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, 2005

                                       or

[ ]     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
              ----------------------------------------------------
              Exact name of registrant as specified in its charter

                      DELAWARE                           22-2372868
          --------------------------------           -------------------
          (State or other jurisdiction of             (I.R.S. Employer
           incorporation or organization)            Identification No.)

     685 Route 202/206, Bridgewater, New Jersey             08807
     ------------------------------------------           ----------
      (Address of principal executive offices)            (Zip Code)

                                 (908) 541-8600
              (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__


     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No__

Shares of Common Stock outstanding as of May 4, 2005:  43,858,705.


<PAGE>



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)

<TABLE>
<CAPTION>
                                                             MARCH 31, 2005           JUNE 30, 2004
                                                             ---------------          -------------
                                                                                             *
ASSETS

Current assets:
<S>                                                             <C>                     <C>
  Cash and cash equivalents                                     $  41,158               $  77,532
  Short-term investments                                          102,986                  27,119
  Accounts receivable, net                                         20,831                  25,977
  Inventories                                                      16,651                  11,215
  Deferred tax and other current assets                            17,276                  12,382
                                                                ---------               ---------
       Total current assets                                       198,902                 154,225
                                                                ---------               ---------

Other assets:
  Property and equipment, net                                      33,518                  34,859
  Marketable securities                                            65,893                  81,582
  Investments in equity securities                                 15,848                  37,906
  Amortizable intangible assets, net                              180,617                 194,067
  Goodwill                                                        150,985                 150,985
  Deferred tax and other assets                                    70,262                  68,786
                                                                ---------               ---------
                                                                  517,123                 568,185
                                                                ---------               ---------
Total assets                                                    $ 716,025               $ 722,410
                                                                =========               =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                              $  10,821               $   8,663
  Accrued expenses                                                 18,206                  23,001
                                                                ---------               ---------
       Total current liabilities                                   29,027                  31,664
                                                                ---------               ---------
Other liabilities                                                     899                   1,655
Notes payable                                                     400,000                 400,000
                                                                ---------               ---------
                                                                  400,899                 401,655
                                                                ---------               ---------
Commitments and contingencies
Stockholders' equity:
  Common stock-$.01 par value, authorized
   90,000,000 shares; issued and
   outstanding 43,858,705 shares at March 31, 2005
    and 43,750,934 shares at June 30, 2004                            439                     438
  Additional paid-in capital                                      323,354                 322,486
  Accumulated other comprehensive loss                             (3,010)                 (5,035)
  Deferred compensation                                            (3,804)                 (3,571)
  Accumulated deficit                                             (30,880)                (25,227)
                                                                ---------               ---------
       Total stockholders' equity                                 286,099                 289,091
                                                                ---------               ---------
Total liabilities and stockholders' equity                      $ 716,025               $ 722,410
                                                                =========               =========
</TABLE>

 * Condensed from audited financial statements.

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


                                       2
<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                        MARCH 31,                    MARCH 31,
                                                                -------------------------    --------------------------
                                                                   2005            2004          2005           2004
                                                                ---------       ---------    ----------    ------------
Revenues:
<S>                                                              <C>            <C>            <C>            <C>
    Product sales, net                                           $  21,224      $  27,993      $  75,712      $  80,665
    Manufacturing revenue                                            4,359          5,035         12,335          8,826
    Royalties                                                       12,705         11,103         32,899         36,461
    Contract revenue                                                   451            248          1,163            769
                                                                 ---------      ---------      ---------      ---------
              Total revenues                                        38,739         44,379        122,109        126,721
                                                                 ---------      ---------      ---------      ---------
Costs and expenses:
    Cost of product sales and manufacturing revenue                  9,024         12,458         32,306         35,195
    Research and development                                        12,942         10,772         31,874         24,711
    Selling, general and administrative                             13,658         12,500         39,630         35,187
    Amortization of acquired intangible assets                       3,339          3,358         10,091         10,074
    Acquired in-process research and development                      --           12,000           --           12,000
                                                                 ---------      ---------      ---------      ---------
             Total costs and expenses                               38,963         51,088        113,901        117,167
                                                                 ---------      ---------      ---------      ---------
Operating (loss) income                                               (224)        (6,709)         8,208          9,554
                                                                 ---------      ---------      ---------      ---------
Other income (expense):
    Investment income, net                                           1,116         11,564          2,859         12,744
    Interest expense                                                (4,957)        (4,957)       (14,871)       (14,871)
    Other, net                                                      (3,230)          (337)        (5,173)            71
                                                                 ---------      ---------      ---------      ---------
                                                                    (7,071)         6,270        (17,185)        (2,056)
                                                                 ---------      ---------      ---------      ---------
(Loss) income before tax benefit                                    (7,295)          (439)        (8,977)         7,498
Income tax benefit                                                  (2,718)        (5,505)        (3,324)        (2,691)
                                                                 ---------      ---------      ---------      ---------
Net (loss) income                                                   (4,577)     $   5,066         (5,653)     $  10,189
                                                                 =========      =========      =========      =========
Basic (loss) earnings per common share                           $   (0.11)     $    0.12      $   (0.13)     $    0.24
                                                                 =========      =========      =========      =========
Diluted (loss) earnings per common share                         $   (0.11)     $    0.12      $   (0.13)     $    0.23
                                                                 =========      =========      =========      =========
Weighted average number of common shares outstanding - basic        43,490         43,368         43,481         43,322
                                                                 =========      =========      =========      =========
Weighted average number of common shares and dilutive
    potential common shares outstanding                             43,490         43,817         43,481         43,657
                                                                 =========      =========      =========      =========

</TABLE>

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


                                       3
<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED
                                                                              MARCH 31,
                                                                       -------------------------
                                                                          2005          2004
                                                                       ----------     ----------
Cash flows from operating activities:
<S>                                                                    <C>            <C>
      Net (loss) income                                                ($  5,653)     $  10,189
      Adjustments to reconcile net (loss) income to net cash
           provided by operating activities:
              Depreciation and amortization                               17,007         16,487
              Non-cash expense for restricted stock grants                   429          1,132
              Loss (gain) on sale of investments                           3,541        (10,997)
              Non-cash loss (gain) related to equity collar
                  arrangement                                              1,781            (82)
              Amortization of debt issue costs                             1,371          1,371
              Amortization of bond premium/discount                        2,049            409
              Deferred income taxes                                       (3,043)        (4,618)
              Changes in operating assets and liabilities                 (4,663)        (5,433)
                                                                       ---------      ---------
                    Net cash provided by operating activities             12,819          8,458
                                                                       ---------      ---------
Cash flows from investing activities:
      Purchase of property and equipment                                  (2,210)        (4,640)
      Proceeds from sale of equity investment                             15,335         17,375
      Proceeds from sale of marketable securities                         74,000         49,744
      Purchase of marketable securities                                 (136,525)       (44,450)
                                                                       ---------      ---------
                    Net  cash  (used  in)  provided  by  investing       (49,400)        18,029
                      activities
                                                                       ---------      ---------
Cash flows from financing activities:
      Proceeds from exercise of common stock options                         207            431
                                                                       ---------      ---------
                    Net cash provided by financing activities                207            431
                                                                       ---------      ---------
Net (decrease) increase in cash and cash equivalents                     (36,374)        26,918

Cash and cash equivalents at beginning of period                          77,532         44,452
                                                                       ---------      ---------
Cash and cash equivalents at end of period                             $  41,158      $  71,370
                                                                       =========      =========
</TABLE>


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


                                       4

<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


(1)  ORGANIZATION AND BASIS OF PRESENTATION

         The unaudited  condensed  consolidated  financial  statements have been
prepared  from the books and  records  of Enzon  Pharmaceuticals,  Inc.  and its
subsidiaries  ("Enzon"  or the  "Company")  in  accordance  with  United  States
generally  accepted   accounting   principles  ("GAAP")  for  interim  financial
information and Rule 10-01 of Regulation S-X.  Accordingly,  they do not include
all of the  information  and footnotes  required for complete  annual  financial
statements.  The  preparation  of financial  statements in conformity  with GAAP
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting period. In the opinion of management,
all adjustments (consisting only of normal and recurring adjustments) considered
necessary  for a fair  presentation  have  been  included.  Certain  prior  year
balances have been  reclassified to conform to the current period  presentation.
Interim  results  are not  necessarily  indicative  of the  results  that may be
expected for the year. The interim  consolidated  financial statements should be
read in conjunction  with the  consolidated  financial  statements and the notes
thereto included in the Company's latest annual report on Form 10-K/A.

(2) MARKETABLE SECURITIES

         The Company  classifies its  investments in debt and marketable  equity
securities,  including  auction  rate  securities,  as  available-for-sale.  The
Company  classified  those  investments  available for current  operations  with
maturities of one year or less as current  assets.  Debt and  marketable  equity
securities  are  carried at fair  value,  with the  unrealized  gains and losses
(which are deemed to be temporary),  net of related tax effect,  included in the
determination of comprehensive income and reported in stockholders'  equity. The
fair value of  substantially  all  securities  is  determined  by quoted  market
prices.

         At March 31,  2005 and June 30,  2004 the  Company  held  auction  rate
securities for which interest or dividend rates are generally re-set for periods
of up to 90 days. The auction rate securities  outstanding at March 31, 2005 and
June  30,  2004  were  investments  in  state  government  bonds  and  corporate
securities.  In the third quarter of 2005, the Company  reclassified its auction
rate securities from cash and cash equivalents to either short-term  investments
or marketable  securities,  depending  upon the  instrument's  maturity date. At
March 31,  2005,  the Company  held auction  rate  securities  with  contractual
maturities between 2005 and 2009.

         The  cost of the  debt  securities  is  adjusted  for  amortization  of
premiums and accretion of discounts to maturity.  The  amortization,  along with
realized  gains  and  losses,  is  included  in  interest  income.  The  cost of
securities is based on the specific identification method.

         A decline in the market value of any security below cost that is deemed
to be  other-than-temporary  results in a reduction  in carrying  amount to fair
value.  The  impairment  is  charged  to  earnings  and a new cost basis for the
security is  established.  Dividend  and  interest  income are  recognized  when
earned.

