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 March 31, 2020
OR
|
¨ |
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission file number 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.) |
| |
|
| 20
Commerce Drive (Suite 135), Cranford, New Jersey |
07016 |
| (Address of principal executive
offices) |
(Zip
Code) |
(732) 980-4500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the Act:
None.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
x No ¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
| Large
accelerated filer ¨ |
|
Accelerated
filer ¨ |
| Non-accelerated filer
x |
| |
|
Smaller reporting company
x |
| |
|
Emerging growth company
¨ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Shares of Common Stock outstanding as of April 24, 2020:
44,214,603
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| |
|
March 31,
2020 |
|
|
December 31,
2019 |
|
| |
|
|
(Unaudited) |
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,144 |
|
|
$ |
5,446 |
|
|
Refundable tax credits receivable, current portion |
|
|
970 |
|
|
|
485 |
|
|
Other current assets |
|
|
123 |
|
|
|
62 |
|
| Total
current assets |
|
|
6,237 |
|
|
|
5,993 |
|
|
Refundable tax credits receivable, net of current portion |
|
|
- |
|
|
|
485 |
|
| |
|
|
|
|
|
|
|
|
| Total
assets |
|
$ |
6,237 |
|
|
$ |
6,478 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
322 |
|
|
$ |
324 |
|
|
Accrued expenses and other current liabilities |
|
|
102 |
|
|
|
99 |
|
|
Total current liabilities |
|
|
424 |
|
|
|
423 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and
contingencies |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
Preferred stock - $0.01 par value, authorized 3,000,000 shares; no
shares issued and outstanding at March 31, 2020 and December 31,
2019 |
|
|
- |
|
|
|
- |
|
| Common
stock - $0.01 par value, authorized 170,000,000 shares; issued and
outstanding 44,214,603 shares at March 31, 2020 and December 31,
2019 |
|
|
442 |
|
|
|
442 |
|
|
Additional paid-in capital |
|
|
75,690 |
|
|
|
75,690 |
|
|
Accumulated deficit |
|
|
(70,319 |
) |
|
|
(70,077 |
) |
|
Total stockholders’ equity |
|
|
5,813 |
|
|
|
6,055 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
6,237 |
|
|
$ |
6,478 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| |
|
Three
months ended |
|
| |
|
March 31, |
|
| |
|
2020 |
|
|
2019 |
|
| Revenues: |
|
|
|
|
|
|
|
Royalties, net |
|
$ |
2 |
|
|
$ |
(51 |
) |
|
Total revenues |
|
|
2 |
|
|
|
(51 |
) |
| |
|
|
|
|
|
|
|
|
| Operating
expenses: |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
242 |
|
|
|
318 |
|
|
Total operating expenses |
|
|
242 |
|
|
|
318 |
|
| |
|
|
|
|
|
|
|
|
| Operating loss and
loss before income tax expense |
|
|
(240 |
) |
|
|
(369 |
) |
| |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
2 |
|
|
|
2 |
|
|
Net loss |
|
$ |
(242 |
) |
|
$ |
(371 |
) |
| |
|
|
|
|
|
|
|
|
| Loss per common share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
Diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
| |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding – basic |
|
|
44,215 |
|
|
|
44,215 |
|
|
Weighted-average shares outstanding – diluted |
|
|
44,215 |
|
|
|
44,215 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(In thousands)
(Unaudited)
| |
|
Common Stock |
|
|
Additional |
|
|
|
|
|
|
|
| |
|
Number of |
|
|
Par |
|
|
Paid-in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
Balance, December 31, 2018 |
|
|
44,215 |
|
|
$ |
442 |
|
|
$ |
83,649 |
|
|
$ |
(69,098 |
) |
|
$ |
14,993 |
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(371 |
) |
|
|
(371 |
) |
|
Common stock dividend |
|
|
|
|
|
|
|
|
|
|
(2,653 |
) |
|
|
|
|
|
|
(2,653 |
) |
|
Balance, March 31, 2019 |
|
|
44,215 |
|
|
$ |
442 |
|
|
$ |
80,996 |
|
|
$ |
(69,469 |
) |
|
$ |
11,969 |
|
| |
|
Common Stock |
|
|
Additional |
|
|
|
|
|
|
|
| |
|
Number of |
|
|
Par |
|
|
Paid-in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
Balance, December 31, 2019 |
|
|
44,215 |
|
|
$ |
442 |
|
|
$ |
75,690 |
|
|
$ |
(70,077 |
) |
|
$ |
6,055 |
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(242 |
) |
|
|
(242 |
) |
|
Balance, March 31, 2020 |
|
|
44,215 |
|
|
$ |
442 |
|
|
$ |
75,690 |
|
|
$ |
(70,319 |
) |
|
$ |
5,813 |
|
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)
| |
|
Three
months ended |
|
| |
|
March 31, |
|
| |
|
2020 |
|
|
2019 |
|
| Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(242 |
) |
|
$ |
(371 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities |
|
|
(60 |
) |
|
|
82 |
|
|
Net cash used in operating activities |
|
|
(302 |
) |
|
|
(289 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
|
Common stock dividends |
|
|
- |
|
|
|
(2,653 |
) |
|
Net cash used in
financing activities |
|
|
- |
|
|
|
(2,653 |
) |
| |
|
|
|
|
|
|
|
|
| Net decrease in
cash |
|
|
(302 |
) |
|
|
(2,942 |
) |
| |
|
|
|
|
|
|
|
|
| Cash beginning of
period |
|
|
5,446 |
|
|
|
6,500 |
|
| |
|
|
|
|
|
|
|
|
| Cash end of
period |
|
$ |
5,144 |
|
|
$ |
3,558 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (1) |
Description of Business |
Enzon Pharmaceuticals, Inc. (together with its subsidiaries,
“Enzon” or the “Company,” “we” or “us”), manages its sources of
royalty revenues from existing licensing arrangements with other
companies primarily related to sales of certain drug products that
utilize Enzon’s proprietary technology.
