Enzo Biochem Inc. (ENZ, Financial) filed Quarterly Report for the period ended 2009-10-31.
Enzo Biochem, Inc. develops, manufactures and markets health care products based on molecular biology and genetic engineering techniques, and also provides diagnostic services to the medical community. The business activities of the company are performed by one of the company's three wholly-owned subsidiaries--Enzo Diagnostics, Inc., Enzo Therapeutics, Inc., and Enzo Clinical Labs, Inc. The primary focus of the company's research is the development of products based on two technology platforms -- genetic modulation and immune modulation. Enzo Biochem Inc. has a market cap of $210.5 million; its shares were traded at around $5.56 with and P/S ratio of 5.2.
Selling, general and administrative expenses were approximately $11.6 million during the 2009 period as compared to $9.2 million in the 2008 period, an increase of $2.4 million or 26%. The increase was primarily due to the net increase at the Enzo Life Sciences segment of $2.0 million in the 2009 period which included approximately $1.1 million of selling, general and administrative expenses related to Assay Designs operations, the impact of realigning manufacturing facilities and certain personnel of $0.8 million and $0.2 million in costs relating to the on-going corporate identity program. The Clinical Lab segments selling general and administrative increased $0.6 million primarily due to increased payroll and related benefits of $0.2 million, professional fees of $0.2 million, and other expenses of $0.2 million. These increases were offset by a decrease in the Other segments selling general and administrative of approximately $0.2 million, primarily due to decreases in payroll and payroll related costs of $0.1 million and consulting and professional fees of $0.1 million.
The Life Sciences segments income before taxes was $2.0 million for the 2009 period as compared to $1.1 million for the 2008 period. Product revenues increased by $0.8 million in the 2009 period primarily due to the contribution of product revenues from the March 2009 acquisition of Assay Designs and organic growth from our core products which replaced low margin, high volume distribution product revenues principally to one customer. Royalty and license fee income increased $0.4 million from the Qiagen agreement and the Abbott license agreement. The segments gross margin of $9.0 million, which increased $3.0 million in 2009, was negatively impacted by $0.1 million representing the fair value adjustment attributed to the sale of inventory acquired from Assay Designs. The remaining fair value adjustment attributed to inventory acquired from Assay Designs of $0.2 million will negatively impact gross margins through the third quarter of fiscal 2010. Gross profit margins increased to 64% from 47% due to favorable impact from ADIs higher margin, which replaced lower margin revenue in 2008, lower inventory fair value adjustments and realignment of personnel from manufacturing to trading activity. The segments other operating expenses, including selling, general and administrative, legal and research and development, increased by approximately $2.5 million during the 2009 period primarily due to the inclusion of Assay Designs expenses and the impact of the aforementioned realignment of personnel. The segment experienced a non-cash foreign currency loss of $0.1 million during the 2009 period resulting from the impact that slightly strengthening foreign currencies had on settled transactions and on an intercompany loan denominated in pounds sterling. In aggregate, the inventory fair value adjustment and amortization of intangibles negatively impacted the segment operating results in the 2009 period by $0.5 million.
The Clinical Laboratory segments loss before taxes was $0.8 million for the 2009 period as compared to a loss of $3.4 million in the 2008 period. The revenue from laboratory services increased in the 2009 period by $2.9 million due to increased service volume and during the 2008 period revenues were adversely affected by contractual adjustments of $2.2 million. The gross profit of $4.3 million, which increased $2.2 million in 2009, was impacted by the non-recurring charge to contractual expense of $2.2 million in 2008 and higher service volume in 2009 offset by the increase in the cost of laboratory services of $0.7 million. In the 2009 period, the selling, general and administrative costs increased by approximately $0.6 million primarily due to increases in payroll and payroll related costs of $0.2 million and other operating costs of $0.4 million. The provision for uncollectible accounts receivables decreased by $1.0 million as compared to the 2008 period.
The Other segments loss before taxes for the 2009 period was approximately $2.4 million as compared to $3.2 million in the 2008 period, a decrease of $0.8 million. The Other segments 2009 period loss reflects a decrease in payroll and payroll related costs of $0.1 million, a decline in professional fees and consulting costs and public relations of $0.2 million and a decrease in legal expenses of $0.9 million due to the reimbursement of $0.5 million in legal fees and reduced services provided relating to certain patent litigation activity. Interest income declined $0.4 million due to the decline in interest rates. The Company earns interest by investing primarily in short term US government treasury bills, and money market accounts.
