Enzo Biochem Inc (ENZ) 2006 Q4 法說會逐字稿

Good morning and welcome to the Enzo Biochem Inc. fourth-quarter and year-end 2006 operating results conference call. Except for historical information the matters discussed on this conference call may be considered forward-looking statements within the meaning of Section 21A 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. 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 obligations to update any forward-looking statement as a result of developments occurring after the date of this conference call.

Our speaker today is Barry Weiner, President. At this time all participants have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. I would now like to turn the floor over to your host. Mr. Weiner, the floor is yours.

Good morning and thank you for joining us for our fiscal 2006 fourth-quarter, year-end and conference call. I am joined today by several members of our senior management group as this call will have a somewhat different format from past calls. With us today is Andrew Crescenzo who will discuss our financial results as well as Dr. Carl Balezentis who will comment on Enzo Life Sciences and David Goldberg who will address strategic initiatives at Enzo Biochem.

I would like to discuss today our fiscal fourth-quarter and year-end results and share with you what we believe is an important overview as to where Enzo is today and how we are positioning the Company to move forward and take advantage of the many opportunities that are in front of us.

Before I get to the specifics, I would like to comment about the recent announcements of Friday and today. These announcements reflect the investments we made in fiscal 2006, a year that we saw important milestones. And also I would like to reflect our commitment to move Enzo toward a more fully integrated organization with greater focus on the Company's inherent strengths.

On Friday morning we announced that we entered into a licensing agreement for six key RNA amplification patents from LBS Technologies, the holder of these patents. This agreement represents the second important technology that we have in-licensed over the past several months. These patents will allow Enzo to add to its life science product portfolio and complement our existing line of genomic products. We feel by increasing our portfolio of product offerings that we will be able to grow revenue as our sales force will have a broader range of products to offer our customers.

Later on Friday we announced the ruling of the Federal Court of a Markman hearing in our suit against Applera Corporation. We filed this action in 2004 and on Friday we received word of a very favorable decision. The Federal Court judge upheld our claims in the patents involved in this case and this decision paves the way for Enzo to pursue our infringement claims against Applera's product including among others their gene expression and sequencing products and systems as well as the services that the company provides.

This is an active litigation which limits the amount of details that can be provided but suffice it to say that we are very pleased with the Court's ruling. This decision is yet another potential value driver resulting from the substantial litigation investment we have made over the past few years.

Earlier today we announced the appointment of Dr. Gary Cupit to the newly created position of President of Enzo Therapeutics. He comes to Enzo with extensive pharmaceutical industry experience which he gained at such organizations as SmithKline, now Glaxo, and Novartis. Dr. Cupit most recently was the Chief Executive Officer of Sapphire Therapeutics. During his career he focused on business development both from an in-licensing as well as an out-licensing perspective. As a Vice President at Novartis he was responsible for the identification, evaluation and due diligence of global business opportunities for their primary-care therapeutics area.

Additionally Dr. Cupit was the Product Director for the launch of Hycamtin, an ovarian cancer therapeutic and the product manager for Tagamet. His extensive industry experience and reputation in the pharmaceutical field will be a tremendous asset as we proceed with the strategic options that are now available to Enzo Therapeutics in commercializing [RNV] compounds.

During this past year we reported on numerous achievements and advances in our intellectual property state and in moving our therapeutic programs through the initiation of new clinical trials. To help achieve the goal of increasing the value of our Company, we expanded and augmented our senior management group and we expect this group will help to bring value to the Company in the months ahead and (indiscernible) scientific achievements were marked by the granting of two pioneering and enabling patents that cover fundamental work in the molecular labeling and identification area, plus an additional patent covering aspects of therapeutic protein and RNA production in living cells.

Additionally an interference was declared involving a method of amplification utilizing Enzo's technology that is currently the foundation of a multimillion dollar line of products. These patents and other court actions are a result of our long-standing scientific research and development program and reflect work initiated in the 1980s. It is estimated that today several billion dollars worth of products are being sold which we believe are covered by one or more components of Enzo's broad patent estate.

