Enzo Biochem Reports Operating Results for Fiscal 2009 First Quarter
Company Reports Record First Quarter Revenue
NEW YORK--(BUSINESS WIRE)-- Enzo Biochem, Inc. (NYSE:ENZ), a leading biotechnology company specializing in gene identification and genetic and immune regulation technologies for diagnostic and therapeutic applications, today announced operating results for the fiscal first quarter ended October 31, 2008.
Total operating revenues for the period increased 8%, to $21.1 million, from $19.4 million in the corresponding year-ago period. Higher expenses resulting from the phase out of Enzo Clinical Labs' legacy billing system and implementation during the quarter of a new billing and accounts receivable system affected Enzo's contractual allowance and therefore revenues, and the provision for doubtful accounts. Also, a foreign exchange loss on an intercompany loan resulting from a strengthened dollar, along with sharply lower interest income primarily as a result of reduced money market rates, resulted in a first quarter net loss of $6.4 million, equal to ($0.17) per share, compared to a year ago loss of $1.2 million, or ($0.03) per share.
The fiscal 2009 first quarter results included expenses of $2.2 million related to the aforementioned phase-out of the legacy billing system, reduced reimbursements from third party payors, the foreign exchange loss of $0.5 million and a provision for doubtful accounts of $1.9 million, compared to $1.2 million in the previous year. Cash used in operations for the quarter approximated $1.5 million, compared to $1.2 million in the same period a year earlier. Approximately half of the cash used for the 2009 first quarter was for expansion of facilities and aforementioned new billing system to meet near-term growth.
"Despite a challenging economic environment, we continue to see opportunities for growth," said Barry Weiner, Enzo President. "Enzo Life Sciences continues to meet its goals and objectives, including the continued integration of the acquired companies. Enzo Clinical Labs' test volume was comparable to a year ago, and the new billing and collection system that we have now instituted should assist us as we continue to drive this division towards improved metrics for managing the business. Enzo Therapeutics has completed the double-blind, placebo-controlled clinical study of Alequel(TM), the Company's innovative immune regulation medicine for treatment of Crohn's disease, and is now analyzing the data. We are planning to move forward with an IND filing in the US for Optiquel(TM), which we regard as a promising treatment for uveitis, a widespread and growing eye disease. Meanwhile, we continue to closely monitor our operating costs, including R&D and legal expenses. Enzo remains well situated to execute its growth objectives, and to capitalize on business opportunities as they become available in a highly volatile and uncertain economy."
The Company's balance sheet remains strong, with working capital of $87 million, and cash and cash equivalents, plus short term government investments, totaling $76.5 million, and no debt.
First Quarter Analysis
Total operating revenues for the period increased 8%, to $21.1 million, from $19.4 million in the corresponding year-ago period. Gross profit declined 14%, to $8.5 million, compared to $9.9 million in the 2008 first quarter, primarily as a result of a reduction in quarterly revenues at Enzo Clinical Labs. This was due to the higher contractual adjustments and costs to provide testing at Enzo Clinical Labs and the product sales mix at Enzo Life Sciences. Interest income declined from $1.5 million in the year-earlier period to $0.5 million in the 2009 fiscal first quarter primarily due to lower prevailing interest rates.
Legal expenses were lower at $1.2 million, compared with $2.4 million last year due to the timing of legal activities. The provision for uncollectible accounts receivable increased to $1.9 million, from $1.2 million. Research and development expenses increased to $2.0 million compared to $1.7 million a year ago primarily due to the expansion of the product development programs at Enzo Life Sciences. The Company incurred a foreign exchange loss of $0.6 million associated with the impact of the dollar on an intercompany loan incurred from a recent acquisition.
Enzo Life Sciences, benefiting from the May 2008 acquisition of Biomol, generated a 70% increase in product sales to $10.0 million, in addition to a 26% increase in royalty and license fee income to $2.9 million, resulting in total revenue of $12.9 million, a 58% increase from the prior year's $8.2 million in revenue. Cost of product sales rose to $6.8 million from $4.4 million a year ago, due to higher sales volume. Gross profit margin for the quarter was 47% and 46%, respectively, for the fiscal 2009 and fiscal 2008 first quarters. Both quarters were impacted by pre-tax inventory fair value charges of $0.5 million and $0.6 million respectively, resulting from acquisitions. Operating income, which was reduced by a foreign exchange loss, was $1.1 million, slightly more than the year ago period.
