Molecular Assay Approvals from New York
State Department of Health and Planned Acquisition of New Facility
Highlight Progress Advancing Growth Strategy
Enzo Biochem Inc. (NYSE:ENZ), an integrated diagnostic and
therapeutics company, today reported results for the fourth quarter
and fiscal year ended July 31, 2018, in addition to announcing New
York State department of Health’s approval of additional assays for
new women’s health infectious disease panel continuing to drive
focus in development of lower cost products, platforms and services
for the clinical laboratory market.
Recent Developments
- Progress in molecular amplification and
immunohistochemistry platforms is leading to full system solution
to aid in addressing challenge of maintaining profitability for
clinical labs in a market affected by declining reimbursement and
high operating costs.
- New York State Department of Health has
approved an additional three women’s health infectious disease
diagnostic assays to expand Enzo’s women’s health panel to 16
pathogens on the Company’s proprietary, versatile and cost
effective AMPIPROBE® platform. This addition makes the panel one of
the most comprehensive in the $800 million market. This is
performed using a single swab and now includes Ureaplasma spp./M.
genitalium/M. hominis (UMM) in addition to Chlamydia trachomatis,
Neisseria gonorrhoeae, Trichomonas vaginalis Candida spp (C.
albicans, C. glabrata, C. krusei, C. parapsilosis, C. tropicalis),
Atopobium vaginae, Gardnerella vaginalis, Lactobacillus spp,
Megasphera spp and BVAB2. UMM testing is vital to women’s health as
mycoplasmas are a significant cause of non-gonococcal urethritis.
Ureaplasmas are also associated with urethritis, and a myriad of
additional medical conditions.
- Entered into an agreement to purchase
an additional commercial facility with nearly 36,000 square feet in
Farmingdale, NY. The building adjacent to the Company’s current
Long Island campus enhances the infrastructure needed to produce
and distribute Enzo’s expanding low cost, open architecture
diagnostic platform products and broaden related services. The
Company’s platform development includes automation-compatible
reagent systems and associated products for sample collection and
processing through to analysis.
- Continued product and platform
development activities directed to each step of the clinical
testing process, expanding into sample collection and processing.
The Company’s programs include manufacturing all components
required for each step in the diagnostic process for integration
into an open platform. Enzo’s system solutions will enable clinical
laboratories to gain economic return in the diagnostics market
where declining reimbursements and rigid costs from suppliers
currently prevail.
- Building on prior progress in the
molecular diagnostics and immunohistochemistry areas, Enzo also
recently announced the validation of three clinically relevant,
cost-efficient immunohistochemistry (IHC) biomarker detection tests
for charting the progression of various cancers, especially in the
field of women’s health. These tests operate with the Company’s
open system workflow and complement Enzo’s strategy of introducing
lower cost testing solutions to the global IHC market that is
projected to reach over $2 billion by 2021.
- The Company recently designated an
in-network laboratory provider for three new health insurance
providers in the MidAtlantic and New England areas to support
geographical expansion. These additional contracts are expected to
add to Enzo’s national reach of testing services to millions of
covered lives across the U.S.
- New York Federal case against Hoffman
LaRoche proceeding with trial date set for early April 2019.
The Company expects the commercialization from the developments
of its strategic initiatives will begin over the next year at which
time it anticipates returning to revenue and margin growth. The
significant implementation steps include:
- Validation through clinical trials of
Enzo’s fully automated, high-throughput instrumentation including
sample collection and sample processing and reagents systems both
for New York State and FDA.
- Completion of buildout of GMP
manufacturing capabilities.
- Approval of additional assays to expand
Enzo’s test menu.
- Expansion of sales and marketing,
logistics and IT efforts to grow national reference laboratory
accounts.
- Partnerships and collaborations with
potential strategic and institutional partners to enhance
commercialization and market penetration of Enzo’s high technology
platforms and products.
Barry Weiner, Enzo President,
Comments:
“Fiscal 2018 was a year of solid progress in our strategic plan,
and one in which each of the principal operating units posted
volume increases and achieved objectives towards our growth
initiatives. These initiatives began over three years ago now
provide the potential for multiple ventures and partnerships that
could generate significant shareholder value. Our focus is centered
on providing cost efficient products and services utilizing our
proprietary assays optimized for our automated, open system
platforms that are compatible with existing sample collection
devices as well as our own lower cost option. These have been
designed to provide not only high-performance and adaptable
solutions to existing lab workflow, but also to address a critical
need for lower cost solutions. Besides the number of assays already
approved, in process is the development of a screening assay for
oncogenic forms of HPV, among others. Today’s clinical laboratories
including Enzo face a two-fold challenge - to maintain revenue
growth and profitability, amidst declining reimbursements and
unreasonably high operating costs. The latter stem from “closed
system” diagnostics platforms, sample collection devices and
accessories that are a barrier to the use of low-cost and efficient
third-party solutions.
