<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                (AMENDMENT NO. 1)

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2004

                                       or

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934


                    For the Transition Period from ___ to ___

                         Commission file number 0-12957

                           Enzon Pharmaceuticals, Inc.
              Exact name of registrant as specified in its charter

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

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

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

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

                                ----------------

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

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).  Yes   X      No
                                                     -----      -----

Shares of Common Stock outstanding as of February 2, 2005:  43,876,159.


<PAGE>
                                EXPLANATORY NOTE

         This quarterly report on Form 10-Q/A amends and restates our original
quarterly report on Form 10-Q for the period ended December 31, 2004 as of the
date of filing the original Form 10-Q on February 9, 2005. We are amending and
restating our original quarterly report on Form 10-Q in its entirety with
respect to our accounting for the application of hedge accounting for a zero
cost protective collar arrangement under Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended (SFAS No. 133) and certain changes identified in the
accounting for technology license agreements. The protective collar arrangement
was entered into during August 2003 to reduce the exposure associated with
changes in the fair value of the 1.5 million shares of common stock of NPS
Pharmaceuticals, Inc. ("NPS") we received in connection with a June 2003 merger
termination agreement.

         This amended quarterly report on Form 10-Q/A for the period ended
December 31, 2004 reflects corrections and restatements of the following
financial statements: (a) condensed consolidated balance sheet as of December
31, 2004; (b) condensed consolidated statements of operations for the period
ended December 31, 2004; (c) and condensed consolidated statement of cash flows
for the fiscal period ended December 31, 2004.

         We are also filing under separate documents amended quarterly reports
on Form 10-Q/A for the quarter and fiscal year-to-date period ended September
30, 2004 and March 31, 2005. For a more detailed description of corrections and
restatements made to the financial statements, see Note 2 "Restatement and
Reclassification of Condensed Consolidated Financial Statements" to the
accompanying notes and reclassifications to the condensed consolidated
financial statements.

         In addition to the changes discussed above, we have also made other
changes, including but not limited to the following to reflect the changes
discussed herein: (a) other income for the fiscal period ended December 31, 2004
under "Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations"; (b) unrealized loss on securities that arose during the
fiscal period and our total comprehensive income for the periods ended December
31, 2004 in Note 4, "Comprehensive Income", to the accompanying notes to the
condensed consolidated financial statements; (c) unrealized gain previously
recognized in other income and recorded in accumulated other comprehensive
income for the fiscal period ended December 31, 2004 with respect to the sale
and repurchase of shares of NPS in Note 13, "Derivative Instruments", to the
accompanying notes to the condensed consolidated financial statements (d) total
gross deferred tax assets and income tax provisions for the fiscal period ended
December 31, 2004 in Note 11, "Income Taxes", to the accompanying notes to the
condensed consolidated financial statements; (e) net loss and net loss per
common share for the fiscal period ended December 31, 2004 in Note 5, "Earnings
Common Per Share", to the accompanying notes to the condensed consolidated
financial statements; and (f) pro forma net loss and net loss per common share
for the fiscal periods ended December 31, 2004 in Note 6,"Stock-Based
Compensation", to the accompanying notes to the condensed consolidated financial
statements.

         This amended and restated quarterly report on Form 10-Q/A is as of the
end of our fiscal period December 31, 2004 as required by Form 10-Q or as of the
date of filing the original Form 10-Q. It does not update any of the statements
contained therein for subsequent events or forward looking statements. This
quarterly report on Form 10-Q/A contains forward looking statements, which were
made at the time the original quarterly report on Form 10-Q was filed on
February 9, 2005 and must be considered in light of any subsequent events and
subsequent statements including forward looking statements in any written
statement subsequent to the filing of the original quarterly report on Form
10-Q, including statements made in filings on current reports on Form 8-K.


                                       2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,      JUNE 30,
                                                                                2004            2004
                                                                             ---------       ---------
                                                                                                (*)
                                                                             (Restated)
                                                                              (Note 2)
<S>                                                                          <C>             <C>
ASSETS

Current assets:
  Cash and cash equivalents                                                  $  69,473       $  91,532
  Short-term investments                                                        76,228          27,119
  Investment in equity securities                                               20,565          23,625
  Accounts receivable, net                                                      18,322          25,977
  Inventories                                                                   14,440          11,215
  Deferred tax and other current assets                                         17,485          11,994
                                                                             ---------       ---------
       Total current assets                                                    216,513         191,462
                                                                             ---------       ---------

Other assets:
  Property and equipment, net                                                   34,152          34,859
  Marketable securities                                                         63,389          67,582
  Investments in equity securities                                               6,377          14,281
  Amortizable intangible assets, net                                           185,076         194,067
  Goodwill                                                                     150,985         150,985
  Deferred tax and other assets                                                 66,092          69,174
                                                                             ---------       ---------
                                                                               506,071         530,948
                                                                             ---------       ---------
Total assets                                                                 $ 722,584       $ 722,410
                                                                             =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                           $   8,614       $   8,663
  Accrued expenses                                                              23,641          23,001
                                                                             ---------       ---------
     Total current liabilities                                                  32,255          31,664
                                                                             ---------       ---------

Other liabilities                                                                1,153           1,655
Notes payable                                                                  400,000         400,000
                                                                             ---------       ---------
                                                                               401,153         401,655
                                                                             ---------       ---------
Commitments and contingencies
Stockholders' equity:
  Preferred stock-$.01 par value, authorized 3,000,000 shares; no shares
   issued and outstanding at December 31, 2004 and at June 30, 2004               --              --
  Common stock-$.01 par value, authorized 90,000,000 shares; issued and
   outstanding 43,876,159 shares at December 31,
   2004 and 43,750,934 shares at June 30, 2004                                     439             438
  Additional paid-in capital                                                   323,656         322,486
  Accumulated other comprehensive loss                                          (6,833)         (7,330)
  Deferred compensation                                                         (4,205)         (3,571)
  Accumulated deficit                                                          (23,881)        (22,932)
                                                                             ---------       ---------
Total stockholders' equity                                                     289,176         289,091
                                                                             ---------       ---------
Total liabilities and stockholders' equity                                   $ 722,584       $ 722,410
                                                                             =========       =========
</TABLE>

(*) Condensed from audited consolidated financial statements.

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

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                  DECEMBER 31,                 DECEMBER 31,
                                                           -----------------------       -----------------------
                                                              2004          2003           2004          2003
                                                           --------       --------       --------       --------
                                                          (Restated)                    (Restated)
                                                           (Note 2)                      (Note 2)
<S>                                                        <C>            <C>            <C>            <C>
Revenues:
    Product sales, net                                     $ 26,962       $ 27,711       $ 54,489       $ 52,672
    Manufacturing revenue                                     5,463          2,187          7,976          3,791
    Royalties                                                10,079         11,547         20,194         25,358
    Contract revenue                                            412            253            711            521
                                                           --------       --------       --------       --------
              Total revenues                                 42,916         41,698         83,370         82,342
                                                           --------       --------       --------       --------

Costs and expenses:
    Cost of sales and manufacturing revenue                  12,381         11,825         23,282         22,737
    Research and development                                  8,752          7,388         18,726         13,939
    Selling, general and administrative                      13,772         11,478         25,971         22,687
    Amortization of acquired intangible assets                3,394          3,358          6,752          6,716
                                                           --------       --------       --------       --------
             Total costs and expenses                        38,299         34,049         74,731         66,079
                                                           --------       --------       --------       --------

Operating income                                              4,617          7,649          8,639         16,263
                                                           --------       --------       --------       --------
Other income (expense):
    Investment income, net                                      973            706          1,743          1,180
    Interest expense                                         (4,957)        (4,957)        (9,914)        (9,914)
    Other, net                                                 (540)        (4,332)        (1,951)        (6,845)
                                                           --------       --------       --------       --------
                                                             (4,524)        (8,583)       (10,122)       (15,579)
                                                           --------       --------       --------       --------

(Loss) income before tax (benefit) provision                     93           (934)        (1,483)           684
Income tax (benefit) provision                                  103           (631)          (534)          (149)
                                                           --------       --------       --------       --------
Net (loss) income                                          ($    10)      ($   303)      ($   949)      $    833
                                                           ========       ========       ========       ========