         The amortized cost, gross unrealized  holding gains or losses, and fair
value for the Company's available-for-sale  securities by major security type as
of March 31, 2005 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                   Gross             Gross
                                Amortized        Unrealized         Unrealized
                                  Cost          Holding Gains     Holding Losses      Fair Value*
                              ---------------  ----------------  ----------------   ----------------
<S>                                  <C>         <C>                  <C>               <C>
U.S. Government Agency Debt         $ 91,357                 -          $  (689)           $ 90,668
U.S. Corporate Debt                   70,942                12             (768)             70,186
Auction Rate Securities                8,025                 -                 -              8,025
                              ---------------  ----------------  ----------------   ----------------
                                    $170,324               $12          $(1,457)           $168,879
                              ===============  ================  ================   ================
</TABLE>

*    $102,986 is included in short-term investments and $65,893 is included in
     marketable securities.

                                       5

<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         The amortized cost, gross unrealized  holding gains or losses, and fair
value for the Company's available-for-sale  securities by major security type at
June 30, 2004 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                               Gross              Gross
                                           Amortized        Unrealized          Unrealized
                                             Cost          Holding Gains      Holding Losses     Fair Value*
                                        ----------------  ----------------   ----------------  ----------------
<S>                                           <C>                  <C>              <C>            <C>
     U.S. Government Agency Debt             $ 24,017             $ 5             ($  351)        $ 23,671
     U.S. Corporate Debt                       71,832               6                (808)          71,030
     Auction Rate Securities                   14,000               -                   -           14,000
                                        ----------------  ----------------   ----------------  ----------------
                                             $109,849             $11             ($1,159)        $108,701
                                        ================  ================   ================  ================
</TABLE>

*    $27,119 is included in short-term investments and $81,582 is included in
     marketable securities.

                                       6
<PAGE>

(3)  COMPREHENSIVE INCOME

         Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  130,
"Reporting  Comprehensive  Income",  requires unrealized gains and losses on the
Company's  available-for-sale  securities to be included in other  comprehensive
income.

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

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED          NINE MONTHS ENDED
                                                              MARCH 31,                  MARCH 31,
                                                       ------------------------    ----------------------
                                                          2005          2004          2005         2004
                                                       ----------    ----------    ---------    ---------
<S>                                                     <C>            <C>          <C>         <C>
         Net (loss) income                              ($4,577)       $5,066       ($5,653)    $10,189
                                                       ----------    ----------    ---------    ---------
         Other comprehensive income:
             Unrealized (loss) gain on securities
                  that arose during the period             (488)          324          (297)          3
             Unrealized (loss) gain on NPS
                  investment arising during the
                  period                                      -             -        (1,014)      1,824
            Foreign currency translation                      3             -            16           -
             Reclassification adjustment
                 for loss (gain) included in net (loss)
                 income                                   2,020           227         3,320        (222)
                                                       ----------    ----------    ---------    ---------
             Total other comprehensive income             1,535           551         2,025       1,605
                                                       ----------    ----------    ---------    ---------
         Comprehensive (loss) income                    ($3,042)       $5,617       ($3,628)    $11,794
                                                       ==========    ==========    =========    =========
</TABLE>




<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


 (4)  EARNINGS PER COMMON SHARE

         Basic  earnings per share is computed by dividing the net (loss) income
by the weighted  average number of shares of Common Stock issued and outstanding
during the periods.  For purposes of calculating  diluted earnings per share for
the three  and nine  months  ended  March 31,  2005 and  2004,  the  denominator
includes both the weighted average number of shares of Common Stock  outstanding
and the number of potentially dilutive Common Stock equivalents if the inclusion
of such Common Stock equivalents was not anti-dilutive. As of March 31, 2005 and
2004,  the  Company  had  10.1  million  and  10.8  million,   respectively,  of
potentially  dilutive  Common  Stock  equivalents  that  are  excluded  from the
dilutive earnings per share  calculations,  as the effect of the inclusion would
be anti-dilutive.

         The following table reconciles the basic and diluted earnings per share
calculations (in thousands):


<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED        NINE MONTHS ENDED
                                                                     MARCH 31,                 MARCH 31,
                                                               ----------------------    ----------------------
                                                                  2005          2004       2005         2004
                                                               ---------    ---------    --------    ----------
<S>                                                             <C>           <C>        <C>           <C>
       Net (loss) income                                        ($4,577)      $5,066     ($5,653)      $10,189
                                                               =========    =========    ========    ==========
       Weighted average number of common                         43,490       43,368      43,481        43,322
          shares issued and outstanding - basic
       Effect of dilutive common stock equivalents:
             Stock options                                           --          449          --           335
                                                               ---------    ---------    --------    ----------
                                                                 43,490       43,817      43,481        43,657
                                                               =========    =========    ========    ==========
</TABLE>

(5)  STOCK-BASED COMPENSATION

         As   permitted   by  SFAS  No.   123,   "Accounting   for   Stock-Based
Compensation", the Company accounts for stock-based compensation arrangements in
accordance  with the provisions of Accounting  Principals  Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees" and related  interpretations.
Compensation  expense  for stock  options  issued to  employees  is based on the
difference  between the fair value of the Company's stock and the exercise price
of the option on the date of grant.  Stock-based  compensation  reflected in net
(loss)  income is  attributed  to  restricted  stock.  No  stock-based  employee
compensation  cost is  reflected  in net  (loss)  income  with  respect to stock
options  granted to employees as options are granted at exercise prices equal to
the market value of the underlying Common Stock at the date of grant.


                                       7
<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         The following table illustrates the effect on net (loss) income and net
(loss) earnings per share if the Company had applied the fair value  recognition
provisions of SFAS No. 123 to stock-based compensation (in thousands, except per
share data):
<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                    MARCH 31,                    MARCH 31,
                                                             ------------------------    --------------------------
                                                                 2005         2004         2005            2004
                                                             ----------    ----------    ----------   -------------
    Net (loss) income:
<S>                                                            <C>           <C>          <C>            <C>
         As reported                                          ($4,577)      $5,066       ($5,653)       $10,189

    Add stock-based employee
        compensation expense included in
        reported net (loss) income, net of tax (1)                 35          277           270            718

   Deduct total stock-based employee
        compensation expense determined
        under fair-value-based method for all
        awards, net of tax (1)                                 (2,303)      (3,040)       (9,073)        (8,588)
                                                             ----------    ----------    ----------   -------------
   Pro forma net (loss) income                                ($6,845)      $2,303      ($14,456)        $2,319
                                                             ==========    ==========    ==========   =============
   Earnings per common share - basic:
            As reported                                        ($0.11)       $0.12        ($0.13)         $0.24
            Pro forma                                          ($0.16)       $0.05        ($0.33)         $0.05
   Earnings per common share - diluted:
            As reported                                        ($0.11)       $0.12        ($0.13)         $0.23
            Pro forma                                          ($0.16)       $0.05        ($0.33)         $0.05
</TABLE>

     (1)  Information for 2005 and 2004 has been adjusted for income taxes using
          estimated tax rates of 37% and 29%, respectively.

(6)  INVENTORIES

            As of March 31, 2005 and June 30, 2004 inventories  consisted of the
following (in thousands):


<TABLE>
<CAPTION>
                                                                   MARCH 31, 2005        JUNE 30, 2004
                                                                 ------------------    ----------------
<S>                                                                      <C>                <C>
             Raw materials                                               $ 4,802            $ 3,143
             Work in process                                               2,928              3,716
             Finished goods                                                8,921              4,356
                                                                 ------------------    ----------------
                                                                         $16,651            $11,215
                                                                 ==================    ================
</TABLE>




                                       8
<PAGE>




                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


(7)   INTANGIBLE ASSETS

         As of March 31, 2005 and June 30, 2004 intangible  assets  consisted of
the following (in thousands):

<TABLE>
<CAPTION>
                                                  MARCH 31,        JUNE 30,         ESTIMATED
                                                     2005            2004         USEFUL LIVES
                                                 -------------    ------------    --------------
<S>                                                   <C>             <C>              <C>
          Product Patented Technology                 $ 64,400       $ 64,400          12 years
          Manufacturing Patent                          18,300         18,300          12 years
          NDA Approval                                  31,100         31,100          12 years
          Trade name and Other Product Rights           80,000         80,000          15 years
          Manufacturing Contract                         2,200          2,200           3 years
          Patent                                         1,906          2,092          15 years
          Product Acquisition Costs                     26,194         26,194       10-14 years
                                                 -------------    ------------
                                                       224,100        224,286
          Less:  Accumulated Amortization               43,483         30,219
                                                 -------------    ------------
                                                      $180,617       $194,067
                                                 =============    ============
</TABLE>

         Amortization  charged  to  operations  relating  to  intangible  assets
totaled  $4.5  million of which $1.1  million is  classified  in cost of product
sales and  manufacturing  revenue for each of the three  months  ended March 31,
2005 and 2004.  For each of the nine month periods ended March 31, 2005 and 2004
amortization  charged to operations  relating to intangible assets totaled $13.4
million,  of which $3.4  million  is  classified  in cost of  product  sales and
manufacturing  revenue.  Amortization expense for these intangibles for the next
five fiscal years is expected to be approximately $17.9 million per year.

 (8)   GOODWILL

        On November 22, 2002, the Company acquired the North American rights and
operational  assets  associated  with the  development,  manufacture,  sales and
marketing of ABELCET(R)  (amphotericin  B lipid complex  injection)  (the "North
American  ABELCET  business")  from Elan  Corporation,  plc  ("Elan") for $360.0
million plus acquisition costs of approximately $9.3 million. The acquisition is
being accounted for by the purchase method of accounting in accordance with SFAS
No. 141 "Business  Combinations".  The amount assigned to goodwill in connection
with the  acquisition  of the North  American  ABELCET  business was recorded at
$151.0 million.  In accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets," the Company does not amortize  goodwill but rather  reviews it at least
annually for impairment.  For income tax purposes, the entire amount of goodwill
is deductible and is being amortized over a 15 year period.

(9)  CASH FLOW INFORMATION

         The  Company  considers  all highly  liquid  securities  with  original
maturities of three months or less to be cash equivalents.  For each of the nine
month  periods  ended March 31, 2005 and 2004,  cash  payments for interest were
$18.0 million.  Income tax payments for the nine months ended March 31, 2005 and
2004, were $590,000 and $3.6 million, respectively.

(10)  INCOME TAXES

         The Company  recognized  a tax benefit for the nine months  ended March
31, 2005 at an estimated annual effective tax rate of 37%, which is based on the
projected  income tax benefit  and taxable  loss for the fiscal year ending June
30,  2005.  During the three and nine  months  ended  March 31, 2005 the Company
recorded a valuation  allowance  of  $701,000  and $1.4  million,  respectively,
related to capital loss  carryforwards  generated  during the periods related to
the sale of a portion  of its equity  investment  in NPS  Pharmaceuticals,  Inc.
("NPS") and certain investments in debt and equity securities.