Our efforts were not limited to laboratory product development,
but also included building an internal sales force that will enable
us to grow this business. We also have added to our development
staff, and hired experienced professionals especially knowledgeable
about health care providers in order to bring them into our fold as
clients. In the next few quarters, our strategic plans call for a
number of new tests currently under development to be submitted for
New York State Department of Health for conditional approval to add
to those already authorized, which will further expand our already
sizable test menu. Our Women’s Health Panel was expanded with three
more tests this quarter to 16 analytes that can be processed in one
sample.
Our acquisition of a new facility ties in directly with the
anticipated expansion of our capabilities at the Farmingdale, NY
campus. In addition to enhancing efficiency, the purchase
represents an important vote of confidence in our strategic plan.
The new facility will provide Good Manufacturing Practices (GMP)
and ISO compliant manufacturing and logistics space for Enzo’s
diagnostics and life science products business. Moreover, the new
facility will enhance space for GMP production of the Company’s
development-stage clinical candidates, including Enzo’s proprietary
sphingosine kinase 1 inhibitor, SK1-I, which is being investigated
for potential applications in oncology and autoimmune diseases.
This effort opens potential for strategic partnerships. It is a
time-consuming, capital intensive effort, to transform an entity
into a provider of platform, products and services in a relatively
short time. We believe when the transition is completed over the
next year that the Company will look very different than it does
today, with an anticipated return to revenue and margin
growth.”
Fiscal 2018 Operating
Results
- Total revenues were $104.7 million,
compared to $107.8 million in the prior year, a decrease of $3.1
million, or 3%. Clinical services revenues were $74.8 million,
compared to $77.4 million in the prior year, a decrease of $2.6
million or 3% due to lower insurance reimbursement payments and
shifts in test mix to lower esoteric testing verses high genetic
testing in the prior year. Total diagnostic testing volume,
measured by the number of accessions reported, increased 4% year
over year. Clinical products and royalties revenue was $29.9
million compared to $30.4 million in the prior year. The decline
year over year resulted from lower product royalties from an
agreement that expired in April 2018.
- Consolidated gross margins were 42%
compared with 45% in the prior year. Clinical services gross
margins were 39% compared to 41% a year ago. Gross margins in the
current year were negatively impacted by lower revenue from
Clinical Services as noted above. Clinical products and royalties
gross margin was 52% compared to 54% in the prior year period.
- Operating expenses totaled $56.5
million, up 10% compared to $51.4 million a year ago. The increase
reflected legal fee expenses in anticipation of a patent
infringement and contract related trial, where Enzo is plaintiff
that may occur next calendar year. Total legal expenses were $5.1
million compared to $1.7 million in the prior year. Selling and
general administrative expenses (SG&A) as well as research and
development (R&D) expenses were slightly higher year over year
in support of the Company’s growth strategies. As a percentage of
revenue, SG&A was 42% compared to 41% in the prior year and
R&D expenses were flat year over year.
- The GAAP and Non-GAAP net loss was
$10.3 million and $11.4 million, respectively, compared to $2.5
million a year ago. The GAAP net loss per share was $0.22, compared
to $0.05 a year ago, and the Non-GAAP loss per share was $0.24.
There were no Non-GAAP adjustments in the prior year. EBITDA was a
loss of $9.1 million compared to earnings of $0.7 million a year
ago.
Fourth Quarter Operating
Results
- Total revenues were $24.5 million,
compared to $28.2 million in the prior year, a decrease of $3.7
million. Clinical services revenues were $16.8 million, compared to
$20.4 million in the prior year, a decrease of $3.7 million.
Approximately $1.7 million of the current quarter’s revenue decline
relates to a previously reported account loss with the remaining
decline due to lower insurance reimbursement payments and shifts in
test mix away from high valued genetic testing in the prior year.
Total diagnostic testing volume, measured by the number of
accessions reported, decreased 3% year over year, however it
increased 3% sequentially compared to the third fiscal quarter of
2018. Clinical products and royalties revenue was approximately
$7.7 million in both the current year and prior year periods.
- Consolidated gross margins were 40%
compared with 44% in the prior year. Clinical services gross
margins were 33% compared to 41% a year ago. Gross margins in the
current year were negatively impacted by lower revenue from
Clinical Services as noted above. Clinical products and royalties
gross margins increased 120 basis points year over year to
54%.
