Enzo Biochem first quarter total revenues increase 2% to $25.7 million

Dec 13 2010

Enzo Biochem, Inc. (NYSE:ENZ) today reported improved sequential results for the first fiscal quarter ended October 31, 2010, the result of recent programs to reduce expenses, consolidate activities and expand operations.

"We are pleased to report that our program instituted this quarter aimed at making Enzo more efficient and designed to produce more effective use of our assets is beginning to show results, as demonstrated by improved performance, " said Barry Weiner, President. "While we are in the early stages of this comprehensive program, the results experienced to date are very encouraging."

"Moreover, in the first quarter, we achieved several milestones. We submitted Colon Sentry, a unique assay for risk-stratification of colon cancer occurrence, to the New York State Department of Health for approval. In addition, we began enrolling the first patients in our clinical trial of Optiquel™, our candidate therapeutic for the treatment of autoimmune uveitis. We also continued to roll out proprietary products and systems designed to aid in drug development," he added.

Among the quarter's highlights (all references are to sequential quarter over quarter results, normalized for an inventory charge and severance of $1.8 million where applicable):

• Enzo Life Sciences, benefiting from increased emphasis on higher margin products, realized a greater than 100% gain in operating income.
• Enzo Clinical Labs increased revenues 6%, while reducing the operating loss 62%.
• Company-wide, gross margin increased $2.0 million or 17%.
• Operating expenses decreased 7%, or to 57% of revenues, from 63%.
• EBITDA, a non-GAAP measure, was $23,000, an improvement of $2.9 million from the prior quarter.
• Net loss for the quarter was reduced 70%.

Quarter's Results

Total revenues for the first quarter of fiscal 2011 increased to $25.7 million, from $25.2 million a year ago, or 2%, despite slightly lower revenues at Life Sciences resulting from a program to emphasize higher margined products, and advanced 3% sequentially. Enzo Clinical Labs benefited from an increase in market share and a new provider contract.

Gross profit margin improved 17% to $13.5 million, or 53% of revenues, compared to the fiscal 2010 fourth quarter's $11.5 million and was a slight improvement year over year. R&D expenses were $1.8 million, 28% lower than both a year ago and in the July 2010 quarter, and SG&A declined $0.5 million to $11.0 million, as a percentage of revenues down 3% from a year ago and 1% from the prior quarter. Overall operating expenses, including R&D, SG&A, legal and provision for uncollectible accounts were $14.6 million, a decline of 4% from last year's first quarter and 7% from the preceding July period. The operating loss decreased 42%, to ($1.1) million from the corresponding year-ago period, while the net loss of ($1.1) million was 38% lower year over year. EBITDA, adjusted for approximately $1.1 million in both periods for depreciation and amortization, was $23,000, compared to a year ago EBITDA loss of ($959,000), an improvement of $936,000.

The Company's financial condition remained strong, with working capital of $42.1 million. As of October 31, 2010, cash and cash equivalents, plus short term investments in US Treasury Bills, totaled $31.6 million. At November 30, 2010 Enzo's cash, and cash equivalents and short-term investments were $33.9 million, which exceeded the July 31, 2010 balance by $0.3 million. Cash utilization in operations declined year over year by approximately $1 million to $1.8 million principally due to the reduced loss in the 2011 period. Management's plan is to move towards being cash flow positive from operations in calendar 2011. There was no debt.

Segment Results

Enzo Clinical Labs ("Lab") benefited in the quarter from increased market share and service volume increases in connection with its being named a participating provider for Empire BlueCross BlueShield in the metropolitan New York area. Revenues increased to $12.4 million, compared to $11.1 million a year ago and $11.7 million in the July 2010 quarter, gains of 12% and 6%, respectively. The Lab has increasingly moved to position itself as a provider of molecular diagnostic and other higher-margin esoteric services. Gross margins improved $0.5 million and $1.1 million year over year and sequentially, respectively Uncollectible accounts receivables increased to $1.1 million, from $0.9 million a year ago, primarily due to a change in payer mix which is expected to normalize in the months ahead. SG&A was $4.5 million in the current quarter, a decrease of $0.3 million from the prior quarter and slightly higher year over year as a result of increased benefit costs. Operating loss improved sequentially to $0.9 million from $2.3 million and was comparable year over year.

Enzo Life Sciences' profitability for the quarter improved due to benefits from the plan instituted in July to integrate functions and rationalize workforce levels. Product and royalty and license fee revenues of $13.3 million in the fiscal 2011 first quarter, compared with $14.1 million a year ago, and $13.2 million in the preceding three months. Product revenues declined $0.6 million over the prior year period mainly due to planned reduction in lower margin distributed products. Gross profit margin improved to 65% in the October 2010 quarter, compared with 64% a year ago and 59% in the July 2010 quarter, after adjusting for an inventory charge of $1.3 million. Operating income amounted to $3.0 million, compared to $2.1 million a year ago, and $1.6 million in the preceding fourth quarter of fiscal 2010, after adjusting for the inventory charge and severance.