~~UNITED STATES~~
~~SECURITIES AND EXCHANGE COMMISSION~~
~~WASHINGTON, D.C. 20549~~

~~FORM 10-Q~~


~~(Mark One)~~UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

	For the quarterly period ended ~~September 30, 2010~~ orMarch 31, 2011

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

~~For the Transition Period~~

For the transition period from ___ to ___

Commission file number 0-12957

Enzon Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


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

~~685 Route 202/206, Bridgewater,~~20 Kingsbridge Road, Piscataway, New Jersey	~~08807~~08854
(Address of principal executive offices)	(Zip Code)

~~(908) 541-8600~~(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)

Indicate by check mark whether the ~~registrant:~~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.

Yesx Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yeso Noo

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

Large ~~Accelerated Filer~~accelerated filero Accelerated ~~Filer~~filerx ~~Non-Accelerated Filer~~Non-accelerated filero Smaller ~~Reporting Company~~reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Nox

Shares of Common Stock outstanding as of ~~November 2, 2010: 59,750,326.~~May 3, 2011: 53,572,889

PART I – FINANCIAL INFORMATION
Item 1. Financial ~~Statements~~Statements.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)


	September 30, 2010			December 31, 2009*			March 31, 2011			December 31, 2010*


ASSETS

Current assets:
Cash and cash equivalents	$	408,594		$	50,440		$	369,938		$	397,530
Short-term investments		28,775			53,670			35,584			31,170
Accounts receivable, net		2,562			671
Other current assets		4,387			6,257			4,589			5,916
Current assets of discontinued operations		—			34,174

Total current assets		444,318			145,212			410,111			434,616
Property and equipment, net of accumulated depreciation of $37,566 at September 30, 2010 and $35,712 at December 31, 2009		22,116			26,534
Property and equipment, net of accumulated depreciation of $38,855 at March 31, 2011 and $38,286 at December 31, 2010								20,223			21,574
Marketable securities		47,233			95,636			13,334			31,394
Other assets		1,413			2,863			1,175			1,273
Noncurrent assets of discontinued operations		—			62,504

Total assets	$	515,080		$	332,749		$	444,843		$	488,857


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	3,438		$	1,390		$	1,405		$	4,192
Accrued expenses and other		22,481			10,338			13,124			14,195
Current liabilities of discontinued operations		—			13,269

Total current liabilities		25,919			24,997			14,529			18,387

Notes payable		134,499			250,050			134,499			134,499
Other liabilities		3,998			4,419			4,355			4,114

Total liabilities		164,416			279,466			153,383			157,000


Commitments and contingencies

Stockholders’ equity:
Preferred stock - $.01 par value, authorized 3,000,000 shares; no shares issued and outstanding at September 30, 2010 and December 31, 2009		—			—
Common stock - $.01 par value, authorized 170,000,000 shares; issued and outstanding 59,667,955 shares at September 30, 2010 and 45,317,702 shares at December 31, 2009		597			453
Preferred stock - $.01 par value, authorized 3,000,000 shares; no shares issued and outstanding at March 31, 2011 and December 31, 2010								—			—
Common stock - $.01 par value, authorized 170,000,000 shares; issued and outstanding 55,053,174 shares at March 31, 2011 and 58,817,561 shares at December 31, 2010								551			588
Additional paid-in capital		463,722			352,047			414,013			454,657
Accumulated other comprehensive income		2,059			2,328			767			914
Accumulated deficit		(115,714	)		(301,545	)		(123,871	)		(124,302	)

Total stockholders’ equity		350,664			53,283			291,460			331,857

Total liabilities and stockholders’ equity	$	515,080		$	332,749		$	444,843		$	488,857

* Condensed from audited financial statements.

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

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three months ended
September 30,

Nine months ended
September 30,

2010

2009

2010

2009

Revenues:

Royalties

$
10,902

$
12,974

$
34,391

$
39,215

Sale of in-process research and development

—

—

40,900

—

Contract research and development

2,217

—

7,428

—

Miscellaneous revenue

111

—

2,388

—

Total revenues

13,230

12,974

85,107

39,215

Expenses:

Research and development

14,206

11,438

35,852

34,332

Research and development – specialty and contracted services

1,197

4,367

6,015

19,450

General and administrative

4,682

7,723

20,293

27,356

General and administrative – contracted services

86

—

1,907

—

Restructuring charge

453

—

11,052

693

Total expenses

20,624

23,528

75,119

81,831

Operating (loss) income

(7,394
)

(10,554
)

9,988

(42,616
)

Other income (expense):

Investment income, net

1,110

1,148

2,892

3,267

Interest expense

(1,479
)

(2,750
)

(5,635
)

(8,763
)
Other-than-temporary investment impairment loss

(896
)

—

(896
)

—

Other, net

174

175

144

5,058

Total other income (expense)

(1,091
)

(1,427
)

(3,495
)

(438
)

(Loss) income from continuing operations, before income tax benefit

(8,485
)

(11,981
)

6,493

(43,054
)
Income tax benefit

(131
)

(456
)

(336
)

(456
)

(Loss) income from continuing operations

(8,354
)

(11,525
)

6,829

(42,598
)
Income and gain from discontinued operations, net of income tax

—

11,658

179,002

43,845

Net (loss) income

$
(8,354
)
$
133

$
185,831

$
1,247

(Loss) earnings per common share - continuing operations

Basic

$
(0.14
)
$
(0.26
)
$
0.12

$
(0.94
)

Diluted

$
(0.14
)
$
(0.26
)
$
0.12

$
(0.94
)

Earnings per common share – discontinued operations

Basic

$
—

$
0.26

$
3.08

$
0.97

Diluted

$
—

$
0.26

$
3.03

$
0.97

(Loss) earnings per common share – net (loss) income

Basic

$
(0.14
)
$
0.00

$
3.20

$
0.03

Diluted

$
(0.14
)
$
0.00

$
3.15

$
0.03

Weighted average shares – basic

60,840

45,276

58,039

45,116

Weighted average shares - diluted

60,840

45,276

58,996

45,116


	Three months ended March 31,

	2011			2010


Revenues:
Royalties	$	11,762		$	12,901
Sale of in-process research and development		5,000			40,900
Contract research and development		1,094			2,609
Miscellaneous income		166			1,843

Total revenues		18,022			58,253


Operating expenses:
Research and development - pipeline		10,548			11,515
Research and development – specialty and contracted services		647			3,059
General and administrative		5,086			9,932
General and administrative – contracted services		58			1,400
Restructuring charge		359			9,889

Total operating expenses		16,698			35,795


Operating income		1,324			22,458


Other income (expense):
Investment income, net		459			971
Interest expense		(1,480	)		(2,676	)
Other, net		128			1

Total other income (expense)		(893	)		(1,704	)


Income from continuing operations, before income tax provision		431			20,754

Income tax provision		—			—


Income from continuing operations		431			20,754

Income and gain from discontinued operations, net of income tax		—			179,053

Net income	$	431		$	199,807


Earnings per common share - continuing operations
Basic	$	0.01		$	0.40

Diluted	$	0.01		$	0.29

Earnings per common share – discontinued operations
Basic	$	—		$	3.42

Diluted	$	—		$	2.41

Earnings per common share – net income
Basic	$	0.01		$	3.82

Diluted	$	0.01		$	2.70


Weighted-average shares - basic		58,002			52,284

Weighted-average shares - diluted		58,736			74,242

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
September 30,

2010

2009

Cash flows from operating activities:

Net income

$
185,831

$
1,247

Income from discontinued operations

179,002

43,845

Income (loss) from continuing operations

6,829

(42,598
)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:

Depreciation

4,521

4,415

Write-down of property and equipment

895

23

Share-based compensation and employee stock purchase plan

5,693

5,716

Amortization and write-off of debt issuance costs

1,985

1,113

Other-than-temporary investment impairment loss

896

—

(Gain) loss on sale of marketable securities

(579
)

104

Gain on redemption of notes payable

—

(4,848
)
Amortization of debt securities premium/discount

2,034

(1,818
)
Changes in operating assets and liabilities

12,942

44,138

Net cash provided by operating activities of continuing operations

35,216

6,245

Net cash provided by operating activities of discontinued operations

—

6,259

Net cash provided by operating activities

35,216

12,504

Cash flows from investing activities:

Proceeds from sale of business, net

262,608

—

Purchase of property and equipment

(916
)

(1,193
)
Proceeds from sale of marketable securities

28,670

30,645

Purchase of marketable securities

(2,154
)

(91,803
)
Maturities of marketable securities

44,161

40,880

Net cash provided by (used in) investing activities of continuing operations

332,369

(21,471
)
Net cash used in investing activities of discontinued operations

—

(6,259
)

Net cash provided by (used in) investing activities

332,369

(27,730
)

Cash flows from financing activities:

Redemption of notes payable

—

(15,602
)
Proceeds from issuance of common stock

30,486

476

Repurchase of common stock

(36,436
)

—

Withholding taxes – share-based compensation

(3,403
)

(702
)
Proceeds from employee stock purchase plan

244

407

Redemptions from employee stock purchase plan

(322
)

(450
)

Net cash used in financing activities

(9,431
)

(15,871
)

Net increase (decrease) in cash and cash equivalents

358,154

(31,097
)

Cash and cash equivalents at beginning of period

50,440

79,711

Cash and cash equivalents at end of period

$
408,594

$
48,614


	Three months ended March 31,

	2011			2010


Cash flows from operating activities:
Net income	$	431		$	199,807
Income and gain from discontinued operations		—			179,053

Income from continuing operations		431			20,754
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation		1,374			1,377
Share-based compensation		1,209			3,863
Amortization and write-off of debt issuance costs		135			1,716
Gain on sale of marketable securities		(22	)		(112	)
Loss on disposal of fixed assets		65			—
Amortization of debt securities premium		328			868
Changes in operating assets and liabilities		(2,474	)		11,385

Net cash provided by operating activities of continuing operations		1,046			39,851
Net cash provided by operating activities of discontinued operations		—			513

Net cash provided by operating activities		1,046			40,364


Cash flows from investing activities:
Proceeds from sale of business, net		—			263,108
Purchase of property and equipment		(88	)		(249	)
Proceeds from sale of marketable securities		206			4,441
Purchase of marketable securities		(344	)		(1,206	)
Maturities of marketable securities		13,332			13,400

Net cash provided by investing activities of continuing operations		13,106			279,494
Net cash used in investing activities of discontinued operations		—			(105	)

Net cash provided by investing activities		13,106			279,389


Cash flows from financing activities:
Repurchase of common stock		(41,401	)		(5,811	)
Proceeds from issuance of common stock		216			2,441
Withholding taxes – share-based compensation		(684	)		(1,885	)
Proceeds from employee stock purchase plan		125			265

Net cash used in financing activities		(41,744	)		(4,990	)


Net (decrease) increase in cash and cash equivalents		(27,592	)		314,763

Cash and cash equivalents at beginning of period		397,530			50,440


Cash and cash equivalents at end of period	$	369,938		$	365,203

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
(Unaudited)

(1) ~~Organization and Basis~~Description of ~~Presentation~~Business

~~On January 29, 2010,~~ Enzon Pharmaceuticals, Inc. and ~~its~~ subsidiaries (Enzon or the Company) consummated the sale of its specialty pharmaceutical business comprised principally of the Company’s products and contract manufacturing segments. These divested components are reflected in these condensed consolidated financial statements as discontinued operations and historical information related to the divested components has been reclassified accordingly. The Company also divested an in-process research and development component of the specialty pharmaceutical business which is reported in revenue from continuing operations. Refer to Note 13, Discontinued Operations, for more information regarding the sale.

~~Following the sale of the specialty pharmaceutical business, Enzon~~ is a ~~biopharmaceutical~~biotechnology company dedicated to the research and development of innovative ~~medicines~~therapeutics for cancer patients with ~~cancer.~~high unmet medical needs. Operations are funded in part by the receipt of royalty revenues from licensing arrangements with other companies related to sales of products developed using the Company’s proprietary Customized PEGylation Linker Technology (Customized Linker Technology®) – primarily PEGINTRON, marketed by Merck & Co., Inc. The Company operates in one business ~~segment, that of discovering and developing innovative medicines for the treatment of cancer.~~segment. The Company’s Principal Executive Officer (chief operating decision maker) reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit. The Company’s operations and assets reside almost exclusively in the United States.

The ~~accompanying unaudited condensed consolidated financial statements have been prepared from~~Company’s pipeline drug development programs utilize two platforms – Customized Linker Technology and third-generation messenger ribonucleic acid (mRNA)-targeting agents utilizing the ~~books~~Locked Nucleic Acid (LNA) technology. The Company currently has four compounds in clinical development: PEG-SN38 and ~~records~~the Hypoxia-Inducible Factor-1α (HIF-1α), Survivin and Androgen Receptor (AR) messenger RNA (mRNA) antagonists. In addition, the Company has other novel LNA targets in various stages of preclinical research.

On January 29, 2010, the Company sold its specialty pharmaceutical business, comprised principally of the ~~Company~~Company’s products and contract manufacturing segments, for approximately $309 million in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and Rule 10-01 of the U.S. Securities and Exchange Commission Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required for complete annual financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include the valuation of certain investments, long-lived assets, legal and contractual contingencies and assumptions used in the calculation of share-based compensation and income taxes. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience, the current economic environment and other factors that management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Moreover, interim results are not necessarily indicative of the results that may be expected for the year. Changes in estimates will be reflected in the financial statements in future periods. In the opinion of management, all adjustments (consisting only of normal and recurring adjustments) considered necessary for a fair presentation have been included in these financial statements. Certain prior-year amounts have been reclassified to conform to the current period presentation. The interim consolidated financial statements should be read in conjunctioncash with the ~~consolidated financial statements~~potential for subsequent milestone payments and ~~the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.~~

Prior to the second quarter of 2010, cash payments for withholding taxes on the exercise of share-based awards was netted against share-based compensation expense within cash provided by operating activities in the Company’s statements of cash flows and reflected as a cash outflow from operating activities. The proper classification of these amounts is in cash flows from financing activities. In the preparation of the June 30, 2010 statement of cash flows, amounts that had previously been reported in the Company’s March 31, 2010, March 31, 2009 and June 30, 2009 Forms 10-Q were revised to correct this immaterial error. In the preparation of these financial statements, cash flows from financing activities for the nine months ended September 30, 2009 were correspondingly adjusted ($0.1 million for the three months ended September 30, 2009 and $0.7 million for the nine months ended September 30, 2009).royalties. See Note 14, Discontinued Operations.

(2)~~New Accounting Standards~~ Basis of Presentation

Enhanced Disclosures about Fair Value – In January 2010, new disclosures became effective relating to fair value measurements. These enhanced disclosures have been fully adopted by the Company and are reflected in Note 3 – Investments and Marketable Securities and Note 4 – Notes Payable. The adoption of these disclosure rules had no effect on the Company’s financial position, results of operations or cash flows.

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 the U.S. Securities and Exchange Commission Regulation S-X. 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 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, 2010.

