UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2021~~2022


☐	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 001-36435

Enzon Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware	22-2372868
(State of incorporation)	(I.R.S. Employer Identification No.)

20 Commerce Drive (Suite 135), Cranford, New Jersey	07016
(Address of principal executive offices)	(Zip Code)

(732) 980-4500

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.


~~Title of Each Class~~	~~Trading Symbol(s)~~	~~Name of Each Exchange on Which Registered~~
~~None~~	~~N/A~~	~~N/A~~

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧☒ No ◻☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒
	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Shares of Common Stock outstanding as of ~~October~~July 29, ~~2021:~~2022: 74,214,603

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

September 30,

December 31,

2021

2020


(Unaudited)


ASSETS





Current assets:




Cash and cash equivalents

$
47,891

$
48,142
Royalty and milestone receivable

—

31
Other current assets

72

59

Total assets (all current)

$
47,963

$
48,232

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
331

$
302
Accrued expenses and other current liabilities

46

110
Total current liabilities

377

412

Commitments and contingencies

Mezzanine equity:

Series C preferred stock - $0.01 par value, 40,000 shares authorized, issued and outstanding (liquidation value $1,050 and $1,012 per share) at September 30, 2021 and December 31, 2020

41,978

40,460

Stockholders’ equity:

Preferred stock - $0.01 par value, authorized 2,960,000 shares; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020

0

0
Common stock - $0.01 par value, authorized 170,000,000 shares; issued and outstanding 74,214,603 shares at September 30, 2021 and December 31, 2020

742

742
Additional paid-in capital

76,488

78,006
Accumulated deficit

(71,622)

(71,388)
Total stockholders’ equity

5,608

7,360
Total liabilities, mezzanine equity and stockholders’ equity

$
47,963

$
48,232


	June 30,		December 31,
	2022		2021
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	46,794	$	47,641
Royalty and milestone receivable		—		28
Other current assets		430		85
Total current assets		47,224		47,754

Total assets (all current)	$	47,224	$	47,754

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	331	$	331
Accrued expenses and other current liabilities		46		72
Total current liabilities		377		403

Commitments and contingencies

Mezzanine equity:
Series C preferred stock - $0.01 par value, 40,000 shares authorized, issued and outstanding (liquidation value $1,089 and $1,062 per share) at June 30, 2022 and December 31, 2021		43,545		42,483

Stockholders’ equity:
Preferred stock - $0.01 par value, authorized 2,960,000 shares; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021		0		0
Common stock - $0.01 par value, authorized 170,000,000 shares; issued and outstanding 74,214,603 shares at June 30, 2022 and December 31, 2021		742		742
Additional paid-in capital		74,921		75,983
Accumulated deficit		(72,361)		(71,857)
Total stockholders’ equity		3,302		4,868
Total liabilities, mezzanine equity and stockholders’ equity	$	47,224	$	47,754

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

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,


2021

2020

2021

2020
Revenues:

Royalties and milestones, net

$
0

$
8

$
672

$
18
Total revenues

0

8

672

18

Operating expenses:

General and administrative

228

415

910

901
Total operating expenses

228

415

910

901

Operating loss

(228)

(407)

(238)

(883)
Other income

2

0

6

0

Loss before income tax expense

(226)

(407)

(232)

(883)

Income tax expense

0

0

2

2

Net loss

(226)

(407)

(234)

(885)
Dividends on Series C preferred stock

(506)

0

(1,518)

0
Net loss available to common shareholders

$
(732)

$
(407)

$
(1,752)

$
(885)

Loss per common share

Basic

$
(0.01)

$
(0.01)

$
(0.02)

$
(0.02)
Diluted

$
(0.01)

$
(0.01)

$
(0.02)

$
(0.02)

Weighted-average number of shares – basic

74,215

44,215

74,215

44,215
Weighted-average number of shares – diluted

74,215

44,215

74,215

44,215


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues:
Royalties and milestones, net	$	0	$	291	$	—	$	672
Total revenues		0		291		—		672

Operating expenses:
General and administrative		303		312		600		682
Total operating expenses		303		312		600		682

Operating loss		(303)		(21)		(600)		(10)
Other income		90		2		92		4

Loss before income tax benefit (expense)		(213)		(19)		(508)		(6)

Income tax benefit (expense)		0		0		4		(2)

Net loss		(213)		(19)		(504)		(8)
Dividends on Series C preferred stock		(531)		(506)		(1,062)		(1,012)
Net loss available to common shareholders	$	(744)	$	(525)	$	(1,566)	$	(1,020)

Loss per common share
Basic	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.01)
Diluted	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.01)

Weighted-average number of shares – basic		74,215		74,215		74,215		74,215
Weighted-average number of shares – diluted		74,215		74,215		74,215		74,215

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

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

Mezzanine Equity – Series C

Preferred Stock

Common Stock

Additional

Total

Number of

Par

Number of

Par

Paid-in

Accumulated

Stockholders’


Shares

Value


Shares

Value

Capital

Deficit

Equity
Balance, December 31, 2019

—

$
—

44,215

$
442

$
75,690

$
(70,077)

$
6,055
Net loss

0

0

0

0

0

(242)

(242)
Balance, March 31, 2020

—

—

44,215

442

75,690

(70,319)

5,813
Net loss

0

0

0

0

0

(236)

(236)
Balance, June 30, 2020

—

—

44,215

442

75,690

(70,555)

$
5,577
Net loss

0

0

0

0

0

(407)

(407)
Balance, September 30, 2020

—

$
—

44,215

$
442

$
75,690

$
(70,962)

$
5,170


	Mezzanine Equity – Series C
	Preferred Stock			Common Stock			Additional				Total
	Number of	Par		Number of	Par		Paid-in		Accumulated		Stockholders’
	Shares	Value		Shares	Value		Capital		Deficit		Equity
Balance, December 31, 2020	40	$	40,460	74,215	$	742	$	78,006	$	(71,388)	$	7,360
Net income	0		0	0		0		0		11		11
Preferred stock dividend accumulation	—		506	—		—		(506)		—		(506)
Balance, March 31, 2021	40		40,966	74,215		742		77,500		(71,377)		6,865
Net loss	—		—	—		—		—		(19)		(19)
Preferred stock dividend accumulation	—		506	—		—		(506)		—		(506)
Balance, June 30, 2021	40	$	41,472	74,215	$	742	$	76,994	$	(71,396)	$	6,340


