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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-12957
 Enzon Pharmaceuticals, Inc.
  Delaware
    
    22-2372868(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)685 Route 202/206, Bridgewater, New Jersey
    
    08807(Address of principal executive offices)
    
    (Zip Code)
 (908) 541-8600
  Title of Class
    
    Name of Exchange on Which RegisteredCommon Stock, $0.01 par value;
    
    NASDAQ Global MarketPreferred Stock Purchase Rights
  o þ
 o  þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer
þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ENZON PHARMACEUTICALS, INC.
2007 Form 10-K Annual Report
TABLE OF CONTENTS
  
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    28Item 1B. Unresolved Staff Comments
    
    
    43Item 2. Properties
    
    
    43Item 3. Legal Proceedings
    
    
    43Item 4. Submission of Matters to a Vote of Security Holders
    
    
    43PART IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters,
and Issuer Purchases of Equity Securities
    
    
    44Item 6. Selected Financial Data
    
    
    47Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    48Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    67Item 8. Financial Statements and Supplementary Data
    
    
    68Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    68Item 9A. Controls and Procedures
    
    
    68Item 9B. Other Information
    
    
    71PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    72Item 11. Executive Compensation
    
    
    72Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    72Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    72Item 14. Principal Accountant Fees and Services
    
    
    72PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    73EX-10.28: AMENDED AND RESTATED EMPLOYMENT AGREEMENTEX-12.1: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-21.1: SUBSIDIARIESEX-23.0: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: CONSENT OF INDEPENDENT VALUATION FIRM
  2




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® ® ® ®
  www.enzon.com www.enzon.com www.sec.gov
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
ENZON PHARMACEUTICALS, INC.
 
 PART I
 
 ITEM 1. BUSINESS
 GENERAL
 ® ® ® ® TM
 STRATEGY
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
    
    To further our goal of establishing a successful franchise of cancer therapeutics, we
are executing on a number of programs to optimize the value of our currently marketed
cancer products, Oncaspar and DepoCyt. We continue to see adoption of Oncaspar in
pediatric and adult cooperative group protocols. In 2007, DepoCyt received full approval
from the U.S. Food and Drug Administration (FDA) for lymphomatous meningitis.
    
    Lifecycle management is being deployed as a critical organizational practice with plans
underway for all of our marketed brands. We believe lifecycle management is an essential
tool for building sustainability and maximizing value for our products. We continue to
evaluate several new means of driving sustainable commercial success for our marketed
products, including new therapeutic areas, modes of administration, manufacturing process
and supply improvements and delivery mechanisms. Our management has aligned all of our
core functions, from research through commercialization, on maximizing the value of our
products through integrated lifecycle management programs.
    
    We continue to rebuild our research and development pipeline. In 2007, we advanced our
PEG-SN38 and our HIF-1 alpha antagonist into Phase I human clinical trials. We continue
to enroll our recombinant human Mannose-binding Lectin (rhMBL) Phase I/II studies.
    
    We continue to identify opportunities in our contract manufacturing business to (i)
foster new contract manufacturing partnerships, (ii) enhance our current processes, (iii)
broaden our manufacturing expertise and infrastructure, and (iv) expand the utilization of
our finish and fill capabilities.
    
    During 2007, we significantly improved our financial condition by successfully
monetizing 25% of our future royalties on the sales of PEG-INTRON for proceeds of $92.5
million. The majority of the net proceeds were placed in a restricted account for the
purpose of eliminating the outstanding 4.5% convertible subordinated
notes due July 1, 2008.
 PRODUCTS SEGMENT
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ROYALTIES SEGMENT
  PRODUCT
    
    INDICATION
    
    COMPANYPEG-INTRON (peginterferon 
alfa-2b)
    
    chronic hepatitis C
    
    Schering-Plough CorporationMacugen (pegaptanib sodium 
injection)
    
    neovascular (wet)
age-related macular
degeneration
    
    OSI Pharmaceuticals, Inc.
and Pfizer Inc.Pegasys (peginterferon alfa-2a)
    
    hepatitis C
    
    Hoffmann-La Roche
 ® ®
   1)
    
    IDEAL Study  In January 2004, Schering-Plough began recruiting patients in the IDEAL
study, which directly compares PEG-INTRON in combination with REBETOL versus Pegasys in
combination with COPEGUS in 2,880 patients in the U.S. On January 14, 2008 Schering
Plough reported preliminary IDEAL Study Results which showed similar sustained response
rates between the two treatments, however fewer patients relapsed following the PEG-INTRON
Combination Therapy.2)
    
    COPILOT Study  PEG-INTRON is being evaluated for use as long-term maintenance
monotherapy in cirrhotic patients who have failed previous treatment.
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3)
    
    ENDURE Study  In January 2006, Schering-Plough announced that it was initiating a
large multinational clinical trial, to evaluate the use of low-dose PEG-INTRON maintenance
monotherapy in preventing or delaying hepatitis disease progression.4)
    
    PROTECT Study  In May 2006, Schering-Plough announced the initiation of a large
multicenter clinical trial in the U.S. to evaluate the safety and efficacy of PEG-INTRON
and REBETOL combination therapy in liver transplant recipients with recurrent hepatitis C
virus infection. The trial is targeted to enroll 125 patients in the U.S.5)
    
    EPIC3 Study  In October 2006, Schering-Plough reported data from EPIC3, a large
ongoing clinical study, showing that retreatment with PEG-INTRON and REBETOL combination
therapy can result in sustained virologic response in patients with chronic hepatitis C
who failed previous treatment with any alpha interferon-based combination therapy,
including peginterferon regimens.6)
    
    Schering-Plough Corporation announced on January 31, 2008, that the FDA accepted the
PEG-INTRON sBLA for review and has granted Priority Review status for the adjuvant
treatment of patients with Stage III melanoma. Based on this Priority Review status, the
FDA reviews the application with the goal of taking action within six months of the
sponsors submission of the sBLA. The application will be discussed by the FDA Oncology
Drugs Advisory Committee on March 12, 2008. PEG-INTRON was also filed with the EMEA in
Europe in the fall of 2007.7)
    
    Finally, PEG-INTRON is being evaluated in several investigator-sponsored trials as a
potential treatment for various cancers, including several earlier stage clinical trials
for other oncology indications.
 ®
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CONTRACT MANUFACTURING SEGMENT
 ®
  RESEARCH AND DEVELOPMENT
   ®
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®
  
    
    PEG-SN38 demonstrated potent in vitro cytotoxicity against several human cancer cell
lines and anti-tumor activity in xenograft models of human breast, colorectal and
pancreatic cancers.
    
    Treatment with a single or multiple small doses of PEG-SN38 led to complete cures of
animals in the breast cancer model.
    
    In colorectal and pancreatic preclinical models, PEG-SN38 demonstrated significantly
better therapeutic efficacy, at their respective maximum tolerated doses and equivalent
dose levels, than CPT-11.
    
    In mice, PEG-SN38 provided a long circulation half-life and exposure to the parent
drug, SN38.
    
    Biodistribution data showed high and prolonged exposure of SN38 within tumors,
supporting the Enhanced Permeation and Retention (EPR) effect.
    
    PEG-SN38 demonstrated antitumor activity in xenograft models of non-Hodgkins
lymphoma.
    
    Treatment with PEG-SN38 resulted in tumor growth inhibition in animals
resistant to CPT-11 and outperformed CPT-11 when given as second-round therapy to animals
initially responding to CPT-11.
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
    
    HIF-1 alpha (hypoxia-inducible factor 1 alpha) Antagonist  The HIF-1 alpha antagonist
is a highly-visible, well-validated target in many cancer types, including common solid
tumors. HIF-1 alpha is a key regulator of a large number of genes important in cancer
biology, such as angiogenesis, cell proliferation, apoptosis, glucose metabolism and cell
invasion. HIF-1 alpha protein level is low in normal cells, but reaches high
intracellular concentrations in a variety of cancers and is strongly correlated with poor
prognosis and resistance to therapy. Drugs targeting HIF-1 alpha thus have the potential
to target multiple cancer processes. In January 2007 we announced that the FDA accepted
our IND for the HIF-1 alpha antagonist. In 2007, we opened two Phase I studies for
patients with solid tumors and lymphoma evaluating different dosing schedules for the
HIF-1 alpha antagonist.
    
    Survivin Antagonist  Survivin plays a vital regulatory role in both apoptosis and cell
division. Survivin is heavily over-expressed in many cancers and in newly formed
endothelial cells engaged in angiogenesis but almost absent in normal adult differentiated
tissue. Resistance of cancer cells to radiotherapy and cytotoxic drugs (in particular
microtubule interfering taxanes) is strongly correlated with expression levels of
Survivin. Clinically, Survivin expression is associated with poor prognosis, increased
cancer recurrence and resistance to therapy. The Survivin antagonist is currently in
preclinical development.
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SALES AND MARKETING
    MANUFACTURING AND RAW MATERIALS
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DEVELOPMENT AND COMMERCIALIZATION AGREEMENTS
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TM
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PATENTS AND INTELLECTUAL PROPERTY RIGHTS
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GOVERNMENT REGULATION
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
    
    conducting appropriate preclinical laboratory evaluations of the products chemistry,
formulation and stability, and animal studies to assess the potential safety and efficacy
of the product,
    
    submitting the results of these evaluations and tests to the FDA, along with
manufacturing information, analytical data and clinical investigational plan, in an IND,
    
    obtaining IND approval from the FDA, which may require the resolution of any safety or
regulatory concerns of the FDA,
    
    obtaining approval of Institutional Review Boards or IRBs, prior to introducing the
drug or biological product into humans in clinical studies and registering clinical trials in public databases such as clinicaltrials.gov,
    
    conducting adequate and well-controlled human clinical trials that establish the safety
and efficacy of the drug or safety, purity and potency of the biological product candidate for the intended use, in the
following three typically sequential, stages:
    
    
    submitting the results of preliminary research, preclinical studies, and clinical
studies as well as chemistry, manufacturing and control information on the drug or
biological product to the FDA in a New Drug Application or NDA, for a drug product, or a
BLA for a biological product, and
    
    obtaining FDA approval of the NDA or BLA prior to any commercial sale or shipment of
the drug or biological product.
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
    
    untitled and warning letters,
    
    suspension of manufacturing,
    
    seizure of the product,
    
    voluntary recall of a product,
    
    injunctive actions,
    
    civil or criminal penalties.
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COMPETITION
 General
  Products
     24




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® ® ® ®
 ® ® TM
    ® ®
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Royalties
    TM
 Technology
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EMPLOYEES
  27




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Item 1A. Risk Factors
    Risks Related to Our Business
  We expect to incur losses over the next several years.
   
    
    the success of our research and development programs;
    
    the continued sales of our marketed products and the products on which we receive
royalties; and
    
    our and our licensees ability to develop and obtain regulatory approvals for
additional product candidates.
 There is a high risk that our early-stage research and development might not generate successful
product candidates. Failure to develop and commercialize our product candidates could materially
harm our business.
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Our financial results are heavily dependent on the continued sales of our marketed products and the
products on which we receive royalties; if revenues from these products fail to increase or
materially decline, our results of operations, financial position and prospects could be materially
harmed.
   Sales of PEG-INTRON and Abelcet have been adversely affected by competitive products introduced
into their respective markets and we have experienced in the past and may continue to experience in
the future a decline in sales of Abelcet, which if not reversed, will adversely affect our results
of operations, financial condition and prospects.
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We will need to obtain additional financing to meet our future capital needs and our significant
debt level may adversely affect our ability to do so. Failure to do so could materially and
adversely affect our business, financial condition and operations.
    