Basic (loss) earnings per common share                     $  (0.00)      ($  0.01)      $  (0.02)      $   0.02
                                                           ========       ========       ========       ========
Diluted (loss) earnings per common share                   $  (0.00)      ($  0.01)      $  (0.02)      $   0.02
                                                           ========       ========       ========       ========
Weighted average number of common shares
     outstanding - basic                                     43,483         43,307         43,476         43,298
                                                           ========       ========       ========       ========
Weighted average number of common shares and dilutive
    potential common shares outstanding                      43,483         43,307         43,476         43,591
                                                           ========       ========       ========       ========
</TABLE>


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




                                       4
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                 SIX MONTHS ENDED
                                                                                   DECEMBER 31,
                                                                             -----------------------
                                                                               2004           2003
                                                                             --------       --------
                                                                            (Restated)
                                                                             (Note 2)
<S>                                                                          <C>            <C>
Cash flows from operating activities:
      Net (loss) income                                                      ($   949)      $    833
      Adjustments to reconcile net (loss) income to net cash
           provided by operating activities:
           Depreciation and amortization                                       11,359         10,958
           Non-cash expense for issuance of common stock                          373          1,622
           Loss on sale of investment                                           1,863           --
           Non-cash income related to equity collar arrangement                   224          4,717
           Amortization of debt issue costs                                       914           --
           Amortization of bond premium/discount                                1,275           (107)
           Deferred income taxes                                                 (251)           170
      Changes in operating assets and liabilities                               3,119            679
                                                                             --------       --------

                    Net cash provided by operating activities                  17,927         18,872
                                                                             --------       --------

Cash flows from investing activities:
      Purchase of property and equipment                                       (1,661)        (2,726)
      Proceeds from sale of equity investment                                   7,510           --
      Proceeds from sale of marketable securities                              18,330         27,944
      Purchase of marketable securities                                       (64,330)       (21,950)
                                                                             --------       --------

                    Net cash (used in) provided by investing activities       (40,151)         3,268
                                                                             --------       --------

Cash flows from financing activities:
      Proceeds from issuance of common stock                                      165            272
                                                                             --------       --------

                    Net cash provided by financing activities                     165            272
                                                                             --------       --------

Net (decrease) increase in cash and cash equivalents                          (22,059)        22,412

Cash and cash equivalents at beginning of period                               91,532         66,752
                                                                             --------       --------

Cash and cash equivalents at end of period                                   $ 69,473       $ 89,164
                                                                             ========       ========
</TABLE>

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


                                       5
<PAGE>
                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)  ORGANIZATION AND BASIS OF PRESENTATION

         The unaudited condensed consolidated financial statements have been
prepared from the books and records of Enzon Pharmaceuticals, Inc. and its
subsidiaries (the "Company") in accordance with United States generally accepted
accounting principles for interim financial information and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required for complete annual financial statements. The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. In the opinion of management, all adjustments
(consisting only of normal and recurring adjustments) considered necessary for a
fair presentation have been included. See Note 2 for discussion of restatement.
Interim results are not necessarily indicative of the results that may be
expected for the year. The interim consolidated financial statements should be
read in conjunction with the condensed consolidated financial statements and the
notes thereto included in the Company's latest annual report on Form 10-K/A
(Amendment No. 2).

(2) RESTATEMENT AND RECLASSIFICATIONS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

         In August and September 2005, the Company concluded that its previously
issued financial statements and other financial information for the quarter and
fiscal year-to-date periods ended September 30, 2004, December 31, 2004 and
March 31, 2005, required restatement with respect to its accounting for a
derivative hedging instrument and certain third party agreements. The Company
has restated the comparable fiscal periods in a previously filed amendment to
the respective Form 10-Q or 10-K due to computational changes in the valuation
of and for the application of hedge accounting for a zero cost protective collar
arrangement under Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Securities," as amended. The
comparable fiscal periods included in this quarterly report on Form 10-Q/A,
reflect the restated amounts.

         The restatement is primarily due to the accounting for the application
of hedge accounting for a zero cost protective collar arrangement under
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended (SFAS No. 133).

         As described in Note 13, "Derivative Instruments", the Company entered
into a zero cost protective collar ("Collar") arrangement in August 2003 to
reduce its exposure to changes in fair value associated with 1.5 million common
shares of NPS Pharmaceutical, Inc. ("NPS"), which the Company received in
connection with the termination of a proposed merger. Pursuant to the terms of
the Merger Termination Agreement, the Company was restricted as to the number of
shares it could sell on a quarterly basis. Under the collar arrangement, the
Company was required to deliver unrestricted freely trading shares of NPS common
stock upon the maturity date of the Collar, as well as maintain 1.5 million of
shares of NPS common stock on account with the financial institution as
collateral during the term of the Collar agreement. Therefore, during the period
of November 2003 to October 2004, the Company sold and simultaneously
repurchased 375,000 shares of NPS common stock quarterly in order to remove the
restriction while maintaining the collateralized shares. In August 2005, the
Company determined that the initial sale of NPS common stock in November 2003
resulted in the termination of the existing hedging relationship and that the
Company was unable to meet certain fair value hedging criteria pursuant to SFAS
No. 133 at that time to re-designate the hedging relationship. Accordingly, the
Company terminated its hedge accounting treatment in November 2003, which
resulted in the change in unrealized gains and losses on the NPS common stock
underlying the derivative hedging instrument previously included in other income
(expense) being recorded in accumulated other comprehensive income expense on
the condensed consolidated balance sheet. The accounting change corrects a
misallocation between other income (expense) and accumulated other comprehensive
income (loss) for the quarters and fiscal year-to-date periods ended September
30, 2004, December 31, 2004, and March 31, 2005.

         The Company has also made certain reclassifications between non-current
and current assets and liabilities of a portion of the balance associated with
the collar and NPS common stock to reflect the timing of the maturity of the
collar instrument and related sale of NPS common stock.

         Additionally, the Company determined that certain third party related
agreements were not accounted for correctly during the fiscal quarters ended
September 30, 2004, December 31, 2004 and March 31, 2005. The resulting changes
are a reduction of research and development expense during the fiscal quarters
ended September 30, 2004, December 31, 2004 and March 31, 2005 and an increase
to revenues during fiscal quarter ended March 31, 2005.

                                       6
<PAGE>

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


         The following tables show the impact of the restatement on the relevant
captions from the Company's condensed consolidated financial statements as of
and for the periods indicated. These tables contain only the changed balances
and do not represent the complete condensed consolidated balance sheet as of
such period or condensed consolidated statements of operations for the periods
then ended (in thousands, except per share amounts).


                 CHANGES TO CONDENSED CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                Previously
                                                 Reported      Adjustments      Restated
                                                 --------      -----------      --------
<S>                                             <C>             <C>             <C>
Investment in equity securities                 $    --         $  20,565       $  20,565
Deferred tax and other current assets              17,279             206          17,485
Total current assets                              195,742          20,771         216,513
Investments in equity securities                   26,942         (20,565)          6,377
Deferred tax and other assets                      66,166             (74)         66,092
Total non-current assets                          526,710         (20,639)        506,071
Total assets                                      722,452             132         722,584
Accumulated other comprehensive loss               (4,543)         (2,290)         (6,833)
Accumulated deficit                               (26,303)          2,422         (23,881)
Total stockholders' equity                        289,044             132         289,176
Total liabilities and stockholders' equity        722,452             132         722,584
</TABLE>

           CHANGES TO CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                       Three Months Ended                           Six Months Ended
                                                       December 31, 2004                            December 31, 2004
                                              --------------------------------------      ---------------------------------------
                                              Previously                                  Previously
                                               Reported     Adjustments     Restated       Reported      Adjustments     Restated
                                              ----------    -----------     --------      ----------     -----------     --------
<S>                                           <C>            <C>            <C>            <C>            <C>            <C>
Research and development                      $  8,887       $   (135)      $  8,752       $ 18,933       $   (207)      $ 18,726
Total costs and expenses                        38,434           (135)        38,299         74,938           (207)        74,731
Operating income                                 4,482            135          4,617          8,432            207          8,639
Other, net                                      (1,273)           733           (540)        (1,943)            (8)        (1,951)
Total other income (expense)                    (5,257)           733         (4,524)       (10,114)            (8)       (10,122)
Income before tax provision (benefit)             (775)           868             93         (1,682)           199         (1,483)
Income tax (benefit) provision                    (243)           346            103           (606)            72           (534)
Net (loss) income                                 (532)           522            (10)        (1,076)           127           (949)
Basic (loss) earnings per common share           (0.01)          0.01          (0.00)         (0.02)            --          (0.02)
Diluted (loss) earnings per common share         (0.01)          0.01          (0.00)         (0.02)            --          (0.02)
</TABLE>


                                       7
<PAGE>



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


         The restatement did not result in any changes to cash and cash
equivalents as of December 31, 2004 or any changes to the net cash flows from
operations, investing or financing activities in the condensed consolidated
statement of cash flows for the period ended December 31, 2004 although it did
impact certain components of net cash flow from operations.

