Company’s Vertically Integrated Life
Sciences and Labs Business Generates Breakthrough Diagnostic
Testing Approvals and Services in Rapidly Expanding Markets
Company Progressing on Three-Pronged Value
Creation and Growth Strategy; Engages Lazard to Assist in Strategic
Relationship Exploration and New Venture Creation
Enzo Biochem, Inc. (NYSE:ENZ), an integrated diagnostics,
clinical lab, and life sciences company focusing on delivering and
applying advanced technology capabilities to produce affordable,
reliable products and services that enable its customers to meet
their clinical needs, today reported results for the fiscal fourth
quarter and year ended July 31, 2019.
The Company reports progress in the three core pillars of its
value creation strategy: strategic relationships for growth,
creating a new paradigm for the laboratory diagnostic marketplace
and returning to operating profitability and growth in the lab
segment of the business. In furtherance of these objectives, Enzo
has retained Lazard to assist in the previously announced
initiative to form strategic relationships or new venture creation
across the Company’s four core platforms: molecular,
immunohistochemistry, cytology and immunology.
Highlights for the Quarter and Full
Year
- Enzo’s vertically integrated research and development program,
harnessing the collective benefits of its laboratory and diagnostic
operations, continued to deliver substantial technological
advances. By leveraging its broad intellectual property portfolio
and manufacturing expertise, Enzo is able to create novel products
and platforms with the potential to be transformative to diagnostic
products and services.
- In September, Enzo Clinical Labs, Inc., received New York State
Department of Health approval for its AMPIPROBE® HBV viral load
monitoring assay for Hepatitis B virus (HBV) based on performance
versus an FDA-approved competitive product. Enzo’s growing
portfolio in the viral load monitoring market includes previous New
York State Department of Health approval for a viral load
monitoring assay for Hepatitis C virus (HCV) and a viral load
monitoring assay under development for human immunodeficiency virus
(HIV). The Company’s expanding menu allows Enzo to provide one of
the most comprehensive panels for sexually transmitted infections
(STI) testing, a rapidly growing healthcare segment where reported
common STIs in the US have increased for the 5th consecutive
year.
- Approval of the HBV assay follows the July announcement of New
York State Department of Health approval for Gonorrhea and
Chlamydia tests for extragenital specimens, and the announcement
that Enzo was creating a direct to consumer testing business for
STIs. Furthermore, the Company is developing an additional test for
HPV testing in multiple sample types.
- The Company was issued 74 patents worldwide during fiscal year
2019. Notably, the Company was issued U.S. Patent No. 10,323,272
entitled “Nucleic acid probes for in situ hybridization” on June
18, 2019, which is directed to a new probe technology that allows
for significantly more cost effective, simple and scalable
processes across the multi-billion dollar diagnostic testing, drug
development and academic research marketplaces. The probes can be
used to detect clinically relevant genomic targets with high
sensitivity in cell samples and biopsy tissue. Compared to
competitive probes, Enzo’s novel probe will lower cost, decrease
complexity, save time and avoid disruptions of sample
integrity.
- In fiscal year 2019, Enzo’s Life Sciences and laboratory
divisions invested approximately $10 million in strategic growth
initiatives such as developing a Good Manufacturing Practice (GMP)
Lab, expanding strategic salesforce and marketing practices, and
ramping up R&D and Lab Developed Test initiatives. This
investment is already resulting in cost reductions for the
laboratory and diagnostics operations. Currently, approximately $4M
of the Company’s revenue is associated with strategic growth
initiatives.
- Over the past 5 years, Enzo has systematically introduced its
technology onto its clinical production floor through LDTs
validated by the New York State Department of Health. Over this
period, Enzo has run over 100,000 of these Enzo LDTs, resulting in
savings of over $5M by substituting third-party vendor tests with
Enzo’s own internally developed tests. Enzo expects the annual
savings from these tests to increase in the next fiscal year to $3M
and to $5M in the following year.
Elazar Rabbani, PhD., Chairman and Chief
Executive Officer, Comment:
“Enzo’s structure and business strategy represent the
culmination of years of extensive planning and productive work. The
Company has the ability to offer low cost, high performance
products and services in molecular diagnostics. While reimbursement
pressures facing diagnostic labs remain a headwind in the short
term, our unique offering positions us well to capitalize on these
secular trends over the long term. Our pioneering work in genomic
analysis coupled with our extensive patent estate and enabling
platforms have positioned the Company to continue to play an
important role in the rapidly growing molecular medicine
marketplaces.
