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

(Mark One)

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

For the quarterly period ended June 30, 2010
or

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

For the Transition Period from ___ to ___

Commission file number 0-12957

Enzon Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

|                                            |                                      
|------------------------------------------- | -------------------------------------
|Delaware                                    | 22-2372868                           
|(State
 of incorporation)                   | (I.R.S.
 Employer Identification No.)
|                                            |                                      
|685
 Route 202/206, Bridgewater, New Jersey | 08807                                
|(Address
 of principal executive offices)   | (Zip
 Code)                          

(908) 541-8600
(Registrants telephone number, including area code)

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

---

Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


Yes x     No o


Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).


Yes o     No o


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

Large Accelerated Filer o     Accelerated
Filer x     Non-Accelerated
Filer o     Smaller
Reporting Company o

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


Yes o     No x


Shares
of Common Stock outstanding as of August 4, 2010: 60,565,682.

---



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, 2010 |          | December 31, 2009* |  
|                                                                                                                                                                     |  |               |          |                    |  
|                                                                                                                                                                     |  |               |          |                    |  
|ASSETS                                                                                                                                                               |  |               |          |                    |   |          |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Current assets:                                                                                                                                                      |  |               |          |                    |   |          |  
|Cash and cash equivalents                                                                                                                                            |  | $             | 399,180  |                    | $ | 50,440   |  
|Short-term investments                                                                                                                                               |  |               | 35,381   |                    |   | 53,670   |  
|Accounts receivable, net                                                                                                                                             |  |               | 2,094    |                    |   | 671      |  
|Other current assets                                                                                                                                                 |  |               | 5,221    |                    |   | 6,257    |  
|Current assets of discontinued operations                                                                                                                            |  |               |         |                    |   | 34,174   |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Total current assets                                                                                                                                                 |  |               | 441,876  |                    |   | 145,212  |  
|Property and equipment, net of accumulated depreciation of $36,168 at
 June 30, 2010 and $35,712 at December 31, 2009                                                |  |               | 23,177   |                    |   | 26,534   |  
|Marketable securities                                                                                                                                                |  |               | 69,426   |                    |   | 95,636   |  
|Other assets                                                                                                                                                         |  |               | 1,311    |                    |   | 2,863    |  
|Noncurrent assets of discontinued operations                                                                                                                         |  |               |         |                    |   | 62,504   |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Total assets                                                                                                                                                         |  | $             | 535,790  |                    | $ | 332,749  |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|LIABILITIES
 AND STOCKHOLDERS EQUITY                                                                                                                                |  |               |          |                    |   |          |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Current liabilities:                                                                                                                                                 |  |               |          |                    |   |          |  
|Accounts payable                                                                                                                                                     |  | $             | 5,335    |                    | $ | 1,390    |  
|Accrued expenses and other                                                                                                                                           |  |               | 20,566   |                    |   | 10,338   |  
|Current liabilities of discontinued operations                                                                                                                       |  |               |         |                    |   | 13,269   |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Total current liabilities                                                                                                                                            |  |               | 25,901   |                    |   | 24,997   |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Notes payable                                                                                                                                                        |  |               | 134,499  |                    |   | 250,050  |  
|Other liabilities                                                                                                                                                    |  |               | 4,190    |                    |   | 4,419    |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Total liabilities                                                                                                                                                    |  |               | 164,590  |                    |   | 279,466  |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Commitments and contingencies                                                                                                                                        |  |               |          |                    |   |          |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Stockholders equity:                                                                                                                                                |  |               |          |                    |   |          |  
|Preferred stock - $.01 par value, authorized 3,000,000 shares; no
 shares issued and outstanding at June 30, 2010 and December 31, 2009                              |  |               |         |                    |   |         |  
|Common stock - $.01 par value, authorized 170,000,000 shares; issued
 and outstanding 60,664,195 shares at June 30, 2010 and 45,317,702 shares at
 December 31, 2009 |  |               | 607      |                    |   | 453      |  
|Additional paid-in capital                                                                                                                                           |  |               | 476,529  |                    |   | 352,047  |  
|Accumulated other comprehensive income                                                                                                                               |  |               | 1,424    |                    |   | 2,328    |  
|Accumulated deficit                                                                                                                                                  |  |               | (107,360 | )                  |   | (301,545 | )
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Total stockholders equity                                                                                                                                           |  |               | 371,200  |                    |   | 53,283   |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  
|Total liabilities and stockholders equity                                                                                                                           |  | $             | 535,790  |                    | $ | 332,749  |  
|                                                                                                                                                                     |  |               |          |                    |   |          |  

* Condensed from audited financial statements.

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

2

---



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

|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|---------------------------------------------------------------------- |  | ---------------------------- | ------ | -------------------------- | - | ------- | - | ---- | ------- | - | - | ------- | -
|                                                                       |  | Three months ended
 June 30, |        | Six months ended
 June 30, |  
|                                                                       |  |                              |        |                            |  
|                                                                       |  | 2010                         |        | 2009                       |   | 2010    |   | 2009 |        
|                                                                       |  |                              |        |                            |   |         |   |      |        
|Revenues:                                                              |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Royalties                                                              |  | $                            | 10,588 |                            | $ | 13,170  |   | $    | 23,489  |   | $ | 26,241  |  
|Sale of in-process research and development                            |  |                              |       |                            |   |        |   |      | 40,900  |   |   |        |  
|Contract research and development                                      |  |                              | 2,602  |                            |   |        |   |      | 5,211   |   |   |        |  
|Miscellaneous revenue                                                  |  |                              | 527    |                            |   |        |   |      | 2,277   |   |   |        |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Total revenues                                                         |  |                              | 13,717 |                            |   | 13,170  |   |      | 71,877  |   |   | 26,241  |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Expenses:                                                              |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Research and development                                               |  |                              | 10,131 |                            |   | 11,805  |   |      | 21,646  |   |   | 22,894  |  
|Research and development  specialty and contracted services           |  |                              | 1,759  |                            |   | 9,390   |   |      | 4,818   |   |   | 15,083  |  
|General and administrative                                             |  |                              | 5,772  |                            |   | 10,087  |   |      | 15,611  |   |   | 19,633  |  
|General and administrative  contracted services                       |  |                              | 421    |                            |   |        |   |      | 1,821   |   |   |        |  
|Restructuring charge                                                   |  |                              | 710    |                            |   |        |   |      | 10,599  |   |   | 693     |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Total expenses                                                         |  |                              | 18,793 |                            |   | 31,282  |   |      | 54,495  |   |   | 58,303  |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Operating (loss) income                                                |  |                              | (5,076 | )                          |   | (18,112 | ) |      | 17,382  |   |   | (32,062 | )
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Other income (expense):                                                |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Investment income, net                                                 |  |                              | 811    |                            |   | 1,152   |   |      | 1,782   |   |   | 2,119   |  
|Interest expense                                                       |  |                              | (1,480 | )                          |   | (2,751  | ) |      | (4,156  | ) |   | (6,013  | )
|Other, net                                                             |  |                              | (31    | )                          |   | 54      |   |      | (30     | ) |   | 4,883   |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Total other income (expense)                                           |  |                              | (700   | )                          |   | (1,545  | ) |      | (2,404  | ) |   | 989     |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|(Loss) income from continuing operations, before income tax benefit    |  |                              | (5,776 | )                          |   | (19,657 | ) |      | 14,978  |   |   | (31,073 | )
|Income tax benefit                                                     |  |                              | (205   | )                          |   |        |   |      | (205    | ) |   |        |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|(Loss) income from continuing operations                               |  |                              | (5,571 | )                          |   | (19,657 | ) |      | 15,183  |   |   | (31,073 | )
|(Loss) income and gain from discontinued operations, net of income tax |  |                              | (51    | )                          |   | 14,591  |   |      | 179,002 |   |   | 32,187  |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Net (loss) income                                                      |  | $                            | (5,622 | )                          | $ | (5,066  | ) | $    | 194,185 |   | $ | 1,114   |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|(Loss) earnings per common share - continuing operations               |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Basic                                                                  |  | $                            | (0.09  | )                          | $ | (0.43   | ) | $    | 0.27    |   | $ | (0.69   | )
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Diluted                                                                |  | $                            | (0.09  | )                          | $ | (0.43   | ) | $    | 0.23    |   | $ | (0.69   | )
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|(Loss) earnings per common share  discontinued operations             |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Basic                                                                  |  |                              |       |                            | $ | 0.32    |   | $    | 3.16    |   | $ | 0.71    |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Diluted                                                                |  |                              |       |                            | $ | 0.32    |   | $    | 2.38    |   | $ | 0.71    |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|(Loss) earnings
     per common share  net (loss) income              |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Basic                                                                  |  | $                            | (0.09  | )                          | $ | (0.11   | ) | $    | 3.43    |   | $ | 0.02    |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Diluted                                                                |  | $                            | (0.09  | )                          | $ | (0.11   | ) | $    | 2.61    |   | $ | 0.02    |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Weighted average shares  basic                                        |  |                              | 60,849 |                            |   | 45,187  |   |      | 56,640  |   |   | 45,036  |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  
|Weighted average shares - diluted                                      |  |                              | 60,849 |                            |   | 45,187  |   |      | 75,209  |   |   | 45,036  |  
|                                                                       |  |                              |        |                            |   |         |   |      |         |   |   |         |  

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

3

---



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

|                                                                                                                           |  |                            |         |      |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | ---- | - | ------- | -
|                                                                                                                           |  | Six months ended
 June 30, |        
|                                                                                                                           |  |                            |        
|                                                                                                                           |  | 2010                       |         | 2009 |  
|                                                                                                                           |  |                            |         |      |  
|                                                                                                                           |  |                            |         |      |  
|Cash flows from operating activities:                                                                                      |  |                            |         |      |   |         |  
|Net income                                                                                                                 |  | $                          | 194,185 |      | $ | 1,114   |  
|Income from discontinued operations                                                                                        |  |                            | 179,002 |      |   | 32,187  |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Income (loss) from continuing operations                                                                                   |  |                            | 15,183  |      |   | (31,073 | )
|Adjustments to reconcile income (loss) from continuing operations to
 net cash provided by (used in) operating activities: |  |                            |         |      |   |         |  
|Depreciation                                                                                                               |  |                            | 3,047   |      |   | 2,930   |  
|Write-down of property and equipment                                                                                       |  |                            | 895     |      |   |        |  
|Share-based compensation                                                                                                   |  |                            | 5,314   |      |   | 4,064   |  
|Amortization and write-off of debt issuance costs                                                                          |  |                            | 1,851   |      |   | 863     |  
|(Gain) loss on sale of marketable securities                                                                               |  |                            | (128    | )    |   | 157     |  
|Gain on redemption of notes payable                                                                                        |  |                            |        |      |   | (4,848  | )
|Amortization of debt securities premium/discount                                                                           |  |                            | 1,232   |      |   | (1,268  | )
|Changes in operating assets and liabilities                                                                                |  |                            | 13,063  |      |   | 23,256  |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Net cash provided by (used in) operating activities of continuing
 operations                                              |  |                            | 40,457  |      |   | (5,919  | )
|Net cash provided by operating activities of discontinued operations                                                       |  |                            |        |      |   | 5,958   |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Net cash provided by (used in) operating activities                                                                        |  |                            | 40,457  |      |   | 39      |  
|                                                                                                                           |  |                            |         |      |   |         |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Cash flows from investing activities:                                                                                      |  |                            |         |      |   |         |  
|Proceeds from sale of business, net                                                                                        |  |                            | 262,608 |      |   |        |  
|Purchase of property and equipment                                                                                         |  |                            | (502    | )    |   | (737    | )
|Proceeds from sale of marketable securities                                                                                |  |                            | 9,238   |      |   | 23,805  |  
|Purchase of marketable securities                                                                                          |  |                            | (1,544  | )    |   | (60,160 | )
|Maturities of marketable securities                                                                                        |  |                            | 34,796  |      |   | 26,032  |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Net cash provided by (used in) investing activities of continuing
 operations                                              |  |                            | 304,596 |      |   | (11,060 | )
|Net cash used in investing activities of discontinued operations                                                           |  |                            |        |      |   | (5,958  | )
|                                                                                                                           |  |                            |         |      |   |         |  
|Net cash provided by (used in) investing activities                                                                        |  |                            | 304,596 |      |   | (17,018 | )
|                                                                                                                           |  |                            |         |      |   |         |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Cash flows from financing activities:                                                                                      |  |                            |         |      |   |         |  
|Redemption of notes payable                                                                                                |  |                            |        |      |   | (15,602 | )
|Proceeds from issuance of common stock                                                                                     |  |                            | 25,289  |      |   | 476     |  
|Repurchase of common stock                                                                                                 |  |                            | (18,136 | )    |   |        |  
|Withholding taxes  share based compensation                                                                               |  |                            | (3,328  | )    |   | (618    | )
|Redemptions from employee stock purchase plan                                                                              |  |                            | (138    | )    |   | (143    | )
|                                                                                                                           |  |                            |         |      |   |         |  
|Net cash provided by (used in) financing activities of continuing
 operations                                              |  |                            | 3,687   |      |   | (15,887 | )
|                                                                                                                           |  |                            |         |      |   |         |  
|Net cash provided by (used in) financing activities                                                                        |  |                            | 3,687   |      |   | (15,887 | )
|                                                                                                                           |  |                            |         |      |   |         |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                                       |  |                            | 348,740 |      |   | (32,866 | )
|                                                                                                                           |  |                            |         |      |   |         |  
|Cash and cash equivalents at beginning of period                                                                           |  |                            | 50,440  |      |   | 79,711  |  
|                                                                                                                           |  |                            |         |      |   |         |  
|                                                                                                                           |  |                            |         |      |   |         |  
|Cash and cash equivalents at end of period                                                                                 |  | $                          | 399,180 |      | $ | 46,845  |  
|                                                                                                                           |  |                            |         |      |   |         |  

