Enzon Reports Solid First Quarter; New Corporate Strategy Begins to Deliver Results.BRIDGEWATER Bridgewater, town (1990 pop. 21,249), Plymouth co., E Mass.; inc. 1656. Manufacturing includes shoes and metal products. Its iron foundry industry dates from colonial times. Bridgewater State College and a state prison are there. , N.J. -- Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) today announced its financial results for the first quarter of 2006. For the three months ended March 31, 2006, Enzon reported net income of $21.7 million or $0.50 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, as compared to a net loss of $(3.1) million or $(0.07) per diluted share for the three months ended March 31, 2005. The March 31, 2006 net income included an investment gain of $13.8 million from the sale of shares of Nektar If you want to read about Czech Republic's beer Nektar. Nektar is a 1970s English progressive rock band based in Germany. History The band formed in Hamburg, Germany in 1969, members included Englishmen Roye Albrighton on guitars and vocals, Allan "Taff" Therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. , Inc. (Nektar) common stock originally acquired as part of a legal settlement in January January: see month. 2002. "The first quarter of 2006 was a very promising start for the year. The new management team is continuing to maximize the opportunities outlined in our strategic plan," said Jeffrey H. Buchalter, chairman and chief executive officer of Enzon. "As you can see, we experienced double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" sales growth for all of our products this quarter, with significant progress for ONCASPAR. This further supports our plans for reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. toward sustainable growth for the new Enzon." Financial Results For the three months ended March 31, 2006, Enzon reported an adjusted net income of $7.9 million or $0.18 per diluted share, as compared to an adjusted net loss of $(2.1) million or $(0.05) per diluted share for the three months ended March 31, 2005. Highlights from the quarter include: --Sales of ONCASPAR increased 16 percent compared to the three months ended March 31, 2005. The Company previously reported in November November: see month. 2005 that an intravenous intravenous /in·tra·ve·nous/ (-ve´nus) within a vein or veins.intrave´nously in·tra·ve·nous adj. Abbr. IV Within or administered into a vein. route of administration for ONCASPAR was approved by the U.S. Food and Drug Administration (FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ). In December December: see month. 2005, Enzon announced it applied for FDA approval of ONCASPAR as a first-line treatment A first-line treatment or first-line therapy is a medical therapy recommended for the initial treatment of a disease, sign or symptom, usually on the basis of empirical evidence for its efficacy. for acute lymphoblastic leukemia acute lymphoblastic leukemia n. Abbr. ALL Lymphoblastic leukemia occurring mainly in older adults, characterized by rapid onset and progression of symptoms. Also called acute lymphocytic leukemia. (ALL). --The Company has initiated a new clinical program for the use of ONCASPAR in treating Non-Hodgkin's Lymphoma non-Hodg·kin's lymphoma n. Any of various malignant lymphomas characterized by the absence of Reed-Sternberg cells. Non-Hodgkin's lymphoma (NHL NHL Non-Hodgkin's lymphoma, see there ) and solid tumors; the first trial will begin enrolling patients this summer, as previously reported. --The Company recorded a gain of $13.8 million and cash proceeds of $20.2 million as a result of sales of approximately one million shares of Nektar common stock as noted above. Revenues The following table reflects the revenues generated by product and segment for each of the three-month periods ended March 31, 2006 and 2005.
