Enzo Biochem, Inc.
Q1 2019 Earnings Call Transcript

Published: 11 Dec 2018

[Operator:]

Good morning and welcome to the Enzo Biochem Inc. First Quarter 2019 Operating Results Conference Call. I will now read the company’s Safe Harbor statement. Except for historical information, the matters discussed in this news release maybe considered forward-looking statements within the meanings of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Such statements include declarations regarding the intent, belief or current expectations of the company and its management, including those related to cash flow, gross margins, revenues and expenses are dependent on a number of factors outside of the control of the company, including inter alia, the market for the company’s products and services, cost of goods and services, other expenses, government regulations, litigations and general business conditions. See Risk Factors in the company’s Form 10-K for the fiscal year ended July 31, 2018. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results. The company disclaims any obligation to update any forward-looking statement as a result of developments occurring after the date of this conference call. During this conference call, the company may refer to EBITDA, a non-GAAP measure. EBITDA is not and should not be considered an alternative to net loss, loss from operations or any other measure for determining operating performance. The company has provided a reconciliation of differences to GAAP on its website, www.enzo.com and in its press release issued last night. Our speaker today is Barry Weiner, President. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation. I would now like to turn the floor over to your host, Mr. Weiner. Sir, the floor is yours.

[Barry Weiner:]

