|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|WASHINGTON, D.C. 20549            
|                                  
|FORM 10-Q                         

(Mark One)


|   |                                                                                          
|-- | -----------------------------------------------------------------------------------------
|x  | QUARTERLY REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|   |                                                                                          
|   | For the
 quarterly period ended March 31, 2011                                           
|   |                                                                                          
|OR
|o  | TRANSITION REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|   |                                                                                          
|   | For the
 transition period from ___ to ___                                               

Commission file number 0-12957

|                                                       
|-------------------------------------------------------
|Enzon Pharmaceuticals, Inc.                            
|(Exact
 name of registrant as specified in its charter)

|                                             |                                      
|-------------------------------------------- | -------------------------------------
|Delaware                                     | 22-2372868                           
|(State
 of incorporation)                    | (I.R.S.
 Employer Identification No.)
|                                             |                                      
|20
 Kingsbridge Road, Piscataway, New Jersey | 08854                                
|(Address
 of principal executive offices)    | (Zip
 Code)                          

(732) 980-4500 
(Registrants telephone number, including area code)

Not Applicable 
(Former name, former address and former fiscal year, if changed since last
report)

---

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days.                     Yes
x
No o

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).
                    Yes
o
No o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o               Accelerated filer x
               Non-accelerated filer o               Smaller reporting company o

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
                    Yes
o
No x

Shares of Common Stock
outstanding as of May 3,
2011:          53,572,889

---



PART I  FINANCIAL INFORMATION
Item 1. Financial Statements.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | ------------------- | - | -------- | -
|                                                                                                                                                                      |  | March
 31, 2011 |          | December
 31, 2010* |  
|                                                                                                                                                                      |  |                 |          |                     |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|ASSETS                                                                                                                                                                |  |                 |          |                     |   |          |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Current assets:                                                                                                                                                       |  |                 |          |                     |   |          |  
|Cash and cash equivalents                                                                                                                                             |  | $               | 369,938  |                     | $ | 397,530  |  
|Short-term investments                                                                                                                                                |  |                 | 35,584   |                     |   | 31,170   |  
|Other current assets                                                                                                                                                  |  |                 | 4,589    |                     |   | 5,916    |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Total current assets                                                                                                                                                  |  |                 | 410,111  |                     |   | 434,616  |  
|Property and equipment, net of accumulated depreciation of $38,855 at
 March 31, 2011 and $38,286 at December 31, 2010                                                |  |                 | 20,223   |                     |   | 21,574   |  
|Marketable securities                                                                                                                                                 |  |                 | 13,334   |                     |   | 31,394   |  
|Other assets                                                                                                                                                          |  |                 | 1,175    |                     |   | 1,273    |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Total assets                                                                                                                                                          |  | $               | 444,843  |                     | $ | 488,857  |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                  |  |                 |          |                     |   |          |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Current liabilities:                                                                                                                                                  |  |                 |          |                     |   |          |  
|Accounts payable                                                                                                                                                      |  | $               | 1,405    |                     | $ | 4,192    |  
|Accrued expenses and other                                                                                                                                            |  |                 | 13,124   |                     |   | 14,195   |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Total current liabilities                                                                                                                                             |  |                 | 14,529   |                     |   | 18,387   |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Notes payable                                                                                                                                                         |  |                 | 134,499  |                     |   | 134,499  |  
|Other liabilities                                                                                                                                                     |  |                 | 4,355    |                     |   | 4,114    |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Total liabilities                                                                                                                                                     |  |                 | 153,383  |                     |   | 157,000  |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Commitments and contingencies                                                                                                                                         |  |                 |          |                     |   |          |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Stockholders equity:                                                                                                                                                 |  |                 |          |                     |   |          |  
|Preferred stock - $.01 par value, authorized 3,000,000 shares; no
 shares issued and outstanding at March 31, 2011 and December 31, 2010                              |  |                 |         |                     |   |         |  
|Common stock - $.01 par value, authorized 170,000,000 shares; issued
 and outstanding 55,053,174 shares at March 31, 2011 and 58,817,561 shares at
 December 31, 2010 |  |                 | 551      |                     |   | 588      |  
|Additional paid-in capital                                                                                                                                            |  |                 | 414,013  |                     |   | 454,657  |  
|Accumulated other comprehensive income                                                                                                                                |  |                 | 767      |                     |   | 914      |  
|Accumulated deficit                                                                                                                                                   |  |                 | (123,871 | )                   |   | (124,302 | )
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Total stockholders equity                                                                                                                                            |  |                 | 291,460  |                     |   | 331,857  |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  
|Total liabilities and stockholders equity                                                                                                                            |  | $               | 444,843  |                     | $ | 488,857  |  
|                                                                                                                                                                      |  |                 |          |                     |   |          |  

* Condensed from audited
financial statements.

The accompanying notes are an
integral part of these unaudited condensed consolidated financial statements.

2

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

|                                                                 |  |                                |        |      |   |         |  
|---------------------------------------------------------------- |  | ------------------------------ | ------ | ---- | - | ------- | -
|                                                                 |  | Three
 months ended
 March 31, |       
|                                                                 |  |                                |       
|                                                                 |  | 2011                           |        | 2010 |  
|                                                                 |  |                                |        |      |  
|                                                                 |  |                                |        |      |   |         |  
|Revenues:                                                        |  |                                |        |      |   |         |  
|Royalties                                                        |  | $                              | 11,762 |      | $ | 12,901  |  
|Sale of in-process research and development                      |  |                                | 5,000  |      |   | 40,900  |  
|Contract research and development                                |  |                                | 1,094  |      |   | 2,609   |  
|Miscellaneous income                                             |  |                                | 166    |      |   | 1,843   |  
|                                                                 |  |                                |        |      |   |         |  
|Total revenues                                                   |  |                                | 18,022 |      |   | 58,253  |  
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Operating expenses:                                              |  |                                |        |      |   |         |  
|Research and development - pipeline                              |  |                                | 10,548 |      |   | 11,515  |  
|Research and development  specialty and contracted services     |  |                                | 647    |      |   | 3,059   |  
|General and administrative                                       |  |                                | 5,086  |      |   | 9,932   |  
|General and administrative  contracted services                 |  |                                | 58     |      |   | 1,400   |  
|Restructuring charge                                             |  |                                | 359    |      |   | 9,889   |  
|                                                                 |  |                                |        |      |   |         |  
|Total operating expenses                                         |  |                                | 16,698 |      |   | 35,795  |  
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Operating income                                                 |  |                                | 1,324  |      |   | 22,458  |  
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Other income (expense):                                          |  |                                |        |      |   |         |  
|Investment income, net                                           |  |                                | 459    |      |   | 971     |  
|Interest expense                                                 |  |                                | (1,480 | )    |   | (2,676  | )
|Other, net                                                       |  |                                | 128    |      |   | 1       |  
|                                                                 |  |                                |        |      |   |         |  
|Total other income (expense)                                     |  |                                | (893   | )    |   | (1,704  | )
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Income from continuing
 operations, before income tax provision  |  |                                | 431    |      |   | 20,754  |  
|                                                                 |  |                                |        |      |   |         |  
|Income tax provision                                             |  |                                |       |      |   |        |  
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Income from continuing
 operations                               |  |                                | 431    |      |   | 20,754  |  
|                                                                 |  |                                |        |      |   |         |  
|Income and gain from
 discontinued operations, net of income tax |  |                                |       |      |   | 179,053 |  
|                                                                 |  |                                |        |      |   |         |  
|Net income                                                       |  | $                              | 431    |      | $ | 199,807 |  
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Earnings per common share - continuing operations                |  |                                |        |      |   |         |  
|Basic                                                            |  | $                              | 0.01   |      | $ | 0.40    |  
|                                                                 |  |                                |        |      |   |         |  
|Diluted                                                          |  | $                              | 0.01   |      | $ | 0.29    |  
|                                                                 |  |                                |        |      |   |         |  
|Earnings per common share 
 discontinued operations             |  |                                |        |      |   |         |  
|Basic                                                            |  | $                              |       |      | $ | 3.42    |  
|                                                                 |  |                                |        |      |   |         |  
|Diluted                                                          |  | $                              |       |      | $ | 2.41    |  
|                                                                 |  |                                |        |      |   |         |  
|Earnings per common share 
 net income                          |  |                                |        |      |   |         |  
|Basic                                                            |  | $                              | 0.01   |      | $ | 3.82    |  
|                                                                 |  |                                |        |      |   |         |  
|Diluted                                                          |  | $                              | 0.01   |      | $ | 2.70    |  
|                                                                 |  |                                |        |      |   |         |  
|                                                                 |  |                                |        |      |   |         |  
|Weighted-average shares -
 basic                                 |  |                                | 58,002 |      |   | 52,284  |  
|                                                                 |  |                                |        |      |   |         |  
|Weighted-average shares -
 diluted                               |  |                                | 58,736 |      |   | 74,242  |  
|                                                                 |  |                                |        |      |   |         |  

The accompanying notes are an
integral part of these unaudited condensed consolidated financial statements.