Prior to 2017, the primary source of the Company’s royalty revenues
was derived from sales of PegIntron, which is marketed by
Merck & Co., Inc. (“Merck”). The Company currently has no
clinical operations and limited corporate operations. The Company has no intention of resuming
any clinical development activities or acquiring new sources of
royalty revenues. In the first quarter of 2020, net royalties from
PegIntron were $1,752. In the first quarter of 2019, net royalties
from PegIntron were negative $51,000, due to returns and rebates
exceeding the amount of royalties earned.
At December 31, 2019, as asserted by Merck, the Company had a
liability to Merck of approximately $324,000, due primarily to
product returns and rebates. With the net royalties earned in the
first quarter of 2020, this amount decreased to approximately
$322,000 at March 31, 2020. See Note 12 to the Condensed
Consolidated Financial Statements.
In April 2013, the Company announced that it intended to distribute
excess cash, expected to arise from ongoing royalty revenues, in
the form of periodic dividends to stockholders. (See Note 7 to the
Condensed Consolidated Financial Statements) On February 4, 2016,
the Company’s Board adopted a Plan of Liquidation and Dissolution
(the “Plan of Liquidation and Dissolution”), the implementation of
which has been postponed. (See Note 11 to the Condensed
Consolidated Financial Statements)
On January 30, 2019, the
Company entered into a letter agreement with Servier, a wholly
owned indirect subsidiary of Les Laboratoires Servier, in
connection with the asset purchase agreement dated as of November
9, 2009 (the “Asset Purchase Agreement”), by and between Klee
Pharmaceuticals, Inc., Defiante Farmacêutica, S.A. (“Defiante”) and
Sigma-Tau, on the one hand, and the Company, on the other hand.
Under the letter agreement, Servier, as successor-in-interest to
Defiante, confirmed its obligation to pay the Company a $7.0
million milestone payment related to SC Oncaspar as a result of the
FDA’s December 20, 2018 approval of calaspargase pegol – mknl
(brand name ASPARLAS™) as a component of a multi-agent
chemotherapeutic regimen for the treatment of acute lymphoblastic
leukemia in pediatric and young adult patients age 1 month to 21
years. In addition, under the letter agreement, the Company agreed
to waive Servier’s obligations to pursue the development of SC
Oncaspar in Europe and the approval of SC Oncaspar by the European
Medicines Agency (“EMEA”) under the Asset Purchase Agreement,
provided that the Company did not waive Servier’s obligation to
make any applicable milestone payment to the Company upon EMEA
approval, if any, of SC Oncaspar. Servier was required to make the
$7.0 million milestone payment to the Company within three business
days following the parties’ completion of procedures for claiming
benefits under the double tax treaty between the United States and
the United Kingdom. That amount was recorded by the Company as a
current receivable at March 31, 2019. The Company received the $7.0
million payment in July 2019.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company has a marketing
agreement with Micromet AG (“Micromet”), now part of Amgen, Inc.
(the “Micromet Marketing Agreement”), that was entered into in 2004
under which Micromet is the exclusive marketer of the parties’
combined intellectual property portfolio in the field of
single-chain antibody technology. Under the Micromet
Marketing Agreement, the parties agreed to share, on an equal
basis, in any licensing fees, milestone payments and royalty
revenue received by Micromet in connection with any licenses of the
patents within the portfolio by Micromet to any third party during
the term of the collaboration. To the Company’s knowledge, Micromet
has a license agreement with Viventia Biotech (Barbados) Inc.
(“Viventia”), now part of Sesen Bio, Inc. (“Sesen”), that was
entered into in 2005, under which Micromet granted Viventia
nonexclusive rights, with certain sublicense rights, for know-how
and patents allowing exploitation of certain single chain antibody
products, which patents cover some key aspects of Vicinium, one of
Sesen’s drug candidates that is in Phase 3 clinical trials being
evaluated for the treatment of patients with non-muscle invasive
bladder cancer and in Phase 1 and 2 clinical trials for the
treatment of head and neck cancer. To the Company’s knowledge,
under the terms of this license agreement between Micromet and
Viventia, Micromet is entitled to receive (i) certain milestone
payments with respect to the filing of a new drug application for
Vicinium with the FDA or the filing of a marketing approval
application for Vicinium with the EMEA; (ii) certain milestone
payments with respect to the first commercial sale of Vicinium in
the U.S. or Europe and (iii) certain royalties on net sales for ten
years from the first commercial sale of Vicinium on a country by
country basis. Pursuant to the Micromet Marketing Agreement, the
Company would be entitled to a 50% share of these milestone
payments and royalties received by Micromet. Due to the challenges
associated with developing and obtaining approval for drug
products, there is substantial uncertainty whether any of these
milestones will be achieved. The Company also has no control over
the time, resources and effort that Sesen may devote to its
programs and limited access to information regarding or resulting
from such programs. Accordingly, there can be no assurance that the
Company will receive any of the milestone or royalty payments under
the Micromet Marketing Agreement. The Company will not recognize
revenue until all revenue recognition requirements are
met.
The Company maintains its principal executive offices at 20
Commerce Drive, Suite 135, Cranford, New Jersey, 07016 through a
lease agreement for space and services with Regus Management Group,
LLC (“Regus”) and also has an office facility at 3556 Main Street,
Manchester, VT, 05225 pursuant to an office rental agreement with
Equinox Junior, LLC (“Equinox”). See Note 10 to the Condensed
Consolidated Financial Statements.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (2) |
Basis of Presentation |
Interim Financial Statements
The accompanying unaudited condensed consolidated financial
statements have been prepared from the books and records of the
Company in accordance with United States generally accepted
accounting principles (U.S. GAAP) for interim financial information
and Rule 10-01 of Regulation S-X promulgated by the U.S. Securities
and Exchange Commission (the “SEC”). Accordingly, these financial
statements do not include all of the information and footnotes
required for complete annual financial statements. Interim results
are not necessarily indicative of the results that may be expected
for the full year. Interim condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2019.
