Enzo Biochem Inc (ENZ) 2011 Q3 法說會逐字稿

Good morning, and welcome to the Enzo Biochem, Inc third-quarter 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, 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 markets 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 10K for the fiscal year ended July 31, 2010.

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.

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 the difference to GAAP on its website, www.enzo.com, and in the press release issued last night.

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. With me today is Drew Crescenzo, our Vice President of Finance; Andrew Whiteley, our Chief Operating Officer of Enzo Life Sciences; and David Goldberg, our VP of Corporate Developer for Enzo Biochem. Now as the moderator mentioned, after our comments, we will open the floor for discussions.

Approximately 2 years ago, we embarked on a far-ranging transition for our Company. This program was designed to position Enzo in the evolving healthcare space that embraces personal medicine, molecular, [and] companion diagnostics, as well as genetic and other esoteric testing. To do so, we envisioned and moved towards a forward integration of our life sciences and clinical laboratory capabilities. These assets are unique in that they enabled Enzo to capitalize on what is clearly a major, new growth initiative in healthcare.

This is particularly the case in the current environment, where truly effective diagnosis and treatment come up against very real and understandable cost-containment issues. Accordingly, we began a radical change. The aim was to make Enzo more responsive to industry trends; to find the right individuals to help bring this about; to streamline the Company in terms of effective staffing and reducing overhead, with a drive towards profitability; and finally, to drive a more focused developmental effort toward key, specific products and technologies that will make a difference in medical know-how and treatment. Our efforts are clearly yielding results.

Thus far this year, we have dramatically increased productivity, and simultaneously have reduced expenses in excess of $4 million. The integration of the resources of both Enzo Life Sciences and Enzo Clinical Labs continues to progress well, and each maintains their own individual growth opportunities and market identities, which gives them a strong business edge.

In the meantime, as it is evident from our third-quarter results, we are making very good financial progress. EBITDA showed improvement of 73%, or $2.4 million. We showed a 9% increase in total revenues, reflecting a 28% increase in Enzo Clinical Lab revenues alone for the period. There were improved margins at both Enzo Labs and Enzo Life Sciences, which resulted in a 17% increase in gross profits. And we had a 54% reduction, or about $2.5 million improvement in the quarter's net loss, as compared to a year ago today.

To achieve these goals, we undertook a number of steps towards improving and optimizing our operating structure. Included in this process was a total review of staffing needs and expenditures, as well as a more directed focus toward integrated research and development, which we felt could result in new products and technologies that could drive growth. What has emerged at Enzo is a more streamlined and focused company with a clear vision of product objectives that, in many cases, will contribute to multiple market segments, serviced by both our Life Sciences and Clinical Laboratories channels of distribution. Our results this quarter are beginning to bear this out. And with what I would like to now share with you, in terms of our financial review, I will turn the comments over to Drew.

Thank you, Barry. Good morning. Before I comment on last night's earnings announcements for our fiscal third quarter, I will provide an update on how we are tracking against our September 2010 announced streamlining of operations that Barry alluded to. We announced a planned improvement in operations with an annualized reduction in expense of $4 million, and a Company focus on higher-margin products and services.

With the three quarters of the fiscal year behind us, we have achieved cumulative cost reductions in excess of $4 million as follows. Without affecting our R&D focus, we have reduced our spend by $1.4 million, or over 20% from the prior year. Our selling, general, and administrative expenses, year over year, are down over $3 million or 8%, without any adjustment for increases in variable cost, directly related to our revenue increases. Our reduced costs, including marketing spend, outside consulting, and professional fees, and we had a lowered headcount. We will continue to evaluate our operations to drive profits improvement, and operational efficiency to drive improved operating results. Our objective is to move forward to being cash flow positive by the end of calendar 2011.

Let me now turn to the quarter results. Total revenues for the third quarter of fiscal 2011, increased to $25.8 million from $23.7 million a year ago, primarily as a result of higher revenue at Clinical Labs, partially offset by lower product revenue, and royalty and licensing fee income at Enzo Life Sciences. Important to note, sequentially our revenues have increased 7%.

The net loss for the quarter was $2.1 million, or $0.05 per diluted share, as compared to the prior period's $4.6 million, or $0.12 per diluted share. This represents a $2.5 million or 54% decrease, and a $0.07 per diluted share improvement. Our EBITDA loss was $900,000, an improvement also of $2.4 million over the year ago EBITDA loss of $3.4 million.

