by the Executive which have vested prior to the date of such
termination shall remain exercisable after such termination in accordance with
the terms of the relevant plans and granting instruments, (iv) all options to
acquire shares of the Company held by the Executive which have not vested prior
to the date of such termination will terminate as of the date of such
termination and will be of no further force and effect, and (v) all shares of
restricted stock awarded to Executive that have not vested prior to the date of
Executive's termination of employment shall be forfeited.

      (f) Termination without Cause or for Good Reason in Connection with a
Change in Control. In the event the Company terminates Executive's employment as
the Company's Executive Vice President and Chief Scientific Officer without
Cause pursuant to Section 9(a)(iv) hereof or Executive terminates such
employment for Good Reason pursuant to Section 9(c) hereof within the period
which commences ninety (90) days before and ends one (1) year following a Change
in Control, in lieu of the provisions of Section 10(a) or 10(e) above,

            (i)   Executive shall receive cash payments equal to any unpaid Base
                  Salary through the date of termination, plus an amount equal
                  to the pro rated portion of the Target Bonus (based on the
                  Base Salary at the time of such termination) which would have
                  been payable to Executive for the fiscal year during which
                  such termination occurs;

            (ii)  Executive shall receive cash payments equal to two (2) times
                  the sum of the following:


                                       50
<PAGE>

                  (1) his Base Salary at the time of such termination and (2)
                  the Target Bonus (based on the Base Salary at the time of such
                  termination) for the fiscal year in which such termination
                  occurs;

            (iii) if Executive and his Family Members have medical and dental
                  coverage on the date of such termination under a group health
                  plan sponsored by the Company, the Company will reimburse
                  Executive for the total applicable premium cost for medical
                  and dental coverage under COBRA for Executive and his Family
                  Members for a period of up to eighteen (18) months commencing
                  on the date of such termination and will continue to pay
                  Executive an amount equal to such COBRA reimbursement during
                  the eighteen (18) month period following such initial eighteen
                  (18) month period after such termination; provided, that the
                  Company shall have no obligation to reimburse Executive for
                  the premium cost of COBRA coverage as of the date Executive
                  and his Family Members become eligible to obtain comparable
                  benefits from a subsequent employer;

            (iv)  Executive shall continue to be entitled to any deferred
                  compensation and other unpaid amounts and benefits earned and
                  vested prior to Executive's termination.

      (g) All payments made to Executive under any of the subsections of this
Section 10 which are based upon Executive's salary or bonus shall be made at
times and in a manner which is in accordance with the Company's standard payroll
practices for senior management; provided that any such payments which are still
owed to Executive under Section 10(f) hereof as of the second anniversary of the
termination of Executive's employment under Section 10(f) hereof shall be paid
to Executive within thirty (30) days after such second anniversary date.

      (h) If and when during the Term, the Company shall adopt (or amend) a
severance plan generally applicable to its executive officers, which provides
for payments and benefits upon certain events of termination of employment in
connection with a change in control of the Company at levels that are greater
than those provided herein under Section 10(f) (or provide in connection with a
change in control of the Company, for lump sum or otherwise more accelerated
payments than those provided for under Section 10(g)), then promptly following
adoption (or amendment) of such a plan, the Company and Executive agree to
negotiate in good faith an amendment to the provisions of Sections 10(f) and/or
(g) to provide Executive with comparable payments and benefits upon certain
events of termination in connection with a change of control of the Company to
those provided to other senior executive officers covered by such plan with the
same line of reporting to the Chief Executive Officer as Executive.
Notwithstanding the foregoing, it is understood that the Company may enter into
individual contractual arrangements with other executives for benefits, and
nothing herein shall require the Company to provide the same benefits or level
of benefits to Employee.

      (i) Notwithstanding anything else herein to the contrary, Executive shall
not be entitled to realize or receive any termination related benefits provided
for in this Section 10, including, without limitation, all post-termination
payments and the acceleration of option or restricted stock or restricted stock
unit vesting schedules, unless Executive shall have executed and delivered to
the Company a full release (reasonably satisfactory to the Company's counsel) of
all claims against the Company and its affiliates, successors and assigns.

