Approval of Proprietary GenFlex™ Platform Is
Significant Milestone and Validates Ability to Leverage Leading
Intellectual Property
Services Revenue and Margins Increase; Cost
Cutting Initiatives Starting to Yield Results
Enzo Biochem, Inc. (NYSE:ENZ), an integrated diagnostics company
focusing on delivering and applying advanced technology to produce
affordable, reliable diagnostic products and services, today
reported results for the fiscal second quarter ended January 31,
2020.
The Company reported both operational and financial progress
against its stated objective to provide a cost-effective,
comprehensive menu of molecular diagnostic products and services.
On February 11, 2020, Enzo announced it received New York State
approval for its CT/NG/TV tests using liquid-based cytology sample
collection on its proprietary GenFlex™ platform. GenFlex™ is a
sample-to-result molecular diagnostic platform that includes sample
collection, sample processing, amplification and detection
(utilizing AMPIPROBE® technology). Compared favorably to all other
proprietary platforms dominating the diagnostic testing market,
Enzo’s GenFlex™ platform offers 30-50% cost-savings over current
closed systems. GenFlex™ addresses the $450 million annualized
global diagnostic market for the detection of chlamydia trachomatis
(CT), neisseria gonorrhoeae (NG), and trichomonas vaginalis (TV) as
well as the $1.3 billion Women’s Health market. Extensions of the
GenFlex™ platform, which Enzo is currently developing, could
eventually address the entire $7 billion molecular diagnostic
market.
The Company’s laboratory services segment recognized top-line
growth of 4% year-over-year to $12.5 million in the second quarter.
The lab segment experienced growing accession counts sequentially
and year-over-year with more than 813,000 accessions in the last
twelve months period. Days Sales Outstanding in the laboratory
segment improved to 43 days in the second quarter, a 23 day
improvement from 66 days in the previous year’s period.
Furthermore, gross margins expanded 1,000 basis points to 18.1% in
the second quarter.
The products segment remained profitable despite continued
investment in product development. The division’s order value
(average order size by dollar amount at which its products are
sold) experienced its third straight quarter of sequential growth.
This trend has continued into the first month of the third quarter.
The product segment has experienced its fourth consecutive quarter
of gross margins above 50% despite fluctuations in product mix and
order timing. Overall, operating results from the two segments
improved by $1.7 million through the initiation of cost cutting and
growth initiatives.
Enzo continues to make solid progress in its previously
announced program to realize more than $10 million in annualized
cost savings. Benefits are already being realized, and full
implementation is anticipated by the end of this year.
Highlights for the
Quarter
- New Commercial Platform: Enzo received New York State
Department of Health approval for its CT/NG/TV tests using
liquid-based cytology sample collection on its proprietary GenFlex™
platform. GenFlex™ is a commercially available sample-to-result
molecular diagnostic platform that includes sample collection,
sample processing, amplification and detection. The GenFlex™ open
system delivers high-throughput, high capacity, workflow efficiency
and flexibility at a much greater level of affordability than
existing systems. This is the latest successful development in
Enzo’s strategic plan to provide a cost-effective, comprehensive
menu of molecular diagnostic products and services.
- Therapeutics Progress: Enzo continues to explore various
avenues to unlock value in Enzo Therapeutics, a biopharmaceutical
subsidiary of Enzo Biochem. Alternatives under consideration
include a possible spin-off, sale, joint venture or licensing of
its intellectual property. Also, underscoring Therapeutics’ depth
of opportunity, subsequent to the quarter end Enzo reported the
publication of a Study Detailing a Promising Activity of Drug
Candidate SK1-I in a Model of Lupus.
- Board / Management Additions: During the second quarter,
Rebecca Fischer, CFO of Bellevue Hospital, was appointed as a new
independent Director and David Bench was appointed as the Chief
Financial Officer of Enzo. Subsequent to the quarter end, Fabian
Blank and Peter Clemens IV were also added as directors.
- Patent Portfolio: The Company has built a substantial
portfolio of intellectual property assets, comprised of 463 issued
patents worldwide and over 75 pending patent applications, along
with extensive enabling technologies and platforms. Enzo is
currently evaluating its robust intellectual property portfolio and
will continue to aggressively defend its patents.