    
    increasing our vulnerability to general adverse economic and industry conditions;
    
    requiring the dedication of a substantial portion of our expected cash flow from
operations to service our indebtedness, thereby reducing the amount of our expected cash
flow available for other purposes;
    
    limiting our flexibility in planning for, or reacting to, changes in our business and
the industry in which we compete;
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
    
    placing us at a possible competitive disadvantage relative to less leveraged
competitors and competitors that have better access to capital resources; and
    
    making it difficult or impossible for us to pay the principal amount of the 2013
notes at maturity, or the repurchase price of the 2013 notes upon a
fundamental change, including accrued and unpaid interest.
 We depend on our collaborative partners; if we lose our collaborative partners or they do not apply
adequate resources to our collaborations, our product development and financial performance may
suffer.
    We purchase some of the compounds utilized in our products from a single source or a limited group
of suppliers, and the partial or complete loss of one of these suppliers could cause production
delays and a substantial loss of revenues.
  Oncaspar
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Adagen
 Abelcet
   Our product candidates must undergo extensive clinical testing, the results of which are uncertain
and could substantially delay or prevent us from obtaining regulatory approval.
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
    
    negative or ambiguous results regarding the efficacy of the product candidate;
    
    undesirable side effects that delay or extend the trials or make the product
candidate not medically or commercially viable;
    
    inability to recruit and qualify a sufficient number of patients for our trials;
    
    regulatory delays or other regulatory actions, including changes in regulatory
requirements;
    
    difficulties in obtaining sufficient quantities of the product candidate
manufactured under current good manufacturing practices;
    
    delays, suspension or termination of the trials imposed by us, an independent
institutional review board for a clinical trial site, or clinical holds placed upon
the trials by the FDA; and
    
    we may have inadequate financial resources to fund these trials.
   We depend on patents and proprietary rights, which may offer only limited protection against
potential infringement and the development by our competitors of competitive products. The U.S. and
foreign patents upon which our original PEG technology was based have expired.
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We or our suppliers could experience delays or difficulties in manufacturing, including problems
complying with the FDAs regulations for manufacturing our products. These problems could
materially harm our business.
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Our arrangements with third-party manufacturers involve significant financial commitments and costs
that may be incurred if we terminate or delay manufacturing.
  We may be subject to a variety of types of product liability or other claims based on allegations
that the use of our products has resulted in adverse effects, whether by participants in our
clinical trials or by patients using our products, and our insurance may not cover all product
liability or other claims.
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We depend on key personnel and may not be able to retain these employees or recruit additional
qualified personnel, which would harm our business.
  Risks Related to Our Industry
 We face rapid technological change and intense competition, which could harm our business and
results of operations.
  ®
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The regulatory approval process is highly uncertain and we may not successfully secure approval for
new products. Failure to obtain, or delays in obtaining, regulatory approvals could materially
harm our business.
    
    
    refusals or delays in the approval of applications or supplements to approved
applications;
    
    refusal of a regulatory authority, including the FDA, to review pending market
approval applications or supplements to approved applications;
    
    warning letters;
    
    fines;
    
    import or export restrictions;
    
    product recalls or seizures;
    
    injunctions;
    
    total or partial suspension of production;
    
    fines, civil penalties or criminal prosecutions; or
    
    withdrawals of previously approved marketing applications or licenses.
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Even if we obtain regulatory approval for our products, they may not be accepted in the
marketplace.
  
    
    the scope of regulatory approvals,
    
    establishment and demonstration of clinical efficacy and safety;
    
    cost-effectiveness of our products;
    
    alternative treatment methods and potentially competitive products;
    
    the availability of third-party reimbursement
  Our operations are subject to extensive environmental laws and regulations.
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Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures,
we may be unable to sell our products profitably in the U.S.
    The law or FDA policy could change and expose us to competition from generic or follow-on
versions of our products, which could adversely impact our business.
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Risks Related to Our Common Stock and our Convertible Notes
 The price of our common stock has been, and may continue to be, volatile, which also may
significantly affect the trading price of our convertible notes.
  
    
    the level of revenues we generate from our sale of products and royalties we
receive;
    
    the losses we incur or the profits we generate;
    
    the results of preclinical testing and clinical trials by us, our collaborative
partners or our competitors;
    
    announcements of technical innovations or new products by us, our collaborative
partners or our competitors;
    
    the status of corporate collaborations and supply arrangements;
    
    regulatory approvals;
    
    developments in patent or other proprietary rights;
    
    public concern as to the safety and efficacy of products developed by us or
others; and
    
    litigation.
  Events with respect to our share capital could cause the shares of our common stock outstanding to
increase.
  
    
    Options. Stock options to purchase 8.4 million shares of our common stock at a
weighted average exercise price of approximately $11.36 per share;
    
    4% convertible senior notes due 2013 (the 2013 convertible notes). Our 2013
convertible notes may be converted into 28.8 million shares of our common stock at
a conversion price of $9.55 per share.
    
    Restricted stock units. 1.8 million shares of our common stock issuable in
respect of outstanding restricted stock units held by officers, employees and
directors.
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Anti-takeover provisions in our charter documents and under Delaware law may make it more difficult
to acquire us, even though such acquisitions may be beneficial to our stockholders.
  
    
    a classified board of directors whereby not all members of the board may be
elected at one
time;
    
    lack of a provision for cumulative voting in the election of directors, which would
otherwise
allow less than a majority of stockholders to elect director candidates;
    
    the ability of our board to authorize the issuance of blank check preferred stock to
increase
the number of outstanding shares and thwart a takeover attempt;
    
    advance notice requirements for nominations for election to the board of directors or for
proposing matters that can be acted upon by stockholders at stockholder meetings; and
    
    limitations on who may call a special meeting of stockholders.
  The issuance of preferred stock may adversely affect rights of common stockholders.
  We may be unable to redeem our 2013 convertible notes upon a fundamental change.
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The market for unrated debt is subject to disruptions that could have an adverse effect on the
market price of the 2013 convertible notes, or a market for our notes may fail to develop or be
sustained.
  We may not have sufficient funds available to pay amounts due under our 2013 convertible notes.
  42




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Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties
   Approx.Square
    
    
    Approx.Location
    
    Principal Operations
    
    Footage
    
    
    Annual Rent
    
    Lease Expiration20 Kingsbridge Road Piscataway, NJ
    
    Research & Development
    
    
    56,000
    
    $
    640,000
    (1)
    
    
    July 31, 2021300 Corporate Ct. S. Plainfield, NJ
    
    Manufacturing
    
    
    24,000
    
    $
    228,000
    
    
    
    October 31, 2012685 Route 202/206 Bridgewater, NJ
    
    Administrative
    
    
    51,000
    
    $
    1.4 million

(2)
    
    
    January 31, 2018
 
 (1)
    
    Under the terms of the lease, annual rent increases over the remaining term of the
lease from $640,000 to $773,000.(2)
    
    Under the terms of the lease, annual rent increases over the remaining term of the
lease from $1.4 million to $1.5 million.    
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
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Item 5. Market for the Registrants Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
    High
    
    LowYear Ended December 31, 2007First Quarter
    
    $
    9.16
    
    
    $
    7.96Second Quarter
    
    
    8.81
    
    
    
    7.85Third Quarter
    
    
    8.85
    
    
    
    6.44Fourth Quarter
    
    
    10.24
    
    
    
    8.97Year Ended December 31, 2006First Quarter
    
    $
    8.35
    
    
    $
    6.50Second Quarter
    
    
    9.28
    
    
    
    7.06Third Quarter
    
    
    8.49
    
    
    
    7.12Fourth Quarter
    
    
    8.73
    
    
    
    7.84
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Total Return To Shareholders
(Includes reinvestment of dividends)
 RETURN PERCENTAGEPeriods
EndingCompany / Index
    
    6/04
    
    
    6/05
    
    
    12/05*
    
    
    12/06
    
    
    12/07Enzon Pharmaceuticals, Inc.
    
    
    1.67
    
    
    
    -49.22
    
    
    
    14.20
    
    
    
    15.00
    
    
    
    11.99Nasdaq U.S. Index
    
    
    27.18
    
    
    
    -0.11
    
    
    
    7.42
    
    
    
    10.27
    
    
    
    9.93Nasdaq Pharmaceutical Index
    
    
    9.20
    
    
    
    -3.95
    
    
    
    20.09
    
    
    
    0.29
    
    
    
    -2.37
 Base
    
    INDEXED RETURNSPeriod
    

Periods
EndingCompany / Index
    
    6/03
    
    6/04
    
    
    6/05
    
    
    12/05*
    
    
    12/06
    
    
    12/07Enzon Pharmaceuticals, Inc.
    
    100
    
    
    101.67
    
    
    
    51.63
    
    
    
    58.96
    
    
    
    67.81
    
    
    
    75.94Nasdaq U.S. Index
    
    100
    
    
    127.18
    
    
    
    127.04
    
    
    
    136.47
    
    
    
    150.48
    
    
    
    165.42Nasdaq Pharmaceutical Index
    
    100
    
    
    109.20
    
    
    
    104.89
    
    
    
    125.96
    
    
    
    126.32
    
    
    
    123.32
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Dividends
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Item 6. Selected Financial Data
  Six MonthsYear Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    Year Ended June 30,2007
    
    
    2006
    
    
    2005 (1)
    
    
    2005
    
    
    2004
    
    
    2003Consolidated Statement of Operations
Data:Total revenues(2)
    
    $
    185,601
    
    
    $
    185,653
    
    
    $
    73,699
    
    
    $
    166,250
    
    
    $
    169,571
    
    
    $
    146,406Cost of product sales and contract
manufacturing
    
    
    54,978
    
    
    
    50,121
    
    
    
    23,216
    
    
    
    46,023
    
    
    
    46,986
    
    
    
    28,521Research and development
    
    
    56,507
    
    
    
    43,521
    
    
    
    13,985
    
    
    
    36,957
    
    
    
    34,769
    
    
    
    20,969Write-down of carrying value of
investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,341
    
    
    
    27,237Acquired in-process research
and development
    
    
    
    
    
    
    11,000
    
    
    
    10,000
    
    
    
    
    
    
    
    12,000
    
    
    
    Restructuring charge
    
    
    7,741
    (3)
    
    
    
    
    
    
    
    
    
    
    2,053
    
    
    
    
    
    
    
    Write-down of goodwill and
intangibles (4)
    
    
    
    
    
    
    
    
    
    
    284,101
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of royalty interest
    
    
    (88,666
    )(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other operating expenses
    
    
    64,547
    
    
    
    70,511
    
    
    
    35,312
    
    
    
    70,642
    
    
    
    60,433
    
    
    
    39,782Operating income (loss)
    
    
    90,494
    
    
    
    10,500
    
    
    
    (292,915
    )
    
    
    10,575
    
    
    
    7,042
    
    
    
    29,897Investment income, net
    
    
    10,918
    
    
    
    24,670
    
    
    
    3,248
    
    
    
    4,360
    
    
    
    13,396
    
    
    
    8,942Interest expense
    
    
    (17,380
    )
    
    
    (22,055
    )
    
    
    (9,841
    )
    
    
    (19,829
    )
    
    
    (19,829
    )
    
    
    (19,828
    )Other, net
    
    
    954
    
    
    
    8,952
    
    
    
    (2,776
    )
    
    
    (6,768
    )
    
    
    6,776
    
    
    
    26,938Income tax (provision) benefit
    
    
    (1,933
    )
    
    
    (758
    )
    
    
    10,947
    
    
    
    (77,944
    )
    
    
    (3,177
    )
    
    
    (223
    )Net income (loss)
    
    $
    83,053
    
    
    $
    21,309
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )
    
    $
    4,208
    
    
    $
    45,726Net income (loss) per common
share:Basic
    
    $
    1.89
    
    
    $
    0.49
    
    
    $
    (6.69
    )
    