         As a result of the adjustments discussed above, modifications were
required to previously filed footnotes as follows: Note 4,"Comprehensive
Income", Note 5, "Earnings Per Common Share", Note 6, "Stock-Based
Compensation", Note 11, "Income Taxes" and Note 13, "Derivative Instruments".

      (3) MARKETABLE SECURITIES

         The Company classifies its investments in debt and marketable equity
securities as available-for-sale since the Company does not have the intent to
hold them to maturity. Debt and marketable equity securities are carried at fair
market value, with the unrealized gains and losses (which are deemed to be
temporary), net of related tax effect, included in the determination of
comprehensive income and reported in stockholders' equity. The fair value of
substantially all securities is determined by quoted market prices.

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

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

         The amortized cost, gross unrealized holding gains or losses, and fair
value for the Company's available-for-sale securities by major security type at
December 31, 2004 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                 Gross           Gross
                                 Amortized     Unrealized      Unrealized
                                   Cost       Holding Gains   Holding Losses   Fair Value*
                                 ---------    -------------   --------------   -----------
<S>                              <C>            <C>             <C>             <C>
U.S. Government agency debt      $  68,981      $       3       ($    304)      $  68,680
U.S. corporate debt                 71,592              7            (662)         70,937
                                 ---------      ---------       ---------       ---------
                                 $ 140,573      $      10       ($    966)      $ 139,617
                                 =========      =========       =========       =========
</TABLE>

* Included in short-term investments $76,228 and marketable securities $63,389.


                                       8
<PAGE>

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


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

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

* Included in short-term investments $27,119 and marketable securities $67,582.

(4) COMPREHENSIVE INCOME

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

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

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED         SIX MONTHS ENDED
                                                         DECEMBER 31,               DECEMBER 31,
                                                   ------------------------    ----------------------
                                                     2004           2003         2004         2003
                                                   ----------    ----------    ----------   ----------
                                                   (Restated)                  (Restated)
<S>                                                 <C>           <C>           <C>           <C>
Net (loss) income                                   ($   10)      ($  303)      ($  949)      $   833
Other comprehensive income (loss):
    Unrealized (loss) gain on securities
         that arose during the period, net of tax    (3,531)        2,874        (1,834)        4,502

    Reclassification adjustment
        for loss (gain) included in net income,
        net of tax                                    2,027          (355)        2,331          (355)
                                                    -------       -------       -------       -------

    Total other comprehensive income (loss)          (1,504)        2,519           497         4,147
                                                    -------       -------       -------       -------

Comprehensive income (loss)                         ($1,514)      $ 2,216       $   452       $ 4,980
                                                    =======       =======       =======       =======
</TABLE>

(5)  EARNINGS PER COMMON SHARE

         Basic earnings per share is computed by dividing the net (loss) income
by the weighted average number of shares of Common Stock issued and outstanding
during the periods. For purposes of calculating diluted earnings per share for
the three and six months ended December 31, 2003, the denominator includes both
the weighted average number of shares of Common Stock outstanding and the number
of dilutive Common Stock equivalents if the inclusion of common stock is not
anti-dilutive. As of December 31, 2004 and 2003, the Company had 10.1 million
and 9.3 million, respectively, dilutive potential common shares outstanding that
are excluded from the dilutive earnings per share calculations as they are
antidilutive.


                                       9
<PAGE>

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


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

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED              SIX MONTHS ENDED
                                                       DECEMBER 31,                   DECEMBER 31,
                                                ----------------------------   --------------------------
                                                    2004          2003           2004            2003
                                                ------------   ------------    ----------    ------------
                                                 (Restated)                    (Restated)
<S>                                               <C>            <C>            <C>            <C>
Net (loss) income                                 ($    10)      ($   303)      ($   949)      $    833
                                                  ========       ========       ========       ========

Weighted average number of common
   shares issued and outstanding - basic            43,483         43,307         43,476         43,298
Effect of dilutive common stock equivalents:
      Exercise of stock options                       --             --             --              293
                                                  --------       --------       --------       --------
                                                    43,483         43,307         43,476         43,591
                                                  ========       ========       ========       ========
</TABLE>

(6) STOCK-BASED COMPENSATION

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


                                       10
<PAGE>

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


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

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED               SIX MONTHS ENDED
                                                        DECEMBER 31,                    DECEMBER 31,
                                                ---------------------------    ----------------------------
                                                   2004           2003            2004            2003
                                                ----------     ------------    ------------    ------------
                                                (Restated)                      (Restated)
<S>                                             <C>             <C>             <C>             <C>
Net (loss) income:
      As reported                               ($     10)      ($    303)      ($    949)      $     833

Add stock-based employee
     compensation expense included in
     reported net income, net of tax (1)              132             237             239             423

Deduct total stock-based employee
     compensation expense determined
     under fair-value-based method for all
     awards, net of tax (1)                        (3,484)         (2,999)         (6,879)         (5,284)
                                                ---------       ---------       ---------       ---------

Pro forma net loss                              ($  3,362)      ($  3,065)      ($  7,589)      ($  4,028)
                                                =========       =========       =========       =========

Earnings (loss) per common share - basic:
         As reported                            ($   0.00)      ($   0.01)      ($   0.02)      $    0.02
         Pro forma                              ($   0.08)      ($   0.07)      ($   0.17)      ($   0.09)
Earnings (loss) per common share - diluted:
         As reported                            ($   0.00)      ($   0.01)      ($   0.02)      $    0.02
         Pro forma                              ($   0.08)      ($   0.07)      ($   0.17)      ($   0.09)
</TABLE>

(1)  Information for 2004 and 2003 has been adjusted for income taxes using
     estimated tax rates of 36% and 35%, respectively.

(7)  INVENTORIES

         Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                    DECEMBER 31, 2004        JUNE 30, 2004
                                                  --------------------    ---------------------
<S>                                               <C>                     <C>
             Raw materials                                 $5,283               $3,143
             Work in process                                4,119                3,716
             Finished goods                                 5,038                4,356
                                                  --------------------    ---------------------
                                                          $14,440              $11,215
                                                  ====================    =====================
</TABLE>





                                       11
<PAGE>

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

(8)   INTANGIBLE ASSETS

         Intangible assets consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,         ESTIMATED
                                                                  2004            USEFUL LIVES
                                                             --------------    -----------------
<S>                                                          <C>               <C>
          Product Patented Technology                             $ 64,400           12 years
          Manufacturing Patent                                      18,300           12 years
          NDA Approval                                              31,100           12 years
          Trade name and other product rights                       80,000           15 years
          Manufacturing Contract                                     2,200            3 years
          Patent                                                     1,906          1-5 years
          Product Acquisition Costs                                 26,194        10-14 years
                                                             --------------
                                                                   224,100
          Less:  Accumulated amortization                           39,024
                                                             --------------
                                                                  $185,076
                                                             ==============
</TABLE>

         Amortization charged to operations relating to intangible assets
totaled $4.5 million including $1.1 million which is classified in cost of sales
and manufacturing revenue for both the three months ended December 31, 2004 and
2003. For the six months ended December 31, 2004 and 2003 amortization charged
to operations relating to intangible assets totaled $9.0 million including $2.2
million which is classified in cost of sales and manufacturing revenue.
Amortization expense for these intangibles and certain other product acquisition
costs for the next five fiscal years is expected to be approximately $15.5
million per year.

