Loss at Enzon Wider than Expected - Analyst Blog

Enzon Pharmaceuticals' (ENZN) third quarter 2010 net loss of 13 cents per share (excluding special items) was wider than the Zacks Consensus Estimate, which indicated a loss of 4 cents. However, the loss compared favorably to the loss of 26 cents suffered in the year-ago quarter

Including special items, the company reported a loss of 14 cents per share as against a loss of 26 cents in the year-ago quarter. The reduced year over year loss was attributable to higher revenues and lower expenses at Enzon.

Total revenue for the quarter climbed 2% to $13.23 million. However, revenues were short of the Zacks Consensus Estimate of $15 million. Bulk of the revenues (approximately 82%) came through royalties. However, royalty revenues in the reported quarter declined 16% to $10.9 million.

Enzon earns a majority of its royalty revenues from the sale of PegIntron, marketed by Merck & Co. (MRK) for treating patients suffering from hepatitis C virus (HCV). The decline in royalty revenues in the reported quarter was attributable to reduced sales of the drug in the US as well as international markets. Moreover, the end of royalties on sales of Pegasys in October 2009 also negatively impacted performance.

We note that Enzon, which was evaluating options to sell its PegIntron royalty stream, decided not to pursue the option. Unfavorable conditions in the HCV market prompted the decision.

The quarter saw Enzon cut its total spending by 12.3% to $20.6 million. General and administrative (G&A) costs, research and development (R&D) expenses and specialty and contracted service R&D costs came down significantly from the year-ago period.

G&A costs in the reported quarter came down by approximately 39.4% to $4.7 million. The reduction was due to the cost cutting initiatives undertaken by the company. Expenses incurred to develop the company's pipeline increased 24.6% in the reported quarter to $14.2 million.