- Operating expenses totaled $15.4
million, up 19% compared to $12.9 million from a year ago. The
increase reflected higher legal fee expenses of $0.9 million in
anticipation of the aforementioned patent infringement and contract
related trial, increased allowances for bad debts of $0.9 million
and higher SG&A expenses of $0.6 million. R&D expenses were
flat year over year.
- The GAAP and Non-GAAP net loss was $5.8
million compared to breakeven a year ago. The GAAP and Non-GAAP net
loss per share was $0.12 and compared to $0.05 a year ago. There
were no Non-GAAP adjustments in the current and prior year. EBITDA
was a loss of $5.3 million compared to EBITDA earnings of $0.9
million a year ago.
Total cash and cash equivalents at July 31, 2018 were $60.0
million compared to $64.2 million at July 31, 2017. Cash used in
operations was $2.7 million during fiscal 2018 and cash used for
investing activities, principally capital expenditures, was $1.9
million. Operating segments continue to be cash flow positive.
Working capital at July 31, 2018 was over $63.0 million.
Conference Call
The Company will conduct a conference call Tuesday, October 16,
2018 at 8:30 AM ET. The call can be accessed by dialing
1-888-459-5609. International callers can dial 1-973-321-1024.
Please reference PIN number 6096026.
Interested parties may also listen over the Internet at:
https://tinyurl.com/y8kzakd2
To listen to the live call, individuals should go to the website
at least 15 minutes early to register, download and install any
necessary audio software. Any pop up blocker installed on your PC
should be disabled while accessing the webcast. A rebroadcast of
the call will be available starting approximately two hours after
the conference call ends, through 12 AM (E.T.) Tuesday, October 30,
2018. The replay of the conference call can be accessed by dialing
1-855-859-2056 (International callers can dial 1-404-537-3406) and,
when prompted, use the same PIN number 6096026.
Adjusted Financial
Measures
To comply with Regulation G promulgated pursuant to the
Sarbanes-Oxley Act, Enzo Biochem attached to this news release and
will post to the Company's investor relations web site
(www.enzo.com) any reconciliation of differences between GAAP and
Adjusted financial information that may be required in connection
with issuing the Company's quarterly financial results.
The Company uses EBITDA as a measure of performance to
demonstrate earnings exclusive of interest, taxes, depreciation and
amortization. Adjustments to EBITDA are for items of a
non-recurring nature and are reconciled on the table provided. The
Company manages its business based on its operating cash flows. The
Company, in its daily management of its business affairs and
analysis of its monthly, quarterly and annual performance, makes
its decisions based on cash flows, not on the amortization of
assets obtained through historical activities. The Company, in
managing its current and future affairs, cannot affect the
amortization of the intangible assets to any material degree, and
therefore uses EBITDA as its primary management guide. Since an
outside investor may base its evaluation of the Company's
performance based on the Company's net loss not its cash flows,
there is a limitation to the EBITDA measurement. EBITDA is not, and
should not be considered, an alternative to net loss, loss from
operations, or any other measure for determining operating
performance of liquidity, as determined under accounting principles
generally accepted in the United States (GAAP). The most directly
comparable GAAP reference in the Company's case is the removal of
interest, taxes, depreciation and amortization.
We refer you to the tables attached to this press release which
includes reconciliation tables of GAAP to Adjusted net income
(loss) and EBITDA to Adjusted EBITDA.
About Enzo Biochem
Enzo Biochem is a pioneer in molecular diagnostics, leading the
convergence of clinical laboratories, life sciences and
intellectual property through the development of unique diagnostic
platform technologies that provide numerous advantages over
previous standards. A global company, Enzo Biochem utilizes
cross-functional teams to develop and deploy products, systems and
services that meet the ever-changing and rapidly growing needs of
health care today and into the future. Underpinning Enzo Biochem’s
products and technologies is a broad and deep intellectual property
portfolio, with patent coverage across a number of key enabling
technologies.
Except for historical information, the matters discussed in this
news release may be considered "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include declarations regarding the intent,
belief or current expectations of the Company and its management,
including those related to cash flow, gross margins, revenues, and
expenses which are dependent on a number of factors outside of the
control of the Company including, inter alia, the markets for the
Company’s products and services, costs of goods and services, other
expenses, government regulations, litigation, and general business
conditions. See Risk Factors in the Company’s Form 10-K for the
fiscal year ended July 31, 2018. Investors are cautioned that any
such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties that
could materially affect actual results. The Company disclaims any
obligations to update any forward-looking statement as a result of
developments occurring after the date of this press release.
