PISCATAWAY, N.J. -- March 12, 2012 -- Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) today announced its financial results for the fourth-quarter and full-year 2011. For the three months ended December 31, 2011, Enzon reported a loss from continuing operations of $5.0 million, or $0.10 per diluted share, compared to a loss from continuing operations of $9.6 million, or $0.16 per diluted share, for the three months ended December 31, 2010. For the full year ended December 31, 2011, Enzon reported a loss from continuing operations of $20.8 million, or $0.40 per diluted share, compared to a loss from continuing operations of $2.8 million, or $0.05 per diluted share, for the full year ended December 31, 2010.
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| • | In September, Enzon announced a reduction in force, which will reduce the number of employees to fewer than 50 by June 2012. Enzon expects the reduction in force to result in approximately $6.0 million in reduced annualized operating expenses once the plan is fully implemented by the second quarter of 2012. |
Summary of Financial Results
Royalty Revenue
Revenues received from the Company’s royalty products for the three months ended December 31, 2011 were $9.8 million, compared to $10.6 million for the three months ended December 31, 2010. For the full year 2011, royalty revenues were $40.9 million, compared to $44.9 million for the full year 2010. Royalties on PEGINTRON, marketed by Merck & Co., Inc., continue to comprise the majority of the Company’s royalty revenue and a reported decline in sales of PEGINTRON accounted for all of the decrease in royalty revenue. In May 2011, the U.S. Food and Drug Administration (FDA) approved two new treatments for chronic hepatitis C, Incivik™ and Victrelis™. These treatments are indicated for use in combination with ribavirin and pegintron alfa. The Company has no clear evidence at this point what impact, if any, these new therapies for hepatitis C may have on sales of PEGINTRON.
Research and Development
The Company’s pipeline research and development expenses were $9.1 million for the three months ended December 31, 2011, compared to $14.0 million for the three months ended December 31, 2010. For the full year 2011, research and development expenses were $40.2 million, compared to $49.9 million in 2010. Such expenses in 2010 included an expense of $7.0 million in milestone payments related to ongoing advancement of its LNA targets, including three mRNA antagonists: Hypoxia-Inducible Factor-1α (HIF-1α), Survivin, and Androgen Receptor (AR). In addition, the Company has other novel LNA targets in various stages of preclinical research.
General and Administrative
General and administrative expenses decreased to $3.5 million for the three months ended December 31, 2011, compared to $4.9 million for the three months ended December 31, 2010. For the full year 2011, the Company incurred general and administrative expenses of $17.3 million, compared to $25.4 million for the full year 2010. The decline in 2011 from 2010 was largely the result of several restructuring programs implemented over the past year, as well as the effects of our ongoing cost containment efforts.
Cash and Investments
Total cash reserves, which include cash, cash equivalents, short-term investments, and marketable securities, were $323.3 million as of December 31, 2011, compared to $460.1 million as of December 31, 2010. The decrease was primarily attributable to Enzon’s use of cash to repurchase shares under its $200.0 million share repurchase program, which the Company initiated in late December 2010. The Company purchased a total of 11.5 million shares of its outstanding common stock for a cumulative cost of $121.5 million through December 2011. During the third quarter of 2011, the Company decided to suspend the share repurchase program. The Company intends to resume repurchasing shares of outstanding common stock under this program. Share repurchases under this program may be made through open market or privately negotiated transactions at such times and in such amounts as Enzon deems appropriate, based on a variety of factors such as price, corporate and regulatory requirements and overall market conditions. There can be no assurance as to the number of shares Enzon will purchase, if any. The share repurchase program may be modified, suspended or terminated at any time without prior notice.