At Enzo Clinical Labs, revenue declined by 27% to $8.2 million in the 2009 fiscal first quarter, from $11.3 million in the year-ago period. During the 2008 period, the Company experienced increased contractual adjustments and therefore, reduced revenues of $2.2 million due to reduced payor reimbursements. This reduced payor reimbursement was attributed to realignment of certain personnel in implementing Enzo's new comprehensive billing and accounts receivable system. The transition to the new system delayed collection efforts, which caused the Company to increase its provision for doubtful accounts. Further, revenue declined due to continued competitive pricing throughout the industry which has negatively impacted reimbursement rates for tests and a higher level of revenue from lower paying insurance providers. The Company's specimen volume was comparable to the prior quarter. Enzo expects revenue in the Clinical Labs to return to customary levels beginning in the fiscal 2009 second quarter.
At Enzo Therapeutics, the Phase IIb trial for Alequel, the Company's proprietary treatment for Crohn's Disease, has been completed, and the data are currently being analyzed. Additionally, the Company is working to file an IND to begin US-based trials of Optiquel(TM), its proprietary product for the treatment of autoimmune uveitis in 2009.
Conference Call
A conference call conducted by Enzo Biochem, Inc. management will take place on Thursday, December 11, 2008 at 8:30 AM E.T. It can be accessed by dialing 1-877-258-8832. International callers can dial 1-973-321-1019. Please reference PIN number 77230186. Interested parties may also listen over the Internet at www.investorcalendar.com. To listen to the live call on the Internet, please go to the web site at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available approximately two hours after the end of the live call, through midnight (ET) on December 25, 2008. The replay of the conference call can be accessed by dialing 1-800-642-1687, and, when prompted, use PIN number 77230186. International callers can dial 1-706-645-9291, using the same PIN number.
About Enzo
Enzo Biochem is engaged in the research, development, manufacture and licensing of innovative health care products and technologies based on molecular biology and genetic engineering techniques, and in providing diagnostic services to the medical community. Enzo's Life Sciences division develops, produces and markets proprietary labeling and detection products for gene sequencing, genetic analysis and immunological research among others. Its catalog of over 33,000 products serves the molecular biology, drug discovery and pathology research markets. The Company's therapeutic division is in various stages of clinical evaluation of its proprietary immune regulation medicines for uveitis and Crohn's Disease as well as of its proprietary gene medicine for HIV-1 infection, and conducts pre-clinical research on several candidate compounds aimed at producing new mineral and organic bone, including technology that could provide therapy for osteoporosis and fractures, among other applications. Enzo's Clinical Labs division provides routine and esoteric reference laboratory services for physicians in the New York Metropolitan and New Jersey areas. Underpinning the Company's technology and operations is an extensive intellectual property estate in which Enzo owns or licenses over 230 patents worldwide, and has pending applications for over 200 more. For more information visit our website www.enzo.com.
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. 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)
Selected Operations Data: Three months ended October 31
(unaudited)
2008 Notes 2007
Product revenues $9,976 $5,863
Royalty and license fee income 2,916 2,318
Clinical laboratory services 8,172 11,266
Total revenues $21,064 A $19,447
Gross profit 8,453 B 9,882
Loss before income tax (provision) (6,232 ) (1,347 )
benefit
(Provision) benefit for income taxes (138 ) C 115
Net loss ($6,370 ) ($1,232 )
Basic and diluted loss per share ($0.17 ) ($0.03 )
Weighted average shares - basic and 37,337 36,717
diluted
Selected Balance Sheet Data:
October 31, 2008 July 31, 2008
Cash, cash equivalents and short term $76,574 $78,322
investments
Working capital 86,826 92,392
Stockholders' equity 131,124 138,289
Total assets 146,505 154,522
Notes:
A- 2008 includes $2.8 million in products revenues from Biomol acquired May 8, 2008.
B- 2008 includes $0.5 million, respectively for inventory fair value adjustments relating to the Biomol acquisition and 2007 includes $0.6 million for inventory fair value adjustments relating to Axxora only.
C- All periods reflect effective tax rates below the statutory rate due to limitation on recording future tax benefits.
Source: Enzo Biochem, Inc.
Released December 10, 2008