Executive Summary / Key Takeaways

• Enzon Pharmaceuticals, Inc. (ENZN) is undergoing a profound transformation, pivoting from a defunct pharmaceutical royalty business to a public company acquisition vehicle, culminating in a merger with Viskase Companies, Inc. (VSK).
• The all-stock merger, anticipated to close by the end of 2025, will result in significant dilution for current common stockholders, who are expected to own approximately 2.0% of the combined entity, while Viskase stockholders will hold approximately 84.1%.
• Financially, Enzon has ceased generating royalty revenues, reporting $0 in the first half of 2025, and is incurring substantial transaction expenses, leading to a net loss of $1.514 million for the six months ended June 30, 2025.
• A critical implication for investors is the expected limitation on Enzon's substantial Net Operating Losses (NOLs) post-merger due to IRC Section 382, potentially rendering a majority of these tax assets unusable.
• The future of the combined company, Viskase Holdings, Inc., will be heavily influenced by Carl C. Icahn and his affiliates, who are expected to exert significant control, and the stock now trades on the OTCQB market due to a low bid price.

The Phoenix's Gambit: Enzon's Strategic Pivot

Enzon Pharmaceuticals, Inc., once a name associated with proprietary drug technology and royalty revenues, has undergone a dramatic metamorphosis. Incorporated in 1981, the company historically derived its income from licensing arrangements, notably from the sales of PegIntron, a patented drug product marketed by Merck & Co., Inc. (MRK). This business model, however, began to wane over a decade ago. For more than ten years leading up to June 30, 2025, Enzon ceased clinical operations and maintained only limited corporate functions, with royalty payments dwindling to minimal amounts in the last two years. A marketing agreement for Vicineum, a drug developed by Sesen (SESN), Inc., was also canceled, eliminating another potential revenue stream. By 2017, the primary source of royalties from PegIntron had effectively ended, signaling the obsolescence of its historical pharmaceutical business.

This profound shift compelled Enzon to redefine its purpose, repositioning itself as a "public company acquisition vehicle." The company's strategic focus transitioned from drug development and licensing to identifying and executing a transformative merger. This pivot was underscored by a significant financial maneuver in September 2020: a Rights Offering that successfully raised approximately $43.60 million in gross proceeds. This capital infusion, alongside the implementation of a Section 382 Rights Plan in August 2020 to protect its substantial Net Operating Losses (NOLs) from ownership changes, laid the groundwork for its new strategic direction.

The culmination of this strategic pivot is the proposed merger with Viskase Companies, Inc. , announced on June 20, 2025. This all-stock transaction is designed to transform Enzon from a non-operating shell into a new entity, Viskase Holdings, Inc., by the end of 2025. This move represents not just an acquisition, but a complete strategic rebirth, fundamentally altering Enzon's business model, competitive landscape, and investment profile.

The Viskase Merger: A New Horizon

The Agreement and Plan of Merger with Viskase Companies, Inc. , executed on June 20, 2025, marks the definitive step in Enzon's transformation. Under the terms, Enzon's wholly-owned subsidiary, EPSC Acquisition Corp., will merge with Viskase, with Viskase continuing as a wholly-owned subsidiary of Enzon. Post-merger, Viskase will convert into Viskase Companies, LLC, and Enzon Pharmaceuticals, Inc. will change its name to Viskase Holdings, Inc. This transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

The merger will significantly reshape the ownership structure of the combined entity. Viskase stockholders are expected to own approximately 84.1% of Viskase Holdings, Inc. Holders of Enzon's Series C Preferred Stock are anticipated to own about 13.9%, while current Enzon common stockholders (excluding affiliates of Icahn Enterprises Holdings L.P. (IEP)) are projected to own approximately 2.0% of the combined company. This substantial dilution for existing common shareholders is a critical consideration for investors. Carl C. Icahn and his affiliates are poised to exert significant influence over the combined company, holding a substantial majority of the voting power, which may lead to interests that do not always align with other stockholders.