	Mezzanine Equity – Series C												Mezzanine Equity – Series C
	Preferred Stock			Common Stock			Additional				Total		Preferred Stock			Common Stock			Additional				Total
	Number of	Par		Number of	Par		Paid-in		Accumulated		Stockholders’		Number of	Par		Number of	Par		Paid-in		Accumulated		Stockholders’
	Shares	Value		Shares	Value		Capital		Deficit		Equity		Shares	Value		Shares	Value		Capital		Deficit		Equity
Balance, December 31, 2020	40	$	40,460	74,215	$	742	$	78,006	$	(71,388)	$	7,360
Net income	0		0	0		0		0		11		11
Preferred stock dividend accumulation	—		506	—		—		(506)		—		(506)
Balance, March 31, 2021	40		40,966	74,215		742		77,500		(71,377)		6,865
Balance, December 31, 2021													40	$	42,483	74,215	$	742	$	75,983	$	(71,857)	$	4,868
Net loss	0		0	0		0		0		(19)		(19)	0		0	0		0		0		(291)		(291)
Preferred stock dividend accumulation	—		506	—		—		(506)		—		(506)	—		531	—		—		(531)		—		(531)
Balance, June 30, 2021	40	$	41,472	74,215	$	742	$	76,994	$	(71,396)	$	6,340
Balance, March 31, 2022													40		43,014	74,215		742		75,452		(72,148)		4,046
Net loss	0		0	0		0		0		(226)		(226)	—		—	—		—		—		(213)		(213)
Preferred stock dividend accumulation	—		506	—		—		(506)		—		(506)	—		531	—		—		(531)		—		(531)
Balance, September 30, 2021	40	$	41,978	74,215	$	742	$	76,488	$	(71,622)	$	5,608
Balance, June 30, 2022													40	$	43,545	74,215	$	742	$	74,921	$	(72,361)	$	3,302

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

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine months ended				Six months ended
	September 30,				June 30,
	2021		2020		2022		2021
Cash flows from operating activities:
Net loss	$	(234)	$	(885)	$	(504)	$	(8)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Changes in operating assets and liabilities		(17)		1,050		(343)		57
Net cash (used in) provided by operating activities		(251)		165		(847)		49

Cash flows from financing activities:
Payment of deferred stock offering expenses		0		(300)
Net cash used in financing activities		0		(300)
Net (decrease) increase in cash						(847)		49

Net decrease in cash		(251)		(135)
Cash and cash equivalents, beginning of period						47,641		48,142

Cash beginning of period		48,142		5,446

Cash end of period	$	47,891	$	5,311

Supplemental non-cash financing disclosure:
Deferred stock offering expenses	$	0	$	157
Cash and cash equivalents, end of period					$	46,794	$	48,191

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

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)Description of Business

Enzon Pharmaceuticals, Inc. (together with its subsidiaries, the “Company,” “Enzon,” “we” or “us”) is positioned as a public company acquisition vehicle, where it can become an acquisition platform and more fully utilize its net operating loss carryforwards (“NOLs”) and enhance stockholder value.

In September 2020, the Company initiated a rights offering for its common and preferred stock (see below and Note 12 to ~~its~~our Condensed Consolidated Financial Statements), which closed in October 2020, and it realized $43.6 million in gross proceeds. This has enabled the Company to embark on its plan to realize the value of its ~~approximately $103.5~~more than $100 million ~~net operating loss carryforwards (“NOLs”)~~NOLs by acquiring potentially profitable businesses or assets. To protect the NOLs, in August 2020, the Company’s Board of Directors adopted a Section 382 rights plan (see Note 11 to our Condensed Consolidated Financial Statements).

The Company's Board of Directors (the "Board") and its management are actively involved in pursuing, sourcing, reviewing and evaluating various potential acquisition transactions consistent with its long-term strategy. The Company's management and Board have made a number of contacts and engaged in discussions with principals of individual companies and financial advisors on behalf of various individual companies, while continuing to evaluate potential transactions. To date, no actionable transactions have been initiated.

Historically, the Company had received royalty revenues from licensing arrangements with other companies primarily related to sales of certain drug products that utilized Enzon’s proprietary technology. In recent years, the Company has had no clinical operations and limited corporate operations. Enzon has a marketing agreement relating to the drug Vicineum, which, if approved, will, potentially, generate milestone and royalty payments to it in the future. Enzon cannot make any assurances that it will earn material future royalties or milestones.

The Company has a marketing agreement with Micromet AG, now part of Amgen, Inc. (the “Micromet Agreement”), pursuant to which the Company may be entitled to a share of certain milestone and royalty payments if Vicineum, a drug being developed by Sesen Bio, Inc. (“Sesen”), is approved for the treatment of non-muscle invasive bladder cancer. In a press release dated February 16, 2021, Sesen announced that the U.S. Food and Drug Administration (the “FDA”) has accepted for filing Sesen’s Biologic License Application (“BLA”) for Vicineum. The FDA further granted Priority Review, with a target Prescription Drug User Fee Act (“PDUFA”) date for a decision on the BLA of August 18, 2021. Accordingly, the Company earned a milestone of $409,430 in the first quarter of ~~2021, which~~2021. The amount of $344,638 was ~~fully paid by June 30,~~received during that quarter and the balance of $64,792 was recorded as a receivable as of March 31, 2021. OnHowever, on August 13, 2021, Sesen announced that it had received a Complete Response Letter (“CRL”) from the FDA and that the FDA had determined that it cannot approve the BLA for Vicineum in its present form and had provided recommendations specific to additional clinical/statistical data and analyses in addition to Chemistry, Manufacturing and Controls (“CMA”) issues pertaining to a recent preapproval inspection and product quality. ~~In a press release~~Since that time, Sesen ~~issued on November 1, 2021,~~has reported that it ~~noted that on October 29, 2021 it~~has had a ~~CMA Type A meeting~~number of meetings with the FDA and ~~reviewed issues related to CMC that will be further discussed during the review of the BLA for Vicineum upon potential resubmission. Sesen, also~~ noted that it ~~is preparing~~had plans for further meetings to align on the remaining outstanding items related to the additional Phase 3 clinical trial. In an SEC filing on July 12, 2022, Sesen noted that on July 11, 2022, it participated in a Type ~~A meeting to discuss the recommendations specific to additional clinical/statistical data and analyses that~~B Meeting with the FDA ~~raised~~and discussed outstanding items related to Sesen’s proposed protocol and statistical analysis plan design elements for an additional Phase 3 clinical trial for Vicineum. However, on July 18, 2022, Sesen announced that it has made the strategic decision to voluntarily pause further development of Vicineum in the ~~CRL. It expects~~U.S. Subsequently, on July 20, 2022, Sesen announced that ~~meeting~~it had approved a restructuring plan to ~~take place later in 2021.~~ reduce operating expenses and better align its workforce to comport with its decision to pause further development of Vicineum.

In a filing with the ~~U. S. Securities and Exchange Commission (“SEC”)~~SEC in March 2021, Sesen noted that it had received notice from the European Medicines Agency (“EMA”) that its Marketing Authorization Application (“MMA”) for Vicineum was found to be valid and the review procedure ~~has~~had officially started. Accordingly, the Company earned and received an additional milestone ~~payment~~ of $292,284 ~~during~~in the second quarter ~~ended June 30,~~of 2021. Subsequently, on August 25, 2021, Sesen announced that it had withdrawn its application to market Vicineum in Europe.

Due to the challenges associated with developing and obtaining approval for drug products, and the lack of involvement by the Company in the development and approval process, there is substantial uncertainty as to whether the Company will receive additional milestone or any royalty payments under the Micromet ~~Agreement or any other agreements.~~Agreement. The Company will not recognize revenue until all revenue recognition requirements are met.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)Description of Business (continued)

In September 2020, the Board approved a Rights Offering (the "Rights Offering"), by which the Company distributed, at no charge to all holders of its common stock on September 23, 2020 (the "Record Date"), transferable subscription rights to purchase units ("Units") at a subscription price per Unit of $1,090. In the Rights Offering, each stockholder on the Record Date received 1 subscription right for every share of common stock owned on the Record Date. For every 1,105 subscription rights held, a stockholder was entitled to purchase one Unit at the subscription price. Each Unit consisted of one share of newly designated Series C Preferred Stock, par value $0.01 per share, and 750 shares of the Company's common stock. The subscription period for the Rights Offering ended on October 9, 2020.

