Enzon Reports Second Quarter 2006 Results; Company Continues to Build a Promising Oncology Franchise

"Our results this quarter were strong, but more importantly, weare committed to our long-term goal of building a novel oncologybusiness." said Jeffrey H. Buchalter, chairman and chief executiveofficer of Enzon. "We are continuing to maximize the value of ouroncology products and have broadened our pipeline by licensingcompounds utilizing the broad LNA(R) technology platform in an effortto drive long-term, sustainable growth."

Financial Results

For the three months ended June 30, 2006, Enzon reported anadjusted net income of $7.9 million or $0.18 per diluted share, ascompared to an adjusted net loss of $(82.0) million or $(1.89) perdiluted share for the three months ended June 30, 2005. The June 2005adjusted net loss included $80.2 million of deferred income taxadjustments.

Highlights include:

-- The Company entered into a strategic collaboration with Santaris Pharma A/S to develop and commercialize a series of innovative RNA Antagonists based on Santaris's LNA(R) (locked nucleic acid) technology.

-- The Company today announced two updates from its oncology pipeline; first, the start of a phase I trial with Oncaspar(R) in combination with Gemzar(R) (gemcitabine HCl for Injection) in patients with advanced solid tumors and lymphomas and second, IND approval to begin a phase I/II trial with rhMBL in immunosuppressed patients with multiple myeloma who are undergoing chemotherapy or stem cell transplantation.

-- The Company recently reported on July 25, 2006, that the U.S. Food and Drug Administration approved an expanded label for Oncaspar to include use as a first-line treatment for patients with acute lymphoblastic leukemia (ALL).

-- The Company successfully refinanced the majority of its debt position. Enzon raised $275.0 million in an offering of new 4 percent convertible notes due 2013 (4% Notes) and repurchased $133.8 million of its existing 4 1/2 percent convertible notes due 2008 (4.5% Notes) during the quarter and an additional $137.6 million of 4.5% Notes in July 2006.

Revenues

The following table reflects the revenues generated by product andsegment for each of the three-month periods ended June 30, 2006 and2005.

Three Months Ended
(in thousands)
---------------------------------------
June 30, 2006 June 30, 2005 %Change
---------------------------------------
Products
--------
Oncaspar $ 7,543 $ 5,849 29%
Depocyt 1,936 1,653 17%
Abelcet 9,393 11,347 (17%)
Adagen 5,665 4,631 22%
---------------------------------------
Total Products 24,537 23,480 5%

Royalties 17,936 16,878 6%
Contract Manufacturing 5,131 3,309 55%
---------------------------------------
Total Revenues $ 47,604 $ 43,667 9%
=======================================

Products Segment

Products segment sales, comprised of sales of Oncaspar(R),Depocyt(R) , Abelcet(R) , and Adagen(R) , increased to $24.5 millionfor the three months ended June 30, 2006, from $23.5 million for thethree months ended June 30, 2005. The improved sales are mainlyattributable to an increase in volume for all products, exceptAbelcet.

Oncaspar (a PEG-enhanced version of a naturally occurring enzymecalled L-asparaginase) sales grew to $7.6 million or twenty-ninepercent for the three months ended June 30, 2006, as compared to $5.9million for the three months ended June 30, 2005. On July 25, 2006,the company announced it received approval of its supplementalBiologics License Application (sBLA) for Oncaspar for use in thefirst-line treatment of patients with ALL. In addition, Enzon iscontinuing to progress the new clinical program for Oncaspar byinitiating its first trial in a variety of solid tumors.

Sales of Depocyt, a sustained-release formulation of thechemotherapeutic agent cytarabine arabinoside or ara-C used for thetreatment of lymphomatous meningitis, increased to $1.9 million orseventeen percent for the three months ended June 30, 2006, ascompared to $1.7 million for the three months ended June 30, 2005.

Sales of Abelcet in the U.S. and Canada, a lipid complexformulation of amphotericin B used primarily in the hospital to treatimmuno-comprised patients with invasive fungal infections, for thethree months ended June 30, 2006 were $9.3 million, down seventeenpercent as compared to $11.3 million for the three months ended June30, 2005. The decrease was primarily the result of continuedcompetition that resulted in a decline in volume. The Companyanticipates increased competition from new therapeutics entering themarket later this year.