                                       9
<PAGE>



                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         At March 31, 2005, the Company has  approximately  $71.2 million in net
deferred tax assets because management concluded that it is more likely than not
that the net deferred tax assets will be realized,  including  the net operating
losses from  operating  activities and stock option  exercises,  based on future
operations.  As of March 31, 2005, the Company carries a valuation  allowance of
$17.9  million with respect to certain  capital loss  carryforwards,  deductible
temporary  differences  that would  result in a capital loss  carryforward  when
realized and federal  research  and  development  tax  credits,  as the ultimate
utilization of such losses and credits is not deemed likely.  Events,  such as a
sustained decline in the Company's  product revenues and/or increased  expenses,
could result in a revision to the Company's projected future taxable income, and
accordingly,  the  need  for a  valuation  allowance  based  upon  the  ultimate
realizability of its net operating loss carryforwards,  research and development
tax  credits and other  deferred  tax assets.  The  Company's  federal and state
operating   loss   carryforwards   will  begin  to  expire  in  2009  and  2006,
respectively,  and the federal and state research and  development  credits will
begin to expire in 2006 and 2021,  respectively.  The Company  will  continue to
assess the need for such  valuation  allowance  based on analyses  of  operating
results and projections of future operating performance of the Company.

         During the three months ended March 31,  2004,  the Company  recorded a
net tax benefit of approximately  $5.5 million related primarily to the reversal
of a $3.8 million deferred tax asset valuation allowance for the write-down in a
prior year of Enzon's equity investment in Nektar  Therapeutics,  which was sold
during  the  quarter  ended  March  31,  2004.  The sale  resulted  in a gain of
approximately  $11.0  million.  The  benefit  was also due to the  reduction  of
Enzon's  estimated  taxable  income and effective tax rate to 29% as compared to
35% used in previous  quarters and a payment during the three months ended March
31, 2004 of $12.0 million to INEX Pharmaceuticals related to acquired in-process
research and development. The tax provision recognized for the nine months ended
March 31, 2004 is based on the  estimated  annual  effective tax rate of 29%. In
addition, the tax effect of the gain on the sale of Nektar Convertible Preferred
Stock and the acquired in process research and development charge was recognized
during the three  months  ended  March 31,  2004,  the period in which the items
occurred.

         During  the three and nine  month  period  ended  March 31,  2004,  the
Company received $254,000 for the sale of certain New Jersey state net operating
loss  carryforwards  and also  purchased  certain New Jersey state net operating
loss carryforwards for $1.5 million, which were recorded as deferred tax assets.

(11)  BUSINESS SEGMENTS

         A single  management team that reports to the Chief  Executive  Officer
comprehensively  manages the Company's operations.  The Company does not operate
separate lines of business or separate  business entities with respect to any of
its  approved  products  or product  candidates  or contract  manufacturing.  In
addition,  the Company  does not conduct  any  operations  outside of the United
States and Canada.  The Company does not prepare discrete  financial  statements
with respect to separate product or contract  manufacturing areas.  Accordingly,
the Company does not have separately  reportable segments as defined by SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information".

(12)  DERIVATIVE INSTRUMENTS

         In August 2003, the Company entered into a Zero Cost Protective  Collar
arrangement with a financial  institution to reduce the exposure associated with
1.5 million shares of NPS common stock,  which the Company received as part of a
merger termination agreement with NPS. The termination agreement imposed a limit
on the maximum number of shares that can be transferred each month. The terms of
the collar  arrangement  are structured so that the Company's  investment in NPS
stock,  when combined with the value of the collar,  should secure ultimate cash
proceeds  in the range of  85%-108%  of the  negotiated  fair value per share of
$23.47  (representing  a 4.85%  discount off of the closing  price of NPS common
stock on the day before the collar was  executed).  The collar is  considered  a
derivative fair value hedging instrument (the "Derivative")  under SFAS No. 133,
"Accounting For Derivative  Instruments and Hedging Activities" and as such, the
Company periodically measures its fair value and recognizes the Derivative as an
asset or a  liability.  Changes in the fair value of NPS stock are  recorded  in
other  comprehensive  income  (See  Note 3) when the  value of the NPS  stock is
within the range of the collar.  Changes in the fair value of NPS stock  outside
the range of the collar and  changes  in the fair  value of the  Derivative  are
charged  or  credited  to the  consolidated  statement  of  operations  when the
Derivative is designated and effective as a fair value hedge.



         As of March 31,  2005,  the market value of NPS common stock was $12.63
per share,  which is below the bottom of the collar.  When the underlying shares
become  unrestricted  and freely  tradable  the Company is required to deliver a
corresponding number of underlying shares to the financial institution as posted
collateral.  In order to deliver such shares, during the nine months ended March
31, 2005, the Company sold and re-purchased  375,000 shares of NPS common stock.
The unrealized gain previously included in other  comprehensive  income prior to
the sale and re-purchase  with respect to these shares  aggregating  $38,000 for
the  nine  months  ended  March  31,  2005,  was  recognized  in  the  Condensed
Consolidated Statements of Operations and is included in other income (expense).
There were no sales and  repurchases  of stock for the three  months ended March
31, 2005.  During the three and nine month  periods  ended March 31,  2004,  the
Company sold and  re-purchased  315,000  shares and 690,100 shares of NPS common
stock,  respectively.  The unrealized  gain  previously  recognized  under other
comprehensive  income with respect to these shares aggregating $504,000 and $1.1
million was  recognized in the Condensed  Consolidated  Statements of Operations
for the three and nine months ended March 31, 2004, respectively.


                                       10
<PAGE>


                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         During  February 2005,  the second  portion of the  Derivative  matured
resulting in net proceeds of $7.5 million,  which  represented  the floor of the
collar or $19.95 per share.  The closing price of NPS common stock was $14.46 on
the day the  second  portion  of the  collar  matured.  The  unrealized  loss of
approximately  $2.0  million  and  $3.4  million  previously  included  in other
comprehensive  income  (loss) was  recognized in the  Consolidated  Statement of
Operations and included in other income  (expense) for the three and nine months
ended March 31, 2005, respectively.

         The  changes  during the  periods in the time  value  component  of the
collar are a loss of $1.2  million and a loss of $1.8  million for the three and
nine months  ended March 31, 2005 and a loss of $318,000 and gain of $83,000 for
the three and nine months ended March 31, 2004, respectively.  These changes are
recorded in other income  (expense) in the Condensed  Consolidated  Statement of
Operations.  The  remainder of the collar will mature on two  separate  maturity
dates in May 2005 and August  2005,  at which time the Company  will receive the
proceeds from the sale of the  securities.  The amount due at each maturity date
will be  determined  based  on the  market  value  of NPS  common  stock on such
maturity  date.  The  contract  requires  the Company to maintain a minimum cash
balance of $30.0 million and additional  collateral of up to $10.0  million,  as
defined  under  certain  circumstances  with  the  financial  institution.   The
Derivative is subject to certain adjustments in the event the Company receives a
dividend from NPS.

(13)   NEW ACCOUNTING PRONOUNCEMENTS

       In response to the  enactment  of the  American  Job Creation Act of 2004
(the "Jobs Act") on October 22, 2004 the Financial  Accounting  Standards  Board
(FASB) issued FASB Staff Position (FSP) 109-1, Application of FASB Statement No.
109,  Accounting for Income Taxes, for the Tax Deduction  Provided to U.S. Based
Manufacturers by the American Job Creation Act of 2004.

       FSP No.  109-1  clarifies  how to apply SFAS No. 109 to the new law's tax
deduction for income attributable to "domestic production activities." The fully
phased-in  deduction  is up to nine  percent of the lesser of taxable  income or
"qualified  production  activities income." The staff position requires that the
deduction be accounted for as a special deduction in the period earned, not as a
tax-rate  reduction.  As a result, the Company will recognize a reduction in its
provision for income taxes for domestic  production  activities in the quarterly
periods in which the Company is eligible for the deduction.

       In November  2004,  the FASB issued  SFAS No. 151,  "Inventory  Costs--An
Amendment of ARB No. 43,  Chapter 4" ("SFAS 151").  SFAS 151 amends the guidance
in ARB No. 43,  Chapter 4,  "Inventory  Pricing," to clarify the  accounting for
abnormal amounts of idle facility expense,  freight,  handling costs, and wasted
material  (spoilage).  Among other provisions,  the new rule requires that items
such  as  idle  facility  expense,   excessive  spoilage,  double  freight,  and
rehandling costs be recognized as current-period  charges  regardless of whether
they meet the criterion of "so abnormal" as stated in ARB No. 43.  Additionally,
SFAS 151 requires that the allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS
151 is effective for fiscal years  beginning after June 15, 2005 and is required
to be adopted by the Company in the first  quarter of fiscal 2006,  beginning on
July 1, 2005.  The Company is currently  evaluating the effect that the adoption
of SFAS 151 will have on its  consolidated  results of operations  and financial
condition and does not expect SFAS 151 to have a material impact.



                                       11
<PAGE>




                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         In  December  2004,  the FASB  issued  SFAS  No.  123  (revised  2004),
"Share-Based  Payment" ("SFAS 123R"),  which replaces SFAS No. 123,  "Accounting
for Stock-Based  Compensation,"  ("SFAS 123") and supercedes APB Opinion No. 25,
"Accounting  for Stock Issued to Employees."  SFAS 123R requires all share-based
payments  to  employees,  including  grants of  employee  stock  options,  to be
recognized in the financial statements based on their fair values beginning with
the first annual  reporting  period that begins after June 15, 2005,  with early
adoption encouraged.  The pro forma disclosures  previously permitted under SFAS
123 no longer will be an alternative  to financial  statement  recognition.  The
Company is  required  to adopt SFAS 123R no later than July 1, 2005.  Under SFAS
123R,  Enzon must  determine  the  appropriate  fair value  model to be used for
valuing share-based payments,  the amortization method for compensation cost and
the transition  method to be used at date of adoption.  The  transition  methods
include  prospective and  retroactive  adoption  options.  Under the retroactive
option,  prior periods may be restated either as of the beginning of the year of
adoption or for all periods  presented.  The  prospective  method  requires that
compensation  expense be recorded for all unvested  stock options and restricted
stock at the beginning of the first quarter of adoption of SFAS 123R,  while the
retroactive  methods would record  compensation  expense for all unvested  stock
options and  restricted  stock  beginning  with the first period  restated.  The
Company  is  evaluating  the  requirements  of SFAS  123R and  expects  that the
adoption of SFAS 123R will have a material impact on its consolidated results of
operations and earnings per share. The Company has not yet determined the method
of adoption or the effect of adopting SFAS 123R, and has not determined  whether
the  adoption  will result in amounts  that are similar to the current pro forma
disclosures under SFAS 123.