Principles of Consolidation

�� The condensed consolidated financial statements include those of Enzon Pharmaceuticals, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated as part of the consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include the valuation of certain investments, long-lived assets, legal and contractual contingencies and assumptions used in the calculation of share-based compensation and income taxes. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience, the current economic environment and other factors that management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates will be reflected in the financial statements in future periods. In the opinion of management, all adjustments (consisting only of normal and recurring adjustments) considered necessary for a fair presentation have been included in these financial statements.

Reclassifications and Adjustments

Certain prior-period amounts have been reclassified to conform to the current period presentation. Prior to the second quarter of 2010, cash payments for withholding taxes on the exercise of share-based awards were netted against share-based compensation expense within the cash provided by operating activities in the Company's statements of cash flows. The proper classification of these amounts is in cash flows from financing activities, which is where they are reported in these financial statements with the three months ended March 31, 2010 having been adjusted. The $1.9 million adjustment amount to the prior period cash flow statement for the three months ended March 31, 2010 is not material.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements ~~– (Continued)~~(continued)
(Unaudited)

~~Revenue Recognition – Multiple-Deliverable Revenue Arrangements – In October 2009, the~~(3) Financial ~~Accounting Standards Board (FASB) amended the Accounting Standards Codification to provide guidance for measuring~~Instruments and ~~allocating consideration received among the separate units~~Fair Value

The carrying values of accounting in revenue arrangements with multiple deliverables. The standard established a hierarchy of evidence for determining each unit’s selling price which includes vendor-specific objective evidence, third-party evidence or the vendor’s best estimatecash, cash equivalents, other current assets, accounts payable, and accrued expenses in the ~~absence of~~Company’s condensed consolidated balance sheets approximated their fair values at March 31, 2011 and December 31, 2010 due to their short-term nature. Short-term investments and marketable securities are carried on the ~~other alternatives. The Company adopted the new standard~~balance sheets at fair value based on ~~a prospective basis effective January 1, 2010. The new standard was employed in the measurement of the sale of in-process research~~quoted market prices. All fair value measures are Level 1. Fair values and ~~development that was a component of the sale~~carrying amounts of the Company’s ~~divestiture of its specialty pharmaceutical business. See Note 8 – Sale of In-Process Research and Development.~~

Milestone Method of Revenue Recognition – Pursuant to a final consensus of the Emerging Issues Task Force of the FASB ratified on March 31, 2010, guidance is provided for determining when milestone payments received in conjunction with the performance of research and development efforts may be recognized. The Company is evaluating the new guidance which is to be implemented prospectively, beginning in 2011, and has preliminarily concluded that it does not believe adoption of the guidance will have a material effect on its financial ~~position, results of operations or cash flows.~~instruments are indicated below (in thousands):


Description	Fair Value		Carrying Amount

Investments and Marketable Securities (Note 4)	$	48,918	$	48,918


4% Convertible Senior Notes (Note 5)	$	165,938	$	134,499

~~(3)~~(4) Short-term Investments and Marketable Securities

The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s investments by major security type at ~~September 30, 2010~~March 31, 2011 were as follows (in thousands):


									Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value*
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value*

Corporate debt	$	60,667	$	971	$	—	$	61,638	$	38,448	$	583	$	—		$	39,031
U.S. government-sponsored entities debt		5,500		16		—		5,516		1,000		1		—			1,001
Non-U.S. government debt		5,593		107		—		5,700		5,513		67		—			5,580
Other		3,042		112		—		3,154		3,190		138		(22	)		3,306

	$	74,802	$	1,206	$	—	$	76,008	$	48,151	$	789	$	(22	)	$	48,918

* ~~Includes~~Included in short-term investments of ~~$28,775~~$35,584 and marketable securities of ~~$47,233~~$13,334 at ~~September 30, 2010.~~March 31, 2011.

The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s investments by major security type at December 31, ~~2009~~2010 were as follows (in thousands):


										Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value*
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value*

Corporate debt	$	114,118	$	1,362	$	(17	)	$	115,463	$	52,079	$	738	$	—		$	52,817
U.S. government-sponsored entities debt		5,713		73		—			5,786		1,000		4		—			1,004
Non-U.S. government debt		23,298		12		(94	)		23,216		5,553		86		—			5,639
Auction rate security		877		—		(558	)		319
Other		3,714		810		(2	)		4,522		3,019		111		(26	)		3,104

	$	147,720	$	2,257	$	(671	)	$	149,306	$	61,651	$	939	$	(26	)	$	62,564

* ~~Includes~~Included in short-term investments of ~~$53,670~~$31,170 and marketable securities of ~~$95,636~~$31,394 at December 31, ~~2009.~~2010.

All corporate, U.S. government-sponsored entity and non-U.S. government debt investments are classified as ~~available for sale.~~available-for-sale securities. Other securities include investments of participants in the Company’s Executive Deferred Compensation Plan (predominantly mutual fund shares) totaling ~~$3.2~~$3.3 million of fair value as of ~~September 30, 2010~~March 31, 2011 and ~~$3.8~~$3.1 million fair value as of December 31, ~~2009.~~2010. There is a non-current liability that offsets the aggregate deferred compensation plan assets.

Fair value is determined from readily available quoted prices in active markets (Level 1, the preferred approach pursuant to applicable accounting guidance). As of March 31, 2011 and December 31, 2010, the Company’s investments and marketable securities are all valued based on Level 1 inputs.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements ~~– (Continued)~~(continued)
(Unaudited)

Maturities of marketable debt securities, excluding securities related to the Company’s Executive Deferred Compensation Plan, at March 31, 2011 were as follows (in thousands):


Twelve-Month Periods Ending March 31,	Amortized Cost		Fair Value


2012	$	35,152	$	35,584
2013		9,809		10,028

	$	44,961	$	45,612

Sales during the quarter ended March 31, 2011 of investments in the deferred compensation plan resulted in a gain of $22,000. However, because the Company maintains a liability for the fair value of the deferred compensation due to plan participants, any realized gains or losses related to these investment holdings are off-set by a corresponding increase or decrease in the liability to operating expenses. The cost of securities is based on the specific-identification method.

Impairment assessments are made at the individual security level each reporting period. When the fair value of an investment is less than its ~~amortized~~ cost ~~basis~~ at the balance sheet date, a determination is made as to whether the impairment is other than temporary and, if it is other than temporary, an impairment loss is recognized in earnings equal to the difference between the investment’s amortized ~~or adjusted~~ cost ~~basis~~ and fair value at such date.

As of September 30, 2010, there were no unrecognized losses related to any of Company’s investments in corporate debt securities. One investment in an auction rate security was written off during the quarter ended September 30, 2010 – see below.

Fair value of the Company’s investments is determined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As of September 30, 2010, the Company usesMarch 31, 2011, only Level 1 observable inputs such as quoted market prices in active markets for identical assets. There were no transfers between Level 1 and Level 2 investments during the quarter or nine-month period ended September 30, 2010.

The Company had employed Level 2 inputs for ascertaining the fair value of its auction rate security through June 2010 which considered listed quotes of securities with comparable maturities, the underlying collateral of the security and the issuer’s credit worthiness. During the quarter ended September 30, 2010, the Company concluded that its estimate of expected cash flows to be collected from this security was severely compromised and that an other-than-temporary impairment had occurred. The underlying collateral, the preferred stock of the issuer, lost substantial value when the insurance commissioner of the issuer’s state of residence effectively seized the issuer’s assets and, in early October 2010, filed a plan of rehabilitation whereby policyholders’ interests would be protected to the extent the issuer’s assets would allow. We believe that thecertain assets of the issuer will not be sufficient to cover policyholder claims and that equity holders’ interests are impaired. Also during the third quarter of 2010, the parent holding company of the issuer announced it was pursuing a restructuring of its outstanding debt through a bankruptcy proceeding.

The auction rate security had an original cost basis of $1.5 million. An estimated credit loss of $0.6 million was previously recorded in earnings based upon an estimate of the present value of expected cash flows from this investment leaving an amortized cost basis of approximately $0.9 million as of June 30, 2008. The Company does not intend to dispose of this security nor is it more likely than not that the Company will be required to do so, however, based on the recent events in the third quarter of 2010, as outlined above, the Company no longer expects that it will recover any of the amortized cost basis in the security. Accordingly, the full amount of the carrying value of $0.9 million was written off as an other-than-temporary investment impairment loss during the third quarter of 2010. The Company will continue to monitor this instrument and the expected cash flows to be derived from it. Any subsequent unrealized recovery in fair value will be reported in accumulated other comprehensive income until the investment is sold or otherwise disposed of.

~~Maturities of marketable debt securities, excluding securities related to~~ the Company’s Executive Deferred Compensation Plan ~~at September 30, 2010 were as follows (in thousands):~~

Twelve-Month
Periods Ending
September 30,

Amortized
Cost

Fair
Value

2011

$
28,559

$
28,775

2012

38,701

39,571

2013

4,500

4,508

$
71,760

$
72,854

The Company realized a net gain of approximately $0.5 million during the quarter ended September 30, 2010 from the sale of certain of its investments and a gain of approximately $0.1 million from the sale of investmentshave unrealized holding losses. None of the ~~deferred compensation plan. The cost of securities is based on the specific-identification method.~~

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(Unaudited)~~

~~Among the securities disposed of during the third quarter of 2010 were certain corporate equity securities that had~~underlying investments has been ~~carried on the books of the Company at~~in a ~~zero cost basis and a fair value of approximately $0.7 million. The gain on the sale of these equity securities was partially offset by a realized~~continuous loss ~~on the sale of certain available-for-sale corporate debt securities.~~position longer than twelve months.

~~(4)~~(5) Notes Payable

The 4% convertible senior notes mature on June 1, 2013 unless earlier redeemed, repurchased or converted. The 4% notes are senior unsecured obligations and rank equal to all future senior unsecured debt of the Company. The 4% notes are convertible at the option of the holders into the Company’s common stock at a conversion price of $9.55 per ~~share.~~share (104.712 shares per $1,000 of principal amount). If the closing price of the Company’s common stock for at least 20 trading days in the 30-consecutive-trading-day period ending on the date one day prior to the date of a notice of redemption is greater than 140 percent of the applicable conversion price on the date of such notice, the Company, at its option, may redeem the 4% notes in whole or in part, at a redemption price in cash equal to 100 percent of the principal amount of the 4% notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date.

~~The January 2010 sale~~ Upon occurrence of ~~the specialty pharmaceutical business constituted~~ a ~~fundamental~~“fundamental change,” as ~~that term is~~ defined in the indenture ~~for~~governing the ~~Company’s~~ 4% ~~convertible senior notes. The fundamental change triggered a change in the conversion rate for the notes. For the period extending from January 29, 2010 to March 4, 2010,~~notes, holders of the notes ~~had~~may require the ~~opportunity~~Company to redeem the notes at a price equal to 100 percent of the principal amount plus accrued and unpaid interest or, in certain cases, to convert ~~their~~the notes ~~into shares of common stock of the Company~~ at an ~~enhanced conversion rate of 116.535 shares per $1,000 principal amount (from the original conversion rate of 104.712 shares per $1,000 principal amount). The~~ increased conversion rate ~~was~~ based on the ~~average of the closing sale~~ price paid per share of the Company’s common stock in the ~~five trading-day period prior to the~~ transaction constituting the fundamental change.

During the ~~enhanced conversion period,~~first quarter of 2010, notes totaling $115.6 million principal amount ~~of notes~~ were converted into approximately 13.5 million shares of the Company’s common stock, ofreducing the ~~Company, reducing the~~outstanding principal balance of the notes outstanding ~~as of September 30, 2010~~ to $134.5 ~~million from the $250.1 million outstanding as~~million. The net effect of ~~December 31, 2009. The note conversion triggered~~forgone interest and the write-off of ~~$1.5 million of~~deferred debt issuance ~~costs. Note holders who elected~~costs amounted to ~~convert their holdings into shares of common stock of the Company waived payment of~~$0.8 million and was charged to interest accumulated from the last interest payment date of December 1, 2009 to the date of conversion. This had a favorable effect on 2010 earnings of approximately $0.8 million. Subsequent to the March 4, 2010 enhanced conversion period, the original conversion rate of 104.712 shares per $1,000 principal amount of notes is again in effect. Also as a result of the January 2010 fundamental change, pursuant to the terms and conditions of the indenture, the Company made an offer in February 2010 to repurchase any or all of the outstanding notes at a price equal to 100% of the principal amount plus accrued and unpaid interest. No notes were tendered pursuant to the offer which expired on March 5, 2010.

~~During~~expense during the first quarter of ~~2009,~~2010 at the ~~Company repurchased $20.5 million principal amount of its 4% notes at a discount to par resulting in a net gain of approximately $4.5 million net~~time of the ~~write-off~~notes conversion. The $0.8 million was adjusted in the fourth quarter of ~~$0.3 million~~2010 to credit interest expense and charge additional paid-in capital to reflect the capital nature of ~~debt issuance costs.~~the transaction. The noncash adjustment was not material to the first or fourth quarters nor to the full year 2010 results of operations.

Interest on the 4% notes is payable on June 1 and December 1 of each year. Accrued interest amounted to $1.8 million and ~~$0.8~~$0.4 million as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, respectively.

~~The fair value of the 4% convertible senior notes payable as of September 30, 2010 is $169.1 million. Fair value of the Company’s notes is based on quoted market prices.~~

~~(5)~~(6) Stockholders’ Equity

On December ~~3, 2009,~~21, 2010, the Company announced a share repurchase program, under which the Company may ~~purchase~~use up to ~~$50.0~~$200.0 million ofto purchase the Company’s outstanding common shares. During the three months ended ~~September 30, 2010,~~March 31, 2011, the Company repurchased ~~approximately 1.7 million~~and retired 3,853,073 shares at a cost of ~~$18.4~~$41.5 million, or ~~approximately a $10.74~~an average cost per ~~share.~~share of approximately $10.77. This brings cumulative ~~purchases~~number of shares repurchased and retired under this program ~~– December 2009~~ through ~~September 30, 2010 –~~March 31, 2011 to ~~approximately 3.7 million~~3,883,073 shares at a total cost of ~~$38.6~~$41.9 million. The plan continues to be in effect.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements ~~– (Continued)~~(continued)
(Unaudited)

~~(6)~~(7) Comprehensive ~~(Loss)~~ Income

The following table reconciles net ~~(loss)~~ income to comprehensive ~~(loss)~~ income (in thousands):

Three months ended
September 30,

Nine months ended
September 30,

2010

2009

2010

2009

Net (loss) income

$
(8,354
)
$
133

$
185,831

$
1,247

Other comprehensive income (loss):

Unrealized gain (loss) on securities that arose during
the period *

40

1,228

(697
)

3,443

Currency translation adjustment *

150

381

111

583

Reclassification adjustments for loss (gain) on sale of securities included in net income*

445

(53
)

317

104

Total other comprehensive income (loss)

635

1,556

(269
)

4,130

Comprehensive (loss) income

$
(7,719
)
$
1,689

$
185,562

$
5,377


	Three months ended March 31,

	2011			2010


Net income	$	431		$	199,807
Other comprehensive income:
Unrealized gain on securities that arose during the period, net of tax⁽¹⁾		(125	)		316
Currency translation adjustment		—			187
Reclassification adjustment for (gain) loss included in net income		(22	)		(112	)

Total comprehensive income	$	284		$	200,198


	⁽¹⁾	* Information has not been tax-effected due to an estimated annual effective tax rate of zero.

