UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2006

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 Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)



| | Delaware(State of incorporation) |  | 22-2372868(I.R.S. Employer Identification No.) | 
| | -------------------------------- |  | ---------------------------------------------- | 

| |  |  |  | 
| |  |  |  | 

| | 685 Route 202/206,
      Bridgewater, New Jersey(Address of principal executive offices) |  | 08807(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  No
| | -------

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



| | Large Accelerated FilerAccelerated FilerNon-Accelerated Filer
| | -------------------------------------------------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



| | YesNo
| | -----

Shares of Common Stock outstanding as of July 31, 2006: 43,790,810.




1

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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)



|                                                                                                                                                                                                                                                |  | June 30,2006 |          | December 31,2005* |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | ----------------- | -
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|ASSETS                                                                                                                                                                                                                                          |  |              |          |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Current assets:                                                                                                                                                                                                                                 |  |              |          |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                       |  | $            | 171,108  |                   | $
|Short-term investments                                                                                                                                                                                                                          |  |              | 161,422  |                   |  
|Accounts
        receivable, net of allowance for doubtful accounts:
        $163 at June 30, 2006 and $71 at December 31, 2005                                                                                                                 |  |              | 12,078   |                   |  
|Inventories                                                                                                                                                                                                                                     |  |              | 17,575   |                   |  
|Other current assets                                                                                                                                                                                                                            |  |              | 8,322    |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Total current assets                                                                                                                                                                                                                            |  |              | 370,505  |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Property
           and equipment, net of accumulated depreciation:                                                                                                                                                                             |  |              |          |                   |  
|$23,926 at June 30, 2006 and $21,668 at December 31, 2005                                                                                                                                                                                       |  |              | 36,067   |                   |  
|Marketable securities                                                                                                                                                                                                                           |  |              | 37,070   |                   |  
|Amortizable intangible assets, net                                                                                                                                                                                                              |  |              | 65,112   |                   |  
|Other assets                                                                                                                                                                                                                                    |  |              | 7,365    |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Total assets                                                                                                                                                                                                                                    |  | $            | 516,119  |                   | $
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                                                           |  |              |          |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Current liabilities:                                                                                                                                                                                                                            |  |              |          |                   |  
|Accounts payable                                                                                                                                                                                                                                |  | $            | 5,545    |                   | $
|Notes payable                                                                                                                                                                                                                                   |  |              | 137,581  |                   |  
|Accrued expenses                                                                                                                                                                                                                                |  |              | 21,282   |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Total current liabilities                                                                                                                                                                                                                       |  |              | 164,408  |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Notes payable                                                                                                                                                                                                                                   |  |              | 397,642  |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Other liabilities                                                                                                                                                                                                                               |  |              | 2,528    |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Total liabilities                                                                                                                                                                                                                               |  |              | 564,578  |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Commitments and contingencies                                                                                                                                                                                                                   |  |              |          |                   |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Stockholders deficit:                                                                                                                                                                                                                          |  |              |          |                   |  
|Preferred stock - $.01 par value, authorized 3,000,000 shares; no shares issued and outstanding at June 30, 2006 and December 31, 2005                                                                                                          |  |              |         |                   |  
|Common
           stock - $.01 par value, authorized 170,000,000 shares and 90,000,000
          shares; issued and outstanding
        43,763,254 shares and 43,786,786 shares at June 30, 2006 and December
          31,  2005, respectively |  |              | 438      |                   |  
|Additional paid-in capital                                                                                                                                                                                                                      |  |              | 323,208  |                   |  
|Accumulated other comprehensive loss                                                                                                                                                                                                            |  |              | (925     | )                 |  
|Accumulated deficit                                                                                                                                                                                                                             |  |              | (371,180 | )                 |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Total stockholders deficit                                                                                                                                                                                                                     |  |              | (48,459  | )                 |  
|                                                                                                                                                                                                                                                |  |              |          |                   |  
|Total liabilities and stockholders deficit                                                                                                                                                                                                     |  | $            | 516,119  |                   | $
|                                                                                                                                                                                                                                                |  |              |          |                   |  

|* | Condensed from audited financial statements.
|- | --------------------------------------------

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

2

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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                 |  | Three months endedJune 30, |        | Six months endedJune 30, |  
|------------------------------------------------ |  | -------------------------- | ------ | ------------------------ | -
|                                                 |  |                            |        |                          |  
|                                                 |  | 2006                       |        | 2005                     |  
|                                                 |  |                            |        |                          |  
|Revenues:                                        |  |                            |        |                          |  
|Product sales, net                               |  | $                          | 24,537 |                          | $
|Royalties                                        |  |                            | 17,936 |                          |  
|Contract manufacturing                           |  |                            | 5,131  |                          |  
|                                                 |  |                            |        |                          |  
|Total revenues                                   |  |                            | 47,604 |                          |  
|                                                 |  |                            |        |                          |  
|Costs and expenses:                              |  |                            |        |                          |  
|Cost of product sales and contract manufacturing |  |                            | 12,352 |                          |  
|Research and development                         |  |                            | 9,466  |                          |  
|Selling, general and administrative              |  |                            | 15,247 |                          |  
|Amortization of acquired intangible assets       |  |                            | 185    |                          |  
|Restructuring charge                             |  |                            |       |                          |  
|                                                 |  |                            |        |                          |  
|Total costs and expenses                         |  |                            | 37,250 |                          |  
|                                                 |  |                            |        |                          |  
|Operating income                                 |  |                            | 10,354 |                          |  
|                                                 |  |                            |        |                          |  
|Other income (expense):                          |  |                            |        |                          |  
|Investment income, net                           |  |                            | 3,084  |                          |  
|Interest expense                                 |  |                            | (6,639 | )                        |  
|Other, net                                       |  |                            | 4,476  |                          |  
|                                                 |  |                            |        |                          |  
|                                                 |  |                            | 921    |                          |  
|                                                 |  |                            |        |                          |  
|Income (loss) before income tax provision        |  |                            | 11,275 |                          |  
|Income tax provision                             |  |                            | 288    |                          |  
|                                                 |  |                            |        |                          |  
|Net income (loss)                                |  | $                          | 10,987 |                          | $
|                                                 |  |                            |        |                          |  
|Earnings
        (loss) per common share - basic |  | $                          | 0.25   |                          | $
|                                                 |  |                            |        |                          |  
|Earnings (loss) per common share - diluted       |  | $                          | 0.25   |                          | $
|                                                 |  |                            |        |                          |  
|Weighted average shares - basic                  |  |                            | 43,539 |                          |  
|                                                 |  |                            |        |                          |  
|Weighted average shares - diluted                |  |                            | 43,539 |                          |  
|                                                 |  |                            |        |                          |  

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

3

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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                                 |  | Six months ended June 30, |         
|------------------------------------------------------------------------------------------------ |  | ------------------------- | --------
|                                                                                                 |  |                           |         
|                                                                                                 |  | 2006                      |         
|                                                                                                 |  |                           |         
|Cash
        flows from operating activities:                                                    |  |                           |         
|Net income (loss)                                                                                |  | $                         | 32,695  
|Adjustments
        to reconcile net income (loss) to net cash provided by operating activities: |  |                           |         
|Depreciation and amortization                                                                    |  |                           | 6,600   
|Non-cash expense for stock options and nonvested shares                                          |  |                           | 2,544   
|(Gain) loss on sale of investments                                                               |  |                           | (13,844 
|Loss (gain) on sale of assets                                                                    |  |                           | 31      
|Gain on redemption of notes payable                                                              |  |                           | (4,397  
|Non-cash loss related to equity collar arrangement                                               |  |                           |        
|Write off and amortization of debt issue costs                                                   |  |                           | 2,220   
|Amortization of bond premium/discount                                                            |  |                           | 548     
|Deferred income taxes                                                                            |  |                           |        
|Changes in operating assets and liabilities                                                      |  |                           | (2,555  
|                                                                                                 |  |                           |         
|Net cash provided by operating activities                                                        |  |                           | 23,842  
|                                                                                                 |  |                           |         
|Cash flows from investing activities:                                                            |  |                           |         
|Purchase of property and equipment                                                               |  |                           | (3,678  
|Proceeds from sale of equity investment                                                          |  |                           | 20,209  
|Purchase of product rights                                                                       |  |                           | (35,000 
|Proceeds from sale of marketable securities                                                      |  |                           | 314,475 
|Purchase of marketable securities                                                                |  |                           | (363,308
|                                                                                                 |  |                           |         
|Net cash used in investing activities                                                            |  |                           | (67,302 
|                                                                                                 |  |                           |         
|Cash flows from financing activities:                                                            |  |                           |         
|Proceeds from exercise of common stock options                                                   |  |                           | 106     
|Redemption of Convertible Subordinated Notes                                                     |  |                           | (129,380
|Proceeds of convertible subordinated notes                                                       |  |                           | 275,000 
|Cash payment for debt issuance costs                                                             |  |                           | (7,655  
|                                                                                                 |  |                           |         
|Net cash provided by (used in) financing activities                                              |  |                           | 138,071 
|                                                                                                 |  |                           |         
|Net increase (decrease) in cash and cash equivalents                                             |  |                           | 94,611  
|Cash and cash equivalents at beginning of period                                                 |  |                           | 76,497  
|                                                                                                 |  |                           |         
|Cash and cash equivalents at end of period                                                       |  | $                         | 171,108 
|                                                                                                 |  |                           |         

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

4

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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 Transition Report on Form 10-K for the six months ended December 31, 2005.

(2) Marketable Securities

The Company classifies its investments in marketable equity securities and debt securities, including auction rate securities, as available-for-sale. The Company classifies those investments with maturities of one year or less as current assets and investments in debt securities with maturities greater than one year and marketable equity securities as noncurrent assets when it has the intent and ability to hold such securities for at least one year. 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 other comprehensive income and reported in stockholders deficit.  The fair value of all securities is determined by quoted market prices.

The Company holds auction rate securities for which interest or dividend rates are generally reset for periods of up to 90 days. The auction rate securities outstanding at June 30, 2006 and December 31, 2005 were investments in state government bonds and corporate securities. At June 30, 2006, the Company held auction rate securities with contractual maturities between 2006 and 2032.

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 investment income, net. The cost of securities is based on the specific identification method.

The Company adopted Financial Accounting Standards Board Staff Position FSP FAS 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments effective January 1, 2006. The adoption of this guidance had no effect on the Companys consolidated financial statements. Pursuant to FSP FAS 115-1, impairment assessments are made at the individual security level each reporting period. When the fair value of an investment is less than its cost at the balance sheet date, a determination is made as to whether the impairment is other than temporary and, if it is other than temporary, an impairment loss is recognized in earnings equal to the difference between the investments cost and fair value at such date.