3

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                                                                          |  |                                |         |      |   |         |  
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | ---- | - | ------- | -
|                                                                                                          |  | Three
 months ended
 March 31, |        
|                                                                                                          |  |                                |        
|                                                                                                          |  | 2011                           |         | 2010 |  
|                                                                                                          |  |                                |         |      |  
|                                                                                                          |  |                                |         |      |   |         |  
|Cash flows from operating activities:                                                                     |  |                                |         |      |   |         |  
|Net income                                                                                                |  | $                              | 431     |      | $ | 199,807 |  
|Income and gain from discontinued operations                                                              |  |                                |        |      |   | 179,053 |  
|                                                                                                          |  |                                |         |      |   |         |  
|Income from continuing operations                                                                         |  |                                | 431     |      |   | 20,754  |  
|Adjustments to reconcile income from continuing operations to net cash
 provided by operating activities: |  |                                |         |      |   |         |  
|Depreciation                                                                                              |  |                                | 1,374   |      |   | 1,377   |  
|Share-based compensation                                                                                  |  |                                | 1,209   |      |   | 3,863   |  
|Amortization and write-off of debt issuance costs                                                         |  |                                | 135     |      |   | 1,716   |  
|Gain on sale of marketable securities                                                                     |  |                                | (22     | )    |   | (112    | )
|Loss on disposal of fixed assets                                                                          |  |                                | 65      |      |   |        |  
|Amortization of debt securities premium                                                                   |  |                                | 328     |      |   | 868     |  
|Changes in operating assets and liabilities                                                               |  |                                | (2,474  | )    |   | 11,385  |  
|                                                                                                          |  |                                |         |      |   |         |  
|Net cash provided by operating activities of continuing operations                                        |  |                                | 1,046   |      |   | 39,851  |  
|Net cash provided by operating activities of discontinued operations                                      |  |                                |        |      |   | 513     |  
|                                                                                                          |  |                                |         |      |   |         |  
|Net cash provided by operating activities                                                                 |  |                                | 1,046   |      |   | 40,364  |  
|                                                                                                          |  |                                |         |      |   |         |  
|                                                                                                          |  |                                |         |      |   |         |  
|Cash flows from investing activities:                                                                     |  |                                |         |      |   |         |  
|Proceeds from sale of business, net                                                                       |  |                                |        |      |   | 263,108 |  
|Purchase of property and equipment                                                                        |  |                                | (88     | )    |   | (249    | )
|Proceeds from sale of marketable securities                                                               |  |                                | 206     |      |   | 4,441   |  
|Purchase of marketable securities                                                                         |  |                                | (344    | )    |   | (1,206  | )
|Maturities of marketable securities                                                                       |  |                                | 13,332  |      |   | 13,400  |  
|                                                                                                          |  |                                |         |      |   |         |  
|Net cash provided by investing activities of continuing operations                                        |  |                                | 13,106  |      |   | 279,494 |  
|Net cash used in investing activities of discontinued operations                                          |  |                                |        |      |   | (105    | )
|                                                                                                          |  |                                |         |      |   |         |  
|Net cash provided by investing activities                                                                 |  |                                | 13,106  |      |   | 279,389 |  
|                                                                                                          |  |                                |         |      |   |         |  
|                                                                                                          |  |                                |         |      |   |         |  
|Cash flows from financing activities:                                                                     |  |                                |         |      |   |         |  
|Repurchase of common stock                                                                                |  |                                | (41,401 | )    |   | (5,811  | )
|Proceeds from issuance of common stock                                                                    |  |                                | 216     |      |   | 2,441   |  
|Withholding taxes  share-based compensation                                                              |  |                                | (684    | )    |   | (1,885  | )
|Proceeds from employee stock purchase plan                                                                |  |                                | 125     |      |   | 265     |  
|                                                                                                          |  |                                |         |      |   |         |  
|Net cash used in financing activities                                                                     |  |                                | (41,744 | )    |   | (4,990  | )
|                                                                                                          |  |                                |         |      |   |         |  
|                                                                                                          |  |                                |         |      |   |         |  
|Net (decrease) increase in cash and cash equivalents                                                      |  |                                | (27,592 | )    |   | 314,763 |  
|                                                                                                          |  |                                |         |      |   |         |  
|Cash and cash equivalents at beginning of period                                                          |  |                                | 397,530 |      |   | 50,440  |  
|                                                                                                          |  |                                |         |      |   |         |  
|                                                                                                          |  |                                |         |      |   |         |  
|Cash and cash equivalents at end of period                                                                |  | $                              | 369,938 |      | $ | 365,203 |  
|                                                                                                          |  |                                |         |      |   |         |  

The accompanying notes are an
integral part of these unaudited condensed consolidated financial statements.

4

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
(Unaudited)

(1) Description of Business

Enzon
Pharmaceuticals, Inc. and subsidiaries (Enzon or the Company) is a
biotechnology company dedicated to the research and development of innovative
therapeutics for cancer patients with high unmet medical needs. Operations are
funded in part by the receipt of royalty revenues from licensing arrangements
with other companies related to sales of products developed using the Companys
proprietary Customized PEGylation Linker Technology (Customized Linker
Technology®)  primarily PEGINTRON, marketed by Merck & Co., Inc. The
Company operates in one business segment. The Companys Principal Executive
Officer (chief operating decision maker) reviews the Companys operating
results on an aggregate basis and manages the Companys operations as a single
operating unit. The Companys operations and assets reside almost exclusively
in the United States.

The Companys
pipeline drug development programs utilize two platforms  Customized Linker
Technology and third-generation messenger ribonucleic acid (mRNA)-targeting
agents utilizing the Locked Nucleic Acid (LNA) technology. The Company
currently has four compounds in clinical development: PEG-SN38 and the
Hypoxia-Inducible Factor-1α (HIF-1α), Survivin and Androgen Receptor
(AR) messenger RNA (mRNA) antagonists. In addition, the Company has other novel
LNA targets in various stages of preclinical research.

On January
29, 2010, the Company sold its specialty pharmaceutical business, comprised
principally of the Companys products and contract manufacturing segments, for
approximately $309 million in cash with the potential for subsequent milestone
payments and royalties. See Note 14, Discontinued Operations.

(2) Basis of Presentation

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Interim Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The
 accompanying unaudited condensed consolidated financial statements have been
 prepared from the books and records of the Company in accordance with United
 States generally accepted accounting principles (U.S. GAAP) for interim
 financial information and Rule 10-01 of the U.S. Securities and Exchange
 Commission Regulation S-X. Accordingly, these financial statements do not
 include all of the information and footnotes required for complete annual
 financial statements. Interim results are not necessarily indicative of the
 results that may be expected for the year. Interim condensed consolidated
 financial statements should be read in conjunction with the consolidated
 financial statements and the notes thereto included in the Companys Annual
 Report on Form 10-K for the year ended December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The
 condensed consolidated financial statements include those of Enzon
 Pharmaceuticals, Inc. and its subsidiaries. All intercompany balances and
 transactions have been eliminated as part of the consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|The
 preparation of financial statements in conformity with U.S. GAAP requires
 management to make estimates and assumptions about contingent assets and
 liabilities at the date of the financial statements and the reported amounts
 of revenues and expenses during the reporting period. Such estimates include
 the valuation of certain investments, long-lived assets, legal and
 contractual contingencies and assumptions used in the calculation of
 share-based compensation and income taxes. These estimates and assumptions
 are based on managements best estimates and judgment. Management evaluates
 its estimates and assumptions on an ongoing basis using historical
 experience, the current economic environment and other factors that
 management believes to be reasonable under the circumstances. Management
 adjusts such estimates and assumptions when facts and circumstances dictate.
 As future events and their effects cannot be determined with precision,
 actual results could differ significantly from these estimates. Changes in
 estimates will be reflected in the financial statements in future periods. In
 the opinion of management, all adjustments (consisting only of normal and
 recurring adjustments) considered necessary for a fair presentation have been
 included in these financial statements.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Reclassifications and Adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Certain
 prior-period amounts have been reclassified to conform to the current period
 presentation. Prior to the second quarter of 2010, cash payments for withholding taxes on the exercise
of share-based awards were netted against share-based compensation expense within the cash provided by operating
activities in the Company's statements of cash flows. The proper classification of these amounts is in cash flows
from financing activities, which is where they are reported in these financial statements with the three months
ended March 31, 2010 having been adjusted. The $1.9 million adjustment amount to the prior period cash flow statement
for the three months ended March 31, 2010 is not material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

5

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements (continued) 
(Unaudited)

(3) Financial Instruments and Fair Value

The
carrying values of cash, cash equivalents, other current assets, accounts
payable, and accrued expenses in the Companys condensed consolidated balance
sheets approximated their fair values at March 31, 2011 and December 31, 2010
due to their short-term nature. Short-term investments and marketable
securities are carried on the balance sheets at fair value based on quoted
market prices. All fair value measures are Level 1. Fair values and carrying
amounts of the Companys financial instruments are indicated below (in
thousands):

|                                                |  |   |            |  |                  |         |  | 
|----------------------------------------------- |  | - | ---------- |  | ---------------- | ------- |  | 
|Description                                     |  |   | Fair Value |  | Carrying
 Amount |        
|                                                |  |   |            |  |                  |        
|Investments
 and Marketable Securities (Note 4) |  | $ | 48,918     |  | $                | 48,918  | 
|                                                |  |   |            |  |                  |         | 
|                                                |  |   |            |  |                  |         | 
|4%
 Convertible Senior Notes (Note 5)           |  | $ | 165,938    |  | $                | 134,499 | 
|                                                |  |   |            |  |                  |         | 

(4) Short-term Investments and Marketable
Securities

The amortized
cost, gross unrealized holding gains or losses, and fair value of the Companys
investments by major security type at March 31, 2011 were as follows (in
thousands):

|                                         |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 
|---------------------------------------- |  | --------------- | ------ | -------------------------------- | - | --------------------------------- |  | ------------ | --- | - | - | ------ | 
|                                         |  | Amortized
 Cost |        | Gross
 Unrealized
 Holding Gains |   | Gross
 Unrealized
 Holding Losses |  | Fair
 Value* |    
|                                         |  |                 |        |                                  |   |                                   |  |              |    
|                                         |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 
|Corporate
 debt                          |  | $               | 38,448 |                                  | $ | 583                               |  | $            |    |   | $ | 39,031 | 
|U.S.
 government-sponsored entities debt |  |                 | 1,000  |                                  |   | 1                                 |  |              |    |   |   | 1,001  | 
|Non-U.S.
 government debt                |  |                 | 5,513  |                                  |   | 67                                |  |              |    |   |   | 5,580  | 
|Other                                    |  |                 | 3,190  |                                  |   | 138                               |  |              | (22 | ) |   | 3,306  | 
|                                         |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 
|                                         |  | $               | 48,151 |                                  | $ | 789                               |  | $            | (22 | ) | $ | 48,918 | 
|                                         |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 

*
Included in short-term investments of $35,584 and marketable securities of
$13,334 at March 31, 2011.