       In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets--An   Amendment  of  APB  Opinion  No.  29,  Accounting  for  Nonmonetary
Transactions"  ("SFAS 153").  SFAS 153  eliminates the exception from fair value
measurement for nonmonetary  exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29,  "Accounting  for  Nonmonetary  Transactions,"  and
replaces  it  with an  exception  for  exchanges  that  do not  have  commercial
substance.  SFAS  153  specifies  that a  nonmonetary  exchange  has  commercial
substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly as a result of the exchange.  SFAS 153 is effective for the fiscal
periods  beginning  after  June 15,  2005 and is  required  to be  adopted by us
beginning on July 1, 2005.  The Company is currently  evaluating the effect that
the adoption of SFAS 153 will have on its consolidated results of operations and
financial condition but does not expect it to have a material impact.

         In March  2004,  the  Financial  Accounting  Standards  Board's  (FASB)
Emerging Issues Task Force (EITF)  released Issue 03-01,  "Meaning of Other Than
Temporary  Impairment",  which  addressed  other-than-temporary  impairment  for
certain debt and equity  investments.  Various disclosure  requirements of Issue
03-01 had been  finalized  previous to issuance and were required as of June 30,
2004. The  recognition and  measurement  requirements of Issue 03-01,  and other
disclosure  requirements  not already  implemented,  were  effective for periods
beginning  after June 15, 2004.  In September  2004,  the FASB staff issued FASB
Staff Position  (FSP) EITF 03-1-1,  which delayed the effective date for certain
measurement and recognition  guidance  contained in Issue 03-1. The FSP requires
the  application  of  pre-existing  "other-than-temporary"  guidance  during the
period of delay until a final consensus is reached. The disclosure  requirements
set forth in Issue  03-01 were not  delayed as a result of the issued  FSP.  The
Company's  management  does not anticipate  the issuance of the final  consensus
will have a material impact on financial  condition,  the results of operations,
or liquidity.

(14)   INEX AGREEMENT

       In March 2005, the Company  terminated  the agreements  entered into with
Inex  Pharmaceuticals,  Inc.  in January  2004  regarding  the  development  and
commercialization of Inex's proprietary oncology product MARQIBO(R) (vincristine
sulfate  liposomes  injection).  Under the terminated  MARQIBO  Agreements,  the
Company  shared the costs of clinical  development  with Inex and  received  the
exclusive commercialization rights for MARQIBO for all indications in the United
States,  Canada and Mexico.  In January  2005,  the United  States Food and Drug
Administration  (the "FDA") provided an action letter detailing  MARQIBO as "not
approvable"  under the  FDA's  accelerated  approval  regulations  for  relapsed
aggressive  non-Hodgkin's  lymphoma.  The FDA's response also  recommended  that
additional  randomized  controlled  studies would need to be conducted  prior to
re-applying   for   approval.   After  a   strategic   analysis   of  the  FDA's
recommendation,  required  investment,  development  timeframe,  and  associated
development risks, the Company concluded it would be in Enzon's best interest to
redirect this investment to pursue other  opportunities.  In connection with the
termination,  Enzon paid Inex a final payment of $5.0 million in satisfaction of
all of  the  Company's  financial  obligations  under  the  MARQIBO  Agreements,
including  development expenses and milestone payments.  The payment was charged
to research and development in the Company's Condensed Consolidated Statement of
Operations.

(15)   SUBSEQUENT EVENTS

       Effective April 21, 2005, the Company's executive vice president, finance
and chief  financial  officer (the "CFO")  resigned,  for personal  reasons.  In
connection  with the CFO's  resignation,  the Company  entered into a Separation
Agreement effective as of April 21, 2005.


                                       12
<PAGE>

                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         Pursuant  to the  Separation  Agreement,  the CFO will  receive  a cash
payment  equal to his  annual  base  salary,  the pro rata  amount of his annual
target  bonus  (which is 50% of his base  salary) for fiscal year 2005,  and his
annual target bonus for fiscal year 2006. In addition, the period of time he has
to exercise certain of his options is extended to 18 months; the vesting of some
of his options and restricted stock was  accelerated;  and he will be reimbursed
for his medical insurance  premiums for up to 36 months. The Company will record
a severance charge in the quarter ended June 30, 2005.

         Based  upon  increasingly  competitive  conditions  in the  intravenous
antifungal market and the recent  discontinuance of certain development projects
in the Company's research and development pipeline, Enzon is realigning its cost
structure through a restructuring.  The Company expects to incur charges of $1.5
million to $2.5 million  during the quarter  ending June 30, 2005.  These costs,
all of which  involve  future cash  expenditures,  are  comprised  primarily  of
employee termination benefits.



                                       13
<PAGE>




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES

         Total cash reserves,  which include cash, cash equivalents,  short-term
investments and marketable securities, were $210.0 million as of March 31, 2005,
as compared to $186.2 million as of June 30, 2004. The increase is primarily due
to net cash provided by operating  activities and proceeds from the  liquidation
of a portion of the shares of NPS  Pharmaceuticals,  Inc.  common  stock that we
own.  We invest our excess cash  primarily  in United  States  government-backed
securities  and  investment-grade  corporate  debt  securities  and auction rate
securities.

         During the nine  months  ended  March 31,  2005,  net cash  provided by
operating  activities was $12.8  million,  compared to $8.5 million for the nine
months ended March 31, 2004. Net cash provided by operations was principally due
to non-cash charges included in our net loss of $5.7 million for the nine months
ended March 31, 2005.  Non-cash charges totaled $26.2 million and were primarily
attributable to depreciation and amortization of $17.0 million,  losses on sales
of investments of $3.5 million, amortization of bond premium/discount of $2.0, a
loss on our equity collar  arrangement  related to our  investment in NPS common
stock of $1.8  million,  and  amortization  of debt issue costs of $1.4 million.
Non-cash  charges were  partially  offset by $7.7 million in changes in deferred
income taxes and operating assets and liabilities.

         Cash used in investing  activities  totaled  $49.4 million for the nine
months ended March 31, 2005 compared to cash provided by investing activities of
$18.0  million for the nine months ended March 31, 2004.  Cash used in investing
activities  during the nine months  ended March 31,  2005,  consisted of $2.2 of
capital expenditures and investments in marketable securities of $136.5 million,
offset by $74.0 million in proceeds from the sale of marketable  securities  and
$15.3 million in proceeds from the liquidation of a portion of our investment in
NPS common stock.

         As of March 31, 2005, we had $400.0 million of convertible subordinated
notes outstanding.  The notes bear interest at an annual rate of 4.5%.  Interest
is payable on January 1 and July 1 of each year.  Accrued  interest on the notes
was $4.5 million as of March 31, 2005.  The holders may convert all or a portion
of the notes into common stock at any time on or before July 1, 2008.  The notes
are convertible into our common stock at a conversion price of $70.98 per share,
subject to  adjustment  in certain  events.  The notes are  subordinated  to all
existing and future senior  indebtedness.  We may redeem any or all of the notes
at specified  redemption  prices,  plus  accrued and unpaid  interest to the day
preceding the redemption  date. As of March 31, 2005 the redemption price of the
notes is 102.571% of the principal amount. The notes will mature on July 1, 2008
unless  converted  earlier,  redeemed at our option or redeemed at the option of
the note holder upon a fundamental change, as described in the indenture for the
notes.  Neither we nor any of our  subsidiaries  are  subject  to any  financial
covenants  under  the  indenture.  In  addition,  neither  we  nor  any  of  our
subsidiaries are restricted under the indenture from paying dividends, incurring
debt, or issuing or repurchasing our securities.

         In August 2003, the Company entered into a Zero Cost Protective  Collar
arrangement with a financial  institution to reduce the exposure associated with
1.5 million shares of NPS common stock,  which the Company received as part of a
merger  termination  agreement with NPS.  During the nine months ended March 31,
2005 we received  proceeds of $15.0  million  related to the  maturation  of two
portions  of the  derivative.  The  remainder  of the collar  will mature on two
separate  maturity  dates in May 2005 and August 2005, at which time the Company
will  receive the  proceeds  from the sale of the  securities  which we estimate
after taking into account the effect of the collar will be in the range of $15.0
million  to  $19.0  million.  The  amount  due at  each  maturity  date  will be
determined  based on the market value of NPS common stock on such maturity date.
The  contract  requires  the Company to maintain a minimum cash balance of $30.0
million and  additional  collateral  of up to $10.0  million,  as defined  under
certain circumstances with the financial institution.  The derivative is subject
to certain adjustments in the event the Company receives a dividend from NPS.

         Our current  sources of  liquidity  are our cash and cash  equivalents,
interest  earned  on such  cash and cash  equivalents,  short-term  investments,
marketable  securities,   sales  of  ADAGEN(R),   ONCASPAR(R),   DEPOCYT(R)  and
ABELCET(R),   royalties  earned,   which  are  primarily  related  to  sales  of
PEG-INTRON(R),  and contract  manufacturing  revenue. In addition,  we intend to
sell our remaining  position in NPS as discussed above. Based upon our currently
planned  research and  development  activities and related costs and our current
sources of liquidity,  we anticipate our current cash reserves and expected cash
flow from  operations  will be sufficient to meet our capital,  debt service and
operational requirements for the foreseeable future.

                                       14
<PAGE>

         While we believe that our cash, cash  equivalents and investments  will
be adequate to satisfy our capital needs for the foreseeable future, we may seek
additional  financing,  such as  through  future  offerings  of  equity  or debt
securities or agreements with  collaborators with respect to the development and
commercialization   of  products,   to  fund  future  operations  and  potential
acquisitions.  We cannot  assure  you,  however,  that we will be able to obtain
additional funds on acceptable terms, if at all.

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
narrow limited  purposes.  As of March 31, 2005, we were not involved in any SPE
transactions.

CONTRACTUAL OBLIGATIONS

         Our major outstanding  contractual  obligations relate to our operating
leases, inventory purchase commitments, convertible debt, and license agreements
with collaborative partners.

