Enzo Biochem Inc (ENZ) 2012 Q2 法說會逐字稿

Good morning, and welcome to the Enzo Biochem, Inc. second-quarter 2012 operating results conference call.

I will now read the Company's Safe Harbor statement. Except for historical information, the matters discussed on this conference call may be considered forward-looking statements within the meanings of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Such statements include declarations regarding the intent, belief or current expectations of the Company and its management. Including those related to cash flow, gross margins, revenues and expenses; are dependent on a number of factors outside of the control of the Company including -- inter alia, the markets for the Company's products and services, costs of goods and services, other expenses, government regulations, litigations, and general business conditions. See Risk Factors in the Company's Form 10-K for the fiscal year ended July 31, 2011.

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.

Thank you. Good morning, and welcome. Thank you for joining us on our second-quarter call. I am joined today by members of our executive team, which include David Goldberg, Drew Crescenzo, and Andrew Whiteley. Last night, we distributed a press release detailing the operating results for our fiscal 2012 second quarter. And I trust you have had an opportunity to review them. Following my opening remarks, Drew will discuss our financial results in detail, and then I will conclude with a brief overview of our molecular diagnostic strategy. At the end, as always, we will open the floor for questions.

Let me begin with a review of the quarter. During the second quarter, Enzo's revenues rose 5% to approximately $25 million, led by a 15% top-line increase at Enzo Clinical Labs. Additionally, as we had indicated was likely during our last call, royalty and licensing income began to normalize, and was actually up by $200,000 over last year. Gross margins improved by more than 12% as we began to see some cost improvements from the integration plan we have been carrying out at Life Sciences. And overall, with higher revenues and greater control of expenses and costs, we were able to reduce our net loss by about $1.5 million, or about $0.04 per share.

More importantly, while improving our operating results we were able to make progress on the execution of our strategic plan in and around molecular diagnostics, as evidenced by a series of announcements we have made over the past couple of weeks. Our progress is in line with positioning Enzo as more and more of the healthcare dollar is heading towards diagnostics, in particular in the area of molecular diagnostics. Over the past several quarters, we have continued to improve Enzo's core capabilities in this area. Our goal has been to continue to make Enzo more responsive to industry trends, and to drive a more focused developmental effort towards key specific products and technologies that will make a difference in medical knowledge, decision-making, and treatment.

With that overview, I'm going to turn the call over to Drew to detail our operating results for the quarter and the six-month period.

Thank you, Barry, and good morning. I want to take this opportunity to discuss last night's earnings announcement for our fiscal second quarter, and expand on Barry's comments. Our revenues rose $1.3 million or 5% over the year-ago period to $25 million. This gain is reflective of a 15% growth in Clinical Lab revenue, a 7% increase in royalties and licensing fee income, partially offset by a 7% decline in product revenues. Product revenues derived from Enzo Life Sciences continue to be negatively affected by softness in the academia market, and for certain of our distributed products.

Our net loss for the quarter showed a $1.5 million improvement, or $0.04 per diluted share, to $4.2 million, or an overall $0.11 per diluted share over the prior year. EBITDA, being earnings or loss before interest, taxes, depreciation and amortization, which is a non-GAAP measure, also improved by $1.4 million or 32%, to a $3 million EBITDA loss for the period, as compared to $4.5 million a year ago.

Turning to our consolidated costs for the quarter. Overall gross margin was $11.6 million, higher by $1.2 million or 12% over the year-ago period. Research and development costs were down 16% from the year-ago period, primarily due to lower payroll and patent-related costs at Enzo Life Sciences. However, the Company increased its developmental effort in the area of new molecular tests and technology platform development, which Barry will go into in greater detail.

Selling, general and administrative expenses were unchanged at $11.5 million, although we incurred higher selling costs due to the increased sales volume-related costs at Enzo Clinical Labs, and greater sales and marketing costs. And higher costs from new senior personnel added at Enzo Life Sciences in the latter half of fiscal 2011. As a percentage of revenues, SG&A decreased to 46% from 49% in the year-ago period.