Sales of Adagen, an enzyme replacement therapy used to treatadenosine deaminase (ADA) deficiency in patients with severe combinedimmunodeficiency disease, increased twenty-two percent to $5.7 millionfor the three months ended June 30, 2006, as compared to $4.6 millionfor the three months ended June 30, 2005. This market has a very smallnumber of patients so quarter-to-quarter variability is not uncommon.

Royalties Segment

Revenues from the Company's Royalties segment for the three monthsended June 30, 2006 were $18.0 million, as compared to $16.9 millionfor the three months ended June 30, 2005, an increase of six percent.This includes the proceeds of $1.0 million on the sale of theCompany's SS1P program, an immunotoxin fusion protein, to CambridgeAntibody Technology. Royalties on PEG-INTRON, marketed bySchering-Plough, continue to comprise the majority of our royaltyrevenue.

Contract Manufacturing Segment

The Company's revenues from its Contract Manufacturing segmentwere $5.1 million for the three months ended June 30, 2006, ascompared to $3.4 million in the corresponding period of the prioryear. This includes contract manufacturing revenues related toservices the Company provides for customers who require injectableproducts, such as Abelcet for markets outside of Canada and the U.S.The fifty-five percent increase in revenue was mainly attributable tothe timing of third party shipments as stated last quarter. Theavailability of certain raw materials in March 2006 delayed theproduction in the first quarter of 2006 and the resulting revenues ofproducts that the Company manufactures. It is not uncommon for thetiming of the shipments to cause quarter-over-quarter fluctuations.

Cost of Sales and Contract Manufacturing

Cost of product sales and contract manufacturing as a percentageof revenues from product sales and contract manufacturing, decreasedto forty-two percent for the three months ended June 30, 2006, ascompared to fifty-one percent for the three months ended June 30,2005. This decrease relative to revenues was primarily attributable toincreased contract manufacturing volumes as well as favorable changesin product mix period over period.

Research and Development

The Company's research and development expenses were $9.5 millionfor the three months ended June 30, 2006, as compared to $5.5 millionfor the three months ended June 30, 2005. The increase wasattributable to initiation of new clinical programs in 2006, ascompared to organizational and research and development portfoliorestructuring that occurred in the second quarter of 2005. Enzon iscommitted to investing in research and development to build a leadingoncology business through the continued development of its currentportfolio, reinforcing its position as a scientific leader inPEGylation through its Customized Linker Technology(TM) platforms andstrategic in-licensing of innovative cancer programs, as demonstratedby our strategic collaboration with Santaris discussed above.

Selling, General and Administrative

Selling, general and administrative expenses decreased to $15.3million, or 13 percent, for the three months ended June 30, 2006, ascompared to $17.5 million for the three months ended June 30, 2005.The reduction is mainly attributable to more focused marketingspending in 2006. The Company will continue to invest in new selling,marketing, and other initiatives to further its objective ofdelivering long-term value, including improving its top-lineperformance by investing in its commercial operations.

Amortization of Acquired Intangible Assets

Amortization expense decreased by $3.2 million to $0.2 million forthe three months ended June 30, 2006, as compared to $3.4 million forthe three months ended June 30, 2005. This reduction was due to theimpairment of Abelcet-related intangible assets recorded in thequarter ended December 2005.

Other Income (Expense)

Net other income (expense) is comprised of investment income,interest expense, and other non-operating expenses. The Companyreported other income of approximately one million dollars for thethree months ended June 30, 2006, as compared to other expense ofnearly seven million dollars in the same period in the prior year. Theimprovement resulted primarily from the debt re-financing as theCompany recorded a gain of $4.4 million on the repurchase of the 4.5%Notes at a discount to par. This income was reduced by the partialwrite-off of the 4.5% Notes offering costs of $1.3 million.

Income Taxes

For the three months ended June 30, 2006, the Company recognized anominal amount of state and Canadian tax, whereas in the quarter endedJune 30, 2005, the Company recorded a non-cash charge of $80.2 millionincluding a deferred tax asset reserve of $68.2 million and theestablishment of a deferred tax liability of $10.6 million associatedwith goodwill. For 2006, the estimated effective annual U.S. incometax rate is zero due to the Company's projected taxable income andavailability of net operating loss carryforwards.