Principles of Consolidation
The condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
intercompany balances and transactions have been eliminated as part
of the consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions
that affect reported amounts of assets and liabilities, disclosures
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. These estimates include legal and
contractual contingencies and income taxes. Although management
bases its estimates on historical experience, relevant current
information and various other assumptions that are believed to be
reasonable under the circumstances, actual results could differ
from these estimates.
Revenue Recognition
Royalty revenues from the Company’s agreements with third parties
are recognized when the Company can reasonably determine the
amounts earned. In most cases, this will be upon notification from
the third-party licensee, which is typically during the quarter
following the quarter in which the sales occurred. The Company does
not participate in the selling or marketing of products for which
it receives royalties. No provision for uncollectible accounts is
established upon recognition of revenues.
Contingent payments due under the asset purchase agreement for the
sale of the Company’s former specialty pharmaceutical business are
recognized as revenue when the milestone has been achieved and
collection is assured, such payments are non-refundable and no
further effort is required on the part of the Company or the other
party to complete the earning process.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be realized. The effect of a change in tax rates or
laws on deferred tax assets and liabilities is recognized in
operations in the period that includes the enactment date of the
rate change. A valuation allowance is established to reduce the
deferred tax assets to the amounts that are more likely than not to
be realized from operations.
Tax benefits of uncertain tax positions are recognized only if it
is more likely than not that the Company will be able to sustain a
position taken on an income tax return. The Company has no
liability for uncertain tax positions. Interest and penalties, if
any, related to unrecognized tax benefits, would be recognized as
income tax expense.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (3) |
Recent Accounting Pronouncements
|
Recent Accounting Standards Updates (“ASUs”) issued by the
Financial Accounting Standards Board (“FASB”) and guidance issued
by the Securities and Exchange Commission did not, or are not
believed by management to, have a material effect on the Company’s
present or future Condensed Consolidated Financial Statements.
| (4) |
Financial Instruments and Fair
Value |
The carrying values of cash, other current assets, accounts
payable, accrued expenses and other current liabilities in the
Company’s condensed consolidated balance sheets approximated their
fair values at March 31, 2020 and December 31, 2019 due to their
short-term nature.
| (5) |
Supplemental Cash Flow
Information |
The Company made income tax payments of $0 and $2,000 during the
three months ended March 31, 2020 and 2019, respectively. There
were no interest payments made during the three months ended March
31, 2020 or 2019.
| (6) |
Loss Per Common Share |
Basic loss per common share is computed by dividing the net income
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 or
performance vesting period has been completed.
For purposes of calculating diluted earnings per common share, the
denominator normally includes both the weighted-average number of
shares of common stock outstanding and the number of common stock
equivalents if the inclusion of such common stock equivalents is
dilutive. Because a loss was incurred in each of the quarters ended
March 31, 2019 and 2020, common stock equivalents would be
anti-dilutive and, accordingly, were excluded from the calculation
of diluted loss per share in each of the periods. Dilutive common
stock equivalents potentially include stock options and nonvested
shares using the treasury stock method and shares issuable under
the employee stock purchase plan (ESPP). During each of the
three-month periods ended March 31, 2020 and 2019, there were no
common stock equivalents. Loss per common share information is as
follows (in thousands, except per share amounts) for the three
months ended March 31, 2020 and 2019:
| |
|
Three months ended
March 31, |
|
| |
|
2020 |
|
|
2019 |
|
|
Loss Per Common Share – Basic and Diluted: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(242 |
) |
|
$ |
(371 |
) |
| |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
44,215 |
|
|
|
44,215 |
|
| |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
At March 31, 2020 and 2019, there were 41,787 potentially dilutive
securities outstanding that have been excluded from the calculation
of dilutive weighted average shares outstanding, as they would be
anti-dilutive.
On January 30, 2019, the Board of Directors of the Company declared
a special cash dividend of $0.06 per share of the Company’s common
stock, aggregating approximately $2,653,000, which was paid on
March 21, 2019 to stockholders of record as of the close of
business on February 21, 2019.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stock Options and Restricted Stock Units (RSUs or Nonvested
Shares)
During the quarter ended March 31, 2020 no options were granted and
the Company incurred no stock-based compensation expense. No RSUs
were outstanding as of March 31, 2020.
There were no options granted during the three months ended March
31, 2019 and no nonvested shares granted or outstanding during the
three months ended March 31, 2019. The Company uses historical data
to estimate forfeiture rates.
Activity related to stock options and nonvested shares during the
three months ended March 31, 2020 and related balances outstanding
as of that date are reflected below:
| |
|
Stock |
|
| |
|
Options |
|
| Outstanding at January 1,
2020 |
|
|
41,787 |
|
| Granted |
|
|
- |
|
|
Exercised and vested |
|
|
- |
|
|
Expired and forfeited |
|
|
- |
|
| Outstanding at
March 31, 2020 |
|
|
41,787 |
|
| |
|
|
|
|
| Options
vested and expected to vest at March 31, 2020 |
|
|
41,787 |
|
| |
|
|
|
|
| Options
exercisable at March 31, 2020 |
|
|
41,787 |
|
During each of the three-month periods ended March 31, 2020 and
2019, the Company recorded approximately $2,000 and $2,000,
respectively, of income tax expense for NJ state income tax.
The Company continues to provide a valuation allowance against all
of its deferred tax assets, as the Company believes it is more
likely than not that its deferred tax assets will not be realized.
Management of the Company will continue to assess the need for this
valuation allowance and will make adjustments when appropriate.
Tax benefits of uncertain tax positions are recognized only if it
is more likely than not that the Company will be able to sustain a
position taken on an income tax return. The Company has no
liability for uncertain tax positions. Interest and penalties, if
any, related to unrecognized tax benefits, would be recognized as
income tax expense.