(9) GOODWILL

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

(10)  CASH FLOW INFORMATION

         The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents. Cash payments for
interest were approximately $9.0 million for the six months ended December 31,
2004 and 2003. Income tax payments for the six months ended December 31, 2004
and 2003, respectively were $366,000 and $3.2 million.

(11) INCOME TAXES

         The Company recognized a tax benefit for the six months ended December
31, 2004 at an estimated annual effective tax rate of 36%, which is based on the
projected income tax benefit and taxable loss for the fiscal year ending June
30, 2005. During the three and six months ended December 31, 2004 the Company
recorded a valuation allowance of $1.3 million and $696,000, respectively,
related to capital loss carryforwards generated during the period related to the
sale of a portion of its equity investment in NPS Pharmaceuticals, Inc. ("NPS")
and certain investments in debt and equity securities.

                                       12
<PAGE>
                  ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         At December 31, 2004, the Company recognized approximately $68.4
million in net deferred tax assets because management concluded that it is more
likely than not that the net deferred tax assets will be realized, including the
net operating losses from operating activities and stock option exercises, based
on future operations. As of December 31, 2004, the Company carries a valuation
allowance of $17.2 million with respect to certain capital loss carryforwards,
deductible temporary differences that would result in a capital loss
carryforward when realized and federal research and development tax credits, as
the ultimate utilization of such losses and credits is not more likely than not.
The Company will continue to reassess the need for such valuation allowance
based on the future operating performance of the Company.

         The tax benefit for the three and six months ended December 31, 2003
was based on the Company's then projected income tax benefit and taxable loss
for the fiscal year ended June 30, 2004. In addition, during the three and six
months ended December 31, 2004 the Company recorded $1.8 million and $2.8
million tax benefit, respectively, relating to the derivative instrument as
described in Note 13.

(12) BUSINESS SEGMENTS

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

(13) DERIVATIVE INSTRUMENTS

         On February 19, 2003, the Company entered into an agreement and plan of
merger with NPS Pharmaceuticals, Inc. ("NPS"). On June 4, 2003, the merger
agreement was terminated. In accordance with the mutual termination agreement
between the two companies, the Company received 1.5 million shares of NPS common
stock. The termination agreement imposes certain restrictions with respect to
the transferability of the underlying shares including limiting the maximum
number of shares that can be transferred each month after the registration
statement relating to the shares is declared effective to 125,000 shares.
Considering such restrictions, 1.1 million shares were valued at $26.7 million,
which was the fair value of NPS stock on June 4, 2003 and in accordance with
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS No. 115") and the balance of 375,000 shares were considered as restricted
stock as defined under the scope exception provisions of SFAS No. 115. The
restricted stock was valued at $7.8 million by applying a 12% discount on the
related fair value based on a valuation performed by an independent third-party
consulting firm. Total consideration received aggregated $34.6 million. The
Company also recorded $7.7 million in costs incurred related to the proposed
merger with NPS (primarily investment banking, legal and accounting fees). The
net gain of approximately $26.9 million was recorded as other income in the
condensed consolidated statement of operations for the year ended June 30, 2003.

         In August 2003, the Company entered into a Zero Cost Protective Collar
arrangement with a financial institution to reduce the exposure associated with
the 1.5 million shares of common stock of NPS received as part of the merger
termination agreement with NPS. By entering into this equity collar arrangement
and taking into consideration the underlying put and call option strike prices,
the terms are structured so that the Company's investment in NPS stock, when
combined with the value of the Collar, should secure ultimate cash proceeds in
the range of 85%-108% of the negotiated fair value per share of $23.47
(representing a 4.85% discount off of the closing price of NPS common stock on
the day before the collar was executed). The Collar will mature in four separate
three-month intervals from November 2004 through August 2005, at which time the
Company receives the proceeds from the sale of the securities. The amount due at
each maturity date is determined based on the market value of NPS' common stock
on such maturity date, as well as the value of the Collar. The contract requires
the Company to maintain a minimum cash balance of $30.0 million and additional
collateral up to $10.0 million (as defined) under certain circumstances with the
financial institution. The strike prices of the put and call options are subject
to certain adjustments in the event the Company receives a dividend from NPS. At
the time of inception, the Collar was designated a derivative hedging instrument
in accordance with SFAS 133 and as such, the Company periodically measures its
fair value and recognizes the derivative as an asset or a liability. The change
in fair value is recorded in other income in the condensed consolidated
statements of operations. At December 31, 2004, the Company had a receivable to
the financial institution of $3.0 million. During the three and six months ended
December 31, 2004, the Company recorded unrealized gains of $2.2 million and
$1.3 million, respectively, as a component of other income (expense)
representing the change in fair value of the Collar. During the three and six
months ended December 31, 2003, the Company recorded unrealized losses of $4.0
million and $10.3 million, respectively, as a component of other income
(expense) representing the change in fair value of the Collar instrument. During
the three and six months ended December 31, 2004, a total of 375,000 shares of
the Collar matured resulting in a realized loss of $3.2 million, and net cash
proceeds to the Company totaling $7.5 million. At December 31, 2004, 1.1 million
shares of the Collar remain active and will mature in three separate intervals
February 2005, May 2005 and August 2005.


                                       13
<PAGE>

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

         The Company began selling and buying back the underlying NPS common
stock in November 2003, which resulted in the termination of the hedging
relationship. During the period from August 2003 through the date the hedging
relationship was terminated, the NPS common stock had appreciated $5.7 million
in value, of which $2.3 million was recorded in other income during the six
months ended December 31, 2003 in the condensed consolidated statements of
operations and $2.1 million, net of tax, was recorded as a component of
accumulated other comprehensive income in the condensed consolidated statement
of stockholders' equity. The $2.1 million gain, net of tax, recognized in
accumulated other comprehensive income at the point the hedging relationship was
terminated was recognized in operations proportionate to the sale of the
underlying NPS common stock.

         During the six months ended December 31, 2004, the Company sold and
repurchased 375,000 shares of NPS common stock to remove the transferability
restrictions on such shares, resulting in a net realized loss of $578,000 which
is included in other income (expense) in the condensed consolidated statements
of operations. There were no shares sold and repurchased during the three months
ended December 31, 2004.

         During the three and six months ended December 31, 2003, the Company
sold and repurchased 375,000 shares of NPS common stock to remove the
transferability restrictions on such shares, resulting in a net realized gain of
$1.2 million, included in other income (expense) in the condensed consolidated
statements of operations.

         As of December 31, 2004 and June 30, 2004, the Company held 1.1 million
shares and 1.5 million shares of NPS common stock are valued at $20.6 million
and $31.5 million, respectively, and are included in investments in equity
securities on the accompanying condensed consolidated balance sheets.

(14) NEW ACCOUNTING PRONOUNCEMENTS

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

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

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


                                       14
<PAGE>

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


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

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets--An Amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions" ("SFAS No. 153"). SFAS No. 153 eliminates the
exception from fair value measurement for nonmonetary exchanges of similar
productive assets in paragraph 21(b) of APB Opinion No. 29, "Accounting for
Nonmonetary Transactions," and replaces it with an exception for exchanges that
do not have commercial substance. SFAS No. 153 specifies that a nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153 is
effective for the fiscal periods beginning after June 15, 2005 and is required
to be adopted by us in the first quarter of fiscal 2006, beginning on July 1,
2005. The Company is currently evaluating the effect that the adoption of SFAS
No. 153 will have on our consolidated results of operations and financial
condition but does not expect it to have a material impact.


                                       15
<PAGE>



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

LIQUIDITY AND CAPITAL RESOURCES

         Total cash reserves, which include cash, cash equivalents and
marketable securities, were $209.1 million as of December 31, 2004, as compared
to $186.2 million as of June 30, 2004. The increase is primarily due to net cash
provided by operating activities and proceeds from the liquidation of a portion
of the shares of NPS Common Stock that we own. We invest our excess cash
primarily in United States government-backed securities and investment-grade
corporate debt securities.

         During the six months ended December 31, 2004, net cash provided by
operating activities was $18.0 million, compared to $18.9 million for the six
months ended December 31, 2003. Net cash provided by operations was principally
due to non-cash charges included in the net loss of $949,000 for the six months
ended December 31, 2004. The non-cash charges were depreciation and amortization
of $11.4 million, $244,000 on the Company's equity collar arrangement, non-cash
activity of totaling $4.2 million and $3.1 million in operating assets and
liabilities.

