Operations to Launch High Quality Products
and Services to Hospital and Independent Laboratories Headline
Quarterly Activities
Enzo Biochem Inc. (NYSE:ENZ), an integrated diagnostic company,
today reported results for the third fiscal quarter and nine months
ended April 30, 2018, in addition to noting significant progression
of its strategic plan aimed at providing cost-effective, high
performing and easily adaptable products and services to hospital
and independent laboratories.
Recent Developments
Implementation of Enzo’s disruptive strategy to alleviate cost
pressures for clinical laboratories by developing cost efficient
high performing technologies and products for use in commonly
available automated systems accelerated in a number of critical
areas during the quarter, capitalizing on Enzo’s integrated
businesses:
- Overall testing volume gains in
services revenue grew nearly 2% despite weather and specific items
impacting services revenue, demonstrating resiliency in the
turbulent marketplace for clinical laboratories. Services revenue
of Enzo’s newly launched women’s health panel on the AmpiProbe®
platform was strong in the quarter.
- Recruitment of incremental sales force
to drive revenue growth is well underway with addition of new
professional team members, including new sales leadership.
- Enzo recently named an in-network
laboratory provider to a large New England commercial payor
covering more than 3 million lives. Applications for in-network
status continue to be filed with several payors that will expand
Enzo’s reach of testing services to millions of covered lives
across the U.S.
- Acceleration of product and services
marketing efforts with additional staff hires and work around
branding of technology platforms, new print and digital articles
and marketing materials, and attendance at targeted trade shows and
conferences.
- Enzo validated three clinically
relevant cost-effective cancer biomarker detection tests as part of
its expanded anatomical Pathology platform. In addition, Enzo added
assays for detecting chromosomal abnormalities for cancer stagings
to Enzo’s development pipeline for introduction later this year and
a UMM marker (Ureaplasma species, Mycoplasma hominis and Mycoplasma
genitalium) is being validated that will expand the Company’s
13-analyte women’s health panel on the AmpiProbe® platform.
- Growing number of important business
development meetings and activities around potential partnerships
and collaborations with hospital networks, diagnostic manufactures
and other laboratories in process, with specific emphasis on use of
Enzo diagnostic reagents in existing automated systems that are
commonly available.
- During fiscal 2018, Enzo has been
granted 14 new patents, including key patents covering potential
cancer therapeutic.
- Expect near term announcement on Enzo’s
facility expansion program to support growth.
Third Quarter Financial
Highlights
- Total revenues in the quarter amounted
to $25.6 million or 5% lower than prior year due to a decrease in
service revenue.
- Services revenue was affected in the
third quarter by the loss of a medical practice that internalized
genetic testing ordering of approximately $1.9 million, storm
related weather in the Northeast which impacted operations
approximately $1.0 million (5 days), and an accounts receivable
reserve adjustment of $0.5 million due to a commercial payor
payment practice. Despite these items, core service testing volume
increased nearly 2% or $2.0 million with growth in genetic and
esoteric testing. Included in this amount was strong revenue
related to the recently launched AmpiProbe® platform in the
quarter. As a result, services revenue totaled $18.1 million
compared to $19.6 million in the prior year.
- Product revenue was slightly ahead of
prior year at $7.4 million as reported sales increased in Europe
and stabilized in the U.S.
- Gross margins in the quarter were 43%
compared with 45% in the prior year period.
- Total operating expenses were $13.9
million compared to $12.4 million, an increase of $1.5 million or
12%. Legal expense accounted for $1.1 million of the increase along
with marketing and sales related expenses of $0.3 million in
advance of launching new sales initiatives.
- The GAAP and Non-GAAP net loss was $3.0
million or $0.06 per share compared to breakeven results or $0.00
per share in the prior year period.
- Total cash and cash equivalents at
April 30, 2018 were $62.6 million compared to $64.2 million at July
31, 2017. Operating segments continue to be cash flow positive.
Cash used in operations for the nine months ended April 30, 2018
was $0.5 million compared to a use of $1.9 million for the nine
months ended April 30, 2017.
Barry Weiner, Enzo Biochem President,
comments:
“Healthcare overall is in a transformative state, a situation
Enzo has long recognized with innovative platforms and assays
designed to bring hospitals and independent labs meaningful cost
savings, improved service to physician customers, assure the
comfort and needs of patients, and overall help to importantly
build value.
