Enzo Biochem Inc (ENZ) 2009 Q4 法說會逐字稿

Good morning and welcome to the Enzo Biochem, Inc. fourth-quarter 2009 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 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.

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 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.

Thank you and good morning. Today we are here to discuss our 2009 fourth-quarter and year-end conference call. I am joined today in our corporate headquarters by members of our senior management team which include Dr. Carl Balezentis, Dr. Kevin Krenitsky, Dr. Christine Fischette, as well as Mr. Drew Crescenzo and David Goldberg.

Last night we announced another record revenue quarter, as well as a record year for revenues at Enzo Biochem. Our revenue for the quarter topped $24 million and was nearly $90 million for the year. Year-over-year our quarterly revenues increased over 15%. We showed double-digit increases in both of our operating divisions as we continue to execute on the transformative process we began some two years ago at Enzo.

We reported an increased loss for the quarter of about a nickel per share. This is primarily due to increased investment in our operations as we move toward the $100 million revenue mark, as well as from some non-cash and sharply reduced interest income items. We remain fiscally strong with cash equivalents of over $50 million and no debt.

Enzo Biochem's continued transformation and evolution has positioned us to take advantage of the changing dynamics in healthcare. As one of the first companies to recognize and utilize DNA as an informational molecule, we've witnessed an accelerated drive towards the promise of personalized medicine that we have discussed for many years.

Enzo today has become a dynamic inventor, developer and provider of reagents, systems and services for specialized markets in the healthcare field. We have underpinned our operations with an unparalleled intellectual property and technology estate that provides us the freedom to operate in markets in which we choose to. We have built a strong physical and management infrastructure to allow us to build a presence in the industry.

Enzo Life Sciences and Enzo Clinical Labs are growing organically and via acquisition and joint venture. The strengthened scientific team across all of Enzo has provided us with a strong flow of new products as is exemplified in this morning's release.

Moreover, over the past year or so you have seen a series of news releases concerning new products relating to our company. Our prominence in the markets in which we compete has never been higher. We remain committed to ensuring that the investment community recognizes the changes that have occurred in the Company.

In the past five weeks we have presented at three major financial conferences, as well as held numerous meetings with analysts, brokers and fund managers. Our executives have been and will continue to be presenters at key industry conferences as the flow of both new products from Enzo Life Sciences and new assays from Enzo Labs accelerates.

At Enzo Life Sciences Dr. Balezentis and his management team are continuing the process of integrating our latest acquisition, Assay Designs Inc., which closed in March. They are expanding the overall business into a world-class supplier of specialized research reagents and technologies to the scientific community.

Additionally, they are executing on a strategy involving the formation and expansion of a number of Centers of Excellence around the world, each designed to be first-in-class and their respective research product niches. This has begun to contribute to our organic growth.

Moreover, Enzo Life Sciences is taking the position that we have developed in the genomic research market and expanding it to the epigenetics market, which is a logical extension of both our technology and our product line.

Epigenetics refers to the changes and appearances of gene expression which are caused by mechanisms other than changes in the underlying DNA sequences. The study of epigenetics is critical to a better understanding of the process of certain diseases such as cancers.

As underscored by today's announcement, Enzo Life Sciences has also greatly expanded its product offering in the fast-growing segment of neuroscience research and this weekend we will be debuting its new line at the largest conference in the world dedicated to discovery in this field.

At Enzo Clinical Labs Dr. Krenitsky has nearly completed a total makeover of the senior management of that division. We were pleased to announce the addition of Dr. Mohan Chellani, an expert in the field of molecular translational diagnostics, to his executive team as we continue to invest in transforming Enzo into a world-class provider of both routine and esoteric clinical tests.

Finally, we are optimistic that we will soon be entering into the first of what we hope will be a series of unique marketing and development agreements as well as the addition of more esoteric assays at that division.

A key strategic value which Enzo, in contrast to many emerging entities in the molecular diagnostics field, brings is the synergistic relationship between our life sciences and clinical lab groups. We are seeing a rapidly changing and growing field in both the study and management of many human conditions and diseases.