Elazar Rabbani, PhD., Chairman and
Chief Executive Officer, Commented:
“Enzo showed strong progress against many of our important
growth initiatives during the second quarter. With the arduous
proxy contest behind us, we welcome our new Directors to our Board
and look forward to working collaboratively to capitalize on our
distinct and highly promising market position in the molecular
diagnostics marketplace as well as our immunoassay,
immunohistochemistry and cytology offerings. New York State
approval of our proprietary GenFlex™ molecular diagnostics platform
provides additional validation of our program as we focus on the
next phase of commercialization of these products and services and
we are preparing to engage with the FDA to secure the final stage
of approval. This milestone achievement highlights our continued
ability to deliver high performance, open, flexible, adaptable and
cost-effective products, devices and services to a diagnostic
industry that continues to be impacted by regulatory price cuts and
sustained high product costs.
“Enzo’s strength in technology and product development is
illustrated by GenFlex’s™ rapid development over the past four
years as it offers important cost-savings over current closed
systems. GenFlex™ particularly addresses the $450 million
annualized global CT/NG/TV diagnostic market as well as the $1.3
billion Women’s Health market. Extensions of the GenFlex™ platform,
currently under development, are aimed at addressing the entire $7
billion molecular diagnostic market.
“At the same time, we are also making positive strides in our
extensive cost reduction program at the labs while continuing to
invest and grow the higher margin and growth segments of our
business that will help assure our objective of building Enzo’s
value.”
Second Quarter Operating
Results
- Total second quarter revenue amounted to $19.4 million,
compared to $19.3 million in the year ago period, up slightly year
over year despite sharply lower industry-wide PAMA reimbursement
rates.
- Clinical Services revenue for the second quarter amounted to
$12.5 million compared to $12.0 million in the previous year
period, an increase of 4%. Volume increases in core and other
non-genetic testing services contributed to the revenue gain. Total
diagnostic testing volume measured by the number of accessions
increased 7% in the period. However, the Protecting Access to
Medicare Act (“PAMA”) continues to negatively impact reimbursements
from Medicare and third-party payers. Gross profit margin at
Clinical Services was 18% in the most recent quarter compared to 8%
in the 2019 period. This margin expansion was attributable to
reductions in outside reference testing expense and headcount
efficiencies, partially offset by increased reagent costs resulting
largely from higher accession volume.
- Life Science revenue for the second quarter was $6.9 million
compared to $7.3 million in the previous year’s second quarter. The
decrease of 6% is primarily due to lower product sales volume in
the U.S. market based on the timing of orders. The gross profit
margin on products was 52% in the 2020 period and 50% in the 2019
period due to the mix of products sold.
- Consolidated gross profit was $5.8 million versus $4.6 million
in the previous year’s quarter. Gross margins for the quarter were
30% compared with 24% a year ago.
- Research and development expenses were $1.0 million in the 2020
period and $0.8 million in the 2019 period, an increase of 28%. The
increase is entirely attributed to the Clinical Services division
for lab developed tests based on our proprietary GenFlex™
platform.
- Selling, general and administrative expenses declined to $10.7
million during the 2020 period from $11.5 million during the 2019
period, and as a percentage of revenue amounted to 55% versus 60% a
year ago. The Clinical Services expense declined $0.3 million,
primarily due to the initial results of the aforementioned cost
savings program. The Life Sciences Products expense decreased $0.5
million primarily due to reductions in operating expenses and
related costs.
- Legal and related expenses were approximately $2.0 million
during the 2020 period compared to $1.1 million in the 2019 period,
an increase of $0.9 million. During the 2020 period, the Company
incurred $1.8 million for proxy costs relating to the February 2020
annual shareholders meeting.
- GAAP net loss was ($7.7) million, or ($0.16) per diluted share,
an improvement of 9% compared with a year ago quarter net loss of
($8.4) million, or ($0.18) per diluted share. The non-GAAP net
loss, adjusted primarily for proxy related costs, was ($5.8)
million, compared to ($8.4 million) a year ago, an improvement of
$2.6 million. On a per share basis, the non-GAAP loss equaled
($0.12), compared with ($0.18) a year ago. Adjusted EBITDA loss in
the quarter and a year ago approximated ($5.3) million and ($7.9)
million reflecting a $2.6 million improvement.