~~(7)~~(8) Supplemental Cash Flow Information

The Company considers all highly liquid investment securities with original maturities of three months or less to be cash equivalents. During the ~~nine-month period~~three months ended ~~September 30,~~March 31, 2011 and 2010, there were no payments of interest related to the Company’s 4% ~~notes in the amount of $2.7 million.~~notes. During the ~~nine~~three months ended ~~September 30,~~March 31, 2010, the Company had a noncash conversion of $115.6 million principal amount of the 4% notes into approximately 13.5 million shares of its common stock. The first-quarter conversion of notes resulted in a waiver of accumulated interest which amounted to approximately $0.8 million in interest savings for the Company. In the first nine months of 2009, there was a payment of interest on the Company’s 4% notes payable of $5.2 million. Income tax payments for the three months ended March 31, 2011 and 2010, were ~~$0.1 million for each of the nine-month periods ended September 30, 2010~~$34,000 and ~~2009.~~$72,000, respectively.

~~(8)~~(9) Sale of In-Process Research and Development

When the Company sold its specialty pharmaceutical business in January 2010, it retained its research and development organization. ~~Enzon is now a biopharmaceutical company engaged in~~Prior to the sale, the Company’s research and development ~~of medicines for patients with cancer and the commercialization of those efforts. The Company had been~~function was engaged in, among other things, studies oriented towards the next-generation formulations of Oncaspar and Adagen, two products that were among those sold as part of the specialty ~~pharmaceutical~~pharmaceuticals business. The in-process research and development related to ~~Oncaspar and Adagen~~those two products was ~~sold to~~included in the ~~purchaser of the specialty pharmaceutical business and~~sale. The $40.9 million ~~was recognized as revenue in the first quarter of 2010.~~

~~In arriving at the~~ selling price ~~of the in-process research and development, management made its~~was management’s best estimate of its standalone fair value based on the stage of development and consideration of future milestone ~~payment consideration. This, in turn, was used to determine~~payments. During the ~~relative selling prices~~first quarter of 2011, the ~~various components (i.e. allocate~~Company earned the ~~total proceeds received~~first $5.0 million milestone payment from the ~~sale~~purchaser of the specialty pharmaceutical business ~~between~~resulting from the ~~manufacturing and marketing~~approval of ~~approved products and~~a supplemental Biologic License Application (sBLA) for the ~~in-process research and development).~~

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(Unaudited)~~

~~Constituting a second deliverable to the sale~~manufacture of the in-process research and development, a transition services agreement entered into with the purchaser commits the Company to provide certain research and consulting services for a period of up to three years following the sale. Enzon is compensated for these services at actual cost plus a mark-up per the terms of the transition services agreement. These services are a convenience to the purchaser, but are not of such a nature that the work could not be performed by the purchaser or third-parties without the Company’s involvement. All necessary technology and know-how was transferred to the purchaser at the time of the sale and the purchaser could resell the in-process research and development asset. The activities necessary to complete the work on the Oncaspar and Adagen next-generation formulations could be performed by others. The in-process research and development has standalone value.SS Oncaspar.

~~(9)~~(10) Earnings Per Common Share

Basic earnings per common share is computed by dividing the income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Restricted stock awards and restricted stock units (collectively, nonvested shares) are not considered to be outstanding shares until the service vesting period has been satisfied. For purposes of calculating diluted earnings per common share, the denominator 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. Dilutive common stock equivalents potentially include stock options and nonvested shares using the treasury stock method, shares issuable under the employee stock purchase plan (ESPP) and the number of shares issuable upon conversion of the Company’s convertible notes payable. In the case of notes payable, the diluted earnings per share calculation is further affected by an add-back of interest to the numerator under the assumption that the interest would not have been incurred if the notes payable were converted into common stock. ~~If the Company incurs a loss from continuing operations in a reporting period, all diluted earnings per share computations for that period exclude potential dilutive shares.~~

The following table reflects the reconciliation of the numerators and denominators of the basic and diluted (loss) earnings per share computations for continuing operations, discontinued operations and net (loss) income available to common stockholders for the three-month and nine-month periods ended September 30, 2010 and 2009 (in thousands, except share and per-share amounts):

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements ~~– (Continued)~~(continued)
(Unaudited)

Three months ended
September 30,

Nine months ended
September 30,

2010

2009

2010

2009

(Loss) Earnings Per Common Share – Basic:

(Loss) income from continuing operations

$
(8,354
)
$
(11,525
)
$
6,829

$
(42,598
)

Income and gain from discontinued operations

$
—

$
11,658

$
179,002

$
43,845

Net (loss) income

$
(8,354
)
$
133

$
185,831

$
1,247

Weighted average common shares outstanding

60,840

45,276

58,039

45,116

Basic (loss) earnings per share:

Continuing operations

$
(0.14
)
$
(0.26
)
$
0.12

$
(0.94
)

Discontinued operations

$
—

$
0.26

$
3.08

$
0.97

Net (loss) income

$
(0.14
)
$
0.00

$
3.20

$
0.03

(Loss) Earnings Per Common Share – Diluted:

(Loss) income from continuing operations

$
(8,354
)
$
(11,525
)
$
6,829

$
(42,598
)
Add back interest expense on 4% convertible notes, net of tax

—
⁽¹⁾

—
⁽¹⁾

—
⁽²⁾

—
⁽¹⁾

Adjusted (loss) income from continuing operations

$
(8,354
)
$
(11,525
)
$
6,829

$
(42,598
)

Discontinued operations

$
—

$
11,658

$
179,002

$
43,845

Adjusted net (loss) income

$
(8,354
)
$
133

$
185,831

$
1,247

Weighted average common shares outstanding

60,840

45,276

58,039

45,116

Weighted-average incremental shares related to assumed exercise of stock options and vesting of nonvested awards

—
⁽¹⁾

—
⁽¹⁾

957

—
⁽¹⁾
Weighted-average incremental shares assuming conversion of 4% notes⁽²⁾

—
⁽¹⁾

—
⁽¹⁾

—
⁽²⁾

—
⁽¹⁾

Weighted-average number of common shares outstanding and common share equivalents

60,840

45,276

58,996

45,116

Diluted (loss) earnings per share:

Continuing operations

$
(0.14
)
$
(0.26
)
$
0.12

$
(0.94
)

Discontinued operations

$
—

$
0.26

$
3.03

$
0.97

Net (loss) income

$
(0.14
)
$
0.00

$
3.15

$
0.03


	Three months ended March 31,

	2011			2010

Earnings Per Common Share – Basic:
Income from continuing operations	$	431		$	20,754

Income and gain from discontinued operations	$	—		$	179,053

Net income	$	431		$	199,807


Weighted average common shares outstanding		58,002			52,284


Basic earnings per share:
Continuing operations	$	0.01		$	0.40

Discontinued operations	$	—		$	3.42

Net income	$	0.01		$	3.82


Earnings Per Common Share – Diluted:
Income from continuing operations	$	431		$	20,754
Add back interest expense on 4% convertible notes, net of tax		—			960

Adjusted income from continuing operations	$	431		$	21,714

Income and gain from discontinued operations	$	—		$	179,053

Adjusted net income	$	431		$	200,767


Weighted average common shares outstanding		58,002			52,284
Weighted-average incremental shares related to assumed exercise of stock options, vesting of nonvested awards, and ESPP		734			1,735
Weighted-average incremental shares assuming conversion of 4% notes		—	⁽¹⁾		20,223	⁽²⁾

Weighted-average number of common shares outstanding and common share equivalents		58,736			74,242


Diluted earnings per share:
Continuing operations	$	0.01		$	0.29

Discontinued operations	$	—		$	2.41

Net income	$	0.01		$	2.70


⁽¹⁾	Because continuing operations for the three months ended September 30, 2010 and the three months and nine months ended September 30, 2009 resulted in losses, there is no adjustment of the numerator or denominator to calculate diluted loss per share for those periods. To do so would be antidilutive. A loss at the continuing operations level requires that all other computations of per-share amounts for the indicated periods must be made exclusive of potential dilutive shares. Accordingly, diluted earnings per share for discontinued operations and net income for the three months and nine months ended September 30, 2010 exclude potentially dilutive shares. In each of these instances, diluted earnings per share are the same as basic earnings per share.

⁽²⁾	The assumed conversion of notes payable would be ~~antidilutive at the continuing operations level of earnings~~anti-dilutive due to the fact that the add-back of interest to the numerator would have a greater effect on the computation than ~~does~~would the incremental number of shares ~~that would result.~~to the denominator. Accordingly, only the assumed exercise of stock options, ~~and~~ vesting of nonvested awards, and ESPP activity enters into the computation. ~~Furthermore,~~

⁽²⁾	Assumes conversion at the ~~same number~~rate of ~~potential~~104.712 shares ~~used in computing the diluted per-share~~per $1,000 principal amount ~~for continuing operations must be used in computing all other reported diluted per-share amounts.~~of notes.

For the three months ended March 31, 2011, approximately 14.1 million potentially dilutive shares were anti-dilutive and were not included in the computation. For the three months ended March 31, 2010, approximately 0.7 million potentially dilutive shares were anti-dilutive and were not included in the computation.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements ~~– (Continued)~~(continued)
(Unaudited)

For the three months and nine months ended September 30, 2010, approximately 15.3 million and 16.8 million potentially dilutive shares, respectively, were anti-dilutive and were excluded from the computation of earnings per share. For the three months and nine months ended September 30, 2009, approximately 27.3 million and 27.2 million potentially dilutive shares, respectively, were anti-dilutive and were excluded from the computation of earnings per share.

~~(10) Restructuring~~(11) Restructurings

During the ~~third~~first quarter of ~~2010,~~2011, the Company ~~entered into~~recorded a ~~sublease for a portion~~restructuring charge in the amount of ~~its excess corporate facilities. These facilities became unused as a result of the reductions in workforce stemming from earlier restructuring efforts~~$0.4 million related to the ~~sale~~excess of committed lease costs over potential sublease income for office space in Bridgewater, New Jersey that was vacated during the quarter when the Company relocated its corporate offices to Piscataway, New Jersey.

A fourth quarter 2010 workforce reduction resulted in an expense of $3.0 million for separation benefits. The affected employees were notified in December 2010 and the majority of the ~~specialty pharmaceutical business. The $0.5~~terminations occurred during the first quarter of 2011. Separation payments will be made for up to a year following the respective separations. As of December 31, 2010, the full $3.0 million ~~charge represents~~was an accrued expense, of which $2.7 million was reported as a current liability. During the ~~excess~~first quarter of 2011, the ~~Company’s leasehold contractual commitment over the amount~~Company made separation payments of ~~cash to be received from the subtenant over the life~~$0.4 million. As of ~~the sublease arrangement.~~March 31, 2011, there is $2.6 million remaining in accrued expenses under current liabilities.

During the first quarter of 2010, the Company’s workforce reduction involved 64 employees ~~resulting~~and resulted in an expense of $6.1 million for separation ~~costs for the affected employees.~~benefits. These actions related primarily to the sale of the specialty pharmaceutical business ~~including several~~and affected employees who were previously engaged in activities related to the divested business but who did not transfer to the employment of the purchaser. These employees were provided with separation benefits after certain transition periods, during which they assisted with an orderly transfer of activities and information to the purchaser. In addition, the Company reassessed its staffing requirements subsequent to the sale ~~of the specialty pharmaceutical business~~ in light of the lessened demands on many of its general and administrative functions. During the first quarter of 2011, the Company made separation payments of $0.6 million. As of ~~September 30, 2010, $2.3~~March 31, 2011, there is $0.3 million ~~remains as an~~remaining in accrued ~~liability which is expected to be fully paid out by the third quarter of 2011. Also, effective~~expenses.

Effective February 22, 2010, ~~Jeffrey Buchalter,~~ the Company’s then President and Chief Executive Officer resigned from the Company. For the quarter ended March 31, 2010, the Company expensed $3.8 million for severance payments and benefits that were payable ~~to Mr. Buchalter per~~under the terms of ~~his~~this individual’s employment agreement. This amount was reduced during the quarter ended June 30, 2010 by approximately $0.2 million once the termination agreement ~~with Mr. Buchalter~~ was executed. ~~Payment of amounts~~Payments due pursuant to ~~Mr. Buchalter was~~the termination agreement were made during the third quarter of 2010.

During the second quarter of 2010, the Company wrote off certain leasehold improvements and furnishings located at its corporate headquarters in Bridgewater, New Jersey that were determined to be excess and without future value as a result of the termination and relocation of several employees. The noncash charge related to this write off was approximately $0.9 million.

In the first quarter of 2009, the Company implemented a restructuring plan involving a reduction in workforce in the areas of general and administrative and research and development. Costs of severance and related benefits for employees affected by the 2009 workforce reduction amounted to $0.7 million during the first quarter of 2009. The amounts accrued in the first quarter of 2009 were fully paid out by the end of October 2009. A portion of the severance payments related to a 2009 workforce reduction related to the Company’s contract manufacturing operations and retained by the Company upon the sale of the specialty pharmaceutical business had not been fully paid out as of December 31, 2009. Of the total amount of approximately $0.4 million of severance payments that remained payable as of December 31, 2009, all but $32,000 was paid out prior to September 30, 2010. The remainder will be paid during the fourth quarter of 2010.

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(Unaudited)~~

~~The Company incurred the following costs in connection with its restructuring programs during the three months and nine months ended September 30, 2010 and 2009, respectively, (in thousands):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2010

2009

2010

2009

Employee termination costs - 2010 program

$
—

$
—

$
9,736

$
—

Employee termination costs - 2009 program

—

—

—

693

Contractual lease obligation net of sublease revenue

453

—

453

—

Write-down of leasehold improvements and furnishings

—

—

863

—

$
453

$
—

$
11,052

$
693

~~(11)~~(12) Share-Based Compensation

Stock Option and Nonvested Share Awards

During the ~~three-month periods~~quarter ended ~~September 30, 2010 and 2009,~~March 31, 2011, the Company recognized share-based compensation expense of ~~$0.4~~$1.2 million. Shares were withheld to pay $0.7 million ~~and $2.0~~of taxes on behalf of employees related to share-based compensation resulting in a net incremental credit to additional paid-in capital of $0.5 million ~~respectively, relating to stock option and nonvested share awards.~~during the quarter. During ~~each of~~ the ~~nine-month periods~~quarter ended ~~September 30,~~March 31, 2010, ~~and 2009,~~ the Company recognized share-based compensation expense of ~~$5.6~~$3.9 million. Shares were withheld to pay $1.9 million ~~for~~of taxes on behalf of employees. In addition, $0.5 million of share-based compensation is included in discontinued operations. The net effect of these ~~plans. Year-to-date 2010 compensation~~adjustments resulted in a net incremental credit to additional paid-in capital of $2.5 million during the quarter.