Three Months Ended
(in thousands)
--------------------------------------------
March 31, 2006 March 31, 2005 % Change
--------------------------------------------
Products
------------
ONCASPAR $ 6,416 $ 5,544 16
DEPOCYT 2,080 1,838 13
ABELCET 10,466 9,054 16
ADAGEN 5,313 4,788 11
--------------------------------------------
Total Products 24,275 21,224 14
Royalties 17,248 13,630 27
Contract Manufacturing 3,206 4,359 (26)
--------------------------------------------
Total Revenues $ 44,729 $ 39,213 14
============================================
Products Segment Products segment sales, comprised of sales of ONCASPAR, DEPOCYT, ABELCET, and ADAGEN, increased to $24.3 million for the three months ended March 31, 2006, from $21.2 million for the three months ended March 31, 2005. The improved sales are mainly attributable to an increase in volume for all products. ONCASPAR sales grew to $6.4 million or 16 percent for the three months ended March 31, 2006, as compared to $5.5 million for the three months ended March 31, 2005. ONCASPAR is a PEG-enhanced version of the enzyme enzyme, biological catalyst. The term enzyme comes from zymosis, the Greek word for fermentation, a process accomplished by yeast cells and long known to the brewing industry, which occupied the attention of many 19th-century chemists. L-asparaginase l-asparaginase Oncology A chemotherapeutic used for lymphomas and lymphocytic leukemia Adverse effects Vomiting, hepatic dysfunction, allergic reaction, lethargy used in combination with other chemotherapeutics to treat ALL. As previously reported, the Company has applied for first-line use of ONCASPAR for the treatment of ALL and anticipates the FDA will take action during the third quarter of 2006. In addition, Enzon recently initiated a new clinical program for ONCASPAR in NHL and solid tumors, and the first trial will begin enrolling patients this summer. Sales of DEPOCYT, a sustained-release sustained-release Adjective (of a pill or tablet) coated with a chemical substance that controls the dosage released into a patient's system formulation formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation of the chemotherapeutic agent chemotherapeutic agent An agent used to treat CA, administered in 'regimens'-one or more 'cycles' that combine 3 or more agents over wks; CAs are toxic to any cell with a high rate of proliferation–the CA itself, the GI tract–causing N&V, cytarabine cytarabine /cy·tar·a·bine/ (ara-C) (si-tar´ah-ben) an antimetabolite that inhibits DNA synthesis and hence has antineoplastic properties; used in the treatment of acute myelogenous and other types of leukemia and of meningitis associated arabinoside or ara-C used for the treatment of lymphomatous lymphomatous pertaining to, or of the nature of, lymphoma. meningitis meningitis (mĕnĭnjī`tĭs) or cerebrospinal meningitis (sĕr'əbrōspī`nəl), acute inflammation of the meninges, the membranes that cover and protect the brain and spinal cord. , increased to $2.1 million or 13 percent for the three months ended March 31, 2006, as compared to $1.8 million for the three months ended March 31, 2005. Sales of ABELCET in the U.S. and Canada for the three months ended March 31, 2006 were $10.5 million, up 16 percent as compared to $9.1 million for the three months ended March 31, 2005. The Company anticipates increased competition from new therapeutics entering the market later this year. Sales of ADAGEN, an enzyme replacement therapy Enzyme replacement therapy is a medical treatment replacing an enzyme in patients in whom that particular enzyme is deficient or absent. Usually this is done by giving the patient an intravenous (IV) infusion containing the enzyme. used to treat adenosine deaminase adenosine deaminase /aden·o·sine de·am·i·nase/ (ADA) (de-am´i-nas) an enzyme that catalyzes the hydrolytic deamination of adenosine to form inosine, a reaction of purine metabolism. (ADA Ada, city, United States Ada (ā`ə), city (1990 pop. 15,820), seat of Pontotoc co., S central Okla.; inc. 1904. It is a large cattle market and the center of a rich oil and ranch area. ) deficiency in patients with severe combined immunodeficiency disease Noun 1. severe combined immunodeficiency disease - a congenital disease affecting T cells that can result from a mutation in any one of several different genes; children with it are susceptible to infectious disease; if untreated it is lethal within the first year or , increased 11 percent to $5.3 million for the three months ended March 31, 2006, as compared to $4.8 million for the three months ended March 31, 2005. This market has a very small number of patients so quarter-to-quarter variability is not uncommon. Royalties Segment Revenues from the Company's Royalties segment for the three months ended March 31, 2006 were $17.2 million, as compared to $13.6 million for the three months ended March 31, 2005. This increase primarily represents revenue received on increased sales of a number of products that utilize the Company's proprietary PEGylation technology, including Schering-Plough's PEG-INTRON. The January 2005 launch of MACUGEN in the U.S. and the December 2004 launch of PEG-INTRON combination therapy in Japan contributed to the comparative increase in sales. The sales of these products were not yet fully reflected in the March quarter of 2005 due to the recent entry of these products into the associated markets. As previously announced, the Company expects competition for both PEG-INTRON combination therapy in Japan and MACUGEN to increase later this year. Contract Manufacturing Segment The Company's revenues from its Contract Manufacturing segment were $3.2 million for the three months ended March 31, 2006, as compared to $4.4 million in the corresponding period of the prior year. This includes contract manufacturing revenues related to services the Company provides for a number