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Enzo Biochem Q3 Revenues Down 14 Percent

NEW YORK – Enzo Biochem reported after the close of the market on Monday that revenues for its fiscal third quarter fell 14 percent year over year, as the COVID-19 pandemic adversely affected its clinical services revenues, diagnostic testing volumes, and product revenues.

For the three months ended April 30, the diagnostics company reported total revenues of $16.9 million compared to $19.7 million in the year-ago quarter.

Clinical Services revenues decreased 11 percent to $10.5 million from $11.8 million in Q3 2019, driven by a 28 percent reduction in accession volume due to factors related to the COVID-19 pandemic, the company said.

Product revenues fell 19 percent to $6.4 million from $7.9 million in the year-ago period, also due to the impact of COVID-19, although the reduction was partially offset by a 19 percent increase in average product order value.

"The COVID-19 pandemic has brought unique challenges as well as opportunities for Enzo. The company has applied several years of investment in technology and product development and rapidly launched a COVID-19 test on its proprietary GenFlex molecular diagnostics platform and serological tests for antibodies on its ELISA platform," Enzo Chairman and CEO Elazar Rabbani said in a statement. "The value proposition for Enzo is clear with its distinct advantage as a vertically integrated company. By leveraging control of our own supply chain in conjunction with our proprietary platforms, we are able to address the unprecedented needs underlying this health crisis. The result is the launch of an extensive COVID-19 program that goes beyond testing alone and spans virus detection, immunity, inflammation, and therapy."

The firm's Emergency Use Authorization submissions to the US Food and Drug Administration for both its SARS-CoV-2 diagnostic system on the GenFlex platform and its IgG ELISA assay kit are currently pending.

In March, Enzo's Clinical Labs subsidiary expanded its screening services for COVID-19, opening a drive-through facility to collect patient specimens for SARS-CoV-2 testing at its laboratory complex in Farmingdale, New York.

In the statement, Enzo President Barry Weiner acknowledged that the firm's third quarter results largely reflected "revenue loss related to the coronavirus pandemic," but added, "we saw favorable trends in average product order value and year-over-year expansion in clinical services gross margins."

He also noted that Enzo's strategic goal remains investing in key focus areas, including its proprietary lab-developed tests, which should have a positive impact on the firm's gross margins post-pandemic.

"While accession volume increased slightly subsequent to the quarter-end, along with the rest of the industry we remain affected by lower volume in the clinical lab segment, in addition to COVID-19 impacted revenue in the life sciences segment," Weiner said. "We expect these issues to be partially counterbalanced by new opportunities related to the COVID-19 pandemic. These opportunities include prospects ranging from academic and research institutions to commercial, laboratory, and government entities. ... On the Enzo Clinical Lab side, we expect to ramp up substantially throughout the year from our initial weekly capacity of approximately 10,000 COVID-19 molecular tests and 10,000 ELISA serological antibody tests."

On a conference call with analysts following the release of the earnings, Weiner noted that the company experienced many supply issues related to personal protective equipment, swabs, tubes, and reagents, but that it had overcome the bulk of those supply issues.

He added that the pandemic has created "a newfound appreciation for clinical laboratories and the diagnostics industry at large," which will benefit Enzo in the long run. He also said that the firm had recently won a bid with the State of Missouri, as well as a contract with New York State, to provide COVID-19 testing to nursing homes.

"We fully expect to secure additional strategic relationships that may provide substantial additional revenue as we build capacity to meet demand," Weiner added.

The company reported a net loss for the quarter of $9.9 million, or $.21 per share, compared to an income of $22.3 million, or $.47 per share, a year earlier. On an adjusted basis, Enzo reported a net loss of $.17 per share for the quarter.

On the conference call, Enzo CFO David Bench said that the firm's Q3 R&D expenses increased 49 percent to $1.2 million from $800,000 in the year-ago period, mostly as a result of investments in the company's GenFlex platform. Enzo's Q3 SG&A expenses were relatively flat at $11 million, Bench added.

At the end of the quarter, Enzo had cash and cash equivalents of $55.2 million, including restricted cash of $750,000.

Bench noted that the company received approximately $7 million from the Small Business Administration under the Paycheck Protection Program provision of the CARES Act. If certain conditions are met, this loan will be forgiven, he said.