Good morning and thank you for joining us today. On the call with me is Jim O'Brien, our Executive Vice President of Finance. We distributed our first quarter results release yesterday after the market close and I hope you have had a chance to take a look at it. As usual, I will provide a brief update on our progress to reshape Enzo into a premier diagnostic company that can deliver high-quality affordable solutions to the clinical laboratory market. I will also highlight developments industry wide which create an even greater need for Enzo products and services and review our fiscal first quarter 2019 financial results. We will then open the floor for questions. We continue this quarter to make significant progress in the design, production and validation of robust products and platforms to address the two primary critical issues facing the clinical laboratory industry, declining reimbursements from government and commercial insurance payers and unreasonably high operating costs, associated with diagnostic companies closed system platforms. Enzo is well-positioned to capitalize on this trend. Having developed highly efficient and cost effective tools in molecular diagnostics anatomical pathology, immunoassays and genomics, the market for these easily adaptable technology solutions is growing and becoming much more necessary. Our strategy involves developing critical assays that offer unusually high sensitivity, specificity, reproducibility and accuracy, while including in some cases of running multiple tests from a single specimen. Moreover, these assays have been designed to perform an automated systems utilizing established workflow processes. We have developed platforms in assays designed to achieve multiple benefits, including savings that can range from 30% to 50% of current costs. As you may know from our prior discussions, in 2018, Medicare and commercial payers have sharply reduced their payments to clinical laboratories. Medicare lowered the clinical laboratory fee schedule, approximately 10% in January of 2018. It is expected to do so again in 2019 and 2020 by an equal amount. What’s more? Many commercial insurance payers often set their fee schedules with clinical laboratories as a percentage of Medicare rates and several have begun to institute these changes. As such, clinical labs will again see reimbursement cuts from government payers in 2019 and 2020. Equally troubling, we have yet to see any discernible reductions by closed system diagnostic equipment manufacturers in the price of reagents and the products that labs have to use in order to perform their tests. This gross margin squeeze has put enormous economic pressure on clinical laboratories, regardless of geographical reach or size measured in the number of tests performed. These reimbursement reductions have been reported throughout the industry and have fallen most drastically on the hundreds of diagnostic laboratories operated by smaller private firms and medium-sized regional labs. With the expense of maintaining their businesses, they are faced with difficult choices, lose margin and profitability or seek other strategic options. Many in the laboratory industry now see consolidation as the only method of expansion in growth. The financial tightening is not only impacting small to medium size labs. We also recently saw the large national labs revise their future revenue guidance as well. We, at Enzo, see a very clear and viable alternative to industry consolidation. We embarked just a few years ago on the strategic plan to make available affordable reagents utilizing open automated diagnostic systems. Our innovative diagnostic platforms and assays are principally designed to bring independent labs meaningful cost savings. In fact, Enzo’s approach is entirely about doing just that providing meaningful cost savings and economic benefits to the clinical laboratory marketplace and we believe that Enzo is unique in its ability to provide these solutions given our vertically integrated operating structure, our deep experience in product and platform development and our knowledge of the industry. Quite simply, with declining reimbursements and significant size diagnostic companies with deep roots embedded in laboratories, our strategy is quite advanced and extremely disruptive. Our laboratory must be able to control its cost of performing tests to remain viable, long-term onerous reagent, consumables and equipment contracts with closed system diagnostic companies are unyielding and don’t provide clinical labs operating mobility in this challenging environment. There is another aspect of today’s highly fragmented clinical laboratory marketplace that is being addressed as part of Enzo’s growth strategy. We estimate that smaller regional size clinical labs are operating at approximately one-third of their available operating capacity. Many laboratories don’t have the test volume to maximize high throughput closed system equipment and as a result often diagnostic tests are run on equipment with unused or available capacity. In addition because of lower test volume, these laboratories don’t operate more than one workforce shipped per day leaving the high cost of equipment idle. As we have previously noted, we see the path of consolidating testing volumes as a rapid and effective means to deploy Enzo solutions whereby excess testing capacity in this laboratory industry is consolidated centrally. It creates immediate market access for Enzo’s low cost products and services. Within our own facilities, we can scale operations less costly than operating multiple locations and can achieve operational efficiency in a highly fragmented industry. By combining test volumes in expanding laboratory test menus, Enzo and its partners will be able to dramatically reduce operating costs. Affecting partnerships and collaborations particularly with regional laboratories that cannot achieve economies of scale makes sense for the laboratory industry. Laboratory assets are undervalued and venturing with Enzo will capture more value than if such assets, remains separate. For a segment with industry-wide organic growth of only 1% to 2% a year combining and centralizing diagnostic testing volumes is critical to gain market presence and operational mass. We believe this strategy works if laboratory partners as a group can realize substantial cost savings or drive higher revenues in individual businesses can on their own. Turning now to recent developments, Enzo’s financial results had not gone unscathed by the challenges facing the laboratory industry. As you have seen in our current quarterly financial results, what’s different about Enzo is that we operate an integrated diagnostic company that is much more than just a laboratory. Our transformation over the past several years was an important pivot in anticipation for these industry challenges. We have positioned Enzo to be able to weather these adverse business conditions over the long-term. In fact as we have noted before, these challenging times create even greater growth opportunities for Enzo. Our focus is maximizing volume in on accelerating Enzo’s growth in a profitable manner by developing highly efficient, easily adaptable and affordable products for independent and hospital labs. Our menu of trip tests already approved provides low cost option for women’s health and our development pipeline is rich with products we expect to be approved. The company’s platform development also includes automation compatible reagent systems and associated products for sample collection and processing to further drive cost down for diagnostic testing. The company’s continuing development activities are directed to each step of the clinical testing process from sample collection and processing through analysis. The company’s programs include manufacturing each of the components required for every step in the diagnostic