Technological advancements are affording a new perspective on drug development which challenges the old paradigm of the same treatment for every individual afflicted with a given disease or condition. Our growing technological capabilities are allowing us to look at subsets of patients that have derived no benefit from given treatment approaches and compare them to those who have benefited.

These molecular diagnostics are assisting in understanding how specific medicines may impact disease state and so aid in the development of a new generation of targeted agents which will allow the preselection of patients that may be most likely to respond to a given new drug. Also, these tools coming out of basic research in our industry sector may be utilized to predict the course of development of certain diseases including cancers and give physicians a more directional pathway as to how to proceed with treatment.

Enzo's combination of drug discovery tools to help the researcher or clinician coupled with our ability and capability to provide these services through our CLIA lab is a very important and powerful combination. We are seeing an exciting new era in disease management and health care as a whole.

The capabilities of this new generation of molecular tools holds the potential to develop more targeted treatment approaches, contain healthcare costs and provide better outcomes for the patient. We believe that the capabilities and business structure of Enzo today will allow us to be an important contributor to this new generation of medicine.

With regards to Enzo Therapeutics, we will help continue to aggressively pursue ways to develop our compounds with an eye towards fiscal [conservatancy]. Over the years, by focusing on small specialized clinical trials for niche products, we have built up a portfolio of clinical data and therapeutic study drugs without spending the large amounts of money that many biopharmas have.

Enzo has concentrated on developing treatments for chronic diseases and as a result we have several very promising platforms each with multiple candidates underpinned by what we believe is a strong patent protection.

During the fourth quarter we released the data from our most recent Phase II study on Alequel, our study compound for the treatment of Crohn's disease; it was extremely well received by the scientific and medical attendees.

In addition, we were extremely pleased to recently announce that we have entered into a cooperative research and development agreement with the National Eye Institute of the NIH where we will begin the next phase of a clinical study for our candidate drug for the treatment of autoimmune uveitis, a chronic disease that causes some 30,000 cases of blindness in the United States annually. This project will be led by Dr. Robert Nussen-blatt, one of the world's foremost authorities in the field.

Moreover, there is also a preclinical research component to the study where Dr. Nussen-blatt's team will examine the use of various enhancements to our proprietary immune regulation technology that, if successful, may have utility across the entire spectrum of our therapeutic platform which includes Crohn's disease as well as NASH.

This is a significant development for us; not only has one of the world's top research institutions chosen our project to work on and to support, there is also a substantial cost savings to Enzo as well. Enzo owns all the rights to Optquel and has an option on any new discoveries that emanate from this exciting project. This type of arrangement is an example of how we want to proceed with therapeutics, measured expenditures coupled with joint development projects.

We are continuing to execute our strategy of conservative expenditures in our therapeutics program with a concentration on partnering and joint development to bring these products to commercialization. I'd like to turn the next portion of our comments over to Drew Crescenzo who will give you a brief detail of the financial performance for the quarter. Drew?

Thank you, Barry, and good morning. I'd like to take this opportunity to expand on both Barry's comments and last night's earnings announcement for our fiscal fourth quarter.

Enzo's revenues rose by 16% over the year-ago period to a fiscal fourth-quarter record of $24.5 million. This gain is reflective of an overall organic growth of 5% at the Company, as well as gains due to the recent acquisition of Assay Designs.

Our net loss for the quarter was $5.3 million or $0.14 per diluted share as compared to $3.3 million or $0.09 per diluted share in the prior year. This increased loss was due to a number of factors including an increase in selling, general and administrative and the provision for uncollectible accounts, as well as substantially reduced interest income which caused this difference.

Other non-cash expenses relating to purchase accounting for the fair value of the inventory purchased and also depreciation and amortization negatively impacted us. Our non-cash pretax items, including the inventory fair value adjustment, amounted to $3.1 million in the quarter or $0.08 per diluted share which is unfavorably affecting our net loss. Comparable non-cash pretax items in the prior year amounted to $2.5 million or $0.07 per diluted share, also unfavorable in the prior year.

To give some brief information on a little more detailed basis, we reported gains in our gross profit of more than 19% to $10.6 million. More importantly we improved gross margins by more than 300 basis points at Enzo Life Sciences as we continue to execute on our strategic plan of operational efficiencies, the shedding of low-margin business, and the increased flow of new internally developed products that Dr. Carl Balezentis will detail shortly.

