##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Transition Period from  to
 Commission file number 0-12957
 Enzon Pharmaceuticals, Inc.
  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)
 
 
 
 þ o
  o þ o
 o þ




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II OTHER INFORMATIONItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESEX-3.(iii): AMENDMENT TO THE AMENDED AND RESTATED BYLAWSEX-10.1: 2007 OUTSIDE DIRECTOR COMPENSATION PLANEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    Table of Contents  
 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)
 December 31,June 30, 2007
    
    
    2006*ASSETSCurrent assets:Cash and cash equivalents
    
    $
    24,224
    
    
    $
    28,431Short-term investments
    
    
    127,815
    
    
    
    145,113Accounts receivable, net of allowance for doubtful accounts;
$237 at June 30, 2007 and $245 at December 31, 2006
    
    
    14,213
    
    
    
    15,259Inventories
    
    
    19,415
    
    
    
    17,618Other current assets
    
    
    7,637
    
    
    
    5,890Total current assets
    
    
    193,304
    
    
    
    212,311Property and equipment, net of accumulated depreciation;
$29,403 at June 30, 2007 and $26,506 at December 31, 2006
    
    
    48,150
    
    
    
    39,491Marketable securities
    
    
    35,042
    
    
    
    67,061Amortizable intangible assets, net
    
    
    73,309
    
    
    
    78,510Other assets
    
    
    5,626
    
    
    
    6,457Total assets
    
    $
    355,431
    
    
    $
    403,830LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    9,004
    
    
    $
    24,918Accrued expenses
    
    
    18,531
    
    
    
    34,967Total current liabilities
    
    
    27,535
    
    
    
    59,885Notes payable
    
    
    381,721
    
    
    
    397,642Other liabilities
    
    
    2,950
    
    
    
    2,744Total liabilities
    
    
    412,206
    
    
    
    460,271Commitments and contingenciesStockholders deficit:Preferred stock  $.01 par value, authorized 3,000,000 shares;
no shares issued and outstanding at June 30, 2007 and
December 31, 2006
    
    
    
    
    
    
    Common stock  $.01 par value, authorized 170,000,000 shares;
issued and outstanding 44,072,110 shares and 43,999,031
shares
at June 30, 2007 and December 31, 2006, respectively
    
    
    441
    
    
    
    440Additional paid-in capital
    
    
    329,993
    
    
    
    326,099Accumulated other comprehensive income (loss)
    
    
    254
    
    
    
    (414
    )Accumulated deficit
    
    
    (387,463
    )
    
    
    (382,566
    )Total stockholders deficit
    
    
    (56,775
    )
    
    
    (56,441
    )Total liabilities and stockholders deficit
    
    $
    355,431
    
    
    $
    403,830
 
 *
    
    Condensed from audited 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 ended
    
    
    Six months endedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Product sales, net
    
    $
    25,019
    
    
    $
    24,537
    
    
    $
    47,668
    
    
    $
    48,812Royalties
    
    
    18,290
    
    
    
    17,936
    
    
    
    34,634
    
    
    
    35,184Contract manufacturing
    
    
    5,903
    
    
    
    5,131
    
    
    
    8,398
    
    
    
    8,337Total revenues
    
    
    49,212
    
    
    
    47,604
    
    
    
    90,700
    
    
    
    92,333Costs and expenses:Cost of product sales and contract
manufacturing
    
    
    16,293
    
    
    
    12,352
    
    
    
    27,757
    
    
    
    22,901Research and development
    
    
    17,739
    
    
    
    9,466
    
    
    
    30,979
    
    
    
    16,469Selling, general and administrative
    
    
    15,225
    
    
    
    15,247
    
    
    
    31,415
    
    
    
    31,085Amortization of acquired intangible assets
    
    
    185
    
    
    
    185
    
    
    
    370
    
    
    
    374Restructuring charge
    
    
    755
    
    
    
    
    
    
    
    1,324
    
    
    
    Total costs and expenses
    
    
    50,197
    
    
    
    37,250
    
    
    
    91,845
    
    
    
    70,829Operating (loss) income
    
    
    (985
    )
    