process and for integration into an open platform. We are determined to develop and create affordable solutions to overcome industry cost pressures through disruptive diagnostic technology and by providing through a unique business model centralized and low cost reference testing to laboratories nationwide. The objective is to allow independent laboratories to not only improve their margins, but also to extend their testing menu into high-valued molecular testing as well as other areas. Over the last quarter, we have continued to make significant progress to implement our strategic plan, including the optimization of diagnostic processes towards FDA clinical trials on Enzo’s proprietary and affordable open system platform, which is capable of high throughput to meet the needs of clinical labs of all sizes. Enzo’s platform includes automation compatible reagent systems and associated products for sample collection and processing to further drive costs down for diagnostic testing. Enzo’s programs also include manufacturing and assembling of all components required for each step of the diagnostic process for integration into these open platforms. We are focused on molecular diagnostics, immunohistochemistry and ELISA platforms, which consist of a significant percentage of the cost of goods for clinical laboratories. Our programs encompass all steps from research and development to manufacturing, translation, clinical trials to FDA approval which is in many ways a complex and coordinated execution plan. To address the tightening reimbursement paradigm, we are expanding our approach to centralize lab-to-lab reference services providing margin improvement, expanding our specialized testing menu to our clientele, developing opportunities with institutional clients and expanding our geographical reach. To support our strategic approach, we have recently obtained a license from the state of Connecticut allowing Enzo to open a new freestanding clinical laboratory in that state. The new facility expands Enzo’s geographical reach allowing it to expand its lab-to-lab reference services in the Northeast. It will also enable Enzo to open additional patient service centers in collaboration with commercial insurance providers to address the large patient population that is in need. Enzo is already designated a network provider for three regional health insurance providers in New England as well as national payers. We are also continuing to build one of the most comprehensive intellectual property estates in our industry, with the recently awarded patent for optimizing real-time nucleic acid detection processes. Our patent work is an ongoing process which historically has generated significant value for the company. We also recently completed the purchase of a previously announced additional 36,000 square foot commercial facility in Farmingdale adjacent to the company’s current Long Island campus. Plans for renovation are underway that will add needed infrastructure to produce and distribute Enzo’s expanding low cost open architecture diagnostic platform products and broaden related services, including automation compatible reagent systems and associated products for sample collection and processing through-to analysis. This new facility will also include GMP manufacturing capabilities. In short, we are active on many fronts with the prime objectives to bring critical capabilities in savings for laboratories most directly impacted by today’s challenging headwinds to enable them to more than justify but to bring them new strength and opportunities. I would like to turn to our results for fiscal 2019’s first quarter that ended October 31, 2018. Before getting into the details, I would like to point out that our quarterly results saw services revenues and gross margin adversely impacted by test mix, unexpected reimbursement changes from commercial payers, and as we noted earlier recently implemented reductions in government-owned commercial payer rates. Nonetheless, Enzo showed resiliency in the quarter replacing some of the lost revenue by expanding our coverage area, increasing services to several national and regional insurance networks, and successfully launching tests such as those performed in our AmpiProbe platform at lower costs thereby improving gross margin. Also of note, Enzo service revenues for both fiscal periods are reported differently with our adoption this year of a new mandated revenue recognition rule. Under these new rules, estimates of uncollectible balances associated with patient responsibility is reported as a direct reduction of net revenues and amounted to approximately $600,000 this quarter and $800,000 in the corresponding year ago first quarter. Historically, these amounts were separately classified in operating expenses as a provision for uncollectible accounts receivable. The change will be reflected in all future quarters and adjustments will be made for comparison purposes on the past year’s reported results. Total revenues in the quarter amounted to $21.3 million. Services revenue totaled $14.3 million versus $19.5 million in the prior year. Product revenue was about $100,000 less than the prior year at $7 million and product sales increased in the U.S., but were down slightly in Europe and they were impacted slightly by unfavorable foreign exchange rates. Gross margins in the quarter were 33% compared with 42.6% in the prior year period. The quarter’s gross margin was impacted by lower services revenue as noted above. Total operating expenses were $13 million compared to $12 million, an increase of $1 million. Legal expenses amounted to $1.3 million accounting for $900,000 of the year-over-year increase in operating expenses. In addition to marketing and sales related cost increases of approximately $100,000 in advance of launching new sales initiatives, the increase in legal expenses was principally related to the New York litigation with Roche where Enzo was the plaintiff and set for trial in April. The GAAP and non-GAAP net loss was $6 million or $0.13 per share compared to net loss of $600,000 or $0.01 per share in the prior year period. At October 31, 2018, cash and cash equivalents approximated $53 million compared to $60 million as of July 31, 2018. Working capital totaled $57.3 million. Cash used in consolidated operations for the quarter ended October 31, 2018 and that was $6.2 million. In conclusion, in light of these significant reimbursement changes that have impacted Enzo and other clinical labs in this quarter, Enzo was taken a number of steps to adjust its operations to this new paradigm. These actions include tightening billings in client services practices, expanding our reference laboratory services menu of tests and hiring sales professionals in new geographical regions. Most importantly, our vertically integrated structure allows Enzo to move quickly to position our broader lab to lab reference services. We are working to develop and execute a unique approach to change processing in clinical labs to generate economic sustainability. This has involved developing superior critical assays that offer unusually high sensitivity, specificity, reproducibility and accuracy, while being capable of running multiple tests from a single specimen as mentioned earlier. The platforms and the assays we have developed are designed to use open systems and achieve multiple benefits, including savings that can range from 30% to 50%, superior product performance and technology that fits seamlessly into customer’s current workflow. The severe economic reimbursement trends, which have hit the industry precipitously, are driving a more accelerated view of the need for our solutions. The company expects the commercialization from the developments of its initiatives will begin over the next year at which time it anticipates returning to growth. The significant implementation steps include