    $
    (2.06
    )
    
    $
    0.10
    
    
    $
    1.06Diluted
    
    $
    1.29
    
    
    $
    0.46
    
    
    $
    (6.69
    )
    
    $
    (2.06
    )
    
    $
    0.10
    
    
    $
    1.05
  December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2003Consolidated Balance Sheet Data:Current assets
    
    $
    281,177
    
    
    $
    212,311
    
    
    $
    207,215
    
    
    $
    213,882
    
    
    $
    179,291
    
    
    $
    154,676Current liabilities(6)
    
    
    105,482
    
    
    
    59,885
    
    
    
    31,146
    
    
    
    37,854
    
    
    
    31,664
    
    
    
    34,345Total assets(4)
    
    
    420,357
    
    
    
    403,830
    
    
    
    341,345
    
    
    
    650,861
    
    
    
    722,410
    
    
    
    728,566Long-term debt(6)
    
    
    275,000
    
    
    
    397,642
    
    
    
    394,000
    
    
    
    399,000
    
    
    
    400,000
    
    
    
    400,000Total stockholders equity (deficit)(4)
    
    
    36,573
    
    
    
    (56,441
    )
    
    
    (83,970
    )
    
    
    203,502
    
    
    
    289,091
    
    
    
    291,584
 
 (1)
    
    The Company adopted the provisions of Statement of Financial Accounting Standards
No. 123R, Share-Based Payment, effective July 1, 2005.(2)
    
    The Company modified its royalty revenue estimation process in December 2005. As a
result, there was a one-time one-quarter delay in recognition of certain significant royalty
revenues from the six months ended December 31, 2005 into the year ended December 31, 2006.(3)
    
    During 2007, the Company initiated a program to consolidate manufacturing operations
at its Indianapolis, Indiana facility. Refer to Note 10 of the accompanying consolidated
financial statements. 47




---



##### Table of Contents



(4)
    
    The Company recognized an impairment of goodwill and intangibles in the six months
ended December 31, 2005. Refer to Note 7 of the accompanying consolidated financial statements.(5)
    
    The Company sold a 25% interest in its PEG-INTRON royalty. Refer to Note 11 of the
accompanying consolidated financial statements.(6)
    
    As of December 31, 2007, $72,391 outstanding principal amount of 4.5% notes payable
is due July 1, 2008 and is classified as a current liability. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  Results of Operations
  Summary-level overview year ended December 31, 2007 compared to 2006
  Summary-level overview year ended December 31, 2006 compared to 2005
  48




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##### Table of Contents



Overview
 Year EndedDecember
    
    
    December
    
    
    December2007
    
    
    2006
    
    
    2005Products segment profit (loss)
    
    $
    7.6
    
    
    $
    20.5
    
    
    $
    (267.6
    )(2)Royalties segment profit
    
    
    156.0
    (1)
    
    
    70.6
    
    
    
    48.3Contract Manufacturing
segment profit (loss)
    
    
    4.4
    
    
    
    2.3
    
    
    
    (3.3
    )(2)Corporate and other expenses
    
    
    (83.0
    )
    
    
    (71.3
    )
    
    
    (89.9
    )Income (loss) before income tax
    
    $
    85.0
    
    
    $
    22.1
    
    
    $
    (312.5
    )
 
 (1)
    
    Includes $88.7 million gain on sale of 25% interest in PEG-INTRON royalties.(2)
    
    Impairment losses of $277.1 million in the Products segment related to
goodwill and Abelcet intangible assets and $7.0 million in the Contract Manufacturing
segment related to goodwill were recognized in December 2005.  Products Segment
  Year EndedDecember
    
    
    %
    
    
    December
    
    
    %
    
    
    December2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Revenues
    
    $
    100.7
    
    
    
    
    
    
    $
    101.0
    
    
    
    7
    
    
    $
    94.2Cost of sales
    
    
    41.8
    
    
    
    9
    
    
    
    38.3
    
    
    
    8
    
    
    
    35.6Research and development
    
    
    11.0
    
    
    
    50
    
    
    
    7.3
    
    
    
    304
    
    
    
    1.8Selling and marketing
    
    
    31.9
    
    
    
    (6
    )
    
    
    34.1
    
    
    
    1
    
    
    
    33.9Amortization
    
    
    0.7
    
    
    
    (5
    )
    
    
    0.8
    
    
    
    n.m.
    
    
    
    13.4Write-down of goodwill
and intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n.m.
    
    
    
    277.1Restructuring charge
    
    
    7.7
    
    
    
    n.m.
    
    
    
    
    
    
    
    
    
    
    
    Segment profit (loss)
    
    $
    7.6
    
    
    
    (63
    )
    
    $
    20.5
    
    
    
    n.m.
    
    
    $
    (267.6
    )
 
 n.m.  not meaningful 49




---



##### Table of Contents



Revenues
  Year EndedDecember
    
    
    %
    
    
    December
    
    
    %
    
    
    DecemberProduct
    
    2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Oncaspar
    
    $
    38.7
    
    
    
    25
    
    
    $
    30.9
    
    
    
    27
    
    
    $
    24.4DepoCyt
    
    
    8.6
    
    
    
    4
    
    
    
    8.3
    
    
    
    4
    
    
    
    7.9Abelcet
    
    
    28.9
    
    
    
    (21
    )
    
    
    36.5
    
    
    
    (12
    )
    
    
    41.5Adagen
    
    
    24.5
    
    
    
    (3
    )
    
    
    25.3
    
    
    
    25
    
    
    
    20.4Totals
    
    $
    100.7
    
    
    
    
    
    
    $
    101.0
    
    
    
    7
    
    
    $
    94.2
 Year ended December 31, 2007 compared to 2006
  Year ended December 31, 2006 compared to 2005
  50




---



##### Table of Contents



Cost of product sales
    Research and development expenses
  Selling and marketing expenses
   51




---



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Amortization of acquired intangibles
  Write-down of goodwill and intangibles
   Restructuring
  52




---



##### Table of Contents



Royalties Segment
  Year EndedDecember
    
    
    %
    
    
    December
    
    
    %
    
    
    December2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Royalty revenue
    
    $
    67.3
    
    
    
    (5
    )
    
    $
    70.6
    
    
    
    n.m.
    
    
    $
    48.3Gain on sale of royalty interest
    
    
    88.7
    
    
    
    n.m.
    
    
    
    
    
    
    
    
    
    
    
    Segment profit
    
    $
    156.0
    
    
    
    n.m.
    
    
    $
    70.6
    
    
    
    n.m.
    
    
    $
    48.3
 
 n.m.  not meaningful   53




---



##### Table of Contents



Costs and expenses
  Contract Manufacturing Segment
   Year EndedDecember
    
    
    %
    
    
    December
    
    
    %
    
    
    December2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Revenues
    
    $
    17.6
    
    
    
    25
    
    
    $
    14.1
    
    
    
    
    
    
    $
    14.1Cost of sales
    
    
    13.2
    
    
    
    12
    
    
    
    11.8
    
    
    
    14
    
    
    
    10.4Write-down of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n.m.
    
    
    
    7.0Segment profit (loss)
    
    $
    4.4
    
    
    
    91
    
    
    $
    2.3
    
    
    
    n.m.
    
    
    $
    (3.3
    )
 
 n.m.  not meaningful 54




---



##### Table of Contents



Revenues
   Cost of sales
  Write-down of goodwill
  Non-U.S. Revenue
  55




---



##### Table of Contents



Corporate and Other Expenses
  Year EndedDecember
    
    
    %
    
    
    December
    
    
    %
    
    
    December2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Research and development
    
    $
    45.5
    
    
    
    26
    
    
    $
    36.2
    
    
    
    19
    
    
    $
    30.4General and administrative
    
    
    31.9
    
    
    
    (11
    )
    
    
    35.7
    
    
    
    38
    
    
    
    25.9Acquired in-process research and
development
    
    
    
    
    
    
    n.m.
    
    
    
    11.0
    
    
    
    10
    
    
    
    10.0Restructuring
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n.m.
    
    
    
    2.1Other income (expense):Interest expense
    
    
    17.4
    
    
    
    (21
    )
    
    
    22.1
    
    
    
    12
    
    
    
    19.8Investment income, net
    
    
    (10.9
    )
    
    
    (56
    )
    
    
    (24.7
    )
    
    
    321
    
    
    
    (5.9
    )Other, net
    
    
    (0.9
    )
    
    
    n.m.
    
    
    
    (9.0
    )
    
    
    n.m.
    
    
    
    7.65.6
    
    
    
    n.m.
    
    
    
    (11.6
    )
    
    
    n.m.
    
    
    
    21.5Corporate costs
    
    $
    83.0
    
    
    
    16
    
    
    $
    71.3
    
    
    
    (14
    )
    
    $
    89.9
 
 n.m.  not meaningful Research and development
 TM
  56




---



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General and administrative
   Acquired in-process research and development
  Other income (expense)
  57




---



##### Table of Contents



58




---



##### Table of Contents



Liquidity and Capital Resources
      59




---



##### Table of Contents



Off-Balance Sheet Arrangements
    Contractual Obligations
  60




---



##### Table of Contents



61




---



##### Table of Contents



Payments due by periodLess
    
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    
    2 - 3
    
    
    4 - 5
    
    
    than 5Contractual Obligations and Commercial Commitments (1)
    
    Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    yearsNotes payable(2)
    
    $
    347.4
    
    
    $
    72.4
    
    
    $
    
    
    
    $
    
    
    
    $
    275.0Operating lease obligations
    
    
    24.9
    
    
    
    2.4
    
    
    
    4.5
    
    
    
    4.5
    
    
    
    13.5Inventory purchase obligations
    
    
    10.8
    
    
    
    5.1
    
    
    
    5.7
    
    
    
    
    
    
    
    Interest due on notes payable
    
    
    63.7
    
    
    
    14.2
    
    
    
    22.0
    
    
    
    22.0
    
    
    
    5.5Totals
    
    $
    446.8
    
    
    $
    94.1
    
    
    $
    32.2
    
    
    $
    26.5
    
    
    $
    294.0
 
 (1)
    
    The table does not include potential milestone payments of $325.3 million,
primarily comprised of; $249.0 million to Santaris that are 62




---



##### Table of Contents



only payable upon successful
development of all eight RNA antagonists selected by us, milestone payments of $55.0 million to NatImmune and $15.0 million
to Pacira, pending successful achievement of various regulatory and sales milestones.(2)
    
    Our 4.5% convertible notes are payable on July 1, 2008 and our 4.0% convertible
notes are payable on June 1, 2013. Critical Accounting Policies and Estimates
    Revenues
   63




---



##### Table of Contents



December 31, 2007
    


December 31, 2006Accounts Receivable ReductionsChargebacks
    
    $
    2,578
    
    
    $
    3,388Cash Discounts
    
    
    159
    
    
    
    168Other (including returns)
    
    
    2,046
    
    
    
    1,767Total
    
    
    4,783
    
    
    
    5,323Accrued LiabilitiesMedicaid Rebates
    
    
    1,382
    
    
    
    1,335Administrative Fees
    
    
    187
    
    
    
    205Total
    
    
    1,569
    
    
    
    1,540Grand Total
    
    $
    6,352
    
    
    $
    6,863
    Income Taxes
  64




---



##### Table of Contents



Long-Lived Asset Impairment Analysis
   Share-Based Payments
     Recently Issued Accounting Standards
  65




---



##### Table of Contents



Forward-Looking Information and Factors That May Affect Future Results
  
    
    The risk that we will not achieve success in our research and development efforts,
including clinical trials conducted by us or our collaborative partners.
    
    The risk that we will experience operating losses for the next several years.
    