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

4

---



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

(1) Organization and Basis of Presentation

On January
29, 2010, Enzon Pharmaceuticals, Inc. and its subsidiaries (Enzon or the Company)
consummated the sale of its specialty pharmaceutical business comprised
principally of the Companys products and contract manufacturing segments.
These divested components are reflected in these condensed consolidated
financial statements as discontinued operations and historical information
related to the divested components has been reclassified accordingly. The
Company also divested of an in-process research and development component of
the specialty pharmaceutical business which is reported in revenue from
continuing operations. Refer to Note 13, Discontinued Operations, for more
information regarding the sale.

Following
the sale of the specialty pharmaceutical business, Enzon is a biopharmaceutical
company dedicated to the research and development of innovative medicines for
patients with cancer. The Company operates in one business segment, that of
discovering and developing innovative medicines for the treatment of cancer.
The Companys Principal Executive Officer (chief operating decision maker)
reviews the Companys operating results on an aggregate basis and manages the
Companys operations as a single operating unit.

The
accompanying unaudited condensed consolidated financial statements have been
prepared from the books and records of the Company in accordance with United
States generally accepted accounting principles (GAAP) for interim financial
information and Rule 10-01 of the U.S. Securities and Exchange Commission
Regulation S-X. Accordingly, these financial statements do not include all of
the information and footnotes required for complete annual financial
statements. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions about contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Such estimates
include the valuation of certain investments, long-lived assets, legal and
contractual contingencies and assumptions used in the calculation of
share-based compensation and income taxes. These estimates and assumptions are
based on managements best estimates and judgment. Management evaluates its
estimates and assumptions on an ongoing basis using historical experience, the
current economic environment and other factors that management believes to be
reasonable under the circumstances. Management adjusts such estimates and
assumptions when facts and circumstances dictate. As future events and their
effects cannot be determined with precision, actual results could differ
significantly from these estimates. Moreover, interim results are not
necessarily indicative of the results that may be expected for the year.
Changes in estimates will be reflected in the financial statements in future
periods. In the opinion of management, all adjustments (consisting only of
normal and recurring adjustments) considered necessary for a fair presentation
have been included in these financial statements. Certain prior-year amounts
have been reclassified to conform to the current period presentation. The
interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2009.

Cash payments for withholding
taxes on the exercise of share-based awards had previously been netted against share-based compensation expense within cash provided
by operating activities in the Companys statements of cash flows and reflected as a cash outflow from operating activities. The
proper classification of these amounts is in cash flows from financing activities. In the preparation of the June 30, 2010 statement of cash flows,
amounts that had previously been reported in the Companys March 31, 2010, March 31, 2009 and June 30, 2009 Forms 10-Q were revised to correct this
immaterial error. The corrected amounts of withholding taxes for these periods, which in each case is deemed to be immaterial,
are $1.9 million for the three months ended March 31, 2010 (included in the year-to-date total withholding of $3.3 million as of June 30, 2010) and
$0.6 million for the six months ended June 30, 2009 ($0.1 million for the three months ended March 31, 2009 and $0.5 million for the three months ended June 30, 2009).

Subsequent
    to the Companys
    issuance on August 3, 2010 of a press release reporting its financial results
    for the second quarter of 2010, a reclassification adjustment was made in
    the amount of $128,000 between continuing and discontinued operations. The
    change, reflected in this report on Form 10-Q for the quarterly period ended
    June 30, 2010, increased the amount of expense reported for research and
    development related to specialty and contracted services and, in turn, increased
    the loss from continuing operations for the quarter by $128,000 and decreased
    the income from continuing operations for the year-to-date period by $128,000.
    The offsetting effect of the change was to decrease the reported loss from
    discontinued operations for the second quarter of 2010 and increase the six-month
    income and gain from discontinued operations from those amounts as reflected
    in the August 3, 2010 earnings release. There was no effect on reported per-share
amounts.

(2) New Accounting Standards

Enhanced
Disclosures about Fair Value  In January 2010, new disclosures became
effective relating to fair value measurements. These enhanced disclosures have
been fully adopted by the Company and are reflected in Note 3  Investments and
Marketable Securities and Note 4  Notes Payable. The adoption of these
disclosure rules had no effect on the Companys financial position, results of
operations or cash flows.

Revenue
Recognition  Multiple-Deliverable Revenue Arrangements  In October 2009, the
Financial Accounting Standards Board (FASB) amended the Accounting Standards
Codification to provide guidance for measuring and allocating consideration
received among the separate units of accounting in revenue arrangements with
multiple deliverables. The new standard establishes a hierarchy of evidence for
determining each units selling price which includes vendor-specific objective
evidence, third-party evidence or the vendors best estimate in the absence of
the other alternatives. The Company adopted the new standard on a prospective
basis effective January 1, 2010, as permitted, in advance of the normal
effective date of January 1, 2011. The new standard was employed in

5

---



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

the measurement of the sale of in-process research and development that was a component of the sale of the Companys divestiture of its
specialty pharmaceutical business. See Note 8  Sale of In-Process Research and
Development.

Milestone
Method of Revenue Recognition  Pursuant to a final consensus of the Emerging
Issues Task Force of the Financial Accounting Standards Board ratified on March
31, 2010, guidance is provided for determining when milestone payments received
in conjunction with research and development efforts performed may be
recognized. The guidance is effective no later than the third quarter of 2010 with
early adoption permitted. The Company is evaluating the new guidance which is
to be implemented prospectively and has preliminarily concluded that it does
not believe adoption of the guidance will have a material effect on its
financial position, results of operations or cash flows.

(3) Investments and Marketable Securities

The
amortized cost, gross unrealized holding gains or losses, and fair value of the
Companys investments by major security type at June 30, 2010 were as follows
(in thousands):

|                                        |  |                 |         |                                  |   |                                   |  |              |        |   |   |         | 
|--------------------------------------- |  | --------------- | ------- | -------------------------------- | - | --------------------------------- |  | ------------ | ------ | - | - | ------- | 
|                                        |  | Amortized
 Cost |         | Gross
 Unrealized
 Holding Gains |   | Gross
 Unrealized
 Holding Losses |  | Fair
 Value* |       
|                                        |  |                 |         |                                  |   |                                   |  |              |       
|                                        |  |                 |         |                                  |   |                                   |  |              |        |   |   |         | 
|Corporate debt                          |  | $               | 76,352  |                                  | $ | 1,021                             |  | $            | (564   | ) | $ | 76,809  | 
|U.S. government-sponsored entities debt |  |                 | 15,296  |                                  |   | 47                                |  |              |       |   |   | 15,343  | 
|Non-U.S. government debt                |  |                 | 7,893   |                                  |   | 104                               |  |              |       |   |   | 7,997   | 
|Auction rate security                   |  |                 | 892     |                                  |   |                                  |  |              | (573   | ) |   | 319     | 
|Other                                   |  |                 | 3,653   |                                  |   | 686                               |  |              |       |   |   | 4,339   | 
|                                        |  |                 |         |                                  |   |                                   |  |              |        |   |   |         | 
|                                        |  | $               | 104,086 |                                  | $ | 1,858                             |  | $            | (1,137 | ) | $ | 104,807 | 
|                                        |  |                 |         |                                  |   |                                   |  |              |        |   |   |         | 

* Includes short-term investments of
$35,381 and marketable securities of $69,426 at June 30, 2010.

The
amortized cost, gross unrealized holding gains or losses, and fair value of the
Companys investments by major security type at December 31, 2009 were as
follows (in thousands):

|                                        |  |                 |         |                                  |   |                                   |  |              |      |   |   |         | 
|--------------------------------------- |  | --------------- | ------- | -------------------------------- | - | --------------------------------- |  | ------------ | ---- | - | - | ------- | 
|                                        |  | Amortized
 Cost |         | Gross
 Unrealized
 Holding Gains |   | Gross
 Unrealized
 Holding Losses |  | Fair
 Value* |     
|                                        |  |                 |         |                                  |   |                                   |  |              |     
|                                        |  |                 |         |                                  |   |                                   |  |              |     
|Corporate debt                          |  | $               | 114,118 |                                  | $ | 1,362                             |  | $            | (17  | ) | $ | 115,463 | 
|U.S. government-sponsored entities debt |  |                 | 5,713   |                                  |   | 73                                |  |              |     |   |   | 5,786   | 
|Non-U.S. government debt                |  |                 | 23,298  |                                  |   | 12                                |  |              | (94  | ) |   | 23,216  | 
|Auction rate security                   |  |                 | 877     |                                  |   |                                  |  |              | (558 | ) |   | 319     | 
|Other                                   |  |                 | 3,714   |                                  |   | 810                               |  |              | (2   | ) |   | 4,522   | 
|                                        |  |                 |         |                                  |   |                                   |  |              |      |   |   |         | 
|                                        |  | $               | 147,720 |                                  | $ | 2,257                             |  | $            | (671 | ) | $ | 149,306 | 
|                                        |  |                 |         |                                  |   |                                   |  |              |      |   |   |         | 

* Includes short-term investments of
$53,670 and marketable securities of $95,636 at December 31, 2009.

All
corporate, U.S. government-sponsored entity and non-U.S. government debt
investments are classified as available for sale. The auction rate security,
also available for sale, is classified as a long-term investment due to its
perpetual term and the Companys intent to hold. Other securities include
investments of participants in the Companys Executive Deferred Compensation
Plan (predominantly mutual fund shares) totaling $3.7 million of fair value as
of June 30, 2010 and $3.8 million as of December 31, 2009. There is a
non-current liability that offsets the aggregate deferred compensation plan
assets. In addition, other securities included $0.6 million and $0.7 million of
fair value of corporate equity securities as of June 30, 2010 and December 31,
2009, respectively.