[Operator:]

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Per Ostlund of Craig-Hallum Capital.

[Per Ostlund:]

Thanks. Good morning, Barry and Jim.

[Barry Weiner:]

Good morning.

[Per Ostlund:]

You have talked this quarter and I would say last quarter probably most extensively about the volatility and the rapidity of change in the payer environment. I am curious if any measure, if it’s too early to say that any measure of stability has begun to emerge. And I guess maybe related to that with the rapidity of change in the payer environment of late, has that also driven a rapidity or an acceleration of receptivity on the part of labs that you are talking about your lab-to-lab strategy in your expanded product and service offering?

[Barry Weiner:]

We believe that the volatility in reimbursement will continue within our industry. We are seeing a lot of movement in fluctuation with the payers trying to develop protocols and payment schedules that will match with what is going on with the Medicare reimbursement rates. I anticipate we will see volatility over the next few quarters and it will continue to impact labs. I believe the impact of this reimbursement instability hit the industry much more severely and with much more rapidity that then many laboratories anticipated. Our dialogue with our peer companies throughout the country, which has been ongoing for the last 1.5 years as we have begun to explore and explain our program strategy and the opportunities that we hope to be presenting to the industry, I think has sat more effectively now that the environment has become so turbulent. I think many labs out there do not anticipate the speed with which these reimbursement cuts would take place or the severity that they would present to the industry. As a result, it certainly has opened the opportunity for us in our educational programs to have a more extensive approach and contact with laboratories, I think the seriousness with which labs are listening to the proposals that we are putting forward is becoming more readily accepted. I think it will drive our programs more effectively. So even though our laboratory is subject to the same economic challenges of every lab in this industry I believe our product programs and our strategy of centralization of clinical lab testing and the utility of low cost testing platforms that are open in nature will be driven more efficiently and effectively in the future.

[Per Ostlund:]

That makes sense. Maybe dovetailing off of that, Barry, as you look at it today, what do you see as the primary gating factors I guess to the lab-to-lab strategy? Is it expanding menu, is it expanding sales force or do you feel like you are in good shape there? Is it regulatory what are – or is it just simple awareness, how do you sort of rank order the things that – or the boxes that you need to check to really see that the strategy accelerate?

[Barry Weiner:]

It’s a complex program and it has multi-facets to it. Certainly, the educational process, which is a longer term sales cycle in general, because you need to educate people to change their current practices, is one step. Secondly, it is menu. We have been working diligently to expand the menu into a critical number of tests as you are aware, our women’s health panel has been approved. We are working towards conclusion of the viral load panel, which we hope to have in hand in the very near future. We also are looking at other platforms to help contribute and these are in the areas of immunohistochemistry as well as ELISA technologies. We see the need throughout the clinical lab in different areas and we have been approaching them with different solutions. The regulatory component is without question another process that is underway and is a critical factor. We have been working to now build systems that not only will be approved for a New York state approval, but also for an FDA approval and that is very important in the totality of this process and we are moving forward in that. Part of the reason, we acquired the additional facility on our campus and we are building out GMP facilities is that we are driving all of our products towards the FDA approval process and that does take time. But I think it’s a critical component to have a competitive capability in the market. Also, I think when you look at this educational process, you have to remember that historically clinical labs have viewed reference testing as a cost center for them typically when one references test to other labs, the economics are not favorable for the laboratory. We are now going out in attempting to educate these laboratories that referencing in centralized testing is a cost efficiency and more in that a critical paradigm for sustainability in our industry. And so this is all part of the process. There are many steps. It’s not simple. It includes multiple platforms, multiple processes, but we are actively moving forward. I think we have a very strong start right now. I think the industry trends are only helping to drive that now. We are seeing the receptivity and I think that has been very encouraging for us.