On December 22, 2017, the Tax Cuts and
Jobs Act (the “Act”) was signed into law. Among its numerous
changes to the Internal Revenue Code, the Act allowed companies
with existing alternative minimum tax credit (“MTC”) carryforwards
as of December 31, 2017 to receive refunds of the credits in tax
years after 2017 and before 2022 in an amount equal to 50% (100% in
2021) of the excess MTC over the amount of the credit allowable for
the year against regular tax liability. As a result of the
Act’s provision allowing for the refund of MTC, the Company had
recorded $485,000 as a long-term receivable and $485,000 as a
current receivable as of December 31, 2019. As a result of
provision in the Coronavirus Aid, Relief and Economic Security Act
(the “CARES Act”) that was signed into law on March 27, 2020, the
Company was able to reclassify the remaining long-term receivable
of $485,000 as a current receivable as of March 31, 2020.
The CARES Act also provides for an
indefinite carryforward period and 5 year carryback period for net
operating losses generated after 2017 but before 2021 and
removes the annual utilization limit of 80% of taxable income and
allows the net operating losses to offset 100% of taxable income
during this period. Net operating losses generated prior to 2018
continue to be carried forward for 20 years and have no 80%
limitation on utilization.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (10) |
Commitments and Contingent
Liabilities |
In December 2019, an outbreak of a novel strain
of coronavirus (COVID-19) was reported in Wuhan, China.
On March 11, 2020, the World Health Organization characterized the
global spread of COVID-19 as a pandemic. In an effort to slow the
spread of the virus, the United States and many other countries
around the world imposed restrictions on non-essential work
activities, travel and mass gatherings. It is not known when and
the extent to which these restrictions will be eased or the
ultimate impact these unprecedented actions will have on the
Company’s financial condition and prospects. At the present time,
the Company’s business activities have been largely unaffected by
COVID 19 restrictions as the Company’s workforce is comprised
solely of independent contractors who are able to perform their
duties remotely. However, these restrictions may impact the third
parties who are responsible for obtaining final approval of and
manufacturing product candidates for which we share the right to receive
licensing fees, milestone payments and royalty revenues. If those
third parties are required to curtail their business activities for
a significant time, or if global supply chain
disruptions impact their ability to procure needed
resources, raw materials or components, the Company’s right to
receive licensing fees, milestone payments or royalties could be
materially and adversely affected. Additionally, the development
timeline for product candidates being developed by third parties
that are pending FDA approval could be delayed if the agency is
required to shift resources to the review and approval of
candidates for treatment of COVID 19.
Effective March 1, 2018, the Company renewed its office service
agreement with Regus Management Group, LLC (“Regus”) for its
principal executive offices at 20 Commerce Drive, Suite 135,
Cranford, New Jersey, 07016. This agreement was renewed until
February 28, 2019, for a monthly fee of $1,259. In June 2018, the
Company and Regus agreed to end the lease on August 31, 2018, and
replace it with an updated office service agreement. Effective
September 1, 2018, the Company entered into an office service
agreement with Regus for mailbox plus, telephone answering, and
virtual office services. Under the agreement, in exchange for the
services provided by Regus, the Company was required to pay Regus
an initial service retainer of $259 and thereafter pay Regus a
monthly fee of $259 until August 31, 2019. The term of this
agreement was extended until August 31, 2020 at a monthly fee of
$259.
Effective July 1, 2018, the Company entered into an office rental
agreement with Equinox Junior LLC (“Equinox”) for use of office
space at 3556 Main Street, Manchester, VT, 05225. Under this
agreement, in exchange for the Company’s right to use the office
space at this location, the Company was required to pay Equinox a
monthly fee of $708 until June 30, 2019. The term of this agreement
was extended until June 30, 2020 at a monthly fee of $729. The
Company has notified Equinox that it will not be renewing the
office rental agreement.
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.
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (11) |
Plan of Liquidation and
Dissolution |
On February 4, 2016, the Company’s Board of Directors adopted a
Plan of Liquidation and Dissolution (the “Plan of Liquidation and
Dissolution”), pursuant to which the Company would, subject to
obtaining requisite stockholder approval, be liquidated and
dissolved in accordance with Sections 280 and 281 (a) of the
General Corporation Law of the State of Delaware. In approving the
Plan of Liquidation and Dissolution, the Company’s Board of
Directors had considered, among other factors, the ability of the
Company to obtain no-action relief from the SEC to suspend certain
of the Company’s reporting obligations under the Securities
Exchange Act of 1934, as amended, and the anticipated cost savings
if such relief is granted by the SEC. After further consideration,
the Company’s Board of Directors determined that it would be fair,
advisable and in the best interests of the Company and its
stockholders to postpone seeking stockholder approval of the Plan
of Liquidation and Dissolution until a later time to be determined
by the Company’s Board of Directors.
From time to time, the Company’s Board of Directors reviews the
Company’s status and prospects in deciding on the timing of
dissolution and liquidation of the Company pursuant to the Plan of
Liquidation and Dissolution. If the Company’s Board of
Directors determines to seek stockholder approval of such plan
and such plan is approved by the Company’s stockholders and
implemented by the Company, it is expected that the Company’s
corporate existence will continue for the purpose of winding up its
business and affairs for at least three years. The Company has
forecasted minimal or no royalty or milestone revenues for the
foreseeable future. In light of the uncertainty as to whether any
of the milestones under the Micromet Marketing Agreement would be
achieved, this forecast assumes that the Company would not receive
any milestone or royalty payments under the Micromet Marketing
Agreement.
As of December 31, 2019, according to Merck, the Company had a net
liability to Merck (net of a 25% royalty interest that the Company
had previously sold) aggregating approximately $324,000. This was
based on Merck’s assertions regarding the net result of
overpayments, rebates and returns related to prior periods sales of
PegIntron. Merck expected to recoup such overpayments through
reductions of future royalties earned by the Company.