6

---



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

Fair value
of the Companys investments is determined in accordance with GAAP as it
relates to fair value measurements and disclosures. The relevant guidance
establishes a hierarchy of preferred measures based upon the level of market
observability used in determining the investments fair value. The preferred
level is that which is derived from readily available quoted prices in active
markets (Level 1). As the table below indicates, the majority of the Companys
investments and marketable securities are valued based on Level 1 inputs.
Failed auctions for the auction rate security have resulted in the need for the
Company to seek alternative measures of fair value which the Company deems to
be Level 2. The model used to value the auction rate security considers listed
quotes of bonds with comparable maturities, the underlying collateral of the
security and the issuers credit worthiness.

The table
below indicates the fair value measurements employed as of June 30, 2010 (in
thousands):

|                                        |  |                                                                     |         |                                                   |   |       |  |   |         | 
|--------------------------------------- |  | ------------------------------------------------------------------- | ------- | ------------------------------------------------- | - | ----- |  | - | ------- | 
|                                        |  | Quoted
 Prices
 in Active
 Markets for
 Identical Assets
 (Level 1) |         | Significant
 Other
 Observable
 Inputs
 (Level 2) |   | Total | 
|                                        |  |                                                                     |         |                                                   |   |       | 
|Corporate debt                          |  | $                                                                   | 76,809  |                                                   | $ |      |  | $ | 76,809  | 
|U.S. government-sponsored entities debt |  |                                                                     | 15,343  |                                                   |   |      |  |   | 15,343  | 
|Non-U.S. government debt                |  |                                                                     | 7,997   |                                                   |   |      |  |   | 7,997   | 
|Auction rate security                   |  |                                                                     |        |                                                   |   | 319   |  |   | 319     | 
|Other                                   |  |                                                                     | 4,339   |                                                   |   |      |  |   | 4,339   | 
|                                        |  |                                                                     |         |                                                   |   |       |  |   |         | 
|                                        |  | $                                                                   | 104,488 |                                                   | $ | 319   |  | $ | 104,807 | 
|                                        |  |                                                                     |         |                                                   |   |       |  |   |         | 

There were
no transfers between Level 1 and Level 2 investments during the six months
ended June 30, 2010.

Maturities
of marketable debt securities, excluding securities related to the Companys
Executive Deferred Compensation Plan, at June 30, 2010 were as follows (in
thousands):

|                                       |  |                 |         |             |   |         | 
|-------------------------------------- |  | --------------- | ------- | ----------- | - | ------- | 
|Twelve-Month
 Periods Ending
 June 30, |  | Amortized
 Cost |         | Fair
 Value |  
|                                       |  |                 |         |             |  
|                                       |  |                 |         |             |   |         | 
|2011                                   |  | $               | 34,515  |             | $ | 34,746  | 
|2012                                   |  |                 | 57,825  |             |   | 58,176  | 
|2013                                   |  |                 | 7,201   |             |   | 7,227   | 
|After 2014                             |  |                 | 892     |             |   | 319     | 
|                                       |  |                 |         |             |   |         | 
|                                       |  | $               | 100,433 |             | $ | 100,468 | 
|                                       |  |                 |         |             |   |         | 

The Company
realized a net loss of $16,000 during the quarter ended June 30, 2010 from the
sale of investments of the deferred compensation plan. The cost of securities
is based on the specific-identification method.

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, 2010 (in thousands):

|                      |  |                     |       |                      |   |             |   |                  |     |  |   |      |  
|--------------------- |  | ------------------- | ----- | -------------------- | - | ----------- | - | ---------------- | --- |  | - | ---- | -
|                      |  | Less Than 12 Months |       | 12 Months or Greater |  
|                      |  |                     |       |                      |  
|                      |  | Fair
 Value         |       | Unrealized
 Loss     |   | Fair
 Value |   | Unrealized
 Loss |    
|                      |  |                     |       |                      |   |             |   |                  |    
|Corporate debt *      |  | $                   | 7,045 |                      | $ | (564        | ) | $                |    |  | $ |     |  
|Auction rate security |  |                     |      |                      |   |            |   |                  | 319 |  |   | (573 | )
|                      |  |                     |       |                      |   |             |   |                  |     |  |   |      |  
|                      |  | $                   | 7,045 |                      | $ | (564        | ) | $                | 319 |  | $ | (573 | )
|                      |  |                     |       |                      |   |             |   |                  |     |  |   |      |  

* The
Company invests in bonds and notes that are rated A or better, as dictated by
its investment policy.

7

---



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

Impairment
assessments are made at the individual security level each reporting period.
When the fair value of an investment is less than its cost at the balance sheet
date, a determination is made as to whether the impairment is other than
temporary and, if it is other than temporary, an impairment loss is recognized
in earnings equal to the difference between the investments amortized or
adjusted cost and fair value at such date.

As of June
30, 2010, the fair value of the Companys holdings of corporate debt securities
exceeded amortized cost basis on a net basis by approximately $0.5 million. The
net unrealized holding loss was reflective of current market conditions related
primarily to one issuer which is being monitored by the Company. The changes in
the market value of corporate investments are generally due to changes in
interest rates and not the credit quality of the issuer. As of June 30, 2010,
the Company does not intend to dispose of these securities before recovery of
their cost basis nor is it more likely than not that the Company will be
required to do so. Accordingly, the Company does not consider any of its
investments in corporate debt to be other-than-temporarily impaired at June 30,
2010 and there has been no recognition of an unrealized loss in earnings.

The Company
has one investment in an auction rate security at risk with an original cost
basis of $1.5 million that is being carried at an estimated fair value of $0.3
million. An estimated credit loss of $0.6 million was previously recorded in
earnings based upon an estimate of the present value of expected cash flows
from this investment. The Company does not intend to dispose of this security
before recovery of its cost basis nor is it more likely than not that the
Company will be required to do so. There have been no additions or adjustments
to the estimated amount of the credit loss associated with the Companys
holding of the auction rate security other than accretion of estimated future
cash flows expected to be received upon settlement. The balance of the amount
related to credit losses on this auction rate security as of June 30, 2010 was
$0.6 million. As of June 30, 2010, there is a $0.6 million unrealized loss
related to this auction rate security, measured from the book basis, which is
included as part of accumulated other comprehensive income. The Company will
continue to monitor this instrument and the expected cash flows to be derived
from it. It is reasonably possible that the Companys estimate of expected cash
flows to be received could change based on the financial condition of the
issuer or macroeconomic conditions and some or all of the amount currently
reported in accumulated other comprehensive income could be recognized in
earnings at some future date.

(4) Notes Payable

The 4%
convertible senior notes mature on June 1, 2013 unless earlier redeemed,
repurchased or converted. The 4% notes are senior unsecured obligations and
rank equal to other senior unsecured debt of the Company and all future senior
unsecured debt of the Company. The 4% notes are convertible at the option of
the holders into the Companys common stock at a conversion price of $9.55 per
share. If the closing price of the Companys common stock for at least 20
trading days in the 30-consecutive-trading-day period ending on the date one
day prior to the date of a notice of redemption is greater than 140 percent of
the applicable conversion price on the date of such notice, the Company, at its
option, may redeem the 4% notes in whole or in part, at a redemption price in
cash equal to 100 percent of the principal amount of the 4% notes to be
redeemed, plus accrued and unpaid interest, if any, to the redemption date.

The January
2010 sale of the specialty pharmaceutical business constituted a fundamental
change as that term is defined in the indenture for the Companys 4%
convertible senior notes. Pursuant to the terms and conditions of the
indenture, the Company made an offer in February 2010 to repurchase any or all
of the outstanding notes at a price equal to 100% of the principal amount plus
accrued and unpaid interest. No notes were tendered pursuant to the offer which
expired on March 5, 2010. The fundamental change also triggered a change in the
conversion rate for the notes. For the period extending from January 29, 2010
to March 4, 2010, holders of the notes had the opportunity to convert their
notes into shares of common stock of the Company at an enhanced conversion rate
of 116.535 shares per $1,000 principal amount (from the original conversion
rate of 104.712 shares per $1,000 principal amount). The increased conversion
rate was based on the average of the closing sale price per share of the
Companys common stock in the five trading-day period prior to the

8

---



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

transaction constituting the fundamental change. During the enhanced conversion period,
$115.6 million principal amount of notes were converted into approximately 13.5
million shares of common stock of the Company, reducing the principal balance
of the notes outstanding as of June 30, 2010 to $134.5 million from the $250.1
million outstanding as of December 31, 2009. The note conversion triggered the
write-off of $1.5 million of debt issuance costs. Also, note holders who
elected to convert their holdings into shares of common stock of the Company waived
payment of interest accumulated from the last interest payment date of
December 1, 2009 to the date of
conversion. This had a favorable effect on earnings of approximately $0.8
million. Subsequent to the March 4, 2010 enhanced conversion period, the original
conversion rate of 104.712 shares per $1,000 principal amount of notes is again
in effect.

During the
first quarter of 2009, the Company repurchased $20.5 million principal amount
of its 4% notes at a discount to par resulting in a net gain of approximately
$4.5 million net of the write-off of $0.3 million of debt issuance costs. No
such purchases were made during the second quarter of 2009.

Interest on
the 4% notes is payable on June 1 and December 1 of each year. Accrued interest
amounted to $0.4 million and $0.8 million as of June 30, 2010 and December 31,
2009, respectively.

The fair
value of the 4% Convertible Senior Notes payable as of June 30, 2010 is $156.9
million. Fair value of the Companys note is based on quoted market prices.

(5) Stockholders Equity

On December
3, 2009, the Company announced a share repurchase program, under which the
Company may purchase up to $50.0 million of the Companys outstanding common
shares. During the three months ended June 30, 2010, the Company repurchased
approximately 1,189,000 shares at a cost of $12.4 million or approximately
$10.41 average cost per share. This brings cumulative purchases under this
program  December 2009 through June 30, 2010 - to approximately 1,943,000
shares at a total cost of $20.2 million. The plan continues in effect.

(6) Comprehensive (Loss) Income

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

|                                                                                             |  |                              |        |                            |   |        |   |      |         |   |   |       | 
|-------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | -------------------------- | - | ------ | - | ---- | ------- | - | - | ----- | 
|                                                                                             |  | Three months ended
 June 30, |        | Six months ended
 June 30, |  
|                                                                                             |  |                              |        |                            |  
|                                                                                             |  | 2010                         |        | 2009                       |   | 2010   |   | 2009 |        
|                                                                                             |  |                              |        |                            |   |        |   |      |        
|                                                                                             |  |                              |        |                            |   |        |   |      |        
|Net (loss) income                                                                            |  | $                            | (5,622 | )                          | $ | (5,066 | ) | $    | 194,185 |   | $ | 1,114 | 
|                                                                                             |  |                              |        |                            |   |        |   |      |         |   |   |       | 
|Other comprehensive income (loss):                                                           |  |                              |        |                            |   |        |   |      |         |   |   |       | 
|Unrealized gain (loss) on securities that
 arose during the period *                         |  |                              | (1,053 | )                          |   | 1,846  |   |      | (737    | ) |   | 2,215 | 
|Currency translation adjustment *                                                            |  |                              | (226   | )                          |   | 309    |   |      | (39     | ) |   | 202   | 
|Reclassification adjustments for (gain)
 loss on sale of securities included in net income*: |  |                              | (16    | )                          |   | 4      |   |      | (128    | ) |   | 157   | 
|                                                                                             |  |                              |        |                            |   |        |   |      |         |   |   |       | 
|Total other comprehensive income (loss)                                                      |  |                              | (1,295 | )                          |   | 2,159  |   |      | (904    | ) |   | 2,574 | 
|                                                                                             |  |                              |        |                            |   |        |   |      |         |   |   |       | 
|Comprehensive (loss) income                                                                  |  | $                            | (6,917 | )                          | $ | (2,907 | ) | $    | 193,281 |   | $ | 3,688 | 
|                                                                                             |  |                              |        |                            |   |        |   |      |         |   |   |       | 

* Information has not been tax-effected due to an estimated annual effective tax
rate of zero.