[Per Ostlund:]

Very good. I want to ask you about the Connecticut lab you are opening essentially I am curious maybe you can talk through factors like timing of when it’s going to open CapEx requirements related to it, the strategic importance of it? And then maybe a last question related to that just because you referred to it in your prepared remarks, Barry, if there as much – potentially as much excess capacity as there is out there in the lab industry, were there any opportunities that you had potentially evaluated from an acquisition standpoint if Connecticut was an important market to enter to go that route versus building off?

[Barry Weiner:]

The Connecticut facility is now licensed and operational. The facility was opened to address the expansion needs not only through Connecticut, but up into Massachusetts and Vermont and the other – and Rhode Island as well. We needed to be able to have a facility that could deal with logistics of specimens flowing from these areas. We needed the facility to be able to obtain inclusion in a number of regional payers that predicate having a localized lab to be allowed into their payer network. We also felt that this facility would brought in our ability to provide more rapid turnaround for certain types of tests in the regions that we are expanding into. So, there are many reasons for the clinical laboratory in Connecticut. In terms of the decision to acquire versus open a new lab, interestingly the type of facility that we have opened on a capital investment base was not extremely onerous to us. It made more economic sense to building new versus to acquire. We did look at potential acquisitions in the area. We did not see anything that we thought was cost effective. And as a result we took the route to build our own and opened our own facility, which I think will payoff in return on investment quite nicely for us. We also have specific payer contracts in these areas currently that were predicated on this type of facility. So, it will expand our network and our reach and our capability to be able to provide more rapid service to this clientele.

[Per Ostlund:]

Okay, that makes sense. And then just one last question for me at the end of your remarks, Barry, you mentioned the therapeutics program with SK-1 and it certainly sounds like the initial indications are very promising. As far as next steps go, what should we be thinking about there, is it xeongraft studies in publications related to that, other publications potentially or is it possible that we would see a partnership or collaboration agreement even before that?

[Barry Weiner:]

Our therapeutic activities have been somewhat quietly executed within Enzo. We have a number of programs that we have been proceeding on in a very cost efficient and selected way. This particular program is showing extremely high value from the early studies that have been executed on. We have to remember that the SK-1 molecule. It’s almost a platform molecule, which means it works in a pathway that has multiple potential applications. The paper that was published on the tamoxifen resistance is only one of the potential interesting applications that this particular pathway impacts. There are others. And I think you will see the early stage investigation or application of this pathway in a number of other potential medical indications. At the same time, it is a molecule which is of high interest industrially at this point in time. And our interest is to look to sophisticated partners that can help to expedite the development of this particular molecule in specific areas and so that will be one area that I would look towards. I think in terms of the actual development program, these were preclinical studies. They will be moving into animal models and obviously depending on the results that come forward, we will continue to push forward on it, because we believe that the molecule in of itself has some very, very interesting dynamics in terms of controlling these unique pathways. So, it’s a very, very exciting compound and we will be pursuing it. I think there are multiple steps whether we take those alone or with partners remains to be seen. I think it is an extremely strong value for Enzo. I think at the same time, we are also looking at this particular compound in light of some of the other therapeutic activity that we have been working on over the past few years in terms of evaluating the ultimate resolution of many of our therapeutic endeavors, I think from our shareholders’ point of view, we have not spent extensive capital, but at the same time, we have been able to develop compounds which are assets towards value that we hope in the near future will start to generate value for us as a company.