During the quarter research and development costs were up approximately $1.2 million or 39% from the year ago period. Due to the increased activity at Enzo Life Sciences our therapeutics expenditures declined by $800,000 reflecting the timing of clinical trials activities as well as our more measured capital spend review.

Selling, general and administrative expenses increased by 33% or $2.9 million. As a percentage of revenue SG&A increased 6% to 48%. This increase was impacted by the inclusion of $800,000 in costs relating to the recently acquired Assay Designs, nonrecurring professional fee expenses of approximately $300,000, plus increases just related to our increased revenues. We believe that moving forward our selling, general and administrative expenses as a percentage of revenues will be reduced.

Our legal cost declined $300,000 for the quarter to $762,000. Our provision for doubtful accounts primarily related to Enzo Clinical Labs increased $500,000 partially due to the payer mix in the quarter. Lastly our interest income declined $400,000 or 97% over the prior year period.

Let me turn to highlighting our segment results. Fourth-quarter revenues at Enzo Life Sciences increased 15% to $13.2 million compared to $11.4 million in the year-ago period. Product revenues rose 16% to $10.6 million including the result of the acquisition of Assay Designs. Royalty and licensing income grew also; it totaled $2.6 million with a 19% increase over the prior year. Our gross profit for the fourth quarter at Enzo Life Sciences was $6.7 million, a 26% increase compared to $5.3 million a year ago with a gross margin increasing to 50% from 47%.

Research and development costs doubled in the quarter at Enzo Life Sciences reflecting the increased activity in building the new product line -- and also the inclusion of Assay Designs. Operating income was affected by non-cash charges of $1.2 million related to purchase accounting on the inventory and $400,000 relating to depreciation and amortization.

More effective utilization of Life Sciences' marketing and distribution platform continues to benefit results in terms of both market activity and margins. Furthermore, Life Sciences is widening new product introductions and overall the operating income was $200,000 in the quarter as compared to $1.1 million a year ago.

Let me now turn to our clinical labs. Enzo Clinical Lab revenues for the fiscal fourth quarter increased to $11.3 million from $9.8 million a year ago reflecting greater service volume. Gross margins advanced 9% to $4.1 million for the current quarter as compared to $3.8 million in the year-ago period. Results were favorably impacted by an increased number of tests partially offset by an increased cost of services.

A new management team, as previously mentioned, is effectively operating and marketing changes to gain greater efficiency while also pursuing new opportunities. The provision for uncollectible accounts, as well as SG&A expenses, increased in the fourth quarter, but as a percentage of revenues our SG&A was down slightly. The operating loss for the clinical labs was $1.2 million as compared to an operating loss of $400,000 a year ago.

Turning to our fiscal 2009 liquidity, our financial condition remains strong. As Barry indicated earlier, Enzo remains debt-free. As of July 31, 2009 we had cash and cash equivalents and short-term investments of approximately $50 million and our working capital is over $60 million. And again, our stockholders equity was well over $117 million. Barry?

Thank you, Drew. I'd like to turn it over to Dr. Balezentis who will deliver some thoughts on Life Sciences and its direction, especially considering the recent acquisition of Assay Designs.

Thank you, Barry. Berry has already spent some time reviewing Enzo's strategic direction, so in the next few minutes I'd like to focus on some of the key operational activities of the division. Previously I have discussed a number of our ongoing programs, so in the interest of time I will focus on a few key ones today.

One of the overriding goals of Enzo Life Sciences has been margin improvement. As Drew indicated in his earlier remarks, we have in fact steadily improved our gross margins. We expect that trend to continue as we shed lower margin business, increase our direct sales from distributed to direct -- from distributed to direct and improve our internal processes.

Overall the current objective of the division is to rapidly build the necessary infrastructure to support the worldwide operations as well as complete the ongoing integration and consolidation activities so that we can then direct our full attention and resources to our organic growth strategies.

The two topics I will cover today relate to -- first, activities aimed at improving operating margins, these include our ongoing consolidation and integration programs; and second, those strategic initiatives which will contribute to organic growth such as new product development introduction and the further development and implementation of our new electronic marketplace.