    
    10,354
    
    
    
    (1,145
    )
    
    
    21,504Other income (expense):Investment income, net
    
    
    2,366
    
    
    
    3,084
    
    
    
    4,943
    
    
    
    18,900Interest expense
    
    
    (4,491
    )
    
    
    (6,639
    )
    
    
    (9,044
    )
    
    
    (11,520
    )Other, net
    
    
    327
    
    
    
    4,476
    
    
    
    417
    
    
    
    4,235(1,798
    )
    
    
    921
    
    
    
    (3,684
    )
    
    
    11,615(Loss) income before income tax provision
    
    
    (2,783
    )
    
    
    11,275
    
    
    
    (4,829
    )
    
    
    33,119Income tax provision
    
    
    261
    
    
    
    288
    
    
    
    68
    
    
    
    424Net (loss) income
    
    $
    (3,044
    )
    
    $
    10,987
    
    
    $
    (4,897
    )
    
    $
    32,695(Loss) earnings per common share  basic
    
    $
    (0.07
    )
    
    $
    0.25
    
    
    $
    (0.11
    )
    
    $
    0.75(Loss) earnings per common share  diluted
    
    $
    (0.07
    )
    
    $
    0.25
    
    
    $
    (0.11
    )
    
    $
    0.75Weighted average shares  basic
    
    
    43,884
    
    
    
    43,539
    
    
    
    43,873
    
    
    
    43,531Weighted average shares  diluted
    
    
    43,884
    
    
    
    43,539
    
    
    
    43,873
    
    
    
    43,531
  3




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six months endedJune 30,2007
    
    
    2006Cash flows from operating activities:Net (loss) income
    
    $
    (4,897
    )
    
    $
    32,695Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    8,106
    
    
    
    6,600Share-based compensation
    
    
    3,605
    
    
    
    2,544Gain on sale of investments
    
    
    
    
    
    
    (13,844
    )Loss on sale of assets
    
    
    
    
    
    
    31Gain on redemption of notes payable
    
    
    (198
    )
    
    
    (4,397
    )Write off and amortization of debt issue costs
    
    
    904
    
    
    
    2,220Amortization of debt securities bond
premium/discount
    
    
    132
    
    
    
    548Changes in operating assets and liabilities
    
    
    (17,491
    )
    
    
    (2,555
    )Net cash (used in) provided by operating
activities
    
    
    (9,839
    )
    
    
    23,842Cash flows from investing activities:Purchase of property and equipment
    
    
    (11,564
    )
    
    
    (3,678
    )Proceeds from sale of equity investment
    
    
    
    
    
    
    20,209Purchase of product rights
    
    
    (17,500
    )
    
    
    (35,000
    )Proceeds from sale of marketable securities
    
    
    110,850
    
    
    
    67,925Purchase of marketable securities
    
    
    (164,488
    )
    
    
    (363,308
    )Maturities of marketable securities
    
    
    103,492
    
    
    
    246,550Net cash provided by (used in) investing
activities
    
    
    20,790
    
    
    
    (67,302
    )Cash flows from financing activities:Proceeds from exercise of common stock options
    
    
    339
    
    
    
    106Proceeds from employee stock purchase plan
    
    
    226
    
    
    
    Redemption of notes payable
    
    
    (15,723
    )
    
    
    (129,380
    )Proceeds from issuance of notes payable
    
    
    
    
    
    
    275,000Cash payment for debt issuance costs
    
    
    
    
    
    
    (7,655
    )Net cash (used in) provided by financing
activities
    
    
    (15,158
    )
    
    
    138,071Net (decrease) increase in cash and cash equivalents
    
    
    (4,207
    )
    
    
    94,611Cash and cash equivalents at beginning of period
    
    
    28,431
    
    
    
    76,497Cash and cash equivalents at end of period
    
    $
    24,224
    
    
    $
    171,108
  4




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (1) Organization and Basis of Presentation
  (2) Marketable Securities
     5




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Holding Gains
    
    
    Holding Losses
    
    
    Fair Value*U.S. Government and GSE debt
    
    $
    19,502
    
    
    $
    
    
    
    $
    (111
    )
    
