Company Outlines Three-Pronged Short-Term
Value Creation and Growth Strategy
Intellectual Property Settlements Generate
Approximately $30 Million in Cash in the Third Quarter
Enzo Biochem, Inc. (NYSE:ENZ), an integrated life sciences
company focused on commercializing innovative diagnostic and
therapeutics products, today reported results for the fiscal
quarter and nine months ended April 30, 2019. The Company updated
the market on the progress of its short-term growth and
profitability initiatives designed to unlock value.
Financial Results
- Third quarter net income was $22.3
million, or $0.47 per share including $28.9 million in net legal
settlements, on revenues of $19.7 million. This compared to a year
ago net loss of $3.0 million, or $0.06 per share when there were no
similar settlements. On a sequential basis, revenue increased
nearly 2%, and Non-GAAP net loss improved by approximately $1.7
million, or 21%.
- Fiscal third quarter 2019 results
reflect the combined impact of continuing reduced insurance
reimbursement payments at rates lower than a year ago and reduced
genetic test volume, while total diagnostic testing volume,
measured by the number of accessions, was up 1% year over year and
3% sequentially to the second fiscal quarter due to increases in
esoteric testing. Cash and cash equivalents at the end of the
quarter was $64 million and working capital was $71 million.
Strategic Short-Term
Initiatives
The Company reiterated the three core pillars of its value
creation strategy, which are all expected to have a positive impact
by the end of calendar 2019.
Forming Strategic Relationships for
Diagnostic Growth
Enzo is in active discussions with several leading global life
sciences and medical device companies, as well as manufacturers of
automated systems to develop strategic relationships in three key
platforms pioneered by Enzo’s proprietary products and intellectual
property: molecular diagnostics, immunohistochemistry and the
Company’s Elisa platform. The discussions involve developing
long-term relationships in automation and manufacturing,
distribution and marketing and product sales.
Enzo’s goal is to announce at least one of these relationships
by the end of calendar 2019.
Building a New Model for the Diagnostic
Marketplace
As a lower cost and vertically integrated manufacturer and
service provider of molecular testing in the U.S. Enzo is rolling
out a new business model for its labs to labs business whereby Enzo
will serve as the “central capability” for smaller labs,
capitalizing on its scale in high value and lower cost operations,
proprietary intellectual property and products, decades of
innovation and commitment to medical solutions.
Response of labs has been positive and Enzo anticipates
announcing the formal roll out of this program by the end of
calendar 2019.
Return to Operating Profitability and
Growth in the Lab Segment
Enzo is focused on returning its lab segment to profitability
and growth in three significant ways. Enzo is working aggressively
to control operational costs in its lab segment, which has been
negatively impacted by a declining reimbursement environment,
through, amongst others, consolidating supply chain functions, as
well as reorganization and alignment of customer support teams to
create greater efficiencies without sacrificing service levels. The
Company is also developing a series of compelling growth
initiatives that capitalize on our strong intellectual property and
integrated approach to manufacturing, which can be offered as
either product or services. Finally, Enzo will continue to pursue,
through licensing, business development and litigation, revenue
opportunities derived from strong intellectual property development
and innovation throughout the Company. While Enzo cannot predict
the outcome of ongoing patent infringement litigation, the Company
believes that its history of settlements and business relationships
will continue to help fund our business and growth initiatives.
We expect to see meaningful sequential quarterly cost reduction
improvement throughout fiscal 2020, and assuming no further changes
in reimbursement programs, with a return to operating profitability
at the labs in early calendar 2020.
Elazar Rabbani, Chairman and Chief
Executive Officer, Comments:
“Enzo is poised to leverage and capitalize on our deep-rooted,
proprietary technology, product development and intellectual
property portfolio in very real, short-term strategic initiatives
designed to unlock the value we know exists across our business.
The Board and the management team are aligned in our belief that we
can be an agent of change and transformation in our industry,
delivering tangible benefits for our customers, partners,
colleagues and shareholders. We know there is tremendous value in
our Company not reflected in today’s market and believe that the
programs highlighted in today’s announcement underscore our
commitment in our business and its prospects.
We are outlining our three-pronged value creation strategy:
developing strategic relationships, building a new market for the
diagnostic marketplace and further reducing operating costs.