      (j) Notwithstanding anything stated in this Agreement to the contrary, if
the amounts that are payable and the benefits that are provided to Executive
under this Agreement either alone or together with other payments that Executive
has a right to receive from the Company or any of its affiliates (the "Combined
Amounts"), would constitute a "parachute payment" (as defined in Code Section
280G or any successor provision), the Combined Amounts shall be reduced, as
necessary, to the largest amount as will result in no portion of the Combined
Amounts being either not deductible as a result of Code Section 280G (or any
successor provision) or subject to the excise tax imposed by Code Section 4999
(or any successor provision). The determination of any reduction in said amounts
and benefits pursuant to the foregoing provision shall be made by the Company in
good faith, and such determination shall be conclusive and binding on Executive;
provided, however, that notwithstanding the foregoing,


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<PAGE>

the Company shall notify Executive, as soon as possible after the Termination
Date (but in no event later than twenty (20) days prior to the payment date of
the sums due under this Section 10) of the value attributed by the Company to
the continuation of health benefits (or payments related thereto) and the value
attributed by the Company to the acceleration of the vesting of options and
restricted stockand/or restricted stock units, and Executive shall have the
option to decline such benefits or the acceleration of the vesting of such
options and restricted stock and/or restricted stock units in a notice to the
Company given no later than ten (10) days prior to such payment date. If the
Combined Amounts (after having accounted for the reduction by the Company
described in the immediately preceding sentence) shall be disallowed in whole or
part as a deductible expense in determining the income tax liability of the
Company, Executive shall reimburse the company to the full extent of such
disallowance. The Company's Board of Directors shall enforce this obligation to
reimburse the Company immediately following such disallowance. The amounts
provided to Executive under this Agreement in connection with a Change in
Control, if any, shall be deemed allocated to such amounts and/or benefits to be
paid and/or provided as the Company's Board of Directors in its sole discretion
shall determine.

11. Effect of Change of Control. In the event of a Change of Control, in
addition to any other consequences provided for in this Agreement,

      (a)   all shares of restricted stock and restricted stock units awarded to
            Executive shall fully vest immediately prior to the Change of
            Control; and

      (b)   all options to acquire shares of the Company held by the Executive
            shall become fully vested immediately prior to the effective date of
            the Change of Control. Executive shall have a reasonable opportunity
            to exercise all or any portion of such options prior to the
            effective date of the Change of Control, and any options not
            exercised prior to the effective date of the Change of Control shall
            terminate as of the effective date of the Change of Control and will
            be of no further force or effect. To the extent that this Section 11
            is inconsistent with the provisions of the relevant plan and
            granting instruments under which such options were issued, the
            Company and Executive agree that such inconsistent provisions are
            hereby superceded and the provisions of this Section 11 shall
            govern.

12. Miscellaneous.

      (a)   Entire Agreement. This Agreement (including the exhibits, schedules
            and other documents referred to herein) contains the entire
            understanding between the parties hereto with respect to the subject
            matter hereof and supersedes any prior understandings, agreements or
            representations, written or oral, relating to the subject matter
            hereof.

      (b)   Counterparts. This Agreement may be executed in separate
            counterparts, each of which will be an original and all of which
            taken together shall constitute one and the same agreement, and any
            party hereto may execute this Agreement by signing any such
            counterpart.

      (c)   Severability. Whenever possible, each provision of this Agreement
            shall be interpreted in such a manner as to be effective and valid
            under applicable law but if any provision of this Agreement is held
            to be invalid, illegal or unenforceable under any applicable law or
            rule, the validity, legality and enforceability of the other
            provision of this Agreement will not be affected or impaired
            thereby.


                                       52
<PAGE>

      (d)   Successors and Assigns. This Agreement shall be binding upon and
            inure to the benefit of the parties hereto and their respective
            heirs, personal representatives and, to the extent permitted by
            subsection (e), successors and assigns. The Company will require its
            successors to expressly assume its obligations under this Agreement.