5

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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company has determined that there were no other-than-temporary declines in the fair values of its marketable securities and short-term investments as of June 30, 2006. The following table shows the gross unrealized losses and fair values of the Companys available-for-sale securities (both short-term and long-term) aggregated by investment category and length of time that individual securities have been in a continuous loss position at June 30, 2006 (in thousands):



|                                |  | Less Than 12 Months |        | 12 Months or Greater |  
|------------------------------- |  | ------------------- | ------ | -------------------- | -
|                                |  |                     |        |                      |  
|                                |  | FairValue           |        | UnrealizedLoss       |  
|                                |  |                     |        |                      |  
|U.S. Government and GSE debt(1) |  | $                   | 3,464  |                      | $
|U.S. corporate debt(2)          |  |                     | 60,140 |                      |  
|                                |  |                     |        |                      |  
|Total                           |  | $                   | 63,604 |                      | $
|                                |  |                     |        |                      |  

|(1) | U.S. Government and government-sponsored enterprise (GSE) debt. The unrealized losses of $648,000 in the U.S. Government and GSE mortgage-backed securities were attributable to increases in interest rates. These holdings do not permit the issuer to settle the securities at a price less than the amortized cost. Further, because the declines in market value are due to increases in interest rates and not the credit quality of the issuer, and because the Company has the ability and the intent to hold these investments until recovery of the fair value, the Company does not consider its investments in U.S. Government and GSE debt to be other-than-temporarily impaired at June 30, 2006.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | U.S. corporate debt. The unrealized losses of $369,000 on the U.S. corporate debt were attributable to increases in interest rates, as well as bond pricing. The Company invests in bonds that are rated A1 or better, as dictated by its investment policy. Since the changes in the market value of these investments are due to changes in interest rates and not the credit quality of the issuer, and because the Company has the ability and intent to hold these investments until recovery of the fair value, the Company does not consider its investments in U.S. corporate debt to be other-than-temporarily impaired at June 30, 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The amortized cost, gross unrealized holding gains or losses, and fair value of the Companys available-for-sale securities by major security type at June 30, 2006 were as follows (in thousands):





|                             |  | AmortizedCost |         | GrossUnrealizedHolding Gains |   | GrossUnrealizedHolding Losses |  | Fair Value* |       
|---------------------------- |  | ------------- | ------- | ---------------------------- | - | ----------------------------- |  | ----------- | ------
|                             |  |               |         |                              |   |                               |  |             |       
|U.S. Government and GSE debt |  | $             | 45,197  |                              | $ |                              |  | $           | (648  
|U.S. corporate debt          |  |               | 125,302 |                              |   | 10                            |  |             | (369  
|Auction rate securities      |  |               | 29,000  |                              |   |                              |  |             |      
|                             |  |               |         |                              |   |                               |  |             |       
|                             |  | $             | 199,499 |                              | $ | 10                            |  | $           | (1,017
|                             |  |               |         |                              |   |                               |  |             |       

|* | $161,422 is included in short-term investments and $37,070 is included in marketable securities.
|- | ------------------------------------------------------------------------------------------------

6

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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 securities available-for-sale by major security type at December 31, 2005 were as follows (in thousands):



|                        |  | AmortizedCost |         | GrossUnrealizedHolding Gains |   | GrossUnrealizedHolding Losses |  | FairValue* |       
|----------------------- |  | ------------- | ------- | ---------------------------- | - | ----------------------------- |  | ---------- | ------
|                        |  |               |         |                              |   |                               |  |            |       
|U.S. Government and GSE |  | $             | 59,458  |                              | $ | 2                             |  | $          | (664  
|U.S. corporate debt     |  |               | 72,606  |                              |   | 3                             |  |            | (478  
|Auction rate securities |  |               | 19,150  |                              |   | 3                             |  |            |      
|                        |  |               |         |                              |   |                               |  |            |       
|                        |  | $             | 151,214 |                              | $ | 8                             |  | $          | (1,142
|                        |  |               |         |                              |   |                               |  |            |       

|* | Included in short-term investments $88,021 and marketable securities $62,059 at December 31, 2005.
|- | --------------------------------------------------------------------------------------------------

Maturities of debt and marketable equity securities classified as available-for-sale at June 30, 2006 were as follows (in thousands):



|June 30,          |  | Amortized Cost |         | Fair Value |  
|----------------- |  | -------------- | ------- | ---------- | -
|                  |  |                |         |            |  
|2007              |  | $              | 162,007 |            | $
|2008              |  |                | 14,776  |            |  
|2009              |  |                | 3,600   |            |  
|2010 & thereafter |  |                | 19,116  |            |  
|                  |  |                |         |            |  
|                  |  | $              | 199,499 |            | $
|                  |  |                |         |            |  

(3) Investment in Equity Securities

During the six months ended June 30, 2006, the Company sold its remaining 1,023,302 shares of common stock of Nektar Therapeutics, Inc. (Nektar). This investment was reflected in other current assets on the December 31, 2005 condensed balance sheet at $6.4 million. The disposition of the shares resulted in cash proceeds of $20.2 million and a gain of $13.8 million reported in investment income, net in the quarter ended March 31, 2006.

(4)Comprehensive Income

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



|                                                                              |  | Three months endedJune 30 |        | Six months endedJune 30, |  
|----------------------------------------------------------------------------- |  | ------------------------- | ------ | ------------------------ | -
|                                                                              |  |                           |        |                          |  
|                                                                              |  | 2006                      |        | 2005                     |  
|                                                                              |  |                           |        |                          |  
|Net income (loss)                                                             |  | $                         | 10,987 |                          | $
|                                                                              |  |                           |        |                          |  
|Other comprehensive income:                                                   |  |                           |        |                          |  
|Unrealized
            gain (loss) on securities that arose during the period |  |                           | 128    |                          |  
|Reclassification adjustment for (gain) loss included in net income (loss)     |  |                           |       |                          |  
|                                                                              |  |                           |        |                          |  
|Total other comprehensive income                                              |  |                           | 128    |                          |  
|                                                                              |  |                           |        |                          |  
|Comprehensive income (loss)                                                   |  | $                         | 11,115 |                          | $
|                                                                              |  |                           |        |                          |  

7

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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(5)Earnings Per Common Share

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders, by the weighted average number of shares of common stock outstanding during the period. For purposes of calculating diluted earnings (loss) per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include non-qualified stock options, nonvested shares (unvested restricted stock awards and unvested restricted stock units) and the number of shares issuable upon conversion of the Companys convertible subordinated notes and/or convertible senior notes.

In determining the dilutive effect of stock options and nonvested shares, a number of treasury shares is calculated using assumed proceeds, which includes compensation costs to be attributed to future service and not yet recognized and, in the case of stock options, the cash paid by the holders to exercise plus the excess, if any, of tax benefits that would be credited to additional paid-in capital. For the three months and six months ended June 30, 2006, the inclusion of unrecognized share-based compensation in the treasury stock component of the calculation caused stock options and nonvested shares outstanding to be anti-dilutive and therefore were excluded from the computation of earnings per share.

As
    of June 30, 2006 and June 30, 2005, the Company determined that all potentially
    dilutive common stock equivalents (41.0 million shares and 11.7 million shares, respectively)
    were anti-dilutive. Consequently, reported diluted earnings (loss) per share
    is the same as basic earnings (loss) per share.

(6)Share-Based Compensation

The Company has incentive and non-qualified stock option plans for employees, officers, directors, consultants and independent contractors. These plans, the 2001 Incentive Stock Plan and the 1987 Non-Qualified Stock Option Plan, are administered by the Compensation Committee of the Board of Directors. Options granted to employees generally vest over four years from date of grant and options granted to directors vest after one year. The exercise price of the options granted must be at least 100% of the market value of the Companys common stock at the time the options are granted. Options may be exercised for a period of up to ten years from the date they are granted. The Company utilizes new shares of stock to satisfy stock option exercises.

The 2001 Incentive Stock Plan also provides for the issuance of restricted stock and restricted stock units, collectively referred to as nonvested shares.  The shares of the Companys common stock underlying these awards are issued by the Company to the recipient at the date of the grant in the case of a restricted stock award, or upon vesting, in the case of a restricted stock unit. The recipient pays no cash to receive the shares other than the $0.01 par value in certain cases. These awards generally vest from the third anniversary of the date of grant to the fifth anniversary of the date of grant.

The
    Company adopted Financial Accounting Standards Board (FASB) Statement of
    Financial Accounting Standards No. 123 (revised), Share-Based Payment (SFAS
    123R), effective July 1, 2005 to account for share-based compensation including
    both options and nonvested shares. The Company has selected the Black-Scholes
    method of valuation for stock options and has adopted the modified prospective
    transition method which requires that compensation cost be recorded, as earned,
    for all unvested stock options and nonvested shares outstanding at the beginning
of the first quarter of adoption of SFAS 123R. The transition charges, and charges
    for new option and share awards, are recognized in research and development
    and selling, general and administrative expenses over the respective service
    periods. Manufacturing-related charges for option and share awards are largely
    embodied in product standard costs and production variances and consequently
    flow through to cost of products sold and contract manufacturing as inventory
    is sold.

8

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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company has determined that a pool of excess tax benefits of approximately $18.0 million existed in additional paid-in capital (APIC) as of July 1, 2005, the date of adoption of SFAS 123R, related to historical stock option exercises. The Company has elected to apply the short-cut method to determine the hypothetical APIC pool provided by FSP FAS 123(R) - 3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. In future periods, excess tax benefits resulting from stock option exercises will be recognized as additions to APIC in the period the benefit is realized. In the event of a shortfall (i.e., the tax benefit realized is less than the amount previously recognized through periodic stock compensation expense recognition and related deferred tax accounting), the shortfall would be charged against APIC to the extent of previous excess
benefits, including the hypothetical APIC pool, and then to tax expense.

The
    following tables summarize stock option activity for the three months and
six months ended June 30, 2006 (in thousands, except per-option amounts):



|                                                                            |  | Options |   | WeightedAverageExercisePrice |      
|--------------------------------------------------------------------------- |  | ------- | - | ---------------------------- | -----
|                                                                            |  |         |   |                              |      
|Outstanding at March 31, 2006                                               |  | 6,163   |   | $                            | 13.84
|Granted at exercise prices that equaled the fair value on the date of grant |  | 1,648   |   |                              | 7.72 
|Exercised                                                                   |  | (15     | ) |                              | 6.90 
|Forfeited                                                                   |  | (80     | ) |                              | 7.32 
|Expired                                                                     |  | (443    | ) |                              | 16.39
|                                                                            |  |         |   |                              |      
|Outstanding at June 30, 2006                                                |  | 7,273   |   | $                            | 12.38
|                                                                            |  |         |   |                              |      
|                                                                            |  |         |   |                              |      
|                                                                            |  | Options |   | WeightedAverageExercisePrice |      
|                                                                            |  |         |   |                              |      
|Outstanding at December 31, 2005                                            |  | 6,114   |   | $                            | 14.17
|Granted at exercise prices that equaled the fair value on the date of grant |  | 1,883   |   |                              | 7.69 
|Exercised                                                                   |  | (15     | ) |                              | 6.90 
|Forfeited                                                                   |  | (90     | ) |                              | 7.46 
|Expired                                                                     |  | (619    | ) |                              | 16.49
|                                                                            |  |         |   |                              |      
|Outstanding at June 30, 2006                                                |  | 7,273   |   | $                            | 12.38
|                                                                            |  |         |   |                              |      
|Exercisable at June 30, 2006                                                |  | 4,917   |   |                              |      
|                                                                            |  |         |   |                              |      

For
    grants during the three months ended June 30, 2006, the Companys weighted
    average assumptions for expected volatility, expected term until exercise
    and risk-free interest rate were 48.89%, 5.18 years and 4.88%, respectively.
    For grants during the six months ended June 30, 2006, the Companys
    weighted average assumptions for expected volatility, expected term until
    exercise and risk-free interest rate were 49.17%, 5.16 years and 4.82%, respectively.
    Expected volatility is based on historical volatility of the Companys
    common stock. The expected term of options is estimated based on the Companys
    historical exercise rate. The risk-free rate is based on U.S. Treasury yields
    for securities in effect at the time of grant with terms approximating the
    expected term until exercise of the option. No dividend payments were assumed.
    The Company granted options with fair  values ranging from $3.71 to $3.96
    per share or a weighted average grant date fair value of $3.82 per option
    during the three months ended June 30, 2006. For the six months ended June
    30, 2006,
    fair
    values
    of options granted ranged from $3.71 to $3.96 per share or a weighted average
    grant date fair value of $3.82 per option.