Additionally we announced progress in several clinical trials as we move to them forward through the validation process. The investments that we have made in R&D, patent prosecution and personnel are beginning to demonstrate tangible results. We recently announced a settlement with one of the defendants in an important litigation which we expect will be reflected in our first-quarter results.

Additionally, we announced in-licensing deals that show our willingness and desire to augment our own internal research and development efforts and with the recent announcement of two major third-party payer contracts in Aetna and United Healthcare, Enzo Clinical Labs division is well-positioned for expansion.

I would like to turn the call over to Drew Crescenzo, who is our Senior Vice President of Finance who will discuss the Company's financial performance for the fourth quarter and full year and then we will come back to discuss the individual divisions and their opportunities.

Thank you Barry. Good morning. Before addressing the specific details of the Company's 2006 results and fourth quarter, it is important to recognize that the results are in line with our expectations. It should be noted that various income and expenses are not comparable to 2005. For instance, effective August 1, 2005, Enzo began expensing share-based compensation in accordance with FAS 123(R) which resulted in expense of $1.6 million for fiscal 2006. This did not exist in the prior fiscal year.

Fiscal 2006 resulted in a net loss of $15.7 million or a loss per share of $0.49 as compared to a year ago income of $3.3 million or net income per share of $0.09. A second item affecting comparability with that of fiscal 2005 was that fiscal 2005 included a pretax gain of $14 million from our settlement and license agreement with Digene Corporation. Excluding Digene, the after-tax gain of $8.1 million or $0.25, fiscal 2005 would have resulted in a loss of $11.1 million or $0.34.

Lastly, fiscal 2006's net loss was increased by the limitation of recording a tax benefit on the pretax loss. Our effective rate for GAAP purposes was 8% in 2006 rather than the expected effective rate of 42%. The lower effective rate increased the loss per share by approximately $0.18. This tax benefit can be recognized in the future if profitability is achieved and taxable income is generated.

The results of operations are reflective of the cost of investments previously mentioned by Barry. I will now expand on the key operating results at each of our three operating units. For the full year, total overall revenues were $39.8 million versus $43.4 million in 2005. After completing the first full year under the Digene agreement, life-sciences royalty income rose to $3.1 million from $1.5 million in the previous year. However, life sciences research products revenue decreased by $2.6 million and other revenue decreased from a former distributor by $1.5 million. Our life-sciences revenue continues to be impacted negatively because of ongoing litigation.

Digene royalties will continue to provide a minimum of an additional $16.5 million in royalties through 2009. In addition, we will continue to receive royalties on sales of certain product's covered items until 2018.

With respect to our cost and expenses, our investment in R&D for our clinical trial activities increased $1 million over the prior year offset by reductions in other R&D items. Selling, general and administrative expenses increased $4.9 million primarily due to the impact of the initial year of expensing share-based compensation of approximately $1.5 million, continued increase in corporate governance expenses of approximately $1.2 million, a portion of which we do not expect will reoccur in fiscal 2007.

Further, as part of our investment in Enzo Clinical Labs, personnel cost increased primarily in the billing and collection areas totaling approximately $500,000. Our legal expenses increased $1.9 million due to the increased activity in the litigation area to protect our intellectual property and in higher legal fees to develop our patent portfolio. These cost increases were offset by reductions in our provision for uncollectible accounts at the clinical labs as a result of improved procedures in billing and collections.

Fiscal 2006 cash collections increased $4.6 million over the prior year as a result of these improvements. It should be noted our overall expenditures were in line with our expectations.

Let me now comment on the results for the fiscal fourth quarter. The loss for the quarter totaled $4.5 million or $0.14 per share compared to a loss in the comparable year-ago period of $2 million or $0.06 per share, again, partially reflective of investments made in legal activities, clinical trial activities and expansion in the clinical lab support staff. Contributing to the increase net loss was the impact of the previously explained limitations under GAAP for recording certain tax benefits.

