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Enzo Biochem Fiscal Q4 Revenues Down 8 Percent

NEW YORK – Enzo Biochem reported after the close of the market on Tuesday that its fiscal fourth quarter revenues fell 8 percent year over year, reflecting new, "sharply lower" industry-wide reimbursement rates under the Protecting Access to Medicare Act (PAMA).

For the three months ended July 31, the diagnostics company said total revenues sank to $20.9 million from $22.8 million a year earlier.

Sequentially, Q4 clinical laboratory services revenues rose 11 percent from Q3, while product revenues for Q4 were up 3 percent year over year as a result of new marketing and sales initiatives. Lab revenues declined to $13.1 million from $15.1 million in the year ago period, due to the reduced insurance reimbursement payments and changes to medical and procedural requirements for genetic testing by payors, the company said. 

Meanwhile, total diagnostic testing volume as measured by the number of accessions rose 4 percent sequentially.

"Enzo's structure and business strategy represent the culmination of years of extensive planning and productive work. The company has the ability to offer low-cost, high performance products and services in molecular diagnostics," Enzo Chairman and CEO Elazar Rabbani said in a statement. "While reimbursement pressures facing diagnostic labs remain a headwind in the short term, our unique offering positions us well to capitalize on these secular trends over the long term. Our pioneering work in genomic analysis coupled with our extensive patent estate and enabling platforms have positioned the company to continue to play an important role in the rapidly growing molecular medicine marketplaces."

In September, Enzo received New York State Department of Health approval for its AmpiProbe HBV viral load monitoring assay for Hepatitis B virus. The firm had previously received NYSDH approval for a viral load monitoring assay for Hepatitis C virus, and for gonorrhea and chlamydia tests for extragenital specimens.

The company said it is developing an additional test for HPV testing in multiple sample types, as well as a viral load monitoring assay for HIV.

On a conference call with analysts following the release of the earnings, Enzo President Barry Weiner said that the company was issued 74 patents during FY2019. He specifically noted Patent No. 10,323,272, which is entitled "Nucleic acid probes for in-situ hybridization." The patent is directed to a new probe technology that allows for significantly more cost-effective, simple, and scalable processes across the diagnostic testing, drug development, and academic research marketplaces, he said.

"The probes can be used to detect clinically relevant genomic targets, with high sensitivity in cell samples and biopsy tissue," Weiner added. "Compared to competitive probes, Enzo's novel approach will be lower cost, decreased complexity, save time and avoid disruptions of sample integrity."

Enzo's Q4 net loss narrowed to $5.4 million, or $.11 per share, from $5.8 million, or $.12 per share, in Q4 2018.

The firm's Q4 R&D costs fell 2 percent to $833,000 from $852,000 in Q4 2018, and its SG&A expenses fell 5 percent to $10.9 million from $11.5 million.

For FY2019, Enzo said total revenues sank 20 percent to $81.2 million from $101.0 million a year earlier, reflected newly instituted reduced reimbursement payments, insurance company claims rejections, and changes to medical and procedural requirements for genetic testing by payors.

As it has previously noted, Enzo said that clinical services revenues for Q4 and FY2019 reflect adoption of new revenue recognition accounting rules on a full retrospective basis. Under the new rules, the company reports uncollectible balances associated with patient responsibility as a reduction in net revenues, whereas these amounts were historically classified in operating expenses as a provision for uncollectible accounts receivable. This amounted to $3.1 million and $3.7 million, respectively, in FY2019 and FY2018, and $1.0 million and $1.7 million for the respective fourth quarter periods.

For FY2019, Enzo reported income of $2.5 million, or $.05 per share, compared to a loss of $10.3 million, or $.22 per share, in 2018. On an adjusted basis, the firm recorded a loss per share of $0.56 for the year.

The firm's FY2019 R&D costs stayed flat at $3.2 million, and its SG&A expenses dipped less than 1 percent to $44.3 million from $44.5 million.

Enzo ended the year with cash, cash equivalents, and restricted cash of $60.9 million.

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