[Per Ostlund:]

Excellent. Thank you, Barry. Appreciate it.

[Barry Weiner:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from Jeff Silver of Corrado Financial Group.

[Jeff Silver:]

Yes, hi, Barry. I have a question – I want to refocus a little bit on this transition between to the new reimbursement regime. It seems as though the transition has not gone quite as planned, because the decline in the most recent quarter in the lab business has been pretty severe. And I just want to understand why with another 10% reimbursement cut coming in 2019 and yet not the one in 2020. You said towards the end of your remarks that you expected to return to growth, I think in the next 12 months, I am assuming that would be from a significant lower base level of revenues. And I know you have been talking about why that could be the case, but it seems like I am just trying to sit together, the sharp decline we saw in the recent quarter and yet another two reimbursement cuts and your optimism in terms of timing of returning to growth, can you maybe just sort of address that?

[Barry Weiner:]

We are. We do believe that the next – over the next two to three quarters you will see volatility in the reimbursement area for clinical laboratories. There is a lot of uncertainty out there. We are optimistic over the next year steps will be put into place to drive not only the extension of our services business, but also our products business. It’s a very difficult environment to handicap right now, because so many of the payers out there are in flux and many are trying to renegotiate contracts. We have a number of processes in place which we hope will move the product opportunities, the centralization of services opportunities into the market. It’s very hard to predict specifically, but our cost structure utilizing our own products is significantly more advantageous than what exists in the market today. So, we are able to understand and get a handle on our own cost of goods. Just looking at what we have been able to do with our own AmpiProbe system, we are seeing that we are able to drive our own margins in the molecular space and we are hopeful that, that will continue not only in the molecular space but as we bring on stream our other products within the other areas in immunohistochemistry and ELISA areas that we will continue to drive margin. So I think when I refer to growth, it isn’t completely only revenue growth it’s growth in improving the margins in bringing online centralized laboratory processing capabilities. I think it has a much broader concept that we have to take into consideration. Whenever, there is challenge like this in the market, there is unusual opportunity and we are uniquely situated right now to capture that opportunity.

[Jeff Silver:]

I guess, just – I mean, as you look at the imminent 10% decline in reimbursement, I’m assuming that you have factored that into your – at least for internal projections in 2019, and it sounds as though you’re reasonably optimistic given that analysis relative to what happened in 2018. I guess, I’m just trying to square this to make sure, because it does seem like the recent quarter certainly the recent quarter was a surprise in terms of the decline in the lab business?

[Jim O’Brien:]

Jeff, hi, this is Jim O’Brien. Just to comment on that, again, I think I don’t want to underestimate the case in which change is occurring in the industry. In just the most recent weeks we’ve been in multiple dialogs with a number of commercial payers, where new fee schedules are being discussed and negotiated. Those are very difficult discussions. We talk quite a bit about the value that Enzo puts forth, the menus that we have, our growth opportunities. As Barry noted on the call, we’re far beyond that of a laboratory. And as we transition the business into a molecular diagnostic manufacturer, you’ll see that shift in our business and shift in our focus over the next year. So I think there are multiple opportunities for Enzo to shift the focus to lab-to-lab strategies, reference services, and be less dependent upon a reimbursement schedule from a government and prior payer that’s just we’ll take some time to make sure that, that transition occurs.

[Barry Weiner:]

Jeff, I would like also to address the question of the last quarter. In the last quarter, the impact that was most dramatic took place precipitously and was not predictable. And what I mean by that, certain payers moved more quickly than I think many labs anticipated in trying to readjust their reimbursement rates. We have obviously known about the Medicare cuts for the last year or so and certainly factored them into our modeling and future revenue thought processes. The real challenge is coming from the commercial payers and we’re seeing a lot of, I would call it, erratic behavior on that front, which has created a lot of the challenges within the industry. I think if you noticed in the last 3 or 4 weeks both major national laboratories had to revise guidance significantly as well. So it’s not an issue which is impacting Enzo. It’s an industry-based issue, and I think it’s going to take a few quarters for this to sort itself out. We are moving forward aggressively on our product strategy, on our strategy for putting forth lower cost solutions for clinical laboratories. We believe that’s where the value proposition is for us. We will weather the industry reimbursement issues, I mean, obviously, we – what we’re seeing from a volume base, we have been able to stay our volume, it’s the reimbursement issues, which we are trying to deal with and we will deal with them over the next 6 months or so.