Currently many of our resources are dedicated to integration and consolidation activities that will result in significant improved operating margins. In June of this year I stated that we expected to complete the integration of our recently acquired Assay Designs business around the middle of next calendar year. We are currently completing a plan which will accelerate the integration by several months and will result in a number of cost savings measures. We view this program as having the greatest impact on our current business.

In terms of consolidation we have several ongoing projects that include both facility and capability consolidations including one of our facilities in the US and another in Europe. While there are some initial costs associated with these activities for the fiscal year, in the long run they will result in considerable savings in terms of facility and personnel expenses.

Because of the nature and sequence of the acquisitions we made we have now been able to build up our core competencies quickly and are now well positioned to take advantage of the operational synergies these companies afford us. Going forward we will continue to review the potential for additional capability consolidation opportunities across the organization to improve our efficiencies.

The Assay Designs integration consolidating activities alone are expected to contribute to over $1 million in annual savings after the initial expenses are incurred to implement these activities.

Turning to our organic growth strategies and activities, we have identified several key markets, such as epigenetics, where we expect high revenue growth and where we have the capability of introducing high-value innovative products. In the last quarter we announced the release of several new products including our new calcium mobilization assay our nuclear [nucleolar] assay and our novel apoptosis assay for cytotoxicity screening.

These products are part of the live cell analysis family of novel fluorescence-based assays for monitoring the function and viability of cells. These products include proprietary Enzo dye technology and are targeted to popular drug discovery platforms. We are targeting our research and development efforts towards developing innovative high-value products and over the next year we will continue to release a significant number of products in these areas which we expect to fuel our organic growth.

Clearly in order to effectively market these novel products, as well as the thousands of in-house products we currently offer, it is absolutely critical to have a modern web infrastructure and underlying database that will support today's e-commerce functions. We are currently designing a state-of-the-art platform with the requisite capabilities to market our products to today's scientists in a manner that will effectively introduce and represent new innovative products and guide scientists to useful products used in areas such as cancer research, immunology and neurobiology.

This newly designed website, which we anticipate releasing in the first half of calendar 2010, will include many advanced features including search engine optimization, a process that ensures that potential customers who are searching online for a particular product are directed to Enzo web pages.

In the life sciences reagent market the Web and e-commerce is becoming the preferred method for identifying and securing products and services by our customers and we need to offer the most advanced Web functionality in order to best serve them and remain competitive.

In summary, we are focusing on activities that will create a business that can support topline growth while simultaneously improving the bottom line. We continue to remain very optimistic about our future and look forward to reporting our progress. Barry?

Thank you, Carl. As you can see, Enzo Life Sciences has now developed the infrastructure needed not only to integrate our latest acquisition but to build organically as well. Our catalog of reagents and kits for the academic and pharma market now exceeds 40,000 offerings, both manufactured in-house and available through other manufacturers, covering numerous life science research applications.

Reflected by increases in research and development expense that Drew discussed, we've been investing in areas where we believe our intellectual property portfolio and technological expertise can allow us the market access to build and grow in these novel high niche areas. Let me use this last point to move into a discussion of Enzo Clinical Labs and with that we will turn this over to Dr. Krenitsky.

Thank you, Barry, and good morning. During the fourth quarter we saw significant progress of our overall strategic plan in addition to continuing our operational improvements. We hired Dr. Mohan Chellani, former head of Nichols Institute science and innovation portfolio team and he's begun the process of implementing our molecular diagnostic expansion strategy which I will come back to in a moment.

In addition, we have added three new sales specialists, are in the process of bringing three more on board to help spearhead our expansion into the New Jersey and Pennsylvania markets armed with an expanded test menu. The quarter also showed improvements in our net revenue to $11,248,291 which is a 15.3% increase over Q4 2008. The net accounts receivable value as of July 31 is $5.1 million or 45 days outstanding. This is a DSL level comparable to other regional and national laboratory benchmarks.

In the upcoming weeks we are meeting with any of our payers to ensure the esoteric tests in our menu expansion will be appropriately reimbursed. Additionally, we successfully passed inspections by both the New York State Department of Health and the College of American Pathologists.