         In March 2005, we terminated  the  agreements we entered into with Inex
Pharmaceuticals,   Inc.  in  January  2004   regarding   the   development   and
commercialization of Inex's proprietary oncology product MARQIBO(R) (vincristine
sulfate liposomes injection). Under the terminated MARQIBO Agreements, we shared
the  costs  of  clinical  development  with  Inex  and  received  the  exclusive
commercialization  rights for MARQIBO for all  indications in the United States,
Canada  and  Mexico.   In  January  2005,   the  United  States  Food  and  Drug
Administration  (the "FDA") provided an action letter detailing  MARQIBO as "not
approvable"  under the  FDA's  accelerated  approval  regulations  for  relapsed
aggressive  non-Hodgkin's  lymphoma.  The FDA's response also  recommended  that
additional  randomized  controlled  studies would need to be conducted  prior to
re-applying   for   approval.   After  a   strategic   analysis   of  the  FDA's
recommendation,  required  investment,  development  timeframe,  and  associated
development  risks,  we concluded it would be in the Company's  best interest to
redirect this investment to pursue other  opportunities.  In connection with the
termination, we paid Inex a final payment of $5.0 million in satisfaction of all
of our financial obligations under the MARQIBO Agreements, including development
expenses  and  milestone  payments.  The payment  was  charged to  research  and
development in our Condensed Consolidated Statement of Operations.

         Since June 30,  2004,  there have been no other  material  changes with
respect  to  our  contractual   obligations  as  disclosed  under   Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Contractual  Obligations  in our annual report on Form 10-K/A for the year ended
June 30, 2004.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

         REVENUES. Total revenues for the three months ended March 31, 2005 were
$38.7 million, as compared to $44.4 million for the three months ended March 31,
2004.  The  components  of revenues are product  sales,  manufacturing  revenue,
royalties we earn on the sale of our products by others and contract revenue.

         Net  product  sales  decreased  by 24% to $21.2  million  for the three
months ended March 31, 2005,  as compared to $28.0  million for the three months
ended  March 31,  2004.  The  decrease  in sales was due to  decreased  sales of
ABELCET.  Sales of ABELCET in North  America  decreased  by $8.5 million to $9.1
million for the three months ended March 31, 2005,  as compared to $17.6 million
for the three months ended March 31, 2004 due to  increased  competition  in the
intravenous  antifungal  market.  Sales of DEPOCYT increased by $483,000 to $1.8
million for the three  months  ended March 31, 2005 as compared to $1.4  million
for the three months ended March 31, 2004.  DEPOCYT's growth over the prior year
was primarily  attributable to increased sales and marketing efforts, as well as
a higher weighted average price. Sales of ONCASPAR increased by $652,000 to $5.5
million for the three  months  ended  March 31,  2005 from $4.9  million for the
three months ended March 31,  2004.  The increase in sales of ONCASPAR  over the
prior year was primarily  driven by a higher  weighted  average price.  Sales of
ADAGEN  increased  by $644,000 for the three months ended March 31, 2005 to $4.8
million as compared to $4.1  million for the three  months  ended March 31, 2004
due  to the  timing  of  shipments.  Historically,  quarterly  sales  of  ADAGEN
experience volatility because of the small number of patients on therapy.


                                       15
<PAGE>

         Manufacturing  revenue  for the  three  months  ended  March  31,  2005
decreased  by $676,000  to $4.4  million,  as  compared to $5.0  million for the
comparable  period of the prior year,  due to reduced  orders from our  contract
manufacturing customers. Manufacturing revenue is related to the manufacture and
sale of ABELCET for the international market and other manufacturing revenue.

         Royalties for the three months ended March 31, 2005,  increased by $1.6
million to $12.7 million as compared to $11.1 million for the three months ended
March 31, 2004.  Royalties are principally  comprised of royalties from sales of
PEG-INTRON,  which is marketed by Schering-Plough  Corporation.  The increase in
royalties  over the prior year was  primarily  due to the  launch of  PEG-INTRON
combination therapy in Japan in December 2004. Currently, PEG-INTRON combination
therapy is the only pegylated  interferon-based  combination therapy approved in
Japan.

         Due to the  December  2004 launch of  PEG-INTRON  in Japan,  we believe
royalties  from sales of  PEG-INTRON  may  continue to increase  over prior year
levels in the near term.  In markets  outside of Japan,  PEG-INTRON  combination
therapy competes  directly with another pegylated  interferon-based  combination
therapy in a highly competitive  market.  Further,  Schering-Plough has reported
that the overall hepatitis C market has been  contracting.  We cannot assure you
that these  contracting  and competitive  market  conditions will not offset the
positive  impact of PEG-INTRON in Japan or that any  particular  sales levels of
PEG-INTRON will be achieved or maintained.

         We expect North American sales of ABELCET may continue to be negatively
impacted  by the  increasingly  competitive  conditions  in the  intravenous
antifungal  market,  namely from the  introduction  of newer agents from Pfizer,
Merck,  and Fujisawa,  as well as increased  pricing  pressure in the market for
lipid  formulations  of amphotericin B. We cannot assure you that any particular
sales  levels of ABELCET,  ADAGEN,  DEPOCYT,  and  ONCASPAR  will be achieved or
maintained.

         Contract  revenues  for the three  months  ended  March  31,  2005 were
$452,000 as compared to $248,000 for the three months ended March 31, 2004.  The
increase was  principally due to revenue related to an agreement with Pharmagene
plc to apply our  PEGylation  technology  to engineer a  long-acting  version of
Pharmagene's drug candidate, PGN0052.

         During the three months  ended March 31, 2005,  we had export sales and
royalties  on export  sales of $12.4  million,  of which  $8.9  million  were in
Europe.  Export  sales and  royalties  recognized  on export sales for the three
months  ended March 31, 2004 were $9.2  million,  of which $7.5  million were in
Europe.

         COST OF PRODUCT SALES AND MANUFACTURING  REVENUE. Cost of product sales
and   manufacturing   revenue,   as  a  percentage  of  net  product  sales  and
manufacturing revenue, improved to 35% for the three months ended March 31, 2005
as  compared  to 38% for the same  period  last year.  The  decrease  was due to
reduced ABELCET costs,  as well as improved  margins for ADAGEN,  ONCASPAR,  and
DEPOCYT.  For each of the three month periods ended March 31, 2005 and March 31,
2004, we have  included $1.1 million in cost of product sales and  manufacturing
revenue,  which related to the  amortization  of intangible  assets  acquired in
connection with the ABELCET acquisition during November 2002.

         RESEARCH AND  DEVELOPMENT.  Research and development  expenses  consist
primarily  of  salaries  and  benefits;   patent  filing  fees;  contractor  and
consulting fees, principally related to clinical and regulatory projects;  costs
related to research and development  partnerships or licenses; drug supplies for
clinical and  preclinical  activities;  as well as other  research  supplies and
allocated facilities charges.

         For the three  months ended March 31,  2005,  research and  development
expenses increased by $2.2 million to $12.9 million as compared to $10.8 million
for the three  months  ended  March 31,  2004.  The  increase  in  research  and
development  expenses was primarily due to increased costs related to MARQIBO of
$3.3 million,  which included the impact of a $5.0 million  payment made to Inex
Pharmaceuticals  Corporation  in March 2005  related to the  termination  of our
partnership for the development and  commercialization of MARQIBO. The increased
research  and  development  costs  related to MARQIBO were  partially  offset by
reduced expenditures of approximately $1.1 million,  which were primarily due to
the discontinuation of certain research and development programs,  including our
clinical development program for Pegamotecan, which was discontinued in February
2005.

                                       16
<PAGE>

         SELLING, GENERAL AND ADMINISTRATIVE. Selling expenses consist primarily
of salaries and benefits for our sales and marketing personnel, as well as other
commercial  expenses and marketing programs to support our sales force.  General
and administrative expenses consist primarily of salaries and benefits;  outside
professional   services  for  accounting,   audit,   tax,  legal,  and  investor
activities; and allocations of facilities costs.

         For the  three  months  ended  March  31,  2005  selling,  general  and
administrative  expenses increased by $1.2 million to $13.7 million, as compared
to $12.5  million for the three months  ended March 31,  2004.  The increase was
primarily  attributable to increased sales and marketing costs of  approximately
$792,000  and  increased  general  and  administrative  costs  of  approximately
$366,000.  The  increase in sales and  marketing  costs was  comprised of a $1.2
million increase in costs related to our oncology sales  operations,  a $441,000
increase in costs related to MARQIBO,  and an $808,000 decrease in costs related
to  our   hospital-based   sales   operations.   The  increase  in  general  and
administrative  costs was primarily  attributable  to an increase of $242,000 in
legal and accounting fees and a net increase of $124,000 in other costs.

         Based on the  increasingly  competitive  conditions in the  intravenous
antifungal market, as previously  discussed,  as well as the  discontinuation of
certain research and development projects, in April 2005 we reported that we are
realigning  our cost  structure  through  a  restructuring.  As a result  of the
restructuring, we expect to incur charges of $1.5 million to $2.5 million during
the quarter ending June 30, 2005. These costs all involve cash  expenditures and
are comprised primarily of employee termination benefits.

         AMORTIZATION.  Amortization  expense is related  to  intangible  assets
acquired  in  connection   with  the  ABELCET   acquisition  in  November  2002.
Amortization  expense  remained  unchanged at $3.4 million for each of the three
month periods ended March 31, 2005 and 2004. A portion of  amortization  expense
is classified in cost of product sales and manufacturing  revenue,  as discussed
above.  Amortization of intangible assets is calculated on a straight-line basis
over the estimated lives of the assets, which range from 3 to 15 years.

         ACQUIRED  IN-PROCESS  RESEARCH  AND  DEVELOPMENT.  Acquired  in-process
research  and  development  for the three  months  ended March 31, 2004 of $12.0
million was due to an up-front  payment to Inex  related to the  execution  of a
strategic  partnership and related  agreements entered into with Inex related to
MARQIBO (a development-stage product). As previously discussed, this partnership
was terminated in March 2005.

         OTHER INCOME  (EXPENSE).  Other income  (expense)  for the three months
ended  March 31, 2005 was an expense of $7.1  million,  as compared to income of
$6.3 million for the three months ended March 31, 2004.  Other income  (expense)
includes: net investment income, interest expense, and other expense.