The
amortized cost, gross unrealized holding gains or losses, and fair value of the
Companys investments by major security type at December 31, 2010 were as
follows (in thousands):

|                                        |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 
|--------------------------------------- |  | --------------- | ------ | -------------------------------- | - | --------------------------------- |  | ------------ | --- | - | - | ------ | 
|                                        |  | Amortized
 Cost |        | Gross
 Unrealized
 Holding Gains |   | Gross
 Unrealized
 Holding Losses |  | Fair
 Value* |    
|                                        |  |                 |        |                                  |   |                                   |  |              |    
|                                        |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 
|Corporate debt                          |  | $               | 52,079 |                                  | $ | 738                               |  | $            |    |   | $ | 52,817 | 
|U.S. government-sponsored entities debt |  |                 | 1,000  |                                  |   | 4                                 |  |              |    |   |   | 1,004  | 
|Non-U.S. government debt                |  |                 | 5,553  |                                  |   | 86                                |  |              |    |   |   | 5,639  | 
|Other                                   |  |                 | 3,019  |                                  |   | 111                               |  |              | (26 | ) |   | 3,104  | 
|                                        |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 
|                                        |  | $               | 61,651 |                                  | $ | 939                               |  | $            | (26 | ) | $ | 62,564 | 
|                                        |  |                 |        |                                  |   |                                   |  |              |     |   |   |        | 

* Included
in short-term investments of $31,170 and marketable securities of $31,394 at
December 31, 2010.

All
corporate, U.S. government-sponsored entity and non-U.S. government debt
investments are classified as available-for-sale securities. Other securities
include investments of participants in the Companys Executive Deferred
Compensation Plan (predominantly mutual fund shares) totaling $3.3 million fair
value as of March 31, 2011 and $3.1 million fair value as of December 31, 2010.
There is a non-current liability that offsets the aggregate deferred
compensation plan assets.

Fair value
is determined from readily available quoted prices in active markets (Level 1,
the preferred approach pursuant to applicable accounting guidance). As of March
31, 2011 and December 31, 2010, the Companys investments and marketable
securities are all valued based on Level 1 inputs.

6

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements  (continued)
(Unaudited)

Maturities
of marketable debt securities, excluding securities related to the Companys
Executive Deferred Compensation Plan, at March 31, 2011 were as follows (in
thousands):

|                                        |  |  |                 |        |             |   |        | 
|--------------------------------------- |  |  | --------------- | ------ | ----------- | - | ------ | 
|Twelve-Month
 Periods Ending
 March 31, |  |  | Amortized
 Cost |        | Fair
 Value |  
|                                        |  |  |                 |        |             |  
|                                        |  |  |                 |        |             |   |        | 
|2012                                    |  |  | $               | 35,152 |             | $ | 35,584 | 
|2013                                    |  |  |                 | 9,809  |             |   | 10,028 | 
|                                        |  |  |                 |        |             |   |        | 
|                                        |  |  | $               | 44,961 |             | $ | 45,612 | 
|                                        |  |  |                 |        |             |   |        | 

Sales
during the quarter ended March 31, 2011 of investments in the deferred
compensation plan resulted in a gain of $22,000. However, because the Company
maintains a liability for the fair value of the deferred compensation
due to plan participants, any realized gains or losses related to these investment holdings
are off-set by a corresponding increase or decrease in the liability to operating expenses. The cost of securities is based on the
specific-identification method.

Impairment
assessments are made at the individual security level each reporting period.
When the fair value of an investment is less than its cost at the balance sheet
date, a determination is made as to whether the impairment is other than
temporary and, if it is other than temporary, an impairment loss is recognized
in earnings equal to the difference between the investments amortized cost and
fair value at such date. As of March 31, 2011, only certain assets of the
Companys Executive Deferred Compensation Plan have unrealized holding losses.
None of the underlying investments has been in a continuous loss position
longer than twelve months.

(5) Notes Payable

The 4%
convertible senior notes mature on June 1, 2013 unless earlier redeemed,
repurchased or converted. The 4% notes are senior unsecured obligations and
rank equal to all future senior unsecured debt of the Company. The 4% notes are
convertible at the option of the holders into the Companys common stock at a
conversion price of $9.55 per share (104.712 shares per $1,000 of principal
amount). If the closing price of the Companys common stock for at least 20
trading days in the 30-consecutive-trading-day period ending on the date one
day prior to the date of a notice of redemption is greater than 140 percent of
the applicable conversion price on the date of such notice, the Company, at its
option, may redeem the 4% notes in whole or in part, at a redemption price in
cash equal to 100 percent of the principal amount of the 4% notes to be
redeemed, plus accrued and unpaid interest, if any, to the redemption date.
Upon occurrence of a fundamental change, as defined in the indenture
governing the 4% notes, holders of the notes may require the Company to redeem
the notes at a price equal to 100 percent of the principal amount plus accrued
and unpaid interest or, in certain cases, to convert the notes at an increased
conversion rate based on the price paid per share of the Companys common stock
in the transaction constituting the fundamental change.

During the first quarter of 2010, notes totaling $115.6 million principal
  amount were converted into approximately 13.5 million shares of the Companys
  common stock, reducing the outstanding principal balance of the notes outstanding
  to $134.5 million. The net effect of forgone interest and the write-off of
  deferred debt issuance costs amounted to $0.8 million and was charged to interest
  expense during the first quarter of 2010 at the time of the notes conversion.
  The $0.8 million was adjusted in the fourth quarter of 2010 to credit interest
  expense and charge additional paid-in capital to reflect the capital nature
  of the transaction. The noncash adjustment was not material to the first or
fourth quarters nor to the full year 2010 results of operations.

Interest on the 4% notes is payable on June
1 and December 1 of each year. Accrued interest amounted to $1.8 million and
$0.4 million as of March 31, 2011 and December 31, 2010, respectively.

(6) Stockholders Equity

On December
21, 2010, the Company announced a share repurchase program, under which the
Company may use up to $200.0 million to purchase the Companys outstanding
common shares. During the three months ended March 31, 2011, the Company
repurchased and retired 3,853,073 shares at a cost of $41.5 million, or an
average cost per share of approximately $10.77. This brings cumulative number
of shares repurchased and retired under this program through March 31, 2011 to
3,883,073 shares at a total cost of $41.9 million. The plan continues to be in
effect.

7

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements  (continued)
(Unaudited)

(7) Comprehensive Income

The
following table reconciles net income to comprehensive income (in thousands):

| |                                                                             |  |                              |      |      |   |         |  
| | --------------------------------------------------------------------------- |  | ---------------------------- | ---- | ---- | - | ------- | -
| |                                                                             |  | Three months ended March 31, |     
| |                                                                             |  |                              |     
| |                                                                             |  | 2011                         |      | 2010 |  
| |                                                                             |  |                              |      |      |  
| |                                                                             |  |                              |      |      |   |         |  
| | Net income                                                                  |  | $                            | 431  |      | $ | 199,807 |  
| | Other
 comprehensive income:                                                |  |                              |      |      |   |         |  
| | Unrealized gain on securities that arose
 during the period, net of tax (1) |  |                              | (125 | )    |   | 316     |  
| | Currency translation adjustment                                             |  |                              |     |      |   | 187     |  
| | Reclassification adjustment for (gain) loss
 included in net income         |  |                              | (22  | )    |   | (112    | )
| |                                                                             |  |                              |      |      |   |         |  
| | Total comprehensive income                                                  |  | $                            | 284  |      | $ | 200,198 |  
| |                                                                             |  |                              |      |      |   |         |  

| |     |                                                                                               
| | --- | ----------------------------------------------------------------------------------------------
| | (1) | Information
 has not been tax-effected due to an estimated annual effective tax rate of
 zero.

(8) Supplemental Cash Flow Information

The Company
considers all highly liquid investment securities with original maturities of
three months or less to be cash equivalents. During the three months ended
March 31, 2011 and 2010, there were no payments of interest related to the
Companys 4% notes. During the three months ended March 31, 2010, the Company
had a noncash conversion of $115.6 million principal amount of the 4% notes
into approximately 13.5 million shares of its common stock. Income tax payments
for the three months ended March 31, 2011 and 2010, were $34,000 and $72,000,
respectively.

(9) Sale of In-Process Research and
Development

When the
Company sold its specialty pharmaceutical business in January 2010, it retained
its research and development organization. Prior to the sale, the Companys
research and development function was engaged in, among other things, studies
oriented towards the next-generation formulations of Oncaspar and Adagen, two
products that were among those sold as part of the specialty pharmaceuticals
business. The in-process research and development related to those two products
was included in the sale. The $40.9 million selling price was managements best
estimate of its standalone fair value based on the stage of development and
consideration of future milestone payments. During the first quarter of 2011,
the Company earned the first $5.0 million milestone payment from the purchaser
of the specialty pharmaceutical business resulting from the approval of a
supplemental Biologic License Application (sBLA) for the manufacture of SS
Oncaspar.

(10) Earnings Per Common Share

Basic
earnings per common share is computed by dividing the income available to
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Restricted stock awards and restricted stock
units (collectively, nonvested shares) are not considered to be outstanding
shares until the service vesting period has been satisfied. For purposes of
calculating diluted earnings per common share, the denominator includes both
the weighted average number of shares of common stock outstanding and the
number of common stock equivalents if the inclusion of such common stock
equivalents is dilutive. Dilutive common stock equivalents potentially include
stock options and nonvested shares using the treasury stock method, shares
issuable under the employee stock purchase plan (ESPP) and the number of shares
issuable upon conversion of the Companys convertible notes payable. In the
case of notes payable, the diluted earnings per share calculation is further
affected by an add-back of interest to the numerator under the assumption that
the interest would not have been incurred if the notes payable were converted
into common stock.