    The risk that there will be a decline in sales of one or more of our marketed products
or products sold by others from which we derive royalty revenues. Such sales declines
could result from increased competition, loss of patent protection, pricing, supply
shortages and/or regulatory constraints.
 66




---



##### Table of Contents




    
    The risk that, due to limited or single sources of supply for
major products, we will be unable to obtain critical compounds used in the manufacture of
our products at economically feasible prices or at all, or one of our key suppliers will
experience manufacturing problems or delays.
    
    Decisions by regulatory authorities regarding whether and when to approve our
regulatory applications as well as their decisions regarding labeling and other matters
could affect the commercial potential of our products or developmental products.
    
    The risk that we will fail to obtain adequate financing to meet our future capital and
financing needs.
    
    The risk that key personnel will leave the Company.
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    2008
    
    
    2009
    
    
    Total
    
    
    Fair ValueFixed Rate
    
    $
    124,480
    
    
    $
    18,353
    
    
    $
    142,833
    
    
    $
    142,806Average Interest Rate
    
    
    3.62
    %
    
    
    5.36
    %
    
    
    3.84
    %Variable Rate
    
    
    54,375
    
    
    
    
    
    
    
    54,375
    
    
    
    54,131Average Interest Rate
    
    
    5.80
    %
    
    
    
    
    
    
    5.80
    %$
    178,855
    
    
    $
    18,353
    
    
    $
    197,208
    
    
    $
    196,937
   67




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Control over Financial Reporting and Remediation Plans
  (c) Managements Report on Internal Control over Financial Reporting
    68




---



##### Table of Contents



/s/ Jeffrey H. Buchalter
    
    /s/ Craig A. ToomanJeffrey H. Buchalter
    
    Craig A. ToomanChairman, President, and Chief Executive Officer
    
    Executive Vice President, Finance and(Principal Executive Officer)
    
    Chief Financial Officer(Principal Financial Officer)February 29, 2008
    
    February 29, 2008
 69




---



##### Table of Contents



70




---



##### Table of Contents



Item 9B. Other Information
  71




---



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PART III
  72




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
   Exhibit
    
    
    
    ReferenceNumber
    
    Description
    
    No.3(i)
    
    Amended and Restated Certificate of Incorporation
    
    
    (1
    )3(ii)
    
    Amended and Restated Bylaws
    
    
    (2
    )3(iii)
    
    Amendment dated July 31, 2007 to Amended and Restated Bylaws
    
    
    (3
    )3(iv)
    
    Amendment dated November 21, 2007 to Amended and Restated
Bylaws
    
    
    (4
    )4.1
    
    Rights Agreement dated May 17, 2002 between the Company and
Continental Stock Transfer & Trust Company, as rights agent
    
    
    (5
    )4.2
    
    First Amendment to the Rights Agreement, dated as of
February 19, 2003 between the Company and Continental Stock
Transfer & Trust Company, as rights agent
    
    
    (6
    )4.3
    
    Second Amendment to the Rights Agreement dated as of
January 7, 2008 between the Company and Continental Stock
Transfer and Trust Company, as rights agent.
    
    
    (7
    )4.4
    
    Indenture dated as of June 26, 2001, between the Company
and Wilmington Trust Company, as trustee, including the
form of 4.5% Convertible Subordinated Note due 2008
attached as Exhibit A thereto
    
    
    (8
    )4.5
    
    Indenture, dated May 23, 2006, between Enzon
Pharmaceuticals, Inc. and Wilmington Trust Company
    
    
    (9
    )4.6
    
    Registration Rights Agreement, dated May 23, 2006, between
Enzon Pharmaceuticals, Inc. and Goldman, Sachs & Co.
    
    
    (9
    )10.1
    
    Lease  300-C Corporate Court, South Plainfield, New Jersey
    
    
    (10
    )10.2
    
    Lease dated April 1, 1995 regarding 20 Kingsbridge Road,
Piscataway, New Jersey
    
    
    (11
    )10.3
    
    First Amendment to Lease regarding 20 Kingsbridge Road,
Piscataway, New Jersey, dated as of November 13, 2001
    
    
    (12
    )10.4
    
    Lease 300A-B Corporate Court, South Plainfield, New Jersey
    
    
    (13
    )10.5
    
    Modification of Lease Dated May 14, 2003  300-C Corporate
Court, South Plainfield, New Jersey
    
    
    (14
    )10.6
    
    Lease  685 Route 202/206, Bridgewater, New Jersey
    
    
    (15
    )10.7
    
    First Amendment of Lease  685 Route 202/206, Bridgewater,
New Jersey
    
    
    (16
    )10.8
    
    Second Amendment to Lease  685 Route 202/206, Bridgewater,
New Jersey
    
    
    (16
    )10.9
    
    Third Amendment to Lease  685 Route 202/206, Bridgewater,
New Jersey
    
    
    (16
    )10.10
    
    2001 Incentive Stock Plan, as amended and restated, of
Enzon Pharmaceuticals, Inc. **
    
    
    (1
    )10.11
    
    Development, License and Supply Agreement between the
Company and Schering Corporation; dated November 14, 1990,
as amended*
    
    
    (17
    )
 73




---



##### Table of Contents



Exhibit
    
    
    
    ReferenceNumber
    
    Description
    
    No.10.12
    
    Executive Deferred Compensation Plan (2008 Restatement) **
    
    
    (18
    )10.13
    
    Amendment dated June 10, 2005, to Employment Agreement between
the Company and Craig A. Tooman dated January 5, 2005 **
    
    
    (19
    )10.14
    
    Form of Non-Qualified Stock Option Agreement between the Company
and Craig A. Tooman **
    
    
    (19
    )10.15
    
    Amended and Restated Severance Agreement with Paul S. Davit dated
May 7, 2004 **
    
    
    (19
    )10.16
    
    Amended and Restated Severance Agreement with Ralph del Campo
dated May 7, 2004 **
    
    
    (19
    )10.17
    
    2007 Outside Director Compensation Plan, as amended **
    
    
    (3
    )10.18
    
    Employment Agreement with Ivan D. Horak, M.D. dated September 2,
2005, along with a form of Stock Option Award Agreement and
Restricted Stock Unit Award Agreement between the Company and Mr.
Horak executed as of September 2, 2005 *, **
    
    
    (20
    )10.19
    
    Form of Non-Qualified Stock Option Agreement for Executive
Officers **
    
    
    (21
    )10.20
    
    Form of Restricted Stock Award Agreement for Executive Officers **
    
    
    (21
    )10.21
    
    Form of Restricted Stock Unit Award Agreement for Executive
Officers **
    
    
    (22
    )10.22
    
    Form of Restricted Stock Unit Award Agreement for Independent
Directors **
    
    
    (20
    )10.23
    
    Form of Stock Option Award Agreement for Independent Directors
1987 Non-Qualified Stock Option Plan **
    
    
    (20
    )10.24
    
    Form of Stock Option Award Agreement for Independent Directors
2001 Incentive Stock Plan **
    
    
    (20
    )10.25
    
    Employment Agreement with Craig A. Tooman dated January 5, 2005 **
    
    
    (21
    )10.26
    
    2007 Employee Stock Purchase Plan
    
    
    (23
    )10.27
    
    Amended and Restated Employment Agreement with Jeffrey H.
Buchalter dated April 27, 2007**
    
    
    (24
    )10.28
    
    Amendment dated February 21, 2008 to Amended and Restated
Employment Agreement with Jeffrey H. Buchalter**
    
    
    +10.29
    
    Purchase Agreement between the Company and Drug Royalty LP1 dated
as of August 19, 2007
    
    
    (25
    )10.30
    
    Amendment to Amended and Restated Severance Agreement with Paul
S. Davit dated November 6, 2007**
    
    
    (26
    )10.31
    
    Amendment to Amended and Restated Severance Agreement with Ralph
del Campo dated November 6, 2007**
    
    
    (26
    )12.1
    
    Computation of Ratio of Earnings to Fixed Charges
    
    
    +21.1
    
    Subsidiaries of Registrant
    
    
    +23.0
    
    Consent of Independent Registered Public Accounting Firm
    
    
    +31.1
    
    Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    +31.2
    
    Certification of Principal Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    
    +32.1
    
    Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    +32.2
    
    Certification of Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
    
    
    +99.1
    
    Consent of Independent Valuation Firm
    
    
    +
 
 +
  74




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##### Table of Contents



(1
    )
    
    Current Report on Form 8-K filed May 19, 2006(2
    )
    
    Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed August 3, 2006(3
    )
    
    Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed August 2, 2007.(4
    )
    
    Current Report on Form 8-K filed November 26, 2007.(5
    )
    
    Form 8-A12G (File No. 000-12957) filed May 22, 2002(6
    )
    
    Form 8-A12G/A (File No. 000-12957) filed February 20, 2003(7
    )
    
    Current Report on Form 8-K filed January 8, 2008(8
    )
    
    Registration Statement on Form S-3 (File No. 333-67509) filed August 14, 2001(9
    )
    
    Current Report on Form 8-K filed May 25, 2006(10
    )
    
    Registration Statement on Form S-18 (File No. 2-88240-NY)(11
    )
    
    Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 filed May 12, 1995(12
    )
    
    Transition Report on Form 10-K for the six months ended December 31, 2005.(13
    )
    
    Annual Report on Form 10-K for the fiscal year ended June 30, 1993(14
    )
    
    Annual Report on Form 10-K for the fiscal year ended June 30, 2003(15
    )
    
    Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 filed May 15, 2002(16
    )
    
    Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed November 2, 2006(17
    )
    
    Annual Report on Form 10-K for the fiscal year ended June 30, 2002(18
    )
    
    Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 filed November 1, 2007(19
    )
    
    Annual Report on Form 10-K for the fiscal year ended June 30, 2005(20
    )
    
    Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed November 9, 2005(21
    )
    
    Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 filed February 9, 2005(22
    )
    
    Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 filed May 10, 2005(23
    )
    
    Form S-8 (File No. 333-140282) filed January 29, 2007(24
    )
    
    Quarterly Report on Form 10Q for the quarter ended March 31, 2007 filed May 4, 2007(25
    )
    
    Current Report on Form 8-K filed August 20, 2007(26
    )
    
    Current Report on Form 8-K filed November 13, 2007*
    
    
    Portions of this exhibit have been redacted and filed separately with the Commission pursuant
to a confidential treatment request.**
    
    
    Management contracts or compensatory plans and arrangements required to be filed pursuant to
Item 601(b)(10)(ii)(A) or (iii) of Regulation S-K.
 75




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##### Table of Contents



SIGNATURES
  ENZON PHARMACEUTICALS, INC.
(Registrant)Dated:  February 29, 2008
    /s/Jeffrey H. BuchalterJeffrey H. BuchalterChairman, President and
Chief Executive Officer
(Principal Executive Officer)Dated:  February 29, 2008
    /s/Craig A. ToomanCraig A. ToomanExecutive Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)  Name
    
    Title
    
    Date/s/Craig A. Tooman
    
    Executive Vice President, Finance
    
    February 29, 2008Craig A. Tooman
    
    and Chief Financial Officer
(Principal Financial Officer)/s/Jeffrey H. Buchalter
    
    Chairman of the Board
    
    February 29, 2008Jeffrey H. Buchalter/s/Goran Ando
    
    Director
    
    February 29, 2008Goran Ando/s/Rolf A. Classon
    
    Director
    
    February 29, 2008Rolf A. Classon/s/Robert LeBuhn
    
    Director
    
    February 29, 2008Robert LeBuhn/s/Victor P. Micati
    
    Director
    
    February 29, 2008Victor P. Micati/s/Phillip M. Renfro
    
    Director
    
    February 29, 2008Phillip M. Renfro/s/Robert C. Salisbury
    
    Director
    
    February 29, 2008Robert C. Salisbury
 76




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 Index
 PageReport
of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial Statements:Consolidated Balance Sheets  December 31, 2007 and 2006
    