    $
    19,391U.S. corporate debt
    
    
    111,263
    
    
    
    
    
    
    
    (195
    )
    
    
    111,068Auction rate securities
    
    
    30,035
    
    
    
    
    
    
    
    
    
    
    
    30,035Other
    
    
    1,962
    
    
    
    401
    
    
    
    
    
    
    
    2,363$
    162,762
    
    
    $
    401
    
    
    $
    (306
    )
    
    $
    162,857
 
 *
    
    $127,815 is included in short-term investments and $35,042 is included in marketable
securities.  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Holding Gains
    
    
    Holding Losses
    
    
    Fair Value*U.S. Government and GSE debt
    
    $
    36,003
    
    
    $
    
    
    
    $
    (260
    )
    
    $
    35,743U.S. corporate debt
    
    
    133,904
    
    
    
    7
    
    
    
    (230
    )
    
    
    133,681Auction rate securities
    
    
    40,350
    
    
    
    
    
    
    
    
    
    
    
    40,350Other
    
    
    2,374
    
    
    
    26
    
    
    
    
    
    
    
    2,400$
    212,631
    
    
    $
    33
    
    
    $
    (490
    )
    
    $
    212,174
 
   Twelve-MonthPeriods EndingJune 30,
    

    Amortized Cost
    
    
    Fair Value2008
    

    $
    127,735
    
    
    $
    127,4672009
    

    
    7,030
    
    
    
    6,992Maturities beyond five years

    
    26,035
    
    
    
    26,035$
    160,800
    
    
    $
    160,494
  6




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Less Than 12 Months
    
    
    12 Months or GreaterFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    LossU.S. Government and GSE debt (1)
    
    $
    2,995
    
    
    $
    (5
    )
    
    $
    14,397
    
    
    $
    (106
    )U.S. corporate debt (2)
    
    
    109,381
    
    
    
    (195
    )
    
    
    
    
    
    
    Total
    
    $
    112,376
    
    
    $
    (200
    )
    
    $
    14,397
    
    
    $
    (106
    )
 
 (1)
    
    The unrealized losses of $0.1 million 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 the Company has the ability and the intent to hold these investments until recovery of
the cost, the Company does not consider its investments in U.S. Government and GSE debt to be
other-than-temporarily impaired at June 30, 2007.(2)
    
    The unrealized losses of $0.2 million 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 the Company has the ability and intent to hold these investments until recovery of the cost,
the Company does not consider its investments in U.S. corporate debt to be other-than-temporarily
impaired at June 30, 2007. (3) Comprehensive (Loss) Income
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net (loss) income
    
    $
    (3,044
    )
    
    $
    10,987
    
    
    $
    (4,897
    )
    
    $
    32,695Other comprehensive income:Unrealized gain on securities
that arose during the period
    
    
    227
    
    
    
    128
    
    
    
    668
    
    
    
    14,009Reclassification adjustment
for gain included in net
income(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,844
    )Total other comprehensive income
    
    
    227
    
    
    
    128
    
    
    
    668
    
    
    
    165Comprehensive (loss) income
    
    $
    (2,817
    )
    
    $
    11,115
    
    
    $
    (4,229
    )
    
    $
    32,860
 
 (1)
 7




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (4) Earnings Per Common Share
    (5) Share-Based Compensation
  Stock Option and Nonvested Share Awards
  8




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 NonvestedOptions
    
    
    SharesOutstanding at December 31, 2006
    
    
    6,708
    
    
    
    1,458Granted
    
    
    2,020
    
    
    
    380Exercised and vested
    
    
    (74
    )
    
    
    (8
    )Expired and forfeited
    
    
    (141
    )
    
    
    (47
    )Outstanding at June 30, 2007
    
    
    8,513
    
    
    
    1,783Options vested and expected to vest at June 30, 2007
    
    
    7,484Options exercisable at June 30, 2007
    
    
    5,143
  Employee Stock Purchase Plan
   9




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (6) Inventories
  December 31,June 30, 2007
    
    
    2006Raw materials
    
    $
    7,945
    
    
    $
    7,321Work in process
    
    
    8,096
    
    
    