8

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements  (continued)
(Unaudited)

|                                                                                                                         |  |                              |        |      |   |         |    
|------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------ | ---- | - | ------- | ---
|                                                                                                                         |  | Three months ended March 31, |       
|                                                                                                                         |  |                              |       
|                                                                                                                         |  | 2011                         |        | 2010 |  
|                                                                                                                         |  |                              |        |      |  
|Earnings Per Common Share  Basic:                                                                                       |  |                              |        |      |   |         |    
|Income from continuing operations                                                                                        |  | $                            | 431    |      | $ | 20,754  |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Income and gain from discontinued
 operations                                                                            |  | $                            |       |      | $ | 179,053 |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Net income                                                                                                               |  | $                            | 431    |      | $ | 199,807 |    
|                                                                                                                         |  |                              |        |      |   |         |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Weighted average common shares outstanding                                                                               |  |                              | 58,002 |      |   | 52,284  |    
|                                                                                                                         |  |                              |        |      |   |         |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Basic earnings per share:                                                                                                |  |                              |        |      |   |         |    
|Continuing operations                                                                                                    |  | $                            | 0.01   |      | $ | 0.40    |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Discontinued operations                                                                                                  |  | $                            |       |      | $ | 3.42    |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Net income                                                                                                               |  | $                            | 0.01   |      | $ | 3.82    |    
|                                                                                                                         |  |                              |        |      |   |         |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Earnings Per Common Share  Diluted:                                                                                     |  |                              |        |      |   |         |    
|Income from continuing operations                                                                                        |  | $                            | 431    |      | $ | 20,754  |    
|Add back interest expense on 4% convertible
 notes, net of tax                                                           |  |                              |       |      |   | 960     |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Adjusted income from continuing operations                                                                               |  | $                            | 431    |      | $ | 21,714  |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Income and gain from discontinued
 operations                                                                            |  | $                            |       |      | $ | 179,053 |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Adjusted net income                                                                                                      |  | $                            | 431    |      | $ | 200,767 |    
|                                                                                                                         |  |                              |        |      |   |         |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Weighted average common shares outstanding                                                                               |  |                              | 58,002 |      |   | 52,284  |    
|Weighted-average incremental shares related
 to assumed exercise of stock options, vesting of nonvested awards, and ESPP |  |                              | 734    |      |   | 1,735   |    
|Weighted-average incremental shares
 assuming conversion of 4% notes                                                     |  |                              |       | (1)  |   | 20,223  | (2)
|                                                                                                                         |  |                              |        |      |   |         |    
|Weighted-average number of common shares
 outstanding and common share equivalents                                       |  |                              | 58,736 |      |   | 74,242  |    
|                                                                                                                         |  |                              |        |      |   |         |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Diluted earnings per share:                                                                                              |  |                              |        |      |   |         |    
|Continuing operations                                                                                                    |  | $                            | 0.01   |      | $ | 0.29    |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Discontinued operations                                                                                                  |  | $                            |       |      | $ | 2.41    |    
|                                                                                                                         |  |                              |        |      |   |         |    
|Net income                                                                                                               |  | $                            | 0.01   |      | $ | 2.70    |    
|                                                                                                                         |  |                              |        |      |   |         |    

|    |                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The assumed
 conversion of notes payable would be anti-dilutive due to the fact that the
 add-back of interest to the numerator would have a greater effect on the
 computation than would the incremental number of shares to the denominator.
 Accordingly, only the assumed exercise of stock options, vesting of nonvested
 awards, and ESPP activity enters into the computation.
|    |                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | Assumes
 conversion at the rate of 104.712 shares per $1,000 principal amount of
 notes.                                                                                                                                                                                                                                                                                              

For the
three months ended March 31, 2011, approximately 14.1 million potentially
dilutive shares were anti-dilutive and were not included in the computation.
For the three months ended March 31, 2010, approximately 0.7 million
potentially dilutive shares were anti-dilutive and were not included in the
computation.

9

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements   (continued)
(Unaudited)

(11) Restructurings

During the
first quarter of 2011, the Company recorded a restructuring charge in the
amount of $0.4 million related to the excess of committed lease costs over
potential sublease income for office space in Bridgewater, New Jersey that was vacated during the quarter when the
Company relocated its corporate offices to Piscataway, New Jersey.

A
    fourth quarter 2010 workforce reduction resulted in an expense of $3.0 million
    for separation benefits. The affected employees were notified in December
    2010 and the majority of the terminations occurred during the first quarter
    of 2011. Separation payments will be made for up to a year following the
    respective separations. As of December 31, 2010, the full $3.0 million was
    an accrued expense, of which $2.7 million was reported as a current liability.
    During the first quarter of 2011, the Company made separation payments of
    $0.4 million. As of March 31, 2011, there is $2.6 million remaining in accrued
expenses under current liabilities.

During the
first quarter of 2010, the Companys workforce reduction involved 64 employees
and resulted in an expense of $6.1 million for separation benefits. These
actions related primarily to the sale of the specialty pharmaceutical business
and affected employees who were previously engaged in activities related to the
divested business but who did not transfer to the employment of the purchaser.
These employees were provided with separation benefits after certain transition
periods, during which they assisted with an orderly transfer of activities and
information to the purchaser. In addition, the Company reassessed its staffing
requirements subsequent to the sale in light of the lessened demands on many of
its general and administrative functions. During the first quarter of 2011, the
Company made separation payments of $0.6 million. As of March 31, 2011, there
is $0.3 million remaining in accrued expenses.

Effective
February 22, 2010, the Companys then President and Chief Executive Officer
resigned from the Company. For the quarter ended March 31, 2010, the Company
expensed $3.8 million for severance payments and benefits that were payable
under the terms of this individuals employment agreement. This amount was
reduced during the quarter ended June 30, 2010 by approximately $0.2 million
once the termination agreement was executed. Payments due pursuant to the
termination agreement were made during the third quarter of 2010.

(12) Share-Based Compensation

Stock Option and Nonvested Share Awards

During the
quarter ended March 31, 2011, the Company recognized share-based compensation expense
of $1.2 million. Shares were withheld to pay $0.7 million of taxes on behalf of
employees related to share-based compensation resulting in a net incremental
credit to additional paid-in capital of $0.5 million during the quarter. During
the quarter ended March 31, 2010, the Company recognized share-based
compensation expense of $3.9 million. Shares were withheld to pay $1.9 million
of taxes on behalf of employees. In addition, $0.5 million of share-based
compensation is included in discontinued operations. The net effect of these
adjustments resulted in a net incremental credit to additional paid-in capital
of $2.5 million during the quarter.

In
connection with the sale of the specialty pharmaceutical business, in December
2009 the board of directors of the Company elected to accelerate the vesting of
certain share-based awards granted under the Companys 2001 Incentive Stock
Plan as of the consummation of the sale. The acceleration applied to all
employees other than executives and members of the board of directors. The
acceleration resulted in a noncash expense of $1.0 million in the first quarter
of 2010. These charges primarily represent an acceleration of expense
recognition pursuant to the original award and, to a lesser extent, an adjustment,
in certain cases, to recognize the modification of the award in contemplation
of the sale. In addition, certain stock awards granted to the Companys former
President and Chief Executive Officer were subject to accelerated vesting as of
the date of termination of his employment in February 2010. The acceleration of
vesting of these share-based awards constituted a noncash charge to general and
administrative expense in the first quarter 2010 of approximately $2.1 million.

As of March
31, 2011, there was $0.7 million of total unrecognized compensation cost
related to unvested options that the Company expects to recognize over a
weighted-average period of 13 months and $4.4 million of total unrecognized
compensation cost related to nonvested shares to be recognized over a
weighted-average period of 26 months.

The
weighted average grant price of the options granted during the quarter ended
March 31, 2011 was $12.40 per share and fair value was $4.41 per share ($0.6
million fair value).

10

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements   (continued)
(Unaudited)

Activity in
options and nonvested shares during the quarter ended March 31, 2011 and
related balances outstanding as of that date are reflected below (in
thousands):

|                                                       |  |         |       |                   |  |      |  
|------------------------------------------------------ |  | ------- | ----- | ----------------- |  | ---- | -
|                                                       |  | Options |       | Nonvested
 Shares | 
|                                                       |  |         |       |                   | 
|Outstanding at January 1, 2011                         |  |         | 3,993 |                   |  | 753  |  
|Granted                                                |  |         | 136   |                   |  |     |  
|Exercised and vested                                   |  |         | (26   | )                 |  | (163 | )
|Expired and forfeited                                  |  |         | (255  | )                 |  | (5   | )
|                                                       |  |         |       |                   |  |      |  
|Outstanding at March 31, 2011                          |  |         | 3,848 |                   |  | 585  |  
|                                                       |  |         |       |                   |  |      |  
|                                                      
|Options vested and expected to vest at
 March 31, 2011 |  |         | 3,820 |                   |  |      |  
|                                                       |  |         |       |                   |  |      |  
|                                                      
|Options exercisable at March 31, 2011                  |  |         | 3,642 |                   |  |      |  
|                                                       |  |         |       |                   |  |      |  

(13) Income Taxes

During the
three months ended March 31, 2011 and 2010, the Company recorded no income tax
expense because the estimated annual effective tax rate was zero. The sale of
the specialty pharmaceutical business in January 2010, including the sale of
in-process research and development, was a taxable transaction for federal
income tax purposes, although it resulted in no federal income tax liability
due to the tax basis the Company had in divested assets and the net operating
loss generated in 2010. As of March 31, 2011, the Company continues to provide
a valuation allowance against its net deferred tax assets since the Company
believes it is more likely than not its deferred tax assets will not be
realized.

(14) Discontinued Operations

On January
29, 2010, the Company consummated the sale of the specialty pharmaceutical
business comprised principally of its Products and Contract Manufacturing
segments, in addition to certain in-process research and development. The
Products and Contract Manufacturing segments constituted components of Enzon
and the sale qualified for treatment as discontinued operations during the
first quarter of 2010 upon receipt of shareholder approval at a special meeting
of shareholders on January 27, 2010. The sale of in-process research and
development associated with marketed products was also a component of Enzon but
has been treated as an asset sale in continuing operations due to the Companys
significant continuing involvement in research and development efforts related
to marketed products subsequent to the sale.