    
    F-3Consolidated Statements of Operations  Years ended December 31, 2007 and 2006, six months
ended December 31, 2005 and the fiscal year ended June 30, 2005
    
    
    F-4Consolidated Statements of Stockholders Equity (Deficit)  Years ended December 31, 2007
and 2006, six months ended December 31, 2005 and the fiscal year ended June 30, 2005
    
    
    F-5Consolidated Statements of Cash Flows  Years ended December 31, 2007 and 2006, six months
ended December 31, 2005 and the fiscal year ended June 30, 2005
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8Consolidated Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    
    F-46
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       
 F-2




---



##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    40,053
    
    
    $
    20,706Short-term investments
    
    
    123,907
    
    
    
    152,838Restricted investments and cash
    
    
    73,592
    
    
    
    Accounts receivable, net
    
    
    14,927
    
    
    
    15,259Inventories
    
    
    22,297
    
    
    
    17,618Other current assets
    
    
    6,401
    
    
    
    5,890Total current assets
    
    
    281,177
    
    
    
    212,311Property and equipment, net
    
    
    45,312
    
    
    
    39,491Marketable securities
    
    
    20,653
    
    
    
    67,061Amortizable intangible assets, net
    
    
    68,141
    
    
    
    78,510Other assets
    
    
    5,074
    
    
    
    6,457Total assets
    
    $
    420,357
    
    
    $
    403,830LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    9,441
    
    
    $
    24,918Notes payable
    
    
    72,391
    
    
    
    Accrued expenses
    
    
    21,105
    
    
    
    31,276Accrued interest
    
    
    2,545
    
    
    
    3,691Total current liabilities
    
    
    105,482
    
    
    
    59,885Notes payable
    
    
    275,000
    
    
    
    397,642Other liabilities
    
    
    3,302
    
    
    
    2,744Total liabilities
    
    
    383,784
    
    
    
    460,271Commitments and contingenciesStockholders equity (deficit):Preferred stock  $.01 par value, authorized 3,000,000 shares; no shares
issued and outstanding at December 31, 2007 and 2006
    
    
    
    
    
    
    Common stock  $.01 par value, authorized 170,000,000 shares;
issued and outstanding: 44,199,831 shares
and 43,999,031 shares at December 31, 2007 and 2006, respectively
    
    
    442
    
    
    
    440Additional paid-in capital
    
    
    335,318
    
    
    
    326,099Accumulated other comprehensive income (loss)
    
    
    326
    
    
    
    (414
    )Accumulated deficit
    
    
    (299,513
    )
    
    
    (382,566
    )Total stockholders equity (deficit)
    
    
    36,573
    
    
    
    (56,441
    )Total liabilities and stockholders equity (deficit)
    
    $
    420,357
    
    
    $
    403,830
  F-3




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Six Months
    
    
    YearEnded
    
    
    EndedYear Ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Revenues:Product sales, net
    
    $
    100,686
    
    
    $
    101,024
    
    
    $
    49,436
    
    
    $
    99,192Royalties
    
    
    67,305
    
    
    
    70,562
    
    
    
    17,804
    
    
    
    51,414Contract manufacturing
    
    
    17,610
    
    
    
    14,067
    
    
    
    6,459
    
    
    
    15,644Total revenues
    
    
    185,601
    
    
    
    185,653
    
    
    
    73,699
    
    
    
    166,250Costs and expenses:Cost of product sales and contract manufacturing
    
    
    54,978
    
    
    
    50,121
    
    
    
    23,216
    
    
    
    46,023Research and development
    
    
    56,507
    
    
    
    43,521
    
    
    
    13,985
    
    
    
    36,957Selling, general and administrative
    
    
    63,840
    
    
    
    69,768
    
    
    
    28,617
    
    
    
    57,195Amortization of acquired intangible assets
    
    
    707
    
    
    
    743
    
    
    
    6,695
    
    
    
    13,447Write-down of goodwill and intangible assets
    
    
    
    
    
    
    
    
    
    
    284,101
    
    
    
    Acquired in-process research and development
    
    
    
    
    
    
    11,000
    
    
    
    10,000
    
    
    
    Restructuring charge
    
    
    7,741
    
    
    
    
    
    
    
    
    
    
    
    2,053Total costs and expenses
    
    
    183,773
    
    
    
    175,153
    
    
    
    366,614
    
    
    
    155,675Gain on sale of royalty interest
    
    
    88,666
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    90,494
    
    
    
    10,500
    
    
    
    (292,915
    )
    
    
    10,575Other income (expense):Investment income, net
    
    
    10,918
    
    
    
    24,670
    
    
    
    3,248
    
    
    
    4,360Interest expense
    
    
    (17,380
    )
    
    
    (22,055
    )
    
    
    (9,841
    )
    
    
    (19,829
    )Other, net
    
    
    954
    
    
    
    8,952
    
    
    
    (2,776
    )
    
    
    (6,768
    )Income (loss) before income tax provision (benefit)
    
    
    84,986
    
    
    
    22,067
    
    
    
    (302,284
    )
    
    
    (11,662
    )Income tax provision (benefit)
    
    
    1,933
    
    
    
    758
    
    
    
    (10,947
    )
    
    
    77,944Net income (loss)
    
    $
    83,053
    
    
    $
    21,309
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )Earnings (loss) per common share  basic
    
    $
    1.89
    
    
    $
    0.49
    
    
    $
    (6.69
    )
    
    $
    (2.06
    )Earnings (loss) per common share  diluted
    
    $
    1.29
    
    
    $
    0.46
    
    
    $
    (6.69
    )
    
    $
    (2.06
    )Weighted-average shares  basic
    
    
    43,927
    
    
    
    43,600
    
    
    
    43,520
    
    
    
    43,486Weighted-average shares  diluted
    
    
    72,927
    
    
    
    61,379
    
    
    
    43,520
    
    
    
    43,486
  F-4




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (In thousands)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    OtherNumber of
    
    
    Par
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Deferred
    
    
    AccumulatedShares
    
    
    Value
    
    
    Capital
    
    
    Income (Loss)
    
    
    Compensation
    
    
    Deficit
    
    
    TotalBalance, June 30, 2004
    
    
    43,751
    
    
    $
    438
    
    
    $
    322,486
    
    
    $
    (7,330
    )
    
    $
    (3,571
    )
    
    $
    (22,932
    )
    
    $
    289,091Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,606
    )
    
    
    (89,606
    )Other comprehensive income,
net of tax:Net unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,803
    
    
    
    
    
    
    
    
    
    
    
    2,803Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,803
    )Exercise of stock options
    
    
    73
    
    
    
    
    
    
    
    461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461Issuance of restricted stock
    
    
    116
    
    
    
    2
    
    
    
    4,772
    
    
    
    
    
    
    
    (4,774
    )
    
    
    
    
    
    
    Forfeiture of restricted stock
    
    
    (158
    )
    
    
    (2
    )
    
    
    (1,894
    )
    
    
    
    
    
    
    1,896
    
    
    
    
    
    
    
    Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    753Balance, June 30, 2005
    
    
    43,782
    
    
    $
    438
    
    
    $
    325,825
    
    
    $
    (4,527
    )
    
    $
    (5,696
    )
    
    
    ($112,538
    )
    
    $
    203,502Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291,337
    )
    
    
    (291,337
    )Other comprehensive income,
net of tax:Net unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,437
    
    
    
    
    
    
    
    
    
    
    
    3,437Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (287,900
    )Exercise of stock options
    
    
    5
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Share-based payment
expense, net
    
    
    
    
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409Elimination of deferred
compensation upon adoption
of SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    (5,696
    )
    
    
    
    
    
    
    5,696
    
    
    
    
    
    
    
    Balance, December 31, 2005
    
    
    43,787
    
    
    $
    438
    
    
    $
    320,557
    
    
    $
    (1,090
    )
    
    $
    
    
    
    $
    (403,875
    )
    
    $
    (83,970
    )
  F-5




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (In thousands)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    OtherNumber of
    
    
    Par
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Deferred
    
    
    AccumulatedShares
    
    
    Value
    
    
    Capital
    
    
    Income (Loss)
    
    
    Compensation
    
    
    Deficit
    
    
    TotalBalance, December 31, 2005
    
    
    43,787
    
    
    $
    438
    
    
    $
    320,557
    
    
    $
    (1,090
    )
    
    $
    
    
    
    $
    (403,875
    )
    
    $
    (83,970
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,309
    
    
    
    21,309Other comprehensive income,
net of tax:Net unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    676
    
    
    
    
    
    
    
    
    
    
    
    676Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,985Exercise of stock options
    
    
    230
    
    
    
    2
    
    
    
    1,088
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,090Share-based payment
expense, net
    
    
    (18
    )
    
    
    
    
    
    
    4,454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,454Balance, December 31, 2006
    
    
    43,999
    
    
    $
    440
    
    
    $
    326,099
    
    
    $
    (414
    )
    
    $
    
    
    
    $
    (382,566
    )
    
    $
    (56,441
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,053
    
    
    
    83,053Other comprehensive income,
net of tax:Net unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519
    
    
    
    
    
    
    
    
    
    
    
    519Currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    221Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,793Exercise of stock options
    
    
    114
    
    
    
    1
    
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    577Share-based payment
expense, net
    
    
    23
    
    
    
    
    
    
    
    8,099
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,099Issuance of stock for employee
stock purchase plan
    
    
    64
    
    
    
    1
    
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    545Balance, December 31, 2007
    
    
    44,200
    
    
    $
    442
    
    
    $
    335,318
    
    
    $
    326
    
    
    $
    
    
    
    $
    (299,513
    )
    
    $
    36,573
  F-6




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Six Months
    
    
    YearEnded
    
    
    EndedYear Ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    83,053
    
    
    $
    21,309
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    16,874
    
    
    
    13,290
    
    
    
    11,405
    
    
    
    22,681Write-off of equipment
    
    
    5,124
    
    
    
    
    
    
    
    
    
    
    
    Amortization of debt securities premium/discount
    
    
    28
    
    
    
    689
    
    
    
    355
    
    
    
    2,555Write-off and amortization of debt issuance costs
    
    
    1,776
    
    
    
    4,304
    
    
    
    941
    
    
    
    1,829(Gain) loss on sale of equity investment
    
    
    
    
    
    
    (13,844
    )
    
    
    3,470
    
    
    
    12,913(Gain) loss on sale of assets
    
    
    (26
    )
    
    
    35
    
    
    
    148
    
    
    
    (5
    )Gain on redemption of notes payable
    
    
    (519
    )
    
    
    (9,212
    )
    
    
    (406
    )
    
    
    (151
    )Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (10,966
    )
    
    
    79,380Acquired in-process research and development
    
    
    
    
    
    
    11,000
    
    
    
    10,000
    
    
    
    Share-based compensation
    
    
    8,268
    
    
    
    4,454
    
    
    
    409
    
    
    
    753Non-cash write down of goodwill and intangibles
    
    
    
    
    
    
    
    
    
    
    284,101
    
    
    
    Change in fair value of derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,463Changes in operating assets and liabilities:Decrease (increase) in accounts receivable, net
    
    
    332
    
    
    
    (1,172
    )
    
    
    11,551
    
    
    
    339Increase in inventories
    
    
    (4,679
    )
    
    
    (1,604
    )
    
    
    (335
    )
    
    
    (4,464
    )(Increase) decrease in other current assets
    
    
    (902
    )
    
    
    244
    
    
    
    138
    
    
    
    (9,507
    )(Decrease) increase in accounts payable
    
    
    (15,340
    )
    
    
    14,879
    
    
    
    165
    
    
    
    1,211Increase (decrease) in accrued expenses
    
    
    6,442
    
    
    