We are also nearing completion of significant infrastructure improvements including the addition of approximately 5,000 square feet of new lab space which includes two new molecular labs as well as a new immunology lab. We have vastly improved our automation capabilities which will allow us to process increased test volumes in fiscal year 2010 without substantive increases in the headcount of technical lab FTEs.

Returning to our molecular expansion strategy, we are currently operationalizing new tests in molecular infectious disease, molecular oncology, auto immune disorders, and genetics. In addition, our enhanced technical capabilities have allowed us to move toward the forefront of offering additional new assays. We are very well positioned to offer them either as soon as they receive FDA clearance or in other instances validate them internally as laboratory developed tests, or LDTs.

This last point is critical we believe for the success of any esoteric testing venture. As the FDA, under the Obama administration, refines its mission it is conceivable that they may take a harder look at laboratory developed tests.

You should know that licensed clinical labs under current regulations can utilize non-FDA cleared assays in their own facility so long as they meet a set of criteria. However, you should also know that the FDA still regulates such test, and can at their discretion as the manufacturer of the components of LDTs to do more extensive clinical validation.

The fact that Enzo is licensed by both the College of American Pathologists and the state of New York which combined are the most rigorous certifications a US lab can earn positions us well when we choose to go the LDT route. Few manufacturers of these products have the licensing and infrastructure to match us.

We are nearing completion of several agreements that will allow Enzo to provide new esoteric tests exclusively in our region. In addition, we have begun comprehensive investigations of Enzo's own extensive IP estate to determine what can be effectively developed and commercialized into novel high-value clinical diagnostic tests. We anticipate announcing one of these initiatives in the coming months. Barry?

Thank you, Kevin. I'd like to conclude the formal comments and remarks before turning the call over to Q&A. Overall these continue to be somewhat trying times for many companies in our industry; however, this has also proven to be an opportunistic time for companies that have the financial capabilities to take advantage of these unique opportunities that the financial turmoil has produced.

This year we have invested more in the growth and future of the Company than we have in any prior period. This investment contributed to the loss that we reported for the year, but its value is emerging in the growth of our core business and in laying of the groundwork for a much larger and much more highly integrated organization.

We continue to look at the value proposition for our company and explore approaches for value optimization which present themselves due to the integrated structure of the Company. Enzo has changed significantly over the last year and a half or so in terms of revenue growth, staffing which is now approaching close to 700 employees with multiple locations in the US and abroad and a dedicated strategic focus.

In a period where many life sciences companies are contracting we have grown dramatically. We are seeing our vision of the power of genomic information that we perceived years ago emerging in concrete products and scientific contribution. Our revenue-generating businesses are growing and this is supported by a robust intellectual property estate. Our management team and infrastructure are poised to continue to move Enzo forward. With that I would like to turn the call over to our operator and we are pleased to take questions.

(Operator Instructions). [Yegal Nacomovitz], Rodman & Renshaw.

Good morning and congratulations on a very strong quarter and the year overall and also for a very thorough review of the Company. I guess maybe we could start with the acquisition of Assay. You mentioned that the consolidation and integration process is underway. Could you give us some thoughts there as to when that would be complete. And then along those lines, you mentioned that that would result in an approximate annual savings of $1 million. Could you give us some sense of how that savings would break down by SG&A, R&D and so forth?

Sure. What we're hoping for and planning for is to try to accelerate that near the February timeframe. Originally we thought the completed integration would occur in August and we're trying to accelerate that because of the expected savings. The over $1 million includes other consolidating activities that we're doing, we're starting to already see -- we've already started to save some -- the biggest savings so far with the integration has been the SG&A.

The next savings when we integrate the marketing and sales teams will be there and then we have some additional operational savings elsewhere. The R&D we're continuing to look at very closely and we'll look at that next. But I mean we didn't include that in that figure I gave you.

Okay, I got it. And then maybe turning to the press release for this morning, sounds very exciting. Could you give us some sense of what the development timelines were for producing these HDAC tests and a sense of the margins? And also, are these being sold yet or will the catalog -- is this the launch coming up this weekend?

It's a family of products and these are some of the newest products and this actually occurred is a collaboration between Enzo in New York and our proprietary dyes with the acquired Plymouth meeting or [biomold] and we are launching these, we have launched them, and we'll put them into a sales campaign beginning in November and we're introducing them this week at the Society for Neuroscience.