Reported amounts

Income and
gain from discontinued operations (in thousands):

|                                                                                      |  |                                     |         | 
|------------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | 
|                                                                                      |  | Three months
 ended
 March 31, 2010 |        
|                                                                                      |  |                                     |        
|Results of operations of the specialty
 pharmaceutical business January 1  29, 2010: |  |                                     |         | 
|Revenues                                                                              |  | $                                   | 8,720   | 
|                                                                                      |  |                                     |         | 
|Income, net of income tax                                                             |  | $                                   | 3,620   | 
|Gain on sale of discontinued operations,
 net of income tax(1)                        |  |                                     | 175,433 | 
|                                                                                      |  |                                     |         | 
|Income and gain from discontinued
 operations, net of income tax                      |  | $                                   | 179,053 | 
|                                                                                      |  |                                     |         | 

| |                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Gain was subsequently adjusted to $176.4 million in the fourth
quarter of 2010 to recognize $1.0 million of currency translation gains that
had been included in accumulated other comprehensive income but should have
been recognized as part of the gain on sale. The fourth-quarter adjusting entry was not material to the first or fourth quarters nor to the full year 2010 results of operations.

11

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements   (continued)
(Unaudited)

The cash
proceeds received from the purchaser during the first quarter of 2010,
including the working capital adjustment, amounted to approximately $309.0
million. Transaction costs amounted to approximately $5.0 million, reducing net
proceeds to approximately $304.0 million. Of this amount, $40.9 million was
allocated to the sale of in-process research and development. The net proceeds
then attributable to discontinued operations amounted to $263.1 million and
this amount less the book basis of $87.7 million in the respective assets and liabilities yielded the gain from discontinued operations of
$175.4 million reported as of March 31, 2010. A second-quarter 2010 working
capital adjustment reduced cash proceeds and book basis of net assets sold
resulting in an immaterial change to these amounts. The sale agreement provided
for milestone payments and royalties in addition to the initial cash payments
if certain conditions are met.

Transition Services Agreement

Pursuant to
a transition services agreement with the purchaser, Enzon began performing
product-support research and development and various general and administrative
functions for the purchaser during the first quarter of 2010. The research and
development work is intended to facilitate the transfer of certain technologies
associated with Oncaspar and Adagen to the purchaser but are not of such a
nature that the work could not be performed by the purchaser or third-parties
without the Companys involvement. The Company committed to provide such
transfer services for a period of up to three years following the closing. As
amended, for a period of up to fifteen months following the closing, the Company
committed to provide the purchaser with certain general and administrative
support efforts. As of March 31, 2011, the Companys involvement in these
general and administrative support activities has essentially been concluded.

Enzon is
being compensated for the research and development and general and
administrative services outlined above at a market rate defined in the
transition services agreement. These revenues and the corresponding expenses
are being reflected in the Companys continuing operating results.

None of
these services confers upon the Company the ability to influence the operating
and/or financial policies of our former specialty pharmaceutical business under
its new ownership.

(15) Commitments and Contingent Liabilities

The Company
has employment and separation agreements with certain members of its management
that provide for severance payments and payments following a termination of
employment occurring for various reasons, including a change in control of the
Company.

The Company
has been involved in various claims and legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material effect on the Companys consolidated
financial position, results of operations, or liquidity.

The Company
has non-cancelable lease obligations for certain office and production
facilities that have been vacated. Some of these facilities have been sublet,
and the Company is actively seeking to sublet the remaining unused space.

12

---



Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations.

Overview

We are a
biotechnology company dedicated to the research and development of innovative
therapeutics for cancer patients with high unmet medical needs. Our Principal
Executive Officer reviews our operating results on an aggregate basis and
manages the operations as a single operating unit. Our drug development
programs utilize two platforms  Customized PEGylation Linker Technology
(Customized Linker Technology ®) and third-generation messenger RNA
(mRNA)-targeting agents utilizing the Locked Nucleic Acid (LNA) technology. We
currently have four compounds in human clinical development: PEG-SN38, which
utilizes our PEGylation technology, and the mRNA antagonists of
Hypoxia-Inducible Factor-1α (HIF-1α), Survivin and Androgen Receptor
(AR), which utilize the LNA technology. In addition, the Company has other
novel LNA targets in various stages of preclinical research. We receive royalty
revenues from licensing arrangements with other companies related to sales of
products developed using our proprietary Customized Linker Technology 
primarily PEGINTRON marketed by Merck & Co., Inc. (Merck).

In
    order to better focus on our portfolio of innovative oncology programs, we
    divested our specialty pharmaceutical business comprised principally of what
    had previously been our Products and Contract Manufacturing segments. Prior
    to the January 29, 2010 closing of the transaction, we were a biopharmaceutical
    company involved in the development, manufacture and commercialization of
    medicines for patients with cancer and other life-threatening conditions.
    We operated in three business segments: Products, Royalties and Contract
    Manufacturing. We had a portfolio of four marketed products and manufactured
    products for other pharmaceutical companies through our contract manufacturing
    business.

The first
quarter of 2011 marks the beginning of a period no longer influenced so heavily
by the restructuring, reorganization and consolidation activities that
significantly impacted the Company in 2010. Our results of operations are now
expected to be more reflective of our ongoing activities, which are directed
towards advancing our research and development pipeline. We continue to conduct
our on-going clinical trials in 2011 and anticipate completing enrollment in
2011 in our Phase II PEG-SN38 trial in metastatic breast cancer as well as our
Phase I clinical trials of HIF-1α and Survivin. The enrollment of patients
for clinical trials is an inherently uncertain process and there can be no
assurance we will be able to complete the enrollment of patients for our
clinical trials within the timeframe anticipated. Because of changes evolving
in patient treatment protocols in the U.S. and certain other countries over the
past year, it has become more difficult to identify and enroll patients in our
study of PEG-SN38 for metastatic colorectal cancer. We intend to continue our
efforts to seek a collaborative partnership designed to finance our development
activities in the future.

Throughout
Managements Discussion and Analysis, the primary focus is on the results of
operations, cash flows, financial condition and future outlook of our
continuing operations. Percentage changes throughout the following discussion
are based on amounts stated in thousands of dollars and not the rounded
millions of dollars reflected in this section.

Results of Continuing Operations

Revenues:

Royalties
(millions of dollars):

|                 |  |                    |      |         |  |             |  |   |      | 
|---------------- |  | ------------------ | ---- | ------- |  | ----------- |  | - | ---- | 
|                 |  | Three Months Ended |     
|                 |  |                    |     
|                 |  | March
 2011        |      | %Change |  | March
 2010 | 
|                 |  |                    |      |         |  |             | 
|Royalty
 revenue |  | $                  | 11.8 |         |  | (9)         |  | $ | 12.9 | 
|                 |  |                    |      |         |  |             |  |   |      | 

We receive
income from royalties on sales of products by other companies that use our
proprietary PEGylation technology, including PEGINTRON, marketed by Merck,
Macugen, marketed by OSI Pharmaceuticals, Inc. and Pfizer, Inc., and CIMZIA,
marketed by UCB Pharma. Royalty revenue for the three months ended March 31,
2011 decreased 9 percent to $11.8 million from $12.9 million for the three
months ended March 31, 2010. The decline in royalty revenue was almost entirely
attributable to lower sales of PEGINTRON, which continues to constitute the
most significant source of our royalty revenues. The decline in PEGINTRON
royalties was partially offset by a nominal increase in the royalty revenue
from CIMZIA sales.

13

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As we have
previously indicated, based upon information we have reviewed, we believe that
a significant number of patients suffering from hepatitis C may be deferring
treatment until new therapies become available potentially as early as
mid-2011. The implications of the unsettled hepatitis C market to future sales
of PEGINTRON are not clear and there can be no assurance concerning the impact,
if any, that any new therapies for hepatitis C may have on sales of PEGINTRON.

During the
three months ended March 31, 2011, we had royalties on export sales of $9.1
million, of which $3.3 million were in Japan and $2.9 million were in Europe.
This compares to $10.8 million of royalties on export sales in the comparable
three-month period of 2010, of which $3.2 million were in Japan and $3.5
million were in Europe.

Sale of In-process
Research and Development

When we
sold our specialty pharmaceutical business, we retained our research and
development organization. We had been engaged in studies oriented towards the
next-generation formulations of Oncaspar and Adagen, two products that were
among those sold as part of the specialty pharmaceutical business. The
in-process research and development related to Oncaspar and Adagen was sold to
the purchaser of the specialty pharmaceutical business and $40.9 million was
recognized as revenue in connection with the sale in the first quarter of 2010.
The selling price of the in-process research and development represented
managements best estimate of its standalone fair value based on the stage of
development and consideration of future milestone payments at that time
potentially amounting to $27.0 million. All necessary technology and know-how
was transferred to the purchaser at the time of the sale, and the purchaser
could resell the in-process research and development asset. At the time of the
sale, the activities necessary to complete the work on Oncaspar and Adagen
next-generation formulas could have been performed by the purchaser or others.

During the
first quarter of 2011, the Company earned the first $5.0 million milestone
payment from the purchaser of the specialty pharmaceutical business resulting
from the approval of a supplemental Biologic License Application (sBLA) for the
manufacture of SS Oncaspar. This milestone payment relates to our transfer of
technology that was included in the 2010 sale of in-process research and
development. During the latter half of 2010, circumstances emerged that made it
unlikely that we will be able to earn another of the milestones, valued at $5.0
million. Of the remaining $17.0 million of potential milestone payments, it is
very unlikely that any will be received in 2011 and there can be no assurance
that the Company will receive any such payments in the future.

Contract Research
and Development

During the
three months ended March 31, 2011, $1.1 million was earned for contract
research and development services. This compares to $2.6 million reported in
the first quarter of 2010 for the period from January 29, 2010 through March
31, 2010. Pursuant to a transition services agreement entered into at the time
of the sale of the specialty pharmaceutical business, we began performing
product-support research and development, consulting, and technology transfer
functions for the purchaser effective with the close of the sale transaction on
January 29, 2010. The transition services associated with product-support
research and development are being reported in continuing operations due to our
on-going involvement in the research and development related to the divested
products. We are being compensated for this work at actual cost plus a mark-up
per the terms of the transition services agreement. Our contractual obligation
is to assist with these transition services for a period of up to three years
subsequent to the date of the sale, although we anticipate the level of such
activity to decline significantly from 2010 levels throughout the remainder of
2011.