Let me now share more specifics on the numbers. Our gross profit improved to $12.4 million, from $10.5 million a year ago, representing a 17% improvement, as Barry mentioned. And, important to note, sequentially the gross profit was $10.3 million, with our gross margins obtained of 48% as compared to 44% in the prior-year period.

As previously stated, our focus on research and development is unchanged. But with more focused spend, and the successful integration of functions and realignment of the workforce at Enzo Life Sciences, we have successfully reduced our expenses 17% from a year ago. Selling, general, and administrative expenses, as a percentage of total revenues, improved to 42% from 50% a year ago. This expense decreased $900,000, and is reflective of the Company-wide improvements previously mentioned.

Although in other expenses we incurred higher legal costs, and an increased provision for uncollectible accounts receivables, which relates to Clinical Labs. As a percentage of revenues, the provision for uncollectibles was 7.2%, up 1% from a year ago. Important to note, sequentially the prior quarter was 7.8% as a percentage of revenues. The increase in the current fiscal year is primarily attributed to the increased revenues at Clinical Labs. We continue to focus on improving collections.

The Company's financial condition remains strong, with working capital of $37.2 million. As of April 30, 2011, our cash and cash equivalents, plus short-term investments, which are in US Treasury bills, totaled $27.8 million. For the 9 months ended, the Company utilized just over $5 million of cash in operations, an improvement of more than $8 million compared to the same period last year. This was attributed to the improved operating results, operated by cash used to fund the working capital for the growth in accounts receivable at the labs, which amounted to over $1.5 million.

Let me now briefly turn to our operating segments. The Clinic Labs reported revenue increase of $28 million, to $13.8 million, representing another record quarter. We experienced organic growth attributed to the new accounts from our sales force, and expansions to our test offerings and our provider network. The lab continues to focus on providing additional molecular tests and other high-margin, esoteric services. The gross margin increased to $5.5 million or 40% of revenues, as compared to $2.9 million or 27% a year ago, due not only to the leverage from increased volume, but also from reduced overhead and process improvements that favorably impacted costs.

Selling, general, and administrative was up slightly, in part to the increased sales commissions from the broader sales force that is now operative. Although as a percentage of revenues, selling, general, and administrative expenses has declined to 33% from 41% a year ago. The Clinical Lab's operating loss was just $70,000, as compared to a year ago loss of $2.2 million, a $2.1 million improvement.

At Enzo Life Sciences, we posted improved operating income of $900,000, up from $700,000 in the year-ago period, despite a 1% decline in product sales to $10.9 million, and a decline in royalty and licensing fee income based on current payments received of $800,000. Despite the reduction in revenues, the improvement in operating income reflects a more profitable product line up, and it benefits from the ongoing cost improvement and business integration program, which is impacted by staffing levels and realignment of facilities at R&D, all designed to achieve greater efficiencies and profitability.

Barry?

Thank you, Drew. As you can see from the financial report, the quarter really hit the mark on many different areas. We've been very pleased with the program that was put into place at the beginning of our fiscal year, and we are now witnessing its benefits.

I'd like to take this opportunity to expand, also, on certain aspects of our operations. First, as some of you may have seen from an 8K we filed a little while ago, that Dr. Kevin Krenitsky moved on to a new position with another entity. I would like to thank Dr. Krenitsky for his 2-plus years of service he gave as President of Enzo Clinical Labs. As we announced, he left to join a venture that provided him with an unusual personal opportunity, and we wish him well in his new endeavor. David Goldberg, who has been with Enzo for many years, is assuming Kevin's duties until a successor is announced.

You should note though, that over the last 2 years we have built a strong management and supervisory team at the labs, which continues to generate exceptional growth and operational improvements. And I think the results for the past quarter demonstrate that.

Also as you have seen, Enzo Clinical Labs had a very strong performance, not only financially, but in many other areas this quarter. What we are seeing is the realization of a strategic program that began more than 2 years ago. Over this period of time, we implemented both quality improvement measures, as well as substantial cost efficiencies. Specifically, we improved and updated our IT capabilities, we bolstered our sales and marketing effort, we expanded our in-house testing capability and menu, and perhaps most importantly, stepped up collaboration efforts with Enzo Life Sciences to further the development of key platforms and technologies. This has resulted in improved client retention, increased employee morale, and enhanced high-value molecular test capabilities, which have all contributed to the very much improved financial performance this quarter.