    (955
    )
    
    
    (5,767
    )
    
    
    3,873Decrease in other, net
    
    
    
    
    
    
    (110
    )
    
    
    (476
    )
    
    
    (1,003
    )Net cash provided by operating activities
    
    
    100,431
    
    
    
    43,307
    
    
    
    13,396
    
    
    
    22,261Cash flows from investing activities:Purchase of property and equipment
    
    
    (17,563
    )
    
    
    (9,694
    )
    
    
    (4,444
    )
    
    
    (3,106
    )Purchase of acquired in-process research and
development
    
    
    
    
    
    
    (11,000
    )
    
    
    (10,000
    )
    
    
    Purchase of product rights
    
    
    (17,500
    )
    
    
    (35,000
    )
    
    
    
    
    
    
    Proceeds from sale of investments in equity securities
    
    
    
    
    
    
    20,209
    
    
    
    7,481
    
    
    
    30,647Proceeds from sale of marketable securities
    
    
    205,618
    
    
    
    193,250
    
    
    
    30,525
    
    
    
    33,000Purchase of marketable securities
    
    
    (412,887
    )
    
    
    (611,743
    )
    
    
    (174,887
    )
    
    
    (219,855
    )Maturities of marketable securities
    
    
    209,727
    
    
    
    353,962
    
    
    
    163,448
    
    
    
    115,694Net cash (used in) provided by investing activities
    
    
    (32,605
    )
    
    
    (100,016
    )
    
    
    12,123
    
    
    
    (43,620
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    1,122
    
    
    
    1,090
    
    
    
    19
    
    
    
    229Employee stock purchase plan
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from issuance of notes payable
    
    
    
    
    
    
    275,000
    
    
    
    
    
    
    
    Redemption of notes payable
    
    
    (49,732
    )
    
    
    (262,146
    )
    
    
    (4,594
    )
    
    
    (849
    )Cash payment for debt issuance costs
    
    
    
    
    
    
    (7,726
    )
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (48,479
    )
    
    
    6,218
    
    
    
    (4,575
    )
    
    
    (620
    )Net increase (decrease) in cash and cash equivalents
    
    
    19,347
    
    
    
    (50,491
    )
    
    
    20,944
    
    
    
    (21,979
    )Cash and cash equivalents at beginning of period
    
    
    20,706
    
    
    
    71,197
    
    
    
    50,253
    
    
    
    72,232Cash and cash equivalents at end of period
    
    $
    40,053
    
    
    $
    20,706
    
    
    $
    71,197
    
    
    $
    50,253
  F-7




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 (1) Company Overview
    
    
    The risk that the Company will not achieve success in its research and
development efforts, including clinical trials conducted by it or its
collaborative partners.
    
    The risk that the Company will experience operating losses for the next
several years.
    
    The risk that there will be a decline in sales of one or more of the Companys
marketed products or products sold by others from which the Company derives
royalty revenues. Such sales declines could result from increased competition,
loss of patent protection, pricing, supply shortages and/or regulatory
constraints.
    
    The risk, due to limited or single sources of supply for major products, that
the Company will be unable to obtain critical compounds used in the manufacture
of its products at economically feasible prices or at all, or that one of its
key suppliers will experience manufacturing problems or delays.
    
    Decisions by regulatory authorities regarding whether and when to approve the
Companys regulatory applications as well as their decisions regarding labeling
and other matters could affect the commercial potential of its products or
developmental products.
    
    The risk that the Company will fail to obtain adequate financing to meet its
future capital and financing needs.
    
    The risk that key personnel will leave the Company.
 (2) Summary of Significant Accounting Policies
 Principles of Consolidation
  F-8




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 Use of Estimates
  Financial Instruments
  Cash
Equivalents
  Investments and Marketable Securities
    F-9




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Holding Gains
    
    
    Holding Losses
    
    
    Value*U.S. Government and GSE debt
    
    $
    9,796
    
    
    $
    2
    
    
    $
    (19
    )
    
    $
    9,779U.S. corporate debt
    
    
    136,037
    
    
    
    83
    
    
    
    (97
    )
    
    
    136,023Auction rate securities
    
    
    51,375
    
    
    
    
    
    
    
    (240
    )
    
    
    51,135Other
    
    
    2,308
    
    
    
    333
    
    
    
    
    
    
    
    2,641$
    199,516
    
    
    $
    418
    
    
    $
    (356
    )
    
    $
    199,578
 
 *
    
    Included in short-term investments $123,907, restricted investments $55,018 and marketable
securities $20,653 at December 31, 2007.  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Holding Gains
    
    
    Holding Losses
    
    
    Value*U.S. Government and GSE debt
    
    $
    36,003
    
    
    $
    
    
    
    $
    (260
    )
    
    $
    35,743U.S. corporate debt
    
    
    133,904
    
    
    
    7
    
    
    
    (230
    )
    
    
    133,681Auction rate securities
    
    
    48,075
    
    
    
    
    
    
    
    
    
    
    
    48,075Other
    
    
    2,374
    
    
    
    26
    
    
    
    
    
    
    
    2,400$
    220,356
    
    
    $
    33
    
    
    $
    (490
    )
    
    $
    219,899
 
 *
    
    Included in short-term investments $152,838 and marketable securities $67,061 at December 31,
2006.   F-10




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
   Maturing During the Yearended December 31,
    
    
    
    
    
    Amortized Cost
    
    
    Fair Value2008
    
    
    
    
    
    $
    178,855
    
    
    $
    178,5832009
    
    
    
    
    
    
    18,353
    
    
    
    18,354$
    197,208
    
    
    $
    196,937
   Less than 12 months
    
    
    12 Months or GreaterFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    lossU.S. corporate debt(1)
    
    $
    49,951
    
    
    $
    (81
    )
    
    $
    15,466
    
    
    $
    (16
    )U.S.
Government and GSE debt(2)
    
    
    3,283
    
    
    
    (13
    )
    
    
    3,994
    
    
    
    (6
    )Auction rate securities(3)
    
    
    1,260
    
    
    
    (240
    )
    
    
    
    
    
    
    Total
    
    $
    54,494
    
    
    $
    (334
    )
    
    $
    19,460
    
    
    $
    (22
    )
 
 (1)
    
    U.S. corporate debt. The unrealized losses of $97,000 on the U.S. corporate debt
were attributable to increases in interest rates, as well as bond pricing. The Company invests in
bonds that are rated A1 or better, as dictated by its investment policy. Since the changes in the
market value of these investments are due to changes in interest rates and not the credit quality
of the issuer, and the Company has the ability and intent to hold these investments until recovery
of the cost, the Company does not consider its investments in U.S. corporate debt to be
other-than-temporarily impaired at December 31, 2007. F-11




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##### Table of Contents



NZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 
 (2)
    
    U.S. Government and GSE debt. The unrealized losses of $19,000 in the U.S.
Government and government-sponsored enterprise, or GSE mortgage-backed securities were attributable
to increases in interest rates. These holdings do not permit the issuer to settle the securities
at a price less than the amortized cost. Further, because the declines in market value are due to
increases in interest rates and not the credit quality of the issuer, and the Company has the
ability and the intent to hold these investments until recovery of the cost, the Company does not
consider its investments in U.S. Government and GSE debt to be other-than-temporarily impaired at
December 31, 2007.(3)
    
    The Companys investments in auction rate securities are AAA or AA rated.
During the latter portion of 2007, auctions for one such security, having a cost basis of $1.5
million, were not successful. When the auctions are not successful, the interest rates on these
investments increase as does the risk associated with their illiquidity. The Company has reported
these securities at their estimated fair value as provided by its investment advisers and
recognized the unrealized loss in other comprehensive income. The Company has the intent and
ability to hold these investments until recovery of the cost and does not believe the impairment to
be other than temporary. The Company will continue to monitor these securities and will recognize
an impairment loss in earnings at such time as it is determined to be permanent. Auctions
generally occur at regular intervals of up to 90 days. Investments in Equity Securities
  Revenue Recognition
   F-12




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
   Accounts Receivable
  Accruals for Medicaid Rebates, Returns, Chargebacks and Distribution Service Fees
   Inventories
  F-13




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 Property and Equipment
  Long-Lived Assets
  Deferred Financing Costs
  Acquired In-Process Research and Development
  Research and Development
  F-14




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 Income Taxes
   Foreign Currency Transactions
  Concentrations of Risk
  F-15




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
   Share-Based Compensation Plans
    F-16




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  Year endedJune  30, 2005Net lossAs reported
    
    $
    (89,606
    )Add stock-based employee compensation expense included in
reported net loss, net of tax (1)
    
    
    755Deduct total stock-based employee compensation expense
determined under fair-value-based method for all awards,
net of tax (1)
    
    
    (27,680
    )Pro forma net loss
    
    $
    (116,531
    )Net loss per common share-basic:As reported
    
    $
    (2.06
    )Pro forma
    
    $
    (2.68
    )Net loss per common share-diluted:As reported
    
    $
    (2.06
    )Pro forma
    
    $
    (2.68
    )
 
 (1)
    
    Information has not been tax-effected as a result of the Companys net operating
loss position and related valuation allowance in that year.   F-17




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 Cash Flow Information
    Reclassifications
  (3) Comprehensive Income
   Six Months
    
    
    YearEnded
    
    
    EndedYear Ended December 31,
    
    
    December 31,
    
    
    June 302007
    
    
    2006
    
    
    2005
    
    
    2005Net income (loss)
    
    $
    83,053
    
    
    $
    21,309
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )Other comprehensive income (loss):Unrealized gain (loss) on securities that
arose during the year, net of tax(1)
    
    
    624
    
    
    
    14,520
    
    
    
    6,897
    
    
    
    (5,886
    )Currency translation adjustment
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    (Loss) gain
included in net income (loss), net of tax
(1)
    
    
    (105
    )
    
    
    (13,844
    )
    
    
    (3,460
    )
    
    
    8,689740
    
    
    
    676
    
    
    
    3,437
    
    
    
    2,803Total comprehensive income (loss)
    
    $
    83,793
    
    
    $
    21,985
    
    
    $
    (287,900
    )
    
    $
    (86,803
    )
 
 (1)
    
    Information for the years ended December 31, 2007 and 2006, the six months ended
December 31, 2005 and the fiscal year ended June 30, 2005 has not been tax-effected as a
result of the Companys net operating loss position and related valuation allowance in those
periods. F-18




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (4) Earnings Per Common Share
    F-19




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  Six Months
    
    
    YearEnded
    
    
    endedYear Ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Earnings Per Common Share  Basic:Net income (loss)
    
    $
    83,053
    
    
    $
    21,309
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )Weighted average common shares outstanding
    
    
    43,927
    
    
    
    43,600
    
    
    
    43,520
    
    
    
    43,486Basic earnings (loss) per share
    
    $
    1.89
    
    
    $
    0.49
    
    
    $
    (6.69
    )
    
    $
    (2.06
    )Earnings Per Common Share  Diluted:Net income (loss)
    
    $
    83,053
    
    
    $
    21,309
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )Add back interest expense on 4% convertible
notes, net of tax
    
    
    11,000
    
    
    
    6,661
    
    
    
    N/A
    
    
    
    N/AAdjusted net income
    
    $
    94,053
    
    
    $
    27,970
    
    
    $
    (291,337
    )
    
    $
    (89,606
    )Weighted-average common shares outstanding
    
    
    43,927
    
    
    
    43,600
    
    
    
    43,520
    
    
    
    43,486Weighted-average incremental shares related to
ESPP and vesting of nonvested shares
    
    
    204
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average incremental shares assuming
conversion of 4% notes
    
    
    28,796
    
    
    
    17,779
    
    
    
    N/A
    
    
    