      (e)   Assignability. Neither this Agreement nor any right, remedy,
            obligation or liability arising hereunder or by reason hereof shall
            be assignable (including by operation of law) by either party
            without the prior written consent of the other party to this
            Agreement, except that the Company may, without the consent of the
            Executive, assign its rights and obligations under this Agreement to
            any corporation, firm or other business entity with or into which
            the Company may merge or consolidate, or to which the Company may
            sell or transfer all or substantially all of its assets, or of which
            50% or more of the equity investment and of the voting control is
            owned, directly or indirectly, by, or is under common ownership
            with, the Company. After any such assignment by the Company, and
            provided that such assignment arises by operation of law or involves
            an express written assumption by the assignee, the Company shall be
            immediately released and discharged from all further liability
            hereunder and such assignee shall thereafter be deemed to be the
            Company for the purposes of all provisions of this Agreement.

      (f)   Modification, Amendment, Waiver or Termination. No provision of this
            Agreement may be modified, amended, waived or terminated except by
            an instrument in writing signed by the parties to this Agreement. No
            course of dealing between the parties will modify, amend, waive or
            terminate any provision of this Agreement or any rights or
            obligations of any party under or by reason of this Agreement. No
            delay on the part of the Company in exercising any right hereunder
            shall operate as a waiver of such right. No waiver, express or
            implied, by the Company of any right or any breach by Executive
            shall constitute a waiver of any other right or breach by Executive.

      (g)   Notices. All notices, consents, requests, instructions, approvals or
            other communications provided for herein shall be in writing and
            delivered by personal delivery, overnight courier, mail, electronic
            facsimile or e-mail addressed to the receiving party at the address
            set forth herein. All such communications shall be effective when
            received.

Address for the Executive:

             Ulrich Grau, Ph.D.
             c/o Enzon Pharmaceuticals, Inc.
             685 Route 202/206
             Bridgewater, New Jersey 08807

Address for the Company:

             Enzon Pharmaceuticals, Inc.
             685 Route 202/206
             Bridgewater, New Jersey 08807
             Attn:  Vice President, Human Resources

Any party may change the address set forth above by notice to each other party
given as provided herein.

      (h)   Headings. The headings contained in this Agreement are for reference
            purposes only and shall not in any way affect the meaning or
            interpretation of this Agreement.

      (i)   Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
            CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
            GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW JERSEY,


                                       53
<PAGE>

            WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.

      (j)   Resolution of Certain Claims - Injunctive Relief. The Executive
            acknowledges that it would be difficult to fully compensate the
            Company for damages resulting from any breach by him of the
            provisions of this Agreement. Accordingly, the Executive agrees
            that, in addition to, but not to the exclusion of any other
            available remedy, the Company shall have the right to enforce the
            provisions of Sections 5 through 8 and 9(f) by applying for and
            obtaining temporary and permanent restraining orders or injunctions
            from a court of competent jurisdiction without the necessity of
            filing a bond therefore, and without the necessity of proving actual
            damages, and the Company shall be entitled to recover from the
            Executive its reasonable attorneys' fees and costs in enforcing the
            provisions of Sections 5 through 8 and 9(f).

      (k)   Arbitration. Except as otherwise specifically provided for
            hereunder, any claim or controversy arising out of or relating to
            this Agreement or the breach hereof shall be settled by arbitration
            in accordance with the laws of the State of New Jersey. Such
            arbitration shall be conducted in the State of New Jersey in
            accordance with the rules then existing of the American Arbitration
            Association. Judgment upon the award rendered by the arbitrators may
            be entered in any court having jurisdiction thereof. In the event of
            any dispute arising under this Agreement, the respective parties
            shall be responsible for the payment of their own legal fees and
            disbursements.

      (l)   Third-Party Benefit. Nothing in this Agreement, express or implied,
            is intended to confer upon any other person any rights, remedies,
            obligations or liabilities of any nature whatsoever.

      (m)   Withholding Taxes. The Company may withhold from any benefits
            payable under this Agreement or any other agreement all federal,
            state, city or other taxes as shall be required pursuant to any law
            or governmental regulation or ruling. Executive hereby agrees to
            indemnify and hold harmless the Company should the Company fail to
            withhold tax from any such payment from which tax is required to be
            withheld.

            IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the Effective Date.

ENZON PHARMACEUTICALS, INC.


By: /s/ Arthur J. Higgins,
   -------------------------------------
   President and Chief Executive Officer


     /s/ Ulrich Grau, Ph.D.
----------------------------------------


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