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Enzo's Streamlining Efforts to Cut Annual Costs by $4M

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Enzo Biochem said after the close of market on Monday that a streamlining of its operations is anticipated to result in a reduction of its annualized operating expenses of more than $4 million as well as improvements in gross margins.

The New York-based company said that the streamlining of operations of two of its three wholly owned subsidiaries, Enzo Life Sciences and Enzo Clinical Labs, is expected to show benefits starting in its fiscal 2011 first quarter, which ends Oct. 31. It added that preliminary results for its fiscal fourth quarter, which ended July 31, indicate a slight increase in total revenues year-over-year.

Barry Weiner, president of Enzo Biochem, told investors at the UBS Global Life Sciences Conference on Monday that the new strategy for the company is to focus on combining the efforts of those two subsidiaries to develop and offer molecular and companion diagnostics and esoteric testing services.

He said that the streamlining, which the firm completed in its fiscal fourth quarter, has resulted in product line rationalization and the elimination of "tail products," which were low-volume sellers. He said the firm's focus now is on higher-margin, higher-volume products.

In addition, Weiner disclosed that Enzo had eliminated about 40 positions through the end of its fiscal year 2010.

In a statement, Enzo Biochem said that in the Life Sciences business, acquisitions made over the past three years had resulted in redundancy "which provided opportunities to reduce costs through realignment or centralization of R&D, customer service, and manufacturing activities."

In 2009, Enzo Biochem acquired Assay Designs, and in the prior year it had acquired Biomol International.

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 work force rationalization and process improvement, including customer service and billing "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. At the UBS conference, Weiner said that the firm is trying to monetize its therapeutics business through partnerships.

Going forward, Weiner said that Enzo would seek selective, accretive acquisitions.

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