As a result of the sale of all 40,000 Units available for purchase in the Rights Offering, the Company received approximately $43.6 million of gross proceeds and had 40,000 shares of Series C Preferred Stock outstanding and an aggregate of 74,214,603 shares of common stock outstanding following the Rights Offering. (See Note 12 to the Consolidated Financial Statements.)

On an annual basis, the Board may, at its sole discretion, cause a dividend with respect to the Series C Preferred Stock to be paid in cash to the holders in an amount equal to 3% of the liquidation preference as in effect at such time (initially $1,000 per share). If the dividend is not so paid in cash, the liquidation preference is adjusted and increased annually by an amount equal to 5% of the liquidation preference per share as in effect at such time, that is not paid in cash to the holders on such date. The Board did not declare a dividend as of December 31, 2021 or 2020 and, at June 30, 2022 and December 31, 2021, the liquidation value of the Series C Preferred Stock was $1,089 and $1,062 per share, respectively. (See Note 13 to the Condensed Consolidated Financial Statements.)

The Company maintains its principal executive offices at 20 Commerce Drive, Suite 135, Cranford, New Jersey 07016 through a service agreement with Regus Management Group, LLC.

(2)Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared from the books and records of the Company in accordance with United States generally accepted accounting principles (U.S. GAAP) for interim financial information and Rule 10-01 of Regulation S-X promulgated by the ~~U.S. Securities and Exchange Commission (SEC).~~SEC. Accordingly, these financial statements do not include all of the information and footnotes required for complete annual financial statements. Interim results are not necessarily indicative of the results that may be expected for the full year. Interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated as part of the consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with ~~U.S. GAAP~~accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates include legal and contractual contingencies and income taxes. Although management bases its estimates on historical experience, relevant current information and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ from these estimates.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2)Basis of Presentation (continued)

Revenue Recognition

Royalty revenues from the Company’s agreements with third parties are recognized when the Company can reasonably determine the amounts earned. In most cases, this will be upon notification from the third-party licensee, which is typically during the quarter following the quarter in which the sales occurred. The Company does not participate in the selling or marketing of products for which it receives royalties. NaN provision for uncollectible accounts is established upon recognition of revenues.

Contingent payments due under the asset purchase agreement for the sale of the Company’s former specialty pharmaceutical business are recognized as revenue when the milestone has been achieved and collection is assured, such payments are non-refundable and no further effort is required on the part of the Company or the other party to complete the earning process.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized. The effect of a change in tax rates or laws on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date of the rate change. A valuation allowance is established to reduce the deferred tax assets to the amounts that are more likely than not to be realized from operations.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has 0 liability for uncertain tax positions. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense.

(3)Recent Accounting Pronouncements

Recent Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") and guidance issued by the ~~Securities and Exchange Commission~~SEC did not, or are not believed by management to, have a material effect on the Company’s present or future Condensed Consolidated Financial Statements.

(4)Financial Instruments and Fair Value

The carrying values of cash and cash equivalents, royalty ~~and milestone~~ receivable, other current assets, accounts payable, accrued expenses and other current liabilities in the Company’s condensed consolidated balance sheets approximated their fair values at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 due to their short-term nature. As of ~~both September 30, 2021 and~~ December 31, ~~2020,~~2021, the Company held cash equivalents ~~(generally, funds that invest more than 99.5 percent of their assets in U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U. S. government)~~ aggregating approximately ~~$43.6~~$43.7 million. There were 0 cash equivalents at June 30, 2022.

(5)Supplemental Cash Flow Information

The Company made an income tax payment during the six-month period ended June 30, 2022 of approximately $1,000 and 0 income tax payments during the six-month period ended June 30, 2021. There were 0 interest payments made during the six-month periods ended June 30, 2022 or 2021.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(5) Supplemental Cash Flow Information~~

The Company made 0 income tax payments during the three and nine-month periods ended September 30, 2021 and 2020. There were 0 interest payments made during the three and nine-month periods ended September 30, 2021.

(6) ~~Loss~~Income (Loss) Per Common Share

Basic ~~earnings~~income (loss) per common share is computed by dividing the net income (loss), less any dividends, accretion or reduction or redemption on our Series C Preferred Stock, by the weighted average number of shares of common stock outstanding during the period. Restricted stock awards and restricted stock units (collectively, ~~nonvested shares)~~“nonvested shares”) are not considered to be outstanding shares until the service or performance vesting period has been completed.

~~The diluted earnings per share calculation would normally involve adjusting both the denominator and numerator as described here if the effect is dilutive.~~

For purposes of calculating diluted earnings per common share, the denominator normally includes both the weighted-average number of shares of common stock outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Because a loss was incurred in each of the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, common stock equivalents would be anti-dilutive and, accordingly, were excluded from the calculation of diluted loss per share in each of the periods. Dilutive common stock equivalents potentially include stock options and nonvested shares using the treasury stock method and shares issuable under the employee stock purchase plan. During each of the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, there were no common stock equivalents. Loss per common share information is as follows (in thousands, except per share amounts) for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Loss Per Common Share – Basic and Diluted:
Net loss	$	(226)	$	(407)	$	(234)	$	(885)	$	(213)	$	(19)	$	(504)	$	(8)
Dividends on Series C preferred stock		(506)		0		(1,518)		—		(531)		(506)		(1,062)		(1,012)
Net loss available to common shareholders	$	(732)	$	(407)	$	(1,752)	$	(885)	$	(744)	$	(525)		(1,566)	$	(1,020)

Weighted-average number of common shares outstanding		74,215		44,215		74,215		44,215		74,215		74,215		74,215		74,215

Basic and diluted loss per share	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.02)	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.01)

~~For the nine-month periods ended September~~At June 30, 2021, ~~and 2020 and the three-month periods ended September 30, 2021 and 2020, there~~options to purchase 25,000 shares of common stock were ~~25,000 and 41,787 potentially dilutive securities~~ outstanding that have been excluded from the calculation of ~~dilutive weighted average~~diluted weighted-average number of shares outstanding, as they would be ~~anti-dilutive.~~anti-dilutive, since the respective options’ strike price was greater than the market price of the respective shares. There were 0 outstanding options at June 30, 2022.

(7) ~~Stock-Based~~Stock Based Compensation

Stock Options and Restricted Stock Units (RSUs or Nonvested Shares)

During the ~~nine months~~six-month periods ended ~~September 30,~~June 31, 2022 and 2021, 0 options or RSUs were granted and the Company incurred 0 stock-based compensation expense. ~~NaN RSUs were outstanding as of September 30, 2021.~~

~~There were 0 options granted during the nine months ended September 30, 2020 and 0 nonvested shares granted or~~ ~~outstanding~~ ~~during the nine months ended September 30, 2020. The Company uses historical data to estimate forfeiture rates.~~

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Activity related to stock options and nonvested shares during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and related balances outstanding as of that date are reflected below ~~(in thousands)~~:


		Stock Options
Outstanding at January 1, ~~2021~~2022		25,000
Granted		0
Exercised and vested		0
Expired and forfeited		0(25,000)
Outstanding at ~~September~~June 30, ~~2021~~2022		~~25,000~~0

Options vested and expected to vest at ~~September~~June 30, ~~2021~~2022		~~25,000~~0

Options exercisable at ~~September~~June 30, ~~2021~~2022		~~25,000~~0

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(8)Income Taxes

During ~~each of~~ the ~~three and nine-month~~six-month periods ended ~~September~~June 30, 2022 and 2021, the Company recorded approximately $0($3,600) and $2,000, respectively, of income tax (benefit) expense for New Jersey state income ~~tax.~~

~~During~~tax and a true-up adjustment for the ~~three and nine-month periods ended September 30, 2020, the Company recorded approximately $0 and $2,000, respectively,~~over accrual of ~~income tax expense for~~ New Jersey ~~state income tax.~~tax in prior years.

ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. For the period ended December 31, ~~2020,~~2021, the Company believed that it was more likely than not that future taxable income would not exist to utilize some or all of its deferred tax assets. However, although there can be no certainty of such, if the Company’s acquisition strategy is successful and future taxable income is projected, among other things, the valuation allowance will be reevaluated. Accordingly, ~~the Company~~it recorded a valuation allowance in the amount of its total deferred tax assets for the period ended December 31, ~~2020.~~2021. In ~~2021,~~2022, the Company projects a taxable loss before utilization of NOLs. Due to the valuation allowance placed on its deferred tax assets, the deferred tax expense resulting from the usage and/or expiration of deferred tax assets was offset by a corresponding deferred tax benefit from a reduction in valuation allowance, and the Company recorded no deferred tax expense as of ~~September~~June 30, ~~2021.~~2022. The Company intends to acquire profitable businesses, entities or revenue streams that will generate sufficient income so that it can utilize its approximately ~~$103.5~~$104 million of NOLs. To date, no actionable acquisition candidates have been identified and, while the Company expects that, ultimately, it will be successful in realizing the value of its NOLs, the Company cannot provide assurance that it will be able to do so.

Management of the Company will continue to assess the need for this valuation allowance and will make adjustments when or if appropriate.

At ~~September~~June 30, ~~2021,~~2022, the Company had federal NOLs of approximately ~~$103.5~~$104 million, of which approximately $100.6 million will expire in the years 2025 through 2036, and New Jersey state NOLs of approximately ~~$25.8~~$26.5 million that expire in the years 2031 through 2041. Under the Tax Cuts and Jobs Act, net operating losses generated in tax years beginning after December 31, 2017 have an unlimited carryforward period, and the amount of net operating loss allowed to be utilized each year is limited to 80% of taxable income.

At June 30, 2022, the Company has federal research and development ("R&D") tax credit carryforwards of approximately $12.8 million that expire in the years 2023 through 2029. These deferred tax assets were subject to a valuation allowance such that the deferred tax expense incurred as a result of the expiration of the R&D credit carryforwards was offset by a corresponding deferred tax benefit for the related reduction in valuation allowance.

The ~~Coronavirus Aid, Relief~~Company's ability to use the NOLs and ~~Economic Security Act, which was signed into law on March 27, 2020, suspended~~R&D tax credit carryforwards may be limited, as they are subject to certain limitations due to ownership changes as defined by rules pursuant to Section 382 of the ~~80% limitation for taxable years 2018 through 2020 and provided for~~Internal Revenue Code of 1986, as amended. However, management of the Company believes that the Company's NOLs will not be limited by any changes in the Company's ownership as a ~~five-year carryback period for net operating losses for those years. Net operating losses generated~~result of the successful completion of the Rights Offering. (See Note 12 to the Condensed Consolidated Financial Statements.) Additionally, in ~~2017 and earlier continue~~an effort to ~~be carried forward for 20 years and have no 80%~~protect stockholder value by attempting to protect against a possible limitation on ~~utilization.~~the Company's ability to use its NOLs, the Board adopted a Section 382 rights plan. (See Note 11 to the Condensed Consolidated Financial Statements.)

The Company has not recorded a liability for unrecognized income tax benefits.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(9)Commitments and Contingent Liabilities

~~In December 2019, an outbreak of~~The COVID-19 global pandemic has had and may continue to have a ~~novel strain of coronavirus (COVID-19) was reported in Wuhan, China. On March 11, 2020, the World Health Organization characterized~~serious adverse impact on the global ~~spread of COVID-19 as a pandemic. In an effort~~economy and may adversely affect the Company's business operations. It is impossible to ~~slow~~predict the ~~spread of the virus, the United States~~effect and many other countries around the world imposed restrictions on non-essential work activities, travel and mass gatherings. Although these restrictions have been eased in some areas, it is not known whether these lockdowns and other restrictions will be reintroduced, especially in light of the uncertainty regarding cases in the United States, including theultimate impact of the ~~Delta variant, when they will end or~~COVID-19 pandemic, as the ~~ultimate impact these unprecedented actions will have on~~situation is continually evolving and different variants and sub-variants of COVID-19 continue to emerge. The COVID-19 pandemic may continue to disrupt the ~~Company’s~~global supply chain and may cause disruptions to the Company's operations, financial condition and prospects. At the present time, the Company’s business activities have been largely unaffected by COVID-19 restrictions as the

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Company’s workforce is comprised solely of independent contractors who are able to perform their duties remotely. However, ~~these restrictions~~COVID-19, including the various containment measures put into place across the globe, may impact the third parties who are responsible for obtaining final approval of and manufacturing product candidates for which the Company shares the right to receive licensing fees, milestone payments and royalty revenues. If those third parties are required to curtail their business activities for a significant time, or if global supply chain disruptions impact their ability to procure needed resources, raw materials or components, the Company’s right to receive licensing fees, milestone payments or royalties could be materially and adversely affected. Additionally, the development timeline for product candidates being developed by third parties that are pending before the FDA or other regulatory approval could be delayed if the agency is required to shift resources to the review and approval of candidates for treatment of COVID-19. In addition, the effects of the COVID-19 pandemic ~~including the current global challenges,~~ may negatively impact the Company’s search for a ~~business acquisition or investment,~~target company, as well as ~~negatively impacting~~ the business and/or results of operations of any target business ~~which~~that the Company acquires or in which itthe Company invests.

On April 25, 2022, the Company entered into an Indemnification Agreement with each of Richard L. Feinstein, its Chief Executive/Chief Financial Officer and Randolph Read, a director, (collectively, the “Indemnitees”). The Indemnification Agreements clarify and supplement indemnification provisions already contained in the Company's Bylaws and generally provide that the Company shall indemnify the Indemnitees to the fullest extent permitted by applicable law, subject to certain limitations and exceptions, against expenses, judgments, fines and other amounts actually and reasonably incurred in connection with their service as a director or officer and also provide for rights to advancement of expenses and contribution. Subsequent to his election as a director, the Company entered into the same form of Indemnification Agreement with Jaffrey (Jay) A. Firestone.

The Company has been involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Company’s consolidated financial position, results of operations, or liquidity.