Miscellaneous Income

As part of the transition services agreement referred to above, we are
being compensated for various general and administrative services provided to
the purchaser of the specialty pharmaceutical business. The compensation for
this work includes reimbursement of costs incurred plus a mark-up defined in
the agreement. The expenses incurred in relation to these services are reported
as general and administrative  contracted services. Our involvement in the
transitioning of general and administrative activities is essentially complete.
During the three months ended March 31, 2011, approximately $0.1 million was
earned for these services. This compares to approximately $1.7 million reported
in the first quarter of 2010 for the period from January 29, 2010 through March
31, 2010. Also reflected in miscellaneous revenue are rental receipts from the
sublease of unused manufacturing and excess office space for which we

14

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have
on-going lease commitments. The underlying lease expense is reflected in general and administrative expenses.
During each of the three-month periods ended March 31, 2011 and 2010, we
received $0.1 million of sublease income.

Operating Expenses:

Research and
Development (millions of dollars):

|                                                              |  |                    |      |         |  |             |  |   |      | 
|------------------------------------------------------------- |  | ------------------ | ---- | ------- |  | ----------- |  | - | ---- | 
|                                                              |  | Three Months Ended |     
|                                                              |  |                    |     
|                                                              |  | March
 2011        |      | %Change |  | March
 2010 | 
|                                                              |  |                    |      |         |  |             | 
|Research and
 development  pipeline                          |  | $                  | 10.5 |         |  | (8)         |  | $ | 11.5 | 
|                                                              |  |                    |      |         |  |             |  |   |      | 
|Research and
 development  specialty and contracted services |  | $                  | 0.6  |         |  | n.m.        |  | $ | 3.1  | 
|                                                              |  |                    |      |         |  |             |  |   |      | 

n.m.  not meaningful

Research
and development  pipeline. For the three months ended
March 31, 2011, research and development expenses decreased by $1.0 million to
$10.5 million as compared to the three months ended March 31, 2010. Included in
the first-quarter 2010 expense was a $1.0 million milestone payment for the
beta-catenin antagonist. There was no comparable milestone expenditure in the
first quarter of 2011. Eliminating the prior-period milestone payment from the
comparison, pipeline research and development spending was essentially flat
period over period.

Spending
related to the ongoing Phase II and Phase I studies of PEG-SN38 rose approximately
32 percent to $5.6 million over the $4.2 million spent in the first quarter of
2010. We continued our Phase II clinical trials for metastatic colorectal and
metastatic breast cancer. In February 2010, we initiated in a Phase I study in
pediatric solid tumors which is expected to be completed during 2011. Finally,
the National Cancer Institute continues to study PEG-SN38 and bevacizumab in
patients who failed multiple prior chemotherapy regimens.

Spending on the mRNA antagonists in the first quarter of 2011 was $4.6 million
  compared to $6.4 million in the first quarter of 2010. Spending in the prior
  period included the $1.0 million milestone payment. Excluding this item, comparable
  aggregate spending on the mRNA antagonists decreased approximately 15 percent
  from the prior period. The studies relate to the antagonists of Hypoxia-Inducible
Factor-1α (HIF-1α), Survivin and Androgen Receptor (AR). We enrolled
and treated the first patient in the AR antagonist study of patients with
castration-resistant prostate cancer in the first quarter of 2011. We continue to evaluate the remaining
targets we have licensed from Santaris, based on our priorities and the
underlying science, and intend to focus only on the most promising of them.

During
2010, we were also working on identifying additional compounds that may benefit
from our proprietary Customized Linker Technology. This effort resulted in an
investment of $0.3 million in the first quarter of 2011 compared to $0.9
million in the first quarter of 2010. While these efforts were diminished, we
still entertain opportunities to identify compounds for PEGylation.

Research
and development  specialty and contracted services.
As a result of the sale of our specialty pharmaceutical business in January
2010, the programs related to the next-generation Oncaspar and Adagen
formulations became the responsibility of the purchaser. We continue to assist
in the development of these programs through a transition services arrangement.
During the first three months of 2011, our spending related to these products
decreased substantially, as expected, as the purchaser assumed greater control.
These costs amounted to $0.6 million during the three months ended March 31,
2011. During the first three months of 2010, our spending related to these
products totaled $3.1 million, of which approximately $1.4 million was
reflected in invoices we sent to the purchaser covering February and March
services with $1.7 million having been spent in January, prior to the sale.

15

---



General and
Administrative (millions of dollars):

|                                                  |  |                    |     |         |  |             |   |   |     | 
|------------------------------------------------- |  | ------------------ | --- | ------- |  | ----------- | - | - | --- | 
|                                                  |  | Three Months Ended |    
|                                                  |  |                    |    
|                                                  |  | March
 2011        |     | %Change |  | March
 2010 |  
|                                                  |  |                    |     |         |  |             |  
|General and
 administrative                       |  | $                  | 5.1 |         |  | (49         | ) | $ | 9.9 | 
|                                                  |  |                    |     |         |  |             |   |   |     | 
|General and
 administrative  contracted services |  | $                  | 0.1 |         |  | n.m.        |   | $ | 1.4 | 
|                                                  |  |                    |     |         |  |             |   |   |     | 

n.m.  not
meaningful

General and
administrative. General and administrative expenses declined 49 percent in the
first quarter of 2011 to $5.1 million compared to $9.9 million incurred in the
first quarter of 2010. Several factors contributed to this decrease.
Approximately half of the decrease is attributable to our efforts to contain
costs and to reduce the overhead necessary to support the Companys structure
subsequent to the sale of the specialty pharmaceutical business. The remainder
of the period-to-period decrease in general and administrative expense relates
to charges incurred in the first quarter of 2010 for acceleration of vesting of
share-based awards  a cost that was not incurred to the same extent during the
first quarter of 2011.

Savings to
the Company from reductions in staffing and consolidation of facilities are
expected to continue over the remainder of 2011. The benefits of the
first-quarter 2010 restructuring had not yet been fully realized as of March
31, 2010. In this restructuring, a number of general and administrative
positions in human resources, information technology and accounting services
that had supported the divested specialty pharmaceutical operations were identified
for elimination. During 2010 we reduced contracted services, accounting and
consulting fees and began the process of consolidating our corporate
administrative offices from Bridgewater, New Jersey into our Piscataway, New
Jersey location in an effort to further reduce costs and improve operating
efficiencies. The benefits of these efforts are reflected in our first-quarter
2011 results.

A
restructuring program announced in the fourth-quarter 2010 and being
implemented during the first few months of 2011 plus the completion of
consolidation of our corporate offices into the Piscataway facility during the
first quarter of 2011 are expected to have a further favorable impact on our
general and administrative expenses during 2011.

General and
administrative  contracted services. As part of the transition services
agreement with the purchaser of the specialty pharmaceutical business, we
committed to provide certain general and administrative services for a period
up to one year subsequent to the sale. We subsequently extended the agreement
by ninety days. We were compensated for these services based upon costs
incurred plus a mark-up per the terms of the agreement. As expected, the demand
for such services from us declined significantly over the course of 2010 and
has essentially ceased as of the end of the first quarter of 2011. General and
administrative expenses representing transitional services to the purchaser
amounted to approximately $0.1 million during the three months ended March 31,
2011. This compares to $1.4 million reported in the first quarter of 2010 for
the period from January 29, 2010 through March 31, 2010.

Restructuring

As part of
our continued efforts to streamline operations, we undertook reductions in the
size of our workforce during the first and fourth quarters of 2010. We also
incurred charges related to reductions in leased space at our corporate offices
and the write-off of certain related leasehold improvements and furnishings
during the second quarter of 2010 and the first quarter of 2011.

During the
first quarter of 2011, we completed the planned relocation of our corporate
offices from Bridgewater, New Jersey to Piscataway, New Jersey. As a result of
having vacated the excess office space in Bridgewater, the Company incurred a
charge during the first quarter of 2011 in the amount of approximately $0.4
million. This amount represents the excess of committed lease costs over
potential sublease income. We are actively attempting to sublet the vacated
office space.

16

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During the
first quarter of 2010, our workforce reduction involved 64 employees and
resulted in an expense of $6.1 million for separation benefits. These actions
related primarily to the sale of the specialty pharmaceutical business and
affected employees who were previously engaged in activities related to the
divested business but who did not transfer to the employment of the purchaser.
These employees were provided with separation benefits after certain transition
periods, during which they assisted with an orderly transfer of
activities and information to the purchaser. In addition, we reassessed
our staffing requirements subsequent to the sale in light of the lessened
demands on many of our general and administrative functions. Effective February
22, 2010, our then President and Chief Executive Officer resigned from the
Company. For the quarter ended March 31, 2010, we expensed $3.8 million for
severance payments and benefits that were payable under the terms of this
individuals employment agreement. This amount was reduced during the quarter
ended June 30, 2010 by approximately $0.2 million once the termination
agreement was executed. Payments due pursuant to the termination agreement were
made during the third quarter of 2010.

Other Income
(Expense) (millions of dollars):

|                        |  |                    |      |           |  |             |   |   |      |  
|----------------------- |  | ------------------ | ---- | --------- |  | ----------- | - | - | ---- | -
|                        |  | Three Months Ended |     
|                        |  |                    |     
|                        |  | March
 2011        |      | %
 Change |  | March
 2010 |  
|                        |  |                    |      |           |  |             |  
|Other income (expense): |  |                    |      |           |  |             |   |   |      |  
|Investment income, net  |  | $                  | 0.5  |           |  | (53         | ) | $ | 1.0  |  
|                        |  |                    |      |           |  |             |   |   |      |  
|Interest expense        |  | $                  | (1.5 | )         |  | (45         | ) | $ | (2.7 | )
|                        |  |                    |      |           |  |             |   |   |      |  
|Other, net              |  | $                  | 0.1  |           |  | n.m.        |   | $ | 0.0  |  
|                        |  |                    |      |           |  |             |   |   |      |  

n.m.  not
meaningful

Net
investment income was $0.5 million for the three months ended March 31, 2011,
as compared to $1.0 million for the three months ended March 31, 2010. The
decline reflects the lower balances of investment holdings and a shift to
shorter maturity and lower risk investments.