         Net  investment  income  decreased by $10.5 million to $1.1 million for
the three months ended March 31, 2005  compared with $11.6 million for the three
months ended March 31,  2004.  The  decrease  was  principally  due to the prior
year's  sale of  880,075  shares  of Nektar  Therapeutics  common  stock,  which
resulted in a net gain of approximately  $11.0 million in the three months ended
March 31, 2004.

         Interest  expense was $5.0  million for each of the three  months ended
March 31, 2005 and 2004.  Interest  expense is related to $400.0 million in 4.5%
convertible  subordinated  notes,  which were  outstanding for each of the three
month periods ended March 31, 2005 and 2004.

         Other  expense  increased  to $3.2  million for the three  months ended
March 31,  2005,  as compared to $337,000  for the three  months ended March 31,
2004.  The  increase  in the  expense  was  related  to a  realized  loss on the
liquidation  of 375,000  shares of our investment in NPS common stock during the
quarter  ended March 31,  2005,  as well as an increase in the  unrealized  loss
associated  with a  derivative  instrument  we  formed  as a  protective  collar
arrangement  to reduce our  investment  risk  associated  with our investment in
these shares.

         INCOME  TAXES.  During  the  three  months  ended  March 31,  2005,  we
recognized a tax benefit of  approximately  $2.7  million,  as compared to a tax
benefit of $5.5 million for the three months ended March 31, 2004. We recognized
a tax benefit for the three months  ended March 31, 2005 at an estimated  annual
effective tax rate of 37%,  which is based on the  projected  income tax benefit
and taxable  loss for the fiscal year  ending  June 30,  2005.

         During the three months ended March 31,  2004,  the Company  recorded a
net tax benefit of approximately  $5.5 million related primarily to the reversal
of a $3.8 million deferred tax asset valuation allowance for the write-down in a
prior year of Enzon's equity investment in Nektar  Therapeutics,  which was sold
during  the  quarter  ended  March  31,  2004.  The sale  resulted  in a gain of
approximately  $11.0  million.  The  benefit  was also due to the  reduction  of
Enzon's  estimated  taxable  income and effective tax rate to 29% as compared to
35% used in previous  quarters and a payment during the three months ended March
31, 2004 of $12.0 million to Inex Pharmaceuticals related to acquired in-process
research and development.

                                       17
<PAGE>

NINE MONTHS ENDED MARCH 31, 2005 AND 2004

         REVENUES.  Total revenues for the nine months ended March 31, 2005 were
$122.1  million,  as compared to $126.7  million for the nine months ended March
31, 2004. The components of revenues are product sales,  manufacturing  revenue,
royalties we earn on the sale of our products by others and contract revenues.

         Net product sales  decreased by 6% to $75.7 million for the nine months
ended March 31,  2005,  as compared to $80.7  million for the nine months  ended
March 31, 2004. The decrease in sales was due to decreased  sales of ABELCET(R).
Sales of ABELCET in North  America  decreased by $10.7  million to $39.9 million
for the nine months ended March 31, 2005,  as compared to $50.6  million for the
nine  months  ended  March 31,  2004 due to weaker  demand for the  product as a
result of increased  competition in the intravenous  antifungal market. Sales of
DEPOCYT  increased  by $1.8  million to $5.8  million for the nine months  ended
March 31, 2005 as compared to $4.0  million for the nine months  ended March 31,
2004.  DEPOCYT'S  growth  over the  prior  year was  primarily  attributable  to
increased  sales and marketing  efforts and to a lesser extent a higher weighted
average price.  Sales of ONCASPAR increased by $2.0 million to $15.3 million for
the nine months ended March 31, 2005,  as compared to $13.3 million for the nine
months  ended March 31, 2004.  The increase in sales of ONCASPAR  over the prior
year was due to a higher  weighted  average price as well as increased sales and
marketing  efforts.  Sales of ADAGEN  increased by $1.9 million to $14.7 million
for the nine months  ended  March 31, 2005 as compared to $12.8  million for the
nine  months  ended  March 31, 2004 due to an increase in the number of patients
receiving ADAGEN therapy and the timing of shipments.

         Manufacturing  revenue  for  the  nine  months  ended  March  31,  2005
increased by $3.5 million to $12.3 million,  as compared to $8.8 million for the
comparable  period  of the  prior  year due to the  timing  of  orders  from our
contract  manufacturing  customers.  Manufacturing  revenue  is  related  to the
manufacture  and  sale  of  ABELCET  for  the  international  market  and  other
manufacturing revenue.

         Royalties for the nine months ended March 31, 2005,  decreased to $32.9
million as compared to $36.4  million for the nine months  ended March 31, 2004.
The  decrease  was   primarily   due  to  decreased   sales  of   PEG-INTRON  by
Schering-Plough, our marketing partner, due to competitive pressure from another
pegylated  alpha  interferon  product and  contracting  market  conditions.  The
competitive  and  contracting  market  conditions  were partially  offset by the
launch of PEG-INTRON combination therapy in Japan in December 2004.

         Contract revenues for the nine months ended March 31, 2005 increased by
$394,000 to $1.2 million as compared to $769,000 for the nine months ended March
31, 2004 principally due to revenue related to an agreement we entered into with
Pharmagene to apply our PEGylation  technology to engineer a long-acting version
of Pharmagene's drug candidate, PGN0052.

         During the nine months  ended March 31,  2005,  we had export sales and
royalties  on export  sales of $34.9  million,  of which $26.0  million  were in
Europe. Export sales and royalties recognized on export sales for the prior year
were $28.0 million, of which $23.4 million were in Europe.

         COST OF PRODUCT SALES AND MANUFACTURING  REVENUE. Cost of product sales
and  manufacturing  revenue,  as a  percentage  of net sales  and  manufacturing
revenue,  decreased to 37% for the nine months ended March 31, 2005  compared to
39% for the nine months  ended March 31, 2004 due to lower  ABELCET  costs.  For
each of the nine month  periods ended March 31, 2005 and March 31, 2004, we have
included $3.4 million in cost of product sales and manufacturing  revenue, which
related to the amortization of intangible assets acquired in connection with the
ABELCET acquisition during November 2002.

         RESEARCH AND DEVELOPMENT.  Research and development  expenses increased
by $7.2 million to $31.9  million for the nine months  ended March 31, 2005,  as
compared to $24.7 million for the nine months ended March 31, 2004. The increase
in research and development  expenses was primarily due to $6.2 million in costs
related to MARQIBO,  which included the impact of a $5.0 million payment made to
Inex in  March  2005  related  to the  termination  of our  partnership,  and an
increase of $2.0 million in employee compensation expenses. These increases were
partially offset by a $1.0 million decrease in costs due to the  discontinuation
of research and development programs, including our clinical development program
for Pegamotecan, which was discontinued in February 2005.

                                       18
<PAGE>

         SELLING,    GENERAL   AND   ADMINISTRATIVE.    Selling,   general   and
administrative  expenses increased by $4.4 million to $39.6 million for the nine
months  ended March 31, 2005,  as compared to $35.2  million for the nine months
ended March 31, 2004. The increase was primarily  attributable to a $4.5 million
increase in sales and  marketing  costs,  which was  comprised of a $3.4 million
increase in costs  related to our  oncology  sales  operations,  a $1.3  million
increase in costs related to MARQIBO,  and a $300,000  decrease in costs related
to our hospital-based sales operations.

         AMORTIZATION.  Amortization expense remained unchanged at $10.1 million
for the nine months ended March 31, 2005 and 2004. Amortization expense for both
periods  relates to intangible  assets  acquired in connection  with the ABELCET
acquisition  during  November 2002. A portion of  amortization  is classified in
cost of product  sales and  manufacturing  revenue.  Amortization  of intangible
assets is calculated on a  straight-line  basis over the estimated  lives of the
assets, which range from 3 to 15 years.

         ACQUIRED  IN-PROCESS  RESEARCH  AND  DEVELOPMENT.  Acquired  in-process
research and  development  was $12.0 million for the nine months ended March 31,
2004 due to an up-front payment, which we made in January 2004 for the execution
of an agreement with Inex for the development and  commercialization of MARQIBO.
As previously discussed, this partnership was terminated in March 2005.

         OTHER  INCOME  (EXPENSE).  Other income  (expense)  for the nine months
ended March 31, 2005 was an expense of $17.2 million,  as compared to an expense
of $2.1 million for the nine months ended March 31, 2004. Other income (expense)
includes: net investment income, interest expense, and other income (expense).

         Net  investment  income  for the  nine  months  ended  March  31,  2005
decreased to $2.9 million from $12.7 million for the nine months ended March 31,
2004.  The  decrease  was  principally  due to the prior  year's sale of 880,075
shares of Nektar  Therapeutics  common  stock,  which  resulted in a net gain of
approximately  $11.0  million  recorded in the nine months ended March 31, 2004.
This decrease was offset in part by $1.2 million increase in interest income for
the nine months ended March 31, 2005, as compared to the nine months ended March
31, 2004.

         Interest  expense was $14.9  million for each of the nine months  ended
March 31, 2005 and 2004.  Interest  expense is related to $400.0 million in 4.5%
convertible subordinated notes, which were outstanding for both periods.

         Other expense  amounted to $5.2 million for the nine months ended March
31, 2005, as compared to other income of $71,000 for the nine months ended March
31,  2004.  The  increase in the  expense was related to a realized  loss on the
liquidation  of 750,000  shares of our investment in NPS common stock during the
nine months ended March 31, 2005, which was offset in part by an increase in the
unrealized  loss  associated  with  a  derivative  instrument  we  formed  as  a
protective collar  arrangement to reduce our risk associated with our investment
in these shares.

         INCOME TAXES. During the nine months ended March 31, 2005 we recognized
a tax benefit of $3.3 million compared to a tax benefit of $2.7 million, for the
nine  months  ended March 31,  2004.  We  recognized  a tax benefit for the nine
months ended March 31, 2005 at an estimated  annual  effective  tax rate of 37%,
which is based on the  projected  income tax benefit  and  taxable  loss for the
fiscal  year  ending June 30,  2005.

         During the nine months ended March 31, 2004, the Company recorded a net
tax benefit of approximately $2.7 million related primarily to the reversal of a
$3.8 million  deferred tax asset  valuation  allowance  for the  write-down in a
prior year of Enzon's equity investment in Nektar  Therapeutics,  which was sold
during the nine months  ended  March 31,  2004.  The sale  resulted in a gain of
approximately  $11.0  million.  The  benefit  was also due to the  reduction  of
Enzon's  estimated  taxable  income and effective tax rate to 29% as compared to
35% used in previous  quarters and a payment during the three months ended March
31, 2004 of $12.0 million to INEX Pharmaceuticals related to acquired in-process
research and development.