(10)Accounts Payable

~~Due~~Prior to ~~returns, rebates and other adjustments, at various times,~~2017, the Company’s primary source of royalty revenues was derived from sales of PegIntron, which is marketed by Merck ~~has notified the Company of its expected repayment of previously paid royalties. As of~~& Co., Inc. (“Merck”). At December 31, ~~2020, according to Merck, the Company had~~2021, we recorded a ~~net~~ liability to Merck ~~(net~~ of ~~a 25% royalty interest that the Company had previously sold) aggregating~~ approximately ~~$302,000. This was~~$331,000, based primarily on Merck’s assertions regarding ~~the net result of overpayments, rebates and returns~~recoupments related to prior ~~periods sales of PegIntron.~~returns and rebates. Merck ~~expected to be repaid for such overpayments through reductions of future royalties~~has not yet reported royalty revenues earned by us for product sales and/or recoupments for returns and rebates for the ~~Company. During the three months ended March 31, 2021, Merck notified the Company of an additional amount they believe is owed to them approximating $27,000. During the three months~~quarter ended June 30, 2021, Merck notified the Company of an additional amount they believe is owed to them approximating $2,000. During the three months ended September 30, 2021, Merck reported minimal royalties earned by the Company.2022. Accordingly, at ~~September~~June 30, ~~2021,~~2022, the Company recorded a net payable to Merck of approximately $331,000 due to such royalty overpayment claims by Merck. The Company believes that it will receive no ~~material~~ additional royalties from Merck.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(11)Section 382 Rights Plan

On August 14, 2020, in an effort to protect stockholder value by attempting to protect against a possible limitation on the Company’s ability to use its NOLs, the Company’s Board of Directors adopted a Section 382 rights plan and declared a dividend distribution of 1 right for each outstanding share of the Company’s common stock to stockholders of record at the close of business on August 24, 2020. Accordingly, holders of the Company’s common stock own 1 preferred stock purchase right for each share of common stock owned by such holder. The rights are not immediately exercisable and will become exercisable only upon the occurrence of certain events as set forth in the Section 382 rights plan. If the rights become exercisable, each right would initially represent the right to purchase from the Company 1 one-thousandth of a share of the Company’s Series A-1 Junior Participating Preferred Stock, par value $0.01 per share, for a purchase price of $1.20 per right. If issued, each fractional share of Series A-1 Junior Participating Preferred Stock would give the stockholder approximately the same dividend, voting and liquidation rights as does 1 share of the Company’s common stock. However, prior to exercise, a right does not give its holder any rights as a stockholder of the Company, including any dividend, voting or liquidation rights. The rights will expire on the earliest of (i) the close of business on June 2, 2024 (unless that date is advanced or extended by the Board), (ii) the time at which the rights are redeemed or exchanged under the Section 382 rights plan, (iii) the close of business on the day of repeal of Section 382 of the Internal Revenue Code or any successor statute or (iv) the close of business on the first day of a taxable year of the Company to which the Company’s Board of Directors determines that no NOLs may be carried forward. The Company received stockholder ratification of the Section 382 rights plan at the Company’s 2021 annual meeting ~~held~~on June 2, 2021. In connection with the stockholder ratification, on June 4, 2021, effective as of June 2, 2021, the Company amended the Section 382 rights plan to extend the original expiration date from the close of business on August 13, 2021 to the close of business on June 2, 2024.

(12)Rights Offering

In September 2020, the Company’s Board of Directors approved athe Rights Offering, ~~(the “Rights Offering”),~~ by which the Company distributed, at no charge to all holders of its common stock on ~~September 23, 2020 (the “Record Date”),~~the Record Date, transferable subscription rights to purchase ~~units (“Units”)~~Units at a subscription price per Unit of $1,090. In the Rights Offering, each stockholder on the Record Date received 1 subscription right for every share of common stock owned on the Record Date. For every 1,105 subscription

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

rights held, a stockholder was entitled to purchase 1 Unit at the subscription price. Each Unit consisted of one share of newly designated Series C Preferred Stock, par value $0.01 per share, and 750 shares of the Company’s common stock. The subscription period for the Rights Offering ended on October 9, 2020.

Pursuant to the Rights Offering, Icahn Capital LP, together with its affiliates, subscribed for 5,971 Units (its pro-rata share of the Rights Offering) representing the purchase of 4,478,250 shares of the Company’s common stock and 5,971 shares of Series C Preferred Stock. Icahn Capital LP also purchased all Units that remained unsubscribed for at the expiration of the Rights Offering to the extent that other holders elected not to exercise all of their respective subscription rights, which totaled 33,306 Units representing the purchase of 24,979,500 shares of common stock and 33,306 shares of Series C Preferred Stock. Following the completion of the Rights Offering, Icahn Capital LP, together with its affiliates, owned approximately 48% of the Company’s outstanding common stock and approximately 98% of the Company’s outstanding Series C Preferred Stock.

(13)Series C Preferred Stock

In October 2020, the Company issued 40,000 shares of Series C Preferred Stock for an aggregate purchase price of $40.0 million.

On December 31^st of each year, the Company’s Board of Directors may, at its sole discretion, cause a dividend with respect to the Series C Preferred Stock to be paid in cash to the holders in an amount equal to 3% of the liquidation preference as in effect at such time (initially $1,000 per share). If the dividend is not so paid in cash, the liquidation preference will be adjusted and increased annually by an amount equal to 5% of the liquidation preference per share as in effect at such time, that is not paid in cash to the holders on such date. The Company’s Board of Directors did not declare a dividend as of December 31, 2020 or subsequently. Accordingly, dividends on the Series C Preferred Stock were accrued at 5% at December 31, 2020 and 2021, aggregating approximately ~~$460,000. Therefore,~~$2,023,000. Accordingly, as of December 31, ~~2020,~~2021, the cumulative liquidation value of the Series C Preferred Stock was approximately ~~$40,460,000~~$42,483,000 ($~~1,012~~1,062 per share).

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(13)Series C Preferred Stock (continued)

As of ~~September 30,~~December 31, 2021 and June 30, ~~2021 and March 31, 2021,~~2022, pursuant to the terms of the Series C Preferred Stock, the Company’s Board of Directors had not declared a cash dividend on the Series C Preferred Stock as dividends on such stock are only declared and paid once a year on or about December 31^st of each year. As of ~~September~~June 30, ~~2021,~~2022, the Board had not yet determined whether to declare a cash dividend at the end of ~~2021.~~2022. Since a determination has not been made, in the quarter ended June 30, 2022 the Company has recorded a 5% increase (computed on a pro rata basis) to the liquidation preference of approximately ~~$13, $13 and $12~~$14 per share of Series C Preferred Stock, aggregating approximately ~~$506,000, $506,000 and $506,000, respectively, at September 30, 2021,~~$531,000 (for the six months ended June 30, ~~2021 and March 31, 2021~~2022, the Company recorded an aggregate of approximately $1,062,000 or $27 per share to the liquidation preference), for a cumulative liquidation value of approximately ~~$41,978,000~~$43,545,000 ($~~1,050~~1,089 per share) as of ~~September~~June 30, ~~2021.~~2022. Unless and until an amount in cash is paid to the holders of the Series C Preferred Stock in an amount equal to the difference between the initial liquidation value ($1,000 per share) and the then-current liquidation value, 0 dividends may be paid to holders of the Company’s common stock.

The Company may not repurchase or redeem the Series C Preferred Stock prior to November 1, 2022. Since the redemption of the Series C Preferred Stock is contingently or optionally redeemable, the Series C Preferred Stock has been classified in mezzanine equity on the Condensed Consolidated Balance Sheets.