         Cash used in investing activities totaled $40.2 million for the six
months ended December 31, 2004 compared to cash provided by investing activities
of $3.3 million for the six months ended December 31, 2003. Cash used in
investing activities during the six months ended December 31, 2004, consisted of
$1.7 of capital expenditures and net purchases of marketable securities of $46.0
million, offset by $7.5 million in proceeds from the liquidation of a portion of
our shares of NPS Common Stock.

         As of December 31, 2004, we had $400.0 million of 4.5% convertible
subordinated notes outstanding. The notes bear interest at an annual rate of
4.5%. Interest is payable on January 1 and July 1 of each year. Accrued interest
on the notes was $9.0 million as of December 31, 2004. The holders may convert
all or a portion of the notes into common stock at any time on or before July 1,
2008. The notes are convertible into our common stock at a conversion price of
$70.98 per share, subject to adjustment in certain events. The notes are
subordinated to all existing and future senior indebtedness. We may redeem any
or all of the notes at specified redemption prices, plus accrued and unpaid
interest to the day preceding the redemption date. The notes will mature on July
1, 2008 unless earlier converted, redeemed at our option or redeemed at the
option of the note-holder upon a fundamental change, as described in the
indenture for the notes. Neither we nor any of our subsidiaries are subject to
any financial covenants under the indenture. In addition, neither we nor any of
our subsidiaries are restricted under the indenture from paying dividends,
incurring debt, or issuing or repurchasing our securities.

         In August 2003, we entered into a zero cost protective collar
arrangement with a financial institution to reduce the exposure associated with
the 1.5 million shares of common stock of NPS Pharmaceuticals, Inc. ("NPS") we
received as part of a merger termination agreement with NPS. The first interval
of four intervals matured during the three months ended December 31, 2004 and we
liquidated that portion of the investment and received proceeds of $7.5 million.
The remainder of the Collar will mature in three separate three-month intervals
from February 2005 through August 2005, at which time we will receive the
proceeds from the sale of the securities which we estimate with consideration to
the Collar to be $22.4 million to $28.5 million. The amount due at each maturity
date will be determined based on the market value of NPS common stock on such
maturity date. The contract requires us to maintain a minimum cash balance of
$30.0 million and additional collateral up to $10.0 million (as defined) under
certain circumstances with the financial institution. The strike prices of the
put and call options are subject to certain adjustments in the event we receive
a dividend from NPS.

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

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



                                       16
<PAGE>

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 December 31, 2004 we are not involved in any SPE
transactions.

CONTRACTUAL OBLIGATIONS

         Our major outstanding contractual obligations relate to our operating
leases, inventory purchase commitments, convertible debt, and license agreements
with collaborative partners. Since June 30, 2004, there has 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/A for the
year ended June 30, 2004.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003

         Revenues. Total revenues for the three months ended December 31, 2004
were $42.9 million, as compared to $41.7 million for the three months ended
December 31, 2003. The components of revenues are product sales, contract
manufacturing revenue, royalties we earn on the sale of our products by others
and contract revenue.

         Net product sales decreased by 3% to $27.0 million for the three months
ended December 31, 2004, as compared to $27.7 million for the three months ended
December 31, 2003. The decrease in sales was due to decreased sales of ABELCET.
Sales of ABELCET in North America decreased by 21% to $14.3 million for the
three months ended December 31, 2004, as compared to $18.0 million for the three
months ended December 31, 2003 as a result of weaker demand for the product due
to increased competition in the intravenous antifungal market. Sales of DEPOCYT
increased by 23% to $1.6 million for the three months ended December 31, 2004 as
compared to $1.3 million for the three months ended December 31, 2003. DEPOCYT'S
growth over the prior year was primarily attributable to the Company's sales and
marketing efforts to support the product. Sales of ONCASPAR increased by 25% to
$5.5 million for the three months ended December 31, 2004 from $4.4 million in
the corresponding period in the prior year. The increase in sales of ONCASPAR
over the prior year was primarily driven by our focused marketing effort during
the quarter ended September 30, 2004. Sales of ADAGEN increased by 40% for the
three months ended December 31, 2004 to $5.6 million as compared to $4.0 million
for the three months ended December 31, 2003 due to an increase in the number of
patients receiving ADAGEN therapy and the timing of shipments.

         Contract manufacturing revenue for the three months ended December 31,
2004 increased to $5.5 million, as compared to $2.2 million for the comparable
period of the prior year, due to the timing of orders from our contract
manufacturing customers. Contract manufacturing revenue is related to the
manufacture and sale of ABELCET for the international market and other contract
manufacturing revenue.

         Royalties for the three months ended December 31, 2004, decreased to
$10.1 million as compared to $11.5 million in the same period in the prior year.
The decrease was primarily due to decreased sales of PEG-INTRON by
Schering-Plough, our marketing partner, due to competitive pressure from the
competing pegylated alpha interferon product, PEGASYS(R), which Hoffmann-La
Roche launched in December 2002.

         Due to the competitive pressure and contracting market conditions, we
believe royalties from sales of PEG-INTRON in the United States and Europe may
continue to decrease in the near term. This decrease may be offset by the
ongoing launch of PEG-INTRON in combination with REBETOL(R) in Japan.
Schering-Plough began selling PEG-INTRON in Japan during December 2004. Since
its launch in the United States and Europe, the competing product has taken
market share away from PEG-INTRON and the overall market for pegylated alpha
interferon in the treatment of hepatitis C has not increased enough to offset
the effect. This competition has had on sales of PEG-INTRON. As a result,
quarterly sales of PEG-INTRON and the royalties we receive on those sales have
declined in recent quarters. We cannot assure you that the competing product
will not continue to gain market share at the expense of PEG-INTRON, which could
result in lower PEG-INTRON sales and royalties to us.

                                       17
<PAGE>

         Based on competitive pressure from the introduction of new products in
the antifungal market, namely Pfizer's VFEND(R) and Merck's CANCIDAS(R) and more
recent pricing pressure in the market for lipid formulations of amphotericin B,
we believe ABELCET may continue to be negatively impacted over the next year.

         We expect ADAGEN sales to grow over the next year at similar levels to
those achieved for the year ended June 30, 2004. Assuming we are able to
successfully address certain manufacturing and product stability problems we
have experienced with ONCASPAR, which have resulted in the recent recalls
mentioned above, we expect ONCASPAR sales to continue to grow, but at a pace
slower then the growth achieved in fiscal 2004. ONCASPAR sales may decline,
however, if we are unable to correct these manufacturing and product stability
problems. We expect DEPOCYT sales to gain modestly from the current sales
levels. However, we cannot assure you that any particular sales levels of
ABELCET, ADAGEN, ONCASPAR, DEPOCYT or PEG-INTRON will be achieved or maintained.

         Contract revenues for the three months ended December 31, 2004 were
$412,000 as compared to $253,000 for the three months ended December 31, 2003.
The increase was due to revenue related to a development agreement we entered
into with Pharmagene plc.

         During the three months ended December 31, 2004, we had export sales
and royalties on export sales of $11.7 million, of which $9.3 million were in
Europe. Export sales and royalties recognized on export sales for the prior year
quarter were $9.1 million, of which $7.7 million were in Europe.

         Cost of Sales and Manufacturing Revenue. Cost of sales and
manufacturing revenue, as a percentage of net sales and manufacturing revenue,
decreased to 38% for the three months ended December 31, 2004 as compared to 40%
for the same period last year. The decrease was principally due to lower
manufacturing cost for ABELCET. Included with cost of sales is $1.1 million for
the three months ended December 31, 2004 and 2003 related to amortization of
intangible assets acquired in connection with the ABELCET acquisition during
November 2002.

         Research and Development. Research and development expenses increased
by 20% to $8.8 million for the three months ended December 31, 2004 from $7.4
million for the same period last year. The increase was primarily due to
spending of approximately $1.5 million related to our strategic partnership with
Inex Pharmaceuticals Corporation on Inex's proprietary oncology product MARQIBO.
In January 2005, the United States Food and Drug Administration (FDA) provided
an action letter to the Company's partner, Inex, detailing that MARQIBO is "not
approvable" under the FDA's accelerated approval regulations based on the Phase
2b clinical-trial data submitted.

