Enzo Biochem Inc (ENZ) 2015 Q3 法說會逐字稿

Good morning and welcome to the Enzo Biochem, Inc. third-quarter 2015 operating results conference call. I will now read the Company's Safe Harbor statement.

Except for historical information the matters discussed in this news release 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 10-K for the fiscal year ended July 31, 2014. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results. The Company disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

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. (Operator Instructions)

I would now like to turn the floor over to your host Mr. Weiner, the floor is yours.

Thank you very much. Good morning and thank you for joining us today.

With me is Jim O'Brien, our Executive Vice President of Finance, and David Goldberg, our Vice President of Corporate Development. Our press release regarding the fiscal year 2015 third-quarter results was distributed last night and has been posted to our website.

I'm going to begin my remarks with a review of some of the key operational and financial developments from the quarter. Then I will shift the call to a discussion of how we are going to continue to evolve Enzo into an important participant in the healthcare marketplace today.

First looking at some of the numbers, on a sequential basis total revenues were up 4%. This reflects an exceptionally strong performance at Enzo Clinical Lab which logged an 8% gain year over year and 6% sequentially. We'll have more to say on the lab a little bit later in the dialogue.

Life Sciences product revenues while down 9% for the quarter from the prior-year period as a result of foreign currency headwinds and the timing of consumer reordering patterns are about even with last year on a constant currency basis for the nine-month period. Our top 200 Life Science products representing roughly 50% of revenues continue to give a strong account. However, weakness in the small molecule segment along with a shift in ordering patterns, some industry consolidations and foreign currency fluctuations accounted for the difference.

Consolidated margins are 44% and were higher both year over year and sequentially by 100 basis points. Sequentially the GAAP net loss improved by over $1 million to approximately $2.9 million from the prior quarter's $4.1 million. EBITDA improved 38% sequentially to minus $2 million, an improvement of $1.2 million.

On a non-GAAP basis which is adjusted for legal settlements, certain related legal fees and compensation factors the net loss amounted to $3.1 million for the quarter as compared to a year-ago loss of $2.1 million. Other key metrics were positive including SG&A which improved 200 basis points as a percent of revenues and the provision for uncollectible receivables which continues to narrow and was 30% better than a year ago.

Our cost of goods sold was essentially unchanged and largely reflected cost attended to the growth at Clinical Labs. Both operating units, the Clinical Lab and Life Sciences, reach profitable during the quarter and cash flow positive which augurs well for future development.

Cash usage in the quarter was about $1 million and about half of that, $500,000, was due to investments in new diagnostic equipment and other capital expenditures related to developmental projects designed to enhance capabilities and promote profitability. Legal expenses were essentially unchanged year over year and roughly $1 million lower sequentially. Our investment in protecting both our intellectual and contractual rights continue to vary depending on the level of legal activity in our ongoing matters.

As most of you are probably aware we have ongoing a total of 12 infringement cases in Delaware. In addition, we are in preparation for what we believe will be a trial in New York sometime late in the year and we are continuing to evaluate our options in the Applera Life Technologies matter. In denying en banc review the Federal Circuit remanded the case back to the District Court judge in Connecticut for reconsideration in light of the appeals court revision of the patent's primary claim. Needless to point out but for these litigation expenditures which we view as necessary investment to protect and also to seek compensation from exploitation of our valuable patent estate our results would have certainly been more favorable.

Let me now share with you some of our thoughts and how we are positioning Enzo to grow and to move into the future. We have built an organization that is well-positioned to deliver sophisticated technology solutions that result in cost-effective clinically relevant products and services that are designed to meet the needs of the markets that we serve. Enzo has built an integrated organization with core competencies in a number of molecular-based technologies and platforms.

The field of molecular diagnostics is the most rapidly growing diagnostic segment and Enzo is working to be at the forefront both in terms of high quality products and unsurpassed customer service. This combination which sits at the heart of what we have been building over the last several years provides both Enzo and our customers with optionality as we navigate through the complex technological, legal and payer landscapes of today.

As examples, Enzo has had a long history and core competency in women's health or perhaps more correctly family health. We developed the first product to visualize the presence of high-risk human papilloma subtypes in tissues, a product that some three decades later is still in use not only in our own Clinical Lab but in commercial hospital and government clinical laboratories around the world.

Our HPV product line has been cited in literally hundreds of peer-reviewed articles over the years and it has provided the medical community with an invaluable tool and potentially helping identify the progression pathway to certain cancers. We have been able to expand the market reach for HPV identification from cervical cancer now to anal cancers where the CDC has estimated that thousands of cases of HPV-associated anal cancers occur annually in the US.