Revenues in the fourth quarter of fiscal 2006 decreased by $1 million or 9% to $9.9 million compared with $10.9 million a year earlier reflecting a $300,000 decline in revenues at Enzo Clinical Labs and a $700,000 decrease in revenues at life-sciences. Overall decreases were due to the same reasons as mentioned for the full year. Expenses increased by $0.9 million from a year-ago period. The expenses that increased were consistent with the full year except that R&D related to clinical trial-related costs increased by $500,000 which was offset by significant reductions in the provision for uncollectible accounts of approximately $0.6 million.

Our finances continue to be strong with solid working capital at year end of approximately $80 million with a working capital ratio of 14.5 as compared to 13.3 in 2005. Cash equivalents and marketable securities approximate $70 million. We used cash to fund the loss incurred, purchase capital expansion of $4.2 million including acquiring a building for $3.2 million and also we noted a decrease in our current liabilities offset by stronger collections at the clinical labs. Our shareholders equity exceeds $96 million and the company remains debt-free.

I will now comment on results on a before tax basis for our three operating units. Enzo Clinical Labs posted an operating profit for the fiscal fourth quarter as well as for the full year. Revenues for the quarter were $8.1 million and for the year were nearly $32 million. Our cost of services have increased due to the additional testing costs incurred internally and externally and increased compensation.

Gross margin for the quarter was $4.5 million and for the year was $18 million. At Enzo Labs, selling, general and administrative expenses increased for the quarter by $0.1 million to $3.4 million and for the year increased $0.4 million to $12.9 million.

Despite increased operating costs for the quarter and the year as a result of the improved billing and collection procedures, the Clinical Labs division for uncollectible accounts decreased 45% or approximately $600,000 for the quarter over the prior year-ago period and 27% or $1.3 million for the year over the prior year.

We have continued to position Enzo Clinical Labs for growth. There are now over 300 Enzo direct physician office computer systems in the field which allow us to be directly connected with a number of our key clients on a continuous basis. Being able to provide lab reports through Enzo direct is even more critical today given the expenses in the cost of having a courier deliver such a report. Additionally we now have over 100 sites of our web-based connectivity solution of Enzo direct in place. Physicians logging in can now obtain results from any web-based computer providing the ultimate in flexibility. This has been well received by our clients.

Also on the information technology front we have increased our electronic medical record called EMR capabilities with a number of active interfaces. These interfaces with physician practice management systems allows the transference of data into electronic charts. We will continue to invest in EMR capabilities which will provide Enzo Clinical Labs with a new physician service opportunity and potentially new opportunities with third-party providers. We are confident that our EMR investments will allow us to be ready as the industry moves towards paperless record-keeping.

During the past year we continued to make improvements to our building and collection procedures. Combining this with the increased number of installations of systems in the field allows us to collect accurate billing information in a more timely manner. In 2006 we completed the process of installing electronic payment capabilities so that our patients can pay their bills via credit card through a secure web portal or at any one of our 19 patient service centers. The above actions have contributed to the decrease in our provision for uncollectible accounts receivable and an increase in cash collections.

Turning now to the results of Enzo Life Sciences, this unit posted a loss from operations for the fourth fiscal quarter at approximately $400,000 as compared to an operating profit of $700,000 in the prior year. For the full year, Life Sciences incurred an operating loss of $200,000 as compared to the prior year's operating profit of $14.6 million which included the $14 million pretax gain from the Digene settlement.

Now looking at the financials for Enzo Therapeutics. For the 2006 fourth quarter and full year, Enzo Therapeutics reported losses from operations up a $1.5 million and $4.2 million respectively reflecting our continued investment in this unit. Compared to the 2005 fourth quarter and full year, the losses from operations increased $200,000 and $1.1 million respectively reflecting increases in clinical related costs.

I will now turn the meeting back to Barry.

Thank you Drew. As you can see, we have invested in many facets of this Company specifically protecting and developing our intellectual property and our therapeutic development programs. Even with these investments, the Company remains in excellent financial health.