9

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables summarize nonvested share activity for the three months and six months ended June 30, 2006 (in thousands, except per share amounts):



|                               |  | Numberof Shares |   | Weighted-AverageGrant-DateFair Value |     
|------------------------------ |  | --------------- | - | ------------------------------------ | ----
|                               |  |                 |   |                                      |     
|Nonvested at March 31, 2006    |  | 1,094           |   | $                                    | 8.31
|Granted                        |  | 444             |   |                                      | 8.06
|Vested                         |  | (1              | ) |                                      | 9.10
|Forfeited                      |  | (33             | ) |                                      | 7.28
|                               |  |                 |   |                                      |     
|Nonvested at June 30, 2006     |  | 1,504           |   | $                                    | 8.26
|                               |  |                 |   |                                      |     
|                               |  |                 |   |                                      |     
|                               |  | Numberof Shares |   | Weighted-AverageGrant-DateFair Value |     
|                               |  |                 |   |                                      |     
|Nonvested at December 31, 2005 |  | 1,063           |   | $                                    | 8.33
|Granted                        |  | 510             |   |                                      | 7.95
|Vested                         |  | (1              | ) |                                      | 9.10
|Forfeited                      |  | (68             | ) |                                      | 7.11
|                               |  |                 |   |                                      |     
|Nonvested at June 30, 2006     |  | 1,504           |   | $                                    | 8.26
|                               |  |                 |   |                                      |     

In
    the three months ended June 30, 2006, the Company recorded share-based compensation
    for nonvested shares and options of $408,000 and $1.2 million, respectively,
    and for the six months ended June 30, 2006, $850,000 and $1.7 million, respectively,
    which is included in the Companys net income for the period.  Cash
    received from exercise of stock options amounted to $106,000 during the three
    months ended June 30, 2006. There were no stock option exercises during the
    first three months of 2006. As of June 30, 2006, there was $8.6 million of
    total unrecognized compensation cost related to unvested options that the
    Company expects to recognize over a weighted-average period of 35 months.
    As of June 30, 2006, there was $2.2 million and $9.7 million, respectively,
    of total unrecognized cost related to nonvested shares awards and units that
    the Company expects to recognize over weighted-average periods of 31 and
    48
months, respectively.

Prior
    to the adoption of SFAS 123R, the Company applied the intrinsic-value-based
    method of accounting prescribed by APB 25, Accounting for Stock Issued
    to Employees, and  related interpretations, to account for its stock
    options granted to employees. Under this method, compensation cost was recorded
    only if the market price of the underlying common stock on the date of grant
    exceeded the exercise price. SFAS 123, Accounting for Stock-Based Compensation,
    as amended, (SFAS 123) established accounting and disclosure requirements
    using a fair-value-based method of accounting for stock-based employee compensation
    plans. As permitted by SFAS 123, the Company elected to continue to apply
    the intrinsic-value-based method of accounting described above, and adopted
    only the disclosure requirements of SFAS 123. For the Company, SFAS 123 was
    similar in most respects to SFAS  123R, with the exception of option forfeitures,
    which the Company accounted for as they occurred under SFAS 123. As a result
    of adopting SFAS No. 123R, the Companys net income for the three-month and six-month
	periods ended June 30, 2006 were $1.1 million and $1.3 million less, respectively, than if it had continued
	to account for share-based compensation under APB 25. Basic and diluted earnings per share for the
	three-month and six-month periods ended June 30, 2006 would have been $0.25 per share and $0.78 per
	share, respectively, as compared to reported per-share amounts of $0.25 and $0.75, respectively.

The fair value under SFAS 123 for each stock option granted was estimated at the date of grant using a Black-Scholes option-pricing model, assuming no dividends and the following assumptions. For grants during the six months ended June 30, 2005, the Companys weighted average assumptions for expected volatility, expected life and risk-free interest rate were 59.18%, 5 years and 3.71%, respectively.

10

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based compensation (in thousands, except per-share data):



|                                                                                                                |  | Three MonthsEnded |          | Six Months
      Ended |  
|--------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- | ---------------------- | -
|                                                                                                                |  | June 30, 2005     |          | June 30, 2005          |  
|                                                                                                                |  |                   |          |                        |  
|Net loss as reported                                                                                            |  | $                 | (85,532  | )                      | $
|Add: Stock-based employee compensation expense included in reported net loss                                    |  |                   | 485      |                        |  
|Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards |  |                   | (18,606  | )                      |  
|                                                                                                                |  |                   |          |                        |  
|Pro forma net loss                                                                                              |  | $                 | (103,653 | )                      | $
|                                                                                                                |  |                   |          |                        |  
|Earnings per common share - basic:                                                                              |  |                   |          |                        |  
|As reported                                                                                                     |  | $                 | (1.97    | )                      | $
|Pro forma                                                                                                       |  | $                 | (2.38    | )                      | $
|Earnings per common share - diluted:                                                                            |  |                   |          |                        |  
|As reported                                                                                                     |  | $                 | (1.97    | )                      | $
|Pro forma                                                                                                       |  | $                 | (2.38    | )                      | $

(7) Inventories

As of June 30, 2006 and December 31, 2005 inventories consisted of the following (in thousands):



|                |  | June 30,2006 |        | December 31,2005 |  
|--------------- |  | ------------ | ------ | ---------------- | -
|                |  |              |        |                  |  
|Raw materials   |  | $            | 4,840  |                  | $
|Work in process |  |              | 7,957  |                  |  
|Finished goods  |  |              | 4,778  |                  |  
|                |  |              |        |                  |  
|                |  | $            | 17,575 |                  | $
|                |  |              |        |                  |  

11

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(8) Intangible Assets

As of June 30, 2006 and December 31, 2005 intangible assets consisted of the following (in thousands):



|                               |  | June 30,2006 |        | December 31,2005 |   | WeightedAverageRemainingUseful Lives | 
|------------------------------ |  | ------------ | ------ | ---------------- | - | ------------------------------------ | 
|                               |  |              |        |                  |   |                                      | 
|Product patented technology    |  | $            | 6,000  |                  | $ | 6,000                                | 
|Manufacturing patent           |  |              | 9,000  |                  |   | 9,000                                | 
|Patent                         |  |              | 1,875  |                  |   | 1,875                                | 
|Product acquisition costs      |  |              | 61,194 |                  |   | 26,194                               | 
|                               |  |              |        |                  |   |                                      | 
|                               |  |              | 78,069 |                  |   | 43,069                               | 
|Less: Accumulated amortization |  |              | 12,957 |                  |   | 8,915                                | 
|                               |  |              |        |                  |   |                                      | 
|                               |  | $            | 65,112 |                  | $ | 34,154                               | 
|                               |  |              |        |                  |   |                                      | 

In October 2005, the Company amended its license agreement with Sanofi-Aventis for Oncaspar. The amendment became effective in January 2006 and includes a significant reduction in the royalty rate, with a single-digit royalty percentage now payable by Enzon only on those aggregate annual sales of Oncaspar in the U.S. and Canada that are in excess of $25.0 million. In consideration for the amendment, Enzon made an upfront cash payment of $35.0 million to Sanofi-Aventis in January 2006. The $35.0 million payment will be amortized on a straight-line basis over its remaining economic life of 8.5 years. The Company is obligated to make royalty payments through June 30, 2014, at which time all of the Companys royalty obligations will cease.

For the three months and six months ended June 30, 2006, amortization charged to operations relating to intangible assets totaled $2.0 million and $4.0 million, respectively, of which $1.8 million and $3.7 million, respectively, were classified in cost of product sales and contract manufacturing. For the three months and six months ended June 30, 2005, amortization expense was $4.5 million and $8.9 million, respectively, of which $1.1 million and $2.2 million, respectively, were charged to cost of sales. Amortization charges in 2005 were higher than in 2006 reflecting the higher balances of Abelcet-related amortizable intangible assets recorded at that time. In December 2005, $133.1 million of Abelcet-related intangibles were written down due to impairment.

(9) Notes Payable

The table below reflects the composition of the notes payable balances as of June 30, 2006 and December 31, 2005 (in millions):



|                                                     |  | June 30,2006 |       | December 31,2005 |  
|---------------------------------------------------- |  | ------------ | ----- | ---------------- | -
|                                                     |  |              |       |                  |  
|4.5% Convertible Subordinated Notes due July 1, 2008 |  | $            | 260.2 |                  | $
|4% Convertible Senior Notes due June 1, 2013         |  |              | 275.0 |                  |  
|                                                     |  |              |       |                  |  
|                                                     |  | $            | 535.2 |                  | $
|                                                     |  |              |       |                  |  

Of the $260.2 million of 4.5% notes outstanding as of June 30, 2006, $137.6 million is classified as short-term in the condensed consolidated balance sheet as it was the Companys intention to repurchase this portion of the notes in July 2006 - see below.

The
    4.5% notes mature on July 1, 2008 and are convertible, at the option of the
    holders, into common stock of the Company at a conversion price of $70.98
    per share at any time on or before July 1, 2008. The 4.5% notes are subordinated
    to all existing and future senior indebtedness. Upon occurrence of a fundamental
    change, as defined in the indenture governing the notes, holders of
    the notes may require the Company to redeem the notes at a price equal to
    100% of the principal amount plus accrued and unpaid interest.

12

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

During the quarter ended June 30, 2006, the Company issued $275.0 million of 4% notes that mature on June 1, 2013 unless earlier redeemed, repurchased or converted. The 4% notes are senior unsecured obligations and rank equal to other senior unsecured debt of the Company and all future senior unsecured debt of the Company. The 4% notes may be converted at the option of the holders into the Companys common stock at an initial conversion price of $9.55 per share.

At any time on or after June 1, 2009, if the closing price of the Companys common stock for at least 20 trading days in the 30 consecutive trading day period ending on the date one day prior to the date of a notice of redemption is greater than 140% of the applicable conversion price on the date of such notice, the Company, at its option, may redeem the 4% notes in whole or in part, at a redemption price in cash equal to 100% of the principal amount of the 4% notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date. The 4% notes are not redeemable prior to June 1, 2009. Upon occurrence of a fundamental change, as defined in the indenture governing the notes, holders of the notes may require the Company to redeem the notes at a price equal to 100% of the principal amount plus accrued and unpaid interest or, in certain cases, to convert the
notes at an increased conversion rate based on the price paid per share of the Companys common stock in the transaction constituting the fundamental change.

In connection with the Companys second-quarter 2006 issuance of $275.0 million of the 4% notes, the Company entered into a registration rights agreement (RRA) whereby it agreed to file a shelf registration statement permitting the registered resale of the 4% notes and the common stock issuable upon conversion of the notes.
Failure to comply with specified obligations under the RRA relating to filing of the shelf registration, its being declared effective and maintaining its effectiveness would result in additional interest being payable on the notes. The Company anticipates filing the shelf registration within the time period prescribed in the RRA.