CRITICAL ACCOUNTING POLICIES

         In December 2001, the U.S.  Securities and Exchange  Commission ("SEC")
requested that all registrants discuss their most "critical accounting policies"
in  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations.  The SEC indicated that a "critical  accounting policy" is one which
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.

                                       19
<PAGE>

         Our consolidated  financial statements are presented in accordance with
accounting  principles  that are generally  accepted in the United  States.  All
professional accounting standards effective as of March 31, 2005 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  including those related to contingent  assets
and  liabilities.  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.

         Revenue from product sales and manufacturing revenue is recognized upon
passage of title and risk of loss to  customers.  This is  generally at the time
products are shipped to  customers.  Provisions  for  discounts or  chargebacks,
rebates and sales incentives to customers, and returns and other adjustments are
provided for in the period the related  sales are recorded.  Historical  data is
readily  available and reliable,  and is used for  estimating  the amount of the
reduction in gross sales.

         The majority of our net product sales are to wholesale distributors who
resell the  products to the end  customers.  We provide  chargeback  payments to
these  distributors  based on their sales to members of buying  groups at prices
determined  under a contract between Enzon and the member.  Administrative  fees
are paid to buying  groups  based on the  total  amount  of  purchases  by their
members. Chargeback amounts are based upon the volume of purchases multiplied by
the difference  between the wholesaler  acquisition  cost and the contract price
for a product.  We estimate the amount of the chargeback that will be paid using
historical  trends,  adjusted for current  changes,  and record the amounts as a
reduction to accounts  receivable  and a reduction of gross sales when we record
the sale of the product.  The  settlement of the  chargebacks  generally  occurs
within three months after the sale to the wholesaler.  We regularly  analyze the
historical  chargeback  trends and make  adjustments  to recorded  reserves for
changes in trends.

         In addition, state agencies, which administer various programs, such as
the U.S. Medicaid and Medicare program,  also receive rebates.  Medicaid rebates
and  administrative  fees are  recorded as a liability  and a reduction of gross
sales when we record the sale of the  product.  Medicaid  rebates are  typically
paid  within six to nine months  after  sale.  In  determining  the  appropriate
accrual amount we consider our historical Medicaid rebate and administration fee
payments  by  product as a  percentage  of our  historical  sales as well as any
significant   changes  in  sales  trend.   Current   Medicaid  rebate  laws  and
interpretations,  and the  percentage  of our products that are sold to Medicaid
patients are also evaluated. Factors that complicate the rebate calculations are
the timing of the average manufacturer  pricing  computation,  the estimated lag
time  between  sale and  payment of a rebate and the level of  reimbursement  by
state agencies.


         The  following is a summary of  reductions of gross sales accrued as of
March 31, 2005 and June 30, 2004 (the end of our last fiscal year):



<TABLE>
<CAPTION>
                                                          March 31, 2005            June 30, 2004
                                                       ----------------------    ---------------------
     Accounts Receivable Reductions
<S>                                                             <C>                      <C>
          Chargebacks                                           $6,812                   $7,802
          Cash Discounts                                           183                      414
          Other (including returns)                              1,407                    1,323
                                                       ----------------------    ---------------------
                Total                                           $8,402                   $9,539
                                                       ----------------------    ---------------------
     Accrued Liabilities
           Medicaid Rebates                                     $2,299                   $2,011
           Administrative Fees                                     425                      640
                                                       ----------------------    ---------------------
                Total                                           $2,724                   $2,651
                                                       ----------------------    ---------------------
</TABLE>

         There  were no  revisions  to the  estimates  for  gross  to net  sales
adjustments  that would be material to income from  operations for the three and
nine months ended March 31, 2005 and 2004.

         Royalties   under  our  license   agreements  with  third  parties  are
recognized  when earned  through the sale of the product by the  licensee net of
any estimated future credits, chargebacks, sales discount rebates and refunds.

                                       20
<PAGE>

         Contract  revenues are recorded as the earnings  process is  completed.
Non-refundable  milestone  payments that  represent the completion of a separate
earnings  process are recognized as revenue when earned,  upon the occurrence of
contract-specified  events and when the milestone has substance.  Non-refundable
payments received upon entering into licenses and other collaborative agreements
where we have  continuing  involvement  are  recorded  as  deferred  revenue and
recognized ratably over the estimated service period.

         Under  the  asset  and  liability  method  of  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 109 "Accounting for Income Taxes",  deferred
tax  assets  and  liabilities  are  recognized  for  the  estimated  future  tax
consequences  attributable to differences  between financial  statement carrying
amounts of  existing  assets and  liabilities  and their  respective  tax bases.
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 recovered or settled.  A valuation  allowance on
net  deferred  tax assets is  provided  for when it is more likely than not that
some portion or all of the  deferred  tax assets will not be  realized.  We have
significant net deferred tax assets, primarily related to net operating loss and
other  carryforwards.  Events,  such as a  sustained  decline  in the  Company's
product  revenues  and/or  increased  expenses could result in a revision to the
Company's  projected  future taxable  income,  and  accordingly,  the need for a
valuation  allowance based upon the ultimate  realizability of its net operating
loss carryforwards,  research and development tax credits and other deferred tax
assets.  The Company's federal and state operating loss carryforwards will begin
to expire in 2009 and 2006, respectively, and the federal and state research and
development  credits  will begin to expire in 2006 and 2021,  respectively.  The
Company will continue to assess the need for such valuation  allowance  based on
analyses of operating results and projections of future operating performance of
the Company.


         We  assess  the  carrying  value  of our  cost  method  investments  in
accordance  with SFAS No. 115  "Accounting  for Certain  Investments in Debt and
Equity"  and SEC  Staff  Accounting  Bulletin  ("SAB")  No. 59  "Accounting  for
Non-current Marketable Equity Securities".  An impairment write-down is recorded
when  a  decline  in  the  value  of  an   investment   is   determined   to  be
other-than-temporary.  These  determinations  involve  a  significant  degree of
judgment and are subject to change as facts and circumstances change.

         In accordance  with the  provisions of SFAS No. 142 "Goodwill and other
Intangible  Assets",  goodwill  and  intangible  assets  determined  to  have an
indefinite  useful life  acquired  in a purchase  business  combination  are not
subject to  amortization,  are tested at least annually for impairment,  and are
tested for impairment more frequently if events and circumstances  indicate that
the asset might be impaired. We completed our annual goodwill impairment test on
May 31, 2004, which indicated that goodwill was not impaired. An impairment loss
is  recognized to the extent that the carrying  amount  exceeds the asset's fair
value.  Because the Company is in one reporting unit, this determination is made
at the Company  level and consists of two steps.  First,  we determine  the fair
value of our reporting unit and compare it to its carrying  amount.  Second,  if
the carrying  amount of its reporting unit exceeds our fair value, an impairment
loss is recognized for any excess of the carrying amount of the reporting unit's
goodwill over the implied fair value of that goodwill. The implied fair value of
goodwill is determined by allocating  the fair value of the reporting  unit in a
manner similar to a purchase price allocation,  in accordance with SFAS No. 141,
"Business  Combinations".  The residual fair value after this  allocation is the
implied fair value of our goodwill.  Recoverability  of  amortizable  intangible
assets is determined by comparing the carrying amount of the asset to the future
undiscounted net cash flow to be generated by the asset. The evaluations involve
amounts  that are based on  management's  best  estimate  and  judgment.  Actual
results may differ from these  estimates.  If recorded  values are less than the
fair  values,  no  impairment  is  indicated.  SFAS No. 142 also  requires  that
intangible assets with estimated useful lives be amortized over their respective
estimated useful lives.

         We apply the intrinsic  value-based method of accounting  prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to  Employees",  and related  interpretations,  in accounting for our fixed plan
stock options.  As such,  compensation  expense would be recorded on the date of
grant of options to employees and members of the Board of Directors  only if the
current market price of the underlying  stock exceeded the exercise price.  SFAS
No. 123, "Accounting for Stock-Based  Compensation",  established accounting for
stock-based  employee  compensation  plans.  As allowed by SFAS No. 123, we have
elected to  continue to apply the  intrinsic  value-based  method of  accounting
described above,  and have adopted the disclosure  requirements of SFAS No. 123,
as amended in December 2004.

         When the exercise  price of employee or director  stock options is less
than the fair  value  of the  underlying  stock on the  grant  date,  we  record
deferred  compensation  for the  difference  and amortize this amount to expense
over the  vesting  period of the  options.  Options  or stock  awards  issued to
non-employees  and consultants are recorded at their fair value as determined in
accordance  with  SFAS No.  123 and  EITF  No.  96-18,  "Accounting  for  Equity
Instruments  That Are  Issued  to Other  Than  Employees  for  Acquiring,  or in
Conjunction  with Selling,  Goods or Services",  and recognized over the related
vesting period.




                                       21
<PAGE>




CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS (CAUTIONARY STATEMENTS UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995)

         Management's Discussion and Analysis of Financial Condition and Results
of Operations  contains  "forward-looking  statements" within the meaning of the
Securities Litigation Reform Act of 1995.  Forward-looking  statements relate to
expectations or forecasts of future events.  These  statements use words such as
"anticipate,"  "believe," "could," "estimate," "expect," "forecast,"  "project,"
"intend,"  "plan,"  "potential,"  "will,"  and other  words and terms of similar
meaning  in  connection  with  a  discussion  of  potential   future  events  or
circumstances  or  future  operating  or  financial  performance.  You can  also
identify forward-looking statements by the fact that they do not relate strictly
to historical or current facts.

         Specific examples of such forward looking statements include statements
in  this  report   relating  to  the   potential   impact  on  our  revenues  of
Schering-Plough's  launch of  PEG-INTRON in Japan,  the potential  impact on our
ability  to  sustain  or grow  our  ABELCET  revenues  in  light  of  continuing
competitive  and pricing  pressure in the  intravenous  antifungal  market,  the
future sales  performance  of our other  products,  the potential  impact of the
manufacturing  and stability  problems with ONCASPAR we continue to  experience,
the performance of our protective collar  arrangement  relating to the shares of
NPS common stock we hold, the continued sufficiency of our capital resources and
our ability to access the capital markets in the future. This is not necessarily
inclusive  of all  examples  of forward  looking  statements  that are or may be
contained in this report.

