Did you lift it out of the water and expose it to the air? I had an orange sponge once and it deteriorated just like yours is doing. All of the ones at pet stores I have seen do the same. I don't know if my area gets poor-quality sponges, sponges that were mishandled, or what.... but I won't buy sponges anymore.
Good luck with yours. Make sure its out of the light, getting heavy flow, and heavy doses of pyto.