Interest
expense was $1.5 million for the three months ended March 31, 2011. Interest
expense for the three months ended March 31, 2010 was $2.7 million, which
included a net effect related to the first quarter 2010 conversion of $115.6
million principal amount of our 4% notes subsequent to the sale of our
specialty pharmaceutical business. The net effect of forgone interest and the
write-off of a pro rata amount of deferred debt issuance costs amounted to $0.8
million and was charged to interest expense during the first quarter of 2010 at
the time of the notes conversion. The $0.8 million was adjusted in the fourth
quarter of 2010 to credit interest expense and charge additional paid-in
capital to reflect the capital nature of the transaction. The noncash
adjustment was not material to the first or fourth quarters nor to the full
year 2010 results of operations. Additionally, the decline in interest expense
is attributable to lower principal amounts outstanding in 2011 compared to
2010.

Income taxes

During the
three months ended March 31, 2011 and 2010, the Company recorded no income tax
expense because the estimated annual effective tax rate was zero. The sale of
the specialty pharmaceutical business, including the sale of in-process
research and development, was a taxable transaction for federal income tax
purposes, although it resulted in no federal income tax liability due to the
tax basis the Company had in divested assets and the net operating loss
generated in 2010. As of March 31, 2011, the Company continues to provide a
valuation allowance against its net deferred tax assets since the Company
believes it is more likely than not its deferred tax assets will not be
realized.

Discontinued
operations

The cash
proceeds received from the sale of the specialty pharmaceutical business,
including a second-quarter 2010 working capital adjustment, amounted to
approximately $309.0 million. Of this amount, $40.9 million was allocated to
the sale of in-process research and development and included in continuing
operations. The net proceeds then attributable to discontinued operations
yielded a gain of $175.4 million. The results of operations of the specialty
pharmaceutical business for the period in January 2010 preceding the sale
amounted to income of $3.6 million comprising the remainder of the $179.0
reported in 2010 as income and gain from discontinued operations. The gain from
discontinued operations was subsequently adjusted to $176.4 million in the
fourth quarter of 2010 to recognize $1.0 million of currency translation gains
that had been included in accumulated other comprehensive income but should
have been recognized as part of the gain on sale.

17

---



Liquidity and Capital Resources

Total cash
reserves, which include cash, cash equivalents, short-term investments and
marketable securities, were $418.9 million as of March 31, 2011, as compared to
$460.1 million as of December 31, 2010. The decrease was primarily attributable
to the Companys on-going share repurchase program. During the three months
ended March 31, 2011, the Company repurchased and retired 3,853,073 shares at a
cost of $41.5 million, or an average cost per share of approximately $10.77.

For the
three months ended March 31, 2011, cash provided by operating activities of
continuing operations was $1.0 million compared to cash provided in the first
quarter of 2010 of $39.9 million. Income from continuing operations in the
first quarter of 2011, adjusted for noncash and non-operating items,
constituted a source of cash of approximately $3.5 million. Changes in various
working capital accounts comprised the partially offsetting $2.5 million.

Investing
activities generated approximately $13.1 million of cash in the first quarter
of 2011 primarily from maturities of marketable securities. This compares to
$279.5 million of cash provided by investing activities during the first quarter
of 2010, which was primarily attributable to the $263.1 million net proceeds
from the January 2010 sale of the specialty pharmaceutical business (exclusive
of the amount apportioned to the sale of in-process research and development
reported in operating revenue).

Net cash
used in financing activities was $41.7 million in the first quarter of 2011
versus $5.0 million in the first quarter of 2010. During the first quarter of
2011, we utilized $41.4 million to repurchase shares of the Companys common
stock on the open market as part of the $200.0 million share repurchase program
initiated in December of 2010. Fees of approximately $0.1 million incurred to purchase the shares were reflected in cash flows from operating activities. The share repurchase program is designed as a
means by which to return to shareholders value derived from the sale of the
specialty pharmaceutical business. Through April 30, 2011 there have been a
total of 5.7 million shares acquired at a cumulative cost of $62.2 million, inclusive of transaction costs.

As of March
31, 2011, we had outstanding $134.5 million of convertible senior notes that
mature on June 1, 2013 and bear interest at an annual rate of 4%. Interest is
payable on June 1 and December 1 for the 4% notes. Accrued interest on the
notes was $1.8 million and $0.4 million, respectively, as of March 31, 2011 and
December 31, 2010.

Our current
sources of liquidity are our cash reserves; interest earned on such cash
reserves and royalties earned - primarily related to sales of PEGINTRON. Based
upon our current planned research and development activities and related costs,
our current sources of liquidity and the planned remaining purchases of our
outstanding stock under our existing share repurchase program, we anticipate
our current cash reserves will be sufficient to meet our capital and
operational requirements for the near future. While we believe that our current
sources of liquidity will be adequate to satisfy our capital and operational
needs for the near future, it is likely that we will need to obtain additional
financing or enter into a collaborative arrangement to sustain our research and
development efforts prior to the time we are able to commercialize any of our
product candidates. There can be no assurance, however, that we will be able to
obtain additional funds or engage a collaborator on acceptable terms, if at
all. If we are unable to obtain adequate financing or collaborative support, we
may be required to curtail our research and development activities and/or
license our product candidates to third parties on terms that are not favorable
to us.

Off-Balance Sheet Arrangements

As part of
our ongoing business, we do not participate in transactions that generate
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities
(SPE), which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually limited purposes. As of
March 31, 2011, we were not involved in any SPE transactions.

Our
    4% notes payable are convertible into shares of our common stock at a conversion
price of $9.55 per share and pose a reasonable likelihood of potential
significant dilution. As of March 31, 2011, the maximum potential dilutive
effect of conversion of the 4% notes is approximately 14.1 million shares using
the conversion rate of 104.712 shares per $1,000 principal amount currently in
effect. If we were to experience a fundamental change as defined in the
indenture agreement, the conversion rate could be enhanced for the benefit of
the note holders which would yield greater dilution. Notes payable are
discussed in greater detail in Liquidity and Capital Resources above and in the
notes to our condensed consolidated financial statements.

18

---



In
addition, stock options to purchase 3.8 million shares of our common stock at a
weighted average exercise price of $12.27 per share and 0.6 million restricted
stock units were outstanding at March 31, 2011, which represent additional
potential dilution.

Contractual Obligations

Our major
outstanding contractual obligations relate to our operating leases, convertible
debt, and license agreements with collaborative partners. There have been no
material changes since December 31, 2010 with respect to our contractual
obligations.

Critical Accounting Policies and Estimates

A critical
accounting policy is one that is both important to the portrayal of a companys
financial condition and results of operations and requires managements most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.

Our
condensed consolidated financial statements are presented in accordance with
U.S. GAAP. All professional accounting standards effective as of March 31, 2011
have been taken into consideration in preparing the consolidated financial
statements. The preparation of the consolidated financial statements requires
estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosures. Some of those estimates are
subjective and complex, and, consequently, actual results could differ from
those estimates. The following accounting policies have been highlighted as
significant because changes to certain judgments and assumptions inherent in
these policies could affect our consolidated financial statements.

We base our
estimates, to the extent possible, on historical experience. Historical
information is modified as appropriate based on current business factors and
various assumptions that we believe are necessary to form a basis for making
judgments about the carrying value of assets and liabilities. We evaluate our
estimates on an ongoing basis and make changes when necessary. Actual results
could differ from our estimates.

Revenues

Royalties
under our license agreements with third-parties and pursuant to the sale of our
specialty pharmaceutical business are recognized when reasonably determinable
and earned through the sale of the product by the third-party and collection is
reasonably assured. Notification from the third-party licensee of the royalties
earned under the license agreement is the basis for royalty revenue
recognition. This information generally is received from the licensees in the
quarter subsequent to the period in which the sales occur.

Contingent
payments due under the asset purchase agreement related to the sale of the
specialty pharmaceutical business are recognized as income when the milestone
has been achieved and collection is assured. Such payments are non-refundable
and no further effort is required on the part of the Company or the other party
to complete the earning process. Non-refundable payments received upon entering
into license and other collaborative agreements where we have continuing
involvement are recorded as deferred revenue and recognized ratably over the
estimated service period.

The sale of
the specialty pharmaceutical business involved the application of guidance
regarding multiple deliverables in separating the revenues associated with the
sale of in-process research and development from the other elements of the
transaction, namely the assets sold as part of discontinued operations and our
continuing involvement in contract research activities. We determined that the
in-process research and development had value to the buyer of the specialty
pharmaceutical business on a stand-alone basis and that there was objective and
reliable evidence available to support the allocation of the total purchase
price to the respective units of accounting.

19

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Research and
Development Expenses

We accrue
expenses for costs for work performed by contract research organizations,
contract manufacturing organizations and others based upon the estimated amount
of the total effort completed on each order, study or project using factors
such as number of lots produced, number of patients enrolled, the number of active clinical sites and the duration for which the patients will be
enrolled in the study. We base the estimates on the information available at
the time. Additional information may come available at a later date that would
enable us to develop a more accurate estimate. Such changes in estimate are
generally recognized in the period when the information is first known.

Income Taxes

Under the
asset and liability method of accounting for income taxes, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized. A
valuation allowance is provided for when it is more likely than not some
portion or all of the deferred tax assets will not be realized. As of March 31,
2011, we believe, based on future projections, that it is more likely than not
that our net deferred tax assets will not be realized. We recognize the benefit
of an uncertain tax position that we have taken or expect to take on the income
tax returns we file if it is more likely than not we will be able to sustain
our position.

Share-Based Payment

Compensation
cost, measured by the fair value of the equity instruments issued, adjusted for
estimated forfeitures, is recognized in the financial statements as the
respective awards are earned. The impact that share-based payment awards will
have on our results of operations is a function of the number of shares
awarded, vesting and the trading price and fair value of our stock at date of
grant or modification. Fair value of share-based payments is determined using
the Black-Scholes valuation model which employs weighted average assumptions
for expected volatility of our stock, expected term until exercise of the
options, the risk free interest rate, and dividends, if any. Expected
volatility is based on our historical stock price information.

