Enzon and Inhale Announce Formation of Broad Strategic Alliance.

Business Editors

PISCATAWAY, N.J. and SAN CARLOS, Calif.--(BUSINESS WIRE)--Jan. 7, 2002

Enzon, Inc. (NASDAQ:ENZN) and Inhale Therapeutic Systems, Inc. (NASDAQ:INHL) announced today the formation of a broad strategic alliance that will serve to enhance each company's business model. The most significant terms of the alliance are:

-- Enzon and Inhale will collaborate to develop three products to be specified
over time based on the Inhale Inhance(TM) pulmonary delivery platform and
SEDS(TM) supercritical fluids platform. The collaboration will have a
particular focus on the development of products in the oncology field. Enzon
will be responsible for the commercialization and clinical development while
Inhale will be responsible for the product development and manufacturing of the
products.

-- Inhale will be solely responsible for licensing Enzon's PEG Patents, which
includes over 40 U.S. patents, to third parties. Inhale will also have the
option to license Enzon's PEG Patents for use in Inhale's proprietary products.
Enzon will receive a royalty or a share of profits on final product sales of
any products that use Enzon's patented PEG technology, including branched PEG.
Enzon retains the right to use its PEG technology for its own proprietary
products and those it may develop with co-commercialization partners.

-- Enzon will have the option to license Inhale's PEGylation patents for Enzon
proprietary products and Inhale will receive royalties on any such products.

-- Enzon and Inhale will explore the development of non-invasive delivery of
single-chain antibody (SCA(R)) products via the pulmonary route. Inhale will
become the exclusive pulmonary technology provider for Enzon's single-chain
antibody technology using Inhale's proprietary Inhance pulmonary drug delivery
technology for at least three years assuming success in the initial proof of
concept program.

-- Enzon will purchase $40 million of newly issued Inhale convertible preferred
stock.

-- Enzon and Inhale have agreed to settlement of the patent infringement
litigation filed by Enzon against Inhale's Shearwater subsidiary.

"We believe this alliance with a premier company in the drug delivery field will further accelerate the growth of Enzon's product pipeline," said Arthur J. Higgins, Enzon's chairman and chief executive officer. "We believe several new products will result from this alliance and hope to have our first collaborative program in the clinic within the next twelve months. The licensing arrangement will enable our extensive PEG patent portfolio to generate revenue without placing any significant limitations on our own use of the technology. We see great benefit to Inhale now being able to offer a full package of PEGylation solutions to its drug delivery customers. The SCA collaboration is particularly exciting as we see the development of an inhaled antibody fragment as offering significant patient benefits that are not possible with full monoclonal antibodies. We believe Inhale has the leading technology position in the pulmonary delivery of proteins and macromolecules, and we are pleased to embark upon such an exciting endeavor."

"This strategic alliance is a landmark for Inhale and for the drug delivery industry," said Ajit Gill, president and chief executive officer of Inhale. "First, it transforms the landscape for use of PEGylation technology. PEGylation can benefit almost every protein, peptide, and antibody fragment and many small molecules. While we have built an outstanding position in the PEGylation field, adding Enzon's pioneering technology enables us to offer an even wider range of solutions to biopharmaceutical partners. We believe Inhale's ability to offer Enzon's technology to partners should further accelerate the acceptance of PEGylation as the industry standard for improving the efficacy, safety, and convenience of macromolecule drugs. Second, this alliance will expand our product pipeline significantly. We believe Enzon will be an excellent commercialization partner for the three products we plan to develop with them. In addition, we are excited about working with Enzon to explore inhaleable applications of its single chain antibody technology. This alliance moves us closer to our goal of becoming the leading provider of drug delivery solutions."

Product Development Agreements

Enzon and Inhale will jointly develop up to three products using Inhale's platform technologies: the Inhance(TM) pulmonary delivery platform and SEDS(TM) supercritical fluids platform. The two companies will collaborate to identify product candidates. Inhale will be responsible for formulation development, delivery system supply, and in some cases, early clinical development. Enzon will have responsibility for most clinical development and for commercialization.

The two companies have agreed to collaborate on realizing the significant therapeutic and competitive potential offered by single-chain antibody (SCA(R)) products when administered by the pulmonary route. The two companies will initially focus on exploring the utility of the Inhale pulmonary platform for single-chain antibodies and then move to develop single-chain products that will complement the current use of antibodies through the injectable route. Single-chain antibodies are genetically engineered proteins designed to expand on the therapeutic and diagnostic applications possible with monoclonal antibodies. Enzon retains all rights to its SCA products while Inhale retains all rights to its own technology. Inhale will become the exclusive pulmonary technology provider for Enzon's single-chain antibody technology using Inhale's Inhance pulmonary drug delivery technology for at least the next three years assuming a successful initial proof-of-concept program.

Technology Licensing

Enzon will grant to Inhale the exclusive right to grant sub-licenses for Enzon's PEG technology to third parties. Enzon will receive a share of profits for certain products that currently incorporate the Enzon branched PEG technology and royalties on new sub-licenses that Inhale grants to its partners to use Enzon's PEG technology. Enzon retains the right to use all of its PEG technology for its own product portfolio, as well as for those products it develops in co-commercialization collaborations with third parties. It is the intent of the parties that Inhale will be responsible for marketing PEG services and Enzon and Inhale PEG technology to third parties.

Enzon will have an option to license Inhale's PEGylation technology for use with its own portfolio products. Inhale will receive royalties on any Enzon PEGylation products using Inhale technology. Enzon will have the ability to request PEGylation supply and services from Inhale.

The terms in the product collaboration and PEG licensing agreements are subject to exclusions of certain drug molecules.