    4,444Finished goods
    
    
    3,374
    
    
    
    5,853$
    19,415
    
    
    $
    17,618
 (7) Intangible Assets
  WeightedAverageDecember 31,
    
    
    RemainingJune 30, 2007
    
    
    2006
    
    
    Useful LivesProduct acquisition costs
    
    $
    78,694
    
    
    $
    78,694
    
    
    7 yearsProduct patented technology
    
    
    6,000
    
    
    
    6,000
    
    
    8 yearsManufacturing patent
    
    
    9,000
    
    
    
    9,000
    
    
    1 yearsPatent
    
    
    1,875
    
    
    
    1,875
    
    
    *95,569
    
    
    
    95,569Less: Accumulated
amortization
    
    
    22,260
    
    
    
    17,059$
    73,309
    
    
    $
    78,510
 
 *
    
    fully amortized   10




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (8) Notes Payable
  December 31,June 30, 2007
    
    
    20064.5% Convertible Subordinated Notes due
July 1, 2008
    
    $
    106,721
    
    
    $
    122,6424% Convertible Senior Notes due June 1,
2013
    
    
    275,000
    
    
    
    275,000$
    381,721
    
    
    $
    397,642
       11




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
   (9) Restructuring
    (10) Supplemental Cash Flow Information
  12




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (11) Income Taxes
       (12) Segment Information
  Products
 Royalties
 Contract Manufacturing
 13




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
   Three months ended June 30,ContractSegment
    
    
    
    
    
    Products
    
    
    Royalties
    
    
    Manufacturing
    
    
    Corporate(1)
    
    
    ConsolidatedRevenues
    
    
    2007
    
    
    $
    25,019
    
    
    $
    18,290
    
    
    $
    5,903
    
    
    $
    
    
    
    $
    49,2122006
    
    
    $
    24,537
    
    
    $
    17,936
    
    
    $
    5,131
    
    
    $
    
    
    
    $
    47,604Profit
(Loss)(2)
    
    
    2007
    
    
    $
    636
    
    
    $
    18,290
    
    
    $
    1,813
    
    
    $
    (23,522
    )
    
    $
    (2,783
    )2006
    
    
    $
    6,389
    
    
    $
    17,936
    
    
    $
    1,995
    
    
    $
    (15,045
    )
    
    $
    11,275
 Six months ended June 30,ContractSegment
    
    
    
    
    
    Products
    
    
    Royalties
    
    
    Manufacturing
    
    
    Corporate(1)
    
    
    ConsolidatedRevenues
    
    
    2007
    
    
    $
    47,668
    
    
    $
    34,634
    
    
    $
    8,398
    
    
    $
    
    
    
    $
    90,7002006
    
    
    $
    48,812
    
    
    $
    35,184
    
    
    $
    8,337
    
    
    $
    
    
    
    $
    92,333Profit
(Loss)(2)
    
    
    2007
    
    
    $
    3,002
    
    
    $
    34,634
    
    
    $
    1,854
    
    
    $
    (44,319
    )
    
    $
    (4,829
    )2006
    
    
    $
    13,009
    
    
    $
    35,184
    
    
    $
    2,767
    
    
    $
    (17,841
    )
    
    $
    33,119
 
 (1)
    
    Corporate expenses include operating income (loss) components that are not
directly attributable to an operating segment, including general and administrative expenses,
treasury activities and exploratory, preclinical and clinical research and development expenses not
specifically identifiable with existing marketed products or product candidates that have not
entered Phase III clinical trials.(2)
    
    Starting in the fourth quarter of 2006, the Company began evaluating the performance
of the Products segment with the inclusion of research and development costs related to marketed
products and new indications for those products. Segment profit for prior periods reflects
reclassifications for comparability.  Three Months Ended June 30
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Segment profit
    
    $
    20,739
    
    
    $
    26,320
    
    
    $
    39,490
    
    
    $
    50,960Unallocated operating expense
    
    
    21,724
    
    
    
    15,966
    
    
    
    40,635
    
    
    
    29,456Operating (loss) income
    
    
    (985
    )
    
    
    10,354
    
    
    
    (1,145
    )
    