ENZO BIOCHEM, INC. (in
thousands, except per share data)
Three months
ended Twelve months ended
Selected
operations data:
July 31, July 31, (unaudited)
(unaudited)
2018
2017
2018
2017
Revenues: Clinical laboratory services $
16,776 $ 20,429 $ 74,777
$ 77,407 Product revenues 7,606 7,471 29,224
29,192 Royalty and license fee income
73 272
712 1,205
Total revenues $ 24,455 $
28,172 $ 104,713 $
107,804 Gross profit $
9,665 $ 12,387 $
44,328 $ 48,329
Gross profit % 40 %
44 % 42 %
45 % Income (loss) before income
taxes (5,764 ) 94 (11,418 ) (2,504 ) Benefit for income
taxes (1) - - 1,097 - Net income (loss)
$ (5,764 )
$ 94 $ (10,321 ) $
(2,504 ) Basic net income (loss) per
share ($0.12 ) $
0.00 ($0.22 )
($0.05 ) Diluted net income (loss) per share
($0.12 ) $ 0.00
($0.22 )
($0.05 ) Weighted average shares outstanding - basic
47,173
46,473 46,972
46,350 Weighted average shares
outstanding - diluted 47,173
47,720
46,972 46,350
(1) The statement of operations for the twelve months ended
July 31, 2018 includes a one-time tax benefit related to the
passing of the Tax Cut and Jobs Act, which was signed into law in
December 2017.
Selected balance sheet
data:
7/31/2018 (unaudited)
7/31/2017 (unaudited)
Cash and cash equivalents $60,041 $64,167 Working
capital $63,014 $71,274 Stockholders' equity $81,121 $88,872
Total assets $101,660 $107,665 The following table
presents a reconciliation of reported net income (loss) and basic
and diluted net income (loss) per share to Adjusted net income
(loss) and basic and diluted net income (loss) per share for the
three and twelve months ended July 31, 2018 and 2017:
ENZO BIOCHEM, INC. Adjusted
Reconciliation Table (Unaudited, in thousands, except per share
data)
Three months ended
Twelve months ended July 31, July 31,
2018
2017
2018
2017
Reported GAAP net income (loss) $ (5,764 ) $ 94 $ (10,321 )
$ (2,504 ) Adjusted for: Benefit for income
taxes -
- (1,097 )
- Adjusted net income (loss) $
(5,764 ) $ 94 $ (11,418 )
$ (2,504 ) Weighted Shares
Outstanding: Basic 47,173 46,473 46,972 46,350 Diluted 47,173
47,720 46,972 46,350 Basic and diluted earnings per share:
Basic net income (loss) per share - GAAP ($0.12 ) $ 0.00 ($0.22 )
($0.05 ) Diluted net income (loss) per share - GAAP ($0.12 ) $ 0.00
($0.22 ) ($0.05 ) Basic net income (loss) per share -
Adjusted ($0.12 ) $ 0.00 ($0.24 ) ($0.05 ) Diluted net income
(loss) per share - Adjusted ($0.12 ) $ 0.00 ($0.24 ) ($0.05 )
(1) The statement of operations for the twelve months ended
July 31, 2018 includes a one-time tax benefit related to the
passing of the Tax Cut and Jobs Act, which was signed into law in
December 2017. The Company has excluded the one-time impact of this
law in the calculation of Adjusted net income as it is
non-recurring. The following table presents a reconciliation of
reported net income (loss) for the three and twelve months ended
July 31, 2018 and 2017 to EBITDA and Adjusted EBITDA:
ENZO BIOCHEM, INC. EBITDA & Adjusted
EBITDA Reconciliation Table (Unaudited, in thousands)
Three months ended Twelve months ended July
31, July 31,
2018
2017
2018
2017
GAAP net income (loss) $ (5,764 ) $ 94 $ (10,321 ) $ (2,504
) Plus (minus): Depreciation and amortization 780 906 3,130 3,598
Interest income (284 ) (144 ) (853 ) (384 ) Benefit for income
taxes - - (1,097 ) - EBITDA and
Adjusted EBITDA $ (5,268 ) $
856 $ (9,141 ) $
710
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version on businesswire.com: https://www.businesswire.com/news/home/20181015005893/en/
For: Enzo Biochem, Inc.Steve Anreder,
212-532-3232steven.anreder@anreder.comorCEOcast, Inc.Michael Wachs,
212-732-4300mwachs@ceocast.com
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