“Our quarterly services revenue and gross margin was adversely
impacted by a customer shift to internalizing genetic ordering,
adverse weather, and payment practices at a commercial insurance
payor. Nevertheless, Enzo showed its business model can replace
this service revenue by expanding our coverage area, increasing
services to hospital networks and successfully launching tests such
as AmpiProbe® at lower cost, thereby improving gross margins.
“Enzo is making significant progress preparing to roll out our
disruptive diagnostic technology to hospital and independent
laboratories. Our operating and commercial activities have
accelerated and we expect the pace to continue throughout calendar
2018. The insurance reimbursement market is shifting rapidly,
making Enzo’s strategic plan to develop and market cost-efficient
proprietary products and services that are high performing,
critical to the laboratory industry. The Company saw increased
service revenue from its AmpiProbe® line with attractive gross
margins in just the first quarter since launch.
“Our focus is clear: expanding Enzo’s proprietary technology
platforms in high-valued molecular diagnostics, immunoassays and
genomics segments that will provide laboratories margin relief as
insurance reimbursement and cost challenges become more prevalent.
This ongoing effort involves training an expanded sales team,
investing in related marketing and promotion programs, in addition
to continuing our pipeline development.
“We have a highly liquid and strong balance sheet with which to
implement our strategic plan and bring it to fruition.”
Business Strategy
As an integrated diagnostic company, Enzo is driving the
development of cost efficient, high performing and easily adaptable
disruptive diagnostic technologies to the hospital and independent
clinical laboratory industry. Enzo’s current market position is the
culmination of extensive strategic planning and years of work
developing reagents and assays in clinical markets. Key to our
strategy is Enzo’s unique operating structure and integration of
Enzo Life Sciences products and Enzo Clinical Laboratories services
that provide us with a unique advantage. Enzo Life Sciences has
broad capabilities for developing critical assays that have
demonstrated unusually high sensitivity. In our facilities in New
York and Michigan we also have the capability to manufacture them
as they are approved.
In turn, Enzo Clinical Labs with its state-of-the-art diagnostic
capabilities is working seamlessly with Life Sciences to assure the
quality and effectiveness of our products through testing services
on commonly available automated systems.
The result of this unique integration is that we are able to
bring to market platforms and technologies that are fully vetted in
a real world diagnostic facility. Moreover, these solutions cover
multiple diagnostic segments including molecular diagnostics,
anatomical pathology, immunoassays, and genetics. Affordable price
structure is related to our ability to access installed automated
systems. At a time when reimbursement pressures and cost challenges
persist, Enzo’s solutions provide much needed margin relief for
clinical laboratories.
Third Quarter Results
Total revenues in the quarter amounted to $25.6 million or 5%
lower than prior year due to a decrease in services revenue. As
noted above, services revenue was impacted in the third quarter by
the loss of a large medical practice that internalized genetic
testing ordering of approximately $1.9 million, storm related
weather in the Northeast that impacted operations approximately
$1.0 million, and an accounts receivable reserve adjustment of $0.5
million due to a commercial payor payment practice. Despite these
items, core service testing volume increased nearly 2%, or $2.0
million, with growth in genetic and esoteric testing. Product
revenue was slightly ahead of prior year at $7.4 million as
reported sales increased in Europe and stabilized in the U.S. The
current quarter’s products revenue was impacted favorably by
foreign currency movements of approximately $0.2 million.
Gross margins in the quarter were 43% compared with 45% in the
prior year period. Total operating expenses were $13.9 million
compared to $12.4 million, an increase of $1.5 million or 12%.
Legal expenses were $1.7 million and accounted for $1.1 million of
the increase in operating expenses along with marketing and sales
related expenses of $0.3 million in advance of launching new sales
initiatives. The increase in legal expenses was principally related
to the New York litigation with Roche, where Enzo is the
plaintiff.
The GAAP and Non-GAAP net loss was $3.0 million or $0.06 per
share compared to breakeven results or $0.00 per share in the prior
year period.
EBITDA (earnings before interest, taxes, depreciation and
amortization) and Adjusted EBITDA was a loss of $2.4 million,
compared to EBITDA of $0.7 million in the prior year period.