Concurrent with the May 2006 issuance of the 4% notes, a portion of the proceeds were used to repurchase $133.8 million of principal amount of 4.5% notes outstanding at a purchase price of $129.4 million plus accrued interest of $2.4 million. Upon repurchase of the 4.5% notes, deferred offering costs of $1.3 million were written off and included in interest expense on the consolidated statements of operations.

On July 6, 2006, the Company completed a tender offer whereby it repurchased $137.6 million principal amount of 4.5% notes at a purchase price of $965 for each $1,000 principal amount, plus accrued interest of $86,000. As of August 1, 2006, $122.6 million principal amount of the 4.5% notes remain outstanding. Upon repurchase of the 4.5% notes, deferred offering costs of $1.2 million were written off and will be included in interest expense in the consolidated statements of operations.

Interest on the 4.5% notes is payable January 1 and July 1 of each year. Accrued interest on the 4.5% notes was $5.8 million as of June 30, 2006 and $8.9 million as of December 31, 2005. Interest on the 4% notes is payable on June 1 and December 1 of each year, commencing on December 1, 2006. As of June 30, 2006, accrued interest on the 4% notes amounted to $1.1 million.

The Company incurred $7.7 million of costs in connection with the issuance of the 4% notes including legal, accounting and underwriting fees. These costs have been capitalized as a component of other assets and will be amortized over the approximately 84 month term of the 4% notes.

The
    Company evaluated the accounting for the conversion feature in accordance
    with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments
    Indexed to and Potentially Settled in, a Companys Own Stock, and
    related issues, at the date of issuance of the 4% Convertible Notes and determined
    that the conversion feature should be classified as equity, and therefore
    it does not need to be accounted for separately from the Convertible Notes.
     The Company will update its analysis of the accounting for the conversion
    feature as circumstances warrant. If the conversion feature is required to
    be bifurcated in the future, changes in the fair value of the conversion
    feature would be charged or credited to interest expense in each period.

(10)
  Stockholders Equity

At the Companys annual meeting on May 18, 2006, the Companys stockholders approved an amendment and restatement of the Companys Restated Certificate of Incorporation to increase the number of authorized $0.01 per share par value common stock from 90,000,000 shares to 170,000,000 shares.

Also at the annual meeting, the Companys stockholders approved an amendment to the 2001 Incentive Stock Plan to increase the number of shares of common stock issuable thereunder by 4,000,000 shares from 6,000,000 shares to 10,000,000 shares.

13

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of June 30, 2006, the Company has reserved shares of its common stock for special purposes as detailed below (in thousands):



Non-Qualified and Incentive Stock Plan
        
        12,689Shares issuable upon conversion of 4.5% Notes due 2008
        
        3,666Shares issuable upon conversion of 4% Notes due 2013
        
        28,79645,151


(11) 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 six-month periods
    ended June 30, 2006 and 2005, there were payments of interest of $11.2 million
    and $9.0 million, respectively. Income tax payments for the six months ended
June 30, 2006 and 2005, were $100,000 and $257,000, respectively.

(12) Income Taxes

During
    the three months and six months ended June 30, 2006, the Company recorded
    a net tax expense of approximately $288,000 and $424,000, respectively, which
    represents state and Canadian taxes payable. No federal income tax provision
    was recorded for the three months and six months ended June 30, 2006 as the
    estimated
annual effective tax rate is zero due to the Companys projected taxable
income and its ability to utilize its net operating loss carry forwards. As of
June 30, 2006, the Company continues to provide a valuation allowance against
its net deferred tax assets since the Company believes it is more likely than
not its deferred tax assets will not be realized.

During the quarter ended June 30, 2005, the Company concluded that it was more likely than not that it would not realize the tax benefits from its accumulated state and federal net operating loss carryforwards and research and development tax credit carryforwards and established a valuation allowance for all such deferred tax assets. Accordingly, the Company recorded non-cash charges of $80.2 million and $78.5 million for the three months and six months ended June 30, 2005, respectively, inclusive of a full reserve against existing deferred tax assets at June 30, 2005 of $68.2 million and a charge for a deferred tax liability $10.6 million associated with then existing goodwill. The goodwill and associated deferred tax liability were written off as of December 31, 2005.

(13) Derivative Instruments

During the quarter ended June 30, 2005, the Company sold 375,000 shares of NPS Pharmaceuticals, Inc. (NPS) common stock it held and 375,000 shares of the related Zero Cost Protective Collar (Collar) instrument matured. During the three months ended June 30, 2005, the Company recorded an unrealized loss of $2.2 million as a component of other, net in the condensed consolidated statements of operations representing the change in fair value of the Collar. Also, during the three months ended June 30, 2005, the Collar matured resulting in a realized loss of $1.3 million recorded in other, net. The Company received cash proceeds from the settlement of this instrument totaling $7.5 million in the quarter ended June 30, 2005. During the six months ended June 30, 2005, the Company sold 750,000 shares of NPS common stock it held and 750,000 shares of the Collar instrument matured. The Company recorded
as a component of other, net, an unrealized loss of $160,000 representing the change in fair value of the Collar and a realized loss of $5.3 million related to the collar maturation. The Company received cash proceeds from the settlement of this instrument totaling $15.0 million in the six months ended June 30, 2005. At December 31, 2005, the Company no longer held any shares of NPS common stock nor did it hold any portion of the Collar.

14

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(14) Related Party Transactions

Two
    of the Companys
    executive officers received relocation benefits in connection with their
    joining the Company whereby the residences from which they were moving were
    purchased at independently determined appraisal values. During the six months
    ended June 30, 2006, both properties have been sold resulting in an aggregate
    net loss
    to
    the
    Company of $268,000. At December 31, 2005, there was a balance of $736,772
    in other current assets carried in the condensed consolidated balance sheet representing
these temporary holdings.

(15) Recently Issued Accounting Standards

In
    July 2006, the FASB issued FASB Interpretation No. 48, Accounting for
    Uncertainty in Income Taxes, an interpretation of FASB Statement No.
    109, Accounting for Income Taxes. The Interpretation establishes
    criteria for recognizing and measuring the financial statement tax effects
    of positions taken on a companys
    tax returns. A two-step process is prescribed whereby the threshold for recognition
    is a more-likely-than-not test that the tax position will be sustained upon
    examination and the tax position is measured at the largest amount of benefit
    that is greater than 50 percent likely of being realized upon ultimate settlement.
    The Company currently recognizes a tax position if it is probable of being
    sustained. The Interpretation is effective for the Company beginning January 1,
    2007 and will be applicable to all tax positions upon initial adoption. Only
    tax positions
    that meet
    the
    more-likely-than-not recognition threshold at the effective date may continue
    to be recognized upon adoption of the Interpretation. The Company is evaluating
    the potential effects the Interpretation may have on its consolidated financial
position or results of operations, but no material consequence is expected.

(16) Segment Information

The Company operates in the following business and reportable segments:

Products- Sales of the Companys four therapeutic, FDA-approved products: Abelcet, Adagen, Oncaspar and Depocyt.

Royalties- Licensing income from royalties received on the sale of products by third-party companies that utilize Enzons proprietary technology - primarily royalties on sales of PEG-INTRON by Schering-Plough Corporation.

Contract Manufacturing- Contract manufacture of products for other firms - primarily Abelcet for export and MYOCET, each for Zeneus Pharma Ltd, a wholly owned subsidiary of Cephalon, Inc., and the injectable multivitamin, MVI, for Mayne Pharma U.S.A. Inc.

Profit (loss) for the Companys segments is measured based on operating results, excluding investment income, interest expense and income taxes. The Company does not identify or allocate property and equipment by operating segment, and does not allocate depreciation, as such, to the operating segments. Operating segments do not have intersegment revenue, and accordingly, there is none to be reported.

15

---



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents segment revenues and profitability information for the three-month and six- month periods ended June 30, 2006 and 2005 (in thousands):

Three months ended June 30,

|Segment       |  |      |  | Products |        | Royalties |   | ContractManufacturing |  | Corporate(1) |       | Consolidated |  
|------------- |  | ---- |  | -------- | ------ | --------- | - | --------------------- |  | ------------ | ----- | ------------ | -
|              |  |      |  |          |        |           |   |                       |  |              |       |              |  
|Revenues      |  | 2006 |  | $        | 24,537 |           | $ | 17,936                |  | $            | 5,131 |              | $
|              |  | 2005 |  | $        | 23,480 |           | $ | 16,878                |  | $            | 3,309 |              | $
|              |  |      |  |          |        |           |   |                       |  |              |       |              |  
|Profit (Loss) |  | 2006 |  | $        | 7,406  |           | $ | 17,936                |  | $            | 1,995 |              | $
|              |  | 2005 |  | $        | (1,150 | )         | $ | 16,878                |  | $            | 547   |              | $

Six months ended June 30,

|Segment       |  |      |  | Products |        | Royalties |   | ContractManufacturing |  | Corporate(1) |       | Consolidated |  
|------------- |  | ---- |  | -------- | ------ | --------- | - | --------------------- |  | ------------ | ----- | ------------ | -
|              |  |      |  |          |        |           |   |                       |  |              |       |              |  
|              |  |      |  |          |        |           |   |                       |  |              |       |              |  
|Revenues      |  | 2006 |  | $        | 48,812 |           | $ | 35,184                |  | $            | 8,337 |              | $
|              |  | 2005 |  | $        | 44,703 |           | $ | 30,509                |  | $            | 7,668 |              | $
|              |  |      |  |          |        |           |   |                       |  |              |       |              |  
|Profit (Loss) |  | 2006 |  | $        | 15,315 |           | $ | 35,184                |  | $            | 2,767 |              | $
|              |  | 2005 |  | $        | 1,690  |           | $ | 30,509                |  | $            | 2,355 |              | $

|(1) | Corporate expenses include operating income (loss) components that are not directly attributable to an operating segment, including general and administrative expenses, exploratory and preclinical research and development expenses, and treasury activities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Following is a reconciliation of segment profit to consolidated income (loss) before income tax provision (in thousands):



|                                          |  | Three Months Ended June 30 |         | Six Months Ended June 30, |  
|----------------------------------------- |  | -------------------------- | ------- | ------------------------- | -
|                                          |  |                            |         |                           |  
|                                          |  | 2006                       |         | 2005                      |  
|                                          |  |                            |         |                           |  
|Segment profit                            |  | $                          | 27,337  |                           | $
|Unallocated operating expense             |  |                            | (16,983 | )                         |  
|                                          |  |                            |         |                           |  
|Operating income (loss)                   |  |                            | 10,354  |                           |  
|Other corporate income and expense        |  |                            | 921     |                           |  
|                                          |  |                            |         |                           |  
|Income (loss) before income tax provision |  | $                          | 11,275  |                           | $
|                                          |  |                            |         |                           |  

Assets of the Products segment increased by $35.0 million as a result of the payment made January 1, 2006 to Sanofi-Aventis for a negotiated reduction in royalty rates to be paid by the Company on sales of Oncaspar. This intangible asset is being amortized over 8.5 years on a straight-line basis.