In connection with the sale of the specialty pharmaceutical business, in December 2009 the board of directors of the Company elected to accelerate the vesting of certain share-based awards granted under the Company’s 2001 Incentive Stock Plan as of the consummation of the sale. The acceleration applied to all employees other than executives and members of the board of directors. The acceleration resulted in a noncash expense ~~includes noncash charges totaling $2.7~~of $1.0 million ~~which arose~~ in the first quarter of ~~2010 relating to~~2010. These charges primarily represent an acceleration of ~~vesting~~expense recognition pursuant to the original award and, to a lesser extent, an adjustment, in certain cases, to recognize the modification of the award in contemplation of the sale. In addition, certain ~~share-based~~stock awards ~~in connection with the termination of employment of~~granted to the Company’s former President and Chief Executive Officer ~~and the sale~~were subject to accelerated vesting as of the ~~specialty pharmaceutical business.~~date of termination of his employment in February 2010. The ~~weighted average grant price~~acceleration of vesting of these share-based awards constituted a noncash charge to general and administrative expense in the ~~options granted during the nine months ended September 30,~~first quarter 2010 ~~was $4.41 per share and fair values ranged from $4.24 to $4.47 per share. The fair value~~ of ~~the options granted during the nine months was $0.7~~approximately $2.1 million. The nonvested shares granted during the nine months had a weighted average grant-date fair value of $10.74 per share for an aggregate fair value of $7.4 million. The Company uses historical data to estimate forfeiture rates. Activity in options and nonvested shares during the nine months ended September 30, 2010 and related balances outstanding as of that date are reflected below (in thousands).

Options

Nonvested
Shares

Outstanding at January 1, 2010

8,369

1,069

Granted

153

692

Exercised and vested

(3,940
)

(925
)
Expired and forfeited

(292
)

(61
)

Outstanding at September 30, 2010

4,290

775

Options vested and expected to vest at September 30, 2010

4,203

Options exercisable at September 30, 2010

3,927

As of ~~September 30, 2010,~~March 31, 2011, there was ~~$0.6~~$0.7 million of total unrecognized compensation cost related to unvested options that the Company expects to recognize over a weighted-average period of 1013 months and ~~$7.3~~$4.4 million of total unrecognized compensation cost related to nonvested shares ~~expected~~ to be recognized over a weighted-average period of 2726 months.

InThe weighted average grant price of the ~~third~~options granted during the quarter ~~of 2010, withholding of income taxes on exercise of options amounted to $0.1~~ended March 31, 2011 was $12.40 per share and fair value was $4.41 per share ($0.6 million which partially offset the $0.4 million of expense resulting in a net increase to additional paid-in capital of $0.3 million. In the third quarter of 2009, withholding was $0.1 million, which partially offset expense of $2.0 million, resulting in a net increase in additional paid-in capital of $1.9 million. Withholding amounted to $3.4 million and $0.7 million in each respective nine-month periods resulting in net increases to additional paid-in capital of $2.2 million and $4.9 million, respectively.fair value).

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements ~~– (Continued)~~(continued)
(Unaudited)

Activity in options and nonvested shares during the quarter ended March 31, 2011 and related balances outstanding as of that date are reflected below (in thousands):


	Options			Nonvested Shares

Outstanding at January 1, 2011		3,993			753
Granted		136			—
Exercised and vested		(26	)		(163	)
Expired and forfeited		(255	)		(5	)

Outstanding at March 31, 2011		3,848			585


Options vested and expected to vest at March 31, 2011		3,820


Options exercisable at March 31, 2011		3,642

~~(12)~~(13) Income Taxes

During the three months ~~and nine months~~ ended ~~September 30,~~March 31, 2011 and 2010, the Company recorded a net tax benefit of $0.1 million and $0.3 million, respectively, which includes $0.1 million related to the American Recovery and Reinvestment Act of 2009 which extends the temporary benefit for busineses to accelerate historic alternative minimum tax or research and development credits in lieu of bonus deprecation in 2009. The net current year tax benefit also reflects a $0.2 million refund due from the Canadian taxing authority. During both the three months and nine months ended September 30, 2009, the Company recorded a net tax benefit of $0.5 related to the Housing Assistance Act of 2008 that contained a provision allowing corporate taxpayers to make an election to treat certain unused research and alternative minimum tax credit carryforwards as refundable in lieu of claiming bonus and accelerated depreciation for “eligible qualified property” placed in service through the end of 2008.

~~The Company did not recognize a U.S. Federal~~no income tax ~~provision for the first nine months of 2010 or 2009 as~~expense because the estimated annual effective tax rate was zero. The sale of the specialty pharmaceutical business in January 2010, including the sale of in-process research and development, was a taxable transaction for federal income tax purposes, although it resulted in no federal income tax liability due to the tax basis the Company had in divested assets and the net operating loss generated in 2010. As of ~~September 30, 2010,~~March 31, 2011, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not its deferred tax assets will not be realized.

~~(13)~~(14) Discontinued Operations

On January 29, 2010, the Company consummated the sale of the specialty pharmaceutical business comprised principally of its Products and Contract Manufacturing segments, in addition to certain in-process research and development. The ~~products~~Products and ~~contract manufacturing~~Contract Manufacturing segments constituted components of Enzon and the sale qualified for treatment as discontinued operations during the first quarter of 2010 upon receipt of shareholder approval at a special meeting of shareholders on January 27, 2010. The sale of in-process research and development associated with marketed products was also ~~was~~ a component of Enzon but has been treated as an asset sale in continuing operations due to the Company’s significant continuing involvement in research and development efforts related to marketed products subsequent to the sale.

Reported amounts

~~Summary results of~~Income and gain from discontinued operations ~~of the specialty pharmaceutical business through January 29, 2010 and for the three months and nine months ended September 30, 2009 and components of the net gain on the transaction were as follows~~ (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2010

2009

2010

2009

Revenues

$
—

$
31,627

$
8,720

$
101,218

Income before income tax

$
—

$
11,323

$
3,620

$
43,602

Income tax benefit

—

335

—

243

Gain on sale of discontinued operations, net of income tax

—

—

175,382

—

Income and gain from discontinued operations, net of income tax

$
—

$
11,658

$
179,002

$
43,845


	Three months ended March 31, 2010

Results of operations of the specialty pharmaceutical business January 1 – 29, 2010:
Revenues	$	8,720

Income, net of income tax	$	3,620
Gain on sale of discontinued operations, net of income tax⁽¹⁾		175,433

Income and gain from discontinued operations, net of income tax	$	179,053

⁽¹⁾ Gain was subsequently adjusted to $176.4 million in the fourth quarter of 2010 to recognize $1.0 million of currency translation gains that had been included in accumulated other comprehensive income but should have been recognized as part of the gain on sale. The fourth-quarter adjusting entry was not material to the first or fourth quarters nor to the full year 2010 results of operations.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

The cash proceeds received from the purchaser during the ~~sigma-tau Group,~~first quarter of 2010, including the ~~second-quarter 2010~~ working capital adjustment, amounted to approximately ~~$308.0~~$309.0 million. Transaction costs amounted to approximately $5.0 million, reducing net proceeds to approximately ~~$303.0~~$304.0 million. Of this amount, $40.9 million was allocated to the sale of in-process research and development. The net proceeds then attributable to discontinued operations amounted to ~~$262.6~~$263.1 million and this amount less the book basis of $87.7 million in the respective assets and liabilities ~~(see below)~~ yielded the gain from discontinued operations of $175.4 ~~million.~~

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~
~~Notes~~million reported as of March 31, 2010. A second-quarter 2010 working capital adjustment reduced cash proceeds and book basis of net assets sold resulting in an immaterial change to ~~Condensed Consolidated Financial Statements – (Continued)~~
~~(Unaudited)~~

~~Under~~these amounts. The sale agreement provided for milestone payments and royalties in addition to the ~~terms of the asset purchase agreement with the sigma-tau Group, the Company is also entitled to receive up to an additional $27.0 million~~initial cash payments if certain ~~milestones~~conditions are met. It now appears unlikely that one of the milestones, which would have resulted in a $5.0 million payment to us, will be met. There can be no assurance that we will receive any of the milestone payments.

The sale is a taxable transaction for federal income tax purposes. The Company does not anticipate that it will incur significant tax liabilities as a result of the transaction due to the tax basis it has in the disposed of assets and the projected 2010 tax loss from operations. The potential receipt of milestone and/or royalty payments will also be taxable events, but the tax consequences of these payments cannot be estimated at this time.

~~There have been no allocations of corporate interest or general and administrative expenses to discontinued operations.~~

~~The carrying amounts of major classes of assets and liabilities of the specialty pharmaceutical business, as adjusted, were as follows (in thousands):~~

January 29, 2010

December 31, 2009

Trade accounts receivable, net

$
11,886

$
15,026

Inventories

19,516

17,734

Other current assets

693

1,414

Current assets of discontinued operations

$
32,095

$
34,174

Property and equipment, net

$
12,621

$
12,703

Amortizable intangible assets, net

48,896

49,801

Non-current assets of discontinued operations

$
61,517

$
62,504

Trade accounts payable

$
700

$
2,875

Accrued expenses

5,763

10,394

Current liabilities of discontinued operations

$
6,463

$
13,269

~~ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(Unaudited)~~

Transition Services Agreement

Pursuant to a transition services agreement with the ~~sigma-tau Group,~~purchaser, Enzon began performing product-support research and development and various general and administrative functions for the purchaser during the first quarter of 2010. The research and development work is intended to facilitate the transfer of certain technologies associated with Oncaspar and Adagen to the purchaser but isare not of such a nature that the work could not be performed by the purchaser or third-parties without the Company’s involvement. The Company ~~agreed~~committed to provide ~~certain of these~~such transfer services for a period of up to three years following the closing. ~~For~~As amended, for a period of up to ~~twelve~~fifteen months following the closing, the Company ~~agreed~~committed to provide the purchaser with certain general and administrative ~~services. The~~support efforts. As of March 31, 2011, the Company’s involvement in ~~the transitioning of~~these general and administrative support activities ~~is nearly complete.~~has essentially been concluded.

Enzon is being compensated for the research and development and general and administrative services outlined above at ~~actual costs plus~~ a ~~mark-up per the terms of~~market rate defined in the transition services agreement. These revenues and the corresponding expenses are being reflected in the Company’s continuing operating results.

None of these services confers upon the Company the ability to influence the operating and/or financial policies of our former specialty pharmaceutical business under its new ownership.

~~(14)~~(15) Commitments and Contingent Liabilities

In accordance with the terms of a termination agreement entered into during the second quarter of 2010, all amounts owing to Jeffrey Buchalter, former President, Chief Executive Officer and director of the Company who resigned effective February 22, 2010 for good reason (as defined in the employment agreement), were paid to Mr. Buchalter in the third quarter of 2010. The Company ~~had expensed a net amount~~has employment and separation agreements with certain members of ~~$3.6 million~~its management that provide for severance payments and ~~benefits~~payments following a termination of employment occurring for various reasons, including a change in ~~connection with Mr. Buchalter’s resignation.~~control of the Company.

~~Litigation~~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.

The Company has non-cancelable lease obligations for certain office and production facilities that ~~had~~have been ~~initiated against~~vacated. Some of these facilities have been sublet, and the Company ~~in connection with~~is actively seeking to sublet the manufacture of the injectable vitamin, MVI as part of its former contract manufacturing operations was settled during the third quarter of 2010. The net liability to the Company resulting from this litigation was not material.

During the third quarter of 2010, the term of the Company’s lease obligation for a portion of its facilities in Bridgewater, New Jersey was shortened to end on January 31, 2013 from the original termination date of January 31, 2018. This was done in connection with the third-quarter sublease of that same portion of corporate officeremaining unused space.

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

Overview

We are a ~~biopharmaceutical~~biotechnology company dedicated to the research and development of innovative ~~medicines~~therapeutics for cancer patients with ~~cancer.~~high unmet medical needs. Our Principal Executive Officer reviews our operating results on an aggregate basis and manages the operations as a single operating unit. Our drug development programs utilize ~~several cutting-edge approaches, including our proprietary~~two platforms – Customized PEGylation Linker Technology ~~utilizing PEGylation~~(Customized Linker Technology ®) and third-generation messenger RNA (mRNA) ~~antagonists using~~-targeting agents utilizing the Locked Nucleic Acid (LNA) technology. We currently have ~~three~~four compounds in human clinical ~~development;~~development: PEG-SN38, ~~the HIF-1 alpha antagonist~~which utilizes our PEGylation technology, and the mRNA antagonists of Hypoxia-Inducible Factor-1α (HIF-1α), Survivin ~~antagonist.~~and Androgen Receptor (AR), which utilize the LNA technology. In addition, the Company has other novel LNA targets in various stages of preclinical research. We receive royalty revenues from licensing arrangements with other companies related to sales of products developed using our proprietary Customized Linker ~~Technology.~~Technology – primarily PEGINTRON marketed by Merck & Co., Inc. (Merck).

~~We operate in one business segment, that~~In order to better focus on our portfolio of ~~developing and commercializing~~ innovative ~~medicines for the treatment of cancer. Our Principal Executive Officer reviews our operating results on an aggregate basis and manages the operations as a single operating unit.~~

~~On January 29, 2010,~~oncology programs, we consummated the sale of our specialty pharmaceutical business. The cash purchase price, including certain customary working capital adjustments, was $308.0 million. Transaction costs amounted to approximately $5.0 million, reducing net proceeds to approximately $303.0 million. Under the terms of the asset purchase agreement, we are entitled to receive up to an additional $27.0 million if certain milestones are met. It now appears unlikely that one of the milestones, which would have resulted in a $5.0 million payment to us, will be met. There can be no assurance that we will receive any of the milestone payments. In addition, through 2014 we may receive royalties of five to ten percent on incremental net sales above the baseline 2009 amount from the four marketed specialty pharmaceutical products that were sold. Pursuant to a transition services agreement, we have and will continue to perform certain product-support research and development as requested by the purchaser for a period of up to three years after the sale. We also have been providing various general and administrative functions for the purchaser subsequent to the close of the transaction. Our involvement in transitioning of general administrative activities is largely concluded. In consideration for our efforts related to the transition services agreement, we are being compensated at actual cost plus a mark-up per the terms of the transition services agreement.

~~The transaction to sell~~divested our specialty pharmaceutical business comprised principally of what had previously been our Products and Contract Manufacturing segments. Prior to the January 29, 2010 closing of the transaction, we were a biopharmaceutical company involved in the development, manufacture and commercialization of medicines for patients with cancer and other life-threatening conditions. We operated in three business segments: Products, Royalties and Contract Manufacturing. We had a portfolio of four marketed products and manufactured products for other pharmaceutical companies through our contract manufacturing ~~segments~~business.