of customers who require injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. products, such as ABELCET for markets outside of Canada and the U.S. The decrease in revenue was mainly attributable to the timing of availability of raw materials from a third party, which delayed the production and resulting revenues of one of the products Enzon manufactures. Research and Development The Company's research and development expenses were $7.0 million for the three months ended March 31, 2006, as compared to $12.7 million for the three months ended March 31, 2005. The Company's research and development expenses for the three months ended March 31, 2005 included a non-recurring charge of $5.0 million related to the termination of the development and commercialization partnership for MARQIBO with Inex Pharmaceuticals. Enzon is committed to investing in research and development as it advances its objective of delivering long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. value, including reinforcing its position as a scientific leader in PEGylation through its Customized Linker Technology(TM) platforms and rebuilding its development pipeline. Selling, General and Administrative Selling, general and administrative expenses increased to $15.8 million for the three months ended March 31, 2006, as compared to $13.7 million for the three months ended March 31, 2005. The increase is mainly due to salaries and benefits, finance, accounting and legal fees. The Company will continue to invest in new selling, marketing, and other initiatives to further its objective of delivering long-term value, including improving its top-line performance by investing in its commercial operations. Amortization of Acquired Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. Amortization expense decreased by $3.1 million to $0.2 million for the three months ended March 31, 2006, as compared to $3.3 million for the three months ended March 31, 2005. This improvement was due to the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of ABELCET-related intangible assets recorded in the quarter ended December 2005. Other Income (Expense) Net other income (expense) is comprised of investment income, interest expense, and other non-operating expenses. The Company reported other income of $10.7 million for the three months ended March 31, 2006, as compared to other expense of $5.4 million in the same period in the prior year. The improvement resulted primarily from the gain of $13.8 million from the sale of Nektar shares. Income Taxes For the three months ended March 31, 2006, the Company recognized a nominal amount of state and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. tax, whereas in the quarter ended March 31, 2005, a tax benefit of $1.8 million was recognized using a 37 percent effective tax rate. For 2006, the estimated effective annual U.S. income tax rate is zero due to the uncertainty around the Company's ability to utilize its net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. . Cash and Investments Total cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. decreased to $213.8 million as of March 31, 2006, as compared to $226.6 million as of December 31, 2005. The net decrease in cash reserves was the result of a $35.0 million payment to Sanofi-Aventis related to the previously announced reduction of the royalty rates that the Company pays on ONCASPAR sales. This was offset, in part, by a cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of $20.2 million in proceeds from the sale of Nektar shares. Cash reserves include cash, cash equivalents, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments, and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . Reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income (loss) to adjusted net income (loss) The following table reconciles the Company's net income (loss) and net income (loss) per diluted share as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP) to its adjusted net income (loss) and net income (loss) per diluted share for the three months ended March 31, 2006 and 2005:
Three Months Ended
(in thousands, except per-share
amounts)
----------------------------------
March 31, 2006 March 31, 2005
----------------- ----------------
Net
income Net
per loss per
Net diluted Net diluted
income share loss share
----------------------------------
GAAP net income (loss) $ 21,708 $ 0.50 $(3,125) $(0.07)
Adjustments to GAAP net loss:
Investment gain related to the sale
of Nektar common stock (1) (13,844) (0.32) - -
Loss related to the sale of NPS
common stock, net of tax (2) - - 983 0.02
-------- ------ ------- ------
Adjusted net income (loss) (3) $ 7,864 $ 0.18 $(2,142) $(0.05)
======== ====== ======= ======
(1) The Company's adjusted financial results for the first quarter
of 2006 exclude a gain related to the sale of approximately 1.0
million shares of Nektar common stock.
(2) The Company's adjusted financial results for the first quarter
of 2005 exclude a pretax realized loss of $4.0 million and an
offsetting unrealized gain of $2.4 million related to a financial
instrument the Company formed to reduce its investment risk
associated with 1.5 million shares of NPS Pharmaceuticals, Inc.
(NPS) common stock received in June 2003. The Company received the
common stock under a merger termination agreement with NPS.
(3) Adjusted net income (loss) and adjusted net income (loss) per
share, as Enzon defines them, may differ from similarly named
measures used by other entities, and consequently, could be
misleading unless all entities calculated and defined such items
in the same manner. The Company believes that investors'
understanding of its performance is enhanced by disclosing
adjusted net income (loss) and adjusted net income (loss) per
share reflecting adjustments for certain items that the company
deems to be non- recurring.