I would like to focus on certain changes that have taken and some that are going to take place at Enzo. They hold very significant implications with regard to how we are determined to unlock the considerable value that resides in our Company. Our management team as you can surmise from those present at this call has been materially and substantially expanded and enhanced. Drew Crescenzo, who you just heard from, has considerable public and operating accounting experience. He now heads up our financial group ensuring tighter controls and effective use of capital.

The Life Sciences Group is now being headed by Dr. Carl Balezentis, an individual with broad experience in this area who has mapped out a plan to more effectively get products into market, develop new products, build alliances, expand markets and assist our program to fully capitalize on our intellectual property base.

And now we have also added Dr. Gary Cupit, who as you can see from this morning's announcement brings to us proven experience in the development and commercialization of a long list of therapeutics. We expect Dr. Cupit to contribute importantly to a more rapid realization of our very promising therapeutic program.

The addition of the new manufacturing facility in Farmingdale is also a key component of our new look. The building abuts our existing principal facility which houses Life Sciences Labs and other units. The new building will house Enzo Life Sciences providing important space for product development and manufacturing as well as provide additional room for our therapeutic activities. It also means that in our existing facility we will be able to expand the activities of Enzo Clinical Laboratories, enhancing the order flow and most significantly opening up room for new more esoteric testing that carry more attractive margins.

Therapeutics has four study drugs currently in clinical evaluation. A fifth, our treatment for uveitis is being readied for a Phase I/II study. We expect to also start clinical trials in the United States. With the new laboratory provider contracts in place, Enzo Clinical Labs is positioned for improved performance.

Going forward, our principal strength resides in over three decades of investment in new technologies and for which major new patents have recently been awarded. We also are awaiting other possible new awards. A number of these are basic primary patents that position Enzo uniquely in areas that have broad implications and on which we are aggressively and strategically focused in order to maximize the value of these inventions.

All of these activities are directed towards looking at specific values inherent in each of our operating subsidiaries. By installing management that has a proven track record in commercialization and making the necessary investments to capitalize on our strong technological development capabilities, we are looking to maximize our assets.

I would like to now ask Dr. Balezentis to comment about the activities in the Life Sciences area.

Thank you Barry. Over the next few minutes I will spend time reviewing the activities and strategic initiatives that Enzo Life Sciences is focused on to reach our goals of revenue growth in both the short and long term and to maximize the use of Enzo's intellectual property. The strategic initiatives that we have established can be categorized into four main areas designed to drive revenue growth.

The first is increasing the efficiency of our global sales and marketing activities. Second, developing new products which leverage Enzo IP and expertise allowing us to diversify into new market segments. Third, entering into collaborations and agreements with major life science companies, again leveraging our IP and expertise. And finally fourth, acquiring product lines and companies which allow us to diversify into new market segments and apply our IP to development enhancement of these products.

Turning first to the initiative of increasing the efficiency of our global sales activities, there are two aspects that we are concentrating on to grow our revenues in the short term and build an infrastructure to support growth in the longer term. First, we have focused our direct selling activities in areas that will generate the greatest revenue return. We have built a team of experienced professionals that are covering the key geographic areas in North America and we are further prioritizing their efforts with an emphasis on successfully launching our newest products.

Second, we are looking to expand our sales effort internationally in geographic markets where we are not represented but where we are poorly represented in order to capture new customers. We have targeted specific countries through selection criteria which consider such things as market size, future growth, identification of a local partner and we are now in the process of establishing and developing these relationships.

The second initiative is new product development utilizing our IP and expertise to develop new products in diverse markets. While we are making concerted effort to maximize the use of our own IP, we certainly realize the value of licensing in technology from outside sources to complement our own.

In regard to our current product lines, our efforts are focused in two areas. First, we want to make improvements to our highest margin and highest volume products in order to maintain our current market share and remain competitive. The announcement late last week detailing the licensing of technology to amplify RNA for gene expression studies is a perfect example of employing a combination of internal and external IP to develop the best product for the market. We're about to release a product that has incorporated this technology and it represents a significant improvement over our previous product.