9

---



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

(7) Supplemental Cash Flow Information

The Company
considers all highly liquid investment securities with original maturities of
three months or less to be cash equivalents. During the six-month period ended
June 30, 2010, there were payments of interest related to the Companys 4%
notes in the amount of $2.7 million. During the six months ended June 30, 2010,
the Company had a noncash conversion of $115.6 million principal amount of the
4% notes into approximately 13.5 million shares of its common stock. The
first-quarter conversion of notes resulted in a waiver of accumulated interest
which amounted to approximately $0.8 million in interest savings for the
Company. In the first six months of 2009, there was a payment of interest on
the Companys 4% notes payable of $5.2 million. Income tax payments were $0.1
million for each of the six month periods ended June 30, 2010 and 2009.

(8) Sale of In-Process Research and
Development

When the
Company sold its specialty pharmaceutical business, it retained its research
and development organization. Enzon is now a biopharmaceutical company engaged
in the research and development of medicines for patients with cancer and the
commercialization of those efforts. The Company had been engaged in studies
oriented towards the next-generation formulations of Oncaspar and Adagen, two
products that were among those sold as part of the specialty pharmaceutical
business. As the Companys first sales transaction, the in-process research and
development related to Oncaspar and Adagen was sold to the purchaser of the
specialty pharmaceutical business and $40.9 million was recognized as revenue.

In arriving
at the selling price of the in-process research and development, management
made its best estimate of its standalone fair value based on the stage of
development and future milestone payment consideration. This, in turn, was used
to determine the relative selling prices of the various components (i.e.
allocate the total proceeds received from the sale of the specialty
pharmaceutical business between the manufacturing and marketing of approved
products and the in-process research and development).

Constituting
a second deliverable to the sale of the in-process research and development, a
transition services agreement entered into with the purchaser commits the
Company to provide certain research and consulting services for a period of up
to three years following the sale. Enzon is compensated for these services at
actual cost plus a mark-up per the terms of the transition services agreement. These
services are a convenience to the purchaser, but are not of such a nature that
the work could not be performed by the purchaser or third-parties without the
Companys involvement. All necessary technology and know-how was transferred to
the purchaser at the time of the sale and the purchaser could resell the
in-process research and development asset. The activities necessary to complete
the work on the Oncaspar and Adagen next-generation formulations could be
performed by others. The in-process research and development has standalone
value.

(9) Earnings Per Common Share

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

10

---



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

|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|----------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ------------------- | - | ------- | --- | ---- | ------- |  | - | ------- | ---
|                                                                                                                  |  | Three months ended June 30, |        | Six months June 30, |  
|                                                                                                                  |  |                             |        |                     |  
|                                                                                                                  |  | 2010                        |        | 2009                |   | 2010    |     | 2009 |        
|                                                                                                                  |  |                             |        |                     |   |         |     |      |        
|(Loss) Earnings Per Common Share  Basic:                                                                         |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|(Loss) income from continuing operations                                                                          |  | $                           | (5,571 | )                   | $ | (19,657 | )   | $    | 15,183  |  | $ | (31,073 | )  
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Discontinued operations                                                                                           |  | $                           | (51    | )                   | $ | 14,591  |     | $    | 179,002 |  | $ | 32,187  |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Net (loss) income                                                                                                 |  | $                           | (5,622 | )                   | $ | (5,066  | )   | $    | 194,185 |  | $ | 1,114   |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Weighted average common shares outstanding                                                                        |  |                             | 60,849 |                     |   | 45,187  |     |      | 56,640  |  |   | 45,036  |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Basic (loss) earnings per share:                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Continuing operations                                                                                             |  | $                           | (0.09  | )                   | $ | (0.43   | )   | $    | 0.27    |  | $ | (0.69   | )  
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Discontinued operations                                                                                           |  | $                           |       |                     | $ | 0.32    |     | $    | 3.16    |  | $ | 0.71    |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Net (loss) income                                                                                                 |  | $                           | (0.09  | )                   | $ | (0.11   | )   | $    | 3.43    |  | $ | 0.02    |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|(Loss) Earnings Per Common Share  Diluted:                                                                       |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|(Loss) income from continuing operations                                                                          |  | $                           | (5,571 | )                   | $ | (19,657 | )   | $    | 15,183  |  | $ | (31,073 | )  
|Add back interest expense on 4% convertible
 notes, net of tax                                                    |  |                             |       | (1)                 |   |        | (1) |      | 2,305   |  |   |        | (1)
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Adjusted
     (loss) income from continuing operations                                                            |  | $                           | (5,571 | )                   | $ | (19,657 | )   | $    | 17,488  |  | $ | (31,073 | )  
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Discontinued operations                                                                                           |  | $                           | (51    | )                   | $ | 14,591  |     | $    | 179,002 |  | $ | 32,187  |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Adjusted
     net (loss) income                                                                                   |  | $                           | (5,622 | )                   | $ | (5,066  | )   | $    | 196,490 |  | $ | 1,114   |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Weighted average common shares outstanding                                                                        |  |                             | 60,849 |                     |   | 45,187  |     |      | 56,640  |  |   | 45,036  |    
|Weighted-average incremental shares related
 to assumed exercise of stock options and vesting of nonvested awards |  |                             |       | (1)                 |   |        | (1) |      | 1,416   |  |   |        | (1)
|Weighted-average incremental shares
 assuming conversion of 4% notes (2)                                          |  |                             |       | (1)                 |   |        | (1) |      | 17,153  |  |   |        | (1)
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Weighted-average number of common shares
 outstanding and common share equivalents                                |  |                             | 60,849 |                     |   | 45,187  |     |      | 75,209  |  |   | 45,036  |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Diluted (loss) earnings per share:                                                                                |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Continuing operations                                                                                             |  | $                           | (0.09  | )                   | $ | (0.43   | )   | $    | 0.23    |  | $ | (0.69   | )  
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Discontinued operations                                                                                           |  | $                           |       |                     | $ | 0.32    |     | $    | 2.38    |  | $ | 0.71    |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    
|Net
     (loss) income                                                                                            |  | $                           | (0.09  | )                   | $ | (0.11   | )   | $    | 2.61    |  | $ | 0.02    |    
|                                                                                                                  |  |                             |        |                     |   |         |     |      |         |  |   |         |    

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Because the continuing operations for the three months ended June 30,
 2010 and the three months and six months ended June 30, 2009 resulted in
 losses, there is no adjustment of the numerator or denominator to calculate
 diluted loss per share for those periods. To do so would be antidilutive.
 Also, a loss at the continuing operations level requires that all other
 computations of per-share amounts for the indicated periods must be made
 exclusive of potential dilutive shares. Accordingly, diluted earnings per
 share for income from discontinued operations for the three months and six
 months ended June 30, 2009 and net income for the six months ended June 30,
 2009 exclude potentially dilutive shares. In each of these instances, diluted
 earnings per share are the same as basic earnings per share.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(2) | Assumes conversion at the rate of 104.712 shares per $1,000 principal
 amount of notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

For the
three months ended June 30, 2010, approximately 16.0 million potentially
dilutive shares were anti-dilutive and were excluded from the

11

---



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

computation of earnings per share. For the three months and six months ended June 30, 2009, approximately 26.6 million and 36.7 million
potentially dilutive shares, respectively, were anti-dilutive and were excluded
from the computation of earnings per share.

(10) Restructuring

During the
second quarter of 2010, the Company wrote off certain leasehold improvements
and furnishings located at its corporate headquarters in Bridgewater, New
Jersey that were determined to be excess and without future value as a result
of the termination and relocation of several employees. The noncash charge
related to this write off was approximately $0.9 million. During the first
quarter of 2010, the Company undertook a reduction in workforce involving the
termination of 64 employees resulting in an expense of $6.1 million for
severance and related benefits for the affected employees. This related
primarily to the sale of the specialty pharmaceutical business. Several
employees who were previously engaged in activities related to the divested
business but who did not transfer to the employment of the purchaser were
provided with separation benefits after certain transition periods during which
they assisted with an orderly transfer of activities and information to the
purchaser. In addition, the Company reassessed its staffing requirements
subsequent to the sale of the specialty pharmaceutical business in light of the
lessened demands on many of its general and administrative functions. As of
June 30, 2010, $4.0 million remains as an accrued liability which is expected
to be fully paid out by the third quarter of 2011. Also, effective February 22,
2010, Jeffrey Buchalter, the Companys then President and Chief Executive
Officer, resigned from the Company for good reason (as defined in his
employment agreement with the Company). For the quarter ended March 31, 2010,
the Company expensed $3.8 million for severance payments and benefits that were
payable to Mr. Buchalter. This amount was reduced during the quarter ended June
30, 2010 by approximately $0.2 million once the termination agreement with Mr.
Buchalter was executed. Payment of amounts due to Mr. Buchalter is scheduled to
be made during the third quarter of 2010.

In the
first quarter of 2009, the Company implemented a restructuring plan involving a
reduction in workforce in the areas of general and administrative and research
and development. Costs of severance and related benefits for employees affected
by the 2009 workforce reduction amounted to $0.7 million during the first
quarter of 2009. The amounts accrued in the first quarter of 2009 were fully
paid out by the end of October 2009. A portion of the severance payments
related to a third-quarter 2009 workforce reduction related to the Companys
contract manufacturing operations had not been fully paid out as of December
31, 2009. Of the approximately $0.4 million of severance payments that remained
payable as of December 31, 2009, nearly $0.3 million was paid out during the
first six months of 2010. The remaining balance is expected to be paid out
prior to September 30, 2010.

The Company
incurred the following costs in connection with its restructuring programs
during the three months and six months ended June 30, 2010 and 2009,
respectively, (in thousands):

|                                                      |  |                              |      |                            |   |      |  |      |        |  |   |     | 
|----------------------------------------------------- |  | ---------------------------- | ---- | -------------------------- | - | ---- |  | ---- | ------ |  | - | --- | 
|                                                      |  | Three Months Ended
 June 30, |      | Six Months Ended
 June 30, |  
|                                                      |  |                              |      |                            |  
|                                                      |  | 2010                         |      | 2009                       |   | 2010 |  | 2009 |       
|                                                      |  |                              |      |                            |   |      |  |      |       
|Employee
 termination costs - 2010 program            |  | $                            | (153 | )                          | $ |     |  | $    | 9,736  |  | $ |    | 
|Employee
 termination costs - 2009 program            |  |                              |     |                            |   |     |  |      |       |  |   | 693 | 
|Write-down
 of leasehold improvements and furnishings |  |                              | 863  |                            |   |     |  |      | 863    |  |   |    | 
|                                                      |  |                              |      |                            |   |      |  |      |        |  |   |     | 
|                                                      |  | $                            | 710  |                            | $ |     |  | $    | 10,599 |  | $ | 693 | 
|                                                      |  |                              |      |                            |   |      |  |      |        |  |   |     | 

(11) Share-Based Compensation

Stock Option and Nonvested Share Awards

During the
three-month periods ended June 30, 2010 and 2009, the Company recognized
share-based compensation expense of $0.8 million and $2.1 million,
respectively, relating to stock option and nonvested share awards. During the
six-month periods ended June 30, 2010 and 2009, the Company

12

---



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

recognized share-based compensation expense of $5.3 million and $4.1 million,
respectively, for these plans. The weighted average grant price of the options
granted was $4.41 per share and fair values ranged from $4.24 to $4.47 per
share. The fair value of the options granted during the six months ended June
30, 2010 was $0.7 million. The nonvested shares granted during the six months
had a weighted average grant-date fair value of $9.96 per share for an
aggregate fair value of $1.0 million. The Company uses historical data to estimate
forfeiture rates. Activity in options and nonvested shares during the
six-months ended June 30, 2010 and related balances outstanding as of that date
are reflected below (in thousands).

|                                                      |  |         |        |                    |  |       |  
|----------------------------------------------------- |  | ------- | ------ | ------------------ |  | ----- | -
|                                                      |  | Options |        | Nonvested 
 Shares | 
|                                                      |  |         |        |                    | 
|Outstanding
 at January 1, 2010                       |  |         | 8,369  |                    |  | 1,069 |  
|Granted                                               |  |         | 153    |                    |  | 103   |  
|Exercised and vested                                  |  |         | (3,248 | )                  |  | (879  | )
|Expired and forfeited                                 |  |         | (114   | )                  |  | (2    | )
|                                                      |  |         |        |                    |  |       |  
|Outstanding
 at June 30, 2010                         |  |         | 5,160  |                    |  | 291   |  
|                                                      |  |         |        |                    |  |       |  
|                                                      |  |         |        |                    |  |       |  
|Options
 vested and expected to vest at June 30, 2010 |  |         | 5,047  |                    |  |       |  
|                                                      |  |         |        |                    |  |       |  
|                                                      |  |         |        |                    |  |       |  
|Options
 exercisable at June 30, 2010                 |  |         | 4,722  |                    |  |       |  
|                                                      |  |         |        |                    |  |       |  

As of June
30, 2010, there was $1.0 million of unrecognized compensation cost related to
unvested options that the Company expects to recognize over a weighted-average
period of 13 months and $1.3 million of unrecognized compensation cost related
to nonvested shares expected to be recognized over a weighted-average period of
10 months.