In the first quarter of 2020, as reported by Merck, net royalties
from PegIntron were approximately $2,000. As such, as asserted by
Merck, the Company’s liability to Merck was approximately $322,000
at March 31, 2020. The Company believes that it will receive no
more royalties from Merck, but may be charged with additional
chargebacks from returns and rebates in amounts that, based on
current estimates, are not expected to be material.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Unless the context requires otherwise, references in this Quarterly
Report on Form 10-Q to “Enzon,” the “Company,” “we,” “us,” or “our”
and similar terms mean Enzon Pharmaceuticals, Inc. and its
subsidiaries. The following discussion of our financial condition
and results of operations should be read together with our
consolidated financial statements and notes to those statements
included elsewhere in this Quarterly Report on Form 10-Q and our
2019 Annual Report on Form 10-K.
Forward-Looking Information and Factors That May Affect Future
Results
The following discussion contains forward-looking statements within
the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. All statements contained in the following
discussion, other than statements that are purely historical, are
forward-looking statements. Forward-looking statements can be
identified by the use of forward-looking terminology such as
“believes,” “expects,” “may,” “will,” “should,” “potential,”
“anticipates,” “plans,” or “intends” or the negative thereof, or
other variations thereof, or comparable terminology, or by
discussions of strategy. Forward-looking statements are based upon
management’s present expectations, objectives, anticipations,
plans, hopes, beliefs, intentions or strategies regarding the
future and are subject to known and unknown risks and uncertainties
that could cause actual results, events or developments to be
materially different from those indicated in such forward-looking
statements, including the risks and uncertainties set forth in Item
1A. Risk Factors in our 2019 Annual Report on Form 10-K. These
risks and uncertainties should be considered carefully and readers
are cautioned not to place undue reliance on such forward-looking
statements. As such, no assurance can be given that the future
results covered by the forward-looking statements will be
achieved.
The percentage changes throughout the following discussion are
based on amounts stated in thousands of dollars and not the rounded
millions of dollars reflected in this section.
Overview
We manage our sources of royalty revenues from existing licensing
arrangements with other companies primarily related to sales of
certain drug products that utilize our proprietary technology.
Prior to 2017, the primary source of our royalty
revenues was derived from sales of PegIntron, which is marketed by
Merck & Co., Inc. (“Merck”). We currently have no clinical
operations and limited corporate operations. We have no intention of resuming any
clinical development activities or acquiring new sources of royalty
revenues. In the three months ended March 31, 2020, we earned
approximately $2,000 in net royalties from sales of PegIntron.
At December 31, 2019, we had a liability to Merck of approximately
$324,000, due primarily to product returns and rebates. In the
quarter ended March 31, 2020, we earned approximately $2,000 in net
PegIntron royalties. Accordingly, at March 31, 2020, we decreased
our liability to Merck to approximately $322,000, as discussed in
Note 12 to the Condensed Consolidated Financial Statements.
We wound down our remaining research and development activities
during 2013 and we have no intention of resuming any clinical
development activities or acquiring new sources of royalty
revenues.
In April 2013, we announced that we intended to distribute excess
cash, expected to arise from royalty revenues, in the form of
periodic dividends to stockholders. (See Note 7 to the Condensed
Consolidated Financial Statements.)
On February 4, 2016, our Board adopted a Plan of Liquidation and
Dissolution (the “Plan of Liquidation and Dissolution”), the
implementation of which has been postponed. (See Note 11 to the
Condensed Consolidated Financial Statements.)
On
January 30, 2019, we entered into a letter agreement with Servier,
in connection with the Asset Purchase Agreement, by and between
Klee Pharmaceuticals, Inc., Defiante and Sigma-Tau, on the one
hand, and the Company, on the other hand. Under the letter
agreement, Servier, as successor-in-interest to Defiante, has
confirmed its obligation to pay us a $7.0 million milestone payment
related to SC Oncaspar as a result of the FDA’s December 20, 2018
approval of calaspargase pegol – mknl (brand name ASPARLAS™) as a
component of a multi-agent chemotherapeutic regimen for the
treatment of acute lymphoblastic leukemia in pediatric and young
adult patients age 1 month to 21 years. In addition, under the
letter agreement, we agreed to waive Servier’s obligations to
pursue the development of SC Oncaspar in Europe and the approval of
SC Oncaspar by the EMEA under the Asset Purchase Agreement,
provided that we are not waiving Servier’s obligation to make any
applicable milestone payment to us upon EMEA approval, if any, of
SC Oncaspar. Servier was required to pay the $7.0 million milestone
payment to us within three business days following the parties’
completion of procedures for claiming benefits under the double tax
treaty between the United States and the United Kingdom. We expect
to receive the $7.0 million milestone payment from Servier by the
third quarter of 2019. Accordingly, we recorded a current milestone
receivable at March 31, 2019. The $7.0 million payment was received in
July 2019.
We may be entitled to certain
potential future milestone payments and royalties, contingent upon
the achievement of certain regulatory approval-related milestones
and sales by third-party licensees. There can be no assurance that
the Company will receive any milestone payments resulting from its
agreements with any of our third-party licensees or that any sales
of related products will be made. We will not recognize
revenue from any of our third-party
licensees until all revenue recognition requirements are
met.
We have a marketing agreement
with Micromet AG (“Micromet”), now part of Amgen, Inc. (the
“Micromet Marketing Agreement”), that was entered into in 2004
under which Micromet is the exclusive marketer of the parties’
combined intellectual property portfolio in the field of
single-chain antibody technology. Under the Micromet
Marketing Agreement, the parties agreed to share, on an equal
basis, in any licensing fees, milestone payments and royalty
revenue received by Micromet in connection with any licenses of the
patents within the portfolio by Micromet to any third party during
the term of the collaboration. To our knowledge, Micromet has a
license agreement with Viventia Biotech (Barbados) Inc.