Stock Purchase Agreement

Enzon purchased $40 million of Inhale non-voting convertible preferred stock. The conversion price of the preferred stock shall be set at $22.79, which is based on a 25% premium to the average Inhale common stock closing bid price over the last 20 trading days. In the event Inhale's common stock price three years from the date of issuance of the preferred stock or earlier in certain circumstances is less than $22.79, the conversion price will be adjusted down, although in no event will it be less than $18.23. Conversion of the preferred stock into common can occur anywhere from 1 to 4 years following the issuance of the preferred stock or earlier in certain circumstances.

Settlement Agreement

In addition to establishing this major alliance, the two companies have agreed to settle the patent infringement suit related to Enzon's branched PEG technology filed in 1998 by Enzon against Inhale's subsidiary Shearwater. Inhale will receive licensing access to the contested patents under a cross-license agreement. Enzon will receive a one-time payment from Inhale to cover expenses incurred in connection with defending the branched PEG patents that both companies will now commercially exploit.

Enzon Conference Call and Management Availability

Company management of Enzon will be hosting a conference call on Tuesday, January 8, 2002 at 8:00 a.m. EST regarding the formation of this broad strategic alliance. All interested parties can access the call using the following information:

Domestic dial-in number 888/276-9995

International dial-in number 612/288-0337

Access Code 622399

Enzon's conference call will also be webcast in a "listen only" mode via the internet at http://www.vcall.com. Additionally, for those parties unable to listen at the time of Enzon's conference call, a rebroadcast will be available following the call from Tuesday, January 8, 2002 at approximately 1:15 p.m. This rebroadcast will end on Tuesday, January 15, 2002 at 11:59 p.m. 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 622399

Enzon and Inhale Management will also be available from 1:30 to 3:00 p.m. PST on Wednesday, January 9 at the Grand Hyatt San Francisco, 349 Stockton, The San Francisco A Room near the Westin St. Francis hotel where the JP Morgan H&Q 20th Annual Healthcare Conference is being held.

Inhale Conference Call and Management Availability

Company management of Inhale will be hosting a conference call on Tuesday, January 8, 2002 at 10:00 a.m. EST regarding the formation of this broad strategic alliance. All interested parties can access the call using the following information:

Dial-in number: 712/271-3632

Passcode: Inhale

Leader name: Rob Chess

Inhale's conference call will also be webcast via the internet at http://www.inhale.com and will be available on this WEB site for two weeks.

Additionally, for those parties unable to listen at the time of Inhale's conference call, a replay will be available shortly following the completion of the call. This replay will end on Tuesday, January 18, 2002 at 5:00 p.m. The replay may be accessed using the following information:

Dial-in number: 402/998-1062.

Inhale Management will also be available from 1:00 to 2:00 p.m. PST on Tuesday, January 8 at the Handlery Union Square Hotel at 351 Geary St., San Francisco, CA across the street from the Westin St. Francis hotel where the JP Morgan H&Q 20th Annual Healthcare Conference is being held. The room number will be posted at the hotel.

Enzon and Inhale Management will also be available from 1:30 to 3:00 p.m. PST on Wednesday, January 9 at the Grand Hyatt San Francisco, 349 Stockton, The San Francisco A Room near the Westin St. Francis hotel where the JP Morgan H&Q 20th Annual Healthcare Conference is being held.

Inhale Therapeutic Systems, Inc. develops advanced drug delivery solutions for the biopharmaceutical industry. Inhale offers the Inhance pulmonary delivery platform for the inhaleable delivery of macromolecules and small molecules for systemic and local lung delivery; supercritical fluid processing for powder particle engineering; and advanced PEGylation for enhanced delivery performance of most major drug classes. The company is collaborating with major pharmaceutical and biotechnology companies, including Amgen, AstraZeneca, Aventis Behring, Biogen, Bristol-Myers Squibb, Chiron, GlaxoSmithKline, Johnson & Johnson subsidiaries' R.W. Johnson Pharmaceutical Research Institute (RWJPRI) and the Janssen Research Foundation (JRF), Lilly, Pfizer, Pharmacia, Roche and Schering-Plough.

Enzon is a biopharmaceutical company developing advanced therapeutics for life-threatening diseases through the application of its proprietary drug delivery and targeting technologies, PEG Modification, Pro Drug/Transport technology and Single-Chain Antigen-Binding(SCA(R)) protein technology. Three products are currently marketed which utilize Enzon's technology: PEG-INTRON marketed by Schering-Plough for hepatitis C, ONCASPAR(R) for Acute Lymphoblastic Leukemia (ALL), and ADAGEN(R) a treatment for a form of Severe Combined Immunodeficiency Disease (SCID), commonly known as the "Bubble Boy Disease." In addition to three approved products, Enzon has several products in various stages of clinical development by itself and with partners, including additional indications for PEG-INTRON with Schering-Plough. A Phase III clinical trial is being conducted for PEG-INTRON for the treatment of malignant melanoma. Enzon develops and markets products on its own and through strategic alliances, which in addition to Schering-Plough Corporation, include Alexion Pharmaceuticals, Inc., Baxter Healthcare Corporation, Bristol-Myers Squibb Company, Eli Lilly & Company, and Aventis.

This release contains forward-looking statements that reflect the current views of Enzon and Inhale managements respectively as to future products, product development and other future events and operations. These forward-looking statements involve uncertainties and other risks that are detailed in reports and other filings with the Securities and Exchange Commission, including Forms 10-K and 10-Q. These documents identify important factors that could cause the companies' actual performance to differ from current expectations, including the outcome of clinical trials, regulatory review, manufacturing capabilities and marketing effectiveness. This release is also available at http://www.enzon.com and http://www.inhale.com.