Regulatory hurdles for the merger are progressing. Enzon and Viskase filed their Hart-Scott-Rodino Antitrust Improvements Act (HSR) forms on June 27, 2025, and received early termination of the waiting period from the Federal Trade Commission on July 15, 2025. The Merger Agreement has received unanimous recommendations from the Special Committees and Boards of Directors of both companies. The transaction is expected to close before the end of the calendar year 2025, contingent on Enzon stockholder approval and other customary closing conditions.

Financial Performance: A Transitional Snapshot

Enzon's recent financial performance reflects its transitional state as an acquisition vehicle. For the three and six months ended June 30, 2025, the company reported no revenue from royalties and milestones, a stark contrast to the $26,000 earned in the comparable periods of 2024. Management explicitly stated that future royalty revenues are expected to be "de minimis."

The primary source of income for the standalone Enzon has been interest and dividends from its cash reserves. This income decreased by 17% to $501,000 for the three months ended June 30, 2025, compared to $605,000 in the prior year. For the six-month period, interest and dividend income fell by 20% to $998,000 from $1.25 million, primarily due to reduced cash balances and lower interest rates.

Operating expenses have seen a notable increase due to merger-related activities. General and administrative expenses rose by 19% to $809,000 for the six months ended June 30, 2025, driven mainly by professional and consulting fees. Additionally, transaction expenses directly related to the Viskase merger amounted to approximately $1.22 million for the three months and $1.73 million for the six months ended June 30, 2025, with no comparable expenses in 2024. These costs contributed to a net loss of $990,000 for the three months ended June 30, 2025, and a net loss of $1.514 million for the six-month period, reversing net income reported in the prior year. The company did record an income tax benefit of approximately $23,000 for the six months ended June 30, 2025, stemming from a partial reversal of its valuation allowance, anticipating a projected taxable income position due to interest rates not returning to past lows.

Liquidity and Capital Structure: Managing the Transition

Enzon's liquidity is primarily sustained by its existing cash and cash equivalents, which stood at $44.29 million as of June 30, 2025, down from $46.86 million at December 31, 2024. This cash position largely originated from the $43.6 million gross proceeds of its 2020 Rights Offering. The company's cash flows reflect the costs of its transitional strategy. Cash used in operating activities for the six months ended June 30, 2025, was approximately $1.29 million, a significant shift from the $492,000 provided by operating activities in the comparable 2024 period. This change was predominantly driven by the $1.73 million in merger-related transaction costs and the $254,000 decrease in interest and dividend income.

A key component of Enzon's capital structure is its Series C Preferred Stock, which had a liquidation value of approximately $43.55 million ($1,089 per share) as of June 30, 2025. These shares accrue a dividend, which, if not paid in cash, increases the liquidation preference by 5% annually. For the six months ended June 30, 2025, an accretion of approximately $1.06 million ($27.00 per share) was accrued. While a cash dividend of $1.27 million was paid in January 2025, the Board had not determined a dividend for the end of 2025, and the Merger Agreement restricts declaring cash dividends without Viskase's consent. The Series C Preferred Stock is currently redeemable solely at Enzon's option but would become redeemable at the holder's option upon a change of control, such as the consummation of the merger. Management believes its existing cash and cash equivalents will be sufficient to fund operations at least through August 2026.

Competitive Landscape: A Shift in Arena

Enzon's competitive positioning has undergone a fundamental transformation. Historically, Enzon was a niche player in the biotechnology sector, leveraging its proprietary technology for drug products like PegIntron. In this arena, it faced formidable industry giants such as Gilead Sciences (GILD), Merck, and Pfizer (PFE). These larger pharmaceutical companies, characterized by their vast research and development budgets, expansive product pipelines, and global distribution networks, consistently outpaced Enzon in terms of scale, innovation speed, and overall financial performance. Enzon's historical competitive advantages, rooted in its proprietary drug technology and licensing agreements, provided a foundation for niche market access. However, these advantages were insufficient to compete with the broader capabilities and resources of its larger rivals, ultimately leading to a qualitative lag in growth rates, profitability, and cash flow generation. This competitive pressure contributed to Enzon's strategic pivot away from active pharmaceutical operations.