We are focused on growth, in both the short and long-term. We
are gratified by the interest we are receiving from a number of
industry leaders in the life sciences and medical device industries
to engage in discussions with us. These companies recognize our
vision for the future of the diagnostic marketplace and our
commitment to provide innovative platforms and services.
This growth strategy embraces development of our high volume and
lower cost tests used in connection with our proprietary and
affordable open system platforms capable of high throughput to
improve financial margins at clinical laboratories. We believe we
are uniquely positioned to drive change.
At the same time, we have launched an intensive cost cutting and
heightened efficiency program that will achieve greater integration
of our Company’s financial and operating performances. We
anticipate sequential quarterly improvement and a return to
operating profitability in our lab by early calendar 2020.
The Company continues to operate on solid financial footing –
with, at April 30, 2019, over $64 million in cash and cash
equivalents and working capital of almost $71 million, allowing us
to comfortably fund the realistic goals we have set out for
Enzo.”
Third Quarter Operating
Results
- Total revenues were $19.7 million,
compared to $25.2 million in the prior year, a decrease of $5.5
million or 22%, while improving nearly 2% sequentially from the
second fiscal quarter of 2019. Clinical services revenues were
$11.7 million, compared to $17.7 million in the prior year, a
decrease of $6.0 million, largely due to the aforementioned reduced
insurance reimbursement payments, insurance company claims
rejections and changes to medical and procedural requirements for
genetic testing by payors. Enzo’s AMPIPROBE® woman’s health panel
has increased in volume each quarter since its launch last fiscal
year. Product revenue was $7.9 million compared to $7.4 million in
the prior year. Product gross profit was $4.5 million and gross
margins were 57%, a 15% increase over the prior year period.
- Clinical services revenues for the
three and nine months ended April 30, 2019, reflect adoption of new
revenue recognition rules on a full retrospective basis. Under the
new rules, Enzo reports uncollectible balances associated with
patient responsibility as a reduction in net revenues; historically
these amounts were separately classified in operating expenses as a
provision for uncollectible accounts receivable, and amounted to
$0.8 million and $0.4 million in the three months ended April 30,
2019 and 2018, respectively, and $2.0 million in both nine month
periods.
- Consolidated gross margins were 27%
compared with 42% in the prior year, and up from 24% from the
second fiscal quarter of 2019. Clinical services gross margins were
7% compared to 38% a year ago and 1% lower sequentially to last
quarter. Gross margins in the current year period were negatively
impacted by lower reimbursement revenue from Clinical Services.
Products gross margin was 57% compared to 53% in the prior year
period and 50% in the preceding quarter.
- Operating expenses totaled $11.9
million, compared to $13.5 million a year ago, a decrease of $1.6
million or 12%. Total legal expenses were $0.3 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 essentially flat year over year.
- During the quarter, the Company
recorded legal settlements and licensing payments, net of $28.9
million related to a patent infringement and contract case in New
York and an unrelated patent infringement case in Delaware.
- GAAP net income was $22.3 million or
$0.47 per share compared to a GAAP net loss of $3.0 million or
$0.06 per share in the prior year. The non-GAAP net loss was $6.7
million or $0.14 per share compared to a non-GAAP net loss of $3.0
million or $0.06 per share a year ago. EBITDA in the quarter was
$22.8 million and adjusted EBITDA was a loss of $6.1 million.
Nine-month Operating
Results
Total revenues were $60.2 million compared to $78.3 million in
the prior year, a decline of $18.1 million or 23% lower than the
prior year. Gross profit totaled $16.9 million, compared to $32.7
million a year ago, with gross margins of 28% and 42%,
respectively. SG&A of $33.3 million increased a modest $0.3
million over the prior year. Legal expenses were $2.7 million, down
from $3.8 million a year ago. The GAAP net income and Non-GAAP net
loss totaled $7.9 million, or $0.17 per share and $21 million or
$0.45 per share, respectively. EBITDA for the nine months ended
April 30, 2019 was $9.5 million and Adjusted EBITDA was a loss of
$19.4 million.