~~(14) Subsequent Event~~

On November 1, 2021, Jennifer McNealey tendered her resignation as a director from the Board of Directors of the Company, effective November 8, 2021. The decision by Ms. McNealey to resign was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

1113

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Enzon,” the “Company,” “we,” “us,” or “our” and similar terms mean Enzon Pharmaceuticals, Inc. and its subsidiaries. The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our ~~2020~~2021 Annual Report on Form 10-K.

Forward-Looking Information and Factors That May Affect Future Results

The following discussion contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in the following discussion, other than statements that are purely historical, are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “potential,” “anticipates,” “plans,” or “intends” or the negative thereof, or other variations thereof, or comparable terminology, or by discussions of strategy. Forward-looking statements are based upon management’s present expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future and are subject to known and unknown risks and uncertainties that could cause actual results, events or developments to be materially different from those indicated in such forward-looking statements, including the risks and uncertainties set forth in Item 1A. Risk Factors in our ~~2020~~2021 Annual Report on Form 10-K. These risks and uncertainties should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. As such, no assurance can be given that the future results covered by the forward-looking statements will be achieved.

The percentage changes throughout the following discussion are based on amounts stated in thousands of dollars and not the rounded millions of dollars reflected in this section.

Overview

In September 2020, we initiated ~~a rights offering~~the Rights Offering for our common and preferred stock (see below and Note 12 to our Condensed Consolidated Financial Statements), which closed in October 2020, and we realized $43.6 million in gross proceeds. This has enabled us to embark on our plan to realize the value of our ~~approximately $103.5~~more than $100 million ~~net operating loss carryforwards (“NOLs”)~~NOLs by acquiring potentially profitable businesses or assets. To protect the NOLs, in August 2020, our Board of Directors adopted a Section 382 rights plan (see Note 11 to our Condensed Consolidated Financial Statements).

Historically, we had received royalty revenues from licensing arrangements with other companies primarily related to sales of certain drug products that utilized Enzon’s proprietary technology. In recent years, we have had no clinical operations and limited corporate operations. We cannot assure you that we will earn material future royalties or milestones.

We have a marketing agreement with Micromet AG, now part of Amgen, Inc. (the “Micromet Agreement”), pursuant to which we may be entitled to ~~a share of~~ certain milestone and royalty payments if Vicineum, a drug being developed by Sesen, ~~Bio,~~ Inc. ~~(“Sesen”)~~, is approved for the treatment of non-muscle invasive bladder cancer. In a press release dated February 16, 2021, Sesen announced that the U.S. Food and Drug Administration (the “FDA”) ~~has~~had accepted for filing Sesen’s Biologic License Application (“BLA”) for Vicineum. The FDA further granted Priority Review, with a target Prescription Drug User Fee Act (“PDUFA”) date for a decision on the BLA of August 18, ~~2021.~~2021 Accordingly, we earned a milestone of $409,430 in the first quarter of 2021, all of which was received by June 30, 2021. However, on August 13, 2021, Sesen announced that it had received a Complete Response Letter (“CRL”) from the FDA and that the FDA had determined that it cannot approve the BLA for Vicineum in its present form and had provided recommendations specific to additional clinical/statistical data and analyses in addition to Chemistry, Manufacturing and Controls (“CMA”) issues pertaining to a recent preapproval inspection and product quality. ~~In a press release~~Since that time, Sesen ~~issued on November 1, 2021,~~has reported that it ~~noted that on October 29, 2021 it~~has had a ~~CMA Type A meeting~~number of meetings with the FDA and ~~reviewed issues related to CMC that will be further discussed during the review of the BLA for Vicineum upon potential resubmission. Sesen, also~~ noted that it ~~is preparing~~had plans for further meetings to align on the remaining outstanding items related to the additional Phase 3 clinical trial. In an SEC filing on July 12, 2022, Sesen noted that on July 11, 2022, it participated in a Type ~~A meeting to discuss the recommendations specific to additional clinical/statistical data and analyses that~~B Meeting with the FDA ~~raised~~and discussed outstanding items related to Sesen’s proposed protocol and statistical analysis plan design elements for an additional Phase 3 clinical trial for Vicineum.. However, on July 18, 2022, Sesen announced that it has made the strategic decision to voluntarily pause further development of Vicineum in the ~~CRL. It expects~~U.S., Subsequently, on July 20, 2022, Sesen announced that ~~meeting~~it had approved a restructuring plan to ~~take place later in 2021.~~ reduce operating expenses and better align its workforce to comport with its decision to pause further development of Vicineum.

Application (“MMA”) for Vicineum was found to be valid and the review procedure ~~has~~had officially started. Accordingly, we earned and received an additional milestone of $292,284 in the second quarter of 2021.

Subsequently, on August 25, 2021, Sesen announced that it had withdrawn its application to market Vicineum in Europe.

Due to the challenges associated with developing and obtaining approval for drug products, and the lack of our involvement ~~by us~~ in the development and approval process, there is substantial uncertainty as to whether we will receive ~~additional~~any milestone or ~~any~~ royalty payments under the Micromet Agreement. We will not recognize revenue until all revenue recognition requirements are met.

Acquisition Activities

Our Board of Directors and our management are actively involved in pursuing, sourcing, reviewing and evaluating various potential acquisition transactions consistent with our long-term strategy. Our management and Board of Directors have made a number of contacts and engaged in discussions with principals of individual companies and financial advisors on behalf of various individual companies, while continuing to evaluate potential transactions. To date, we have not developed any actionable transactions. We will continue to update our stockholders as material developments arise.

Throughout this Management’s Discussion and Analysis, the primary focus is on our results of operations, cash flows and financial condition. The percentage changes throughout the following discussion are based on amounts stated in thousands of dollars.

Results of Operations

Revenues:

Milestones and Royalties (in thousands of dollars):


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
			%						%						%						%
	2021		Change		2020		2021		Change		2020		2022		Change		2021		2022		Change		2021
Milestone and royalty revenues	$	—	(100)	%	$	8	$	672	3,633	%	$	18	$	—	(100)	%	$	291	$	—	(100)	%	$	672

In the ~~nine~~three-month and ~~three-month~~six-month periods ended ~~September~~June 30, 2021, we earned approximately ~~$701,000~~$291,000 and ~~$0,~~$672,000, respectively, in milestone revenue from Sesen. There were no comparable revenues in the three-month and six-month periods ended June 30, 2022. Separately, in the ~~nine~~three-month and ~~three-month~~six-month periods ended ~~September~~June 30, 2021, we were notified by Merck of an approximate $2,000 and $29,000 ~~and $0,~~repayment, respectively, ~~repayment~~ they believe they are owed of previously-paid royalties on PegIntron. ~~Royalty revenues from sales of PegIntron by Merck accounted for 100% of our total milestone and royalty revenues for the nine-month and three-month periods ended September 30, 2020.~~ Sales of PegIntron-related products will continue their declining trend and we expect to receive little or no future royalties from Merck. Our right to receive royalties on U.S. and European sales of PegIntron expired in 2016 and 2018, respectively, expired in Malaysia in 2020 and ~~will expire~~ in Japan in December ~~2021 and~~2021. Such rights will expire in Chile in April 2024.