Conference Call and Webcast Enzon will be hosting a conference call today, May 2, 2006 at 4:30 p.m. E.D.T. All interested parties may access the call by using the following information:
Domestic Dial-In Number: (800) 762-4885
International Dial-In Number: (480) 248-5089
Access Code: 827825
Enzon's conference call will also be webcast in a "listen only" mode via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at http://www.vcall.com. Additionally, for those parties unable to listen at the time of Enzon's conference call, a telephone rebroadcast will be available following the call from May 2, 2006, at approximately 9:45 p.m. E.D.T. This rebroadcast will end on May 9, 2006, at approximately 11:59 p.m. E.D.T. The rebroadcast may be accessed using the following information:
Domestic Dial-In Number: (800) 475-6701
International Dial-In Number: (320) 365-3844
Access Code: 827825
About Enzon Enzon Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to the development and commercialization of therapeutics to treat patients with cancer and adjacent diseases. Enzon's specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. sales force markets ABELCET(R), ONCASPAR(R), ADAGEN(R), and DEPOCYT(R) in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . In addition, Enzon also receives royalties on sales of PEG-INTRON(R), marketed by Schering-Plough Corporation, and MACUGEN(R), marketed by OSI Pharmaceuticals OSI Pharmaceuticals, Inc. is an American pharmaceutical company based in Long Island, New York with facilities in Colorado, New Jersey and the United Kingdom. They specialize in the discovery and development of molecular targeted therapies, and are listed in the NASDAQ and Pfizer Inc. Enzon's product-driven strategy includes an extensive drug development program that leverages its proprietary technologies, including a Customized Linker TechnologyTM PEGylation platform that utilizes customized linkers designed to release compounds at a controlled rate. Enzon also utilizes contract manufacturing opportunities to broaden its revenue base and enhance its organizational productivity. Enzon complements its internal research and development efforts with strategic initiatives, such as partnerships designed to broaden its revenue base or provide access to promising new technologies or product development opportunities. Further information about Enzon and this press release can be found on the Company's web site at www.enzon.com. There are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. contained herein, which can be identified by the use of forward-looking terminology such as the words "believes," "expects," "may," "will," "should", "potential," "anticipates," "plans" or "intends" and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from the future results, events or developments indicated in such forward-looking statements. Among the factors that could cause actual results, events or developments to differ materially are decisions by regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities regarding whether and when to approve our regulatory applications as well as their decisions regarding labeling and other matters that could affect the commercial potential of Enzon's products. A more detailed discussion of these and other factors that could affect results is contained in our filings with the U.S. Securities and Exchange Commission, including our transition report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the six-month period ended December 31, 2005. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. No assurance can be given that the future results covered by the forward-looking statements will be achieved. All information in this press release is as of the date of this press release and Enzon undertakes no duty to update this information.
Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months ended March 31, 2006 and 2005
(In thousands, except per share data)
(Unaudited)
March March
31, 31,
2006 2005
------- -----
Revenues:
Product sales, net $24,275 $21,224
Royalties 17,248 13,630
Contract manufacturing 3,206 4,359
------- -------
Total revenues 44,729 39,213
------- -------
Costs and expenses:
Cost of product sales and contract
manufacturing 10,549 9,024
Research and development 7,003 12,665
Selling, general and administrative 15,838 13,658
Amortization of acquired intangible
assets 189 3,339
------- -------
Total costs and expenses 33,579 38,686
------- -------
Operating income 11,150 527
------- -------
Other income (expense):
Investment income, net 15,816 1,116
Interest expense (4,881) (4,957)
Other, net (241) (1,572)
------- -------
10,694 (5,413)
------- -------
Income (loss) before income tax
provision (benefit) 21,844 (4,886)
Income tax provision (benefit) 136 (1,761)
------- -------
Net income (loss) $21,708 $(3,125)
======= =======
Earnings (loss) per common share - basic $0.50 $(0.07)
===== ======
Earnings (loss) per common share - diluted $0.50 $(0.07)
===== ======
Weighted average shares - basic 43,524 43,490
======= =======
Weighted average shares - diluted 43,524 43,490
======= =======
Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2006 and December 31, 2005
(In thousands)
(Unaudited)
March 31, Dec. 31
2006 2005
------------------
Assets
Current assets:
Cash and short-term investments $154,306 $164,518
Accounts receivable, net 14,035 14,087
Inventories 16,991 16,014
Other current assets 7,340 12,596
-------- --------
Total current assets 192,672 207,215
-------- --------
Property and equipment, net 35,008 34,978
-------- --------
Other assets:
Marketable securities 59,515 62,059
Amortizable intangible assets, net 67,131 34,154
Other long-term assets 2,490 2,939
-------- --------
129,136 99,152
-------- --------
Total assets $356,816 $341,345
======== ========
Liabilities and Stockholders' Deficit
Current and other liabilities $ 24,139 $ 31,315
Notes payable 394,000 394,000
Stockholders' deficit (61,323) (83,970)
-------- --------
Total liabilities and stockholders' deficit $356,816 $341,345
======== ========
Common shares outstanding 43,747 43,787
======== ========
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