    
    21,504Other corporate (expense) and income
    
    
    (1,798
    )
    
    
    921
    
    
    
    (3,684
    )
    
    
    11,615(Loss) income before income
tax provision
    
    $
    (2,783
    )
    
    $
    11,275
    
    
    $
    (4,829
    )
    
    $
    33,119
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
 TM
 Results of Operations
 Three Month and Six Month Periods Ended June 30, 2007 and 2006
 Overview
    Three Months Ended
    
    
    Six Months EndedJune
    
    
    %
    
    
    June
    
    
    June
    
    
    %
    
    
    June2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Products Segment profit
    
    $
    0.6
    
    
    
    (90
    )
    
    $
    6.4
    
    
    $
    3.0
    
    
    
    (77
    )
    
    $
    13.0Royalty Segment profit
    
    
    18.3
    
    
    
    2
    
    
    
    18.0
    
    
    
    34.6
    
    
    
    2
    
    
    
    35.2Contract Manufacturing
Segment profit
    
    
    1.9
    
    
    
    (9
    )
    
    
    2.0
    
    
    
    1.9
    
    
    
    (33
    )
    
    
    2.8Corporate and other
expenses*
    
    
    (23.5
    )
    
    
    56
    
    
    
    (15.1
    )
    
    
    (44.3
    )
    
    
    148
    
    
    
    (17.9
    )(Loss) income before income
tax provision
    
    $
    (2.7
    )
    
    
    n.m.
    
    
    $
    11.3
    
    
    $
    (4.8
    )
    
    
    n.m.
    
    
    $
    33.1
 
 *
    
    We do 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, investment income, interest
expense and income taxes. Research and development expense is considered a corporate expense
unless it relates to an existing marketed product or a product candidate enters Phase III
clinical trials at which time related costs would be chargeable to one of our operating
segments.n.m.  not meaningful 15




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##### Table of Contents



Products Segment
  Three Months Ended
    
    
    Six Months EndedJune
    
    
    %
    
    
    June
    
    
    June
    
    
    %
    
    
    June2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Revenues
    
    $
    25.0
    
    
    
    2
    
    
    $
    24.5
    
    
    $
    47.7
    
    
    
    (2
    )
    
    $
    48.8Cost of sales
    
    
    12.2
    
    
    
    32
    
    
    
    9.2
    
    
    
    21.2
    
    
    
    22
    
    
    
    17.3Research and
development
    
    
    3.8
    
    
    
    267
    
    
    
    1.0
    
    
    
    6.2
    
    
    
    169
    
    
    
    2.3Selling and marketing
    
    
    7.5
    
    
    
    (3
    )
    
    
    7.7
    
    
    
    15.6
    
    
    
    (2
    )
    
    
    15.8Amortization of
intangibles
    
    
    0.2
    
    
    
    
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    
    
    
    
    0.4Restructuring
    
    
    0.7
    
    
    
    n.m.
    
    
    
    
    
    
    
    1.3
    
    
    
    n.m.
    
    
    
    Segment profit
    
    $
    0.6
    
    
    
    (90
    )
    
    $
    6.4
    
    
    $
    3.0
    
    
    
    (77
    )
    
    $
    13.0
 
 n.m.  not meaningful Revenues
  Three Months Ended
    
    
    Six Months EndedJune
    
    
    %
    
    
    June
    
    
    June
    
    
    %
    
    
    JuneProduct
    
    2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Oncaspar
    
    $
    9.6
    
    
    
    28
    
    
    $
    7.5
    
    
    $
    17.1
    
    
    
    23
    
    
    $
    13.9DepoCyt
    
    
    2.1
    
    
    
    7
    
    
    
    1.9
    
    
    
    4.5
    
    
    
    11
    
    
    
    4.0Abelcet
    
    
    6.7
    
    
    
    (28
    )
    
    
    9.4
    
    
    
    14.4
    
    
    
    (27
    )
    
    
    19.9Adagen
    
    
    6.6
    
    
    
    16
    
    
    
    5.7
    
    
    
    11.7
    
    
    
    6
    
    
    
    11.0Totals
    
    $
    25.0
    
    
    