Our legal costs decreased by $350,000, or 26%, reflective of lower costs for general and proxy-related matters, partially offset by higher costs for litigation matters. Our provision for uncollectible accounts, primarily related to Enzo Clinical Labs, increased $200,000, primarily due to higher revenue volumes. As a percentage of lab revenues, the provision for uncollectibles was comparable to the prior year at 8%.

Highlighting our second-quarter segment results, Enzo Clinical Labs, as mentioned before, increased revenue organically by $1.8 million or 15%, as the lab continued to expand marketing, reaching more physicians, and increasing service volume. Gross margin was up 13% to $5.4 million. However, higher cost impacted the gross profit percentage by 100 basis points. Increases in SG&A from staff additions and higher commission levels were both driven from the higher service volume. As previously mentioned, as a percentage of revenues, the provision for uncollectible accounts was comparable in both periods at 8%.

At Enzo Life Sciences, operating income rose as a result of the results in reduction in expenses and improved operations. Revenues amounted to $9.5 million, as compared to $10.2 million in the prior period. The Company continues to achieve benefits from its programs to integrate the previously acquired global businesses, and focus on greater efficiencies in manufacturing, which drove improved gross profit as a percentage of revenues. Royalty and licensing fee income improved 7% to $1.3 million. Operating income improved by $1.1 million, to $0.7 million compared to a year-ago loss of $400,000.

With respect to our liquidity and capital resources, during the quarter total cash used was $2.8 million, which included a nonrecurring cash payment of $1.1 million for the final earnout from a previous acquisition. And cash used in operations was $1.3 million. At the end of the quarter, our cash and cash equivalents, and short-term investments, totaled $18.6 million. And working capital was approximately $26.7 million. And today, as in the past, the Company continues to have no long-term debt.

Barry?

Thank you, Drew. I would like to take this opportunity to expand on several recent events that serve to underscore the strategic shift that has taken place at Enzo. As you have seen in our release, Enzo Clinical Labs continues its strong revenue growth. Over the past 10 quarters or so, we have continued the implementation of both stepped-up marketing and sales efforts, and on instituting continued quality improvement measures. Perhaps most importantly, there have been increasing collaboration efforts between Clinical Lab and Life Sciences, to further development of key platforms and technologies. The results are now beginning to be seen.

Last month, we were pleased to announce that the New York State Department of Health has given Enzo final approval to begin the marketing of ColonSentry, the risk stratification test for colon cancer developed with our partner, GeneNews. This is an assay that measures the expression of a specific panel of genes. Interpretation of the expression of the seven-gene panel may help to provide physicians with the ability to identify those patients that may have an increased risk of having colorectal cancer at that particular point in time.

This assay is a simple blood test that requires no special preparation on behalf of the patient. It requires no special handling on behalf of the physician or their practice. And it is designed to help identify that segment of the population that may be at highest risk.

Once identified, it is hoped that the individual will have a follow-up exam the could include a colonoscopy. Since compliance for colonoscopy in the US is less than 50%, it is hoped that ColonSentry can help in driving individuals, especially those that may be at higher risk, towards earlier identification and treatment. All studies show that the survival rate for individuals with colon cancer improves dramatically the sooner one is diagnosed.

To provide you with a sense of what the integrated operating structure we have now put into place at Enzo has accomplished, our research and development group set up the molecular parameters that would be needed to run this test. And our medical technology team performed correlation studies that were submitted to the New York Department of Health. Subsequent to this, there were site visits and full inspections by the Department's experts. As we noted before, New York state approval is a long and involved process. And such approvals are recognized worldwide.

To provide you with a sense of the potential market we are looking at, it is estimated by the Centers for Disease Control 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 million-plus Americans over 50 who currently do not comply with the recommendations for colon cancer screening. This may be for a variety of reasons, ranging from fear of a colonoscopy to general apathy.