The next step in our servicing of this segment of family health market revolves around being able to assist clinicians in the triaging of those infected patients that might progress to one of these cancers. A 2013 study estimated the prevalence of anal HPV infection to be as high as 70% in certain segments of the population with high-risk types identified in more than half of these patients. It is also well documented that a majority of high-risk cancers will spontaneously regress; that is, they do not progress fully to cancer.

Enzo has developed a proprietary technology platform that utilizes quantitative nucleic acid expression of two key oncogenes as a marker for potential progression in the cancer pathway. Our FlowScript HPV product which this past quarter was granted conditional approval from the New York State Department of Health for use as a laboratory developed test or LVT is now being used on cervical specimens to provide invaluable analytical data to allow physicians to keep a closer eye on those patients that may be at higher risk.

We have recently commenced a validation study to extend the utility of our platform to the study of anal HPV and thus increase the market reach of this platform. Additionally several of our partners are also validating FlowScript products for use in their own laboratory thereby opening up even more channels to the marketplace from which we will benefit from sales of the assays.

What is most important to understand is that we have developed a new proprietary molecular platform which from just one application will provide our clinical laboratory with multiple tools to service a number of physician clients while simultaneously allowing for our partners to develop their own test that they can then utilize to service their client base. Even more notable is the fact that we began the initial development of this platform only about two years ago and have now not only been able to generate greater profitability for our Clinical Lab as evidenced by our increasing gross margins but from the same research effort we have developed a line of products that our Life Sciences group can market. We have already presented our data at several trade conferences and have received enthusiastic feedback.

Continuing on this thought, we have completed a feasibility project on the use of another core proprietary technology platform, AmpiProbe, for the identification of HIV in various specimen types. This can have particular significance to the medical community as it has been shown by a number of studies that the incidence of HPV is significantly higher in HIV-infected women.

Moreover the initiation of combinational therapy has a positive impact on both HIV and HPV infection rates in those HIV-infected patients that undertake such a course of treatment. Therefore to be able to detect both viruses during the course of co-infection can be very important in the management of these patients. We will keep you updated as we progress through the development phase of this potentially key product and service.

Expanding the discussion into molecular genetics, our high concentration of key opinion leaders in the women's health field that we count among our client base provides us with the unique view into this rapidly expanding field. Just focusing a minute on the prenatal screening market for chromosomal abnormalities, it is estimated that about one in five pregnancies in the US is considered high risk. High risk is defined by such factors as maternal age of 35 or greater, a family history of genetic-based disorders or other factors.

An estimated 750,000 out of 4 million total pregnancies fall into this category in the US annually. As such, it has now been recommended by leading medical societies that women receive some type of prenatal screening test to detect for potential chromosomal anomalies that can result in such disorders such as trisomy 21 which is the presence of an extra chromosome in the fetus that manifests itself as Down syndrome. Enzo has positioned itself to be able to provide its customer base the highest degree of optionality for offering such tests.

Our extensive lab infrastructure built over years of investment provides superior service, data analysis and logistics to support our clients. Enzo is today able to offer tests either from a number of our partners or provide validation of either partner technology and our own platforms.

But there is potentially more to this. As techniques develop and more data is amassed it has been shown that there may be more to prenatal screening than just looking for the presence of additional chromosomes. An article that appeared in the New England Journal of Medicine authored by a cohort of leading medical centers including several here in New York stated that more than 1.5% of pregnancies of women with normal cytogenetic results, that is their fetuses were carrying the normal complement of chromosomes, there were nonetheless deletions, duplications and other potentially deleterious changes in the chromosomal material that may be indicative of any number of genetic situations or maladies.

These syndromes if detected prior to birth can be treated postpartum in such a manner that the impacted child may have far less complications as he or she develops than if early intervention is not performed. Such information can lead to a many-fold increase in the use of such tests as they potentially get rolled out across a wider spectrum of pregnancies.

More potentially key is Enzo's proprietary position in the development of products in the microarray field as such this type of testing expands. In this manner we are uniquely positioned to provide a multiplicity of solutions in this market segment. Not only could such advancements result in improved quality of life for a number of families but potentially could result in reduced medical cost borne by third-party payers as well.

As you can see from these examples, just two segments of the family health market can be responsible for hundreds of millions of dollars in revenue in products and services in which we could share. Additionally, we are using our technological expertise to design and market women-based infectious disease testing based upon our AmpiProbe technology. This suite of assays will have a number of advantages over other offerings.

This includes the need for a smaller specimen volume which allows for more economical use of reagents as well as reduced numbers of specimens and therefore a reduction in the number of times a patient needs to be recalled for the collection of additional specimens. All of this ultimately results in a lessening of patient anxiety and from the payers' perspective high quality results at lower overall cost to their plans.