(“Viventia”), now part of Sesen Bio, Inc. (“Sesen”), that was
entered into in 2005, under which Micromet granted Viventia
nonexclusive rights, with certain sublicense rights, for know-how
and patents allowing exploitation of certain single chain antibody
products, which patents cover some key aspects of Vicinium, one of
Sesen’s drug candidates that is in Phase 3 clinical trials being
evaluated for the treatment of patients with non-muscle invasive
bladder cancer. To our knowledge, under the terms of this license
agreement between Micromet and Viventia, Micromet is entitled to
receive (i) certain milestone payments with respect to the filing
of a new drug application for Vicinium with the FDA or the filing
of a marketing approval application for Vicinium with the EMEA;
(ii) certain milestone payments with respect to the first
commercial sale of Vicinium in the U.S. or Europe and (iii) certain
royalties on net sales for ten years from the first commercial sale
of Vicinium. Pursuant to the Micromet Marketing Agreement, we would
be entitled to a 50% share of these milestone payments and
royalties received by Micromet. Due to the challenges associated
with developing and obtaining approval for drug products, there is
substantial uncertainty whether any of these milestones will be
achieved. We also have no control over the time, resources and
effort that Sesen may devote to its programs and limited access to
information regarding or resulting from such programs. Accordingly,
there can be no assurance that we will receive any of the milestone
or royalty payments under the Micromet Marketing Agreement. We will
not recognize revenue until all revenue recognition requirements
are met.
Effective March 1, 2018, we renewed our office service agreement
with Regus Management Group, LLC (“Regus”) for our principal
executive offices at 20 Commerce Drive, Suite 135, Cranford, New
Jersey, 07016. This agreement was renewed until February 28, 2019,
for a monthly fee of $1,259. In June 2018, we and Regus agreed to
end the lease on August 31, 2018, and replace it with an updated
office service agreement. Effective September 1, 2018, we entered
into an office service agreement with Regus for mailbox plus,
telephone answering, and virtual office services. Under the
agreement, in exchange for the services provided by Regus, we were
required to pay Regus an initial service retainer of $259 and
thereafter pay Regus a monthly fee of $259 until August 31,
2019. The term of this agreement was extended until August 31,
2020 at a monthly fee of $259.
Effective July 1, 2018, we entered into an office rental agreement
with Equinox for use of office space at 3556 Main Street,
Manchester, VT, 05225. Under this agreement, in exchange for our
right to use the office space at this location, we were required to
pay Equinox a monthly fee of $708 until June 30, 2019. The term of
this agreement was extended until June 30, 2020 at a monthly fee of
$729. The Company has notified Equinox that it will not be renewing
the office rental agreement.
Plan of Dissolution
On February 4, 2016, our Board of Directors adopted a Plan of
Liquidation and Dissolution (the “Plan of Liquidation and
Dissolution”), pursuant to which we would, subject to obtaining
requisite stockholder approval, be liquidated and dissolved in
accordance with Sections 280 and 281(a) of the General Corporation
Law of the State of Delaware. In approving the Plan of Liquidation
and Dissolution, our Board of Directors had considered, among other
factors, our ability to obtain no-action relief from the Securities
and Exchange Commission (the “SEC”) to suspend certain of our
reporting obligations under the Securities Exchange Act of 1934, as
amended, and the anticipated cost savings if such relief is granted
by the SEC. Upon further review, our Board of Directors determined
that it would be fair, advisable and in our best interests and our
stockholders to postpone seeking stockholder approval of the Plan
of Liquidation and Dissolution until a later time to be determined
by our Board of Directors.
From time to time, our Board
of Directors reviews the Company’s status and prospects in deciding
on the timing of dissolution and liquidation of the Company
pursuant to the Plan of Liquidation and Dissolution. If our Board
of Directors determines to seek stockholder approval of such
plan and such plan is approved by our stockholders and implemented
by the Company, it is expected that our corporate existence will
continue for the purpose of winding up our business and affairs
for at least three years. We have forecasted minimal or no
royalty or milestone revenues for the foreseeable future. In light
of the uncertainty as to whether any of the milestones under the
Micromet Marketing Agreement would be achieved, this forecast
assumes that we would not receive any milestone or royalty payments
under the Micromet Marketing Agreement.
Throughout this Management’s Discussion and Analysis, the
primary focus is on our results of operations, cash flows and
financial condition. The percentage changes throughout the
following discussion are based on amounts stated in thousands of
dollars.
Results of Operations
Revenues:
Royalties (in thousands of dollars):
| |
|
Three Months Ended
March 31, |
|
| |
|
2020 |
|
|
Percent
Change |
|
|
2019 |
|
| Royalty
revenue |
|
$ |
2 |
|
|
|
100 |
% |
|
$ |
- |
|
|
Less: Adjustment by Merck for returns and rebates |
|
|
- |
|
|
|
(100 |
)% |
|
|
(51 |
) |
| |
|
$ |
2 |
|
|
|
104 |
% |
|
$ |
(51 |
) |
Royalty revenues from sales of PegIntron by Merck accounted for
100% of our total royalty revenues for the three-month period ended
March 31, 2020. In the first quarter of 2019, our net royalties
from PegIntron were negative $51,000, due to returns and rebates
exceeding the amount of royalties earned. Royalty revenues from
Merck have been declining sharply. There are multiple oral drug
therapies, both available and in development, that have been
effective for treatment of hepatitis C that do not require
interferon. As a result, it is likely that sales of
PegIntron-related products will continue their declining trend and
we expect to receive little or no future royalties from Merck.
Our right to receive royalties from sales of PegIntron
expired in the U.S. in 2016, expired in Europe in 2018 and will
expire in Malaysia in 2020, Japan in 2021 and Chile in 2024.
Merck has not yet reported royalty revenues earned by us for
product sales and/or recoupments for returns and rebates for the
quarter ended March 31, 2020.
Operating Expenses:
General and Administrative (in thousands of
dollars):
| |
|
Three Months Ended March 31, |
|
| |
|
2020 |
|
|
Percent
Change |
|
|
2019 |
|
|
General and administrative |
|
$ |
242 |
|
|
|
(24 |
)% |
|
$ |
318 |
|
General and administrative expenses decreased by approximately
$76,000, or 24%, to approximately $242,000 for the first quarter of
2020 from approximately $318,000 for the first quarter of 2019.
This decrease in expense is substantially attributable to the
decrease in accounting fees and consulting fees.
Tax Expense:
We incurred a tax expense of approximately $2,000 in the first
quarter of 2020 and the first quarter of 2019 to reflect state
minimum taxes.