    2
    
    
    $
    24.5
    
    
    $
    47.7
    
    
    
    (2
    )
    
    $
    48.8
   Cost of sales
  16




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Research and development
  Selling and marketing
  Amortization of acquired intangible assets
  Restructuring
    17




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Royalties Segment
  Three Months Ended
    
    
    Six Months EndedJune
    
    
    %
    
    
    June
    
    
    June
    
    
    %
    
    
    June2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Royalty revenue
    
    $
    18.3
    
    
    
    2
    
    
    $
    18.0
    
    
    $
    34.6
    
    
    
    (2
    )
    
    $
    35.2
   Costs and expenses
  Contract Manufacturing Segment
  Three Months Ended
    
    
    Six Months EndedJune
    
    
    %
    
    
    June
    
    
    June
    
    
    %
    
    
    June2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Revenues
    
    $
    5.9
    
    
    
    15
    
    
    $
    5.1
    
    
    $
    8.4
    
    
    
    1
    
    
    $
    8.3Cost of sales
    
    
    4.0
    
    
    
    30
    
    
    
    3.1
    
    
    
    6.5
    
    
    
    17
    
    
    
    5.5Segment profit
    
    $
    1.9
    
    
    
    (9
    )
    
    $
    2.0
    
    
    $
    1.9
    
    
    
    (33
    )
    
    $
    2.8
 Revenues
  Cost of sales
  18




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##### Table of Contents



Non-U.S Revenue
   Corporate and Other Expense
  Three Months Ended
    
    
    Six Months EndedJune
    
    
    %
    
    
    June
    
    
    June
    
    
    %
    
    
    June2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Research and development
    
    $
    14.0
    
    
    
    66
    
    
    $
    8.5
    
    
    $
    24.8
    
    
    
    75
    
    
    $
    14.2General and administrative
    
    
    7.7
    
    
    
    3
    
    
    
    7.6
    
    
    
    15.8
    
    
    
    4
    
    
    
    15.3Other (income) expense:Investment income, net
    
    
    (2.3
    )
    
    
    (23
    )
    
    
    (3.1
    )
    
    
    (4.9
    )
    
    
    (74
    )
    
    
    (18.9
    )Interest expense
    
    
    4.4
    
    
    
    (32
    )
    
    
    6.6
    
    
    
    9.0
    
    
    
    (21
    )
    
    
    11.5Other, net
    
    
    (.3
    )
    
    
    (93
    )
    
    
    (4.5
    )
    
    
    (.4
    )
    
    
    (90
    )
    
    
    (4.2
    )1.8
    
    
    
    n.m.
    
    
    
    (1.0
    )
    
    
    3.7
    
    
    
    n.m.
    
    
    
    (11.6
    )Corporate and other
expenses
    
    $
    23.5
    
    
    
    56
    
    
    $
    15.1
    
    
    $
    44.3
    
    
    
    148
    
    
    $
    17.9
 
 n.m.  not meaningful Research and Development
  General and administrative
  Other (income) expense
   19




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Income taxes
   Liquidity and Capital Resources
   20




---



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Off-Balance Sheet Arrangements
    Contractual Obligations
   21




---



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Critical Accounting Policies and Estimates
    Revenues
     22




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##### Table of Contents



December 31,June 30, 2007
    
    
    2006Accounts Receivable ReductionsChargebacks
    
    $
    2,710
    
    
    $
    3,388Cash Discounts
    
    
    120
    
    
    
    168Other (including returns)
    
    
    1,839
    
    
    
    1,767Total
    
    
    4,669
    
    
    
    5,323Accrued LiabilitiesMedicaid Rebates
    
    
    1,253
    
    
    
    1,335Administrative Fees
    
    
    173
    
    
    
    205Total
    
    
    1,426
    
    
    
    1,540Grand Total
    
    $
    6,095
    
    
    $
    6,863
   Income Taxes
   Available-for-Sale Securities
  23




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##### Table of Contents



Long-Lived Assets
   Share-Based Payment
      Recently Issued Accounting Standards
   24




---



##### Table of Contents



Factors That May Affect Future Results
  
    
    The risk that we will not achieve success in our research and development efforts,
including clinical trials conducted by us or our collaborative partners.
    