As mentioned, we have continued to increase our esoteric or higher-margin offerings at the laboratory, and we have moved the division towards several key developmental areas, most notably in the area of women's health. Today's announcement of an agreement with IncellDx further underscores this trend in our business model. In summary, we will be the first clinical lab in our service area, pending of course, the necessary regulatory approval, to offer a flow-cytometry-based assay for the enumeration of cells containing high levels of certain genes that have a correlation to cervical cancer progression, thus giving physicians another tool in the management of at-risk patients. We believe that this development further enhances our position as a preeminent laboratory in the women's health diagnostic arena.

Additionally, and perhaps even more significant, Enzo's scientific team is currently developing another assay, which is based on our proprietary technology, which may allow a pathologist to actually visualize human papillomavirus DNA directly in the nucleus of a patient's cells, thereby providing perhaps an even more comprehensive indicator of the potential for progressing to cancer. This is but one development arising from this new platform, which was developed at Enzo, and I will elaborate on it in a minute.

Additionally, another potentially high-value molecular assay for which we are waiting final regulatory approval is ColonSentry, the risk stratification test for colon cancer developed by our partner, GeneNews. This is an assay that measures the expression of a specific panel of genes. The interpretation of the expression of this 7-gene panel may provide physicians with the ability to identify those patients that may have an increased risk for developing colorectal cancer. While not replacing colonoscopy, this blood test could be used by physicians to convince their patients of the need for colonoscopy screening.

After ColonSentry was developed, our research and development group set up the molecular parameters that would be needed to run this test, and our medical technology team performed the correlation studies and submitted it to the New York State Department of Health for their approval. We have already successfully concluded a site visit, and have completed the pre-marketing program. Once we receive final approval, we will immediately begin to market this exciting test in our service area.

To give you a sense of the scale we are looking at, the CDC estimates that about 47 out of every 100,000 people develop, or die from, colorectal cancer in New York, the second highest occurrence rate in the United States. Moreover, there are about 40-plus million Americans over 50, who currently don't comply with recommendations for colon cancer screening. This may be for a variety of reasons, ranging from just a fear of colonoscopy to general apathy. In any case, this is a tremendously untapped market.

If we are able to capture just a fractional percentage of this market, it could be a meaningful financial opportunity for us. Moreover, by getting more individuals into the healthcare system with regular examinations, this benefits the medical community and it will hopefully benefit us financially in a rather material way.

At Enzo Life Sciences, we have refocused the Division's efforts toward more higher-value, higher-margin products and assay systems, as we shift our product and marketing focus towards pharma and biotech companies. These customers have increasing needs for tools that can allow them to more rapidly screen drug candidates, or visualize the individual organelles in a cell. To address this market opportunity, we have increased our product menu in the area of lifestyle analysis, and have begun to add a number of high-value drug screening libraries to the Enzo Life Sciences catalog.

Enzo Life Sciences has also increased its marketing focus toward the development of custom assays for specific pharmaceutical clients. Our capability to rapidly design, validate, and package integrated systems has increased our ability to market to this key industry. In addition, these assays, many of which are used for evaluating early stage drug candidates, may become applicable as companion diagnostics downstream. Globally, Enzo Life Sciences has also continued its strategy of moving towards direct sales efforts. We believe that the opportunity to tighten the relationship with our end users will have long-term benefits, as we continue to introduce new products.

The increased synergies that we are seeing among our Divisions have manifested themselves in key developments this quarter, which we believe may have significant long-term revenue potential. One such development has been the initial validation on clinical specimens of our novel energy transfer nucleic acid detection platform. This internally designed proprietary technology was conceived at Enzo Therapeutics, formatted at Enzo Life Sciences, and is being validated at Enzo Clinical Labs. It can enable one to perform PCR-type amplification in a better, faster, and more economical way.

Enzo's proprietary fluorescence resonance energy transfer, we call it FRET, platform has been designed with interchangeable components formatted for open laboratory systems. Initially generated results have shown excellent concordance with other systems, with our platform demonstrating enhanced sensitivities. This can provide both Enzo Clinical Labs, as well as other partners, an opportunity to reduce cost of goods without the need to be tied into long-term diagnostic contracts.