As a public company acquisition vehicle, Enzon's "competition" shifted to identifying and securing a suitable merger target. Its current "moat" is not technological innovation but rather its cash reserves and substantial Net Operating Losses (NOLs), which serve as attractive assets for a potential acquirer. Post-merger, the combined entity, Viskase Holdings, Inc., will operate in Viskase's industry, which is not detailed in this analysis. This represents a complete change in competitive dynamics, moving away from the biotechnology sector entirely. The future competitive landscape will be defined by Viskase's business, requiring a new assessment of its market position, strengths, and vulnerabilities against its new set of industry peers.

Risks and Outlook: Embracing the New Chapter

The investment thesis for Enzon is now inextricably linked to the successful completion and subsequent performance of the Viskase merger. Several critical risks and considerations warrant investor attention.

The most significant risk revolves around the utilization of Enzon's substantial Net Operating Losses (NOLs). The merger is expected to trigger an ownership change under Section 382 of the Internal Revenue Code. This will impose a strict annual limitation on the amount of NOLs and other tax attributes that can be used to offset future taxable income. With federal NOLs of approximately $101.2 million and New Jersey state NOLs of $23.5 million, a "substantial portion—and potentially the majority—of our NOLs may become permanently unusable," which could materially increase the combined company's future tax liability. This risk is compounded by the fact that the Section 382 Rights Agreement, previously adopted to protect these NOLs, is required to be terminated prior to the merger's effective time, with its final expiration set for September 30, 2025.

Shareholder dilution is another major concern. Current common stockholders are projected to own only about 2.0% of the combined company, significantly reducing their influence. The concentration of ownership by Carl C. Icahn and his affiliates, who will hold a substantial majority of the voting power, means their interests may not always align with those of other stockholders. Furthermore, the Merger Agreement contains provisions that limit Enzon's ability to pursue alternative transactions, and a $1.0 million termination fee would be payable to Viskase if Enzon were to back out for a superior offer.

The successful completion of the merger itself is not guaranteed, and if it fails, Enzon would incur substantial transaction-related costs without the benefit of a new operating business. The company would then revert to its status as a public company acquisition vehicle, facing renewed uncertainty. Adding to these challenges, Enzon's stock was delisted from the OTCQX Markets Group on August 11, 2025, due to its bid price falling below $0.10 for 30 consecutive days, and now trades on the OTCQB Market, implying a very limited trading market and low liquidity for stockholders.

The outlook for Enzon is entirely dependent on the Viskase merger. If successfully consummated by the end of 2025, the company will transition into Viskase Holdings, Inc., an operating entity in a new industry. If the merger does not close, Enzon will continue its search for an acquisition, relying on its remaining cash, which is projected to last through August 2026.

Conclusion

Enzon Pharmaceuticals, Inc. stands at a critical juncture, having shed its legacy as a pharmaceutical royalty business to embark on a new chapter as Viskase Holdings, Inc. This strategic pivot, driven by the cessation of its historical revenue streams and a desire to leverage its cash and NOL assets, represents a complete transformation of its investment profile. The core investment thesis now rests squarely on the successful integration and future performance of the combined Viskase entity, rather than the historical Enzon.

While the merger offers a path to becoming an operating company, investors must weigh the significant dilution of existing common shares and the material limitations on NOL utilization against the potential for value creation in the new business. The substantial influence of Carl C. Icahn and his affiliates will be a defining characteristic of the combined company's governance and strategic direction. The transition to the OTCQB market further underscores the speculative nature of this investment. Ultimately, Enzon's future value hinges on the successful closing of the Viskase merger and the ability of the new leadership to navigate its new competitive landscape and deliver operational results, transforming a pharmaceutical relic into a viable, albeit highly changed, enterprise.