    N/AWeighted-average number of common shares
outstanding and common share equivalents
    
    
    72,927
    
    
    
    61,379
    
    
    
    43,520
    
    
    
    43,486Diluted earnings (loss) per share
    
    $
    1.29
    
    
    $
    0.46
    
    
    $
    (6.69
    )
    
    $
    (2.06
    )
   F-20




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (5) Inventories
  December 31,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    9,809
    
    
    $
    7,321Work in process
    
    
    5,419
    
    
    
    4,444Finished goods
    
    
    7,069
    
    
    
    5,853$
    22,297
    
    
    $
    17,618
 (6) Property and Equipment
  December 31,
    
    
    December 31,
    
    
    Estimated2007
    
    
    2006
    
    
    Useful livesLand
    
    $
    1,500
    
    
    $
    1,500Building
    
    
    4,800
    
    
    
    4,800
    
    
    27 yearsLeasehold improvements
    
    
    32,672
    
    
    
    27,202
    
    
    3-15 years*Equipment
    
    
    38,867
    
    
    
    28,967
    
    
    3-7 yearsFurniture and fixtures
    
    
    4,440
    
    
    
    3,497
    
    
    7 yearsVehicles
    
    
    64
    
    
    
    31
    
    
    7 years82,343
    
    
    
    65,997Less: Accumulated depreciation
    
    
    37,031
    
    
    
    26,506$
    45,312
    
    
    $
    39,491
 
 *
    
    Shorter of the lease term or lives indicated   F-21




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (7) Intangible Assets
  WeightedAverageDecember 31,
    
    
    December 31,
    
    
    Remaining2007
    
    
    2006
    
    
    Useful livesProduct acquisition costs
    
    $
    78,694
    
    
    $
    78,694
    
    
    6.6 yearsProduct patented technology
    
    
    6,000
    
    
    
    6,000
    
    
    7.0 yearsManufacturing patent
    
    
    9,000
    
    
    
    9,000
    
    
    7.0 yearsPatent
    
    
    1,875
    
    
    
    1,875
    
    
    
    *95,569
    
    
    
    95,569
    
    
    6.7 yearsLess: Accumulated amortization
    
    
    27,428
    
    
    
    17,059$
    68,141
    
    
    $
    78,510
 
 *
    
    Fully amortized    F-22




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (8) Accrued Expenses
  December 31,
    
    
    December 31,2007
    
    
    2006Accrued compensation
    
    $
    12,731
    
    
    $
    8,289Accrued Medicaid rebates
    
    
    1,382
    
    
    
    1,335Accrued professional and consulting fees
    
    
    348
    
    
    
    389Accrued clinical trial costs
    
    
    281
    
    
    
    17Accrued insurance and taxes
    
    
    2,659
    
    
    
    859Product acquisition
    
    
    
    
    
    
    17,500Other
    
    
    3,704
    
    
    
    2,887$
    21,105
    
    
    $
    31,276
 (9) Notes Payable
  December 31,
    
    
    December 31,2007
    
    
    20064.5% Convertible Subordinated Notes
due July 1, 2008
    
    $
    72,391
    *
    
    $
    122,6424% Convertible Senior Notes due
June 1, 2013
    
    
    275,000
    
    
    
    275,000$
    347,391
    
    
    $
    397,642
 
 *
    
    Classified as current liabilities as of December 31, 2007.  F-23




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
       F-24




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (10) Restructuring
     (11) Gain on Sale of Royalty Interest
  F-25




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (12) Stockholders Equity
 Preferred Stock
  Common Stock
  Non-Qualified and Incentive Stock Plans
    
    
    12,071Shares issuable upon conversion of 4.5% Notes due 2008
    
    
    1,020Shares issuable upon conversion of 4% Notes due 2013
    
    
    28,796Employee Stock Purchase Plan
    
    
    93642,823
 Shareholder Rights Plan
  (13) Stock Options
  F-26




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
     Weighted
    
    WeightedAverage
    
    AverageExercise
    
    Remaining
    
    AggregatePrice Per
    
    Contractual
    
    IntrinsicOptions
    
    Option
    
    Term (years)
    
    Value ($000)Outstanding at January 1, 2007
    
    
    6,708
    
    
    $
    12.36Granted at exercise prices which equaled
the fair value on the date of grant
    
    
    2,070
    
    
    $
    8.52Exercised
    
    
    (114
    )
    
    $
    5.08Forfeited
    
    
    (40
    )
    
    $
    8.06Expired
    
    
    (239
    )
    
    $
    18.38Outstanding at December 31, 2007
    
    
    8,385
    
    
    $
    11.36
    
    
    
    7.44
    
    
    $
    4,636Vested and expected to vest at
December 31, 2007
    
    
    7,599
    
    
    $
    11.71
    
    
    
    7.31
    
    
    $
    4,216Exercisable at December 31, 2007
    
    
    5,184
    
    
    $
    13.38
    
    
    
    6.68
    
    
    $
    3,110
  F-27




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
    Six MonthsYear Ended
    
    Year Ended
    
    EndedDecember 31,
    
    December 31,
    
    December 31,2007
    
    2006
    
    2005Risk-free interest rate
    
    
    4.7
    %
    
    
    4.8
    %
    
    
    4.2
    %Expected volatility
    
    
    37
    %
    
    
    43
    %
    
    
    56
    %Expected term (in years)
    
    
    5.5
    
    
    
    5.2
    
    
    
    4.7
   F-28




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  (14) Restricted Stock and Restricted Stock Units (Nonvested Shares)
    F-29




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  WeightedAverageNumber of
    
    Grant DateNonvested
    
    Fair ValueShares
    
    Per ShareNonvested at January 1, 2007
    
    
    1,458
    
    
    $
    8.18Granted
    
    
    522
    
    
    $
    8.47Vested
    
    
    (88
    )
    
    $
    10.98Forfeited
    
    
    (118
    )
    
    $
    7.98Nonvested at December 31, 2007
    
    
    1,774
    
    
    $
    8.14
   (15) Employee Stock Purchase Plan
  F-30




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
   April 1, 2007
    
    October 1, 2007Risk-free interest rate
    
    
    4.50
    %
    
    
    4.50
    %Expected volatility
    
    
    20.00
    %
    
    
    30.73
    %Expected term (in years)
    
    
    0.5
    
    
    
    0.5
  (16) Income Taxes
  F-31




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  Six MonthsYear Ended
    
    
    Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Current:Federal
    
    $
    1,331
    
    
    $
    127
    
    
    $
    
    
    
    $
    State
    
    
    194
    
    
    
    456
    
    
    
    (75
    )
    
    
    340Foreign
    
    
    408
    
    
    
    175
    
    
    
    93
    
    
    
    Total current
    
    
    1,933
    
    
    
    758
    
    
    
    18
    
    
    
    340Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    (9,395
    )
    
    
    66,785State
    
    
    
    
    
    
    
    
    
    
    (1,570
    )
    
    
    10,819Total deferred
    
    
    
    
    
    
    
    
    
    
    (10,965
    )
    
    
    77,604Income tax provision (benefit)
    
    $
    1,933
    
    
    $
    758
    
    
    $
    (10,947
    )
    
    $
    77,944
  Six MonthsYear Ended
    
    
    Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    June  30,2007
    
    
    2006
    
    
    2005
    
    
    2005Income tax provision (benefit) computed at
federal statutory rate
    
    $
    29,745
    
    
    $
    7,723
    
    
    $
    (105,799
    )
    
    $
    (4,082
    )Nondeductible expenses
    
    
    414
    
    
    
    265
    
    
    
    105
    
    
    
    284Add (deduct) effect of:State income taxes (including sale and
purchase of state net operating loss
carryforwards), net of federal tax*
    
    
    4,393
    
    
    
    1,950
    
    
    
    (16,350
    )
    
    
    (414
    )Federal research and development tax credits
    
    
    (1,105
    )
    
    
    (1,395
    )
    
    
    549
    
    
    
    (1,654
    )Foreign income taxes
    
    
    408
    
    
    
    175
    
    
    
    93
    
    
    
    Increase (decrease) in beginning of
period valuation allowance
    
    
    (31,922
    )
    
    
    (7,960
    )
    
    
    110,455
    
    
    
    83,810Income tax provision (benefit)
    
    $
    1,933
    
    
    $
    758
    
    
    $
    (10,947
    )
    
    $
    77,944
   F-32




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  December 31,
    
    
    December 31,2007
    
    
    2006Deferred tax assets:Inventories
    
    $
    747
    
    
    $
    874Accrued compensation
    
    
    5,410
    
    
    
    2,499Returns and allowances
    
    
    3,811
    
    
    
    2,899Research and development credits carryforward
    
    
    19,690
    
    
    
    16,876Federal AMT credits
    
    
    3,044
    
    
    
    1,718Capital loss carryforwards
    
    
    
    
    
    
    3,988Write-down of carrying value of investment
    
    
    3,407
    
    
    
    3,407Federal and state net operating loss carryforwards
    
    
    29,827
    
    
    
    57,792Acquired in-process research and development
    
    
    11,107
    
    
    
    12,005Unrealized loss on securities
    
    
    20
    
    
    
    187Goodwill
    
    
    40,433
    
    
    
    44,545Intangible assets
    
    
    50,619
    
    
    
    53,880Share-based compensation
    
    
    728
    
    
    
    2,047Other
    
    
    1,593
    
    
    
    1,633Tax basis in excess of book basis of acquired assets
    
    
    207
    
    
    
    Total gross deferred tax assets
    
    
    170,643
    
    
    
    204,350Less valuation allowance
    
    
    (170,643
    )
    
    
    (202,565
    )
    
    
    
    1,785Deferred tax liabilities:Book basis in excess of tax basis of acquired assets
    
    
    
    
    
    
    (1,785
    )
    
    
    
    (1,785
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  F-33




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
   (17) Significant Agreements
 Santaris Pharma A/S Collaboration
  Schering-Plough Agreement
  F-34




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
    Sanofi-Aventis License Agreements
  Medac License Agreement
  F-35




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 Micromet
Alliance
   NatImmune A/S License Agreement
  Nektar Agreement
  F-36




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 TM TM
  Pacira Agreement
   F-37




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  Cephalon
Manufacturing Agreements
  Ovation
Pharmaceuticals, Inc. Agreements
  (18) Recent Accounting Pronouncements
  F-38




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
     (19) Commitments and Contingencies
  F-39




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
   (20) Leases
   OperatingYear ending December 31,
    
    Leases2008
    
    $
    2,3192009
    
    
    2,2852010
    
    
    2,2532011
    
    
    2,2302012
    
    
    2,227Thereafter
    
    
    13,558Total minimum lease payments
    
    $
    24,872
  (21) Retirement Plans
   F-40




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (22) Business and Geographical Segments
    ®
  F-41




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  ContractSegment
    
    
    
    Products
    
    Royalties
    
    Manufacturing
    
    Corporate(1)
    
    ConsolidatedRevenues
    
    December 31, 2007
    
    $
    100,686
    
    
    $
    67,305
    
    
    $
    17,610
    
    
    $
    
    
    
    $
    185,601December 31, 2006
    
    
    101,024
    
    
    
    70,562
    
    
    
    14,067
    
    
    
    
    
    
    
    185,653December 31, 2005
    
    
    49,436
    
    
    
    17,804
    
    
    
    6,459
    
    
    
    
    
    
    
    73,699June 30, 2005
    
    
    99,192
    
    
    
    51,414
    
    
    
    15,644
    
    
    
    
    
    
    
    166,250Segment
    
    December 31, 2007
    
    
    7,604
    
    
    
    155,971
    (2)
    
    
    4,360
    
    
    
    (77,441
    )
    
    
    90,494Profit (Loss)
    
    December 31, 2006
    
    
    20,582
    
    
    