The first quarter of 2011 marks the beginning of a period no longer influenced so heavily by the restructuring, reorganization and consolidation activities that significantly impacted the Company in 2010. Our results of operations are now expected to be more reflective of our ongoing activities, which are directed towards advancing our research and development pipeline. We continue to conduct our on-going clinical trials in 2011 and anticipate completing enrollment in 2011 in our Phase II PEG-SN38 trial in metastatic breast cancer as well as ~~in-process research~~our Phase I clinical trials of HIF-1α and Survivin. The enrollment of patients for clinical trials is an inherently uncertain process and there can be no assurance we will be able to complete the enrollment of patients for our clinical trials within the timeframe anticipated. Because of changes evolving in patient treatment protocols in the U.S. and certain other countries over the past year, it has become more difficult to identify and enroll patients in our study of PEG-SN38 for metastatic colorectal cancer. We intend to continue our efforts to seek a collaborative partnership designed to finance our development ~~related to enhanced next-generation formulations of Oncaspar~~activities in the future.

Throughout Management’s Discussion and ~~Adagen. The~~Analysis, the primary focus is on the results of operations, ~~of the products~~cash flows, financial condition and ~~contract manufacturing segments are reflected as discontinued operations in the first quarter~~future outlook of ~~2010. The sale of the in-process research and development has been reported as an asset sale in continuing operations in the first quarter of 2010 and not as part of discontinued operations due to~~ our continuing ~~involvement with the purchaser’s research efforts.~~

~~Prior-year information has been reclassified to reflect the operations of our specialty pharmaceutical business as discontinued~~ operations. Percentage changes throughout the following ~~Management’s Discussion and Analysis~~discussion are based on amounts stated in thousands of dollars and not the rounded millions of dollars reflected in this section.

Results of Continuing Operations

Revenues:

Royalties

~~(millions~~ (millions of dollars):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2010

%
Change

2009

2010

%
Change

2009

Royalty revenue

$
10.9

(16)

$
13.0

$
34.4

(12)

$
39.2


	Three Months Ended

	March 2011		% Change		March 2010

Royalty revenue	$	11.8		(9)	$	12.9

We receive income from royalties on sales of products by other companies that use our proprietary ~~Customized Linker Technology,~~PEGylation technology, including PEGINTRON, marketed by Merck, ~~& Co., Inc.,~~ Macugen, marketed by OSI Pharmaceuticals, Inc. and Pfizer, Inc., and CIMZIA, marketed by UCB Pharma. Royalty revenue for the three months ended ~~September 30, 2010~~March 31, 2011 decreased 169 percent to ~~$10.9~~$11.8 million from ~~$13.0~~$12.9 million for the three months ended ~~September 30, 2009. On a nine-month year-to-date basis,~~March 31, 2010. The decline in royalty revenues declined 12 percent to $34.4 million from $39.2 million. Effective in October 2009, we no longer receive royalties from the sale of Pegasys. Both the three-month and nine-month periods ended September 30, 2009 included Pegasys royalties. The absence of these royalties in 2010 comprised more than a quarter of the total declines in each period. The remainder of the reduction in royalties from the prior-year comparative periodsrevenue was ~~due primarily~~almost entirely attributable to lower sales of PEGINTRON, which continues to constitute the most significant source of our royalty revenues. The decline in PEGINTRON royalties was partially offset by a nominal increase in the ~~U.S. and in international markets.~~royalty revenue from CIMZIA sales.

~~After evaluating various options for the sale of our PEGINTRON royalty stream,~~As we have ~~concluded~~previously indicated, based upon information we have reviewed, we believe that ~~at this time, we will no longer pursue such~~ a ~~sale. Unsettled conditions in the~~significant number of patients suffering from hepatitis C ~~virus~~may be deferring treatment until new therapies become available potentially as early as mid-2011. The implications of the unsettled hepatitis C market to future sales of PEGINTRON are not clear and there can be no assurance concerning the impact, if any, that any new therapies for hepatitis C may have ~~created a situation whereby we believe we cannot derive optimal value for the asset and resultant return to our shareholders.~~on sales of PEGINTRON.

During the three months ended ~~September 30, 2010,~~March 31, 2011, we had royalties on export sales of ~~$8.9~~$9.1 million, of which ~~$3.1~~$3.3 million were in Japan and $2.9 million were in Europe. This compares to ~~$10.9~~$10.8 million of royalties on export sales in the comparable three-month period of ~~2009,~~2010, of which ~~$4.6~~$3.2 million were in ~~Europe. On a nine-month basis, we had royalties on export sales in 2010 of $28.6 million, of which $10.0 million were in Europe~~Japan and ~~$32.8 million of royalties on export sales in 2009, of which $13.0~~$3.5 million were in Europe.

Sale of ~~in-process research~~In-process Research and ~~development~~Development

When we sold our specialty pharmaceutical business, we retained our research and development organization. ~~We are now a biopharmaceutical company engaged in the research and development of medicines for patients with cancer and the commercialization of those efforts.~~ We had been engaged in studies oriented towards the next-generation formulations of Oncaspar and Adagen, two products that were among those sold as part of the specialty pharmaceutical business. The in-process research and development related to Oncaspar and Adagen was sold to the purchaser of the specialty pharmaceutical business ~~the sigma-tau Group,~~ and $40.9 million was recognized as revenue in connection with the sale in the first quarter of 2010. The selling price of the in-process research and development represented management’s best estimate of its standalone fair value based on the stage of development and consideration of future milestone ~~payment consideration.~~payments at that time potentially amounting to $27.0 million. All necessary technology and know-how was transferred to the purchaser at the time of the sale, and the purchaser could resell the in-process research and development asset. ~~The~~At the time of the sale, the activities necessary to complete the work on ~~the~~ Oncaspar and Adagen next-generation ~~formulations~~formulas could behave been performed by the ~~sigma-tau Group~~purchaser or others.

          During the first quarter of 2011, the Company earned the first $5.0 million milestone payment from the purchaser of the specialty pharmaceutical business resulting from the approval of a supplemental Biologic License Application (sBLA) for the manufacture of SS Oncaspar. This milestone payment relates to our transfer of technology that was included in the 2010 sale of in-process research and development. During the latter half of 2010, circumstances emerged that made it unlikely that we will be able to earn another of the milestones, valued at $5.0 million. Of the remaining $17.0 million of potential milestone payments, it is very unlikely that any will be received in 2011 and there can be no assurance that the Company will receive any such payments in the future.
Contract Research and Development
          During the three months ended March 31, 2011, $1.1 million was earned for contract research and development services. This compares to $2.6 million reported in the first quarter of 2010 for the period from January 29, 2010 through March 31, 2010. Pursuant to a transition services agreement entered into at the time of the sale of the specialty pharmaceutical business, we began performing product-support research and development, consulting, and technology transfer functions for the ~~sigma-tau Group~~purchaser effective with the close of the sale transaction on January 29, 2010. The transition services associated with product-support research and development are being reported in continuing operations due to our ~~continuing~~on-going involvement in the research and development related to the divested products. We are being compensated for this work at actual cost plus a mark-up per the terms of the transition services agreement. ~~Revenue was generated from these services in the amount of $2.2 million for the three months ended September 30, 2010 and $7.4 million for the year to date.~~ Our contractual obligation is to assist with these transition services for a period of up to three years subsequent to the date of the ~~sale.~~sale, although we anticipate the level of such activity to decline significantly from 2010 levels throughout the remainder of 2011.
Miscellaneous ~~Revenue~~Income
          ~~Also as~~As part of the transition services agreement referred to above, we are ~~providing the sigma-tau Group~~being compensated for various general and administrative services ~~for a period of up~~provided to ~~one year following~~ the ~~closing~~purchaser of the ~~sale. We are being compensated~~specialty pharmaceutical business. The compensation for this work ~~including~~includes reimbursement of costs incurred plus a mark-up defined in the ~~transition services~~ agreement. ~~Through September 30, 2010, approximately $2.4 million has been earned for~~The expenses incurred in relation to these services ~~of which $0.1 million was generated during the third quarter of 2010.~~are reported as general and administrative – contracted services. Our involvement in the transitioning of general and administrative activities is ~~nearly~~essentially complete. During the three months ended March 31, 2011, approximately $0.1 million was earned for these services. This compares to approximately $1.7 million reported in the first quarter of 2010 for the period from January 29, 2010 through March 31, 2010. Also reflected in miscellaneous revenue are rental receipts from the sublease of unused manufacturing and excess office space for which we

have on-going lease commitments. The underlying lease expense is reflected in general and administrative expenses. During each of the three-month periods ended March 31, 2011 and 2010, we received $0.1 million of sublease income.
Operating Expenses:
Research and ~~development~~Development
~~(millions~~ (millions of dollars):

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended

2010

%
Change

2009

2010

%
Change

2009

March
2011

%
Change

March
2010

Research and development

$
14.2

24

$
11.4

$
35.8

4

$
34.3

Research and development – pipeline

$
10.5

(8)

$
11.5

Research and development – specialty and contracted services

$
1.2

n.m.

$
4.4

$
6.0

n.m.

$
19.5

$
0.6

n.m.

$
3.1

n.m. – not meaningful
Research and ~~development.~~development – pipeline.~~The total amount of expense related to our pipeline programs was $14.2 million in~~ For the ~~third quarter of 2010, including $3.0 million of milestone payments. This compares to $11.4 million expended in the third quarter of 2009. On a year-to-date nine-month basis,~~three months ended March 31, 2011, research and development ~~spending on our pipeline programs totaled $35.8~~expenses decreased by $1.0 million ~~in 2010, including $5.0 million of milestone payments. Nine-month spending in 2009 amounted~~ to ~~$34.3 million. The pipeline consists of the following programs: PEG-SN38, HIF-1 alpha antagonist, survivin antagonist, and additional mRNA antagonists utilizing the LNA technology.~~
          In the quarter ended September 30, 2010, we continued to enroll patients in our ongoing PEG-SN38 Phase II colorectal study, our Phase II metastatic breast study and our Phase I pediatric study. The total amount incurred on our PEG-SN38 program for the third quarter of 2010 was $5.5$10.5 million as compared to ~~$2.5 million in~~ the three months ended September 30, 2009. On a year-to-date basis, spending on PEG-SN38 totaled $14.1 million in 2010 and $9.3 million in 2009 reflecting increased spending on the clinical studies for colorectal and metastatic breast cancer.

          ~~The cost associated with the preclinical and clinical activities for the mRNA antagonists using the LNA technology was $8.2 million~~March 31, 2010. Included in the ~~third quarter of~~first-quarter 2010 which included $3.0 million of milestone payments. In the three months ended September 30, 2009, we incurred $8.0 million for the mRNA antagonist programs. For the nine months, we expended $19.3 million in 2010, including $5.0 million of milestone payments, and $22.2 million in 2009. The 2009 costs includedexpense was a $1.0 million milestone payment for the beta-catenin antagonist. There was no comparable milestone expenditure in the first quarter of 2011. Eliminating the prior-period milestone payment from the comparison, pipeline research and ~~were elevated due~~development spending was essentially flat period over period.
          Spending related to ~~the purchase and manufacturing of additional clinical drug supply for~~ the ongoing Phase ~~I studies. We are continuing enrollment in~~II and Phase I studies of PEG-SN38 rose approximately 32 percent to $5.6 million over the $4.2 million spent in the first quarter of 2010. We continued our Phase II clinical trials for metastatic colorectal and metastatic breast cancer. In February 2010, we initiated in a Phase I study in pediatric solid tumors which is expected to be completed during 2011. Finally, the ~~HIF-1 alpha~~National Cancer Institute continues to study PEG-SN38 and ~~Survivin antagonists, as well as preclinical studies for additional mRNA antagonist-directed oncology targets which are known to play an important role~~bevacizumab in ~~cancer cell growth.~~patients who failed multiple prior chemotherapy regimens.
          Spending on the mRNA antagonists in the first quarter of 2011 was $4.6 million compared to $6.4 million in the first quarter of 2010. Spending in the prior period included the $1.0 million milestone payment. Excluding this item, comparable aggregate spending on the mRNA antagonists decreased approximately 15 percent from the prior period. The studies relate to the antagonists of Hypoxia-Inducible Factor-1α (HIF-1α), Survivin and Androgen Receptor (AR). We enrolled and treated the first patient in the AR antagonist study of patients with castration-resistant prostate cancer in the first quarter of 2011. We continue to evaluate the remaining targets we have licensed from Santaris, based on our priorities and the underlying science, and intend to focus only on the most promising of them.
          During 2010, we were also ~~are conducting basic research~~working on identifying additional compounds that may benefit from our proprietary Customized Linker ~~Technology which~~Technology. This effort resulted in an investment of ~~$0.5~~$0.3 million ~~for~~in the ~~third~~first quarter of ~~2010,~~2011 compared to $0.9 million in the ~~third~~first quarter of ~~2009. On a nine-month year-to-date basis, this research spending amounted~~2010. While these efforts were diminished, we still entertain opportunities to ~~$2.4 million in 2010 and $2.8 million in 2009.~~identify compounds for PEGylation.
Research and development – specialty and contracted services. As a result of the sale of our specialty pharmaceutical business in January 2010, the ~~activities~~programs related to the ~~specialty pharmaceutical products~~next-generation Oncaspar and Adagen formulations became the responsibility of the ~~purchaser at the close of the transaction.~~purchaser. We continue to ~~provide assistance~~assist in the development of ~~the next-generation Adagen and Oncaspar~~these programs through a transition services arrangement. ~~The total amount incurred during~~During the ~~third quarter~~first three months of ~~2010 for~~2011, our spending related to these products decreased substantially, as expected, as the ~~next-generation programs and other activities associated with the specialty pharmaceutical products was $1.2 million. For the nine-month period ended September 30, 2010, these~~purchaser assumed greater control. These costs amounted to ~~$6.0~~$0.6 million during the three months ended March 31, 2011. During the first three months of 2010, our spending related to these products totaled $3.1 million, of which approximately $1.4 million was reflected in invoices we sent to the purchaser covering February and March services with $1.7 million ~~had~~having been ~~incurred~~spent in January, ~~2010,~~ prior to the sale. The expenses we incur on these programs starting in February 2010 are reimbursed with a mark-up and reported as revenue. For the three months and nine months ended September 30, 2009, we reported expenses of $4.4 million and $19.5 million, respectively related to the specialty pharmaceutical products.

General and ~~administrative~~Administrative
~~(millions~~ (millions of dollars):

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended

2010

%
Change

2009

2010

%
Change

2009

March
2011

%
Change

March
2010

General and administrative

$
4.7

(39)

$
7.7

$
20.3

(26)

$
27.3

$
5.1

(49
)
$
9.9

General and administrative – contracted services

$
0.1

n.m.

$
—

$
1.9

n.m.

$
—

$
0.1

n.m.