    The risk that we will 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 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.
    
    Decisions by regulatory authorities regarding whether and when to approve our regulatory
applications as well as their decisions regarding labeling and other matters could affect
the commercial potential of our products or developmental products.
    
    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.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  25




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##### Table of Contents



MaturitiesBeyond
    
    
    Amortized2008
    
    
    2009
    
    
    Five Years
    
    
    Cost
    
    
    Fair ValueFixed Rate
    
    $
    109,985
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    117,015
    
    
    $
    116,766Average Interest Rate
    
    
    4.70
    %
    
    
    5.39
    %
    
    
    
    
    
    
    4.74
    %Variable Rate
    
    
    17,750
    
    
    
    
    
    
    
    26,035
    
    
    
    43,785
    
    
    
    43,728Average Interest Rate
    
    
    4.62
    %
    
    
    
    
    
    
    5.23
    %
    
    
    4.98
    %$
    127,735
    
    
    $
    7,030
    
    
    $
    26,035
    
    
    $
    160,800
    
    
    $
    160,494
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Controls
  26




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    An annual meeting of stockholders was held on May 16, 2007.(b)
    
    Jeffrey H. Buchalter, Goran A. Ando, M.D. and Victor P. Micati were re-elected as
Class II directors of the Company. The term of office, as a director for each of Philip
M. Renfro, Rolf A. Classon, Robert LeBuhn and Robert C. Salisbury, continued after the
annual meeting.(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 37,167,097 shares in favor and
2,677,775 shares withheld with respect to the election of Jeffrey H. Buchalter
as a Class II director of the Company.The stockholders voted 37,435,838 shares in favor and 2,409,034 withheld with
respect to the election of Goran A. Ando, M.D. as a Class II director of the
Company.The stockholders voted 37,416,039 shares in favor and 2,428,833 withheld with
respect to the election of Victor P. Micati as a Class II director of the
Company.(ii)
    
    The stockholders voted 30,678,163 shares for, 763,286 shares
against and 267,234 shares abstained and 8,136,189 shares were not voted with
respect to the approval of the 2007 Employee Stock Purchase Plan.(iii)
    
    The stockholders voted 39,332,523 shares in favor, 467,533
shares against and 44,816 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, 2007.
 
 Item 5. Other Information
    27




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28




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Item 6. Exhibits
  Exhibit
    
    
    
    ReferenceNumber
    
    Description
    
    No.3(i)
    
    Amended and Restated Certificate of Incorporation
    
    
    (1
    )3(ii)
    
    Amended and Restated Bylaws
    
    
    (2
    )3(iii)
    
    Amendment dated July 31, 2007 to the Amended and Restated Bylaws
    
    
    *4.1
    
    Rights Agreement dated May 17, 2002 between the Company
and Continental Stock Transfer Trust Company, as rights
agent
    
    
    (3
    )4.2
    
    First Amendment to the Rights Agreement, dated as of
February 19, 2003 between the Company and Continental
Stock Transfer & Trust Company, as rights agent
    
    
    (4
    )10.1
    
    2007 Outside Director Compensation Plan **
    
    
    *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.**
    
    Management contracts or compensatory plans and arrangements required to be
filed pursuant to Item 601(b) (10) (ii) (A) or (iii) of Regulation S-K.   (1)
    
    Current Report on Form 8-K filed May 19, 2006.(2)
    
    Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed on August 3, 2006.(3)
    
    Form 8-A12G (File No. 000-12957) filed with the Commission on May 22, 2002.(4)
    
    Form 8-A12G/A (File No. 000-12957) filed with the Commission on February 20, 2003. 
 29




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##### Table of Contents



SIGNATURES
  ENZON PHARMACEUTICALS, INC.
                    (Registrant)Date:  August 2, 2007
    By:
    /s/ Jeffrey H. BuchalterJeffrey H. BuchalterPresident and Chief Executive Officer
(Principal Executive Officer) Date:  August 2, 2007
    By:
    /s/ Craig A. ToomanCraig A. ToomanExecutive Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer) 30