On May 8, 2008, the Companys wholly-owned subsidiary, Enzo Life Sciences, acquired substantially all of the U.S. based assets of Biomol International, L.P. (Biomol) through Enzo Life Sciences newly-formed subsidiary, Biomol International, Inc., and all of the outstanding capital stock of Biomols two wholly owned United Kingdom subsidiaries through Enzo Life Sciences wholly owned subsidiary, Axxora (UK) Ltd. (the Biomol Acquisition), for a purchase price of $18 million, comprised of $15 million in cash, subject to downward adjustment based on net asset value on the closing date, and $3 million of unregistered common stock of the Company. In addition, Biomol may be entitled to receive a maximum of $5 million in earn-out payments over the next two years, payable in two installments of $2.5 million on each of the next two anniversaries of the closing date, if certain revenues and EBITDA targets for the acquired business are attained. The earn-out payments, if any, will be payable in a combination of cash and shares of the Companys common stock, provided no more than 50% of the earn-out payments will be paid in stock. In June 2009, the conditions for the first annual earn-out of $2.5 million were met and the Company recorded $2.5 million of additional goodwill. The Company issued 202,196 shares of Enzo common stock at fair value and paid $1.5 million in cash to satisfy the $2.5 million earn-out liability.
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Enzo Biochem, Inc. develops, manufactures and markets health care products based on molecular biology and genetic engineering techniques, and also provides diagnostic services to the medical community. The business activities of the company are performed by one of the company's three wholly-owned subsidiaries--Enzo Diagnostics, Inc., Enzo Therapeutics, Inc., and Enzo Clinical Labs, Inc. The primary focus of the company's research is the development of products based on two technology platforms -- genetic modulation and immune modulation. Enzo Biochem Inc. has a market cap of $210.5 million; its shares were traded at around $5.56 with and P/S ratio of 5.2.
Highlight of Business Operations:
On May 8, 2008, Enzo Life Sciences, Inc. acquired substantially all of the U.S. based assets and certain liabilities of Biomol International, LP (Biomol LP) through a newly formed US subsidiary Biomol International, Inc. and all of the stock of Biomols wholly-owned United Kingdom subsidiary, Affinity Limited, through Axxora UK, a wholly-owned subsidiary of Enzo Life Sciences, collectively referred to as Biomol for approximately $18.1 million in cash and stock, subject to adjustment, exclusive of acquisition costs of approximately $800,000 and two contingent earn-out payments which will be accounted for as additional purchase consideration over the next two years if and when the contingencies are resolved beyond a reasonable doubt. At closing, the purchase price was satisfied as follows: $12.9 million in cash was paid to Biomol LP, issuance of 352,000 shares of Enzo common stock, at fair market value, to Biomol LP, $1.5 million in cash was paid to an escrow agent for the two-year period following the closing to satisfy any indemnification obligations of the sellers under the Agreement and $550,000 was paid to an escrow agent, for the 60 day period following the closing to satisfy any specified purchase price adjustments. The $550,000 was released by the escrow agent in August 2008. The earn-outs of $2.5 million on each of the first two anniversaries of the acquisition date will be based on attaining certain revenue and EBITDA targets, as defined. In June 2009, the conditions for the first annual earn-out of $2.5 million were met and the Company recorded $2.5 million of additional goodwill. The Company issued 202,196 shares of Enzo common stock at fair value and paid $1.5 million in cash to satisfy the $2.5 million earn-out liability.Selling, general and administrative expenses were approximately $11.6 million during the 2009 period as compared to $9.2 million in the 2008 period, an increase of $2.4 million or 26%. The increase was primarily due to the net increase at the Enzo Life Sciences segment of $2.0 million in the 2009 period which included approximately $1.1 million of selling, general and administrative expenses related to Assay Designs operations, the impact of realigning manufacturing facilities and certain personnel of $0.8 million and $0.2 million in costs relating to the on-going corporate identity program. The Clinical Lab segments selling general and administrative increased $0.6 million primarily due to increased payroll and related benefits of $0.2 million, professional fees of $0.2 million, and other expenses of $0.2 million. These increases were offset by a decrease in the Other segments selling general and administrative of approximately $0.2 million, primarily due to decreases in payroll and payroll related costs of $0.1 million and consulting and professional fees of $0.1 million.