(17) Subsequent Event

In
    July 2006, the Company entered into a license and collaboration agreement
    with Santaris Pharma A/S (Santaris) for up to eight RNA antagonists for the
    treatment of oncology indications. Enzon obtained rights worldwide, other
    than Europe, to develop and commercialize RNA antagonists directed against
    the Hif-l alpha and Survivin gene targets. Santaris will design and synthesize
    RNA antagonists directed against up to six additional gene targets selected
    by Enzon, and Enzon will have the right to develop and commercialize those
    antagonists worldwide other than Europe. Enzon will make an initial payment
    of $8.0 million to Santaris in August 2006 and will be responsible for making
    additional payments upon the successful completion of certain compound synthesis
    and selection, clinical development and regulatory milestones. Santaris is
    also eligible to receive royalties from any future product sales from products
    based on the licensed antagonists. Santaris retains the right to develop
and commercialize products developed under the collaboration in Europe.

16

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are a company dedicated to the development and commercialization of therapeutics to treat patients with cancer and adjacent diseases. Our primary clinical development and commercial focus is on internally developed or acquired products for oncology and adjacent therapeutic areas where there are serious unmet medical needs. We also leverage our scientific expertise in designing improved versions of pharmaceuticals to obtain commercialization rights in products discovered by others. We operate in three business segments: Products, Royalties and Contract Manufacturing. Products revenues are comprised of sales of four FDA-approved products, Abelcet, Adagen, Oncaspar and Depocyt. We receive royalties and license fees on sales of a number of products by other firms that mainly utilize our proprietary PEGylation platform including PEG-INTRON®, marketed by Schering-Plough Corporation, and MACUGEN®, marketed by OSI Pharmaceuticals, Inc. and Pfizer Inc. In addition, we utilize contract manufacturing opportunities to broaden our revenue base and enhance our organizational productivity. Presently, we manufacture three injectable pharmaceutical products for our partners.

Results of Operations

Following
    is a reconciliation of segment profitability to consolidated income before
    income tax (millions of dollars). The percentage changes below and throughout
    Managements
Discussion and Analysis are based on thousands of dollars and not the rounded
    millions of dollars reflected throughout this section.



|                                          |  | Three Months Ended |       | Six Months Ended |     
|----------------------------------------- |  | ------------------ | ----- | ---------------- | ----
|                                          |  |                    |       |                  |     
|                                          |  | June2006           |       | %Change          |     
|                                          |  |                    |       |                  |     
|Products Segment profit (loss)            |  | $                  | 7.4   |                  | n.m.
|Royalty Segment profit                    |  |                    | 18.0  |                  | 6   
|Contract Manufacturing Segment profit     |  |                    | 2.0   |                  | 265 
|Corporate and other expenses*             |  |                    | (16.1 | )                | (26 
|                                          |  |                    |       |                  |     
|Income (loss) before income tax provision |  | $                  | 11.3  |                  | n.m.
|                                          |  |                    |       |                  |     

|* | The Company does not allocate certain corporate income and expenses not directly identifiable with the respective segments, including general and administrative expenses, exploratory and preclinical research and development expenses, depreciation, interest income, interest expense and income taxes.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

n.m.  not meaningful

Products Segment

Segment profitability (millions of dollars):



|                      |  | Three Months Ended |      | Six Months Ended |     
|--------------------- |  | ------------------ | ---- | ---------------- | ----
|                      |  |                    |      |                  |     
|                      |  | June2006           |      | %Change          |     
|                      |  |                    |      |                  |     
|Revenues              |  | $                  | 24.5 |                  | 5   
|Cost of sales         |  |                    | 9.2  |                  | (16 
|Selling & marketing   |  |                    | 7.7  |                  | (25 
|Amortization          |  |                    | 0.2  |                  | (94 
|                      |  |                    |      |                  |     
|Segment profit (loss) |  | $                  | 7.4  |                  | n.m.
|                      |  |                    |      |                  |     

n.m.  not meaningful

17

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Revenues

Performance of individual products is provided below (millions of dollars):



|         |  | Three Months Ended |      | Six Months Ended |    
|-------- |  | ------------------ | ---- | ---------------- | ---
|         |  |                    |      |                  |    
|Product  |  | June2006           |      | %Change          |    
|         |  |                    |      |                  |    
|Abelcet  |  | $                  | 9.3  |                  | (17
|Adagen   |  |                    | 5.7  |                  | 22 
|Oncaspar |  |                    | 7.6  |                  | 29 
|Depocyt  |  |                    | 1.9  |                  | 17 
|         |  |                    |      |                  |    
|Totals   |  | $                  | 24.5 |                  | 5  
|         |  |                    |      |                  |    

For
    the three months ended June 30, 2006, net product sales increased by 5% to
    $24.5 million over the same period of 2005. For the six months ended June
    30, 2006, net product sales increased by 9% to $48.8 million over the same
    six-month period of 2005. All of our products except Abelcet contributed
    to these improvements, which were due largely to rising sales volumes. U.S.
    and Canadian Abelcet net sales declined $2.0 million or 17% in the quarter
    ended June 30, 2006, as the result of continued competition that resulted
    in a decline in volume. For the six months ended June 30, 2006, Abelcet net
    sales decreased over the first six months of the prior year by $0.6 million
    or 3%. We anticipate increased competition from new therapeutics entering
    the market the latter half of 2006.

Adagen
    sales, which tend to fluctuate from quarter to quarter because of the small
    number of patients on therapy, rose 22% for the quarter ended June 30, 2006
    and 17% year to date as compared to the year-earlier periods. The 29% second-quarter
    and
    23% first-half
    increase in revenue for Oncaspar was related to the adoption of Oncaspar
    in certain protocols by hospitals and cooperative groups resulting in an
    increase in demand for the product. In addition there was a small increase
    in price. In December 2005, Enzon announced it applied for FDA approval of
    Oncaspar as a first-line treatment for acute lymphoblastic leukemia (ALL).
    On July 25, 2006, we announced that we were notified by the FDA that our
    application for first line treatment for ALL was approved. Depocyt net sales
    increased by 17% in the three-month period ended June 30, 2006 and 15% in
    the first six months of 2006 compared to the same prior-year periods due
    to increased
    use
    because
    of its more convenient dosing schedule, as well as the effect of a price
    increase. Skyepharma submitted a post marketing study to the U.S. Food and
    Drug Administration as fulfillment of their post marketing commitment. As
    reported at the 2006 American Society of Clinical Oncology (ASCO) annual
    meeting, these results demonstrate at least comparable patient benefit between
    Depocyt and control treatments. Intrathecal Depocyt provides patients with
the added convenience of bimonthly treatment.

Cost of sales

In the three months ended June 30, 2006, cost
    of products sold of $9.2 million as a percentage of sales improved to 37.6% compared to 46.7% ($10.9 million) the
    year-earlier period due primarily to favorable manufacturing variances in
    the current
    year due to higher than anticipated production volumes. Individual
    products
    each showed improved margins. Abelcet was favorably affected by inventory write-offs
    in the quarter ended June 30, 2005 of $3.0 million and experienced none in the current year
    second quarter. Abelcet was also favorably affected by a $0.3 million reduction of amortization
    of intangibles due to the December 2005 impairment write-down. Offsetting
    these favorable effects was a lower per-unit margin as Abelcet selling prices
    declined on a year-over-year basis. The other three products benefited from
    January 1, 2006 price increases which had a favorable effect on gross margins.
    In the case of Oncaspar, inventory write-offs rose in the quarter ended June
    30, 2006 as compared to the same quarter of 2005 due  to ongoing manufacturing
    challenges associated with product stability. This negative effect was offset
    in part by the net favorable effect of having negotiated lower royalties
    to Sanofi-Aventis effective January 1, 2006. The lower royalty payments of $1.2 million have
    more than compensated for the increase in amortization expense ($1.0 million) related to
    the agreement.

For
    the six months ended June 30, 2006, cost of products sold of $17.3 million
    declined more modestly from 39.0% of sales to 35.5%. The prior-year second-quarter
    Abelcet inventory write-offs and reduced amortization discussed above were
    the major influences also for the six-month period. After eliminating these
    factors, margins would otherwise be lower in the first half of 2006 than
    in the comparable prior-year period as the favorable manufacturing variances
    referred to above were offset by unfavorable variances in the first quarter
    of 2006.

18

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Selling and marketing expenses

Selling
    and marketing expenses consist primarily of commercial expense and marketing,
    medical education, Phase IV programs to support our commercial efforts as
    well as salaries and benefits for our sales and marketing personnel. Selling
    and marketing expenses decreased $2.6 million or 25% from the three months
    ended June 30, 2005 and $3.1 million or 16% from the six months ended June
    30, 2005. The decrease in both comparable periods was primarily due to a
    change in marketing personnel and advertising agency resulting in a more
    targeted marketing spend in 2006. For the six months ended June 30, 2006,
    the decrease was also due to the discontinuation of the MARQIBO programs
in 2005.

Amortization of acquired intangible assets

Amortization expense was $0.2 million for the three months ended June 30, 2006, as compared to $3.4 million for the three months ended June 30, 2005. Amortization expense was $0.4 million for the six months ended June 30, 2006, as compared to $6.7 million
    for the six months ended June 30, 2005. Amortization expense was lower in
    each comparative period due to the fourth quarter 2005 impairment of Abelcet-related
    intangible assets. Amortization of intangible assets has been provided over
    their remaining estimated lives ranging from 1-14 years on a straight-line
basis.

Royalties Segment

(millions of dollars)



|                |  | Three Months Ended |      | Six Months Ended |  
|--------------- |  | ------------------ | ---- | ---------------- | -
|                |  |                    |      |                  |  
|                |  | June2006           |      | %Change          |  
|                |  |                    |      |                  |  
|Royalty revenue |  | $                  | 18.0 |                  | 6
|                |  |                    |      |                  |  

Total
    royalties for the three months ended June 30, 2006 of $18.0 million were
    6% higher than the $16.9 million during the comparable three-month period
    ended June 30, 2005. Total royalties for the six months ended June 30, 2006
    increased 15% to $35.2 million as compared to $30.5 million during the comparable
    six-month period ended June 30, 2005. Impacting both the three-months and
    six-month periods were the proceeds of $1.0 million on the sale of our SS1P
    program, an immunotoxin fusion protein, to Cambridge Antibody Technology.
    The improvement in total royalties over the prior year periods was due to
    the January 2005 launch of MACUGEN in the U.S. and the December 2004 launch
    of
    PEG-INTRON
    combination therapy in Japan. The sales of these products were not yet fully
    reflected in the same three- and six-month periods of 2005 due to the recent
    entry of these products into the associated markets. The majority of royalties
    is
     comprised of royalty revenue we receive on sales of PEG-INTRON, but also
    includes other royalty revenue, certain license revenues and contract revenues
    related to the application of our technology to other firms products.
    We expect competition for PEG-INTRON combination therapy in Japan and MACUGEN
    in the U.S. to increase later this year.

Costs and expenses

Current royalty revenues do not require any material specific maintenance costs. At some point in the future, costs associated with initiation of new outlicensing agreements that could result in our receipt of a royalty stream and, if necessary, costs necessary to maintain the underlying technology may be charged to the Royalties segment.