Cash and Investments

Total cash reserves are $369.6 million as of June 30, 2006, ascompared to $226.6 million as of December 31, 2005. The net increasein cash reserves was the result of the $275.0 million debtrefinancing, as well as cash inflows from operating activities and thefirst-quarter 2006 sale of Nektar shares. This increase in cash hasbeen partially offset by associated payments for the extinguishment of$133.8 million of the 4.5% Notes as well as the payment toSanofi-Aventis related to the previously announced reduction of theroyalty rates that the Company pays on Oncaspar sales. Cash reservesinclude cash, cash equivalents, short-term investments, and marketablesecurities. Subsequent to the quarter ended June 30, 2006, the Companyrepurchased the $137.6 million of its existing 4.5% Notes.

Reconciliation of GAAP net income (loss) to adjusted net income(loss)

The following table reconciles the Company's net income (loss) andnet income (loss) per diluted share as determined in accordance withU.S. generally accepted accounting principles (GAAP) to its adjustednet income (loss) and adjusted net income (loss) per diluted share forthe three months ended June 30, 2006 and 2005:

Three Months Ended
(in thousands, except per-share
amounts)
----------------------------------
June 30, 2006 June 30, 2005
---------------- -----------------
Net
income Net
per loss per
Net diluted Net diluted
income share loss share
------- -------- -------- --------
GAAP net income (loss) $10,987 $ 0.25 $(85,532) $(1.97)
Adjustments to GAAP net income
(loss):
Gain related to the repurchase of
debt(1) (3,113) (0.07) - -
Loss related to the sale of NPS
common stock, net of tax(2) - - 3,529 0.08
------- ------ -------- ------
Adjusted net income (loss)(3) $ 7,874 $ 0.18 $(82,003) $(1.89)
======= ====== ======== ======

(1) The Company's adjusted financial results for the second quarter of
2006 exclude a gain related to the repurchase of the 4.5% Notes at
a price of $965 (plus accrued interest) for each $1,000 principal
amount of notes tendered, offset by a write-off of related debt
offering costs.

(2) The Company's adjusted financial results for the June quarter of
2005 exclude a net-of-tax realized loss of $1.3 million and an
unrealized loss of $2.2 million related to a financial instrument
the Company formed to reduce its investment risk associated with
1.5 million shares of NPS Pharmaceuticals, Inc. (NPS) common stock
received in June 2003. The Company received the common stock under
a merger termination agreement with NPS.

(3) Adjusted net income (loss) and adjusted net income (loss) per
diluted share, as the Company defines them, may differ from
similarly named measures used by other entities, and consequently,
could be misleading unless all entities calculated and defined
such items in the same manner. The Company believes that
investors' understanding of its performance is enhanced by
disclosing adjusted net income (loss) and adjusted net income
(loss) per share reflecting adjustments for certain items that the
Company deems to be non- recurring.

Conference Call and Webcast

Enzon will be hosting a conference call August 1, 2006 at 9:00a.m. E.D.T. All interested parties may access the call by using thefollowing information:

Domestic Dial-In Number: (866) 585-6398
International Dial-In Number: (416) 849-9626
Access Code: Enzon

Enzon's conference call will also be webcast in a "listen only"mode via the Internet at http://www.vcall.com. Additionally, for thoseparties unable to listen at the time of Enzon's conference call, atelephone rebroadcast will be available following the call fromTuesday August 1, 2006, at approximately 12:00 p.m. E.D.T. Thisrebroadcast will end on August 8, 2006, at approximately 11:59 p.m.E.D.T. The rebroadcast may be accessed using the followinginformation:


Domestic Dial-In Number: (888) 566-0744
International Dial-In Number: (402) 220-1576
Access Code: 3575790

