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Despite Streamlining Operations, Enzo Biochem Plans to Expand Array-CGH Labeling Offering

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By Justin Petrone

Enzo Biochem this week announced that it has streamlined its operations in an effort to cut its annualized operating expenses by more than $4 million and to improve its gross margins.

As part of the reorganization, which saw the company eliminate about 40 positions, Enzo also eliminated certain "tail products" in its Enzo Life Sciences business that were low-volume sellers in order to focus on higher-margin, higher-volume products.

David Goldberg, Enzo Biochem's vice president of corporate development, told BioArray News this week that while the firm decided to cut some products from its menu, its array-related offerings, such as its comparative genomic hybridization labeling kits, will receive more investment going forward.

"Our core competency is in DNA probes, and CGH is a major focus for us," said Goldberg. "We are looking to grow that business and expand our offering." New York-based Enzo sells internally developed CGH and gene expression-labeling kits for use with different microarray platforms.

According to Goldberg, the recent reorganization, which will result in a one-time charge of about $500,000 in its fiscal fourth quarter, was necessary given Enzo's recent acquisitions. Last year, the firm paid $12.2 million to acquire Assay Designs, while in 2008 it snatched up Biomol International for $11.5 million. In integrating the new firms into its Life Sciences business, Goldberg said, the company had to cut back where the firms overlapped.

"We didn't need three sets of product or personnel managers," he said. In terms of the rationalization of the company's menu, Goldberg pointed out that Enzo had through the acquisitions amassed a portfolio of more than 30,000 products. "You want to have a portfolio of products that sells," he said.

The restructuring also comes at a time when Enzo has intensified its focus on combining the efforts of its Life Sciences and Clinical Labs business to develop and offer molecular and companion diagnostics and esoteric-testing services. That, in turn, is expected to bolster the investment the company makes in CGH.

"We are positioning our firm to be a real player in the diagnostics arena," said Goldberg. "As we focus, we want to invest more in research products that have clinical applicability," he said. "We think CGH has a bright future and we are moving in the direction of offering CGH in our Clinical Labs," Goldberg added. He declined to elaborate.

The firm also said that it has invested "significantly" in technology and process improvements in its Clinical Labs business. Expense reductions and gross margin improvements in that business, it added, are expected to result primarily through workforce reductions and process improvement, including customer service and billing, which are "designed to reduce processing and collection costs of receivables, improved laboratory-service operations, and lower reagent costs."

As a result of all the changes, Enzo Biochem said it anticipates taking a one-time charge of about $500,000 in its fiscal fourth quarter in connection to severance payments made to terminated employees. It expects to report positive operating cash flow in fiscal 2011.
The company said it will report its Q4 earnings in mid-October.

In June, the firm reported a 3-percent increase in revenues for its fiscal Q3 with both Life Sciences and Clinical Labs both seeing slight improvements year over year.

The company did not mention in its release any streamlining efforts connected to its third wholly owned subsidiary, Enzo Therapeutics.

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