In any event, this is a significant, untapped market. If we are able to capture just a fractional percentage of a market this large, and in the New York metropolitan area where our lab is headquartered, it is one of the most densely populated regions, it could be a valuable addition to the business we do and the services we provide. We believe that by getting more individuals into the healthcare system with regular examinations, the benefits both medically and financially could be material. Operationally, we are running the final controls in the lab, as we speak. Our plan is to begin to roll out the test to our lab clients later this month.

In addition to ColonSentry, we have moved two additional lab-developed tests further towards what we hope is potential approval by New York State. The first is our version of OncoTect, an assay developed with our partner, IncellDX. This assay can allow a laboratory to identify patients that are infected with high-risk human papillomavirus, and who might already have the virus integrated into their cells. This would suggest that potentially they would have an increased likelihood of higher risk for progressing toward cervical cancer. Using this information, physicians can closely monitor these patients, and intervene with clarity.

The other test that is in the pipeline, and for which we are awaiting final regulatory feedback, is [Hunter Heart], a cardiac risk assessment profile that utilizes a proprietary algorithm that includes the results of three distinct panels of blood tests. These include basic metabolic studies, such as the National Cholesterol Education Project adult treatment panel. And advanced risk markers such as lipoprotein A, Factor V Leiden, and lipoprotein-associated phospholipase. The results can be utilized by cardiologists and family practitioners to more closely monitor those individuals fitting into a high-risk category of a cardiac event. And can help in the recommendation of appropriate treatment regimens to reduce the risk.

In addition, we have made substantive progress on the first assay based on AmpiProbe, our internally-designed proprietary technology which can enable one to perform realtime PCR type amplification, or DNA amplification and detection, in a better, faster and more economical way. The initial product, a hepatitis C viral load detection assay, can be used with conventional existing open systems that can be found in many reference laboratories. We have completed our [internal] validation study. And as you saw earlier today, we are pleased to announce that we have now submitted this assay to the New York State Department of Health for approval to use this product as a laboratory-developed test.

Currently, it is estimated that the market for assays such as viral loads that are now run by realtime amplification detection methodology, exceed $2 billion in size. Thus, you can certainly understand our desire to move this to a commercialization in an expeditious manner.

Our work has shown that AmpiProbe, based on assay produced results with nearly -- it did produce results that were nearly 100% in concordance with other systems. While at the same time, providing a sensitivity that was 25-fold or higher than existing technologies. Why is this important? As healthcare costs become more and more burdensome, diagnostic laboratories will be under greater pressure to increase the efficiencies of their operations. The higher sensitivity that Enzo's AmpiProbe platform may show could allow labs to reduce the cost of goods by using smaller amounts of costly reagents.

Perhaps even more significant, increased sensitivity can lead to the use of smaller sample volumes, which can have multiple benefits that can all be grouped under the general heading of paneling. Panels in laboratory parlance are multiple tests run off the same sample at nearly the same time. In a clinical laboratory, the most costly portion of nucleic acid or DNA-based tests is often the portion relating to sample extraction. If a lab can spread this cost across a set of tests versus over just one, it could result in substantial economic efficiencies.

Second, the ability to panel may be able to reduce the need for patients to have to be called back by their physician to obtain an additional sample. Reducing this visit can eliminate anxiety for the patient and the inconvenience for the doctor who might not be able to be paid for this additional visit, adding yet another more pragmatic benefit to our technology platform.

Additionally, last week we announced that the European Society for Clinical Microbiology and Infectious Disease had accepted an abstract based on the work Enzo has done in the development and optimization of the AmpiProbe assay. Our scientific team will be presenting on quantitative detection of HCV RNA in human plasma serum using the AmpiProbe HCV RNA assay at the end of the month in London. This meeting will represent the first peer-reviewed presentation of the data surrounding this technology, and we look forward to others in the future.