These second area of focus for our current product line is to develop novel products which allow customers to process samples that have been difficult or impossible to process in the past. We have discussed in past conference calls that we were developing a kit to amplify DNA from archived material such as formalin-fixed paraffin embedded tissues. Pathologists have established large collections of these materials that form invaluable resources for the study of cancer and other important diseases.

We just released this product and we have named it the Biosource Kit. It allows research to amplify small amounts of starting material from archived sources, score the quality of the material and then label and utilize the material to determine relevant genetic profiles. The results of our recent beta trials with our collaborators in the U.S. and Europe have met or exceeded our initial expectations. In our ongoing product development efforts we are continuing to explore additional genetic testing applications for this technology.

Outside of our current product lines we are looking to develop diverse products in new market segments. Several months ago we announced that we had licensed technology for single copy probes from Mercy Hospital in Kansas City. We are exploring the potential to develop a novel platform utilizing this technology in conjunction with our own for detecting genetic abnormalities that can have serious developmental consequences for those born with them. We feel that this platform would offer significant benefits over the current methodology and we are working very closely with key opinion leaders in the field to analyze the commercial potential for this product. We are very confident that we can rapidly develop this product from a technology standpoint and we want to verify that laboratories currently using alternative methods would readily adopt the product.

Our third initiative is focused on developing relationships, collaborations, joint ventures, supplier licensing agreements and the like which leverage Enzo's intellectual property and expertise. We feel that there is significant opportunity to develop these business-to-business relationships due to one, the broad nature of Enzo's IP estate that it has developed over the past several years; two, the recent issue of new Enzo IP in the key areas of life sciences that Barry has mentioned; and three, the expected issue of additional IP in the key areas in the near future. We are currently evaluating the nature and extent of relationships that would be most beneficial in each of the IP areas.

Finally, we are looking for opportunities for growth and diversification that we cannot achieve by organic growth alone through in-licensing of products or acquisitions of companies. Over the past several months since joining Enzo, we have been evaluating and implementing new approaches and commercial options. I am both excited and very optimistic about the potential. Barry?

Thank you Carl. As I indicated before, I have also asked David Goldberg to undertake the task of evaluating the various strategic alternatives that are available to us in the utility of our clinical laboratory and molecular diagnostics opportunities for coordinating that with the life sciences activities. One of the projects he is involved with involves this interaction and I would like David to make a few comments on that area.

Thank you very much Barry. As was indicated earlier, Enzo is evaluating a number of strategic alternatives determined and designed to maximize the value of our assets. To that end I want to discuss once such avenue, that of molecular diagnostics and genetics.

As we previously announced, Enzo Clinical Labs has signed recently two major commercial insurance agreements. These provide us with an enhanced ability to compete with larger laboratories and they may make it possible to expand the lab's geographic reach even further. We are actually in discussions right now with one of the major insurers to expand our service area due to a high concentration of members that the company believes are underserved.

Furthermore these contracts do provide payment for esoteric testing in certain subspecialties that few regional labs are running in house. In those cases, these particular specimens need to be sent out to more specialized laboratories and thus optimal levels of patient service would not be provided. To address this issue we have already moved in house a number of tests in the allergy and immunology areas just to name a few. We have accomplished this without compromising quality as evidenced by the extension we received in our prestigious College of American Pathologists accreditation through next year.

As Carl just mentioned, Enzo had signed a contract with the Children's Hospital Medical Center in Kansas City that provides us with the potential for developing cytogenetics products. To support this development effort as well as to better service our existing and future labs clientele, we are developing the capability to run these and other related genetic and molecular tests in house.

As we stated earlier, we are moving to expand the capacity of the labs. Enzo has acquired a building adjacent to the main facility in Farmingdale. This building will house Enzo Life Sciences and Therapeutics Research Labs and as such will allow space to be freed up in the current location for Enzo Clinical Labs. Some of this space will be allocated to the performance of these genetic tests. Additionally we are exploring different approaches to building this capacity. Among the approaches that are being considered are exploring joint ventures and acquisition opportunities as well as developing assays internally.