[Jeff Silver:]

Yes. Those comments are helpful. Thank you very much.

[Jim O’Brien:]

Thanks.

[Barry Weiner:]

Thank you.

[Operator:]

Our next question comes from the line of Alan Denzer, Private Investor.

[Alan Denzer:]

Yes, hi, Barry.

[Barry Weiner:]

Yes. Good morning.

[Alan Denzer:]

I’ve listened to your calls many years. I’d been around since the days you went public with Drexel Burnham as an employee there for nearly 20 years. I was thrilled to be a part of your early emergence in the biotechnology field that’s quite interesting. Over the years that the company has been able to survive, you’re definitely a survivor, despite the fact that you’ve never really reached any serious modicum of profitability other than capitalizing on your intellectual property portfolio and so I am always wondering where and how you are going to emerge some of the ashes of vicissitudes of your industry. Hopefully, with the next injection of capital and of course, you can’t count on settlements carrying you to the promised land without actually coming up with a business plan that makes money for you. o I guess what I’m hoping and maybe you could tell me your views on this, is whether or not the company can move on to reach its goals without having to further dilute the shares that are outstanding, I know you still have a offering that, that you could tap it anytime that you’ve filed with the SEC, and I don’t expect that you have to use that anytime soon. But I’m just trying to get a feel, are you counting on some settlements or are you going to dilute if the business environment doesn’t get any better over the next year or year and a half? Thank you.

[Jim O’Brien:]

Thank you.

[Barry Weiner:]

Thank you. I think over the years, Enzo has been probably one of the most efficient users of capital within the industry. I think if you were to look at the values that we have generated both in our intellectual property estate, our businesses, our products, we have been an incredibly efficient user of capital. We have never really going out to the public markets in an extensive way since we went public in the early ‘80s. I think we’re quite unique in that area. We do have a very sufficient capital base at this point in time. We believe our programs are designed to be able to be executed within the means of those programs. I can’t say for – opportunities might not present themselves at some point in time, but I think if you look at the history of our utility of capital and our raising of capital, I think it’s been pragmatic, I think it’s been shareholder sensitive in terms of dilution. I mean, of a company that has been in the market for as many years as we have, we have really I think looked at the issue of shareholder dilution very, very sensitively. And when you look at the biotech industry as a whole and you made a comment about the industry in your earlier – in your question, we as a entity I think have produced more value from our capital in terms of product to return than many companies that I’m aware of. And I think if you look at the platforms that we have been – that we are putting forth right now and you compare the cost invested in the development of these platforms relative to other companies who’ve put out not necessarily similar but like-minded platform technologies, I think you will see the efficiency that we have generated. For us at this point in time, we are engaged in an execution issue now that these platforms are pretty much developed to move them into the mainstream and move them into a strategic model that will drive value within the industry, which maybe somewhat unique than the conventional closed system models that are out there, I think that’s part of the educational process and I think we’re well on the way to do that. So I appreciate your question. And I think when you look at our history, I think it answers some of the question that you asked and I think going forward you will see a similar behavior pattern. Is there any other questions?

[Operator:]

There appear to be no further questions at this time.

[Barry Weiner:]

Thank you very much. We appreciate your time on the call. We will look forward to speaking with you in March when we report on our next quarter. Thank you.

[Operator:]

Thank you. A replay of this broadcast will be available until Monday, December 24 at 12 Midnight. You may access this replay by dialing 1855-859-2056. The PIN number is 3927608. This replay is also available over the Internet at www.enzo.com. This concludes today’s teleconference. You may now disconnect your lines at this time and have a wonderful day.