$
1.4

n.m. – not meaningful
General and administrative.
          ~~During~~ General and administrative expenses declined 49 percent in the ~~third~~first quarter of ~~2010, general and administrative expense decreased 39 percent~~2011 to ~~$4.7~~$5.1 million ~~from $7.7~~compared to $9.9 million incurred in the ~~third~~first quarter of ~~2009. Expenses were generally reduced in~~2010. Several factors contributed to this decrease. Approximately half of the ~~third quarter of 2010 as compared~~decrease is attributable to our efforts to contain costs and to reduce the ~~preceding year as a result of ongoing cost containment efforts and~~overhead necessary to support the ~~contraction of corporate services and overhead costs associated with~~Company’s structure subsequent to the sale of the specialty pharmaceutical ~~business~~business. The remainder of the period-to-period decrease in general and administrative expense relates to charges incurred in the first ~~quarter. Also, a significant portion~~quarter of ~~the third-quarter year-over-year decrease is related to compensation. Accelerated~~2010 for acceleration of vesting of share-based awards ~~effected in the fourth quarter of 2009 and first quarter of 2010, resulted in the third-quarter charges related~~– a cost that was not incurred to the ~~vesting of these awards for all but certain senior management and board members to be largely eliminated. In addition, the restructuring program implemented~~same extent during the first quarter of 2011.
          Savings to the Company from reductions in staffing and consolidation of facilities are expected to continue over the remainder of 2011. The benefits of the first-quarter 2010 restructuring had not yet been fully realized as of March 31, 2010. In this restructuring, a number of general and administrative positions in human resources, information technology and accounting services that had supported the divested specialty pharmaceutical operations were identified for elimination. During 2010 we reduced contracted services, accounting and consulting fees and began the process of consolidating our corporate administrative offices from Bridgewater, New Jersey into our Piscataway, New Jersey location in an effort to further reduce costs and improve operating efficiencies. The benefits of these efforts are reflected in our first-quarter 2011 results.
          A restructuring program announced in the fourth-quarter 2010 and being implemented during the ~~resulting reduction in employees is being reflected in lower payroll costs in~~first few months of 2011 plus the ~~third quarter.~~
          ~~For~~completion of consolidation of our corporate offices into the ~~nine months ended September 30, 2010,~~Piscataway facility during the first quarter of 2011 are expected to have a further favorable impact on our general and administrative expenses ~~were $20.3 million, down 26 percent from the prior year. On a year-to-date basis, the favorable effects observed~~ during the second and third quarters were mitigated by a number of unique expenses incurred during the first quarter. The cost of accelerated vesting of share-based awards, a noncash charge to first-quarter 2010 earnings of approximately $2.4 million, is reflected in the year-to-date 2010 amount. First-quarter 2010 costs include the salary and benefits of those general and administrative employees who were a part of the first-quarter 2010 restructuring. During the nine months ended September 30, 2009, certain general and administrative expenses were elevated, including legal costs related to proposed shareholder consent solicitation and the post-implementation costs of an enterprise resource planning computer software system.

          The Company has made significant progress in reducing general and administrative expenses and will continue to seek and implement efficiencies that could potentially further reduce general and administrative costs. The rate of improvement experienced during the second and third quarters of 2010 is not expected to continue, however. We may experience additional charges associated with the South Plainfield lease or its termination prior to its contractual expiration in October 2012.2011.
General and administrative – contracted services.
As part of the transition services agreement with the purchaser of the specialty pharmaceutical business, we committed to provide certain general and administrative services for a period up to one year subsequent to the sale. We subsequently extended the agreement by ninety days. We were compensated for these services based upon costs incurred plus a mark-up per the terms of the agreement. As expected, the demand for such services from us declined significantly over the course of 2010 and has essentially ceased as of the end of the first quarter of 2011. General and administrative expenses representing transitional services to the ~~sigma-tau Group~~purchaser amounted to approximately $0.1 million during the three months ended ~~September 30,~~March 31, 2011. This compares to $1.4 million reported in the first quarter of 2010 ~~and $1.9 million~~for the period from January 29, 2010 through the nine months then ended. Included in this amount are the direct costs of the hours expended by the individuals in support of sigma-tau, other expenses directly identifiable with the specialty pharmaceutical business and a proportionate allocation of overall general and administrative expense. Our involvement with sigma-tau administrative matters is expected to end this year.March 31, 2010.
Restructuring
          ~~Restructuring charges~~As part of our continued efforts to streamline operations, we undertook reductions in the size of our workforce during the ~~third quarter~~first and fourth quarters of ~~2010 amounted~~2010. We also incurred charges related to ~~approximately $0.5 million. On a year-to-date basis through nine months of 2010, restructuring charges totaled $11.1 million. During the third quarter of 2010, we sublet certain excess office~~reductions in leased space at our corporate ~~headquarters. The~~offices and the write-off of certain related leasehold improvements and furnishings during the second quarter of 2010 and the first quarter of 2011.
          During the first quarter of 2011, we completed the planned relocation of our corporate offices from Bridgewater, New Jersey to Piscataway, New Jersey. As a result of having vacated the excess office space in Bridgewater, the Company incurred a charge ~~to restructuring expense~~during the first quarter of 2011 in the amount of approximately $0.4 million. This amount represents the excess of ~~our~~ committed lease ~~obligations~~costs over potential sublease income. We are actively attempting to sublet the ~~anticipated amount of cash to be received from the subtenant over the remaining term of the contract.~~vacated office space.

          During the first quarter of 2010, ~~we initiated a~~our workforce reduction involved 64 employees and resulted in ~~force as a result~~an expense of $6.1 million for separation benefits. These actions related primarily to the sale of the ~~contraction~~specialty pharmaceutical business and affected employees who were previously engaged in activities related to the divested business but who did not transfer to the employment of ~~corporate-level~~the purchaser. These employees were provided with separation benefits after certain transition periods, during which they assisted with an orderly transfer of activities and information to the purchaser. In addition, we reassessed our staffing requirements subsequent to the sale in light of the lessened demands on many of our general and administrative functions. Effective February 22, 2010, our then President and Chief Executive Officer resigned from the Company. For the quarter ended March 31, 2010, we expensed $3.8 million for severance payments and benefits that were payable under the terms of this individual’s employment agreement. This amount was reduced during the quarter ended June 30, 2010 by approximately $0.2 million once the termination agreement was executed. Payments due pursuant to the termination agreement were made during the third quarter of 2010.
Other Income (Expense) (millions of dollars):

Three Months Ended

March
2011

%
Change

March
2010

Other income (expense):

Investment income, net

$
0.5

(53
)
$
1.0

Interest expense

$
(1.5
)

(45
)
$
(2.7
)

Other, net

$
0.1

n.m.

$
0.0

n.m. – not meaningful
          Net investment income was $0.5 million for the three months ended March 31, 2011, as compared to $1.0 million for the three months ended March 31, 2010. The decline reflects the lower balances of investment holdings and a shift to shorter maturity and lower risk investments.
          Interest expense was $1.5 million for the three months ended March 31, 2011. Interest expense for the three months ended March 31, 2010 was $2.7 million, which included a net effect related to the first quarter 2010 conversion of $115.6 million principal amount of our 4% notes subsequent to the sale of our specialty pharmaceutical business. ~~Employees who had been directly connected with~~The net effect of forgone interest and the ~~divested business, but who did not become employees~~write-off of ~~the sigma-tau Group, were retained for varying periods~~a pro rata amount of ~~time subsequent~~deferred debt issuance costs amounted to ~~the sale~~$0.8 million and was charged to assist with transition. Other employees involved with general and administrative activities were identified for separation due to the reduction in volume of those activities resulting from the sale, such as human resources, information technology and accounting services. Restructuring charges for these employees, comprised of separation payments and related benefits, totaled $6.1 millioninterest expense during the first quarter of ~~2010. In addition, effective February 22,~~ 2010 ~~Jeffrey Buchalter,~~at the ~~Company’s then President and Chief Executive Officer, resigned for good reason (as defined in his employment agreement). We expensed $3.8~~time of the notes conversion. The $0.8 million ~~related to Mr. Buchalter’s separation~~was adjusted in the ~~first quarter of 2010 and modified it slightly during the second~~fourth quarter of 2010 to ~~$3.6 million.~~credit interest expense and charge additional paid-in capital to reflect the capital nature of the transaction. The ~~total amount owing~~noncash adjustment was not material to ~~Mr. Buchalter was paid per the terms of his employment agreement in the third quarter of 2010.~~
          During the quarter ended June 30, 2010, we wrote off the carrying value of certain furnishings and leasehold improvements located at our corporate headquarters in Bridgewater, New Jersey amounting to approximately $0.9 million. This is a noncash expense resulting from the relocation of several employees to our research facility in Piscataway, New Jersey.
          ~~Corporate restructuring costs associated with the 2009 workforce reduction amounted to $0.7 million during~~ the first ~~quarter~~or fourth quarters nor to the full year 2010 results of ~~2009. This represents severance and costs related to terminated employees in general and administrative areas as well as research and development.~~
~~Other (income) expense~~

(millions of dollars)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2010

%
Change

2009

2010

%
Change

2009

Other (income) expense:

Investment income, net

$
(1.1
)

(3
)
$
(1.2
)
$
(2.9
)

(11
)
$
(3.3
)
Interest expense

1.4

(46
)

2.8

5.6

(36
)

8.8

Other-than-temporary investment impairment loss

0.9

n.m.

—

0.9

n.m.

—

Other, net

(0.1
)

n.m.

(0.2
)

(0.1
)

n.m.

(5.1
)

Total other (income) expense

$
1.1

(23
)
$
1.4

$
3.5

n.m.

$
0.4

n.m. – not meaningful

          ~~Other (income) expense.~~~~Other (income) expense for~~operations. Additionally, the three months ended September 30, 2010 was net expense of $1.1 million, as compared to net expense of $1.4 million for the three months ended September 30, 2009. On a year-to-date basis, 2010 resulted in net expense of $3.5 million, compared to $0.4 million of net expense in the first nine months of 2009. Other (income) expense includes: net investment income, interest expense, impairment loss on investments and other income or expense.
          Net investment income was $1.1 million for the quarter ended September 30, 2010, reduced slightly from the third quarter of 2009. On a year-to-date basis, net investment income declined 11 percent to $2.9 million. Our current investments are more heavily weighted towards short maturities and reduced risk resulting in lower yields. Also included in net investment income is the net gain resulting from a number of sales of investment holdings. We realized approximately $0.5 million of net gain on sales of company-owned investments. There was also approximately $0.1 million gain realized on sales out of the deferred compensation plan.
          Interest expense, which includes amortization of deferred debt issuance costs, was $1.4 million and $5.6 million for the three-month and nine-month periods ended September 30, 2010 and $2.8 million and $8.8 million for the three-month and nine-month periods ended September 30, 2009, respectively. The reductiondecline in interest expense ~~resulted from the~~is attributable to lower ~~balance of our 4% Convertible Senior Notes due~~principal amounts outstanding in ~~2013.~~
          Other than temporary impairment loss. We hold an investment in an auction rate security for which auctions have failed for several periods and for which the value of the underlying security, preferred stock of the issuer has recently become compromised. Since we no longer expect2011 compared to ~~recover any of the amortized cost basis in the security, the full amount of the carrying value of $0.9 million was written off in the third quarter of~~ 2010. The Company will continue to monitor this instrument and the expected cash flows to be derived from it. Any subsequent unrealized recovery in fair value will be reported in accumulated other comprehensive income.
          During the first quarter of 2009, we repurchased $20.5 million principal amount of our 4% notes at a discount to par yielding a gain of $4.8 million (reflected in Other, net) exclusive of the write-off of related deferred debt offering costs of $0.3 million (reflected in interest expense).
Income taxes
          During the three months ended March 31, 2011 and ~~nine months ended September 30,~~ 2010, wethe Company recorded a net tax benefit of $0.1 million and $0.3 million, respectively, which includes $0.1 million related to the American Recovery and Reinvestment Act of 2009 which extends the temporary benefit for businesses to accelerate historic alternative minimum tax or research and development credits in lieu of bonus deprecation in 2009. The net tax benefit for the nine months ended September 30, 2010 includes a $0.2 million refund due from the Canadian taxing authority. During both the three months and nine months ended September 30, 2009, we recorded a net tax benefit of $0.5 million related to the Housing Assistance Act of 2008 that contained a provision allowing corporate taxpayers to make an election to treat certain unused research and alternative minimum tax credit carryforwards as refundable in lieu of claiming bonus and accelerated depreciation for “eligible qualified property” placed in service through the end of 2008.
          ~~We did not recognize a U.S. Federal~~no income tax ~~provision for the first nine months of 2010 or 2009 as~~expense because the estimated annual effective tax rate was zero. The sale of the specialty pharmaceutical business, including the sale of in-process research and development, was a taxable transaction for federal income tax purposes, although it resulted in no federal income tax liability due to the tax basis the Company had in divested assets and the net operating loss generated in 2010. As of ~~September 30, 2010, we continue~~March 31, 2011, the Company continues to provide a valuation allowance against ~~our~~its net deferred tax assets since ~~we believe~~the Company believes it is more likely than not ~~our~~its deferred tax assets will not be realized.

Discontinued operations
          The cash proceeds received from the sale of the specialty pharmaceutical business, including a second-quarter 2010 working capital adjustment, amounted to approximately $309.0 million. Of this amount, ~~reported as~~$40.9 million was allocated to the sale of in-process research and development and included in continuing operations. The net proceeds then attributable to discontinued operations ~~for the nine months ended September 30, 2010 is comprised~~yielded a gain of ~~the~~$175.4 million. The results of operations of the specialty pharmaceutical business for the period in January ~~1 through January 29,~~ 2010 preceding the sale amounted to income of $3.6 million ~~plus~~comprising the remainder of the $179.0 reported in 2010 as income and gain from discontinued operations. The gain from discontinued operations was subsequently adjusted to $176.4 million in the fourth quarter of 2010 to recognize $1.0 million of currency translation gains that had been included in accumulated other comprehensive income but should have been recognized as part of the gain ~~realized~~ on the sale of the specialty pharmaceutical business of $175.4 million. The cash purchase price was $300.0 million, working capital adjustments were approximately $8.0 million, and transaction costs amounted to $5.0 million. We allocated $40.9 million of the total purchase price to the sale of in-process research and development. The net proceeds attributable to discontinued operations of $262.6 million, less the net carrying value of assets sold of $87.2 million, yielded the $175.4 million gain. Under the terms of the asset purchase agreement, we are entitled to receive up to an additional $27.0 million if certain milestones are met. It now appears unlikely that one of the milestones, which would have resulted in a $5.0 million payment to us, will be met. There can be no assurance that we will receive any of the milestone payments. Furthermore, we may receive royalties of five to ten percent on incremental net sales above the baseline 2009 amount from the marketed specialty pharmaceutical products through 2014.sale.