         Any or all forward-looking  statements contained in this discussion may
turn out to be  wrong.  Actual  results  may vary  materially,  and there are no
guarantees  about our financial and operating  performance or the performance of
our stock.  All statements are made as of the date of signing of this report and
we do not assume any obligation to update any forward-looking statement.

         Many factors  could cause actual  results to differ from the results or
developments  discussed or predicted in the forward  looking  statements made in
this report. These factors include inaccurate assumptions and a broad variety of
other risks and  uncertainties,  including some that are known and some that are
not.  Although it is not possible to predict or identify all such factors,  many
of them are  described  under the caption  "Risk  Factors" in the  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
section of our Annual  Report on Form  10-K/A for the fiscal year ended June 30,
2004, which we filed with the SEC and which is incorporated herein by reference.
Readers of this report are advised to read such Risk Factors in connection  with
this  report.  The  following  information  supplements  and  updates  such Risk
Factors:

         o        Although  Schering-Plough has received approval for PEG-INTRON
                  in Japan in  combination  with  REBETOL for the  treatment  of
                  hepatitis  C, there can be no assurance  that  Schering-Plough
                  will   successfully   market   PEG-INTRON  in  Japan.   It  is
                  anticipated  that  a  competing   pegylated   interferon-based
                  combination  therapy will receive marketing  approval in Japan
                  for  hepatitis  C in  the  next  one  to two  years.  Even  if
                  Schering-Plough  is  successful  in  launching  PEG-INTRON  in
                  Japan,  it is likely  that the  future  launch of a  competing
                  pegylated  interferon-based  combination  therapy  will have a
                  negative  impact on  PEG-INTRON's  Japanese  market  share and
                  sales.

         o        We have been  experiencing  increasing  pricing  pressure with
                  respect to ABELCET.  In particular,  Fujisawa  Healthcare Inc.
                  and Gilead  Sciences,  Inc.,  which jointly market a competing
                  liposomal amphotericin B product have aggressively lowered the
                  price of their  product in  certain  regions  and for  certain
                  customers in the U.S.  This has  resulted in the  shrinkage or
                  loss of certain of our  customer  accounts.  Further,  ABELCET
                  sales may also  continue  to be  negatively  impacted by newer
                  agents from Pfizer,  Merck,  and Fujisawa.  We are  developing
                  strategies to address these competitive  threats, but there
                  can be no assurance as to when or whether we will be
                  successful in stopping or reversing this trend.

         o        We have received a notice from  Bristol-Myers  Squibb  Company
                  ("BMS")  terminating our  amphotericin B supply agreement with
                  BMS effective  March 1, 2006. We currently have an alternative
                  source of supply of  amphotericin B and are seeking to qualify
                  at least one additional  source of supply.  The termination by
                  BMS  may  give  rise  to  future   increased   costs  for  the
                  acquisition  of  amphotericin  B as well as increased  capital
                  expenditures  related to readying a new supplier's  facilities
                  for  cGMP  production  and  regulatory   approval  of  ABELCET
                  incorporating  the alternative  amphotericin B. Although there
                  can be no assurance as to the timing of these  increased costs
                  and additional capital expenditures,  we anticipate that these
                  may be incurred beginning in calendar 2007.


                                       22
<PAGE>

         o        Manufacturing and stability  problems required us to implement
                  a voluntary recall for one ONCASPAR batch March 2005. To date,
                  we have been unable to identify the cause of the manufacturing
                  and stability problems related to the batches of ONCASPAR that
                  we  voluntarily  recalled in March 2005,  September  2004, and
                  July 2004 and  preliminary  indicators do not rule out that an
                  additional   batch  of  ONCASPAR   may  also  be  affected  by
                  manufacturing  and  stability  problems,  which  we  may  also
                  voluntarily recall in the near term. We cannot assure you that
                  future product  recalls will not materially  adversely  affect
                  our business, our financial conditions,  results of operations
                  or our reputation and relationships with our customers.


                                       23
<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The following discussion about our exposure to market risk of financial
instruments  contains  forward-looking  statements.  Actual  results  may differ
materially from those described.

         Our holdings of financial  instruments are comprised of debt securities
and  time  deposits.   All  such   instruments   are  classified  as  securities
available-for-sale.  In August  2003,  we  entered  into a Zero Cost  Protective
Collar  arrangement  with  a  financial   institution  to  reduce  the  exposure
associated  with the 1.5  million  shares of common  stock of NPS we received as
part of the  merger  termination  agreement  with NPS.  The terms of the  collar
arrangement  are structured so that our  investment in NPS stock,  when combined
with the value of the collar,  should secure ultimate cash proceeds in the range
of 85% - 108% of the negotiated  fair value per share of $23.47  (representing a
4.85%  discount off the closing  price of NPS common stock on the day before the
collar  was  executed)  (See  Note 12 to our  unaudited  condensed  consolidated
financial  statements).  We do not  invest in  portfolio  equity  securities  or
commodities or use financial derivatives for trading purposes. Our debt security
portfolio  represents  funds held  temporarily  pending use in our  business and
operations. We manage these funds accordingly. 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.  We typically  invest the majority of our investments in the
shorter-end of the maturity spectrum,  and at March 31, 2005 all of our holdings
were in instruments maturing in four years or less.

         The table below  presents the  principal  amounts and related  weighted
average  interest rates by year of maturity for our  investment  portfolio as of
March 31, 2005 (in thousands):

<TABLE>
<CAPTION>
                                2006         2007         2008         2009       TOTAL      FAIR VALUE
                              --------     -------      --------     --------   ---------    -----------
<S>                           <C>          <C>           <C>          <C>       <C>         <C>
   Fixed Rate                 $103,454     $37,259       $18,586      $11,025    $170,324       $168,879
   Average Interest Rate          0.92%       2.14%         2.54%        2.82%       1.49%             -
   Variable Rate                     -           -             -            -           -              -
   Average Interest Rate             -           -             -            -           -              -
                              ---------    -------      --------     --------    ---------   -----------
                              $103,454     $37,259       $18,586      $11,025    $170,324       $168,879
                              =========    =======      ========     ========    =========   ===========
</TABLE>

         Our 4.5%  convertible  subordinated  notes in the  principal  amount of
$400.0 million due July 1, 2008 have fixed interest rates. The fair value of the
notes was  approximately  $360.0  million at March 31,  2005.  The fair value of
fixed interest rate  convertible  notes is affected by changes in interest rates
and by changes in the price of our common stock.




                                       24
<PAGE>




ITEM 4.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

         Under the  supervision  and with the  participation  of our management,
including  our Chief  Executive  Officer and our  Controller  (Acting  Principal
Accounting Officer),  we evaluated the effectiveness of the design and operation
of our disclosure  controls and  procedures (as defined in Rule 13a-15(e)  under
the Exchange  Act) as of March 31, 2005,  the end of the period  covered by this
report (the "Evaluation Date"). Based upon that evaluation,  the Chief Executive
Officer and Controller concluded that, as of the Evaluation Date, our disclosure
controls and procedures  were effective in timely  alerting them to the material
information required to be included in our periodic SEC filings.

CHANGES IN INTERNAL CONTROLS

         There were no changes in our internal controls over financial reporting
during the period covered by this report that have materially  affected,  or are
reasonably  likely to  materially  affect our internal  control  over  financial
reporting.




                                       25
<PAGE>




PART II OTHER INFORMATION


ITEM 6.  EXHIBITS

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

        EXHIBIT
        NUMBER       DESCRIPTION

     3.1  Certificate  of  Incorporation,  as  amended  (previously  filed as an
          exhibit to the Company's Annual Report on Form 10-K for the year ended
          June 30, 2002 and incorporated herein by reference thereto)

     3.2  Amendment to  Certificate  of  Incorporation  (previously  filed as an
          exhibit to the Company's  Current Report on Form 8-K filed on December
          10, 2002 and incorporated herein by reference thereto)

     3.3  By laws, as amended  (previously  filed as an exhibit to the Company's
          Current  Report on Form 8-K filed with the  Commission on May 22, 2002
          and incorporated herein by reference thereto)

     4.1  Indenture  dated  as  of  June  26,  2001,  between  the  Company  and
          Wilmington  Trust  Company,  as trustee,  including the form of 4 1/2%
          Convertible  Subordinated Notes due 2008 attached as exhibit A thereto
          (previously  filed  as  an  exhibit  to  the  Company's   Registration
          Statement on Form S-3 (File No.  333-67509)  filed with the Commission
          and incorporated herein by reference thereto)

     4.2  Rights   Agreement   dated  May  17,  2002  between  the  Company  and
          Continental Stock Transfer Trust Company,  as rights agent (previously
          filed as an exhibit  to the  Company's  Form 8-A (File No.  000-12957)
          filed with the Commission on May 22, 2002 and  incorporated  herein by
          reference thereto)

     4.3  First  Amendment  to Rights  Agreement,  dated as of February 19, 2003
          (previously  filed as an exhibit to the Company's Form 8-A12 G/A (File
          No.  000-12957)  filed with the  Commission  on February  20, 2003 and
          incorporated herein by reference thereto)

     10.2 Employment  Agreement  with  Craig A.  Tooman  dated  January  5, 2005
          (previously  filed as an exhibit to the Company's  Quarterly Report on
          Form 10-Q for the quarter  ended  December  31, 2004 and  incorporated
          herein by reference thereto)

     10.6 Form of Restricted Stock Unit Award Agreement for Executive Officers *

     31.1 Certification of Principal  Executive  Officer pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002 *

     31.2 Certification of Principal  Accounting Officer pursuant to Section 302
          of the Sarbanes-Oxley Act.*

     32.1 Certification of Principal  Executive  Officer pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002 *

     32.2 Certification of Principal  Accounting Officer pursuant to Section 906
          of the Sarbanes-Oxley Act.*

     *    Filed herewith.



                                       26
<PAGE>




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)

                            By: /S/JEFFREY H. BUCHALTER
                                ---------------------------------------
                                  President and Chief Executive Officer
                                (Principal Executive Officer)

Date:  May 10, 2005         By: /S/TONI L. KLICH
                                ---------------------------------------
                                 Controller
                                 (Acting Principal Accounting Officer)

                                       27




<PAGE>


                                      ENZON


















                    685 Route 202/206, Bridgewater, NJ 08807
                      (908) 541-8600 o FAX: (908) 575-9457
                              HTTP://WWW.ENZON.COM