And just related to the doubling of the R&D for life sciences in the fourth quarter, were these tests all developed in the fourth quarter just in this short period of time or were the development timelines longer?

Both. Some things happen more quickly and other things that we've been working on for six, eight months or so --.

Okay. Any comments on the potential margins for these products?

The margins are excellent and most of these products have margins approaching 80%.

Okay. All right. Then I guess turning to some of the remarks that Kevin made, he mentioned that in the coming months there would be an initiative to introduce at least one new molecular diagnostic test and he mentioned four categories -- infectious disease, oncology, autoimmune and genetics. Is that the order in which these will be released or is that just a sense of what's to come?

Actually in the coming months we'll be operationalizing several new esoteric molecular diagnostic tests. I alluded to the fact that we will in the coming months announce an R&D -- internal R&D collaboration where we take some of the IP that we have developed here and we operationalize or we have a plan to commercialize that into a clinical diagnostic test. With regards to the disease states, I anticipate that the molecular infectious disease will be the first assay that we bring up followed by some of the others you mentioned.

Okay, thank you. And maybe we could speak a bit just more, Kevin, if you could give some comments on the seasonality in the clinical lab. I know that's just a standard issue in the clinical lab business, but if you could briefly comment on when the peaks are and when the troughs are just from the point of view of our modeling here?

Sure. Obviously we're getting heavily now into a season that is prime for infectious disease in the winter. Typically you see a bit of a downturn around the holidays, it tends to pick up quite strongly after that in early January and continues until you hit the summer recess, if you will, where we tend to see a little bit of a downturn that, once again, tends to pick up after Labor Day.

Okay, great. And then maybe a question for either Barry or David. You mentioned in the remarks that you have a variety of centers of excellence throughout the world and they have different niche expertise. It would be informative to just have a brief review perhaps of what those different niche expertises are just to get a sense of the scope of Enzo's research and development operations?

Actually I'm going to let Carl address that because those centers for excellence are associated with the life sciences area.

Okay, terrific.

By acquiring companies in different locations each tends to have an expertise. The Exeter site in England for example is well renowned and has the largest market in ubiquitin and ubiquitin like products. It's an important part. The Swiss operation is extremely strong in apoptosis and some other things. The Plymouth meeting site has the HDAC capabilities along with a lot of other bioactive lipids and different things. New York has things like fluorescent dye capabilities and then Ann Arbor who we just acquired has cell stress and immunology capabilities, kit building capabilities and some custom services to the pharma capabilities.

So each one is complimentary. We're working with the other and together we build things like the epigenetics comes from each of those sites, contributes a lot of the products. And we really now are having a good story, are now being able to use our capabilities at each of these sites to build some very exciting and new products that we weren't independently able to do previously.

Thanks, that was a good summary. And then maybe one final question I'll throw out there, more of a future directions question, should we be bracing ourselves for another acquisition or would you say that we're more steady as she goes for the time being as we grow the organic growth and so forth?

We're always evaluating the opportunities in front of us. This market has allowed a rather interesting period for evaluating companies because valuations have become I would suggest more realistic. As a result we are continually reviewing acquisition opportunities. If there is an opportunity that presents itself that we feel makes sense, is economically viable we will certainly move and execute on it. In terms of timing, this is an ongoing process and I really couldn't comment on the timing, but it is an ongoing process for us.

All right, terrific. Thank you very much, Barry, and the rest of the team and congratulations on a strong quarter and good luck in the coming quarter and year.

(Operator Instructions). Robert Smith, Center for Performance Investing.

Good morning. Speaking of the science in particular, of the host of prior therapeutic initiatives how many continue to have validity today?

Certainly we are accelerating our optical program and, as you heard, we have formed a very prestigious collaboration agreement with NIH. So certainly we are progressing very strongly and actively on that front. We have also significantly presented our latest information on Crohn's disease. We are actively pursuing partners and we are in discussions with potential companies for that. And of course we have some very interesting preclinical work that is still ongoing for both diabetes and osteoporosis and we continue to explore whatever we have to see if we can maximize any therapeutic potential of these compounds and to partner them appropriately.