In
    the second quarter of 2010, withholding of income taxes on exercise of options
amounted to $1.4 million which exceeded the $0.8 million of expense resulting
in a net decrease to additional paid-in capital of $0.6 million. In the second
quarter of 2009, withholding was $0.5 million, which partially offset expense
and resulted in a net increase in additional paid-in capital of $1.6 million.
Withholding amounted to $3.3 million and $0.6 million in each respective six-month period
resulting in net increases to additional paid-in capital of $2.0 million and
$3.5 million, respectively.

(12) Income Taxes

During the
three months and six months ended June 30, 2010, the Company recorded a net
income tax benefit of $0.2 million consisting principally of a Canadian
transfer pricing refund. During the three months and six months ended June 30,
2009, the Company recorded no income tax expense. The Company did not recognize
a U.S. Federal income tax provision for the first half of 2010 or 2009 as the
estimated annual effective tax rate was zero. As of June 30, 2010, 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.

(13) Discontinued Operations

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

13

---



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

Reported amounts

Summary
results of operations of the specialty pharmaceutical business through January
29, 2010 and for the three months and six months ended June 30, 2010 and 2009,
respectively, and components of the net gain on the transaction were as follows
(in thousands):

|                                                                        |  |                    |     |                  |   |               |  |               |         |  |   |        |  
|----------------------------------------------------------------------- |  | ------------------ | --- | ---------------- | - | ------------- |  | ------------- | ------- |  | - | ------ | -
|                                                                        |  | Three Months Ended |     | Six Months Ended |  
|                                                                        |  | June 30, 2010      |     | June 30, 2009    |   | June 30, 2010 |  | June 30, 2009 |        
|                                                                        |  |                    |     |                  |   |               |  |               |         |  |  
|Revenues                                                                |  | $                  |    |                  | $ | 34,024        |  | $             | 8,720   |  | $ | 69,591 |  
|                                                                        |  |                    |     |                  |   |               |  |               |         |  |   |        |  
|Income before income tax                                                |  | $                  |    |                  | $ | 14,591        |  | $             | 3,620   |  | $ | 32,205 |  
|Income tax provision                                                    |  |                    |    |                  |   |              |  |               |        |  |   | (18    | )
|(Loss) gain on sale of discontinued
 operations, net of income tax      |  |                    | (51 | )                |   |              |  |               | 175,382 |  |   |       |  
|                                                                        |  |                    |     |                  |   |               |  |               |         |  |   |        |  
|(Loss) income and gain from discontinued
 operations, net of income tax |  | $                  | (51 | )                | $ | 14,591        |  | $             | 179,002 |  | $ | 32,187 |  
|                                                                        |  |                    |     |                  |   |               |  |               |         |  |   |        |  

The cash
proceeds received from the purchaser, the sigma-tau Group, including the
second-quarter 2010 working capital adjustment amounted to approximately $308.0
million. Transaction costs amounted to approximately $5.0 million reducing net
proceeds to approximately $303.0 million. Of this amount, $40.9 million was
allocated to the sale of in-process research and development. The net proceeds
then attributable to discontinued operations amounted to $262.6 million and
this amount less the book basis in the respective assets and liabilities (see
below) yielded the gain from discontinued operations of $175.4 million.

The sale is
a taxable transaction for federal income tax purposes. The Company does not
anticipate that it will incur significant tax liabilities as a result of the
transaction due to the tax basis it has in the disposed of assets and the
projected 2010 tax loss from operations. The potential receipt of milestone
and/or royalty payments will also be taxable events, but the tax consequences
of these payments cannot be estimated at this time.

There have
been no allocations of corporate interest or general and administrative
expenses to discontinued operations.

The carrying amounts of major classes of assets and liabilities of the
specialty pharmaceutical business as adjusted were as follows (in thousands):

|                                                |  |                  |        |                   |   |        | 
|----------------------------------------------- |  | ---------------- | ------ | ----------------- | - | ------ | 
|                                                |  | January 29, 2010 |        | December 31, 2009 |  
|                                                |  |                  |        |                   |  
|Trade
 accounts receivable, net                 |  | $                | 11,886 |                   | $ | 15,026 | 
|Inventories                                     |  |                  | 19,516 |                   |   | 17,734 | 
|Other
 current assets                           |  |                  | 693    |                   |   | 1,414  | 
|                                                |  |                  |        |                   |   |        | 
|Current assets of discontinued operations       |  | $                | 32,095 |                   | $ | 34,174 | 
|                                                |  |                  |        |                   |   |        | 
|Property and
 equipment, net                    |  | $                | 12,621 |                   | $ | 12,703 | 
|Amortizable
 intangible assets, net             |  |                  | 48,896 |                   |   | 49,801 | 
|                                                |  |                  |        |                   |   |        | 
|Non-current assets of discontinued
 operations  |  | $                | 61,517 |                   | $ | 62,504 | 
|                                                |  |                  |        |                   |   |        | 
|Trade
 accounts payable                         |  | $                | 700    |                   | $ | 2,875  | 
|Accrued
 expenses                               |  |                  | 5,763  |                   |   | 10,394 | 
|                                                |  |                  |        |                   |   |        | 
|Current liabilities of discontinued
 operations |  | $                | 6,463  |                   | $ | 13,269 | 
|                                                |  |                  |        |                   |   |        | 

Transition Services Agreement

Pursuant to
a transition services agreement with the sigma-tau Group, Enzon began
performing product-support research and development and various general and
administrative functions for the purchasing parties during the first quarter of
2010. The research and development work is intended to facilitate the

14

---



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

transfer
of certain technologies associated with Oncaspar and Adagen to the purchaser
but is not of such a nature that the work could not be performed by the purchaser or third-parties without
the Companys involvement. The Company will provide such transfer services for
a period of up to three years following the closing. For a period of up to
twelve months following the closing, the Company will provide the purchaser
with certain general, administrative services.

Enzon is
being compensated for the research and development and general and
administrative services outlined above at actual costs plus a mark-up per the
terms of the transition services agreement. These revenues and the
corresponding expenses are being reflected in the Companys continuing
operating results. None of these services confers upon the Company the ability
to influence the operating and/or financial policies of our former specialty
pharmaceutical business under its new ownership.

(14) Commitments and Contingent Liabilities

In
December 2004, the Company entered into an employment agreement with Jeffrey H.
Buchalter, the Companys former President and Chief Executive Officer. The
agreement, as amended, provided that in the event Mr. Buchalters employment were to be terminated
for good reason (as defined therein), Mr. Buchalter would be entitled to
receive: (i) any unpaid base salary through the date of termination plus any
earned but unpaid bonus for the fiscal year, (ii) a lump sum cash payment equal
to four times his annual base salary, (iii) a pro rata portion of his target
bonus for the year in which the termination occurs and (iv) continuation of
certain fringe benefits. In addition, Mr. Buchalter would continue to be
entitled to any deferred compensation and any other unpaid amounts and benefits
earned and vested prior to or as a result of his termination. Moreover, in the
event of a termination of his employment for good reason, full vesting of all
of Mr. Buchalters unvested equity awards as of the termination date might also
be triggered. The agreement stipulates that the Company would reimburse Mr.
Buchalter for his reasonable attorneys fees incurred in connection with any
dispute arising from the employment agreement in which Mr. Buchalter proceeded
in good faith.

On February
19, 2010, Jeffrey Buchalter resigned as President and Chief Executive Officer
and as a director of the Company for good reason (as defined in the
employment agreement), effective as of February 22, 2010. For the six months
ended June 30, 2010, the Company expensed $3.6 million for severance payments
and benefits. This amount is scheduled to be paid to Mr. Buchalter in the third
quarter of 2010 in accordance with the terms of his termination agreement
entered into during the second quarter of 2010.

Litigation
has been initiated against the Company in connection with the contract
manufacturing operations it owned through January 29, 2010. The suit relates to
the manufacture of the injectable vitamin, MVI. The customer claims breach of
contract among other damages. The case is scheduled for a mediation proceeding
on August 12, 2010. The Company is not able to estimate what, if any, loss it
may experience or the extent to which the claim may be covered by insurance.
Ultimate liability resulting from this litigation, if any, would remain the
responsibility of Enzon and would not pass to the sigma-tau Group.

15

---



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

Overview

We are a
biopharmaceutical company dedicated to the research and development of
innovative medicines for patients with cancer. Our drug development programs
utilize several cutting-edge approaches, including our industry-leading
Customized Linker Technology and messenger RNA (mRNA) antagonists using the
Locked Nucleic Acid (LNA) technology. We currently have three compounds in
human clinical development; PEG-SN38, the HIF-1 alpha antagonist and the
Survivin antagonist. We receive royalty revenues from licensing arrangements
with other companies related to sales of products developed using our proprietary
PEGylation technology.

We operate
in one business segment, that of developing and commercializing innovative
medicines for the treatment of cancer. Our Principal Executive Officer reviews
our operating results on an aggregate basis and manages the operations as a
single operating unit.

On
    January 29, 2010, we consummated the sale of our specialty pharmaceutical
    business. The cash purchase price, including certain customary working capital
    adjustments, was $308.0 million. Transaction costs amounted to approximately
    $5.0 million, reducing net proceeds to approximately $303.0 million. An additional
    amount of up to $27.0 million may be received based on certain success milestones.
    In addition, through 2014 we may receive royalties of five to ten percent
    on incremental net sales above the baseline 2009 amount from the four marketed
specialty pharmaceutical products that were sold. Pursuant to a transition
services agreement, we will perform product-support research and development
    as requested by the purchaser for a period of up to three years after the
    sale. We also have been providing various general and administrative functions
    for the purchasing parties subsequent to the close of the transaction. Our
    involvement in the general administrative activities is expected to end during
    2010. In consideration for our efforts related to the transition services
    agreement, we are being compensated at actual cost plus a mark-up per the
terms of the transition services agreement.

The transaction
to sell our specialty pharmaceutical business comprised our Products and
Contract Manufacturing segments as well as in-process research and development
related to enhanced next-generation formulations of Oncaspar and Adagen. The
Products and Contract Manufacturing segments are reflected as discontinued
operations beginning in the first quarter of 2010. The sale of the in-process
research and development has been reported as an asset sale in continuing
operations in the first quarter of 2010 and not as part of discontinued
operations due to our continuing involvement with the purchasers research
efforts.