Contract Manufacturing Segment

(millions of dollars)



|               |  | Three Months Ended |     | Six Months Ended |    
|-------------- |  | ------------------ | --- | ---------------- | ---
|               |  |                    |     |                  |    
|Product        |  | June2006           |     | %Change          |    
|               |  |                    |     |                  |    
|Revenues       |  | $                  | 5.1 |                  | 55 
|Cost of sales  |  |                    | 3.1 |                  | 14 
|               |  |                    |     |                  |    
|Segment profit |  | $                  | 2.0 |                  | 265
|               |  |                    |     |                  |    

Revenues

Contract
    manufacturing revenue for the three-month and six-month periods ended June
    30, 2006 was $5.1 million and $8.3 million, respectively. This compares to
    $3.4 million and $7.7 million for the comparable periods of 2005. The increase
    in contract manufacturing revenue was primarily attributable to the timing
    of third-party shipments. In addition, in the three months ended June 30,
    2006, we settled a matter with one of our customers resulting in recognition
    of an additional $0.9 million of revenue. The unavailability of certain raw
    materials in March 2006, delayed production in that quarter and the resulting
    revenues
    from products that the Company manufactures. It is not uncommon for the timing
of the shipments to cause quarter-over-quarter fluctuations.

19

---



Cost of sales

Cost of sales for contract manufacturing for the three months ended June 30, 2006 was $3.1 million or 61% of sales. This compared to $2.8 million or 83% of sales for the comparable three-month period of 2005. The decrease in cost of sales as a percent of sales was attributable to lower production efficiency and decreased volumes in 2005 that resulted in a proportionate increase in fixed costs being allocated to the units produced. In addition, the higher margin in the three months ended June 30, 2006, was impacted by a settlement from one of our customers that resulted in the recognition of an additional $0.9 million in revenue. For the six months ended June 30, 2006, cost of sales for contract manufacturing was $5.5 million or 67% of sales, compared to $5.3 million or 69% of sales for the six months ended June 30, 2005.

Non-U.S Revenue

During the three months ended June 30, 2006, we had export sales and royalties on export sales of $16.2 million, of which $9.9 million were in Europe. This compares to $17.5 million of export sales in the comparable three-month period of 2005, of which $10.7 million were in Europe.

We had export sales and royalties on export sales of $31.8 million and $29.9 million, of which $18.1 million and $19.5 million were in Europe, for the six months ended June 30, 2006 and 2005, respectively.

Corporate and Other Expense

(millions of dollars)



|                           |  | Three Months Ended |      | Six Months Ended |     
|-------------------------- |  | ------------------ | ---- | ---------------- | ----
|                           |  |                    |      |                  |     
|                           |  | June2006           |      | %Change          |     
|                           |  |                    |      |                  |     
|Research and development   |  | $                  | 9.5  |                  | 70  
|                           |  |                    |      |                  |     
|General and administrative |  |                    | 7.6  |                  | 4   
|                           |  |                    |      |                  |     
|Restructuring charge       |  |                    |     |                  | n.m.
|                           |  |                    |      |                  |     
|Other (income) expense:    |  |                    |      |                  |     
|Investment income          |  |                    | (3.1 | )                | 105 
|Interest expense           |  |                    | 6.6  |                  | 34  
|Other, net                 |  |                    | (4.5 | )                | n.m.
|                           |  |                    |      |                  |     
|                           |  |                    | (1.0 | )                |     
|                           |  |                    |      |                  |     
|Corporate Costs            |  | $                  | 16.1 |                  | (26 
|                           |  |                    |      |                  |     

n.m.  not meaningful

Research and Development.

For the three months ended June 30, 2006, research and development expenses increased by $4.0 million to $9.5 million as compared to the three months ended June 30, 2005. The increase was primarily due to new clinical programs in 2006, as compared to organizational and research and development portfolio restructuring that occurred in the second quarter of 2005.

For the six months ended June 30, 2006, research and development expenses decreased by $1.7 million to $16.5 million as compared to the six months ended June 30, 2005. The decrease was primarily due to the fact that the six months ended June 30, 2005 included a $5.0 million payment to Inex Pharmaceuticals Corporation related to the termination of our partnership for the development and commercialization of MARQIBO. Partly offsetting this favorable effect was the increased spending referred to above.

The Companys clinical trial activities are expected to increase during the latter half of 2006, due to anticipated enrollment this summer in a study related to the use of Oncaspar in the treatment of certain cancers as well as ongoing development work on recombinant human Mannose-Binding Lectin (rhMBL) and the recently announced strategic collaboration with Santaris Pharma A/S to develop and commercialize a series of innovative RNA antagonists based on Santaris LNA®technology.

20

---



General and administrative.

General
    and administrative expenses for the three months ended June 30, 2006, rose
    4% to $7.6 million. For the six month-period, general and administrative
    expenses rose 24% to $15.3 million. A number of factors contributed to these
    increases, including contracted and consulting services, legal fees and salaries
    and benefits, partially offset by a decrease in accounting-related fees.
    The decrease in accounting-related fees is due to a change in our year end.
    Salaries
    and
    benefits are comparatively higher due in part to the recognition in 2006
of compensation expense for stock options, due to our adoption of SFAS 123R.
    Consulting and legal fees were higher due to due diligence efforts related
    to potental transactions.

Other income (expense).

Other income (expense) for the three months ended June 30, 2006 was net income of $1.0 million, as compared to net expense of $6.9 million for the three months ended June 30, 2005. For the six-month periods, other income (expense) was net income of $11.6 million in 2006 versus a net expense of $12.2 million in 2005. Other income (expense) includes: net investment income, interest expense and other expense.

Net
    investment income increased by $1.6 million to $3.1 million for the three
    months ended June 30, 2006 compared to $1.5 million for the three months
    ended June 30, 2005. Net investment income increased by $16.3 million to
    $18.9 million for the six months ended June 30, 2006 compared to $2.6 million
    for the six months ended June 30, 2005. The six months increase was
    principally due to the sale in January and February 2006 of our remaining
    1,023,302 shares of Nektar Therapeutics, Inc. common stock which resulted
    in a net gain of $13.8 million and cash proceeds of $20.2 million.

Interest
    expense was $6.6 million and $11.5 million for the three-month and six-month
    periods ended June 30, 2006 and $4.9 million and $9.9 million for the three-month
    and six-month periods ended June 30, 2005. The favorable effect on interest
    expense from the decline in the 4.5% notes payable of $133.7 million was
    more than offset by the May 2006 issuance of $275.0 million of the 4% notes.
    Also, the repurchase of the 4.5% notes resulted in the write-off of $1.3
    million of deferred
    offering costs which is included in interest expense.

Other, net was a net income of $4.5 million for the three months ended June 30, 2006, as compared to a net expense of $3.5 million for the three months ended June 30, 2005. The improvement resulted primarily from the debt refinancing which included a $4.4 million gain on the repurchase of the 4.5% notes. For the six months ended June 30, 2006, other, net was a net income of $4.2 million versus a net expense of $4.9 million for the six months ended June 30, 2005. The 2005 expense was higher due to costs associated with our holding of NPS Pharmaceuticals, Inc. (NPS) common stock and a related hedging instrument. We recognized a realized loss of $1.3 million on the maturation of the hedging instrument and sale of the underlying shares and a $2.2 million unrealized loss on the instrument for the three months ended June 30, 2005. For the six months ended June 30, 2005 we recognized a realized
loss of $5.3 million on the maturation of the hedging instrument and sale of the underlying shares partially offset by an unrealized gain of $160,000 on the instrument.

Income taxes

During
    the three months and six months ended June 30, 2006, we recorded a net tax
    expense of approximately $0.3 million and $0.4 million, respectively, which
    represents state and Canadian taxes payable. No federal income tax provision
    was recorded for the three months and six months ended June 30, 2006 as the
    estimated
    annual effective tax rate is zero due to our projected taxable income and
    the ability to utilize our federal net operating loss carryforwards. During
    the three months and six months ended June 30, 2005, we recorded non-cash
    charges
    of
    $80.2 million and $78.5 million, respectively, principally representing a
    full reserve against deferred tax assets of $68.2 million at June 30, 2005
    and establishment of a deferred tax liability of $10.6 million associated
with goodwill.

Liquidity and Capital Resources

Total
    cash reserves, which include cash, cash equivalents, short-term investments
    and marketable securities, were $369.6 million as of June 30, 2006, as compared
    to $226.6 million as of December 31, 2005. The increase is primarily due
    to the $267.3 million net proceeds from the 4% Convertible Senior Notes and
    the $20.2 million cash proceeds from the sale of Nektar common stock we owned.
    This was offset in part by the $129.4 million cash payment for the repurchase
    of $133.8 million of our 4.5% Convertible Subordinated Notes at a $4.4 million
    discount and the January payment to Sanofi-Aventis of $35.0 million relating
    to a reduction of the Oncaspar royalty rate. We invest our excess cash primarily
    in United States government and government-sponsored enterprise securities
    and investment-grade corporate
debt securities and auction rate securities.

21

---



In
    July 2006 we completed a tender offer whereby we repurchased $137.6 million
    principal amount of 4.5% notes at a purchase price of $965 for each $1,000
    principal amount, plus accrued interest of $0.1 million. We used the $275.0
    million from our new convertible offering due in 2013 to extinguish an aggregate
    principal amount of $272.0 million
of debt that otherwise would have been due in 2008.

Cash
    provided by operating activities totaled $23.8 million for the six months
    ended June 30, 2006 compared to cash provided by operating activities of
    $4.3 million for the six months ended June 30, 2005. The favorable shift
    was the result of improved net income of $32.7 million, offset in part by
    gains on sale of investments of $13.8 million and on the redemption of a
    portion of our 4.5% notes. Cash used in investing activities rose $49.8 million
    from $17.5 million to
    $67.3
    million.
    This was
    due primarily
    to the January 2006 $35.0 million payment to Sanofi-Aventis for an Oncaspar
    intangible asset and a net increase in marketable securities of $9.7 million.
    Cash provided by financing activities for the six months ended June 30, 2006
    was
    $138.1
    million,
    compared
    to cash
    used
    in financing
    activities of 785,000 for the six months ended June 30, 2005. In the six
    months ended June 30, 2006, the Company raised $267.3 million of 4% notes
and repaid $129.4 million of 4.5 % notes.

As
    of June 30, 2006, we had $535.2 million of convertible notes outstanding.
    The 4.5% notes in the principal amount of $260.2 million are subordinated
    to all existing and future senior indebtedness of the Company, including
    the $275.0 million of 4% convertible senior notes issued during the second
    quarter of 2006. Interest is payable on January 1 and July 1 of each year
    on the 4.5% notes and on June 1 and December 1 of each year on the 4% notes.
    During the six-month periods ended June 30, 2006 and June 30, 2005, there
    were payments of interest of $11.2 million and $9.0 million, respectively.
    Accrued interest on the aggregate amount of the notes outstanding was $6.9
    million
as of June 30, 2006 and $8.9 million as of December 31, 2005.

The
    4.5% notes mature on July 1, 2008 and are convertible, at the option
    of the holders, into common stock of the Company at a conversion price of
    $70.98 per share
    at any time on or before July 1, 2008. The 4.5% notes are subordinated to
    all existing and future senior indebtedness. Upon occurrence of a fundamental
    change, as defined in the indenture governing the 4.5% notes, holders
    of the 4.5% notes may require the Company to redeem the notes at a price
    equal to 100% of the principal amount plus accrued and unpaid interest.