It could potentially also be used for reference labs to validate and brand their own assays, and affords both patent protection and freedom to operate. The market for assays that this platform could potentially be applied is very large, in the $2-plus billion range. We are applying the platform technology for assays as diverse as the measurement of viral load, the presence or absence of a particular gene sequence, or the presence or absence of an infectious agent, to name a few.

In addition, we have also advanced the development of our next generation branched DNA platform. Enzo scientists have been able to apply this technology to the visualization of as little as a single copy of virus that has been actually integrated into the cell. We have applied our branched DNA platform to enhance the visualization of foreign DNA in patients' chromosomes, and believe that it may be useful in the development of a battery of more sensitive tests that are looking for the presence of small amounts of genetic material. Examples of these include a number of assays used to identify specific types of cancers, such as breast and bladder, to name a few.

Additionally, this might be used as an even more sensitive predictor of the risk of progression to cervical cancer. As Enzo moves to increase its HPV-testing options, by looking at the presence of oncogene expression, our scientists are using our next generation v-DNA technology to develop assays that may allow a pathologist to actually see the presence of the DNA inside the nucleus of a cell. Being able to identify the integration into the genome of HPV is one of the most powerful indicators in a potential progression to cancer. By being able to identify in which patients the virus has integrated, physicians can target therapy and treatment to the correct subpopulation of infected individuals. In this way, Enzo may be able to help more efficiently treat a disease that has become especially, in areas other than cervical cancer, such as head and neck and anal cancers, increasingly more serious.

Finally, after many years of diligent and challenging work, we are pleased to see these platforms move closer to utility. And we are extremely excited at the number of possibilities that they can enable.

Before concluding, I would like to mention that our clinical trial for Optiquel, our oral preparation for the treatment of chronic noninfectious uveitis that is being conducted at the NIH under a CRADA, continues to enroll and treat patients, and we hope to start reporting results sometime in 2012.

Let me conclude with a final word on our strategic vision. Looking to the future, the outlook for Enzo becomes even more robust. Our business model, which offers a hedged approach that mitigates risk but also develops innovative market offerings, is well positioned to address the changing face of healthcare today. Going forward, healthcare will require solutions that solve practical problems. These will include diagnostics that offer prognostic insights, economically driven assessment tools that motivate clinical decision making, and therefore improve the efficiency and effectiveness of healthcare delivery.

Historically, we have tried to meet these challenges by going after existing markets that are well established and well recognized with better, faster, and more economical means. But we pursue these opportunities through licensing and distribution relationships. We have shifted our emphasis to a product and services marketing model that touches these markets directly now.

The demands placed on the healthcare system will continue to increase, and we have an obligation to place our solutions directly into the hands of those, despite the battles of the chronically and critically ill, as quickly and cost effectively as possible. Our integrated structural realignment is critical to our success in this area. We are excited and energized at our product opportunities, and we are strongly motivated to bringing them into a commercial setting now.

On that note, I would like to turn the floor over for questions. Are there any questions from the floor?

Thank you, the floor is now open for questions.

(Operator Instructions)

Yigal Nochomovitz of Rodman and Renshaw.

Good morning, gentlemen. Congrats on a solid quarter especially in the clinical laboratory. Maybe we could start there. Could you just give us a sense, a little more what the drivers were behind the growth for this quarter? Where did it come from? Was it the Blue Cross and Blue Shield contact, the salespeople, higher count retention? Can you just give us a sense of how things are improving there?

The quarter showed very strong revenue growth, as you witnessed. It is attributable to a few different areas. One is purely enhanced revenues from organic sales growth; we have increased our physician population in our regional area rather strongly, this past quarter. We also witnessed a strength in growth because of the tightening up of the operations of the laboratory. Our attrition rate decreased significantly and I believe that is attributable to a very strong operational execution at the lab which really is quite a credit to the staff there. The third component is the extension of new accounts, which were derived from our extended network providers, specifically the Blue Cross. So, you put all this together and you have a strong gelling of potential and opportunity which I believe the lab capitalized on this quarter.

And, could you just review what the status of the new top-flight salespeople are? Are they all officially off their non-compete clauses at this point?

I believe that at this point they are all off their non-competes. Yes.

Okay, great. Now, just turning to ColonSentry, could you give us any sense regarding the timelines there? I know it's not like the FDA where they will issue a PDUFA date and you'll know by such-and-such a day what the decision is. But any feedback from the agency there in a sense of potential timing for an approval?