Prior-year
information has been reclassified to reflect the operations of our specialty
pharmaceutical business. Percentage changes throughout the following
Managements Discussion and Analysis are based on amounts stated in thousands
of dollars and not the rounded millions of dollars reflected in this section.

Results of Operations

Revenues:

Royalties

(millions of dollars)

|                 |  |                             |      |                           |  |      |   |      |      |           |   |      |  |  |     |   |   |      | 
|---------------- |  | --------------------------- | ---- | ------------------------- |  | ---- | - | ---- | ---- | --------- | - | ---- |  |  | --- | - | - | ---- | 
|                 |  | Three Months Ended June 30, |      | Six Months Ended June 30, | 
|                 |  |                             |      |                           | 
|                 |  | 2010                        |      | %
 Change                 |  | 2009 |   | 2010 |      | %
 Change |   | 2009 | 
|                 |  |                             |      |                           |  |      |   |      |      |           |   |      |  |  |    
|Royalty
 revenue |  | $                           | 10.6 |                           |  | (20  | ) | $    | 13.2 |           | $ | 23.5 |  |  | (10 | ) | $ | 26.2 | 
|                 |  |                             |      |                           |  |      |   |      |      |           |   |      |  |  |     |   |   |      | 

We receive
income from royalties on sales of products by other companies that use our
proprietary PEGylation technology, including PEGINTRON, marketed by Merck &
Co., Inc., Macugen, marketed by OSI Pharmaceuticals, Inc. and Pfizer, Inc. and
CIMZIA, marketed by UCB Pharma. Royalty revenue for the three months ended June
30, 2010 decreased 20 percent to $10.6 million from $13.2 million for the three
months ended June 30, 2009. On a six-month year-to-date basis, royalty revenues
declined 10 percent to $23.5 million from $26.2 million. Effective in October
2009, we no longer receive royalties from the

16

---



sale of Pegasys. Both the three-month and six-month periods ended June 30, 2009 included
Pegasys royalties. The absence of these royalties in 2010 comprised approximately
thirty percent of the total declines in each period. The remainder of the
reduction in royalties from the prior-year comparative periods was due
primarily to lower sales of PEGINTRON. We continue to evaluate the possible
sale of our PEGINTRON royalty stream.

During the
three months ended June 30, 2010, we had royalties on export sales of $9.0
million, of which $3.4 million were in Europe. This compares to $11.3 million
of export sales in the comparable three-month period of 2009, of which $4.5
million were in Europe. On a six-month basis, we had royalties on export sales
in 2010 of $19.7 million, of which $6.8 million were in Europe and $22.0
million of royalties on export sales in 2009, of which $8.4 million were in
Europe.

Sale of in-process
research and development

When we
sold our specialty pharmaceutical business, we retained our research and
development organization. We are now a biopharmaceutical company engaged in the
research and development of medicines for patients with cancer and the
commercialization of those efforts. We had been engaged in studies oriented
towards the next-generation formulations of Oncaspar and Adagen, two products
that were among those sold as part of the specialty pharmaceutical business. As
our first sales transaction, the in-process research and development related to
Oncaspar and Adagen was sold to the purchaser of the specialty pharmaceutical
business, the sigma-tau Group, and $40.9 million was recognized as revenue in
connection with the sale in the first quarter of 2010. The selling price of the
in-process research and development represents managements best estimate of
its standalone fair value based on the stage of development and future
milestone payment consideration. All necessary technology and know-how was
transferred to the purchaser at the time of the sale and the purchaser could
resell the in-process research and development asset. The activities necessary
to complete the work on the Oncaspar and Adagen next-generation formulations
could be performed by the sigma-tau Group or others.

Contract Research
and Development

Pursuant to
a transition services agreement entered into at the time of the sale of the
specialty pharmaceutical business, we began performing product-support research
and development, consulting and technology transfer functions for the sigma-tau
Group effective with the close of the sale transaction on January 29, 2010. The
transition services associated with product-support research and development are
being reported in continuing operations due to our continuing involvement in
the research and development related to the divested products. We are being
compensated for this work at actual cost plus a mark-up per the terms of the
transition services agreement. In each of the three-month periods ended March
31, 2010 and June 30, 2010, $2.6 million of revenue was generated from these
services. Our contractual obligation is to assist with these transition
services for a period of up to three years subsequent to the date of the sale.

Miscellaneous
Revenue

Also as
part of the transition services agreement referred to above, we will be
reimbursed by the sigma-tau Group for various general and administrative
expenses incurred on their behalf for a period of up to one year following the
closing of the sale. Such services include financial, human resources,
manufacturing, medical affairs, customer services and information technology.
We are being compensated for this work including reimbursement of costs incurred
plus a mark-up defined in the transition services agreement. Through June 30,
2010, approximately $2.3 million has been earned for these services of which
$0.5 million was generated during the second quarter of 2010 reflecting our
diminishing level of involvement in general and administrative matters

Research and
development

(millions of dollars)

|                                                              |  |                             |      |                           |  |      |   |      |      |           |   |      |  |  |      |   |   |      | 
|------------------------------------------------------------- |  | --------------------------- | ---- | ------------------------- |  | ---- | - | ---- | ---- | --------- | - | ---- |  |  | ---- | - | - | ---- | 
|                                                              |  | Three Months Ended June 30, |      | Six Months Ended June 30, | 
|                                                              |  |                             |      |                           | 
|                                                              |  | 2010                        |      | %
 Change                 |  | 2009 |   | 2010 |      | %
 Change |   | 2009 | 
|                                                              |  |                             |      |                           |  |      |   |      |      |           |   |      | 
|Research and development                                      |  | $                           | 10.1 |                           |  | (13  | ) | $    | 11.8 |           | $ | 21.6 |  |  | (5   | ) | $ | 22.9 | 
|                                                              |  |                             |      |                           |  |      |   |      |      |           |   |      |  |  |      |   |   |      | 
|Research and development  specialty and
 contracted services |  | $                           | 1.7  |                           |  | n.m. |   | $    | 9.4  |           | $ | 4.8  |  |  | n.m. |   | $ | 15.1 | 
|                                                              |  |                             |      |                           |  |      |   |      |      |           |   |      |  |  |      |   |   |      | 

n.m.  not meaningful

17

---



Research
and development. The Companys overall research and
development expenses were $11.8 million for the three months ended June 30,
2010, as compared to $21.2 million for the three months ended June 30, 2009.
On a six-month year-to-date basis, research and development expenses totaled
$26.4 million in 2010 compared to $38.0 million in 2009. The January 2010 divestiture
of the specialty pharmaceutical business and resultant restructuring and change
in our research and development focus related thereto had a very significant
effect on these year-over-year comparisons.

Our
pipeline consists of the following programs: PEG-SN38, HIF-1 alpha antagonist,
survivin antagonist, and an additional six mRNA antagonists utilizing the LNA
technology. The total amount of expense related to Enzons pipeline programs
was $10.1 million in the second quarter of 2010, compared to $11.8 million in
the second quarter of 2009. For the six months ended June 30, 2010, pipeline
expenses were $21.6 million compared to $22.9 million in the prior year. The
second quarter and first half of 2009 expense was higher due to the costs
associated with the purchase of materials and manufacturing of HIF-1 alpha and
survivin antagonist drug supply for Phase I clinical trials. Partially
offsetting this was a $1.0 milestone expense related to HER3 RNA antagonist in
the second quarter of 2010 and a $1.0 million milestone payment related to the
beta-catenin antagonist in the first quarter of 2010.

Enzon
continues to enroll patients in its ongoing PEG-SN38 studies. Enrollment is
ongoing in the Phase II colorectal cancer study, as well as the Phase II
metastatic breast cancer and the Phase I pediatric cancer studies, both of
which were initiated in early 2010. The amount incurred on our PEG-SN38 program
for the second quarter of 2010 was $4.4 million, as compared to $3.0 million
    in the three months ended June 30, 2009. For the six-month periods, we incurred
$8.6 million of expense in 2010 on PEG-SN38 and $6.8 million in 2009.

The cost
associated with the preclinical and clinical activities for the mRNA
antagonists using the LNA technology was $4.7 million in the second quarter of
2010, which included the $1.0 million milestone payment for the HER3 antagonist
and $11.1 million on a six-month basis, including $2.0 million of milestone
payments. In the three months ended June 30, 2009, Enzon incurred $8.0 million
for the mRNA antagonist programs and $14.2 million through six months of 2009. During
the second quarter of 2009, the Company purchased raw materials used in the
manufacturing process of the LNA compounds and manufactured additional clinical
drug supply for the ongoing Phase I studies for the HIF-1 alpha and survivin
antagonists. Enrollment in the Phase I clinical trials for the HIF-1 alpha and
survivin antagonists is ongoing and Enzon is continuing preclinical development
for the additional six mRNA antagonist-directed oncology targets which are
known to play an important role in cancer cell growth. Data from three of our
mRNA antagonist programs were presented at the April 2010 American Association
for Cancer Research meeting in Washington, DC.

The Company
is also working on the identification of additional compounds that may benefit
from Enzons proprietary Customized Linker Technology which is associated with
the PEGylation platform. This effort resulted in an investment of $1.0 million
for the second quarter of 2010, compared to $0.8 million spent on these efforts
in the second quarter of 2009. For six months ended June 30, 2010 and 2009,
these expenses totaled $1.9 million.

Research
and development  specialty and contracted services.
As a result of the sale of our specialty pharmaceutical business in January
2010, the activities related to the specialty pharmaceutical products became
the responsibility of the purchaser at the close of the transaction. We
continue to provide assistance in the development of the next-generation Adagen
and Oncaspar programs through a transition services arrangement. Spending
related to the products acquired by the sigma-tau Group totaled $1.7 million
in the three months and $4.8 million for the six months ended June 30, 2010.
Of the six-month amount, approximately $1.7 million had been incurred in January
2010, prior to the sale. Expenses incurred during the three months ended June
30, 2009 in support of the product pipeline totaled $9.4 million and for the
first six months of 2009, totaled $15.1 million.

18

---



General and
administrative

|                                                 |  |                             |     |                           |  |      |   |      |      |           |   |      |  |  |      |   |   |      | 
|------------------------------------------------ |  | --------------------------- | --- | ------------------------- |  | ---- | - | ---- | ---- | --------- | - | ---- |  |  | ---- | - | - | ---- | 
|                                                 |  | Three Months Ended June 30, |     | Six Months Ended June 30, | 
|                                                 |  |                             |     |                           | 
|                                                 |  | 2010                        |     | %
 Change                 |  | 2009 |   | 2010 |      | %
 Change |   | 2009 | 
|                                                 |  |                             |     |                           |  |      |   |      |      |           |   |      | 
|General and administrative                       |  | $                           | 5.8 |                           |  | (43  | ) | $    | 10.1 |           | $ | 15.6 |  |  | (20  | ) | $ | 19.6 | 
|                                                 |  |                             |     |                           |  |      |   |      |      |           |   |      |  |  |      |   |   |      | 
|General and administrative contracted
 services |  | $                           | 0.4 |                           |  | n.m. |   | $    |     |           | $ | 1.8  |  |  | n.m. |   | $ |     | 
|                                                 |  |                             |     |                           |  |      |   |      |      |           |   |      |  |  |      |   |   |      | 

n.m.  not meaningful

General
and administrative.

During the
second quarter of 2010, general and administrative expense decreased 43 percent
to $5.8 million from $10.1 million in the second quarter of 2009. A significant
portion of the decrease is related to compensation. Because of the accelerated
vesting of share-based awards effected in the fourth quarter of 2009 and first
quarter of 2010, the second-quarter charges related to the vesting of these
awards for all but certain senior management and board members was effectively
eliminated. Also, the restructuring program implemented during the first
quarter of 2010 and the resulting reduction in employees is being reflected in
lower payroll costs in the second quarter. Other expenses were also down in the
second quarter of 2010 from the preceding year comparison as a result of
conscious cost containment and the contraction of corporate services and
overhead costs associated with the sale of the specialty pharmaceutical
business in the first quarter.