Liquidity and Capital Resources
          Total cash reserves, which include cash, cash equivalents, short-term investments and marketable securities, were ~~$484.6~~$418.9 million as of ~~September 30, 2010,~~March 31, 2011, as compared to ~~$199.7~~$460.1 million as of December 31, ~~2009.~~2010. The ~~increase~~decrease was primarily attributable to the ~~receipt~~Company’s on-going share repurchase program. During the three months ended March 31, 2011, the Company repurchased and retired 3,853,073 shares at a cost of ~~proceeds from the sale~~$41.5 million, or an average cost per share of ~~our specialty pharmaceutical business in January 2010.~~approximately $10.77.
          For the ~~nine~~three months ended ~~September 30, 2010,~~March 31, 2011, cash provided by operating activities of continuing operations was ~~$35.2~~$1.0 million compared to cash provided in the first quarter of 2010 of $39.9 million. Income from continuing operations in the first ~~nine months~~quarter of ~~2010,~~2011, adjusted for noncash and non-operating items, constituted a source of cash of approximately $22.3 million of positive cash flow. Included in income from continuing operations for the nine-month period ended September 30, 2010 was $40.9 million related to the sale of in-process research and development in connection with the sale of the specialty pharmaceutical business.$3.5 million. Changes in various working capital accounts ~~also constituted a source of operating cash flow.~~comprised the partially offsetting $2.5 million.
          Investing activities generated approximately ~~$332.4~~$13.1 million of cash in the first ~~nine months~~quarter of ~~2010 compared~~2011 primarily from maturities of marketable securities. This compares to $279.5 million of cash ~~used in~~provided by investing activities ~~of $27.7 million~~ during the first ~~nine months~~quarter of ~~2009. The~~2010, which was primarily attributable to the $263.1 million net proceeds from the January 2010 sale of the specialty pharmaceutical business ~~of $262.6 million~~ (exclusive of the amount apportioned to the sale of in-process research and development reported in operating revenue) ~~represented the largest source of cash. Approximately $0.9 million was invested in property and equipment. Maturities of, and net proceeds from sales of, investments accounted for the remainder.~~.
          Net cash used in financing activities was ~~$9.4~~$41.7 million in the first ~~nine months~~quarter of ~~2010 compared to net cash used in financing activities of $15.9~~2011 versus $5.0 million in the first ~~nine months~~quarter of ~~2009. Proceeds from the exercise of employee stock options generated approximately $30.5 million of cash inflow during~~2010. During the first ~~nine months~~quarter of ~~2010. This inflow was more than offset by $36.4~~2011, we utilized $41.4 million ~~of expenditures in the nine-month period~~ to repurchase shares of the Company’s common stock on the open market as part of the $200.0 million share repurchase program initiated in December of ~~2009. In~~2010. Fees of approximately $0.1 million incurred to purchase the ~~first quarter~~shares were reflected in cash flows from operating activities. The share repurchase program is designed as a means by which to return to shareholders value derived from the sale of ~~2009, $15.6~~the specialty pharmaceutical business. Through April 30, 2011 there have been a total of 5.7 million shares acquired at a cumulative cost of ~~cash was expended to repurchase $20.5~~$62.2 million, ~~principal amount~~inclusive of ~~our 4% notes.~~transaction costs.
          As of ~~September 30, 2010,~~March 31, 2011, we had outstanding $134.5 million of convertible senior notes that mature on June 1, 2013 and bear interest at an annual rate of 4%. The sale of our specialty pharmaceutical business constituted a fundamental change under the indenture for the notes, which triggered a change in the conversion rate from 104.712 shares per $1,000 principal amount of notes to 116.535 shares per $1,000 principal amount of notes during the period January 29, 2010 to March 4, 2010. During that period, $115.6 million principal amount of the notes were converted into approximately 13.5 million shares of our common stock. Subsequent to March 4, 2010, the original conversion rate of 104.712 shares per $1,000 principal amount is again in effect. Interest is payable on June 1 and December 1 for the 4% notes. Accrued interest on the notes was $1.8 million and ~~$0.8~~$0.4 million, respectively, as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009.~~2010.
          Our current sources of liquidity are our cash reserves; interest earned on such cash reserves and royalties earned - primarily related to sales of PEGINTRON. Net proceeds from the sale of our specialty pharmaceutical business were approximately $303.0 million. Our board of directors is continuing the process of determining the funding needs for the ongoing operation of our business and evaluating various options to return value derived from the sale of our specialty pharmaceutical business to our stockholders. Based upon our current planned research and development activities and related costs, ~~and~~ our current

sources of liquidity and the planned remaining purchases of our outstanding stock under our existing share repurchase program, we anticipate our current cash reserves ~~and expected cash flow from operations~~ will be sufficient to meet our capital and operational requirements for the near future. While we believe that our current sources of liquidity will be adequate to satisfy our capital and operational needs for the near future, it is likely that we will ~~likely~~ need to obtain additional ~~capital before~~financing or enter into a collaborative arrangement to sustain our research and development efforts prior to the time we are able to commercialize any of our product candidates that are currently under development are approved for marketing. We may seek such additional funding through agreements with potential collaborators or by accessing the capital markets. We cannot assure you,candidates. There can be no assurance, however, that we will be able to obtain additional funds or engage a collaborator on acceptable terms, if at all. If we are unable to obtain adequate financing or collaborative support, we may be required to curtail our research and development activities and/or license our product candidates to third parties on terms that are not favorable to us.
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 (SPE), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually ~~narrow~~ limited purposes. As of ~~September 30, 2010,~~March 31, 2011, we were not involved in any SPE transactions.
          Our 4% notes payable are convertible into shares of our common stock at a conversion price of $9.55 per share and pose a reasonable likelihood of potential significant dilution. ~~The~~As of March 31, 2011, the maximum potential dilutive effect of conversion of the 4% notes ~~at the current conversion price~~ is approximately 14.1 million ~~shares. These notes~~shares using the conversion rate of 104.712 shares per $1,000 principal amount currently in effect. If we were to experience a fundamental change as defined in the indenture agreement, the conversion rate could be enhanced for the benefit of the note holders which would yield greater dilution. Notes payable are discussed in greater detail in Liquidity and Capital Resources above and in the notes to our condensed consolidated financial statements.

          In addition, stock options to purchase ~~4.3~~3.8 million shares of our common stock at a weighted average exercise price of ~~$13.41~~$12.27 per share and ~~0.8~~0.6 million restricted stock units were outstanding at ~~September 30, 2010 that~~March 31, 2011, which represent additional potential dilution.
Contractual Obligations
          Our major outstanding contractual obligations relate to our operating leases, convertible debt, and license agreements with collaborative partners.
          ~~During the first quarter of 2010, $115.6 million principal amount of our 4% notes were converted into shares of the Company’s common stock.~~
          Effective August 1, 2010, we entered into a sublease for a portion of our corporate office leased space in Bridgewater, New Jersey. The amount of the original lease commitment for the affected office space exceeds the cash that we expect to receive over the term of the sublease. The excess of our obligation over the sublease proceeds has been accrued for and has been charged to restructuring. The beneficial effect of the sublease is a reduction of our lease obligations by approximately $0.9 million over 29 months beginning September 2010.
          ~~Other than the note conversion and the sublease referred to above, there~~ There have been no material changes since December 31, 2010 with respect to our contractual obligations as disclosed under Management’s Discussion and Analysis of Financial Condition and Results of Operations - - Contractual Obligations in our Annual Report on Form 10-K for the year ended December 31, 2009.obligations.
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. GAAP. All professional accounting standards effective as of ~~September 30, 2010~~March 31, 2011 have been taken into consideration in preparing the consolidated financial statements. The preparation of the 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 have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our 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~~third-parties and pursuant to the sale of our specialty pharmaceutical business are recognized when reasonably determinable and earned through the sale of the product by the ~~licensee net of future credits, chargebacks, sales discount rebates and refunds~~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 ~~generally~~ received from the licensees in the quarter subsequent to the period in which the sales occur.
          Contingent payments due under the asset purchase agreement related to the sale of the specialty pharmaceutical business are recognized as income 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. Non-refundable payments received upon entering into license and other collaborative agreements where we have continuing involvement are recorded as deferred revenue and recognized ratably over the estimated service period.
          The sale of the specialty pharmaceutical business involved the application of guidance regarding multiple deliverables in separating the revenues associated with the sale of in-process research and development from the other elements of the transaction, namely the assets sold as part of discontinued operations and our continuing involvement in contract research activities. We determined that the in-process research and development had value to the buyer of the specialty pharmaceutical business on a stand-alone basis and that there was objective and reliable evidence available to support the allocation of the total purchase price to the respective units of accounting.

Research and Development Expenses
          We accrue expenses for costs for work performed by contract research organizations, contract manufacturing organizations and others based upon the estimated amount of the total effort completed on each order, study or project using factors such as number of lots produced, number of patients enrolled, the number of active clinical sites and the duration for which the patients will be enrolled in the study. We base the estimates on the information available at the time. Additional information may come available at a later date that would enable us to develop a more accurate estimate. Such changes in estimate are generally recognized in the period when the information is first known.
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.~~realized. A valuation allowance is provided for when it is more likely than not some portion or all of the deferred tax assets will not be realized. As of ~~September 30, 2010,~~March 31, 2011, we believe, based on future projections, that it is more likely than not that our net deferred tax assets will not be realized. 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 we will be able to sustain our position.
Share-Based Payment
          Compensation cost, measured by the fair value of the equity instruments issued, adjusted for estimated forfeitures, is recognized in the financial statements as the respective awards are earned. The impact that share-based payment awards will have on our results of operations is a function of the number of shares awarded, vesting and the trading price and fair value of our stock at date of grant or modification. Fair value of share-based payments is determined using the Black-Scholes valuation model which employs weighted average assumptions for expected volatility of our stock, expected term until exercise of the options, the risk free interest rate, and dividends, if any. Expected volatility is based on our historical stock price information.
~~Recently Issued Accounting Standards, Not Adopted as of September 30, 2010~~
          Milestone Method of Revenue Recognition – Pursuant to a final consensus of the Emerging Issues Task Force of the Financial Accounting Standards Board ratified on March 31, 2010, guidance is provided for determining when milestone payments received in conjunction with researchForward-Looking Information and development efforts performed may be recognized. The guidance is effective beginning in 2011 with early adoption permitted. We are evaluating the new guidance which is to be implemented prospectively and do not believe that adoption of the guidance will have a material effect on our results of operations, financial position or cash flows.
Factors That May Affect Future Results
          There are forward-looking statements contained herein, which can be identified by the use of forward-looking terminology such as the words “believes,” “expects,” “may,” “will,” “should,” “potential,” “anticipates,” “plans” or “intends” and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from the future results, events or developments indicated in such forward-looking statements. Such factors include, but are not limited to:

•
~~The risk that we will experience operating losses for the foreseeable future and may never achieve profitability.~~
•
The risk that we will not achieve success in our research and development efforts, including clinical trials conducted by us or our collaborative partners.

•
The risk that we may be unable to recruit and qualify a sufficient number of patients for our trials and/or there may be the need to delay, suspend or terminate trials for various reasons.
•
The risk that we will experience operating losses for the next several years.
•
The risk that there will be a decline in sales of one or more of the products sold by others from which we derive royalty revenues.

•
Decisions by regulatory authorities regarding whether and when to approve our ~~or our collaborative partners’~~ regulatory applications.

•
The risk that we will fail to obtain adequate financing to meet our future capital and financing needs.

•
The risk that key personnel will leave our company.
          A more detailed discussion of these and other factors that could affect ~~our~~ results is contained ~~below and~~ in our filings with the ~~SEC,~~U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, ~~2009.~~2010. 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 contained herein is as of the date of this report and we ~~do not intend~~undertake no duty to update this information.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.
          The majority of our holdings of financial instruments ~~consists~~consist of ~~corporate debt securities~~money market funds, classified as ~~securities available-for-sale.~~cash equivalents, and debt instruments, classified as available-for-sale securities. Apart from custodial accounts related to ~~our~~the Executive Deferred Compensation Plan, we do not invest in portfolio equity securities. We do not invest in commodities or use financial derivatives for trading purposes. ~~Our debt security portfolio represents funds held temporarily pending use in our business and operations. We manage these funds accordingly.~~ We seek reasonable assuredness of the safety of principal and market liquidity by investing in rated fixed income securities while at the same time seeking to achieve a favorable rate of return. Our market risk exposure consists principally of exposure to changes in interest rates. Our holdings are also exposed to the risks of changes in the credit quality of issuers the majority of which are rated AA1 or better. We typically invest the majority of our investments in the shorter-end of the maturity spectrum. Cash equivalents are primarily held in a number of AAA-rated institutional money market funds as well as several corporate and U.S. government-sponsored entities’ debt securities.
          The table below presents the principal amounts ~~or adjusted cost basis~~ and related ~~weighted average~~weighted-average interest rates of our marketable debt securities, excluding those related to our Executive Deferred Compensation Plan, by year of maturity (twelve-month intervals ending ~~September 30~~March 31 of the year indicated) as of ~~September 30, 2010~~March 31, 2011 (in thousands):

2011

2012

2013

Total

Fair Value

2012

2013

Total

Fair Value

Fixed Rate

$
28,559

$
38,701

$
4,500

$
71,760

$
72,854

$
35,152

$
9,809

$
44,961

$
45,612

Average Interest Rate

5.77
%

5.12
%

1.77
%

5.17
%

4.67
%

6.32
%

5.03
%

Variable Rate

—

—

—

—

—

—

—

—

Average Interest Rate

—

—

—

$
28,559

$
38,701

$
4,500

$
71,760

$
72,854

$
35,152

$
9,809

$
44,961

$
45,612

          Our convertible senior unsecured notes ~~payable outstanding~~ have fixed interest rates. Accordingly, the quoted fair values of ~~the respective issues~~our notes will fluctuate as market rates of interest rise or fall. Fair values are also affected by changes in the price of our common stock. Our 4% Convertible Senior Notes in the principal amount of $134.5 million at March 31, 2011 are due on June 1, 2013 and have a fair value of ~~$169.1~~$165.9 million at ~~September 30, 2010.~~March 31, 2011.
Item 4. Controls and ~~Procedures~~Procedures.
Evaluation of Disclosure Controls and ~~Procedures.~~Procedures
          Our management, under the direction of our ~~Principal Executive~~Chief Operating Officer and ~~Principal Financial Officer,~~Vice President, Finance, 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 30, 2010.~~March 31, 2011. Based on the evaluation, our ~~Principal Executive~~Chief Operating Officer and ~~Principal Financial Officer~~Vice President, Finance have concluded that our disclosure controls and procedures were effective as of ~~September 30, 2010.~~March 31, 2011.