The examples I've just described have already manifested themselves in improving our operating financials. This is most evident with the results we reported for our Clinical Lab division propelled by its growth, it's continually increasing menu of high-margin molecular assays.

Together with programs to reduce costs and improve efficiencies the increased molecular diagnostic volume at the lab has resulted in a 500 basis point improvement in third-quarter gross profit and a division that along with Life Sciences is now profitable and cash flow positive. These gains are reflective as well of the Clinical Labs' singular independent position in a key national medical market, its access to proprietary technology and programs and what especially sets our lab apart is forward-looking innovative reputation enhanced by the combined capabilities of our Life Sciences and Lab team of experts.

Finally before turning the call over to the operator for your questions I'd like to comment about the evolving regulatory environment in which we operate. We manage a Clinical Lab under probably the most stringent regulatory environment in the country, namely New York State. In addition we are accredited by the College of American Pathologists.

Much has been made recently about the changing oversight regarding diagnostics that is in various stages of drafts and we believe and that is our understanding and experience being reviewed by a number of different regulatory bodies. We have developed a bifurcated delivery model utilizing our Life Sciences as a product deliver as well as our Clinical Labs as a deliverer of services. And we believe that we have been designing and organizing our product development model in such a way as to provide minimal disruption no matter which way the regulatory winds blow in overseeing product approvals.

We design our products to meet or exceed the highest levels of regulatory compliance and we are keenly aware that our customers need to be able to utilize them in a manner consistent with how they operate their labs today. No one can be sure how the FDA and the various lab accrediting agencies will function in the future but we believe that a recent task force announcement a few weeks ago between the FDA and the Centers for Medicare and Medicaid services, or CMS, the federal overseer of Clinical Labs will bring clarity and most beneficially a reduction in the months and years ahead in the duplication of oversight that we and our customers are currently subjected to with commensurate reductions in cost and enhanced efficiency.

At this point I would like to conclude our formal remarks and turn the floor over to questions.

Bill Bonello, Craig-Hallum.

Good morning, guys. So I want to dig a bit into your thoughts on the cash burn here.

Obviously you're continuing to do really well from growth in the core lab business as well as gross margin expansion in that business. But you continue to burn cash every single quarter and you continue to access the ATM every single quarter. And I get that that's to cover legal expenses and maybe to some extent some of the ongoing product development, but I guess I'm just wondering have you given any thought to just tightening up some of the expenses or cutting back on some of the R&D rather than continually diluting investors quarter after quarter and how you're thinking about cash burn going forward?

First in terms of our cash burn, our cash burn is associated predominantly with the investment we are making in our legal efforts which historically have proven to be financially very responsible and have delivered us a significant return on that investment. The second investment we make is in R&D, and I think one cannot forget that the future of this Company is built in its business model and the development of products that we think will impact the market in a significant and material way.

We are fortunate as a Company to have developmental capability and platform capability which has shown historically to create extremely large value across the industry. If you look at the platforms that Enzo has developed and have been utilized throughout this industry over the years we made a strategic decision a few years ago to go directly to the market with novel platforms that we have developed.

As you are aware, the AmpiProbe system is pending regulatory approval. We believe that will have a material and significant opportunity to deliver a low-cost solution to laboratories around the world and also meet an unaddressed need in the market for a low-cost dot molecular diagnostic system.

So investments are critical here. And I think when we look at the cash burn over the quarter I think it was relatively modest over the last quarter, it was about $1 million. You mentioned accessing the ATM and diluting investors.

I think we have utilized the ATM very marginally over the last year and a half. I think the dilution effect has been not very extensive. Certainly not as extensive as if we had gone and raised capital as many companies do with a secondary offering which we've not done.

I think we've had extreme consideration for our shareholders in terms of how we have been managing our cash utility and cash needs. We have multiple future opportunities for building our cash capabilities whether they come via settlements on the legal front, whether they come via joint partnerships with other partners, developing the multiple uses of our different technologies such as the application of AmpiProbe in the veterinary space or the food clearing space. So we have multiple opportunities.

And the amount of cash burn that we anticipate utilize I think particularly on the legal front may moderate as these cases move more towards trial and conclude the discovery phase of the situation. So we have been tightening up. And I think if you look at the numbers and the improvements that we've seen in our line items in terms of our cost structure we have been implementing these types of improvements for the last year and a half.

So I think that we have been addressing the developmental programs responsibly. I believe our cash burn is not extensive. I think the utility has been of our programs is being forcefully exerted.

And I would like to comment just that, we've not used the ATM this quarter that we're currently in. So I think overall we've tried to address the markets responsibly in terms of our cash needs and how we have approached them overall.