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About Enzon
Enzon Pharmaceuticals, Inc. is a biotechnology company dedicated to the research and development of innovative therapeutics for cancer patients with high unmet medical needs. Enzon’s drug-development programs utilize two platforms -- Customized PEGylation Linker Technology (Customized Linker Technology®) and third-generation mRNA-targeting agents utilizing the Locked Nucleic Acid (LNA) technology. Enzon currently has four compounds in human clinical development and multiple novel mRNA antagonists in preclinical research. Enzon receives royalty revenues from licensing arrangements with other companies related to sales of products developed using its proprietary Customized Linker Technology. Further information about Enzon and this press release can be found on the Company’s website atwww.enzon.com.
Forward-Looking Statements
This press release contains, or may contain, forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release, other than statements that are purely historical, are forward-looking statements, which can be identified by the use of forward-looking terminology such as the words “believes,” “expects,” “may,” “will,” “should,” “potential,” “anticipates,” “plans,” or “intends” and similar expressions. Forward-looking statements in this press release include, but are not limited to: (i) statements regarding Enzon’s intent with respect to funding further development of PEG-SN38, (ii) statements regarding the reduction in force, including its expected results, (iii) statements regarding the possibility of increased sales of PEGINTRON in the future resulting from the FDA’s approval of Incivik™ and Victrelis™ for chronic hepatitis C and (iv) statements regarding Enzon’s intent to resume repurchasing shares under its share repurchase program.
Such forward-looking statements are based upon management’s present expectations, objectives, anticipation, 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 (i)uncertainty regarding the impact of the reduction in force on Enzon’s results, (ii) uncertainty regarding the impact, if any, of the FDA’s approval of Incivik™ and Victrelis™ for chronic hepatitis C on sales of PEGINTRON (iii) uncertainty as to the number of shares Enzon will purchase, if any, (iv) whether Enzon will be able to successfully complete the share repurchase program in a manner that complies with applicable laws and regulations, (v) the time it may take for Enzon to complete the share repurchase program and economic and market conditions and (vi) other corporate liquidity requirements and priorities. A more detailed discussion of these and other factors that could affect results is contained in Enzon’s filings with the U.S. Securities and Exchange Commission, including Enzon’s Annual Report on Form 10-K for the year ended December 31, 2011. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. No assurance can be given that the future results covered by the forward-looking statements will be achieved. All information in this press release is as of the date of this press release and Enzon does not intend to update this information.
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited; In thousands, except per share amounts)
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| | Three months ended
December 31, | |
| | 2011 | | 2010 | |
Revenues: | | | | | | | |
Royalties | | $ | 9,782 | | $ | 10,549 | |
Sale of in-process research and development | | | — | | | — | |
Contract research and development | | | 52 | | | 1,845 | |
Miscellaneous revenue | | | 177 | | | 124 | |
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Total Revenues | | | 10,011 | | | 12,518 | |
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Operating Expenses: | | | | | | | |
Research and development - pipeline | | | 9,135 | | | 14,032 | |
Research and development - specialty and contracted services | | | 48 | | | 1,120 | |
General and administrative | | | 3,466 | | | 4,905 | |
General and administrative - contracted services | | | 1 | | | 49 | |
Restructuring charges | | | 1,376 | | | 2,974 | |
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Total Operating Expenses | | | 14,026 | | | 23,080 | |
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Operating Loss | | | (4,015 | ) | | (10,562 | ) |
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Other Income (Expense) | | | | | | | |
Investment income, net | | | 484 | | | 573 | |
Interest expense | | | (1,490 | ) | | (680 | ) |
Other-than-temporary impairment loss | | | — | | | — | |
Other, net | | | — | | | 1,039 | |
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Total Other Income (Expense) | | | (1,006 | ) | | 932 | |
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Loss from continuing operations before taxes | | | (5,021 | ) | | (9,630 | ) |
Income tax benefit | | | — | | | (1 | ) |
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Loss from continuing operations | | | (5,021 | ) | | (9,629 | ) |