Connected to this, we are also exploring several projects in the pharmacogenetics area that would fit under this umbrella while at the same time assist our therapeutics division in the development of genetic signatures that [classes] of responders to various clinical projects. In short, the development of this capability can serve each of Enzo's divisions and is an area that we'll be increasingly focused on through the next fiscal year.

Thank you David. I would like to turn to make some comments concerning Enzo Therapeutics activity. Enzo Therapeutics made significant progress in a number of fronts this year. To review you should note that Enzo Therapeutics has four distinct enabling platforms on which most of our clinical development is built. These include oral immune regulation wherein we are attempting to manage immune mediated disorders such as Crohn's and uveitis; our EGS21, are small molecule treatment that acts as both a Crohn's anti-inflammatory agent and is in trials for NASH as well as Crohn's.

Next we have gene transfer, the pioneering technology that is the foundation of our HIV treatment. And fourth, an extensive preclinical development program that focuses on protein coating interactions that serves as the basis for her work with various metabolic pathways that may have utility in the treatment of bone, metabolic disorders and perhaps some cancers. Currently we are in a Phase II study of our all immune regulation therapy, Alequel for Crohn's disease as well as EGS21 for Crohn's and NASH. We are currently enrolling patients in our I/II trial for HIV and are in the final planning stages for multisite phase I/II trials for B27PD, our treatment regimen for autoimmune uveitis.

Focusing on specific achievements during the year, Alequel has been running through an expanded dose escalation Phase II trial. As of right now we continue to enroll patients in that study. Also on the Crohn's front, we completed a Phase I safety trial and are engaged in a randomized double-blind trial administering EGS21, our proprietary small molecule immunomodulatory agent. We are evaluating this compound as another potential Crohn's treatment based on favorable preclinical data.

In addition, we are testing the same compound in another Phase II trial this time for the treatment of NASH or non-alcoholic steatohepatitis. By running these trials simultaneously we can take advantage of numerous operational efficiencies and leverage our research dollars more effectively.

Our uveitis project is moving forward. We have identified a number of opinion leaders in the field. Our plan here is to perform multisite studies during 2007, both in the U. S. and Europe. Since uveitis is a major cause of blindness in the 20- to 50-year-old age group and because positive data has been observed in a physician-initiated study, we are putting a high level of emphasis on this compound during fiscal 2007. We have been working closely with the various regulatory agencies to move these trials in an expeditious manner.

Looking at the HIV project, we are currently enrolling patients and are awaiting the first of these to be treated. During the recent world AIDS conference in Toronto, our work was cited in a key abstract and for this I want to thank and congratulate the research team that has been working so diligently on this project.

On the preclinical front, we continue with our small molecular development program; lead compounds have been identified in the area of bone and metabolic disorders in cancer and we are pursuing their viability.

What all our therapeutic modalities have in common is that we have identified for each a core therapeutic mark with a focused prescriber based to achieve solid market penetration. We also focus on therapeutic products for which there are limited or perhaps no apparent competitors and for which delivery of treatment is based on a reimbursable value pricing strategy. In other words we are seeking opportunities of novel treatments and when we have identified certain non-core compounds, we will consider seeking commercial partners and once we have completed the proof of concept studies, perhaps extending these studies into more extended farther term study designs and putting us in a forum where we can either partner or maintain the development in house.

Let me turn to a discussion of the strategic alternatives that are available to Enzo Therapeutics. One of the reasons we recruited Dr. Cupit was because of his extensive commercial development experience. We know that for a company of our size and for the money we have invested we have a very broad and deep pipeline. We are currently evaluating the potential of partnering or joint venturing certain of our clinical and preclinical products.

In order to produce the highest return, we need to bring these products further through the approval process. At each step along the way comes an inflection point where we would decide whether to develop in house or to partner. Without getting into specifics at this point, I can tell you that we are exploring inquiries from large pharma who are looking to supplement their internal development efforts.

I would like to leave you with some thoughts about our intellectual property activities as well. There are a number of key biotech enabling technologies and we at Enzo are very fortunate because we are extremely well-positioned in at least three of them, gene labeling, micro-arrays and amplification. Today we are seeing a dramatic change in the diagnostics field both as it relates to prediction of disease as well as the utility of therapeutics to treat disease.