Conference Call
The Company will conduct a conference call Tuesday, June 11,
2019 at 8:30 AM ET. The call can be accessed by dialing (888)
459-5609. International callers can dial (973) 321-1024. Please
reference PIN number 1870919.
Interested parties may also listen over the Internet
at: https://tinyurl.com/yyx76wwr
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 June 25, 2019. The replay of the
conference call can be accessed by dialing (855)-859-2056.
International callers can dial (404) 537-3406), and when prompted,
used the same PIN number 2037608.
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 Nine months ended
Selected
operations data:
April 30, April 30, (unaudited)
(unaudited)
2019
2018
2019
2018
Total revenues $ 19,662 $ 25,230 $ 60,249
$ 78,258 Gross profit $ 5,302 $ 10,673
$ 16,902 $ 32,663 Gross profit %
27 % 42 % 28 % 42 % Income (loss)
before income taxes 22,265 (3,016 ) 7,876 (5,654 ) Benefit
for income taxes - - - 1,097 Net income
(loss) $ 22,265
$ (3,016 ) $ 7,876 (4,557 ) Basic net income
(loss) per share $ 0.47 ($0.06 ) $ 0.17
($0.10 ) Diluted net income (loss) per share $ 0.47
($0.06 ) $ 0.17 ($0.10 ) Weighted average
shares outstanding - basic 47,452 47,073
47,259 46,895 Weighted average
shares outstanding - diluted 47,555 47,073
47,364 46,895
Selected balance
sheet data:
4/30/2019 (unaudited)
7/31/2018 (unaudited)
Cash and cash equivalents (including restricted cash $750) $
64,802 $ 60,041 Working capital $ 70,451 $ 63,014
Stockholders' equity $ 90,999 $ 81,121 Total assets
$ 111,000 $ 101,660
The following table presents a reconciliation of reported net
income (loss) and basic and diluted net income (loss) per share to
non-GAAP net income (loss) and basic and diluted net income (loss)
per share for the three and nine months ended April 30, 2019 and
2018:
ENZO BIOCHEM, INC.
Non-GAAP Reconciliation Table (Unaudited, in thousands, except per
share data)
Three months ended Nine months
ended April 30, April 30,
2019
2018
2019
2018
Reported GAAP net income (loss) $ 22,265 $ (3,016 ) $ 7,876
$ (4,557 ) Adjusted for: Legal settlements, net (28,925 ) - (28,925
) - Benefit for income taxes - - - (1,097 )
Non-GAAP net loss $ (6,660 ) $ (3,016 ) $ (21,049 ) $ (5,654
) Weighted Shares Outstanding Basic 47,452 47,073
47,259 46,895 Diluted 47,555 47,073 47,364 46,895 Basic and
diluted earnings per share Basic and diluted net income (loss) per
share GAAP $ 0.47 ($0.06 ) $ 0.17 ($0.10 ) Basic and diluted
net income (loss) per share non-GAAP
($0.14 ) ($0.06 ) ($0.45 )
($0.12 )
The following table presents a reconciliation of reported net
income (loss) for the three and nine months ended April 30, 2019
and 2018, respectively to EBITDA and Adjusted EBITDA:
ENZO BIOCHEM, INC.
EBITDA & Adjusted EBITDA Reconciliation Table (Unaudited, in
thousands)
Three months ended Nine months
ended April 30, April 30,
2019
2018
2019
2018
GAAP net income (loss) $ 22,265 $ (3,016 ) $ 7,876 $ (4,557
) Plus (minus): Depreciation and amortization 838 815 2,372 2,350
Interest income (258 ) (227 ) (759 ) (569 ) Benefit for income
taxes - - - (1,097
) EBITDA $ 22,845 $ (2,428 ) $ 9,489 $ (3,873 ) Adjusted
for: Legal settlements, net (28,925 ) -
(28,925 ) - Adjusted EBITDA $ (6,080 ) $ (2,428 ) $
(19,436 ) $ (3,873 )
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version on businesswire.com: https://www.businesswire.com/news/home/20190610005741/en/
For: Enzo Biochem, Inc.Steve Anreder,
212-532-3232steven.anreder@anreder.comorMichael Wachs, CEOcast,
Inc., 212-732-4300mwachs@ceocast.com
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