Liquidity and Capital Resources
Our current sources of liquidity are (i) our existing cash on hand;
and (ii) refunds of alternative minimum tax credits aggregating
approximate $1.0 million. We believe that our existing cash on hand
and anticipated tax refunds will be sufficient to fund our
operations, at least, through April 2021. However, our future
royalty revenues are expected to be de minimis over the next
several years and there can be no assurance that we will receive
any royalty or other revenues.
Cash was $5.1 million as of March 31, 2020, as compared to $5.4
million as of December 31, 2019. The decrease of approximately $.3
million was primarily attributable to a net decrease in cash of
approximately $0.3 million used in operating activities.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in
transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred
to as structured finance or special purpose entities (SPEs), which
would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually limited
purposes. As of March 31, 2020, we were not involved in any SPE
transactions.
Critical Accounting Policies and Estimates
A critical accounting policy is one that is both important to the
portrayal of a company’s financial condition and results of
operations and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain.
Our consolidated financial statements are presented in accordance
with accounting principles that are generally accepted in the U.S.
(“U.S. GAAP”). All applicable U.S. GAAP accounting standards
effective as of March 31, 2020 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 and estimates 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 and
pursuant to the sale of our former specialty pharmaceutical
business are recognized when reasonably determinable and earned
through the sale of the product by the third-party and collection
is reasonably assured. Notification from the third-party licensee
of the royalties earned under the license agreement is the basis
for royalty revenue recognition. This information generally is
received from the licensees in the quarter subsequent to the period
in which the sales occur.
Contingent payments due under the asset purchase agreement
for the sale of our former specialty pharmaceutical business are
recognized as revenue when the milestone has been achieved,
collection is assured, such payments are non-refundable and no
further effort is required on the part of the Company or the other
party to complete the earning process.
Income Taxes
Under the asset and liability method of accounting for income
taxes, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. A valuation allowance on net
deferred tax assets is provided for when it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. As of March 31, 2020, we believe, based on our
projections, that it is more likely than not that our net deferred
tax assets, including our net operating losses from operating
activities, will not be realized. We recognize the benefit of an
uncertain tax position that we have taken or expect to take on the
income tax returns we file if it is more likely than not that we
will be able to sustain our position.
Forward-Looking Information and Factors That May Affect Future
Results
This Quarterly Report on Form 10-Q contains forward-looking
statements within the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. All statements contained
in the Quarterly Report on Form 10-Q, other than statements that
are purely historical, are forward-looking statements.
Forward-looking statements can be identified by the use of
forward-looking terminology such as the words “believes,”
“expects,” “may,” “will,” “should,” “potential,” “anticipates,”
“plans” or “intends” or the negative thereof, or other variations
thereof, or comparable terminology, or by discussions of strategy.
Forward-looking statements are based upon management’s present
expectations, objectives, anticipations, plans, hopes, beliefs,
intentions or strategies regarding the future and are subject to
known and unknown risks and uncertainties that could cause actual
results, events or developments to be materially different from
those indicated in such forward-looking statements, including, but
not limited to, the following risks and uncertainties:
| |
· |
The proposed dissolution and liquidation of the
Company may not be completed in a timely manner or at
all. |
| |
· |
The amount we distribute to our shareholders as
liquidating distributions, if any, pursuant to the Plan of
Liquidation and Dissolution may be minimal. |
| |
· |
Until
2017, in recent years, we derived most of our royalty revenues from
continued sales of PegIntron, which have been in sharp decline. In
addition, our right to receive royalties on U.S. and European sales
of PegIntron expired in 2016 and 2018, respectively, which has
negatively impacted our royalty revenues. |
| |
· |
We expect to incur losses over the next several
years. |
| |
· |
Our rights to receive royalties on sales of
PegIntron and sales of other drug products have expired in various
jurisdictions and will, by 2024, expire world-wide. We currently do
not anticipate any significant royalties from other sources and we
do not intend to acquire new sources of royalty
revenues. |
| |
· |
We
expect that we will not realize our deferred income tax
assets. |
|
· |
The unprecedented actions taken
globally to control the spread of COVID 19, as well as the
uncertain timing for an effective treatment or vaccine for the
virus, may materially and adversely affect our future right to
receive licensing fees, milestone payments and royalties on product
candidates that are being developed by third parties. |
| |
· |
We have reallocated all employment
responsibilities and outsourced all corporate functions, which
makes us more dependent on third parties to perform these corporate
functions. |
| |
· |
We may be subject to a variety of types of
product liability or other claims based on allegations that the use
of our product candidates by participants in our previously
conducted clinical trials has resulted in adverse effects, and our
insurance may not cover all product liability or other
claims. |
| |
· |
Our revenues largely depend on proprietary
rights, which may offer only limited protection against the
development of competing products. |
| |
· |
We are party to license agreements whereby we may
receive royalties and or milestone payments from products subject
to regulatory approval. |
| |
· |
The price of our common stock has been, and may
continue to be, volatile. |
| |
· |
Our common stock is quoted on the OTCQX market of
the OTC Markets Group, Inc., which has a very limited trading
market and, therefore, market liquidity for our common stock is low
and our stockholders’ ability to sell their shares of our common
stock may be limited.
|
| |
· |
The declaration of dividends is within the
discretion of our Board of Directors, subject to any applicable
limitations under Delaware corporate law. Our ability to pay
dividends in the future depends on, among other things, our future
revenues, which are expected to be minimal, if any, over the next
several years, as well as our ability to manage expenses, including
costs relating to our ongoing operations. |
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· |
Anti-takeover provisions in our charter documents
and under Delaware corporate law may make it more difficult to
acquire us, even though such acquisitions may be beneficial to our
stockholders. |
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· |
The
issuance of preferred stock may adversely affect rights of our
common stockholders. |
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· |
If we experience an "ownership change," as
defined in
Section 382 of
the Internal Revenue Code of 1986, as amended, our ability to fully
utilize our net operating loss carryforwards (“NOLs”) on an annual
basis will be substantially limited, and the timing of the usage of
the NOLs could be substantially delayed, which could therefore
significantly impair the value of those benefits. |
A more detailed discussion of these risks and uncertainties and
other factors that could affect results is contained in our filings
with the U.S. Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 2019.