Income and gain from discontinued operations, net of taxes | | | — | | | 1,041 | |
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Net Loss | | $ | (5,021 | ) | $ | (8,588 | ) |
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Loss per common share - continuing operations - basic and diluted | | $ | (0.10 | ) | $ | (0.16 | ) |
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Earnings per common share - discontinued operations - basic and diluted | | $ | — | | $ | 0.02 | |
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Loss per common share - net loss - basic and diluted | | $ | (0.10 | ) | $ | (0.14 | ) |
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Weighted average shares - basic and diluted | | | 48,289 | | | 59,747 | |
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
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| | Year ended December 31, | |
| | 2011 | | 2010 | |
Revenues: | | | | | | | |
Royalties | | $ | 40,923 | | $ | 44,940 | |
Sale of in-process research and development | | | 5,000 | | | 40,900 | |
Contract research and development | | | 1,431 | | | 9,273 | |
Miscellaneous revenue | | | 718 | | | 2,752 | |
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Total Revenues | | | 48,072 | | | 97,865 | |
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Operating Expenses: | | | | | | | |
Research and development - pipeline | | | 40,180 | | | 49,883 | |
Research and development - specialty and contracted services | | | 926 | | | 7,135 | |
General and administrative | | | 17,281 | | | 25,439 | |
General and administrative - contracted services | | | 115 | | | 1,957 | |
Restructuring charges | | | 6,025 | | | 14,026 | |
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Total Operating Expenses | | | 64,527 | | | 98,440 | |
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Operating Loss | | | (16,455 | ) | | (575 | ) |
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Other Income (Expense) | | | | | | | |
Investment income, net | | | 1,735 | | | 3,465 | |
Interest expense | | | (5,929 | ) | | (6,315 | ) |
Other-than-temporary impairment loss | | | — | | | (896 | ) |
Other, net | | | 91 | | | 1,184 | |
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Total Other Expense | | | (4,103 | ) | | (2,562 | ) |
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Loss from continuing operations before taxes | | | (20,558 | ) | | (3,137 | ) |
Income tax expense (benefit) | | | 205 | | | (337 | ) |
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Loss from continuing operations | | | (20,763 | ) | | (2,800 | ) |
Income and gain from discontinued operations, net of taxes | | | — | | | 180,043 | |
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Net (Loss) Income | | $ | (20,763 | ) | $ | 177,243 | |
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Loss per common share - continuing operations - basic and diluted | | $ | (0.40 | ) | $ | (0.05 | ) |
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Earnings per common share - discontinued operations - basic and diluted | | $ | — | | $ | 3.08 | |
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(Loss) earnings per common share - net (loss) income - basic and diluted | | $ | (0.40 | ) | $ | 3.03 | |
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Weighted average shares - basic and diluted | | | 51,910 | | | 58,466 | |
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Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
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| | December 31,
2011 | | December 31,
2010 | |
Assets | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 104,324 | | $ | 397,530 | |
Marketable securities - available-for-sale | | | 58,188 | | | 31,170 | |
Other current assets | | | 2,749 | | | 5,916 | |
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Total current assets | | | 165,261 | | | 434,616 | |
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Property and equipment, net | | | 16,802 | | | 21,574 | |
Marketable securities | | | 160,779 | | | 31,394 | |
Other assets | | | 367 | | | 1,273 | |
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Total Assets | | $ | 343,209 | | $ | 488,857 | |
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Liabilities and Stockholders’ Equity | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 1,572 | | $ | 4,192 | |
Accrued expenses and other current liabilities | | | 13,692 | | | 14,195 | |
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Total current liabilities | | | 15,264 | | | 18,387 | |
Notes payable | | | 129,499 | | | 134,499 | |
Other liabilities | | | 1,265 | | | 4,114 | |
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Total Liabilities | | $ | 146,028 | | $ | 157,000 | |
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Total Stockholders’ Equity | | $ | 197,181 | | $ | 331,857 | |
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Total Liabilities and Stockholders’ Equity | | $ | 343,209 | | $ | 488,857 | |
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