“Enzo technology solutions and platforms and unique operational
structure are designed to reduce overall healthcare costs for both
government and private insurers. Our proprietary technology
platforms reduce our current and prospective customers' needs for
multiple, specialized instruments, and offer a variety of high
throughput capabilities together with a demonstrated high level of
accuracy and reproducibility. Our genetic test panels are focused
on large and growing markets primarily in the areas of personalized
medicine, women's health, infectious diseases and genetic
disorders.
“Our Company continues to make significant progress toward
unlocking shareholder value, guided by the three core pillars of
our strategy – strategic relationships, creating a new paradigm for
the laboratory and diagnostic marketplaces, and returning to
operating profitability and lab segment growth. One of our chief
goals, as we’ve stated previously, is to achieve clinical
laboratory profitability despite a very challenging reimbursement
environment. We feel confident we are on track towards
accomplishing this objective.”
“Testing activity and volume is up sequentially this quarter, as
overall lab revenues grew 11% in the fourth quarter vs. the third
quarter of fiscal 2019. Our expanding panel of STI testing,
enhanced by a recent diagnostic test approval, is one of the most
extensive available, including the highly comprehensive women’s
health diagnostic panel.
“Our diagnostic products, developed and manufactured at Enzo
Life Sciences, and formatted and validated at Enzo Clinical Labs,
are perfect examples of the integrated nature of our Company’s
businesses and the value and leverage we generate from these
synergies. It would be extremely difficult and costly to replicate
as two separate units and more importantly, this combination
demonstrates the real time benefits that labs around the country
can achieve as the result of our work. In an adverse
laboratory-wide climate of shrinking margins and declining
profitability, our proprietary platforms that offer high
sensitivity, compatibility with existing systems and low
cost/higher margins, are tailor-made for both product sales and the
lab-to-lab growth opportunities that we are actively pursuing.
“This active, commercial installation in our Lab is attracting
increasing attention among major as well as smaller players who are
showing meaningful enthusiasm for our platforms and products.
Discussions with leading life sciences and medical device companies
as well as manufacturers of automated systems of our molecular
diagnostics, immunohistochemistry and ELISA platform are
progressing well. We expect to update the market by the end of the
calendar year on these discussions.”
Fourth Quarter Operating
Results
- Total revenues amounted to $21.0 million, compared to $22.8
million in the year ago period, a decline of 8% reflecting new,
sharply lower industry-wide Protecting Access to Medicare Act
reimbursement rates; sequential total testing volume increased 4%.
Sequentially, clinical laboratory services revenues increased 11%
from the prior quarter’s $11.8 million, while product revenues for
the quarter were up 3% over the prior year period as a result of
the successful implementation of new marketing and sales
initiatives. Lab revenues declined to $13.1 million, from $15.1
million in the year ago period, due to the reduced insurance
reimbursement payments and changes to medical and procedural
requirements for genetic testing by payors. Overall, gross profit
improved sequentially by 21%, to $6.3 million, with clinical lab
gross profit more than doubling to $1.8 million, from $0.8 million,
and product gross margin increasing 2% to $4.6 million.
- As noted previously, clinical services revenues for the fourth
quarter and full year ended July 31, 2019, reflect adoption of new
revenue recognition accounting 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 $3.1 million and $3.7 million, respectively in the
fiscal years ended July 31, 2019 and 2018, and $1.0 million and
$1.7 million for the respective fourth quarter periods.
- Consolidated gross margins for the quarter of 30.3% compared
with 35.2% a year ago, and up 300 basis points sequentially.
Clinical services gross margins were 13.8% compared to 25.4% a year
ago and sequentially improved in the third quarter. The improvement
reflected both higher testing volume and enhanced efficiency.
Product gross margin for the quarter increased to 58%, from 54%,
and sequentially was up 200 basis points.
- Operating expenses declined 12%, or $1.6 million to $12.0
million year over year, and sequentially remained flat, adjusted
for net legal settlements. Legal fee expenses declined by $1.0
million compared to the fourth quarter last year, to $0.3 million,
and sequentially were flat in both periods.
- GAAP net loss was ($5.4) million, or ($0.11) per share, an
improvement of 7% compared with a year ago quarter net loss of
($5.8) million, or ($0.12) per share. The non-GAAP net loss was
($5.4) million, compared to ($5.8 million) a year ago and ($6.7)
million in the preceding quarter. On a per share basis, the
non-GAAP loss equaled ($0.11), compared with ($0.12) a year ago and
($0.14) in 3Q19 on an adjusted basis. EBITDA loss in the quarter
and a year ago approximated ($5.0) million and ($5.3) million
respectively and decreased sequentially from ($6.1) million on an
adjusted basis.