Segment Results
Services revenues were $18.1 million versus $19.6 million in the
prior year period as a result of the aforementioned specific items
offset by growth in testing volume. Gross margins declined to
39.4%, from 42.1% a year ago. Operating income amounted to $0.5
million, compared to $1.5 million, a year ago. Noteworthy was
steady growth in tests using the newly installed AmpiProbe™
platform with significantly above average profit margins compared
to historical laboratory testing.
Products revenue increased to $7.4 million from $7.3 million a
year ago. With costs well maintained, and sales of higher margin
products, resulting from the unit’s recent product mix realignment,
Life Science product profit margins advanced to 52%, from 51% a
year earlier. Operating income approximated $0.4 million for the
April 2018 quarter and $0.6 million in the year ago period.
Nine Month Results
Total products and services revenues year to date amounted to
$80.3 million, up 1% from $79.6 million a year ago. Gross margins
were 43.2%, vs. 44.9% a year ago, and SG&A as a percentage of
revenue was 41% vs. 42%. Legal expenses amounted to $3.8 million,
up from $1.3 million a year ago principally due to litigation
expenses in New York with Roche, where Enzo is the plaintiff. The
GAAP and Non-GAAP net loss was $4.6 million or $0.10 per share and
$5.7 million or $0.12 per share, respectively, compared to GAAP and
Non-GAAP net loss of $2.6 million or $0.06 in the prior year
period. EBITDA and Adjusted EBITDA was a loss of $3.9 million
compared to a loss of $0.2 million in the prior year period.
Conference Call
The Company will conduct a conference call Tuesday, June 12,
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 8178498.
Interested parties may also listen over the Internet at:
https://tinyurl.com/ybasc9sh
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 June 26,
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 8178498.
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, 2017. 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) 2018
2017 2018
2017 Revenues: Clinical
laboratory services $ 18,137 $ 19,584 $ 58,001 $ 56,979 Product
revenues 7,415 7,312 21,618 21,721 Royalty and license fee income
78 193 639 933
Total revenues $ 25,630 $ 27,089 $
80,258 $ 79,633 Gross profit $ 11,073 $
12,173 $ 34,663 $ 35,940 Gross profit %
43 % 45 % 43 % 45 % Income
(loss) before income taxes (3,016 ) (71 ) (5,654 ) (2,598 )
Benefit for income taxes (1) - - 1,097 -
Net income (loss) $ (3,016 )
$ (71 ) $ (4,557 ) $ (2,598 ) Basic and diluted net income
(loss) per share ($0.06 ) ($0.00 ) ($0.10 )
($0.06 ) Weighted average shares outstanding - basic
and diluted 47,073 46,367 46,895
46,310 (1) The statement of operations
for the nine months ended April 30, 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:
4/30/2018(unaudited)
7/31/2017(unaudited)
Cash and cash equivalents $62,556 $64,167 Working
capital $67,748 $71,274 Stockholders' equity $86,379 $88,872
Total assets $105,451 $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 nine months ended April 30, 2018 and 2017:
ENZO BIOCHEM, INC. Adjusted
Reconciliation Table (Unaudited, in thousands, except per share
data)
Three months ended Nine months ended
April 30, April 30, 2018
2017
2018 2017
Reported GAAP net income (loss) $ (3,016 ) $ (71 ) $ (4,557 ) $
(2,598 ) Adjusted for: Benefit for income taxes -
- (1,097 ) - Adjusted net income
(loss) $ (3,016 ) $ (71 ) $ (5,654 ) $ (2,598 )
Weighted Shares Outstanding: Basic and diluted 47,073 46,367 46,895
46,310 Basic and diluted earnings per share: Basic and
diluted net income (loss) per share - GAAP ($0.06 ) ($0.00 ) ($0.10
) ($0.06 ) Basic and diluted net income (loss) per share -
Adjusted ($0.06 ) ($0.00 ) ($0.12 ) ($0.06 ) (1) The
statement of operations for the 2018 nine month period 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 nine months ended April 30, 2018 and 2017 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, 2018
2017 2018
2017 GAAP net
income (loss) $ (3,016 ) $ (71 ) $ (4,557 ) $ (2,598 ) Plus
(minus): Depreciation and amortization 815 849 2,350 2,692 Interest
income (227 ) (115 ) (569 ) (240 ) Benefit for income taxes - -
(1,097 ) - EBITDA and Adjusted EBITDA $
(2,428 ) $ 663 $ (3,873 ) $ (146 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180611006142/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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