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Enzo Biochem Fiscal Q1 Revenues Down 21 Percent

NEW YORK (GenomeWeb) – Enzo Biochem reported after the close of the market on Monday that its revenues for the first quarter of fiscal year 2019 fell 21 percent year over year.

For the three months ended Oct. 31, the firm reported total revenues of $21.3 million, down from $26.9 million in Q1 2018.

Clinical services revenues dropped 27 percent to $14.3 million from $19.5 million in Q1 2018 due to reduced insurance reimbursement payments and a tough comparison to the prior year, which had a mix of testing that was reimbursed at higher than average rates, the firm said. Total diagnostic testing volume as measured by the number of accessions reported decreased 5 percent year over year, again due to lower high-value testing. This decrease was partially offset by an increase in esoteric testing, including Enzo's AmpiProbe women's health panel. Clinical products and royalty revenues fell 4 percent to $7.0 million from $7.3 million in the prior-year period.

The company noted that clinical services revenues for the quarter were restated to reflect adoption of new revenue recognition rules on a full retrospective basis. Under the new rules, Enzo reports balances owed by patients that it cannot collect as a reduction in net revenues, whereas historically, these amounts were separately classified in operating expenses as a provision for uncollectable accounts receivable. The reductions amounted to $600,000 in Q1 2018 and $800,000 in Q1 2017.

In order to address the tightening reimbursement paradigm, Enzo said it is expanding its approach to centralize lab-to-lab reference services, expanding its specialized testing menu, developing opportunities with institutional clients, and expanding its geographical reach. As part of this strategy, the firm recently obtained a license from the state of Connecticut allowing it to open a new freestanding clinical laboratory in the state. It will enable Enzo to open additional patient service centers in collaboration with commercial insurance providers, will expand the company's geographical reach, and will allow it to expand its lab-to-lab reference services in the Northeast.

"In the few weeks since we last reported on fiscal 2018 results and commented on how we viewed the inevitable consequences of [Protecting Access to Medicare Act] reimbursement reductions … Enzo's strategy to provide low-cost, efficient, and high-capacity diagnostic solutions has become even more important and critical for an industry being challenged to maintain high quality services, while being paid less for work performed," Enzo President Barry Weiner said in a statement. "Our investment and focus on development of cost-effective products should assist in the improvement of our financial performance in the future."

Enzo's Q1 2019 net loss widened to $6.0 million, or $.13 per share, from $640,000, or $.01 per share, in Q1 2018.

The company said its Q1 R&D expenses dipped 3 percent to $728,000 from $747,000 in the prior-year quarter. Its SG&A costs for the quarter, meanwhile, rose nearly 2 percent year over year to $11.0 million from $10.8 million in Q1 2018. Enzo said that the increase was due to money spent in support of its growth strategies. The firm also noted that operating expenses were affected by higher legal expenses related to patent infringement and contract litigation with Roche where Enzo is the plaintiff. A trial is slated to begin in 2019.

Enzo ended the quarter with $52.8 million in cash and cash equivalents.

The firm's shares dipped less than 1 percent to $3.25 in Tuesday morning trading on the New York Stock Exchange.