First Half Operating
Results
Total revenue for the first half of fiscal year 2020 was $39.6
million compared to $40.6 million in the prior year, a decline of
2%. Gross profit totaled $11.5 million, compared to $11.7 million a
year ago, with gross margins of 29% in each of the periods. Sales,
General and Administrative Expenses decreased to $21.8 million from
$22.5 million or 55% of revenue for both periods. Research &
Development increased to $2.1 million, or 36% in the period. Legal
expenses amounted to $3.8 million versus $2.4 million in the prior
year period. The GAAP net loss totaled $15.3 million, or ($0.32)
per share compared to a net loss of $14.4 million, or ($0.30) per
share in the previous period. Adjusted EBITDA was a loss of $11.8
million compared to a loss of $13.4 million a year ago.
At quarter-end, cash, cash equivalent and restricted cash
totaled $52 million, and working capital amounted to $48 million.
As of March 2, 2020, the company had 47.6 million shares
outstanding.
Conference Call
The Company will conduct a conference call Friday, March 6, 2020
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 4496317.
Interested parties may also listen over the Internet at:
https://tinyurl.com/rq732hc
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 March 20, 2020. The replay of the
conference call can be accessed by dialing (855) 859-2056.
International callers can dial (404) 537-3406 and, when prompted,
use the same PIN number 4496317.
About Enzo Biochem, Inc.
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, revenue, 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 Six months ended
Selected operations data:
January 31 January 31, (unaudited)
(unaudited)
2020
2019
2020
2019
Total revenues
$
19,384
$
19,327
$
39,591
$
40,587
Gross profit
$
5,809
$
4,579
$
11,495
$
11,600
Gross profit %
30.0%
24%
29.0%
29%
Loss before income taxes
(7,687)
(8,408)
(15,335)
(14,389)
Net loss
$
(7,687)
$
(8,408)
$
(15,335)
$
(14,389)
Basic and diluted net income (loss) per share
($
0.16)
($
0.18)
($
0.32)
($
0.30)
Weighted average shares outstanding - basic and diluted
47,557
47,199
47,557
47,197
Selected balance sheet
data: 1/31/2020(unaudited)
7/31/2019(unaudited) Cash and cash equivalents
including restricted cash of $750
$52,252
$60,896
Working capital
$47,900
(a)
$65,444
Stockholders' equity
$70,860
$86,028
Total assets
$116,782
$106,640
(a) Includes impact of adoption of ASC 842 leases, the
current portion of operating lease liabilities recorded is $4,534
The following table presents a reconciliation of reported net
loss and basic and diluted net loss per share to non-GAAP net loss
and basic and diluted net loss per share for the three and six
months ended January 31, 2020 and 2019:
ENZO BIOCHEM, INC. Non-GAAP Reconciliation Table
(Unaudited, in thousands, except per share data)
Three
months ended Six months ended January 31
January 31,
2020
2019
2020
2019
Reported GAAP net loss
$
(7,687)
$
(8,408)
$
(15,335)
$
(14,389)
Adjusted for: Contested proxy expenses
1,847
-
2,493
-
Non-GAAP net loss
$
(5,840)
$
(8,408)
$
(12,842)
$
(14,389)
Weighted Shares Outstanding Basic and diluted
47,557
47,199
47,557
47,197
Basic and diluted earnings per share Basic and diluted net
loss per share GAAP
($0.16)
($0.18)
($0.32)
($0.30)
Basic and diluted net loss per share non-GAAP
($0.12)
($0.18)
($0.27)
($0.30)
The following table presents a reconciliation of reported net
loss for the three and six months ended January 31, 2020 and 2019,
respectively to EBITDA and Adjusted EBITDA:
ENZO BIOCHEM, INC. EBITDA & Adjusted EBITDA
Reconciliation Table (Unaudited, in thousands)
Three
months ended Six months ended January 31
January 31,
2020
2019
2020
2019
GAAP net loss
$
(7,687)
$
(8,408)
$
(15,335)
$
(14,389)
Plus (minus): Depreciation and amortization
709
768
1,434
1,534
Interest, net
(171)
(227)
(408)
(501)
EBITDA
$
(7,149)
$
(7,867)
$
(14,309)
$
(13,356)
Adjusted for: Contested proxy expenses
1,847
-
2,493
-
Adjusted EBITDA
$
(5,302)
$
(7,867)
$
(11,816)
$
(13,356)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200305005820/en/
For: Enzo Biochem, Inc. David Bench, CFO 212-583-0136
dbench@enzo.com
Steve Anreder Anreder & Company 212-532-3232
Steven.anreder@anreder.com
Elliot Sloane ESPR LLC 917-291-0833 Elliot.espr@gmail.com
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