Merck has not yet reported royalty revenues earned by us for product sales and/or recoupments for returns and rebates for the quarter June 30, 2022.

Other Income(in thousands of dollars):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
			%						%
	2022		Change		2021		2022		Change		2021
Other income	$	90	4,400	%	$	2	$	92	2,200	%	$	4

Other income is attributable to the interest and dividends received on the invested cash we received from the $43.6 million of proceeds from our rights offering (see Note 12 to our Condensed Consolidated Financial Statements). Other income increased by approximately $88,000, or 2,200%, to $92,000 for the six months ended ~~September~~June 30, ~~2021, but neither~~2022 from $4,000 for the first six months of 2021. The increase in other income is ~~expected~~attributable to ~~be material.~~the higher rate of interest in 2022 and the nature of the account in which the proceeds were invested.

Other income increased by approximately $88,000, or 4,400%, to $90,000 for the three months ended June 30, 2022 from $2,000 for the three months ended June 30, 2021. The increase in other income is attributable to the higher rate of interest in 2022 and the nature of the account in which the proceeds were invested.

Operating Expenses:

General and Administrative (in thousands of dollars):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
			%						%						%						%
	2021		Change		2020		2021		Change		2020		2022		Change		2021		2022		Change		2021
General and administrative	$	228	(45)	%	$	415	$	910	1	%	$	901	$	303	(3)	%	$	312	$	600	(12)	%	$	682

General and administrative expenses remained fairly consistent, increasing by approximately $9,000, or 1%, to $910,000 for the nine months ended September 30, 2021 from $901,000 for the first nine months of 2020.

General and administrative expenses decreased by approximately ~~$187,000,~~$82,000, or ~~45%~~12%, to ~~$228,000~~$600,000 for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$415,000~~$682,000 for the ~~third quarter~~first six months of ~~2020.~~2021. The decrease in expense is substantially attributable to the decrease in consulting fees.

13General and administrative expenses decreased by approximately $9,000, or 3%, to $303,000 for the three months ended June 30, 2022 from $312,000 for the three months ended June 30, 2021.

~~disproportionate legal fees and consulting fees that were incurred in connection with the Section 382 Rights Plan during the third quarter of 2020.~~

Tax ~~Expense:~~Expense:

We incurred noa tax ~~expense during the third quarters of 2021 and 2020 and a tax~~(benefit) expense of approximately ($3,600) in the first half of 2022 and $2,000 in the first ~~nine months~~half of 2021 ~~and $2,000 during~~for the ~~prior comparable period to reflect~~ New Jersey state minimum ~~taxes.~~taxes and a true-up adjustment for the over accrual of the New Jersey tax in prior years.

Liquidity and Capital Resources

Our current source of liquidity is our existing cash ~~and cash equivalents~~ on hand, which includes the approximately $43.6 million of gross proceeds from our Rights Offering. (See Note 12 to the Condensed Consolidated Financial Statements.) While we no longer have any research and development activities, we continue to retain rights to receive royalties and milestone payments from existing licensing arrangements with other ~~companies and, accordingly, we received milestone revenue of approximately $701,000 from Sesen during the nine months ended September 30, 2021.~~companies. We may become entitled to additional milestone payments as a result of regulatory ~~approvals and initial sales~~filings in the United States and Europe in connection with Vicineum. We may share in royalty payments upon ~~additional sales~~the approval and sale of Vicineum, We believe that our existing cash ~~and cash equivalents~~ on hand will be sufficient to fund our operations, at least, through ~~November 2022.~~August 2023. Our future royalty revenues may be de minimis over the next several years unless and until we receive a share of milestone and royalty payments resulting from the approval and sale of Vicineum, and we cannot assure you that we will receive any royalty, milestone or other payments or revenues.

While we are positioned as a public company acquisition vehicle, where we can become an acquisition platform and more fully utilize our NOLs and enhance stockholder value, we cannot assure you that we will succeed in making acquisitions that are profitable and that will enable us to utilize our NOLs.

Cash used in operating activities represents a net loss, as adjusted for certain non-cash items including the effect of changes in operating assets and liabilities. Cash used in operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was approximately ~~$251,000,~~$847,000, as compared to cash provided by operating activities of approximately ~~$165,000~~$49,000 during the comparable period in ~~2020.~~2021. The decrease of approximately ~~$416,000~~$896,000 was ~~significantly~~primarily attributable to the ~~collection of tax credits of approximately $1.0 million during the comparable period in 2020, as partially offset by the decrease in~~ net loss of approximately ~~$650,000~~$504,000 and an increase in prepaid insurance of approximately $346,000 during the ~~current period.~~first half of 2022.

The net effect of the foregoing was a decrease of cash and cash equivalents of approximately ~~$251,000,~~$847,000, from ~~$48.1~~$47.6 million at December 31, ~~2020~~2021 to ~~$47.9~~$46.8 million at ~~September~~June 30, ~~2021.~~2022.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually limited purposes. As of ~~September~~June 30, ~~2021,~~2022, we were not involved in any SPE transactions.

Critical Accounting Policies and Estimates

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

Our condensed consolidated financial statements are presented in accordance with accounting principles that are generally accepted in the ~~United States~~U.S. (“U.S. GAAP”). All applicable U.S. GAAP accounting standards effective as of ~~September~~June 30, ~~2021~~2022 have been taken into consideration in preparing the condensed consolidated financial statements. The preparation of the condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies and estimates have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our condensed consolidated financial statements.

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

Revenues

Royalties under our license agreements with third-parties and pursuant to the sale of our former specialty pharmaceutical business are recognized when reasonably determinable and earned through the sale of the product by the third-party and collection is reasonably assured. Notification from the third-party licensee of the royalties earned under the license agreement is the basis for royalty revenue recognition. This information generally is received from the licensees in the quarter subsequent to the period in which the sales occur.

Contingent payments due under the asset purchase agreement for the sale of our former specialty pharmaceutical business are recognized as revenue when the milestone has been achieved, collection is assured, such payments are non-refundable and no further effort is required on the part of the Company or the other party to complete the earning process.

Income Taxes

Under the asset and liability method of accounting for income taxes, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance on net deferred tax assets is provided for when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of ~~September~~June 30, ~~2021,~~2022, we believe, based on our projections, that at this time it is more likely than not that our net deferred tax assets, including our net operating losses from operating activities, will not be realized. We are positioned as a public company acquisition vehicle, where we can become an acquisition platform and more fully utilize our NOLs. We intend to acquire profitable businesses, entities or revenue streams that will generate sufficient income so that we can utilize our approximately ~~$103.5~~$104 million NOLs. At this time, however, we cannot assure you that we will be successful in doing so. Accordingly, our management will continue to assess the need for this valuation allowance and will make adjustments when appropriate. Additionally, our management believes that our NOLs will not be limited by any changes in our ownership as a result of the successful completion of the Rights Offering (See Note 12 to the Condensed Consolidated Financial Statements). ~~We recognize the benefit of an uncertain tax position that we have taken or expect to take on the income tax returns we file if it is more likely than not that we will be able to sustain our position.~~

Forward-Looking Information and Factors That May Affect Future Results

This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in the Quarterly Report on Form 10-Q, other than statements that are purely historical, are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as the words “believes,” “expects,” “may,” “will,” “should,” “potential,” “anticipates,” “plans” or “intends” or the negative thereof, or other variations thereof, or comparable terminology, or by discussions of strategy. Forward-looking statements are based upon management’s present expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future and are subject to known and unknown risks and uncertainties that could cause actual results, events or developments to be materially different from those indicated in such forward-looking statements, including, but not limited to, the following risks and uncertainties:

●

We may be unsuccessful in our strategy to fully utilize our NOLs and other tax assets and enhance stockholder value as a public company acquisition vehicle.