In addition to AmpiProbe, we have also advanced the development of our next-generation branch 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 a cell. We have applied our bDNA platform to enhance the visualization of foreign DNA in patients' chromosomes. We 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, including breast and bladder.

Additionally, this bDNA platform can be used as an even more sensitive predictor of the risk progression to cervical cancer. As Enzo continues to move to increase its HPV, or human papillomavirus, testing options, both with our partners as well as with internally-generated products, our scientists have also used our next-generation bDNA technology to develop an assay that may allow a pathologist to actually visualize the presence of HPV DNA inside of a patient's cell's nucleus. Therefore, potentially providing even more concrete evidence of viral integration, while allowing the pathologist to simultaneously view cellular morphology.

By being able to identify in which patients the virus has integrated, patients can more accurately target therapy and treatment to infected individuals. In this way, Enzo's platform may help to more efficiently treat a disease that has become increasingly more serious, especially in areas other than cervical cancer, such as head and neck, and anal cancers. When combining the developments we have been able to drive internally, and employing what amounts to a moderate R&D spend in conjunction with the opportunities that our partners present, Enzo may emerge with one of the most comprehensive HPV women's health portfolios in the industry.

There is even yet another set of value propositions that may result from these platforms. While the ultimate goal of these technology platforms is to produce clinical assays, we believe that products developed from these platforms can be introduced as research products by our Life Sciences team, which besides the US, has a strong presence in the European life sciences market. On that score, we have already begun the process of seeking European CE-IVD designation for AmpiProbe HCV. And upon being granted, we will be able to market this assay as a diagnostic product, thereby opening up even further opportunities for our Company.

These exciting platforms are really the culmination of decades of developmental work. As many of you know, we have developed technologies in and around the labeling and detection of DNA and RNA for most of our history. About five years ago or so, we focused in on these two technologies -- AmpiProbe and bDNA. And began to work on ways to make them potentially more commercially viable. The synergistic effort of having our research and development group co-located with our clinical lab has made these advancements a possibility. And we look forward to updating you regularly on progress.

Before I turn the call over to Q&A, let me conclude with a final word on our strategic vision. Enzo's integrated business model, which offers a hedged approach that mitigates risk, but also develops innovative marketing offerings, is well-positioned to benefit from the changing face of healthcare today. Going forward, we believe that healthcare will require solutions that solve practical problems. These will include diagnostics that offer prognostic insights, and economically-driven assessment tools that motivate clinical decision-making, thereby improving the efficiency and effectiveness of healthcare delivery.

The demands placed on the healthcare system will no doubt continue to increase. And we are positioned to place our solutions directly into the hands of those who treat the chronically and critically ill as quickly and cost-effectively as possible. Our integrated structure is key to our success in this area.

We are excited and energized by the developments of the last quarter. They have positioned us well to move forward in this marketplace. And we are motivated to move them into a commercialization mode as quickly as possible.

On that note, I would like to turn the call over for questions.

(Operator Instructions) Ren Benjamin, Rodman.

Congratulations on the progress. Could you talk to us a little bit about ColonSentry, how big the market is. And I don't mean in general as to how many billions of dollars. But how big within New York you feel the market is. And any sort of guidance you could give us regarding revenues. And have you done any sort of beta testing with ColonSentry to get an idea as what sort of uptake there could be for a product like this?

We have begun pre-marketing this product well over four months ago. In that process we have conducted focus groups, we have met with our key opinion leaders that are on surface with our lab. And, again, having the clinical lab which calls on hundreds of doctors every day as part of our channel of distribution is a very valuable asset because it does give us insight into the actual utility of a given test in a marketplace. In our dialogue with our physician base, we have seen a keen interest in this test. We have seen an ability, particularly from general practitioners, internist and OB/GYNs to employ this test as part of a routine screen for an individual.