We are in a dialogue -- in the process. It is very difficult to predict exact timing. There are no indicators of that. But, as I mentioned, we have completed a site visit. We have had dialogue and introduction with the agency and we believe that we have addressed all -- we have and are addressing all the needs that were queried about. So we are looking forward opportunistically and optimistically, that this process will proceed in a timely fashion.

And can you provide any color on the nature of the dialogue? Where there specific questions that the agency asked? Anything there to give us a sense as to the feedback?

I really can't say too much about the specifics. We feel that we have addressed, and we are addressing the needs and they are very addressable. So, that we have not looked at anything that looks problematic for us at this moment.

Okay, got it. Now, just turning to the new asset that you have end-licensed from Incell, any initial comments there on the economics of that agreement? Is it similar to the ColonSentry one, which I believe was a relatively modest upfront and then some sort of revenue-sharing arrangement going forward?

I can't comment on the specifics of the relationship, but I can mention that our program of bringing in house, specific new tests do have a similar profile and a similar business structure. We are fortunate that we happen to have a very strong operation and probably the best clinical laboratory market in the United States, which gives our ability to distribute and validate new LDTs a real catalyst for companies that do not have commercialization capability in this area. It is bringing to us a stream of potential opportunities. We screen through them. I believe that terms that we have struck, not only with GeneNews, but with almost all of the other entities in which we have brought in-house products to validate, is of a similar profile and one that will bring economic well-being both to us, as well as our partner.

Now on the call, one you didn't mention was the status of MultiGEN. Is that -- I think that was for prenatal infectious disease and thrombophilia, also a high-value test. Is that taking a backseat to IncellDx, given that, that test has a higher overlap in synergy with your strength in the women's health market?

As I mentioned, we have focused our laboratory energies very much in the women's health areas, so we obviously are going to drive product mix that will fulfill that pipeline at a much faster pace if we can achieve such. As a result, we certainly tried to prioritize our efforts. We do have to look at our capabilities and allocate them in a way that we think we can derive the best possible returns for us as a Company. There is no question the women's health product line is a product line that is one that would take emphasis and, obviously, we look at all of our products that we bring in with care and they need to get approvals for. But the Incell product is a unique opportunity for us and we are pushing that one.

And what sort of timelines for validation of that LDT are you anticipating? And when might you be able to submit that application to New York State? Assuming that's the path you would take?

Hi, Yigal. David Goldberg here. I believe that this should be a fairly straightforward LDT application. We've already got the protocols worked out and I would say -- I would anticipate conservatively, 6 months that we would have this ready to market.

Meaning ready to submit? Or ready to --?

No, no, ready to market. We believe that we can submit this fairly quickly and we are hoping that it will be a fairly easy review, because there is some precedent for this. GeneNews, the ColonSentry test, excuse me, is really groundbreaking and there is not a lot of precedent there, that is why the timing is much longer. The technology behind the IncellDx -- there have been precedents to have LDTs done already and so that's why we believe it will be a much more straightforward and simpler submission. So, we are optimistic that we will be able to market this test by calendar year-end.

Oh, okay, that's good to hear. Do you have any initial thoughts regarding pricing and reimbursement for this HPV integration test?

Not yet. We are -- we have retained some reimbursement consultants; the initial indications are that they will be very favorable. But, nothing specific yet.

Okay. And, maybe just turning to the Life Sciences division. Barry, you mentioned increasing emphasis on direct sales and increased marketing focus, the large pharma players, could you just give us a sense, when we may see the sort of tangible progress that we are now beginning to witness in the lab, be reflected in the revenue line for the Life Sciences division?

I will turn that over to Andrew.

It's Andrew Whiteley here. After 2 tough quarters a the beginning of this year, we obviously saw an improved performance this quarter. If you stripped out the sales that we eliminated, the lower margin sales that we limited, we actually showed a 1% growth on this quarter. So, we are starting to see the progress that we anticipate as a result of the restructuring efforts that have gone on this year.

Okay, thanks. And if I could just ask one final question to Drew -- Drew, the SG&A line really looked very good and it tightened up the cost nicely. Is this the sort of run rate for SG&A, as a percent of overall revenues, that we should be expecting, going forward?

We would expect that this would be a run rate we could maintain going forward.

Okay, thank you very much, gentlemen, and congratulations on the progress.

Thank you.

Thanks, Yigal.

Robert Smith of Center for Performance Investing.

Good morning. I heard your comment about uveitis therapeutic. So 2012 is 18 months. Could you give us a little more color and narrow that as to what might be expected, the progress of the program?