Forward-Looking Information and Factors That
May Affect Future Results

There are
forward-looking statements contained herein, which can be identified by the use
of forward-looking terminology such as the words believes, expects, may,
will, should, potential, anticipates, plans or intends and similar
expressions. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, events or
developments to be materially different from the future results, events or
developments indicated in such forward-looking statements. Such factors
include, but are not limited to:

|  |                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The risk that we will not achieve success in our research and
 development efforts, including clinical trials conducted by us or our
 collaborative partners.                                 
|  |                                                                                                                                                                                               
| | The risk that we may be unable to recruit and qualify a sufficient
 number of patients for our trials and/or there may be the need to delay,
 suspend or terminate trials for various reasons.
|  |                                                                                                                                                                                               
| | The risk that we will experience operating losses for the next
 several years.                                                                                                                
|  |                                                                                                                                                                                               
| | The risk that there will be a decline in sales of one or more of the
 products sold by others from which we derive royalty revenues.                                                          
|  |                                                                                                                                                                                               
| | Decisions by regulatory authorities regarding whether and when to
 approve our regulatory applications.                                                                                       
|  |                                                                                                                                                                                               
| | The risk that we will fail to obtain adequate financing to meet our
 future capital and financing needs.                                                                                      
|  |                                                                                                                                                                                               
| | The risk that key personnel will leave our company.                                                                                                                                           

A more
detailed discussion of these and other factors that could affect results is
contained in our filings with the U.S. Securities and Exchange Commission,
including our Annual Report on Form 10-K for the year ended December 31, 2010.
These factors should be considered carefully and readers are cautioned not to
place undue reliance on such forward-looking statements. No assurance can be
given that the future results covered by the forward-looking statements will be
achieved. All information contained herein is as of the date of this report and
we undertake no duty to update this information.

20

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Item 3. Quantitative and Qualitative
Disclosures About Market Risk.

The
majority of our holdings of financial instruments consist of money market
funds, classified as cash equivalents, and debt instruments, classified as
available-for-sale securities. Apart from custodial accounts related to the Executive
Deferred Compensation Plan, we do not invest in portfolio equity securities. We
do not invest in commodities or use financial derivatives for trading purposes.
We seek reasonable assuredness of the safety of principal and market liquidity
by investing in rated fixed income securities while at the same time seeking to
achieve a favorable rate of return. Our market risk exposure consists
principally of exposure to changes in interest rates. Our holdings are also
exposed to the risks of changes in the credit quality of issuers the majority
of which are rated A1 or better. We typically invest the majority of our
investments in the shorter-end of the maturity spectrum. Cash equivalents are
primarily held in a number of AAA-rated institutional money market funds as
well as several corporate and U.S. government-sponsored entities debt
securities.

The table
below presents the principal amounts and related weighted-average interest
rates of our marketable debt securities, excluding those related to our
Executive Deferred Compensation Plan, by year of maturity (twelve-month
intervals ending March 31 of the year indicated) as of March 31, 2011 (in
thousands):

|                      |  |      |        |      |   |       |   |            |        |   |   |        | 
|--------------------- |  | ---- | ------ | ---- | - | ----- | - | ---------- | ------ | - | - | ------ | 
|                      |  | 2012 |        | 2013 |   | Total |   | Fair Value |       
|                      |  |      |        |      |   |       |   |            |       
|Fixed Rate            |  | $    | 35,152 |      | $ | 9,809 |   | $          | 44,961 |   | $ | 45,612 | 
|Average
Interest Rate |  |      | 4.67   | %    |   | 6.32  | % |            | 5.03   | % |   |        | 
|Variable
 Rate        |  |      |       |      |   |      |   |            |       |   |   |        | 
|Average
Interest Rate |  |      |       |      |   |      |   |            |       |   |   |        | 
|                      |  |      |        |      |   |       |   |            |        |   |   |        | 
|                      |  | $    | 35,152 |      | $ | 9,809 |   | $          | 44,961 |   | $ | 45,612 | 
|                      |  |      |        |      |   |       |   |            |        |   |   |        | 

Our convertible
senior unsecured notes have fixed interest rates. Accordingly, the quoted fair
values of our notes will fluctuate as market rates of interest rise or fall.
Fair values are also affected by changes in the price of our common stock. Our
4% Convertible Senior Notes in the principal amount of $134.5 million at March
31, 2011 are due June 1, 2013 and have a fair value of $165.9 million at March
31, 2011.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and
Procedures

Our management,
under the direction of our Chief Operating Officer and Vice President, Finance,
has evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended, (the Exchange Act)) as of March 31, 2011. Based on the
evaluation, our Chief Operating Officer and Vice President, Finance have
concluded that our disclosure controls and procedures were effective as of
March 31, 2011.

Changes in Internal Controls

There were
no changes in our internal controls over financial reporting as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect our internal control over financial reporting.

21

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Part II  OTHER INFORMATION

Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.

Common Stock

In
the first quarter of 2011, we repurchased shares of our Common Stock as set
forth in the following table:

ISSUER PURCHASES OF EQUITY SECURITIES

|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 
|------------------------------- |  | --------------------------------------- | --------- | --------------------------------- | - | -------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ | --------- |  | - | ----------- | 
|Period                          |  | (a) Total
 Number of
 Shares
 Purchased |           | (b) Average Price
 Paid per Share |   | (c) Total Number of
 Shares Purchased as
 Part of Publicly
 Announced Plans or
 Programs (1) |  | (d) Maximum
 Number (or
 Approximate
 Dollar Value) of
 Shares that May
 Yet Be
 Purchased Under
 the Plans or
 Programs |          
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |          
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 
|January 1 
 January 31, 2011   |  |                                         | 353,854   |                                   | $ | 11.95                                                                                        |  |                                                                                                                          | 353,854   |  | $ | 195,399,505 | 
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 
|February 1 
 February 28, 2011 |  |                                         | 858,920   |                                   | $ | 11.20                                                                                        |  |                                                                                                                          | 858,920   |  | $ | 185,776,398 | 
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 
|March 1 
 March 31, 2011       |  |                                         | 2,640,299 |                                   | $ | 10.48                                                                                        |  |                                                                                                                          | 2,640,299 |  | $ | 158,110,102 | 
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 
|Total                           |  |                                         | 3,853,073 |                                   | $ | 10.77                                                                                        |  |                                                                                                                          | 3,853,073 |  | $ | 158,110,102 | 
|                                |  |                                         |           |                                   |   |                                                                                              |  |                                                                                                                          |           |  |   |             | 

| |                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Share
 repurchase program announced December 21, 2010 whereby Enzons board of
 directors authorized the repurchase of up to $200.0 million of its
 outstanding shares of common stock. Through December 31, 2010, the Company
 had repurchased 30,000 shares at an average cost of $12.45 per share for a
 total expenditure of $373,642.

Item 4. (Removed and Reserved)

22

---



Item 6. Exhibits.

(a) Exhibits
required by Item 601 of Regulation S-K.

|        |  |             |                                                                                                                                                                                                  |           |    
|------- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------- | ---
|Exhibit |  |             |                                                                                                                                                                                                  | Reference
|Number  |  | Description |                                                                                                                                                                                                  | No.      
|        |  |             |                                                                                                                                                                                                  |          
|3(i)    |  |             | Amended and
 Restated Certificate of Incorporation dated May 18, 2006, together with that
 Certificate of Amendment to the Amended and Restated Certificate of
 Incorporation date July 13, 2010 |           | (1)
|3(ii)   |  |             | Second
 Amended and Restated By-laws effective March 11, 2011                                                                                                                                    |           | (2)
|4.1     |  |             | Rights
 Agreement dated May 17, 2002 between the Company and Continental Stock
 Transfer & Trust Company, as rights agent                                                                        |           | (3)
|4.2     |  |             | First
 Amendment to the Rights Agreement, dated as of February 19, 2003 between the
 Company and Continental Stock Transfer & Trust Company, as rights agent                                     |           | (4)
|4.3     |  |             | Second
 Amendment to the Rights Agreement, dated as of January 7, 2008 between the
 Company and Continental Stock Transfer & Trust Company, as rights agent                                      |           | (5)
|4.4     |  |             | Third
 Amendment to the Rights Agreement, dated as of July 23, 2009, between the
 Company and Continental Stock Transfer and Trust Company, as rights agent                                      |           | (6)
|31.1    |  |             | Certification
 of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002                                                                                         |           | *  
|31.2    |  |             | Certification
 of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002                                                                                         |           | *  
|32.1    |  |             | Certification
 of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002                                                                                         |           | *  
|32.2    |  |             | Certification
 of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002                                                                                         |           | *  

|  |                 
|- | ----------------
|* | Filed
 herewith.

Referenced
exhibit was previously filed with the Commission as an exhibit to the Companys
filing indicated below and is incorporated herein by reference to that filing:

|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(1) | Quarterly
 Report on Form 10-Q for the quarter ended June 30, 2010 filed August 9, 2010
|    |                                                                                        
|(2) | Current
 Report on Form 8-K filed March 17, 2011                                       
|    |                                                                                        
|(3) | Form 8-A12G
 (File No. 000-12957) filed May 22, 2002                                   
|    |                                                                                        
|(4) | Form
 8-A12G/A (File No. 000-12957) filed February 20, 2003                            
|    |                                                                                        
|(5) | Form
 8-A12G/A (File No. 000-12957) filed January 8, 2008                              
|    |                                                                                        
|(6) | Form
 8-A12G/A (File No. 000-12957) filed July 24, 2009                                

23

---



SIGNATURES

Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                   |                                  
|------------------ | ---------------------------------
|                   | ENZON PHARMACEUTICALS, INC.      
|                   | (Registrant)                     
|                   |                                  
|Date: May 6,
 2011 | /s/Ralph del
 Campo              
|                   |                                  
|                   | Ralph del
 Campo                 
|                   | Chief
 Operating Officer         
|                   | (Principal
 Executive Officer)   
|                   |                                  
|Date: May 6,
 2011 | /s/Mark L.
 Ogden                
|                   |                                  
|                   | Mark L.
 Ogden                   
|                   | Vice
 President, Finance         
|                   | (Principal
 Financial Officer and
|                   | Principal
 Accounting Officer)   

---