For the six
months ended June 30, 2010, general and administrative expenses were $15.6
million, down 20 percent from the prior year. On a year-to-date basis, the
favorable effects observed during the second quarter were mitigated by a number
of unique expenses incurred during the first quarter. The cost of accelerated vesting
of share-based awards, a noncash charge to first-quarter 2010 earnings of
approximately $2.4 million, is reflected in the year-to-date 2010 amount.
First-quarter 2010 costs include the salary and benefits of those general and
administrative employees who were a part of the first-quarter 2010
restructuring. During the six months ended June 30, 2009, certain general and
administrative expenses were elevated, including legal costs related to
proposed shareholder consent solicitation and the post-implementation costs of
an enterprise resource planning computer software system.

The Company
has made significant progress in reducing expenses and will continue to
identify and implement efficiencies that could potentially further reduce
general and administrative costs. However, the rate of improvement experienced
during the second quarter of 2010 is not expected to continue. We may
experience additional charges associated with the South Plainfield lease or its
termination prior to its contractual expiration in October 2012.

General
and administrative  contracted services.

General
and administrative expenses representing transitional services to the sigma-tau
Group amounted to $0.4 million during the three months ended June 30, 2010 and
$1.8 million through the six months then ended. Included in this amount are the
direct costs of the hours expended by the individuals in support of sigma-tau,
other expenses directly identifiable with the specialty pharmaceutical business
and a proportionate allocation of overall general and administrative expense.
Our involvement with sigma-tau administrative matters is expected to continue
to decline throughout the remainder of the year.

Restructuring

During the
quarter ended June 30, 2010, we wrote off the carrying value of certain
furnishings and leasehold improvements located at our corporate headquarters in
Bridgewater, New Jersey amounting to approximately $0.9 million. This is a
noncash expense resulting from the relocation of several employees to our
research facility in Piscataway, New Jersey. In addition, we reduced amounts
owing to Mr. Buchalter upon the finalization of his termination agreement
during the second quarter by approximately $0.2 million.

On a
year-to-date basis, restructuring charges totaled $10.6 million through six
months of 2010. During the first
quarter of 2010, we initiated a reduction in force as a result of the
contraction of corporate-level activities subsequent to the sale of our
specialty pharmaceutical business. Employees who had been directly connected
with the divested business, but who did not become employees of the sigma-tau
Group, were retained for varying periods of time subsequent to the sale to
assist with transition. Other employees involved with general and
administrative activities were identified for separation due to the reduction
in volume of those activities resulting from the sale, such as human resources,
information technology and accounting services. Restructuring charges for these
employees, comprised of separation payments and related benefits, totaled $6.1
million during the first quarter of 2010. In addition, effective February 22,
2010,

19

---



Jeffrey Buchalter, the Companys then President and Chief Executive Officer, resigned for
good reason (as defined in his employment agreement). We expensed $3.8
million related to Mr. Buchalters separation in the first quarter of 2010 and
modified it slightly during the second quarter of 2010, as noted above, to $3.6
million. The total amount owing to Mr. Buchalter will be paid per the terms of
his employment agreement in the third quarter of 2010.

Corporate
restructuring costs associated with the 2009 workforce reduction amounted to
$0.7 million during the first quarter of 2009. This represents severance and
costs related to terminated employees in general and administrative areas as
well as research and development.

Other (income)
expense

(millions of dollars)

|                        |  |                             |      |                           |  |      |   |      |      |           |   |      |   |  |      |   |   |      |  
|----------------------- |  | --------------------------- | ---- | ------------------------- |  | ---- | - | ---- | ---- | --------- | - | ---- | - |  | ---- | - | - | ---- | -
|                        |  | Three Months Ended June 30, |      | Six Months Ended June 30, | 
|                        |  |                             |      |                           | 
|                        |  | 2010                        |      | %
 Change                 |  | 2009 |   | 2010 |      | %
 Change |   | 2009 |  
|                        |  |                             |      |                           |  |      |   |      |      |           |   |      |  
|Other (income) expense: |  |                             |      |                           |  |      |   |      |      |           |   |      |   |  |      |   |   |      |  
|Investment income, net  |  | $                           | (0.8 | )                         |  | (30  | ) | $    | (1.2 | )         | $ | (1.8 | ) |  | (16  | ) | $ | (2.1 | )
|Interest expense        |  |                             | 1.5  |                           |  | (46  | ) |      | 2.8  |           |   | 4.2  |   |  | (31  | ) |   | 6.0  |  
|Other, net              |  |                             |     |                           |  | n.m. |   |      | (0.1 | )         |   |     |   |  | n.m. |   |   | (4.9 | )
|                        |  |                             |      |                           |  |      |   |      |      |           |   |      |   |  |      |   |   |      |  
|                        |  | $                           | 0.7  |                           |  | (55  | ) | $    | 1.5  |           | $ | 2.4  |   |  | n.m. |   | $ | (1.0 | )
|                        |  |                             |      |                           |  |      |   |      |      |           |   |      |   |  |      |   |   |      |  

n.m.  not meaningful

Other
(income) expense.Other (income) expense for the three
months ended June 30, 2010 was net expense of $0.7 million, as compared to net
expense of $1.5 million for the three months ended June 30, 2009. On a
year-to-date basis, 2010 resulted in net expense of $2.4 million, compared to $1.0
million of net income in the first half of 2009. Other (income) expense
includes: net investment income, interest expense and other income or expense.

Net
investment income was $0.8 million for the quarter ended June 30, 2010 compared
to $1.2 million for the second quarter of 2009, down 30 percent. On a
year-to-date basis, net investment income declined 16 percent to $1.8 million.
Our current investments are more heavily weighted towards short maturities and
reduced risk.

Interest expense,
which includes amortization of deferred debt issue costs, was $1.5 million and
$4.2 million for the three-month and six-month periods ended June 30, 2010 and
$2.8 million and $6.0 million for the three-month and six-month periods ended
June 30, 2009, respectively. The reduction in interest expense resulted from
the declining balance of our 4% Convertible Senior Notes due in 2013.

During
    the first quarter of 2009, we repurchased $20.5 million principal amount
    of our 4% notes at a discount to par yielding a gain of $4.8 million (reflected
    in Other, net) exclusive of the write-off of related deferred debt offering
    costs of $0.3 million (reflected in interest expense).

Income taxes

During the
three months and six months ended June 30, 2010, we recorded a net income tax
benefit of approximately $0.2 million which primarily represents a Canadian
transfer pricing refund. During the three months and six months ended June 30,
2009, we recorded no tax expense. No federal income tax provision was recorded
for the three months and six months ended June 30, 2010 as the estimated annual
effective tax rate is zero.

Discontinued
operations

The amount
reported as discontinued operations for the six months ended June 30, 2010 is
comprised of the results of operations of the specialty pharmaceutical business
for the period January 1 through January 29, 2010 of $3.6 million plus the gain
realized on the sale of the specialty pharmaceutical business of $175.4
million. The cash purchase price was $300.0 million, working capital
adjustments were approximately $8.0 million, and transaction costs

20

---



amounted to
$5.0 million. We allocated $40.9 million of the total purchase price to the sale of in-process research and development. The net proceeds
attributable to discontinued operations of $262.6 million, less the net
carrying value of assets sold of $87.2 million, yielded the $175.4 million
gain. In addition to the initial cash received in the transaction, we may
receive an amount of up to $27.0 million based on certain success milestones.
Furthermore, we may receive royalties of five to ten percent on incremental net
sales above the baseline 2009 amount from the marketed specialty pharmaceutical
products through 2014.

Liquidity and Capital Resources

Total cash
reserves, which include cash, cash equivalents, short-term investments and
marketable securities, were $504.0 million as of June 30, 2010, as compared to
$199.7 million as of December 31, 2009. The increase was primarily attributable
to the receipt of proceeds from the sale of our specialty pharmaceutical
business in January 2010.

For the six
months ended June 30, 2010, cash provided by operating activities was $40.5
million. Income from continuing operations in the first six months of 2010, adjusted for
noncash and non-operating items, constituted approximately $27.4 million of
positive cash flow. Changes in various working capital accounts comprised the
remainder.

Investing
activities generated approximately $304.6 million of cash in the first six
months of 2010 compared to cash used in investing activities of $17.0 million
during the first six months of 2009. The net proceeds from the sale of the
specialty pharmaceutical business of $262.6 million (exclusive of the amount
apportioned to the sale of in-process research and development reported in
operating revenue) represented the largest source of cash. Maturities of, and
net proceeds from, sales of investments accounted for the remainder.

Net cash
provided by financing activities was $3.7 million in the first six months of
2010 compared to net cash used in financing activities of $15.9 million in the
first six months of 2009. Proceeds from the exercise of employee stock options
generated approximately $25.3 million of cash inflow during the first six
months of 2010. This inflow was offset, in part, by $18.1 million of
expenditures to repurchase shares of the Companys common stock on the open
market as part of the share repurchase program initiated in December of 2009.
In the first quarter of 2009, $15.6 million of cash was expended to repurchase
$20.5 million principal amount of our 4% notes.

As of June
30, 2010, we had outstanding $134.5 million of convertible senior notes that
bear interest at an annual rate of 4%. The sale of our specialty pharmaceutical
business constituted a fundamental change under the indenture for the notes,
which triggered a change in the conversion rate from 104.712 shares per $1,000
principal amount of notes to 116.535 shares per $1,000 principal amount of
notes during the period January 29, 2010 to March 4, 2010. During this period,
$115.6 million principal amount of the notes were converted into approximately
13.5 million shares of our common stock. Subsequent to March 4, 2010, the
original conversion rate of 104.712 shares per $1,000 principal amount is again
in effect. Interest is payable on June 1 and December 1 for the 4% notes. Accrued
interest on the notes was $0.4 million and $0.8 million, respectively, as of
June 30, 2010 and December 31, 2009.

Our current
sources of liquidity are our cash reserves; interest earned on such cash
reserves and royalties earned - primarily related to sales of PEGINTRON. Net proceeds from the
sale of our specialty pharmaceutical business was approximately $303.0 million. Our board of directors is in the
process of determining the funding needs for the continuing operation of our
business and evaluating various options to return value derived from the sale
of our specialty pharmaceutical business to our stockholders. Based upon our
current 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 will likely need to obtain additional capital
before any of our product candidates that are currently under development are
approved for marketing. We may seek such additional funding through agreements
with potential collaborators or by accessing the capital markets. We cannot
assure you, however, that we will be able to obtain additional funds on
acceptable terms, if at all.

We continue
to evaluate the possible sale of our PEGINTRON royalty stream.

21

---



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, 2010, we were not involved in any SPE transactions.

Our 4%
notes payable are convertible into shares of our common stock at a conversion
price of $9.55 per share and pose a reasonable likelihood of potential
significant dilution. The maximum potential dilutive effect of conversion of
the 4% notes at the current conversion price is 14.1 million shares. Notes
payable are discussed in greater detail in Liquidity and Capital Resources
above and in the notes to our condensed consolidated financial statements.

In
addition, stock options to purchase 5.2 million shares of our common stock at a
weighted average exercise price of $12.60 per share and 0.3 million restricted
stock units were outstanding at June 30, 2010 that represent additional
potential dilution.

Contractual Obligations

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

During the
first quarter of 2010, $115.6 million principal amount of our 4% notes were
converted into shares of the Companys common stock.

Other than
the note conversion, 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 Annual Report on Form 10-K for the year ended December 31, 2009.

Critical Accounting Policies and Estimates

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

Our
condensed consolidated financial statements are presented in accordance with
accounting principles that are generally accepted in the United States. All
professional accounting standards effective as of June 30, 2010 have been taken
into consideration in preparing the consolidated financial statements. The
preparation of the consolidated financial statements requires estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures. Some of those estimates are subjective and
complex, and, consequently, actual results could differ from those estimates.
The following accounting policies have been highlighted as significant because
changes to certain judgments and assumptions inherent in these policies could
affect our consolidated financial statements.