Going back to the attributes or benefits of the test, as we mentioned earlier, it is a simple blood test. It is a draw off of a routine blood screen. Thus, not providing any complications or differentiations from a normal, general practice of drawing blood and looking at blood parameters. That being said, physicians appear to be very reticent to utilize this test. They see it as a benefit to their patients, as a benefit to their own practices in being able to encourage or guide their patients to a more diligent prognostic outcome for the individual. Our team has been working to get as many of our docs lined up for the introduction of this test. We think it will be initially a gradual but very strong penetration of our marketplace.

In terms of scale and size, we do believe that the test has the potential to deliver revenues in the millions of dollars. We have not given specific guidance because we are still accumulating what we feel will be the early data for penetration. But we think it will be a consequential test for our laboratory. And we believe it actually has potential over time to move across the country. We are the only licensed lab in the United States to perform this test. And we can take specimens from other states, at this point probably about 45 states across the country. So we do see a strong potential for the test.

Okay. And then just continuing with the molecular diagnostics theme, clearly the OncoTect and I think you mentioned Hunter Heart were both under review. Could you give us a sense, your best approximation, as to when it could receive regulatory approval?

Ren, it is David Goldberg here. I would say that with regard to both tests, we are probably looking at somewhere in the range of three months at this point. Again, the way New York state operates, it is an iterative process. So just judging on some of the information that we are providing with them, I would say within three, maybe four, months is a reasonable estimate.

And it is fair to estimate that in terms of market both these two products would be similar to ColonSentry? And that, let's say, in the second half of this calendar year all three products would be up and running and contributing to revenues?

I think the second half of your question is correct, that they should be up and running sometime in the second half of the year. In terms of the market size, I don't think that -- the Hunter Heart and OncoTect, our version of OncoTect, are certainly more narrowly focused products. Remember OncoTect is for those patients who already are high-risk HPV positive. And so it is much more of a triage for doctors to really have them focus in on those patients that have already been identified as having HPV. The Hunter Heart at this point is going to be marketed strictly to cardiologists. And, again, it's hard to say what the uptake will be there. But I would think ColonSentry addresses a bigger market.

Okay. And then just one final question regarding the cash and cash consumption. I know that for quite some time we were trying to figure out when exactly the Company could become cash flow positive or neutral, when the cash burn would be net neutral. Can you give us any thoughts given that three new products are coming on to the market in the next several months, what your thoughts are regarding that?

Cash utilization is really discretionary in many ways to our Company. It is dependent on the R&D involvement we put behind our products. We made the decision this year, with the proliferation of these products, to invest behind them more significantly than we have in the past invested behind key products. We saw a window of opportunity now to build sales volume and to generate some key product opportunities that would be differentiating. Particularly at the Clinical Lab, which you see is now growing at a very nice revenue pace.

In terms of our cash utilization, again, if you saw the actual cash utilized for the quarter it was not that high. We are obviously extremely focused on our bottom line. We are focused on our cash needs. We have multiple opportunities in front of us. And it is difficult to say specifically when that will happen but it is certainly a high focal point for us as a Company. I cannot say specifically. We are looking towards improvements in our cost basis at our Clinical Lab. As you saw, there was improvement in the bottom line at the Life Sciences company. We have contained a lot of costs, particularly in legal. And at the same time we are driving these new products because we see the opportunity to really drive a revenue proposition for the Company today.

Also, there are multiple events and activities here that could generate some cash events for this Company. In the legal front, as you are well aware, we have a very extensive IP program in place to build our royalty rates and our revenue from our licensing stream that we hope will have consequence over the next year. We also believe that the introduction of a multiple of new products in our Life Sciences area will be contributory to driving growth in that division. So, all in all, we are extremely focused on our bottom line and in achieving cash flow neutrality and profitability. We think we can accomplish that over time but we feel we must make the necessary investments in the interim to get us to that point.

Sounds great. Thanks very much and good luck.

Paul Nouri, Noble Equity Fund.

Hitting on ColonSentry for a minute, can you talk about what kind of reimbursement you are expecting?

We have publicly said that we are looking for an average reimbursement around $350. And that means it could be as low as $290, as high as $600.