Changes in Internal Controls
          There were no changes in our internal controls over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the period covered by this report 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~~
          In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009.
We depend on key personnel and may not be able to retain these employees or recruit additional qualified personnel, which would harm our business; our chief financial officer recently resigned and we currently do not have a chief financial officer.
          Because of the specialized scientific nature of our business, we are highly dependent upon qualified research and development scientists, technical and managerial personnel, including our President of Research and Development. There is intense competition for qualified personnel in the pharmaceutical field. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. Although we have an employment agreement with our President of Research and Development, our ability to continue to retain him, as well as other senior executives or key managers is not assured.
          Effective February 22, 2010, Jeffrey Buchalter resigned as our President and Chief Executive Officer. Our board of directors established an executive committee to serve as a search committee for a new Chief Executive Officer. On February 22, 2010, the executive committee appointed Ralph del Campo as our Chief Operating Officer and designated him as Principal Executive Officer and Dr. Ivan Horak as President of Research and Development. Mr. del Campo had been serving as our Executive Vice President, Technical Operations and Dr. Horak had been serving as our Executive Vice President, Research and Development and Chief Scientific Officer.
          Effective July 23, 2010, Craig A. Tooman resigned as our Executive Vice President of Finance and Chief Financial Officer. On July 8, 2010, Mark L. Ogden, a financial consultant to Enzon since 2005, was appointed as acting Vice President of Finance and Principal Financial Officer following Mr. Tooman’s departure. Our executive committee is actively engaged in a search for a Chief Financial Officer.
          The loss of the services of one or a combination of our senior executives, particularly our President of Research and Development, as well as the failure to recruit additional key research and development scientists, technical and managerial personnel, including a chief financial officer, in a timely manner, could have an adverse effect on our business.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.
Common Stock
          In the ~~third~~first quarter of ~~2010,~~2011, we repurchased shares of our Common Stock as set forth in the following table:
ISSUER PURCHASES OF EQUITY SECURITIES

Period

(a) Total
Number of
Shares
Purchased

(b) Average Price
Paid per Share

(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)

(d) Maximum
Number (or
Approximate
Dollar Value) of
Shares that May
Yet Be
Purchased Under
the Plans or
Programs

July 1 – July 31, 2010

125,093

$
10.49

125,093

$
28,458,000

August 1 – August 31, 2010

335,000

10.48

335,000

24,948,000

September 1 – September 30, 2010

1,250,217

10.83

1,250,217

11,403,000

Total

1,710,310

$
10.74

1,710,310

$
11,403,000

Period

(a) Total
Number of
Shares
Purchased

(b) Average Price
Paid per Share

(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)

(d) Maximum
Number (or
Approximate
Dollar Value) of
Shares that May
Yet Be
Purchased Under
the Plans or
Programs

January 1 – January 31, 2011

353,854

$
11.95

353,854

$
195,399,505

February 1 – February 28, 2011

858,920

$
11.20

858,920

$
185,776,398

March 1 – March 31, 2011

2,640,299

$
10.48

2,640,299

$
158,110,102

Total

3,853,073

$
10.77

3,853,073

$
158,110,102

(1)
Share repurchase program announced December ~~3, 2009~~21, 2010 whereby Enzon’s board of directors authorized the repurchase of up to ~~$50.0~~$200.0 million of its outstanding shares of common stock. Through ~~September 30,~~December 31, 2010, the Company ~~has~~had repurchased ~~3,654,000~~30,000 shares at an average cost of ~~$10.56~~$12.45 per share for a total expenditure of ~~$38,597,000.~~$373,642.
Item 4. (Removed and Reserved)

Item 6. ~~Exhibits~~Exhibits.
(a) Exhibits required by Item 601 of Regulation S-K.

Exhibit

Reference
Number

Description

No.

3(i)

Amended and Restated Certificate of Incorporation dated May 18, 2006, together with that Certificate of Amendment to the Amended and Restated Certificate of Incorporation date July 13, 2010

(1)
3(ii)

Second Amended and Restated By-laws effective March 11, 2011

(2)
4.1

Rights Agreement dated May 17, 2002 between the Company and Continental Stock Transfer & Trust Company, as rights agent

(3)
4.2

First Amendment to the Rights Agreement, dated as of February 19, 2003 between the Company and Continental Stock Transfer & Trust Company, as rights agent

(4)
4.3

Second Amendment to the Rights Agreement, dated as of January 7, 2008 between the Company and Continental Stock Transfer & Trust Company, as rights agent

(5)
4.4

Third Amendment to the Rights Agreement, dated as of July 23, 2009, between the Company and Continental Stock Transfer and Trust Company, as rights agent

(6)
31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*
31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*
32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*
32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*

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

Exhibit
Number

Description

Reference
No.

3.1

Amended and Restated Certificate of Incorporation dated May 18, 2006, together with that Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated July 13, 2010.

(1)
3.2

Amended and Restated By-laws effective July 13, 2010.

(1)
4.1

Rights Agreement dated May 17, 2002 between the Company and Continental Stock Transfer & Trust Company, as rights agent.

(2)
4.2

First Amendment to the Rights Agreement, dated as of February 19, 2003 between the Company and Continental Stock Transfer & Trust Company, as rights agent.

(3)
4.3

Second Amendment to the Rights Agreement, dated as of January 7, 2008 between the Company and Continental Stock Transfer & Trust Company, as rights agent.

(4)
10.2

Consulting Agreement dated as of October 5, 2005, as amended, by and between the Company and Mark Ogden.

*
31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*
31.2

Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*
32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*
32.2

Certification of Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

*
Filed herewith.
Referenced exhibit was previously filed with the Commission as an exhibit to the Company’s filing indicated below and is incorporated herein by reference to that filing:

(1)
~~Current~~Quarterly Report on Form ~~8-K~~10-Q for the quarter ended June 30, 2010 filed ~~July 13, 2010.~~August 9, 2010

(2)
Current Report on Form ~~8-A12G (File No. 000-12957)~~8-K filed ~~May 22, 2002.~~March 17, 2011

(3)
Form ~~8-A12G/A~~8-A12G (File No. 000-12957) filed ~~February 20, 2003.~~May 22, 2002

(4)
~~Current Report on~~ Form ~~8-K~~8-A12G/A (File No. 000-12957) filed February 20, 2003
(5)
Form 8-A12G/A (File No. 000-12957) filed January 8, ~~2008.~~2008
(6)
Form 8-A12G/A (File No. 000-12957) filed July 24, 2009

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

ENZON PHARMACEUTICALS, INC.

(Registrant)

Date: ~~November 4, 2010~~
~~By:~~May 6, 2011
/s/Ralph del Campo

Ralph del Campo

Chief Operating Officer

(Principal Executive Officer)

Date: ~~November 4, 2010~~
~~By:~~May 6, 2011
/s/Mark L. Ogden

Mark L. Ogden

Vice President, Finance

(Principal Financial Officer and

Principal Accounting Officer)
30


	Three months ended September 30,						Nine months ended September 30,

	2010			2009			2010			2009

Revenues:
Royalties	$	10,902		$	12,974		$	34,391		$	39,215
Sale of in-process research and development		—			—			40,900			—
Contract research and development		2,217			—			7,428			—
Miscellaneous revenue		111			—			2,388			—

Total revenues		13,230			12,974			85,107			39,215


Expenses:
Research and development		14,206			11,438			35,852			34,332
Research and development – specialty and contracted services		1,197			4,367			6,015			19,450
General and administrative		4,682			7,723			20,293			27,356
General and administrative – contracted services		86			—			1,907			—
Restructuring charge		453			—			11,052			693

Total expenses		20,624			23,528			75,119			81,831


Operating (loss) income		(7,394	)		(10,554	)		9,988			(42,616	)


Other income (expense):
Investment income, net		1,110			1,148			2,892			3,267
Interest expense		(1,479	)		(2,750	)		(5,635	)		(8,763	)
Other-than-temporary investment impairment loss		(896	)		—			(896	)		—
Other, net		174			175			144			5,058

Total other income (expense)		(1,091	)		(1,427	)		(3,495	)		(438	)


(Loss) income from continuing operations, before income tax benefit		(8,485	)		(11,981	)		6,493			(43,054	)
Income tax benefit		(131	)		(456	)		(336	)		(456	)

(Loss) income from continuing operations		(8,354	)		(11,525	)		6,829			(42,598	)
Income and gain from discontinued operations, net of income tax		—			11,658			179,002			43,845

Net (loss) income	$	(8,354	)	$	133		$	185,831		$	1,247


(Loss) earnings per common share - continuing operations
Basic	$	(0.14	)	$	(0.26	)	$	0.12		$	(0.94	)

Diluted	$	(0.14	)	$	(0.26	)	$	0.12		$	(0.94	)

Earnings per common share – discontinued operations
Basic	$	—		$	0.26		$	3.08		$	0.97

Diluted	$	—		$	0.26		$	3.03		$	0.97

(Loss) earnings per common share – net (loss) income
Basic	$	(0.14	)	$	0.00		$	3.20		$	0.03

Diluted	$	(0.14	)	$	0.00		$	3.15		$	0.03

Weighted average shares – basic		60,840			45,276			58,039			45,116

Weighted average shares - diluted		60,840			45,276			58,996			45,116


	Options			Nonvested Shares

Outstanding at January 1, 2010		8,369			1,069
Granted		153			692
Exercised and vested		(3,940	)		(925	)
Expired and forfeited		(292	)		(61	)

Outstanding at September 30, 2010		4,290			775


Options vested and expected to vest at September 30, 2010		4,203


Options exercisable at September 30, 2010		3,927


	January 29, 2010		December 31, 2009

Trade accounts receivable, net	$	11,886	$	15,026
Inventories		19,516		17,734
Other current assets		693		1,414

Current assets of discontinued operations	$	32,095	$	34,174

Property and equipment, net	$	12,621	$	12,703
Amortizable intangible assets, net		48,896		49,801

Non-current assets of discontinued operations	$	61,517	$	62,504

Trade accounts payable	$	700	$	2,875
Accrued expenses		5,763		10,394

Current liabilities of discontinued operations	$	6,463	$	13,269


(millions of dollars)
	Three Months Ended September 30,									Nine Months Ended September 30,

	2010			% Change			2009			2010			% Change			2009

Other (income) expense:
Investment income, net	$	(1.1	)		(3	)	$	(1.2	)	$	(2.9	)		(11	)	$	(3.3	)
Interest expense		1.4			(46	)		2.8			5.6			(36	)		8.8
Other-than-temporary investment impairment loss		0.9			n.m.			—			0.9			n.m.			—
Other, net		(0.1	)		n.m.			(0.2	)		(0.1	)		n.m.			(5.1	)

Total other (income) expense	$	1.1			(23	)	$	1.4		$	3.5			n.m.		$	0.4

n.m. – not meaningful


	•	~~The risk that we will experience operating losses for the foreseeable future and may never achieve profitability.~~

	•	The risk that we will not achieve success in our research and development efforts, including clinical trials conducted by us or our collaborative partners.


•	The risk that we may be unable to recruit and qualify a sufficient number of patients for our trials and/or there may be the need to delay, suspend or terminate trials for various reasons.

•	The risk that we will experience operating losses for the next several years.

•	The risk that there will be a decline in sales of one or more of the products sold by others from which we derive royalty revenues.

	•	Decisions by regulatory authorities regarding whether and when to approve our ~~or our collaborative partners’~~ regulatory applications.

	•	The risk that we will fail to obtain adequate financing to meet our future capital and financing needs.

	•	The risk that key personnel will leave our company.


Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs


July 1 – July 31, 2010		125,093	$	10.49		125,093	$	28,458,000

August 1 – August 31, 2010		335,000		10.48		335,000		24,948,000


September 1 – September 30, 2010		1,250,217		10.83		1,250,217		11,403,000

Total		1,710,310	$	10.74		1,710,310	$	11,403,000


	(1)	Share repurchase program announced December ~~3, 2009~~21, 2010 whereby Enzon’s board of directors authorized the repurchase of up to ~~$50.0~~$200.0 million of its outstanding shares of common stock. Through ~~September 30,~~December 31, 2010, the Company ~~has~~had repurchased ~~3,654,000~~30,000 shares at an average cost of ~~$10.56~~$12.45 per share for a total expenditure of ~~$38,597,000.~~$373,642.


Exhibit		Reference
Number	Description	No.

3(i)	Amended and Restated Certificate of Incorporation dated May 18, 2006, together with that Certificate of Amendment to the Amended and Restated Certificate of Incorporation date July 13, 2010	(1)
3(ii)	Second Amended and Restated By-laws effective March 11, 2011	(2)
4.1	Rights Agreement dated May 17, 2002 between the Company and Continental Stock Transfer & Trust Company, as rights agent	(3)
4.2	First Amendment to the Rights Agreement, dated as of February 19, 2003 between the Company and Continental Stock Transfer & Trust Company, as rights agent	(4)
4.3	Second Amendment to the Rights Agreement, dated as of January 7, 2008 between the Company and Continental Stock Transfer & Trust Company, as rights agent	(5)
4.4	Third Amendment to the Rights Agreement, dated as of July 23, 2009, between the Company and Continental Stock Transfer and Trust Company, as rights agent	(6)
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	*
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	*
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*


Exhibit Number	Description	Reference No.

3.1	Amended and Restated Certificate of Incorporation dated May 18, 2006, together with that Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated July 13, 2010.	(1)
3.2	Amended and Restated By-laws effective July 13, 2010.	(1)
4.1	Rights Agreement dated May 17, 2002 between the Company and Continental Stock Transfer & Trust Company, as rights agent.	(2)
4.2	First Amendment to the Rights Agreement, dated as of February 19, 2003 between the Company and Continental Stock Transfer & Trust Company, as rights agent.	(3)
4.3	Second Amendment to the Rights Agreement, dated as of January 7, 2008 between the Company and Continental Stock Transfer & Trust Company, as rights agent.	(4)
10.2	Consulting Agreement dated as of October 5, 2005, as amended, by and between the Company and Mark Ogden.	*
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*
32.2	Certification of Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*


(1)	~~Current~~Quarterly Report on Form ~~8-K~~10-Q for the quarter ended June 30, 2010 filed ~~July 13, 2010.~~August 9, 2010

(2)	Current Report on Form ~~8-A12G (File No. 000-12957)~~8-K filed ~~May 22, 2002.~~March 17, 2011

(3)	Form ~~8-A12G/A~~8-A12G (File No. 000-12957) filed ~~February 20, 2003.~~May 22, 2002

(4)	~~Current Report on~~ Form ~~8-K~~8-A12G/A (File No. 000-12957) filed February 20, 2003

(5)	Form 8-A12G/A (File No. 000-12957) filed January 8, ~~2008.~~2008

(6)	Form 8-A12G/A (File No. 000-12957) filed July 24, 2009


	ENZON PHARMACEUTICALS, INC.
		(Registrant)

Date: ~~November 4, 2010~~	~~By:~~May 6, 2011	/s/Ralph del Campo

		Ralph del Campo
		Chief Operating Officer
		(Principal Executive Officer)


Date: ~~November 4, 2010~~	~~By:~~May 6, 2011	/s/Mark L. Ogden

		Mark L. Ogden
		Vice President, Finance
		(Principal Financial Officer and
		Principal Accounting Officer)