    70,562
    
    
    
    2,280
    
    
    
    (82,924
    )
    
    
    10,500December 31, 2005
    
    
    (268,885
    )(3)
    
    
    17,804
    
    
    
    (5,614
    )(3)
    
    
    (36,220
    )
    
    
    (292,915
    )June 30, 2005
    
    
    13,153
    
    
    
    51,414
    
    
    
    4,421
    
    
    
    (58,413
    )
    
    
    10,575Assets
    
    December 31, 2007
    
    
    97,485
    
    
    
    292
    
    
    
    7,588
    
    
    
    314,992
    
    
    
    420,357December 31, 2006
    
    
    106,760
    (4)
    
    
    178
    
    
    
    4,449
    
    
    
    292,443
    
    
    
    403,830December 31, 2005
    
    
    58,304
    (3)
    
    
    2,265
    
    
    
    3,686
    (3)
    
    
    277,090
    
    
    
    341,345June 30, 2005
    
    
    342,342
    
    
    
    15,949
    
    
    
    10,153
    
    
    
    282,417
    
    
    
    650,861Amortization
    
    December 31, 2007
    
    
    10,369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,369December 31, 2006
    
    
    8,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,144December 31, 2005
    
    
    8,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,873June 30, 2005
    
    
    17,925
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,925
 
 (1)
    
    Corporate expenses include operating income (loss) components that are not directly
attributable to an operating segment, including general and administrative expenses,
exploratory and preclinical research and development expenses and treasury activities.
Corporate assets consist principally of cash, short-term investments, restricted investments
and cash, marketable securities, property and equipment and certain working capital items.
The Company does not identify or allocate property and equipment by operating segment, and as
such does not allocate depreciation to the operating segments, nor does the chief operating
decision maker evaluate operating segments on these criteria. The Company does not allocate
interest income, interest expenses or incomes taxes to operating segments.(2)
    
    Royalty segment profit for the year ended December 31, 2007 includes a gain of $88.7
million resulting from the third-quarter 2007 sale of a 25% interest in future royalty
revenues. The subject royalties are those payable by Schering-Plough to Enzon on sales of
PEG-INTRON occurring after June 30, 2007. The impact of the 25% reduction in royalties on
sales of PEG-INTRON was first realized in the fourth quarter of 2007.(3)
    
    During the quarter ended December 31, 2005, the Company recognized impairment
write-downs of goodwill of $151.0 million and the Product segments intangible assets of
$133.1 million. The goodwill write-off was charged to the Products segment ($144.0 million)
and Contract Manufacturing ($7.0 million).(4)
    
    Assets of the Products segment increased by $48.5 million in 2006, net of
amortization, related to a payment of $35.0 million to Sanofi-Aventis for a negotiated
reduction in royalty rates to be paid by the Company on sales of Oncaspar and $17.5 million
for the Companys license of the cell line owned by Ovation Pharmaceuticals, Inc. and from
which the active ingredient in Oncaspar is derived. F-42




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
  Six Months
    
    
    YearEnded
    
    
    EndedYear Ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Segment profit (loss)
    
    $
    167,935
    
    
    $
    93,424
    
    
    $
    (256,695
    )
    
    $
    68,988Unallocated corporate operating expense
    
    
    (77,441
    )
    
    
    (82,924
    )
    
    
    (36,220
    )
    
    
    (58,413
    )Operating income (loss)
    
    
    90,494
    
    
    
    10,500
    
    
    
    (292,915
    )
    
    
    10,575Other corporate income and expense
    
    
    (5,508
    )
    
    
    11,567
    
    
    
    (9,369
    )
    
    
    (22,237
    )Income (loss) before income tax
    
    $
    84,986
    
    
    $
    22,067
    
    
    $
    (302,284
    )
    
    $
    (11,662
    )
  Six Months
    
    
    YearEnded
    
    
    EndedYear Ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Product sales, netOncaspar
    
    $
    38,711
    
    
    $
    30,881
    
    
    $
    13,005
    
    
    $
    21,216DepoCyt
    
    
    8,628
    
    
    
    8,273
    
    
    
    4,459
    
    
    
    7,446Abelcet
    
    
    28,843
    
    
    
    36,526
    
    
    
    21,076
    
    
    
    51,229Adagen
    
    
    24,504
    
    
    
    25,344
    
    
    
    10,896
    
    
    
    19,301Total product sales, net
    
    
    100,686
    
    
    
    101,024
    
    
    
    49,436
    
    
    
    99,192Royalties
    
    
    67,305
    
    
    
    70,562
    
    
    
    17,804
    
    
    
    51,414Contract manufacturing
    
    
    17,610
    
    
    
    14,067
    
    
    
    6,459
    
    
    
    15,644Total revenues
    
    $
    185,601
    
    
    $
    185,653
    
    
    $
    73,699
    
    
    $
    166,250
  Six MonthsEnded
    
    
    Year EndedYear Ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Revenues:U.S.
    
    $
    111,683
    
    
    $
    117,161
    
    
    $
    52,650
    
    
    $
    113,891Europe
    
    
    45,624
    
    
    
    40,118
    
    
    
    14,079
    
    
    
    36,667Other
    
    
    28,294
    
    
    
    28,374
    
    
    
    6,970
    
    
    
    15,692Total revenues
    
    $
    185,601
    
    
    $
    185,653
    
    
    $
    73,699
    
    
    $
    166,250
 F-43




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 (23) Quarterly Results of Operations (Unaudited)
  Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2007
    
    
    2007
    
    
    2007
    
    
    2007Revenues:Product sales, net
    
    $
    22,649
    
    
    $
    25,019
    
    
    $
    24,874
    
    
    $
    28,144Royalties
    
    
    16,344
    
    
    
    18,290
    
    
    
    18,206
    
    
    
    14,465Contract manufacturing
    
    
    2,495
    
    
    
    5,903
    
    
    
    3,761
    
    
    
    5,451Total revenues
    
    
    41,488
    
    
    
    49,212
    
    
    
    46,841
    
    
    
    48,060Gross profit
    
    
    13,680
    
    
    
    15,653
    (2)
    
    
    14,517
    
    
    
    19,468Tax (benefit) provision
    
    
    (193
    )
    
    
    261
    
    
    
    1,987
    
    
    
    (122
    )Net (loss) income
    
    
    (2,786
    )(1)
    
    
    (1,959
    )(2)
    
    
    87,530
    
    
    
    268Net (loss) income per common share:Basic
    
    $
    (0.06
    )(1)
    
    $
    (0.04
    )(2)
    
    $
    1.99
    
    
    $
    0.01Diluted
    
    $
    (0.06
    )(1)
    
    $
    (0.04
    )(2)
    
    $
    1.23
    
    
    $
    0.01Weighted average number of shares Basic
    
    
    43,862
    
    
    
    43,884
    
    
    
    43,925
    
    
    
    44,039Weighted average number of shares Diluted
    
    
    43,862
    
    
    
    43,884
    
    
    
    74,344
    
    
    
    44,708
 Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2006
    
    
    2006
    
    
    2006
    
    
    2006Revenues:Product sales, net
    
    $
    24,275
    
    
    $
    24,537
    
    
    $
    25,295
    
    
    $
    26,917Royalties
    
    
    17,248
    
    
    
    17,936
    
    
    
    18,705
    
    
    
    16,673Contract manufacturing
    
    
    3,206
    
    
    
    5,131
    
    
    
    1,856
    
    
    
    3,874Total revenues
    
    
    44,729
    
    
    
    47,604
    
    
    
    45,856
    
    
    
    47,464Gross profit
    
    
    16,932
    
    
    
    17,316
    
    
    
    15,010
    
    
    
    15,712Tax provision
    
    
    136
    
    
    
    288
    
    
    
    127
    
    
    
    207Net income (loss)
    
    
    21,708
    
    
    
    10,987
    
    
    
    2,238
    
    
    
    (13,624
    )Net income (loss) per common share:Basic
    
    $
    0.50
    
    
    $
    0.25
    
    
    $
    0.05
    
    
    $
    (0.31
    )Diluted
    
    $
    0.50
    
    
    $
    0.25
    
    
    $
    0.05
    
    
    $
    (0.31
    )Weighted average number of shares Basic
    
    
    43,524
    
    
    
    43,539
    
    
    
    43,590
    
    
    
    43,730Weighted average number of shares Diluted
    
    
    43,524
    
    
    
    43,539
    
    
    
    43,590
    
    
    
    43,730
 
 (1)
    
    Net loss for the three months ended March 31, 2007 was revised in the third
quarter of 2007 from $1,853 (thousand) or $0.04 per share to $2,786 (thousand) or $0.06 per
share to correct a misstatement of share-based compensation expense. Share-based compensation
was understated by approximately $0.9 million for the three months ended March 31, 2007,
understating selling, general and administrative F-44




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ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements  (Continued)
 expense with an offsetting understatement of
APIC. The misstatement resulted from application of an incorrect amortization schedule to certain newly issued option awards. Due
to the Companys net operating loss position, there would have been no income tax effect
related to the revision. The effect of the misstatement on the results as previously reported
for the first quarter of 2007 was quantitatively and qualitatively immaterial.(2)
    
    Net loss for the three months ended June 30, 2007 was revised in the third quarter
of 2007 from $3,044 (thousand), or $0.07 per share to $1,959 (thousand) or $0.04 per share
primarily to correct a misstatement of cost of product sales. Cost of product sales in the
Products segment had been overstated by approximately $1.0 million with a corresponding
understatement of inventory and overstatement of net loss. The misstatement resulted from a
failure to capitalize certain purchase price variances in inventory as of June 30, 2007.
Further reducing net loss was a $61 (thousand) effect in the second quarter related to the
adjustment of share-based compensation in the first quarter. Due to the Companys net
operating loss position, there would have been no income tax effect related to the revisions.
The effect of the misstatement on the results as previously reported for the first quarter of
2007 was quantitatively and qualitatively immaterial. F-45




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##### Table of Contents



ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 Schedule II  Valuation and Qualifying Accounts
 (In thousands)
 AdditionsBalance at
    
    Charged to
    
    
    
    
    
    
    
    
    
    Balancebeginning
    
    costs and
    
    Charged to
    
    
    
    
    
    at end ofof period
    
    expenses
    
    other accounts
    
    Deductions
    
    periodYear ended December 31, 2007:Allowance for chargebacks,
returns and cash discounts
    
    $
    5,078
    
    
    $
    
    
    
    $
    27,552
    (2)
    
    $
    (28,127
    )
    
    $
    4,503Allowance for doubtful accounts
    
    
    245
    
    
    
    352
    (1)
    
    
    
    
    
    
    (317
    )
    
    
    280Year ended December 31, 2006:Allowance for chargebacks,
returns and cash discounts
    
    $
    5,152
    
    
    $
    
    
    
    $
    30,859
    (2)
    
    $
    (30,933
    )
    
    $
    5,078Allowance for doubtful accounts
    
    
    71
    
    
    
    245
    (1)
    
    
    
    
    
    
    (71
    )
    
    
    245Six months ended December 31, 2005:Allowance for chargebacks,
returns and cash discounts
    
    $
    7,242
    
    
    $
    
    
    
    $
    14,943
    (2)
    
    $
    (17,033
    )
    
    $
    5,152Allowance for doubtful accounts
    
    
    
    
    
    
    71
    (1)
    
    

    

    
    
    
    
    
    
    
    71Year ended June 30, 2005:Allowance for chargebacks,
returns and cash discounts
    
    $
    8,785
    
    
    
    
    
    
    $
    37,982
    (2)
    
    $
    (39,525
    )
    
    $
    7,242
 
 (1)
    
    Amounts are recognized as bad debt expense.(2)
    

    Amounts are recognized as reductions from gross sales. F-46




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