         Selling, General and Administrative. Selling, general and
administrative expenses for the three months ended December 31, 2004 increased
by 20% to $13.8 million, as compared to $11.5 million for the same period last
year. The increase was primarily due to increased sales and marketing expense of
approximately $2.0 million and increased accounting and auditing fees of
approximately $300,000.

         Amortization. Amortization expense remained unchanged at $3.4 million
for the three months ended December 31, 2004 and 2003. Amortization expense for
both periods related to intangible assets acquired in connection with the
ABELCET acquisition during November 2002. In addition, a portion of amortization
is classified in cost of sales and manufacturing revenue. Amortization of
intangible assets is calculated on a straight-line basis over the estimated
lives of the assets, which range from 3 to 15 years.

         Other income (expense). Other income (expense) for the three months
ended December 31, 2004 was an expense of $4.5 million, as compared to an
expense of $8.6 million for the three months ended December 31, 2003. Other
income (expense) includes: net investment income, interest expense, and other,
net.

         Net investment income for the three months ended December 31, 2004
increased to $973,000 from $706,000 for the three months ended December 31, 2003
due to an increase in our interest bearing investments and higher interest
rates.

                                       18
<PAGE>

         Interest expense was $5.0 million for each of the three months ended
December 31, 2004 and 2003. Interest expense is related to $400.0 million in
4.5% convertible subordinated notes, which were outstanding for each of the
periods.

         Other, net is primarily related to the 1.5 million shares of NPS common
stock we received under a June 2003 merger termination agreement and a financial
instrument we formed to reduce our exposure to the change in fair value
associated with such shares, specifically a zero cost protective collar
arrangement (the "Collar.") For the three months ended December 31, 2004, other,
net was an expense of $540,000, as compared to an expense of $4.3 million for
the three months ended December 31, 2003. During the three months ended December
31, 2004, we recognized (i) an unrealized gain of $2.2 million related to change
in the fair value of the Collar (ii) a realized loss of $3.2 million related to
the maturation of a portion of the Collar and the sale of the underlying shares.
For a more detailed description of our Merger Termination Agreement with NPS and
the Collar see Note 13 to the Notes to the accompanying condensed consolidated
financial statements - Derivative Instruments.

         During the three months ended December 31, 2003, we recognized (i) a
realized gain of $1.2 million related to the sale and repurchase of 375,000
shares of NPS common stock, (ii) an unrealized loss of $4.0 million related to
change in the fair value of the Collar, and (iii) an unrealized loss of $1.5
million on the NPS common stock.

         Income Taxes. During the three months ended December 31, 2004 we
recognized a tax expense of approximately $103,000 compared to tax benefit of
$631,000, for the three months ended December 31, 2003. We recognized a tax
expense for the three months ended December 31, 2004 which is based on the
projected income tax expense and taxable income for the fiscal year ending June
30, 2005. The tax provision for the three months ended December 31, 2003 was
based on the Company's projected income tax benefit and taxable loss for the
fiscal year ended June 30, 2004.

SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003

         Revenues. Total revenues for the six months ended December 31, 2004
were $83.4 million, as compared to $82.3 million for the six months ended
December 31, 2003. The components of revenues are product sales, contract
manufacturing revenue, royalties we earn on the sale of our products by others
and contract revenues.

         Net product sales increased by 3% to $54.5 million for the six months
ended December 31, 2004, as compared to $52.7 million for the six months ended
December 31, 2003. The increase in sales was due to increased sales of three of
our internally marketed products: ADAGEN(R), DEPOCYT(R), and ONCASPAR(R). Sales
of ABELCET in North America decreased by 7% to $30.8 million for the six months
ended December 31, 2004, as compared to $33.0 million for the six months ended
December 31, 2003 as a result of weaker demand for the product due to increased
competition in the intravenous antifungal market. Sales of DEPOCYT increased by
54% to $4.0 million for the six months ended December 31, 2004 as compared to
$2.6 million for the six months ended December 31, 2003. Sales of ONCASPAR
increased by 17% to $9.8 million for the six months ended December 31, 2004, as
compared to $8.4 million in the corresponding period in the prior year. These
increased product sales resulted in large part from our focused sales and
marketing efforts to support ONCASPAR and DEPOCYT. Sales of ADAGEN increased by
14% for the six months ended December 31, 2004 to $9.9 million as compared to
$8.7 million for the six months ended December 31, 2003 due to an increase in
the number of patients receiving ADAGEN therapy and the timing of shipments.

         Contract manufacturing revenue for the six months ended December 31,
2004 increased to $8.0 million, as compared to $3.8 million for the comparable
period of the prior year due to the timing of orders from our contract
manufacturing customers. Contract manufacturing revenue is related to the
manufacture and sale of ABELCET for the international market and other contract
manufacturing revenue.

         Royalties for the six months ended December 31, 2004, decreased to
$20.2 million as compared to $25.3 million in the same period in the prior year.
The decrease was primarily due to decreased sales of PEG-INTRON by
Schering-Plough, our marketing partner, due to competitive pressure from the
competing pegylated alpha interferon product, PEGASYS(R), which Hoffmann-La
Roche launched in December 2002.

         Contract revenues for the six months ended December 31, 2004 increased
to $711,000 as compared to $521,000 in the previous year, due to revenue related
to the co-development agreement we entered into with Pharmagene plc.

         During the six months ended December 31, 2004, we had export sales and
royalties on export sales of $22.5 million, of which $17.2 million were in
Europe. Export sales and royalties recognized on export sales for the prior year
were $19.1 million, of which $16.2 million were in Europe.

         Cost of Sales and Manufacturing Revenue. Cost of sales and
manufacturing revenue, as a percentage of net sales and manufacturing revenue,
decreased to 37% for the six months ended December 31, 2004 compared to 40% for
the six months ended December 31, 2003 due to lower manufacturing cost for
ABELCET. Included with cost of sales is $2.2 million for the six months ended
December 31, 2004 and 2003 related to amortization of intangible assets acquired
in connection with the ABELCET acquisition during November 2002.

                                       19
<PAGE>

         Research and Development. Research and development expenses increased
by 34% to $18.7 million for the six months ended December 31, 2004 from $13.9
million for the same period last year. The increase was primarily due to
increased spending of approximately $2.7 million related to our strategic
partnership with Inex on Inex's proprietary oncology product, MARQIBO, and
increased personnel-related expenses of approximately $2.1 million. In January
2005, the FDA provided an action letter to the Company's partner, Inex,
detailing that MARQIBO is "not approvable" under the FDA's accelerated approval
regulations based on the Phase 2b clinical-trial data submitted.

         Selling, General and Administrative. Selling, general and
administrative expenses for the six months ended December 31, 2004 increased by
15% to $26.0 million, as compared to $22.7 million in the same period last year.
The increase was primarily due to increased sales and marketing expense of
approximately $3.7 million which includes expenses associated with the potential
launch of MARQIBO. This increase was offset in part by a decrease in general and
administrative personnel and other related costs of approximately $414,000.

         Amortization. Amortization expense remained unchanged at $6.7 million
for the six months ended December 31, 2004 and 2003. Amortization expense for
both periods relates to intangible assets acquired in connection with the
ABELCET acquisition during November 2002. In addition, a portion of amortization
is classified in cost of sales and manufacturing revenue. Amortization of
intangible assets is calculated on a straight line basis over the estimated
lives of the assets, which range from 3 to 5 years.

         Other income (expense). Other income (expense) for the six months ended
December 31, 2004 was an expense of $10.1 million, as compared to an expense of
$15.6 million for the six months ended December 31, 2003. Other income (expense)
includes: net investment income, interest expense, and other, net.

         Net investment income for the six months ended December 31, 2004
increased to $1.7 million from $1.2 million for the six months ended December
31, 2003, due to an increase in our interest bearing investments, along with
higher interest rates.

         Interest expense was $9.9 million for each of the six months ended
December 31, 2004 and 2003. Interest expense is related to $400.0 million in
4.5% convertible subordinated notes, which were outstanding for each of the
periods.