The fields of predictive medicine and pharmacogenetics are areas of growth and focus by many companies in the industry. Enzo Biochem is particularly well-positioned with its intellectual property state and technology development programs to impact the development of products and services in this area. That is to say that we have patents that are fundamental to these areas and we expect to aggressively seek out opportunities to joint ventures, partnerships and our own development to fully realize their values.

On that I would like to conclude and open up the floor for questions.

(OPERATOR INSTRUCTIONS). Keith Markey, Value Line.

Good morning and thank you for taking my question. I was just wondering if you could give us some guidance regarding Clinical Labs and Life Sciences revenues and profit margins for the this coming year?

We are currently looking at the opportunity that is in front of us with the addition of our new contracts that have come into place. We historically have not given direct guidance on each of the individual divisions. I think there are a lot of implications that could impact both the performance of the Life Sciences as well as the Clinical Labs in the next year.

As Dr. Balezentis pointed out, we have a variety of new products which are coming on stream. We have a series of new relationships in the distribution area that are in discussion. We also have a series of new distributors around the world that we are looking to work with and to implement programs that we think will enhance and drive our revenue growth. We are looking forward to seeing a more productive, more highly focused activity in the Life Sciences area and we have really situated that in Dr. Balezentis's hands and we're optimistic that he will be able to fulfill those charges.

In the clinical laboratory, it's a very interesting proposition for us right now. We were very pleased to obtain inclusion in the contracts from United Healthcare, Aetna and Oxford. We believe that these will give us a broader geographical reach opportunity. We believe that that coupled with the enhancement of our testing line of products will give us the opportunity to do testing that will be of a higher margin format. We are optimistic that the pull through that we may be able to obtain from the inclusion in these contracts will give us a more significant reach and pull in terms of revenue generation.

So overall we're optimistic on the revenue growth in both of these divisions.

Otis Bradley, Gilford Securities.

Barry, could you compare the Markman ruling handed down Friday to the Digene? Were you as pleased with the Applera one as you were with the Digene? Secondly, can it be appealed? And thirdly, does it have any bearing on the earlier Roche Markman?

We were very pleased with the ruling that emerged out of the federal court on Friday. The Markman ruling basically affirmed a majority of our claim construction points. These were points that were very important in terms of this particular litigation. We feel it is very difficult to compare this particular ruling to the Digene ruling. It covered a different content. It was a different format. Obviously that ruling was a very strong ruling and ultimately that particular litigation emerged with a settlement which we were very pleased with it.

I think this ruling was one that we had worked very hard -- I know our attorney's invested a tremendous amount of time and effort and I think the product and the result speaks for itself.

I think the other point of your question in terms of the specifics of the appeal; there is a period of 10 days for which one can appeal. It was in the ruling; the judge allowed that to take place if one wishes to do an appeal. I think we will have to wait and see what the other side does. We were very pleased with the ruling and so from our perspective it is very favorable to us.

In terms of how it will impact the other case, this particular court validated some of the claim construction points that the court in New York did not support and from that point of view, we are also very pleased because it is another point of view in the federal system now where we feel our position has been very strongly validated. We also feel that this particular opinion that was just issued is one that was very diligently executed and we think very well reasoned and we believe will serve us well.

Thank you. And one second question. Do you feel the Sigma settlement sets precedent in terms of payment or the judicial decision?

The Sigma settlement was an important settlement. It was the first of the litigation group members to settle with us. Even though the numbers in absolute dollars were not as large as perhaps what we can expect or hope to expect from other settlements, we feel that the format and structure of the settlement was a very strong one for us and one that we hope will carry forward within the rest of the litigation group.

(OPERATOR INSTRUCTIONS). I would like to hand the floor back to Barry Weiner for any closing comments.

Thank you very much. I appreciate your time and listening to our call today. We have a very exciting period in front of us and we look forward to reporting to you at the next quarter. Thank you.

Thank you. This concludes today's Enzo Biochem conference call. You may now disconnect.