Obviously the Clinical Lab continues to grow nicely. How much of that do you owe to Pennsylvania and how is the progress in eastern Pennsylvania?

We're just at the edge of Pennsylvania right now. We are through New Jersey and we encroach just on the outskirts of Philadelphia.

Do you see that expanding a lot over the next couple of years? Or is that Philadelphia area your main Pennsylvania market?

Paul, David Goldberg again. No, I think we have a lot of room to expand in our current service area. The New York metropolitan area, as Barry indicated in his comments earlier, is the most densely populated area, not only obviously with people but also with physicians and their practices. And so our goal is as much very measured geographic expansion as well as it is organic growth within our area. We believe that there is a large area within just our current service range for us to grow and we are focusing on both. So, the geographic expansion is really measured but it is as much focusing in on the New York metropolitan area with the Clinical Lab as we can because we believe that there is still a lot of opportunities. Tests like ColonSentry and the OncoTect, as well as eventually AmpiProbe down the line, will give us unique opportunities to call on physicians who in the past we haven't had anything unique to call on them with. So we think there is plenty of opportunity just in our current service area.

Historically, UnitedHealth has been over 20% of your business. Does that continue to be the case?

Yes, I believe so.

All right, thank you.

Anthony Pfaffle, Bearing Circle Capital.

Good morning, gentlemen, and congratulations on the progress. The question I had, the former caller asked and answered most of my questions. The one particular question I had is in terms of ColonSentry, in terms of reaching and leveraging primary care. Most people think of the internists but also is there an opportunity with OB/GYN physicians to recommend the test to their patients who might need a colonoscopy based on guidelines and receive it? And the second question is, how are you leveraging both the Diagnostic Lab and Life Sciences? Is it purely through R&D? Are you working on joint commercialization efforts with them, as well?

In terms of the first question, OB/GYNs service as the primary physician for many women, particularly younger women. As a result, they are a prime candidate to utilize the ColonSentry test. As we have stated in the past, Enzo Clinical Labs has a very large women's health franchise. So, for a lab our size we have a very large percentage of OB/GYNs in our service capabilities today. And we have been reaching out to them. It is a test which appears to be of interest to the OB/GYN. It is a service. It is interesting, women are more tuned in traditionally to preventive healthcare than men are. So, it is something we are seeing a nice uptake from. Again, our agenda and goal is to help introduce this test as part of a primary screen in a routine physical exam at both general internal practices as well as OB/GYNs.

The second question that you raised in terms of the integration or association of our Life Sciences entity and our Clinical Lab operations. We are very fortunate to have a structure which allows us to be able to go from basic core research through product development, platform development, through manufacturing capability, through distribution to Life Sciences entities, both in the United States as well as in Europe. And bring that product with what we call a translational diagnostics team that sits on both sides of the Life Sciences world and the Clinical Lab world to introduce those technologies and platforms in through the Clinical Laboratory, provide us with the ability to do rapid clinical validation.

Remember, again, our Clinical Lab, because of its scale today runs most major clinical diagnostic systems that are out in the marketplace. We can run side-by-side. We are receiving specimens in the hundreds every day to try these particular new platforms. And ultimately use the Clinical Lab as a channel of distribution locally to our regional market in which we have physicians on service and are linked through an integrated IT approach. And ultimately follow that test as we submit it for future validation, whether it is in the FDA or through CE mark in Europe. So the integrated structure is a structure which I think more companies in our industry are moving towards. I think the benefits are fairly visible, and one that we are capitalizing on today.

Thank you very much.

Robert Smith, the Center For Performance.

Could you give us an update and overview on the therapeutics area?

Yes. Our Optiquel product is in the middle of its Phase II trial at the National Institutes of Health. They are enrolling patients. We're actually looking at expanding the sites beyond the NIH right now. The trial has been enrolling successfully. Data is being accumulated. We are actually even looking at expanding the indications beyond autoimmune uveitis for the product. It is a generalized anti-inflammatory compound. We are very pleased about the progress of the trial so far. And hope sometime early 2013 to have initial data on this. Again, the product market is significant.