         Other, net is primarily related to the 1.5 million shares of NPS common
stock we received under a June 2003 merger termination agreement and a financial
instrument we formed to reduce our exposure to the change in fair value
associated with such shares, specifically a zero cost protective collar
arrangement (the "Collar.") For the six months ended December 31, 2004, other,
net was an expense of $2.0 million compared to an expense of $6.8 million for
the six months ended December 31, 2003. During the six months ended December 31,
2004, we recognized (i) a realized gain of $578,000 related to the sale and
repurchase of 375,000 shares of NPS common stock, (ii) an unrealized gain of
$1.3 million related to change in the fair value of the Collar, and (iii) a
realized loss of $3.2 million related to the maturation of a portion of the
Collar and the sale of the underlying shares. For a more detailed description of
our Merger Termination Agreement with NPS and the Collar see Note 14 to the
Notes to the accompanying Consolidated Financial Statements - Derivative
Instruments.

         For the six months ended December 31, 2003, other, net was an expense
of $6.8 million. During the six months ended December 31, 2003, we recognized
(i) a realized gain of $1.2 million related to the sale and repurchase of
375,000 shares of NPS common stock, (ii) an unrealized loss of $10.3 million
related to change in the fair value of the Collar, and (iii) an unrealized gain
of $2.3 million on NPS common stock.

         Income Taxes. During the six months ended December 31, 2004 we
recognized a tax benefit of approximately $534,000 compared to $149,000, for the
six months ended December 31, 2003. We recognized a tax benefit for the six
months ended December 31, 2004 which is based on the projected income tax
benefit and taxable loss for the fiscal year ending June 30, 2005. The tax
provision for the six months ended December 31, 2003 was recorded based on an
estimated annual effective tax rate of 35% which represented our anticipated
Alternative Minimum Tax Liability based on the anticipated taxable income for
the full fiscal year. In addition, during six months ended December 31, 2004 the
Company recorded $2.8 million tax benefit relating to the derivative instrument
as described in Note 13.

CRITICAL ACCOUNTING POLICIES

         In December 2001, the U.S. Securities and Exchange Commission ("SEC")
requested that all registrants discuss their most "critical accounting policies"
in Management's Discussion and Analysis of Financial Condition and Results of
Operations. The SEC indicated that a "critical accounting policy" is one which
is both important to the portrayal of a company's financial condition and
results of operations and requires management's most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain.

                                       20
<PAGE>

         Our consolidated financial statements are presented in accordance with
accounting principles that are generally accepted in the United States. All
professional accounting standards effective as of December 31, 2004 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.

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

         The majority of our net products sales are to distributors who resell
the products to the end customers. We provide rebates or chargebacks to members
of buying groups who purchase from our distributors that sell to their customers
at prices determined under a contract between Enzon and the customer. In
addition, state agencies, which administer various programs such as the U.S.
Medicaid and Medicare program also receive rebates or Medicaid rebates and
administrative fees. Chargeback amounts are usually based upon the volume of
purchases or by reference to a specific price for a product. Factors that
complicate the rebate calculations are which customer or government price terms
apply, and the estimated lag time between sale and payment of a rebate. Using
historical trends, adjusted for current changes, we estimate the amount of the
chargeback that will be paid, and record the amounts as a reduction to accounts
receivable and a reduction of gross sales when we record the sale of the
product. Settlement of the chargebacks generally occur from three to nine months
after sale. We regularly analyze the historical chargebacks trends and makes
adjustments to recorded reserves for changes in trends.

         Medicaid rebates and administrative fees are recorded as a liability
and a reduction of gross sales when we record the sale of the product. Medicaid
rebates are typically paid up to six months later. In determining the
appropriate accrual amount we consider our historical Medicaid rebate and
administration fee payments by product as a percentage of our historical sales
as well as any significant changes in sales trend, an evaluation of the current
Medicaid rebate laws and interpretations and the percentage of our products that
are sold to Medicaid patients.

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

<TABLE>
<CAPTION>
                                                         December 31, 2004          June 30, 2004
                                                       ----------------------    ---------------------
<S>                                                    <C>                       <C>
     Accounts Receivable Reductions
          Chargebacks                                           $9,479                   $7,802
          Cash Discounts                                           318                      414
          Other (including returns)                              1,241                    1,323
                                                       ----------------------    ---------------------
                Total                                          $11,038                   $9,539
                                                       ----------------------    ---------------------
     Accrued Liabilities
           Medicaid Rebates                                     $2,354                   $2,011
           Administrative Fees                                     605                      640
                                                       ----------------------    ---------------------
                Total                                           $2,959                   $2,651
                                                       ----------------------    ---------------------
</TABLE>


         There were no revisions to the estimates for gross to net sales
adjustment that would be material to income from operations for the three and
six months ended December 31, 2004 and 2003.

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

                                       21
<PAGE>

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

         Under the asset and liability method of Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes", deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance on
net deferred tax assets is provided for when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. We have
significant net deferred tax assets, primarily related to net operating loss and
other carryforwards, and continue to analyze what level of the valuation
allowance is needed taking into consideration the expected future performance of
the Company.

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

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

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

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



                                       22
<PAGE>

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

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

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

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

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

         o  Although Schering-Plough has received approval for PEG-INTRON in
            Japan in combination with REBETOL for the treatment of hepatitis C,
            there can be no assurance that Schering-Plough will successfully
            market PEG-INTRON in Japan. It is anticipated that Hoffmann-La Roche
            will obtain marketing approval in Japan for a competing pegylated
            interferon-based combination therapy for hepatitis C in the next one
            or two years. Hoffmann-La Roche's subsidiary (Chugai Pharmaceutical
            Co. LTD) currently markets other pharmaceutical products in Japan.
            Even if Schering-Plough is successful in launching PEG-INTRON in
            Japan, it is likely that the future launch in Japan of Hoffmann-La
            Roche's competing pegylated interferon-based combination therapy
            will have a negative impact on PEG-INTRON's Japanese market share
            and sales.

         o  We have begun to experience increasing pricing pressure with respect
            to ABELCET. In particular, Fujisawa Healthcare Inc. and Gilead
            Sciences, Inc., which jointly market a competing liposomal
            amphotericin B product have aggressively lowered the price of their
            product in certain regions and for certain customers in the U.S.
            This has resulted in the shrinkage or loss of certain of our
            customer accounts. We are developing strategies to address this
            competitive threat, but there can be no assurance as to when or
            whether we will be successful in stopping or reversing this trend.

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


                                       23
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

         Our holdings of financial instruments are comprised of debt securities
and time deposits. All such instruments are classified as securities
available-for-sale. In August 2003, we entered into a Zero Cost Protective
Collar arrangement with a financial institution to reduce the exposure
associated with the 1.5 million shares of common stock of NPS we received as
part of the merger termination agreement with NPS. The terms of the collar
arrangement are structured so that our investment in NPS stock, when combined
with the value of the collar, should secure ultimate cash proceeds in the range
of 85% - 108% of the negotiated fair value per share of $23.47 (representing a
4.85% discount off the closing price of NPS common stock on the day before the
collar was executed) (See Note 12). We do not invest in portfolio equity
securities or commodities or use financial derivatives for trading purposes. Our
debt security portfolio represents funds held temporarily pending use in our
business and operations. We manage these funds accordingly. We seek reasonable
assuredness of the safety of principal and market liquidity by investing in
rated fixed income securities while at the same time seeking to achieve a
favorable rate of return. Our market risk exposure consists principally of
exposure to changes in interest rates. Our holdings are also exposed to the
risks of changes in the credit quality of issuers. We typically invest the
majority of our investments in the shorter-end of the maturity spectrum, and at
December 31, 2004 all of our holdings were in instruments maturing in four years
or less.