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

Revenues

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

22

---



Income Taxes

Under the
asset and liability method of accounting for income taxes, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. A valuation allowance is provided for when it is more likely than not
some portion or all of the deferred tax assets will not be realized. As of June
30, 2010, we believe, based on future projections, that it is more likely than
not that our net deferred tax assets, will not be realized. We recognize the
benefit of an uncertain tax position that we have taken or expect to take on
the income tax returns we file if it is more likely than not we will be able to
sustain our position.

Share-Based Payment

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

Recently Issued Accounting Standards, Not
Adopted as of June 30, 2010

Milestone
Method of Revenue Recognition  Pursuant to a final consensus of the Emerging
Issues Task Force of the Financial Accounting Standards Board ratified on March
31, 2010, guidance is provided for determining when milestone payments received
in conjunction with research and development efforts performed may be
recognized. The guidance is effective no later than the third quarter of 2010
with early adoption permitted. We are evaluating the new guidance which is to
be implemented prospectively and do not believe that adoption of the guidance
will have a material effect on our results of operations, financial position or
cash flows.

Factors That May Affect Future Results

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

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

A more
detailed discussion of these and other factors that could affect our results is
contained below and in our filings with the SEC, including our Annual Report on
Form 10-K for the year ended December 31, 2009. These factors should be
considered carefully and readers are cautioned not to place undue reliance on
such forward-looking statements. No assurance can be given that the future
results covered by the forward-looking statements will be achieved. All
information contained herein is as of the date of this report and we do not
intend to update this information.

23

---



Item 3. Quantitative and Qualitative
Disclosures About Market Risk

The
majority of our holdings of financial instruments consists of corporate debt
securities classified as securities available-for-sale. Apart from custodial
accounts related to our Executive Deferred Compensation Plan, we do not invest
in portfolio equity securities. We do not invest in commodities or use
financial derivatives for trading purposes. 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 the majority of which are rated A or better. We typically
invest the majority of our investments in the shorter-end of the maturity
spectrum.

The table
below presents the principal amounts or adjusted cost basis and related
weighted average interest rates of our marketable debt securities, excluding
those related to our Executive Deferred Compensation Plan, by year of maturity
(twelve-month intervals ending June 30 of the year indicated) as of June 30,
2010 (in thousands):

|                      |  |      |        |      |   |        |   |             |       |       |   |            |   |   |         |   |   |         | 
|--------------------- |  | ---- | ------ | ---- | - | ------ | - | ----------- | ----- | ----- | - | ---------- | - | - | ------- | - | - | ------- | 
|                      |  | 2011 |        | 2012 |   | 2013   |   | After
 2014 |       | Total |   | Fair Value |  
|                      |  |      |        |      |   |        |   |             |       |       |   |            |  
|Fixed Rate            |  | $    | 34,515 |      | $ | 57,825 |   | $           | 7,202 |       | $ |           |   | $ | 99,542  |   | $ | 100,149 | 
|Average Interest Rate |  |      | 5.8    | %    |   | 4.28   | % |             | 1.95  | %     |   |            |   |   | 4.64    | % |   |         | 
|Variable
 Rate        |  |      |       |      |   |       |   |             |      |       |   | 891        |   |   | 891     |   |   | 319     | 
|Average Interest Rate |  |      |        |      |   |        |   |             |       |       |   | 2.35       | % |   | 2.35    | % |   |         | 
|                      |  |      |        |      |   |        |   |             |       |       |   |            |   |   |         |   |   |         | 
|                      |  | $    | 34,515 |      | $ | 57,825 |   | $           | 7,202 |       | $ | 891        |   | $ | 100,433 |   | $ | 100,468 | 
|                      |  |      |        |      |   |        |   |             |       |       |   |            |   |   |         |   |   |         | 

Our
convertible notes payable outstanding have fixed interest rates. Accordingly,
the fair values of the respective issues will fluctuate as market rates of
interest rise or fall. Fair values are also affected by changes in the price of
our common stock. Our 4% Convertible Senior Notes in the principal amount of
$134.5 million are due June 1, 2013 and have a fair value of $156.9 million at
June 30, 2010.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and
Procedures.

Our
management, under the direction of our Principal Executive Officer and
Principal 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,
2010. Based on the evaluation, our Principal Executive Officer and Principal
Financial Officer have concluded that our disclosure controls and procedures
were effective as of June 30, 2010.

Changes in Internal Controls

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

As
reported in a Current Report on Form 8-K filed by us on July 8, 2010, Craig A.
Tooman our Executive Vice President of Finance and Chief Financial Officer
tendered his resignation from our company effective July 23, 2010. On July 8,
2010, Mark L. Ogden, a financial consultant to Enzon since 2005, was appointed
as acting Vice President of Finance and Principal Financial Officer. As of the
date of the filing of this Quarterly Report on Form 10-Q, we do not believe
that this change has materially affected, or is reasonably likely to materially
affect our internal control over financial reporting.

24

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Part II OTHER INFORMATION

Item 1A. Risk Factors

In
addition to the other information set forth in this report, you should
carefully consider the factors discussed in Part I, Item 1A. Risk Factors in
our Annual Report on Form 10-K for the year ended December 31, 2009.

We depend on key
personnel and may not be able to retain these employees or recruit additional
qualified personnel, which would harm our business; our chief executive officer
and chief financial officer recently resigned and we currently do not have a
chief executive officer or chief financial officer.

Because
of the specialized scientific nature of our business, we are highly dependent
upon qualified research and development scientists, technical and managerial
personnel, including our President of Research and Development. There is
intense competition for qualified personnel in the pharmaceutical field.
Therefore, we may not be able to attract and retain the qualified personnel
necessary for the development of our business. Although we have an employment
agreement with our President of Research and Development, our ability to
continue to retain him, as well as other senior executives or key managers is
not assured.

Effective
February 22, 2010, Jeffrey Buchalter resigned as our President and Chief
Executive Officer. Our board of directors established an executive committee to
serve as a search committee for a new Chief Executive Officer. On February 22,
2010, the executive committee appointed Ralph del Campo as our Chief Operating
Officer and designated him as Principal Executive Officer and Dr. Ivan Horak as
President of Research and Development. Mr. del Campo had been serving as our
Executive Vice President, Technical Operations and Dr. Horak had been serving
as our Executive Vice President, Research and Development and Chief Scientific
Officer. However, we currently do not have a Chief Executive Officer.

Effective
July 23, 2010, Craig A. Tooman resigned as our Executive Vice President of
Finance and Chief Financial Officer. On July 8, 2010, Mark L. Ogden, a financial
consultant to Enzon since 2005, was appointed as acting Vice President of
Finance and Principal Financial Officer following Mr. Toomans departure. Our
executive committee will conduct a search for a permanent Chief Financial
Officer.

The
loss of the services of one or a combination of our senior executives,
particularly our President of Research and Development, as well as the failure
to recruit additional key research and development scientists, technical and
managerial personnel, particularly a new chief executive officer and chief
financial officer, in a timely manner, could have an adverse effect on our
business.

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

Common Stock

In
the second quarter of 2010, we repurchased shares of our Common Stock as set
forth in the following table:

ISSUER PURCHASES OF EQUITY SECURITIES

|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            |  | 
|------------------------- |  |  | --------------------------------------- |  | --------------------------------- | ----- | -------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | - | ---------- |  | 
|Period                    |  |  | (a) Total
 Number of
 Shares
 Purchased |  | (b) Average Price
 Paid per Share |       | (c) Total Number of
 Shares Purchased as
 Part of Publicly
 Announced Plans or
 Programs (1) |  | (d) Maximum
 Number (or
 Approximate
 Dollar Value) of
 Shares that May
 Yet Be
 Purchased
 Under the Plans
 or Programs | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            | 
|April 1 
 April 30, 2010 |  |  | 563,665                                 |  | $                                 | 10.47 |                                                                                              |  | 563,665                                                                                                                  |  | $ | 36,244,000 | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            | 
|May 1  May
 31, 2010     |  |  | 445,452                                 |  |                                   | 10.29 |                                                                                              |  | 445,452                                                                                                                  |  |   | 31,661,000 | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            | 
|June 1 
 June 30, 2010   |  |  | 179,911                                 |  |                                   | 10.50 |                                                                                              |  | 179,911                                                                                                                  |  |   | 29,771,000 | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            | 
|Total                     |  |  | 1,189,028                               |  | $                                 | 10.41 |                                                                                              |  | 1,189,028                                                                                                                |  | $ | 29,771,000 | 
|                          |  |  |                                         |  |                                   |       |                                                                                              |  |                                                                                                                          |  |   |            | 

25

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| |     |                                                                                                                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Share
 repurchase program announced December 3, 2009 whereby Enzons board of
 directors authorized the repurchase of up to $50.0 million of its outstanding
 shares of common stock. Through June 30, 2010, the Company had repurchased
 1,943,234 shares at an average cost of $10.41 per share for a total
 expenditure of $20,229,000.

Item 4. (Removed and Reserved)

26

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Item 6. Exhibits

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

|                |  |  |                                                                                                                                                                                                   |  |     |                |  | 
|--------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | -------------- |  | 
|Exhibit
 Number |  |  | Description                                                                                                                                                                                       |  |     | Reference
 No.
|                |  |  |                                                                                                                                                                                                   |  |     |               
|3.1             |  |  | Amended and Restated Certificate of Incorporation dated May 18, 2006,
 together with that Certificate of Amendment to the Amended and Restated
 Certificate of Incorporation dated July 13, 2010. |  | *   |               
|3.2             |  |  | Amended and Restated By-laws effective July 13, 2010.                                                                                                                                             |  | *   |               
|4.1             |  |  | Rights Agreement dated May 17, 2002 between the Company and
 Continental Stock Transfer & Trust Company, as rights agent.                                                                         |  | (1) |               
|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.                                     |  | (2) |               
|4.3             |  |  | Second Amendment to the Rights Agreement, dated as of January 7, 2008
 between the Company and Continental Stock Transfer & Trust Company, as
 rights agent.                                      |  | (3) |               
|10.1            |  |  | Amendment No. 2 dated June 18, 2010 to Amended and Restated Severance
 Agreement with Ralph del Campo dated November 6, 2007.                                                                     |  | (4) |               
|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.
|    |                                                                                                                                                                              |                 
|    | Referenced
 exhibit was previously filed with the Commission as an exhibit to the
 Companys filing indicated below and is incorporated herein by reference to
 that filing:
|   
|(1) | Form 8-A12G
 (File No. 000-12957) filed May 22, 2002.                                                                                                                       
|    |                                                                                                                                                                             
|(2) | Form
 8-A12G/A (File No. 000-12957) filed February 20, 2003.                                                                                                                
|    |                                                                                                                                                                             
|(3) | Current
 Report on Form 8-K filed January 8, 2008.                                                                                                                          
|    |                                                                                                                                                                             
|(4) | Current
 Report on Form 8-K filed June 18, 2010.                                                                                                                            

27

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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
 9, 2010 | By:                          | /s/Ralph del
 Campo              
|                      |                              |                                  
|                      |                              | Ralph del
 Campo                 
|                      |                              | Chief
 Operating Officer         
|                      |                              | (Principal
 Executive Officer)   
|                      |                              |                                  
|                      |                              |                                  
|Date: August
 9, 2010 | By:                          | /s/Mark L.
 Ogden                
|                      |                              |                                  
|                      |                              | Mark L.
 Ogden                   
|                      |                              | Vice President,
 Finance         
|                      |                              | (Principal
 Financial Officer and
|                      |                              | Principal
 Accounting Officer)   
|                      |                              |                                  
|                      |                              |                                  

---