The Life Sciences segments income before taxes was $2.0 million for the 2009 period as compared to $1.1 million for the 2008 period. Product revenues increased by $0.8 million in the 2009 period primarily due to the contribution of product revenues from the March 2009 acquisition of Assay Designs and organic growth from our core products which replaced low margin, high volume distribution product revenues principally to one customer. Royalty and license fee income increased $0.4 million from the Qiagen agreement and the Abbott license agreement. The segments gross margin of $9.0 million, which increased $3.0 million in 2009, was negatively impacted by $0.1 million representing the fair value adjustment attributed to the sale of inventory acquired from Assay Designs. The remaining fair value adjustment attributed to inventory acquired from Assay Designs of $0.2 million will negatively impact gross margins through the third quarter of fiscal 2010. Gross profit margins increased to 64% from 47% due to favorable impact from ADIs higher margin, which replaced lower margin revenue in 2008, lower inventory fair value adjustments and realignment of personnel from manufacturing to trading activity. The segments other operating expenses, including selling, general and administrative, legal and research and development, increased by approximately $2.5 million during the 2009 period primarily due to the inclusion of Assay Designs expenses and the impact of the aforementioned realignment of personnel. The segment experienced a non-cash foreign currency loss of $0.1 million during the 2009 period resulting from the impact that slightly strengthening foreign currencies had on settled transactions and on an intercompany loan denominated in pounds sterling. In aggregate, the inventory fair value adjustment and amortization of intangibles negatively impacted the segment operating results in the 2009 period by $0.5 million.
The Clinical Laboratory segments loss before taxes was $0.8 million for the 2009 period as compared to a loss of $3.4 million in the 2008 period. The revenue from laboratory services increased in the 2009 period by $2.9 million due to increased service volume and during the 2008 period revenues were adversely affected by contractual adjustments of $2.2 million. The gross profit of $4.3 million, which increased $2.2 million in 2009, was impacted by the non-recurring charge to contractual expense of $2.2 million in 2008 and higher service volume in 2009 offset by the increase in the cost of laboratory services of $0.7 million. In the 2009 period, the selling, general and administrative costs increased by approximately $0.6 million primarily due to increases in payroll and payroll related costs of $0.2 million and other operating costs of $0.4 million. The provision for uncollectible accounts receivables decreased by $1.0 million as compared to the 2008 period.
The Other segments loss before taxes for the 2009 period was approximately $2.4 million as compared to $3.2 million in the 2008 period, a decrease of $0.8 million. The Other segments 2009 period loss reflects a decrease in payroll and payroll related costs of $0.1 million, a decline in professional fees and consulting costs and public relations of $0.2 million and a decrease in legal expenses of $0.9 million due to the reimbursement of $0.5 million in legal fees and reduced services provided relating to certain patent litigation activity. Interest income declined $0.4 million due to the decline in interest rates. The Company earns interest by investing primarily in short term US government treasury bills, and money market accounts.
On May 8, 2008, the Companys wholly-owned subsidiary, Enzo Life Sciences, acquired substantially all of the U.S. based assets of Biomol International, L.P. (Biomol) through Enzo Life Sciences newly-formed subsidiary, Biomol International, Inc., and all of the outstanding capital stock of Biomols two wholly owned United Kingdom subsidiaries through Enzo Life Sciences wholly owned subsidiary, Axxora (UK) Ltd. (the Biomol Acquisition), for a purchase price of $18 million, comprised of $15 million in cash, subject to downward adjustment based on net asset value on the closing date, and $3 million of unregistered common stock of the Company. In addition, Biomol may be entitled to receive a maximum of $5 million in earn-out payments over the next two years, payable in two installments of $2.5 million on each of the next two anniversaries of the closing date, if certain revenues and EBITDA targets for the acquired business are attained. The earn-out payments, if any, will be payable in a combination of cash and shares of the Companys common stock, provided no more than 50% of the earn-out payments will be paid in stock. In June 2009, the conditions for the first annual earn-out of $2.5 million were met and the Company recorded $2.5 million of additional goodwill. The Company issued 202,196 shares of Enzo common stock at fair value and paid $1.5 million in cash to satisfy the $2.5 million earn-out liability.
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