Right. The NIH, is controlling this trial right now. They are funding it so they are controlling it. They are enrolling patients. We are getting favorable commentary back from the enrollment process. Obviously it is a blinded trial so we can't -- we don't have data specifically. We believe and we hope that sometime after the new year, we will perhaps have a critical mass of -- there will be patients that will have been enrolled through a time frame that may start to generate indication of where this product or trial can move to. We are cautiously optimistic. It is -- our PIs are excited about product per se, we just have to wait and see what the results will bear.

Could you discuss the status of the other therapeutic programs?

Yes. Part of the design in the NIH of the uveitis trial, a component consists of a research program in which they have been working on adjuvants to enhance the therapeutic efficacy of the type of product which we are delivering which is an immune regulation product that -- and it is this adjuvant that made have applicability across multiple product or disease indications. Meaning, if it works in the uveitis product, there is a probability that it will work in the Crohn's product. We are at a stage with Crohn's, now, where we can move to the next level of testing. We are seriously considering it.

Part of this, because of the cost reductions that we have implemented over the last year, was deferred in a sense, to try to bring into control some of our cost structure, which I believe we have accomplished over the last 9 months. That being said, we are waiting this -- the testing on this adjuvant, to see if we wish to apply to the Crohn's product, because if we do decide to initiate the next level of trials, it would be nice to go with the most advanced product in the mix that we could go with. And so, that is the decision tree that is being processed on Crohn's right now.

And, when do you think you would be able to reach some kind of decision?

We are just -- there is an ongoing dialogue with the research programs at the NIH. When we see and have a confidence level of acceptability of this, we will then move forward.

Is there life in any of the other therapeutic areas?

Yes, there is. As we have talked about in the past, we have on our hepatitis B program -- we have been involved in dialogue with parties to partner these programs. We did make a strategic decision, 1.5 years ago or so, to focus our capital resources towards the most immediate returns to drive the company more to a profitability mode. To do that, we had to take a different model approach for our therapeutic programs. We focused on the products that we felt could bring us either economic return in partnership or license and/or development via funding by others, i.e., the NIH.

So, it is interesting that we do have a therapeutic portfolio today that has not been impaired in any way. We are in partnering dialogue, not only of -- within the hep B, but also in our [Wint] program which is our bone program which is actually making some very interesting progress. So, there is a component here, but the practical realities of the world over the last 2 years has been to conserve our capital and focus our capital in the directions where we felt we could get the most immediate return in that, certainly within the evolution of our molecular program, at our Life Sciences and Clinical Laboratories.

What remains of the NIP litigations? Has your assessment changed at all in that area?

Well, there has been a significant amount of activity on the IP front. We are awaiting a decision by the Supreme Court, whether they will pick up the Applera case. This is an interesting case, I don't want to go through the history, but if you do remember we prevailed on an appeal in the Appeals Court over the Connecticut Federal Court in that particular case. Applera then bumped that up with a cert to the Supreme Court to see if they would take the case. We did get a favorable amicus brief from the solicitor general. We are now awaiting the Supreme Court review of that, of whether they will accept or not. If they do not accept, it will then go down to the federal level for trial and we are actually looking for do that because that will be a significant progression, in that particular case. So, there is some currency -- current immediacy in terms of the IP area.

The branched DNA case is also in a state of evolution here. As you know, we prevailed on the interference proceeding. Siemens then filed to try to invalidate that or get a review from the patent office. That is still pending. But, we were deemed senior party and the allowed claims were granted to us and that's a very meaningful patent for us, as you can see. It's driving the development now for a series of products for BD&A which I spoke about earlier, which we think will have strong, commercial potential and opportunity. So, that one is progressing quite well, as well.

Thank you.

And at this time there are no further questions. I will turn the conference back to Mr. Wiener for any other remarks.

Thank you very much. Again, I thank you for joining with us. It's been a very meaningful quarter, one that we feel we have had some very consequential developments in progress. We look forward to reporting to you at our year-end, which will be in October. Thank you very much.

And, ladies and gentlemen, a replay of this broadcast will be available until Friday, June 24, at 12 midnight. You may access this replay by dialing 1-800-642-1687, the PIN number is 72843756. This replay is also available over the internet at www.enzo.com. This concludes today's teleconference, you may disconnect your lines at this time. Have a wonderful day.