●

Our sources of revenue are limited and we may incur losses for the foreseeable future.

●

In recent years, we derived most of our royalty revenues from continued sales of PegIntron, which have been in sharp decline. In addition, our right to receive royalties on U.S. and European sales of PegIntron expired in 2016 and 2018, respectively, which has negatively impacted our royalty revenues.

●

Our rights to receive royalties on sales of PegIntron and sales of other drug products have expired in various jurisdictions and, except for Vicineum, will, by 2024, expire world-wide. We currently do not anticipate any significant royalties from other sources, but we may acquire new sources of royalty revenues.

●

We have an agreement with Sesen from which we have recently received milestone payments and, potentially, may be entitled to receive future royalty payments related to sales of Vicineum, a drug being developed by Sesen for the treatment of non-muscle invasive bladder cancer. In August 2021, Sesen announced that it had received a Complete Response Letter from the FDA and that the FDA had determined that it cannot approve the BLA for Vicineum in its present form and had provided recommendations specific to additional clinical/statistical data and analyses in addition to CMA issues pertaining to a recent preapproval inspection and product quality. In a press release that Sesen issued on November 1, 2021, it noted that on October 29, 2021 it had a CMA Type A meeting with the FDA and reviewed issues related to CMC that will be further discussed during the review of the BLA for Vicineum upon potential resubmission. Sesen, also noted that it is preparing for the clinical Type A meeting to discuss the recommendations specific to additional clinical/statistical data and analyses that the FDA raised in the CRL. It expects that meeting to take place later in 2021. Also, in August 2021, Sesen announced that it had withdrawn its application to the EMA to market Vicineum in Europe. There is no guarantee that Sesen will receive approval from the FDA or EMA and, even if so, whether there will significant sales of Vicineum so as to generate material royalties to us.

●

The unprecedented actions taken globally to control the spread of COVID 19 and its related variants, as well as the uncertainty surrounding the success of global vaccination efforts, may materially and adversely affect our future right to receive licensing fees, milestone payments and royalties on product candidates that are being developed by third parties.

●

We have reallocated all employment responsibilities and outsourced all corporate functions, which makes us more dependent on third parties to perform these corporate functions.

●

We may be subject to a variety of types of product liability or other claims based on allegations that the use of our product candidates by participants in our previously conducted clinical trials has resulted in adverse effects, and our insurance may not cover all product liability or other claims.

●

Our revenues largely depend on proprietary rights, which may offer only limited protection against the development of competing products.

●

We are party to license agreements whereby we may receive royalties and or milestone payments from products subject to regulatory approval.

●

The price of our common stock has been, and may continue to be, volatile.

●

Our common stock is quoted on the OTCQX market of the OTC Markets Group, Inc., which has a very limited trading market and, therefore, market liquidity for our common stock is low and our stockholders’ ability to sell their shares of our common stock may be limited.

●

The declaration of dividends is within the discretion of our Board of Directors, subject to any applicable limitations under Delaware corporate law, as well as the requirements of the Series C Preferred Stock. Our ability to pay dividends in the future depends on, among other things, our fulfillment of the conditions of the Series C Preferred Stock, fluctuating royalty revenues, our ability to acquire other revenue sources and our ability to manage expenses, including costs relating to our ongoing operations.

●

We have adopted a Section 382 rights plan, which may discourage a corporate takeover.

●

Anti-takeover provisions in our charter documents and under Delaware corporate law may make it more difficult to acquire us, even though such acquisitions may be beneficial to our stockholders.

●

The terms of our outstanding Series C Preferred Stock and the issuance of additional series of preferred stock may adversely affect rights of our common stockholders.

●

The interests of our significant stockholders may conflict with the interests of other stockholders.

●

If we experience an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended, our ability to fully utilize our NOLs on an annual basis will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of those benefits.

●

If we experience a "Change of Control," as defined in Certificate of Designation of the Series C Preferred Stock, the holders of the Series C Preferred Stock shall have the right, at such holder's option, to require the Company to redeem at the Liquidation Preference then in effect all or a portion of such holder's shares of Series C Preferred Stock, which would negatively impact our available cash.

A more detailed discussion of these risks and uncertainties and other factors that could affect results is contained in our filings with the ~~U.S. Securities and Exchange Commission,~~SEC, including in Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. These risks and uncertainties and other factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. As such, no assurance can be given that the future results covered by the forward-looking statements will be achieved. All information in this Quarterly Report on Form 10-Q is as of the date of this report, unless otherwise indicated, and we undertake no duty to update this information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide information required by this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, ~~under the direction~~consisting of Richard L. Feinstein who serves as our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of ~~September~~June 30, ~~2021.~~2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. ~~Our~~Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2021, our~~2022, the Company's disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1A. Risk Factors.

There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 filed with the SEC on February ~~23, 2021.~~25, 2022.

Item 5. Other ~~Information.~~Information

~~On November 1, 2021, Jennifer McNealey tendered her resignation~~In connection with his election as a director, ~~from~~ the ~~Board~~Company entered into its form of ~~Directors~~Indemnification Agreement with Jaffrey (Jay) A. Firestone (the “Indemnitee”). The Indemnification Agreement clarifies and supplements indemnification provisions already contained in the Company's Bylaws and generally provides that the Company shall indemnify the Indemnitee to the fullest extent permitted by applicable law, subject to certain limitations and exceptions, against expenses, judgments, fines and other amounts actually and reasonably incurred in connection with his service as a director or officer and also provides for rights to advancement of expenses and contribution.

The description of the ~~Company, effective November 8, 2021. The decision~~Indemnification Agreement set forth in this Item 5 is not complete and is qualified in its entirety by ~~Ms. McNealey~~reference to ~~resign was not due to any disagreement with~~the full text of the form of Indemnification Agreement between the Company ~~on any matter relating~~and the Indemnitee which is filed as Exhibit 10.2 to the Company’s ~~operations, policies or practices.~~Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 and is incorporated herein by reference.

Item 6. ~~Exhibits.~~Exhibits

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


Exhibit Number	Description	Reference No.
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **	+
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **	+
101	The following materials from Enzon Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, formatted in inline XBRL ~~(Extensible~~(inline Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.	+

+Filed herewith.

●

These certifications are not deemed filed by the Commission and are not to be incorporated by reference in any filing the Company makes under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.

**These certifications are not deemed filed by the Commission and are not to be incorporated by reference in any filing the Company makes under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.

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SIGNATURES

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


	ENZON PHARMACEUTICALS, INC.
	(Registrant)


Dated: ~~November 5, 2021~~August 4, 2022	/s/ Richard L. Feinstein
	Richard L. Feinstein
	Chief Executive Officer, Chief Financial Officer and Secretary
	(Principal Executive Officer, Principal Financial Officer and Principal ~~Financial~~Accounting Officer)

1921