These risks and uncertainties and other factors should be
considered carefully and readers are cautioned not to place undue
reliance on such forward-looking statements. As such, no assurance
can be given that the future results covered by the forward-looking
statements will be achieved. All information in this Quarterly
Report on Form 10-Q is as of the date of this report, unless
otherwise indicated, and we undertake no duty to update this
information.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
As a smaller reporting company, we are not required to provide
information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, under the direction of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), as of March 31, 2020. Disclosure controls and
procedures are designed to ensure that information required to be
disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms and that such information
is accumulated and communicated to management, including the Chief
Executive Officer and Chief Financial Officer, to allow timely
decisions regarding required disclosures. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded
that, as of March 31, 2020, the Company’s disclosure controls and
procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act, during the quarter ended March 31, 2020
that have materially affected, or are reasonably likely to
materially affect our internal control over financial
reporting.
Part II – OTHER INFORMATION
Item 1A. Risk Factors.
There are no material changes from the risk factors previously
disclosed in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2019 filed on February 19, 2020, except for the
addition of the risk factor described below.
The coronavirus outbreak has the potential to disrupt the
approval and manufacture of products for which we share the right
to receive licensing fees, milestone payments and
royalties.
In December 2019, an outbreak of a novel strain of coronavirus
(COVID-19) was reported in Wuhan, China. On March 11, 2020,
the World Health Organization characterized the global spread of
COVID-19 as a pandemic. In an effort to slow the spread of the
virus, the United States and many other countries around the world
imposed restrictions on non-essential work activities, travel and
mass gatherings. It is not known when and the extent to which these
restrictions will be eased or the ultimate impact these
unprecedented actions will have on our financial condition and
prospects. At the present time, our own business activities have
been largely unaffected by COVID 19 restrictions as our workforce
is comprised solely of independent contractors who are able to
perform their duties remotely. However, these restrictions may
impact the third parties who are responsible for obtaining final
approval of and manufacturing product candidates for which we share the right to receive
licensing fees, milestone payments and royalty revenues. If those
third parties are required to curtail their business activities for
a significant time, or if global supply chain
disruptions impact their ability to procure needed
resources, raw materials or components, our right to receive
licensing fees, milestone payments or royalties could be materially
and adversely affected. Additionally, the development timeline for
product candidates that are pending FDA approval could be delayed
if the agency is required to shift resources to the review and
approval of candidates for treatment of COVID 19.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
None.
Item 5. Other Information
(b) On April 30, 2020, the Board of Directors of the Company
scheduled the Company's 2020 annual meeting of stockholders (the
"2020 Annual Meeting") for September 17, 2020, at a time and
location to be announced, which represents a change of 27 days from
the anniversary date of the Company's 2019 annual meeting of
stockholders, which was held on August 22, 2019 (the “2019 Annual
Meeting”).
As the 2020 Annual Meeting is being called for a date that is not
more than 30 days after the anniversary date of the 2019 Annual
Meeting, the deadline for submission of stockholder proposals
intended for inclusion in the Company’s proxy statement for the
2020 Annual Meeting pursuant to Rule 14a-8 under the Exchange Act
remains March 14, 2020, the date disclosed in the Company’s proxy
statement for the 2019 Annual Meeting. However, the dates disclosed
in the proxy statement for the 2019 Annual Meeting for the timely
submission of stockholder proposals made outside of Rule 14a-8 are
not accurate and should not be relied upon. As the 2020 Annual
Meeting will be called for a date that is more than 25 days after
the anniversary date of the 2019 Annual Meeting, the Company's
Second Amended and Restated Bylaws require such proposals be
delivered to or mailed and received at the principal executive
offices of the Company not later than the close of business on the
tenth (10th) day following the day on which notice of the date of
the 2020 Annual Meeting is mailed or public disclosure of the date
of the 2020 Annual Meeting is made, whichever first occurs. Based
on an anticipated July 28, 2020 filing date for the Company’s
definitive proxy statement, which will contain a notice to
stockholders of the date, time and location for the Company’s 2020
Annual Meeting, the deadline for stockholder proposals made outside
of Rule 14a-8 would be the close of business on August 7, 2020.
In order for any stockholder proposal made outside of Rule 14a-8,
including any director nomination, to be brought before the 2020
Annual Meeting, it must be in proper form and delivered to or
mailed and received at the following address not later than the
deadline discussed above: Attn: Corporate Secretary, Enzon
Pharmaceuticals, Inc., 20 Commerce Drive, Suite 135, Cranford, New
Jersey 07016. To be in proper form, a stockholder proposal,
including any director nomination, must include all of the
information required for such proposal or nomination by the
Company's Second Amended and Restated Bylaws.
Item 6. Exhibits
(a) Exhibits required by Item 601 of Regulation S-K.
| * |
These certifications are not deemed filed by the
Commission and are not to be incorporated by reference in any
filing the Company makes under the Securities Act of 1933 or the
Securities Exchange Act of 1934, irrespective of any general
incorporation language in any filings. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
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ENZON PHARMACEUTICALS,
INC. |
| |
(Registrant) |
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|
| Dated: April 30, 2020 |
/s/ Andrew Rackear |
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Andrew Rackear |
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Chief Executive Officer and Secretary |
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(Principal Executive Officer) |
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|
| Dated: April 30, 2020 |
/s/ Richard L. Feinstein |
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Richard L. Feinstein |
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Vice
President-Finance and |
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Chief Financial Officer |
| |
(Principal Financial Officer) |
EXHIBIT INDEX
| * |
These certifications are not deemed filed by the
Commission and are not to be incorporated by reference in any
filing the Company makes under the Securities Act of 1933 or the
Securities Exchange Act of 1934, irrespective of any general
incorporation language in any filings. |
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