At any time on or after June 1, 2009, if the closing price of the Companys common stock for at least 20 trading days in the 30 consecutive trading day period ending on the date one day prior to the date of a notice of redemption is greater than 140% of the applicable conversion price on the date of such notice, the Company, at its option, may redeem the 4% notes in whole or in part, at a redemption price in cash equal to 100% of the principal amount of the 4% notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date. The 4% notes are not redeemable prior to June 1, 2009. Upon occurrence of a fundamental change, as defined in the indenture governing the 4% notes, holders of the 4% notes may require the Company to redeem the 4% notes at a price equal to 100% of the principal amount plus accrued and unpaid interest or, in certain cases, to convert
the 4% notes at an increased conversion rate based on the price paid per share of the Companys common stock in the transaction constituting the fundamental change.

In
    connection with our second-quarter 2006 issuance of $275.0 million of the
    4% senior convertible notes, we entered into a registration rights agreement
    (RRA) whereby we agreed to file a shelf registration statement permitting
    the registered resale of the 4% notes and the common stock issuable upon
    conversion of the notes. Failure to comply with specified obligations under
    the RRA relating to filing of the shelf registration, its being declared
    effective and maintaining its effectiveness would result in additional interest
    being payable on the notes. We anticipate filing the shelf registration
    within the time period prescribed in the RRA.

Our current sources of liquidity are our cash reserves; interest earned on such cash reserves; short-term investments, marketable securities; sales of Abelcet, Adagen, Oncaspar and Depocyt; royalties earned, which are primarily related to sales of PEG-INTRON; and contract manufacturing revenue. 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 and operational requirements for the near future.

While we believe that our current sources of liquidity will be adequate to satisfy our capital and operational needs for the near future, we may enter into agreements with collaborators with respect to the development and commercialization of products that could increase our cash requirements, or seek additional financing 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.

22

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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 June 30, 2006, 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 January 2006, we terminated our development and supply agreement entered into in June 2003 with, and returned our rights to ATG-Fresenius S, to Fresenius Biotech. The development and supply agreement with Fresenius Biotech provided us with exclusive development and distribution rights in the U.S. and Canada for a new formulation of the polyclonal antibody preparation, ATG-Fresenius S. Subsequently, in April 2006, Fresenius Biotech and Nabi Biopharmaceuticals announced an agreement to advance the ongoing clinical development of ATG-Fresenius S. The clinical trial has been transitioned to Nabi Biopharmaceuticals.

In
    July 2006, we entered into a license and collaboration agreement with Santaris
    Pharma A/S (Santaris) for up to eight RNA antagonists for the treatment of
    oncology indications. We obtained rights worldwide other than Europe,
    to develop and commercialize RNA antagonists directed against the Hif-l alpha
    and Survivin gene targets. Santaris will design and synthesize RNA antagonists
    directed against up to six additional gene targets selected by us, and
    we will have the right to develop and commercialize those antagonists
    worldwide other than Europe. We will make an initial payment of $8.0 million
    to Santaris in August 2006 and will be responsible for making additional
    payments upon the successful completion of certain compound synthesis and
    selection, clinical development and regulatory milestones. Santaris is also
    eligible to receive royalties from any future product sales from products
    based on
    the licensed antagonists. Santaris retains the right to develop and commercialize
products developed under the collaboration in Europe.

During
    the quarter ended June 30, 2006, we issued $275.0 million of 4% notes that
    mature on June 1, 2013 unless earlier redeemed, repurchased or converted.
    The 4% notes are senior unsecured obligations and rank equal to other senior
    unsecured debt of the Company and all future senior unsecured debt of the
    Company. The 4% notes may be converted at the option of the holders into
    the Company’s common stock at an initial conversion price of $9.55
    per share.

At
    any time on or after June 1, 2009, if the closing price of the Company’s
    common stock for at least 20 trading days in the 30 consecutive trading day
    period ending on the date one day prior to the date of a notice of redemption
    is greater than 140% of the applicable conversion price on the date of such
    notice, the Company, at its option, may redeem the 4% notes in whole or in
    part, at a redemption price in cash equal to 100% of the principal amount
    of the 4% notes to be redeemed, plus accrued and unpaid interest, if any,
    to the redemption date. The 4% notes are not redeemable prior to June 1,
    2009. Upon occurrence of a "fundamental change", as defined in
    the indenture governing the notes, holders of the notes may require the Company
    to redeem the notes at a price equal to 100% of the principal amount plus
    accrued and unpaid interest or, in certain cases, to convert the notes at
    an increased conversion rate based on the price paid per share of the Company’s
    common stock in the transaction constituting the fundamental change.

Concurrent
    with the May 2006 issuance of the 4% notes, a portion of the proceeds were
    used to repurchase $133.8 million of principal amount of 4.5% notes outstanding
    at a purchase price of $129.4 million plus accrued interest of $2.4 million.

On
    July 6, 2006, we completed a tender offer whereby we repurchased $137.6 million
    principal amount of 4.5% notes at a purchase price of $965 for each $1,000
    principal amount, plus accrued interest. As of August 1, 2006, $122.6 million
    principal amount of the 4.5% notes remain outstanding.

Other than as described in the proceeding paragraphs, since December 31, 2005, there have been no 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 Transition Report on Form 10-K for the six months ended December 31, 2005.

Critical Accounting Policies and Estimates

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

Our 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 June 30, 2006 have been taken into consideration in preparing the consolidated financial statements. The preparation of the consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our consolidated financial statements.

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

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Revenues

Revenues from product sales and contract manufacturing revenue are recognized when title passes to the customer, generally at the time of shipment. For product sales, we also record a provision at the time of shipment for estimated future credits, chargebacks, sales discounts, rebates and returns. These sales provision accruals, except for rebates which are recorded as a liability, are presented as a reduction of the accounts receivable balances. We continually monitor the adequacy of the accruals by comparing the actual payments to the estimates used in establishing the accruals.

Effective January 1, 2006, we changed our third-party distributor for three of our four products; Abelcet, Oncaspar and Depocyt. For Abelcet, our new third-party distributor ships product to the same wholesalers as prior to the change and the wholesalers then resell the product to the end-users. We continue to recognize revenues for Abelcet at the time of sale to the wholesaler. The distribution process for Oncaspar and Depocyt has changed. We previously sold the products to a specialty distributor and recorded sales at that time. The distributor then sold the products to the end-user. Now, sales are recorded when Oncaspar and Depocyt are shipped by our new third-party distributor directly to the end-user. The orders may be placed by either the end-user or by a wholesaler representing the end-user. For Adagen, our distribution process remains the same. Adagen continues to be sold directly
to a specialty distributor who then sells the product to end-users. We continue to recognize revenue for Adagen upon sale to the specialty distributor.

In addition to the new distributor handling the indicated products on our behalf, it also maintains the related accounts receivable system for us and records sales, cash receipts and certain adjustments. We provide chargeback payments to wholesalers based on their sales to members of buying groups at prices determined under a contract between us and the member. Administrative fees are paid to buying groups based on the total amount of purchases by their members. We estimate the amount of the chargeback that will be paid using (a) distribution channel information obtained from certain of our wholesalers, which allows us to determine the amount and expiry of inventory in the distribution channel and (b) historical trends, adjusted for current changes. 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 that administer various programs, such as the U.S. Medicaid programs, 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. In determining the appropriate accrual amount, we use (a) distribution channel information obtained from certain of our wholesalers, which allows us to determine the amount and expiry of inventory in the distribution channel, (b) our historical rebate and administrative fee payments by product as a percentage of our historical sales and (c) any significant changes in sales trends. 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 lag time
between sale and payment of a rebate, which can range up to nine months, and the level of reimbursement by state agencies.

The following is a summary of reductions of gross sales accrued as of June 30, 2006 and December 31, 2005 (in thousands):



|                               |  | June 30,2006 |       | December 31,2005 |  
|------------------------------ |  | ------------ | ----- | ---------------- | -
|                               |  |              |       |                  |  
|Accounts Receivable Reductions |  |              |       |                  |  
|Chargebacks                    |  | $            | 4,076 |                  | $
|Cash Discounts                 |  |              | 149   |                  |  
|Other (including returns)      |  |              | 1,628 |                  |  
|                               |  |              |       |                  |  
|Total                          |  | $            | 5,853 |                  | $
|                               |  |              |       |                  |  
|Accrued Liabilities            |  |              |       |                  |  
|Medicaid Rebates               |  | $            | 1,484 |                  | $
|Administrative Fees            |  |              | 220   |                  |  
|                               |  |              |       |                  |  
|Total                          |  | $            | 1,704 |                  | $
|                               |  |              |       |                  |  

There were no revisions to the estimates for gross to net sales adjustments that would be material to income from operations for the three-month or six-month periods ended June 30, 2006.

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We have inventory management agreements with three of our major wholesalers. These agreements provide that the wholesalers maintain inventory levels at no more than six selling weeks.

Royalties
    under our license agreements with third parties are recognized when reasonably
    estimable and earned through the sale of the product by the licensee net
    of future credits, chargebacks, sales discount rebates and refunds, and product
    returns and collection is reasonably assured. Beginning with the quarter
    ended December 31, 2005,
    notification from the third party licensee of the royalties earned under
    the license agreement became the basis for royalty revenue recognition. This
    information is generally received from the licensees in the quarter subsequent
    to the period in which the sales occur. Other fees and royalties received
    from third parties using our technology 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 license and other collaborative
    agreements where we have continuing involvement are recorded as deferred
    revenue and recognized ratably over the estimated service period.

Income Taxes

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 believe, based on future projections, that it is more likely than not that our net deferred tax assets, including our net operating losses from operating
activities and stock option exercises, will not be realized.

Available-for-Sale Securities

We assess the carrying value of our available-for-sale securities in accordance with FASB Staff Position (FSP) 115-1, The Meaning of Other-Than-Temporary Impairment and its application to Certain Investments. 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.

Long-Lived Assets

Long-lived assets, including amortizable intangible assets are tested for impairment in accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This testing is performed when an impairment indicator is present. An impairment indicator is one or more event or circumstance that may be indicative of possible impairment such as a significant adverse change in legal factors or in business climate, a current period operating loss combined with a history of operating losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group.

SFAS No. 144 testing for the recoverability of amortizable intangible assets is performed initially by comparing the carrying amount of the asset to the future undiscounted net cash flows to be generated by the assets. If the undiscounted net cash flow stream exceeds the carrying amount, no further analysis is required. However, if this test shows a negative relationship, the fair value of the intangible assets must be estimated and we would record an impairment charge for any excess of the carrying amount over the fair value. These evaluations involve amounts that are based on managements best estimates and judgment. Actual results may differ from these estimates.

Share-Based Payment

We account for share-based compensation in accordance with SFAS 123R, Share-Based Payment. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services and requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements, measured by the fair value of the equity or liability instruments issued, adjusted for estimated forfeitures. Until we have developed sufficient reliable Enzon-specific information, we are using an industry average for purposes of estimating forfeitures of share-based payments. As stratified data are developed, they will be compared to the initial average and the rate will be adjusted as deemed necessary.

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Options or stock awards issued to non-employees and consultants are recorded at their fair value as determined in accordance with SFAS No. 123R 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 or service period.