I'd also like to comment that we are actually reporting data on our NASH trial in the next month -- or actually it's two months from now, so that opportunity is coming forward. We have been noted most recently by the [Wendover] Conference as a focus -- yes, I'll even let David elaborate a little bit for you on that, Robert, but it's an interesting situation in terms of our NASH product.

Yes, Bob, it's David Goldberg here. We actually were -- we were very honored to be selected by the Wendover organization as one of the more exciting therapeutic developers of the year and we will be presenting there in the middle of November. We also were invited to present our platform technology at a very prestigious meeting in Europe which I'll be attending the first week of November run by BIO, Biotech Industry Organization, which is the largest organization in the field.

So to answer your question, I think we have a lot of scientific validity and combining -- really what you've got to look at, Bob, is that we've been developing platforms and these platforms have multiple uses and we've been able to do this with a very measured capital spend. So I think we're very, very optimistic about where we have taken the therapeutics program.

Is the HIV/AIDS programs still alive?

The HIV program, as I mentioned in our last conference call, is in a watch and wait mode. We have been following the one patient we have in the second trial that we conducted. Because of the complications of government oversight in the gene therapy field we had to make a strategic decision as to how to allocate our resources. We are awaiting the protocols and the procedures that we believe should be reviewed by the -- not relating to Enzo alone but to the whole industry of gene therapy before we proceed forward and introduce more patients into that trial.

This has been a decision that has been made predominantly as a result of a pragmatic financial review and the driving or the direction being taken by the Company is one where we wish to focus our finances in the areas where we think we can get the nearest return and also the quickest return for the dollars we spend. So it is not a project which has been discontinued, it is in a watch and wait mode.

Barry, can you give the some kind of update on the litigation front?

We are awaiting still, decisions from the patent office on two interference proceedings which are long overdue. Unfortunately I have no barometer in terms of how they will or when they will come forth. We are anxiously awaiting them. We are awaiting the decision from the appeals court in the Applera case and that was prosecuted in the New Haven courts at this point in time.

And unfortunately the judge in our case as in New York, which were involving Roche and Affymetrix passed away in December; a new judge was put on to that case and that case is awaiting determination as well.

I think the thing to remember from our litigation perspective is that there is no downside; we are the plaintiffs in these cases so we have only potential upside from them. We have been somewhat frustrated because of the timing associated with these, but unfortunately it's our system and that's all we can do.

And is there no indication? I mean, as far as timeline or where in the queue you are in the patent office?

We have indications and those indications initially pointed to a decision emerging at the end of the summer, it has not yet emerged so we are just awaiting that to happen.

Finally, are you satisfied with the organic growth in life sciences from the prior acquisitions to date or what can seem to move them along more quickly?

I think there are several things that are occurring that probably are not visible. One is we convert distributed business to direct, so we have millions of dollars that were distributed and now we go to direct sales so we have a dip in that and I think that in the long run will contribute significantly. Also we haven't fully integrated the Assay Designs and others and I think once we do that with our robust pipeline we'll start to see, along with our electronic marketplace website, we'll really start to see good organic growth.

Again, Bob, this has been a process, remember we've acquired four companies in the last 18, 19, 20 months.

Yes, I realize that.

And it's been an enormous integration problem. I think Carl and his team have done a superb job so far. We are just now beginning to see the fruits of the developmental efforts between the cross-roughing of technologies between the companies. We are now seeing the introduction of the new electronic platform that integrates all of these products. We have been exchanging new products and internally manufactured products for low-margin distributed products.

That's why some of that growth is a little bit misleading, as Carl said, because we're in and out of product lines trying to supplement our own products with high margins for distributed products as low margin. So there's been an enormous amount of activity and I think the entity that is emerging is appearing quite formidable and I think it will have quite a nice presence in the life sciences field.

Thank you very much. Good luck.

There are no other questions. I would like to thank you for joining us. We look forward to speaking with you again on our first-quarter call which will take place in mid-December. Again, thank you for your participation.

A replay of this broadcast will be available until Thursday, October 29 at 12 midnight. You may access this replay by dialing 800-642-1687; the pin number is 333-65-308. This replay is also available over the Internet at http://www.WFW.com/webcast/cc/ENZ3. This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day.