Autoimmune uveitis is, I believe, to be the second largest cause of blindness in this country, or third largest cause of blindness in this country. And it is a marketplace that is served by not a very efficient therapeutic approach. Specifically, steroidal injections. And this is a pill. So we are very excited about it. The important aspect is that this trial is being conducted under CRADA. This is a joint developmental program in which the NIH is picking up the bulk of the cost of this particular trial. So, for us and all of our shareholders it is a very economical way to run a therapeutic drug trial. We believe that upon conclusion of the Phase II trial we will have multiple options, assuming that the product meets its endpoints, whether to partner that product off or to continue to further develop it on our own with support. So we are very excited about it. It has been a successful execution to date, and we are following it closely.

In terms of our Alequel product, which is our product for the treatment of Crohn's Disease, as is known, we have concluded a Phase IIb study for about. There are other approaches that are being explored, particularly enhancing certain adjuvants that may enhance the efficiency of this particular product. The determination on the next steps of that are now being determined and we will see where that one will go. And so those are the two key products within the therapeutic platforms. Neither one is at this point draining much capital for the Company. Yet, we have maintained optionality and we have maintained potential on each of these particular tests.

Barry, could you give us any heads up on the new litigation? What is the basis of it and what are you seeking?

Recently, we announced filing of litigation against a number of companies. These companies cover a spectrum that has been utilizing this particular intellectual property piece. It's a patent that covers the use of a phosphate linkage in attaching a signaling moiety to a target of DNA, or RNA target. It is very generally utilized in the industry today currently. The market is probably in excess of $2 billion in terms of the markets that utilize this type of linkage.

The IP is being enforced by a firm called De Mare and Partners. Mr. De Mare has had a long history of success in the IP area. I think one of the key issues here is that the relationship with the Mr. De Mare and Partners is one on a contingency basis. So that the cost to us is not material. And yet we will be able to enforce our rightful rights under the patent laws against these parties that are currently infringing on this technology. I hope that answers your question.

Thank you very much.

Robert Gould, Gould Capital.

A comment and two questions. The comment was, when you were talking about ColonSentry, you said that physicians would be very reticent to use it, is what I heard you say. I think you spoke in error?

I may have used the wrong word when I said that.

Okay, I just wanted to clarify that for the record. That was one. Two is, can you discuss the AmpiProbe as far as it is going up to the HCV now, each test has to have a separate approval? Or can they be bundled and sent up?

Let me rephrase that. A key valuable aspect of this technology platform is the ability to do what is called paneling. Meaning, from a given single specimen we can run multiple tests. Now, that affords economic benefit because you reduce your up-front sample collection cost. It will increase speed, efficiency, as well as cost to the laboratory.

I am just talking about the approval process.

Okay. In terms of the approval process, each individual analyte will have to be separately reviewed and validated.

And can you quantitate the number of different tests you think you're eventually going to have on AmpiProbe?

Yes. We today are working on panels. As an example, a load panel may include four tests. An OB/GYN panel may include four or five tests. There are multiple panels being developed right now.

So, this is going to be an ongoing approval process?

That is correct.

Okay. And last question is, when you talked about Optiquel you said you might expand the site, and there are other disease processes that might be looked at. What other disease states might be looked at?

The key area of direction would be in the area of macular degeneration.

Okay. Thank you.

Thank you. If there are no other questions, I would like to thank you again for joining with us. The period ahead will be exciting as we see these products begin to become commercialized. We will begin the introduction this quarter of at least one, if not two, of these particular products. And we will be pleased to report to you on the next quarter on the progress. Thank you again.

A replay of this broadcast will be available until Tuesday, March 27 at 12.00 midnight. You may access this replay by dialing 1-800-585 8367. The pin number is 59249560. 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. And have a wonderful day. Thanks.