About Enzon

Enzon Pharmaceuticals, Inc. is a biopharmaceutical companydedicated to the development and commercialization of therapeutics totreat patients with cancer and adjacent diseases. Enzon's specializedsales force markets Abelcet(R), Oncaspar(R), Adagen(R), and Depocyt(R) in the United States. In addition, Enzon also receives royaltieson sales of PEG-INTRON(R), marketed by Schering-Plough Corporation,and MACUGEN(R), marketed by OSI Pharmaceuticals and Pfizer Inc.Enzon's product-driven strategy includes an extensive drug developmentprogram that leverages its proprietary technologies, including aCustomized Linker Technology(TM) PEGylation platform that utilizescustomized linkers designed to release compounds at a controlled rate.Enzon complements its internal research and development efforts withstrategic initiatives, such as partnerships designed to broaden itsrevenue base or provide access to promising new technologies orproduct development opportunities. The Company has also engaged incontract manufacturing opportunities with third parties to improve itsefficiency. Further information about Enzon and this press release canbe found on the Company's web site at www.enzon.com.

There are forward-looking statements contained herein, which canbe identified by the use of forward-looking terminology such as thewords "believes," "expects," "may," "will," "should", "potential,""anticipates," "plans" or "intends" and similar expressions. Suchforward-looking statements involve known and unknown risks,uncertainties and other factors that may cause actual results, eventsor 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 timing, success andcost of clinical studies and the ability to obtain regulatory approvalof products A more detailed discussion of these and other factors thatcould affect results is contained in our filings with the U.S.Securities and Exchange Commission, including our transition report onForm 10-K for the six-month period ended December 31, 2005. Thesefactors should be considered carefully and readers are cautioned notto place undue reliance on such forward-looking statements. Noassurance can be given that the future results covered by theforward-looking statements will be achieved. All information in thispress release is as of the date of this press release and Enzon doesnot intend to update this information.

(Financial information to follow)

Enzon Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months ended June 30, 2006 and 2005
(In thousands, except per share data)
(Unaudited)

June 30, June 30,
2006 2005
-------- ---------
Revenues:
Product sales, net $ 24,537 $ 23,480
Royalties 17,936 16,878
Contract manufacturing 5,131 3,309
-------- ---------
Total revenues 47,604 43,667
--------- ---------

Costs and expenses:
Cost of product sales and contract manufacturing 12,352 13,717
Research and development 9,466 5,567
Selling, general and administrative 15,247 17,565
Amortization of acquired intangible assets 185 3,356
Restructuring charge - 2,053
--------- ---------
Total costs and expenses 37,250 42,258
--------- ---------

Operating income 10,354 1,409
--------- ---------

Other income (expense):
Investment income, net 3,084 1,501
Interest expense (6,639) (4,958)
Other, net 4,476 (3,245)
--------- ---------
921 (6,702)
--------- ---------
Income (loss) before income tax provision 11,275 (5,293)
Income tax provision 288 80,239
--------- ---------
Net income (loss) $ 10,987 $(85,532)
========= =========

Earnings (loss) per common share - basic $ 0.25 $ (1.97)
========= =========
Earnings (loss) per common share - diluted $ 0.25 $ (1.97)
========= =========
Weighted average shares - basic 43,539 43,501
========= =========
Weighted average shares - diluted 43,539 43,501
========= =========


Enzon Pharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2006 and December 31, 2005
(In thousands)
(Unaudited)

June 30, December 31,
2006 2005
----------------------

Assets
Current assets:
Cash and short-term investments $ 332,530 $ 164,518
Accounts receivable, net 12,078 14,087
Inventories 17,575 16,014
Other current assets 8,322 12,596
----------------------
Total current assets 370,505 207,215
----------------------
Property and equipment, net 36,067 34,978
----------------------
Other assets:
Marketable securities 37,070 62,059
Amortizable intangible assets, net 65,112 34,154
Other long-term assets 7,365 2,939
----------------------
109,547 99,152
----------------------
Total assets $ 516,119 $ 341,345
=====================

Liabilities and Stockholders' Deficit
Current and other liabilities $ 29,355 $ 31,315
Notes payable 535,223 394,000
Stockholders' deficit (48,459) (83,970)
----------------------
Total liabilities and stockholders'
deficit $ 516,119 $ 341,345
======================

Common shares outstanding 43,762 43,787
======================