Enzo Biochem third quarter total revenue increases 4% to $26 million

Jun 12 2012

Enzo Biochem, Inc. (NYSE:ENZ) today reported results for the fiscal third quarter ended April 30, 2012. Among the quarter's highlights were the following:    

• Revenue increases compared to year-earlier same period.
• Sequential 4% increases in revenues and gross margin at Enzo Clinical Labs and Enzo Life Sciences combined.
• Successful launch of the ColonSentry™ test for providing an assessment of a patient's risk of having colorectal cancer.
• Continued strong organic growth in excess of industry averages, sequentially and year over year, of Clinical Lab revenues, the result of an expanded marketing platform and the resultant increase in new physician clients as well as greater testing volume.

"We continue to improve results on a sequential basis, despite the continuing impact of lower spending in life sciences, primarily as a result of reduced government-sponsored R&D outlays, particularly in academia. We are quite excited by the strong response we have received from the market to our initial launch of the ColonSentry™ test. The assay was launched late in the quarter and we are working to significantly expand our capacity to address the potential market. In addition, we have several promising innovative diagnostic tests that we are optimistic we can bring to market prior to the end of the year," said Barry Weiner, President.

"Enzo Clinical Labs is making important progress both organically and in terms of market share. Enzo Life Sciences, experiencing a slowing research market particularly as budgets in academia have been reduced, is focusing more intensively on the pharma industry, where there are growth opportunities, especially in personalized medicine. In addition, we continue to rationalize and integrate our operations, and identify operational efficiencies, from which we expect future benefits. Enzo has a strong, proprietary base of products and technologies, as well as a unique infrastructure with Clinical Lab and Life Science sectors that can closely interact and that enables us to be especially competitive.

"Our efforts over the next few quarters are being directed at realizing gains in both top and bottom line results, improving cash flow and maximizing value."

Third Quarter Results

Total revenue for the quarter, led by strong gains at Enzo Clinical Labs, amounted to approximately $26 million, up almost 4% sequentially, and compared with $25.8 million, a year earlier. The higher Clinical Labs volume resulted in increased testing expenses, offset by lower cost of goods at Enzo Life Sciences. As a result, gross margins improved to $12.1 million, from $11.6 million in the immediately preceding January 2012 quarter, and compared with $12.4 million a year ago. Other operating costs, including selling, general and administrative, research and development, provision for uncollectible accounts and legal increased 1% sequentially and 6% year over year. Increases year over year in SG&A were primarily attributed to increased sales and marketing costs reflective of increased volume at Clinical Labs and senior management additions in the latter half of fiscal 2011 at Life Sciences.

The provision for uncollectible receivables as a percentage of revenues decreased slightly sequentially, but was up slightly from a year ago. Legal expenses rose 36% year over year, related largely to pre-trial expenditures. The increases were offset by a 23% decline in R&D, which was in line with planned activities. On a sequential basis, the net loss improved to ($3.4) million or ($0.09) per share, from ($4.2) million, or ($0.11) per share, and compared to ($2.1) million, or ($0.05) per share, year over year. EBITDA likewise improved with a smaller loss of ($2.4) million, as compared to a loss of ($3.0) million in the preceding three month period, and ($0.9) million last year.

Enzo has no long-term debt. On April 30, 2012, cash and cash equivalents and short term investments, totaled $15.2 million. Cash declined approximately $8.9 million from July 31, 2011, which includes a one- time earn-out payment related to a fiscal 2008 acquisition in the amount of $1.1 million and $1.0 million in payments for capital expenditures. Working capital amounted to $24.5 million, or a 2.5-to-1 current ratio.

Segment Quarterly Results

Spurred by organic growth that outdistanced the industry average, reflecting the results of a broader, highly seasoned sales staff, Enzo Clinical Labs posted a 10% organic revenue gain year over year and 8% sequentially. The launch of ColonSentry™ in March was too late in the quarter to materially impact fiscal third quarter results, but is expected to make a more meaningful contribution throughout the year. The operating loss sequentially declined by approximately $0.4 million, to ($0.6) million, from ($1.0) million. In the year ago quarter, the operating loss was ($0.1) million. During the current period, the increased volume resulted in higher expenses, including testing costs, commissions and other sales and marketing costs. The provision for uncollectible accounts receivable as a percentage of revenues increased to 7.6% from 7.3% year over year.

At Life Sciences, the program to emphasize fewer but higher margin products is on-going. Revenues in the 2012 third quarter, including royalties, lagged sequentially and year over year were $10.7 million, versus $10.8 million and $12.0 million, respectively. Other operating costs year over year declined $0.6 million, mostly due to lower planned R&D. Operating income was $0.6 million, compared with $0.7 million in the preceding quarter and $0.9 million a year ago.

Year to Date Results

For the first nine months of fiscal 2012, total revenues, with Enzo Clinical Labs up 13%, amounted to $76.7 million, a 2% increase over $75.2 million a year ago. Along with the increased Lab volume and higher testing costs, offset by reduced cost of goods at Life Sciences, total cost of goods amounted to $41.2 million, as compared to $39.0 million a year ago. Combined with the 2% percentage point decline in gross profit as a percentage of revenues and other operating expenses up 5%, mostly due to higher sales and marketing costs, offset by lower R&D, the operating loss for the nine months was ($11.7) million, or $2.8 million higher than a year ago. The nine month net loss amounted to ($12.1) million, or ($0.31) cents per share, compared with ($8.9) million, or ($0.23) cents per share, last year. The year to date EBITDA loss was $8.6 million.

Other

In March, as previously reported, the Company filed an application with the New York State Department of Health for the first assay based on its proprietary AmpiProbe™ nucleic acid detection platform. Upon approval, the Company plans to market its HCV RNA Quantification Assay for viral load determination through its Enzo Clinical Laboratory. The Company also has moved to obtain CE-IVD designation for this assay in order to make it available as a diagnostic product in the European Union. Both applications are still pending.