Fair value of share-based payments is determined using the Black-Scholes valuation model which employs weighted average assumptions for expected volatility of the Companys stock, expected term until exercise of the options, the risk free interest rate, and dividends, if any. Expected volatility is based on historical Enzon stock price information.

We have elected the modified prospective transition method which requires that compensation costs be recorded, as earned, for all unvested stock options and restricted stock awards and restricted stock units outstanding at July 1, 2005.

Recently Issued Accounting Standards

In
    July 2006, the FASB issued FASB Interpretation No. 48, Accounting for
    Uncertainty in Income Taxes, an interpretation of FASB Statement No.
    109. The interpretation establishes criteria for recognizing and measuring
    the financial statement tax effects of positions taken on a companys
    tax returns. A two-step process is prescribed whereby the threshold for recognition
    is a more-likely-than-not test that the tax position will be sustained upon
    examination and the tax position is measured at the largest amount of benefit
    that is greater than 50 percent likely of being realized upon ultimate settlement.
    We currently recognize a tax position if it is probable of being sustained.
    The Interpretation is effective for us beginning January 1, 2007. We are
    evaluating the
    potential
    effects
    the Interpretation
    may
    have on our consolidated financial position or results of operations, but
    we do not expect there to be any material consequence.

Factors That May Affect Future Results

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

| |  | The risk that we will continue to experience operating losses for the next several years.
| | - | -----------------------------------------------------------------------------------------

| |  | The risk that there will be a decline in sales of one or more of our marketed products or products sold by others from which we derive royalty revenues. Such sales declines could result from increased competition, loss of patent protection, pricing, supply shortages and/or regulatory constraints.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The risk that we will not achieve success in our research and development efforts including clinical trials conducted by us or by our collaborative partners.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The risk that we will be unable to obtain critical compounds used in the manufacture of our products at economically feasible prices or at all, or one of our key suppliers will experience manufacturing problems or delays.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The risk that we will fail to obtain adequate financing to meet our future capital and financing needs.
| | - | -------------------------------------------------------------------------------------------------------

| |  | The risk that key personnel will leave the company.
| | - | ---------------------------------------------------

A more detailed discussion of these and other factors that could affect our results is contained in our filings with the U.S. Securities and Exchange Commission, including our Transition Report on Form 10-K for the six-month period ended December 31, 2005. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. No assurance can be given that the future results covered by the forward-looking statements will be achieved. All information contained herein is as of the date of this report and Enzon does not intend to update this information.

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|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. 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 June 30, 2006
the vast majority of our holdings were in instruments maturing in two years or less with the exception of certain auction rate securities and mutual fund investments relating to our executive deferred compensation plan, that had maturity dates through 2032.

The
    table below presents the principal amounts and related weighted average interest
    rates by year of maturity (as of June 30 each year) for our investment portfolio
    as of June 30, 2006 (in thousands):



|                      |  | 2007 |         | 2008 |   | 2009   |   | 2010 &thereafter |       | Total |   | Fair Value |  
|--------------------- |  | ---- | ------- | ---- | - | ------ | - | ---------------- | ----- | ----- | - | ---------- | -
|                      |  |      |         |      |   |        |   |                  |       |       |   |            |  
|Fixed Rate            |  | $    | 123,707 |      | $ | 7,276  |   | $                | 3,600 |       | $ | 1,116      |  
|Average Interest Rate |  |      | 3.97    | %    |   | 3.65   | % |                  | 4.04  | %     |   | 0.53       | %
|Variable Rate         |  |      | 38,300  |      |   | 7,500  |   |                  |      |       |   | 18,000     |  
|Average Interest Rate |  |      | 4.43    | %    |   | 3.44   | % |                  |      |       |   | 5.26       | %
|                      |  |      |         |      |   |        |   |                  |       |       |   |            |  
|                      |  | $    | 162,007 |      | $ | 14,776 |   | $                | 3,600 |       | $ | 19,116     |  
|                      |  |      |         |      |   |        |   |                  |       |       |   |            |  

As
    of June 30, 2006, our  4.5%
    convertible subordinated notes in the principal amount of $260.2 million
    due July 1, 2008 and our 4% convertible senior notes in principal amount
    of $275.0 million, have fixed interest rates. The fair value of the 4.5%
    notes was approximately $250.8 million and $356.1 million (on a principal
    amount of $394.0 million) at June 30, 2006 and December 31, 2005, respectively.
    The fair value of the 4% notes was approximately $273.5 million at June 30,
    2006. 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.

|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures.

Our management, under the direction of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the Exchange Act)) as of June 30, 2006. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2006.

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.

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PART II OTHER INFORMATION

Item
1A. Risk Factors

This
    section sets forth changes in the risk factors previously disclosed in our
    Transition Report on Form 10-K for the six months ended December 31, 2005.

Disruption
	      in supply or manufacturing difficulties relating to Oncaspar could
	      cause a disruption in our ability to market and sell Oncaspar and result
    in a substantial loss of revenues.

We
    continue to face manufacturing and stability issues with Oncaspar. To date,
    we have been unable to identify the cause of these issues. If we continue
    to have these issues with Oncaspar, we may have a disruption in our ability
    to manufacture Oncaspar. Additionally, the period covered by our current
    supply agreement for L-asparaginase used in the manufacture of Oncaspar for
    the U.S. and Canadian markets will expire on December 31, 2006. The supplier
    has informed us that it does not intend to renew the current agreement,
    although we have been in discussions with them for a new agreement. If we
    are unable to agree on a new agreement for the supply of L-asparaginase on
    acceptable terms or at all, we may have a disruption in the supply of L-asparaginase,
    and as a result, a disruption in our ability to manufacture Oncaspar. We
    can give no assurance that we will be able to successfully obtain a new agreement
    for the supply of L-asparaginase. If we cannot market and distribute Oncaspar
    for an extended period, sales of the product and customer relationships will
    suffer, which would adversely affect our financial results.

Events
      with respect to our share capital could cause the shares of our common stock
outstanding to increase.

The
    issuance of our 4% convertible notes in May 2006 could significantly increase
    the number of shares of our common stock outstanding on a fully diluted basis.
    Our 4% covertible notes can convert to 28.8 million shares of our common
    stock at a conversion price of $9.55 per share. We intend to file a registration statement
    covering the shares of common stock that may be issued upon conversion of
    the 4% notes to make them eligible for public resale.

Item 4. Submission of Matters to a Vote of Security Holders

| | (a) | An annual meeting of stockholders was held on May 18, 2006.
| | --- | -----------------------------------------------------------

| | (b) | Philip Renfro was re-elected as a Class I director of the Company. The term of office as a director for each of Dr. Goran Ando, Jeffrey H. Buchalter, Rolf G. Classon, Robert LeBuhn, Victor P. Micati and Robert C. Salisbury continued after the annual meeting. Dr. Rosina B. Dixon, M.D. retired from the Board of Directors effective April 30, 2006.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | The matters voted upon at the annual meeting and the results of the voting, including broker non-votes where applicable, are set forth below. All proposals were approved by the requisite percentage:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i) | The stockholders voted 40,060,733 shares in favor and 626,824 shares withheld with respect to the election of Philip Renfro as a Class I director of the Company.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | The stockholders voted 24,230,402 shares in favor, 5,661,350 shares against and 19,917 shares abstained with respect to a proposal to approve the amendment of the 2001 Incentive Stock Plan to increase the number of shares of common stock issuable thereunder by 4,000,000 shares from 6,000,000 shares to 10,000,000 shares. Broker non-votes totaled 10,775,888 shares.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | The stockholders voted 33,158,930 shares in favor, 7,506,586 against and 22,041 shares abstained with respect to the amendment and restatement of our Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 90,000,000 shares to 170,000,000 shares.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iv) | The stockholders voted 36,572,591 shares in favor, 4,072,965 shares against and 42,001 shares abstained with respect to a proposal to ratify the selection of KPMG LLP to audit our consolidated financial statements for the fiscal year ending December 31, 2006.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 5. Other Information

1. Amendment to Bylaws

On August 1, 2006, the Company amended and restated its Bylaws to reflect the prior change in the name of the Company from Enzon, Inc. to Enzon Pharmaceuticals, Inc. and to make certain ministerial changes. A copy of the Amended and Restated Bylaws of the Company are filed as an exhibit to this Quarterly Report on Form 10-Q.

2. Amendment to Executive Deferred Compensation Plan

On August 1, 2006, the Company amended its Executive Deferred Compensation Plan to make certain clarifications and ministerial changes. A copy of the Companys Executive Deferred Compensation Plan (2006 Restatement) is filed as an exhibit to this Quarterly Report on Form 10-Q.

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Item 6. Exhibits

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

|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                   |  | ReferenceNo. | 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |              | 
|3(i)          |  | Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                                                                                             |  | (1)          | 
|3(ii)         |  | Amended and Restated By-laws                                                                                                                                                                                                                                                                                                                  |  | *            | 
|4.1           |  | Rights Agreement dated May 17, 2002 between the Company and Continental Stock Transfer Trust Company, as rights agent                                                                                                                                                                                                                         |  | (2)          | 
|4.2           |  | First Amendment to the Rights Agreement, dated as of February 19, 2003 between the Company and Continental Stock Transfer & Trust Company, as rights agent                                                                                                                                                                                    |  | (3)          | 
|4.3           |  | Indenture,
                    dated May 23, 2006, between Enzon Pharmaceuticals, Inc. and
                    Wilmington Trust Company (Previously filed as an exhibit
                    to the Companys Current Report on Form 8-K filed May
                    25, 2006 and incorporated herein by reference thereto.)                 |  |              | 
|10.1          |  | Executive Deferred Compensation Plan (2006 Restatement)                                                                                                                                                                                                                                                                                       |  | *            | 
|10.2          |  | Registration
                    Rights Agreement, dated May 23, 2006, between Enzon Pharmaceuticals,
                    Inc. and Goldman, Sachs & Co. (Previously filed as an exhibit
                    to the Companys Current Report on Form 8-K filed May
                    25, 2006 and incorporated herein by reference thereto.) |  |              | 
|10.3          |  | 2001
                    Incentive Stock Plan, as amended and restated, ofEnzon
                    Pharmaceuticals, Inc. (Previously
                    filed as an exhibit to the Companys Current Report
                    on Form 8-K filed May 19, 2006 and incorporated herein by
                    reference thereto.)           |  |              | 
|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 of 2002                                                                                                                                                                                                                                       |  | *            | 
|32.1          |  | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        |  | *            | 
|32.2          |  | Certification of Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                       |  | *            | 

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

|(1) | Previously filed as an exhibit to the Companys Current Report on Form 8-K filed May 19, 2006 and incorporated herein by reference thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Previously filed as an exhibit to the Companys Form 8-A12G (File No. 000-12957) filed with the Commission on May 22, 2002 and incorporated herein by reference thereto.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Previously filed as an exhibit to the Companys Form 8-A12G/A (File No. 000-12957) filed with the Commission on February 20, 2003 and incorporated herein by reference thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

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



ENZON PHARMACEUTICALS, INC.
        (Registrant)Date: August 2, 2006
      
      By:
      /s/ Jeffrey H. BuchalterJeffrey
          H. BuchalterPresident and Chief Executive Officer(Principal Executive Officer)




Date:  August 2, 2006
        

      By:

      /s/ Craig A. ToomanCraig A. ToomanExecutive Vice President, Financeand Chief Financial Officer(Principal Financial Officer)


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