         The table below presents the principal amounts and related weighted
average interest rates by year of maturity for our investment portfolio as of
December 31, 2004 (in thousands):

<TABLE>
<CAPTION>
                             2005           2006          2007            2008          TOTAL        FAIR VALUE
                           --------       --------       --------       --------       --------      ---------
<S>                        <C>            <C>            <C>            <C>            <C>            <C>
Fixed Rate                 $ 76,521       $ 38,425       $ 20,627       $  5,000       $140,573       $139,617
Average Interest Rate          0.89%          2.32%          2.69%          2.73%          1.61%          --
Variable Rate                  --             --             --             --             --             --
Average Interest Rate          --             --             --             --             --             --
                           --------       --------       --------       --------       --------       --------
                           $ 76,521       $ 38,425       $ 20,627       $  5,000       $140,573       $139,617
                           ========       ========       ========       ========       ========       ========
</TABLE>

         Our 4.5% convertible subordinated notes in the principal amount of
$400.0 million due July 1, 2008 have fixed interest rates. The fair value of the
notes was approximately $377.0 million at December 31, 2004. The fair value of
fixed interest rate convertible notes is affected by changes in interest rates
and by changes in the price of our common stock.

         As discussed in Liquidity and Capital Resources, in August 2003, we
entered into a zero cost protective collar arrangement (the "Collar") with a
financial institution to reduce the exposure to the changes in the fair value
associated with the 1.5 million shares of common stock of NPS we received as
part of the merger termination agreement with NPS. The Collar is considered a
derivative instrument and as such, we carry the Collar at fair value as an asset
or liability on the consolidated balance sheet and changes in fair value are
recorded as a charge or credit to operations in the period of change. The value
of the Collar instrument is subject to market conditions that cause variability
associated with its intrinsic and time values. The fair value of the Collar at
December 31, 2004 was a receivable of $3.0 million.


                                       24
<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

         The following has been amended to reflect the restatement of the
Company's condensed consolidated financial statements as discussed in (i) the
Explanatory Note to this Quarterly Report on Form 10-Q/A and (ii) Note 2 to the
condensed consolidated financial statements for the quarter ended December 31,
2004, which appear under Item 1 of this quarterly report on Form 10-Q/A.

         In connection with the preparation of our previously filed quarterly
report on Form 10-Q for the quarterly period ended December 31, 2004, our
management, including our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended ("the Exchange Act")). Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of December 31, 2004, our internal control and procedures were
effective in timely alerting them to the material information relating to us
required to be included in our periodic filings with the U.S. Securities and
Exchange Commission ("SEC").

         Subsequent to the period covered by this report, in connection with the
audit of our consolidated financial statements for the year ended June 30, 2005,
we reevaluated our use of hedge accounting for a derivative hedging instrument
under Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended (SFAS No. 133). We
identified certain computational changes in the valuation of the Collar and,
therefore did not properly account for the Collar. In conjunction with our
reevaluation, we determined that we would need to amend and restate certain
previously issued financial statements, including those pertaining to the
quarter and year-to-date period ended December 31, 2004, with respect to our
accounting for the derivative hedging instrument. Accordingly, on August 16,
2005 and September 1, 2005 we filed a current report on Form 8-K with the SEC
detailing our determination. Due to our need to amend and restate our financial
statements for the quarter ended December 31, 2004, our management, including
our Chief Executive Officer and Chief Financial Officer, now believe that our
disclosure controls and procedures were not effective as of December 31, 2004.

         There have been no other changes in our internal control over financial
reporting during the quarter covered by this report that have materially
affected or are reasonably likely to materially affect our internal control over
financial reporting. However, since December 31, 2004, we are designing a
remediation plan to address a material weakness in our internal control and
procedures pertaining to our application of SFAS No. 133, the accounting for
derivative instruments and the related restatements of certain previously issued
financial statements as reported in our current reports on Form 8-K filed with
the SEC on August 16, 2005 and September 1, 2005. Our remediation plan will
include improving training, education, and accounting reviews to ensure that all
relevant financial personnel have the appropriate level of technical expertise
to effectively interpret and apply accounting standards.


                                       25
<PAGE>

PART II OTHER INFORMATION


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



          (a)  An annual meeting of stockholders was held on December 7, 2004.

          (b)  The directors elected at the annual meeting were Rolf A. Classon
               and Robert LeBuhn, Jr. The term of office as a director for each
               of Dr. Goran Ando, Jeffrey H. Buchalter, Dr. Rosina Dixon and
               Victor P. Micati continued after the annual meeting.

          (c)  The matters voted upon at the annual meeting and the results of
               the voting, including broker non-votes where applicable, are set
               forth below:

                     (i) The stockholders voted 35,210,091 shares in favor and
               2,081,559 shares withheld with respect to the election of Rolf A.
               Classon as a Class II director of the Company, and 35,203,652
               shares in favor and 2,087,998 shares withheld with respect to the
               election of Robert LeBuhn as a Class II director of the Company.
               Broker non-votes were not applicable.

                     (ii) The stockholders voted 35,915,099 shares in favor and
               1,372,561 shares against and 3,990 shares abstained with respect
               to a proposal to ratify the selection of KPMG LLP to audit our
               consolidated financial statements for the fiscal year ending June
               30, 2005. Broker non-votes were not applicable.







                                       26
<PAGE>


ITEM 6.  EXHIBITS

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




 EXHIBIT
 NUMBER       DESCRIPTION
 ------       -----------
 3.1          Certificate of Incorporation, as amended (previously filed as
              as an exhibit to the Company's Annual Report on Form 10-K for
              the year ended June 30, 2002 and incorporated herein by reference
              thereto)
 3.2          Amendment to Certificate of Incorporation (previously filed
              as an exhibit to the Company's Current Report on Form 8-K
              filed on December 10, 2002 and incorporated herein by
              reference thereto)
 3.3          By laws, as amended (previously filed as an exhibit to the
              Company's Current Report on Form 8-K filed with the
              Commission on May 22, 2002 and incorporated herein by
              reference thereto)
 4.1          Indenture dated as of June 26, 2001, between the Company
              and Wilmington Trust Company, as trustee, including the
              form of 4 1/2% Convertible Subordinated Notes due 2008
              attached as exhibit A thereto (previously filed as an
              exhibit to the Company's Registration Statement on Form S-3
              (File No. 333-67509) filed with the Commission and
              incorporated herein by reference thereto)
 4.2          Rights Agreement dated May 17, 2002 between the Company and
              Continental Stock Transfer Trust Company, as rights agent
              (previously filed as an exhibit to the Company's Form 8-A
              (File No. 000-12957) filed with the Commission on May 22, 2002
              and incorporated herein by reference thereto)
 4.3          First Amendment to Rights Agreement, dated as of February
              19, 2003 (previously filed as an exhibit to the Company's
              Form 8-A12 G/A (File No. 000-12957) filed with the
              Commission on February 20, 2003 and incorporated herein by
              reference thereto)
 10.1         Employment Agreement with Jeffrey H. Buchalter dated
              December 22, 2004
 10.2         Employment Agreement with Craig A. Tooman dated January 5,
              2005
 10.3         Form of Non-Qualified Stock Option Agreement for Executive
              Officers
 10.4         Form of Restricted Stock Award Agreement for Executive Officers
 10.5         Separation Agreement with Dr. Ulrich Grau dated November 24,
              2004
 31.1         Certification of Principal Executive Officer pursuant to Section
              302 of the Sarbanes-Oxley Act of 2002 *
 31.2         Certification of Principal Accounting Officer pursuant to
              Section 302 of the Sarbanes-Oxley Act.*
 32.1         Certification of Principal Executive Officer pursuant to Section
              906 of the Sarbanes-Oxley Act of 2002 *
 32.2         Certification of Principal Accounting Officer pursuant to
              Section 906 of the Sarbanes-Oxley Act.*

* Filed herewith.


                                       27
<PAGE>



SIGNATURES

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

                                   ENZON PHARMACEUTICALS, INC.
                                   ---------------------------
                                          (Registrant)



Date:  September 28, 2005             By: /s/Jeffrey H. Buchalter
                                          ----------------------------------
                                          Jeffrey H. Buchalter
                                          Chairman, President and
                                          Chief Executive Officer
                                          (Principal Executive Officer)



Date:  September 28, 2005             By: /s/Craig A. Tooman
                                          ----------------------------------
                                          Craig A. Tooman
                                          Executive Vice President Finance and
                                          Chief Financial Officer
                                          (Principal Financial Officer)



                                       28

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                       [ENZON PHARMACEUTICALS, INC. LOGO]








                    685 Route 202/206, Bridgewater, NJ 08807
                      (908) 541-8600 o FAX: (908) 575-9457
                              http://www.enzon.com