Full Year Operating Results
Total revenues were $81.2 million compared to $101.0 million, a
year ago, a decline of 20%, and as noted earlier reflected newly
instituted reduced reimbursement payments, insurance company claims
rejections and changes to medical and procedural requirements for
genetic testing by payors. Gross profit was $23.2 million, compared
to $40.7 million the prior year, with gross margins at 28.6% and
40.3%, respectively. Legal fees declined by 41%, to $3.0 million,
and tailed off sharply towards year end, while SG&A declined to
$44.2 million from $44.5 million. GAAP net income amounted to $2.5
million, or $0.05 per diluted share, compared to a net loss of
($10.3) million, or ($0.22) per share, a year earlier. Non-GAAP net
loss amounted to ($26.4) million, net of legal settlements,
compared to a non-GAAP fiscal 2018 net loss of approximately
($11.4) million. EBITDA was $4.5 million, compared to year ago
EBITDA loss of ($9.1) million.
At year-end, cash, cash equivalent and restricted cash totaled
$60.9 million, and working capital amounted to $65.4 million.
Conference Call
The Company will hold a conference call on Tuesday, October 15,
2019, at 4:30 PM E.T. To listen to the conference call dial
1-888-459-5609. International callers can dial 1-973-321-1024. When
prompted, use PIN number 4196818.
Interested parties may also listen over the Internet at:
https://tinyurl.com/yxb9r46c
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 29,
2019. 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 4196818.
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 406 issued patents worldwide and over 75 pending
patent applications, along with extensive enabling technologies and
platforms.
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, 2019. 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)
2019
2018
2019
2018
Total revenues
$
20,921
$
22,755
$
81,170
$
101,013
Gross profit
$
6,346
$
7,999
$
23,248
$
40,628
Gross profit %
30
%
35
%
29
%
40
%
Income (loss) before income taxes
(5,387
)
(5,764
)
2,489
(11,418
)
Benefit for income taxes
-
-
-
1,097
Net income (loss)
$
(5,387
)
$
(5,764
)
$
2,489
(10,321
)
Basic net income (loss) per share
($
0.11
)
($
0.12
)
$
0.05
($
0.22
)
Diluted net income (loss) per share
($
0.11
)
($
0.12
)
$
0.05
($
0.22
)
Weighted average shares outstanding - basic
47,557
47,173
47,351
46,972
Weighted average shares outstanding - diluted
47,557
47,173
47,476
46,972
Selected balance sheet
data:
7/31/2019
(unaudited)
7/31/2018
(unaudited)
Cash and cash equivalents (including restricted cash $750)
$
60,896
$
60,041
Working capital
$
65,444
$
63,014
Stockholders' equity
$
86,028
$
81,121
Total assets
$
106,640
$
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 twelve months ended July 31, 2019 and
2018:
ENZO BIOCHEM, INC. Non-GAAP Reconciliation Table (Unaudited,
in thousands, except per share data)
Three months
ended Twelve months ended July 31, July
31,
2019
2018
2019
2018
Reported GAAP net income (loss)
$
(5,387
)
$
(5,764
)
$
2,489
$
(10,321
)
Adjusted for: Legal settlements, net
-
-
(28,925
)
-
Benefit for income taxes
-
-
-
(1,097
)
Non-GAAP net loss
$
(5,387
)
$
(5,764
)
$
(26,436
)
$
(11,418
)
Weighted Shares Outstanding Basic
47,557
47,173
47,351
46,972
Diluted
47,557
47,173
47,476
46,972
Basic and diluted earnings per share Basic and diluted net
income (loss) per share GAAP
($
0.11
)
($
0.12
)
$
0.05
($
0.22
)
Basic and diluted net income (loss) per share non-GAAP
($
0.11
)
($
0.12
)
($
0.56
)
($
0.24
)
The following table presents a reconciliation of reported net
income (loss) for the three and twelve months ended July 31, 2019
and 2018, respectively 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,
2019
2018
2019
2018
GAAP net income (loss)
$
(5,387
)
$
(5,764
)
$
2,489
$
(10,321
)
Plus (minus): Depreciation and amortization
664
784
3,036
3,149
Interest income
(296
)
(283
)
(1,056
)
(853
)
Benefit for income taxes
-
-
-
(1,097
)
EBITDA
$
(5,019
)
$
(5,263
)
$
4,469
$
(9,122
)
Adjusted for: Legal settlements, net
-
-
(28,925
)
-
Adjusted EBITDA
$
(5,019
)
$
(5,263
)
$
(24,456
)
$
(9,122
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191015006090/en/
For: Enzo Biochem, Inc. Steve Anreder, 212-532-3232
steven.anreder@anreder.com or Michael Wachs, CEOcast, Inc.,
212-732-4300 mwachs@ceocast.com
Elliot Sloane, ESPR LLC 917-291-0833 Elliot.espr@gmail.com
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