Okay. And just to follow-up on that -- that's helpful but just to understand, I mean given the cash burn outlook that you have right now for ongoing legal and product development, would you still continue -- would you anticipate having a continued modest cash burn for the foreseeable future and how are you thinking about responding to that in terms of the balance sheet?

I do see cash burn continuing into the next quarters as we invest behind our products. I think we are optimistic on the approval of these products.

We saw FlowScript come in in this quarter. We're looking forward to AmpiProbe emerging. We're starting to see the benefits of this strategy, of this bifurcated marketing strategy with FlowScript.

And as we see product build I think that will certainly overcome the cash utility that we will be needing as we produce more products in these product lines and start to market them out. The legal burden which has certainly been one of our key users of capital is something that we hope to see ameliorate over time.

We are looking forward to seeing returns on that legal process which I think can certainly address some of the future cash needs of the Company. So we're watching it closely and I think as a Company we are attempting to be responsible and diligent in the management of our cash needs.

Great. And then if I can just a couple of quick follow-ups.

So on the AmpiProbe I know it's really hard to anticipate timing of a regulatory agency. But it seems like it's been now maybe half a year longer than what you had originally anticipated. Is there any kind of feedback that you get from the New York Department of Health, any sense of why this is taking so long?

We do get feedback and we are aware that the platform is under consideration and evaluation. We cannot handicap what the agency does and how they do it.

As you are aware there has been a significant influx of products seeking approval subsequent to the FDA draft regs on overseeing LDT products. I think New York State from what we understand has had an overwhelming level of submissions for approval and I believe they are attempting to address them in a timely fashion. But certainly I have no way to handicap when they will address the issue specifically.

Okay. And just the last question, can you just tell us next steps in the Applera case, to the best of your understanding what happens now, walk us through that and any associated expenditure on that front?

The Applera case is still very much ongoing. The Federal Circuit remanded it back to the District Court judge who was the overseeing judge at trial for her to now evaluate the infringement that was alleged in light of the revision of the primary claim within the case. That judge has broad discretion how to deal with it.

It's too early to define the exact process because there are a number of channels or routes that this thing can take ranging from just a judicial decision to another trial to another whole review of this particular case and situation. That being said, we hopefully will have some clarity within the next month or so. We are in the process of defining the approach with our attorneys and we'll let you know as this thing starts to play out.

Okay, great. Thanks so much.

[Robert] Gould, Gould Capital Management.

Yes, good morning. I was wondering if AmpiProbe got approved today at what point and to what degree would we start to see some financial impact thereof?

The first product that is pending approval is a product for the testing for hepatitis C virus. It's a singular product and the importance of it is that it's a validation of the platform. Upon approval we can certainly begin to provide that test within our own clinical laboratories a lab-developed test and generate improved margins and thus improved bottom line at the Clinical Laboratory.

The secondary products coming through under development at this point is a women's health panel. And that is a panel that will address upwards of 14 to 16 different analytes in a single specimen.

And for those that may not understand the terminology we will be able to detect specifically multiple disease states from a single diagnostic approach. That has significant economic capability and possibility. And I think --

Is there a time frame on that -- go ahead --

Yes, basically we're looking for submissions of these particular women's health analytes within the course of this year. I am optimistic that once we see the initial approval secondary approvals will be more rapid. We are hoping to begin to see the introduction of some of these products within this calendar year.

So it's hard to say the numbers. It will depend on how quickly the agencies deal with this. But we have developed and we have in process quite a few different analytes at this point in time.

Okay. Second question regards the valuation of the Company. And in light of the extreme consideration for shareholders that has been discussed already on the call, can you comment about the fluctuation of the stock price and the thus in and out of funds and what can be done so that this type of fluctuation isn't a continuing process?

I'm not sure I understand --

Well, we've gone in and out of funds based on the capitalization of the Company. And now that the Company is capitalized at a lower level we don't qualify for certain funds and thus those funds have (multiple speakers)

I understand. Okay.

And since we go in and out of this I was just wondering if there was a plan in mind over of course it's been decades now or there's a plan in mind so that we don't go through this process on a regular basis which we have.

Right. I believe the response to your question relates to the rebalancing of the Russell indexes. And I think what the fluctuations you've seen over the last few months have emerged from the rebalancing of the Russell.

It has resulted in a shift of certain index funds out of Enzo and I think that has been reflected in the stock. In terms of addressing it, I think we must build our business which we are doing.

I think the results that were reported today show a strengthening of the core assets of this Company. We have two very healthy, very strong businesses that are not now aligned in a business model which we think is becoming a paradigm within the industry.

I think in terms of trying to deal with stock and market fluctuations as our revenues build, as our bottom line builds. And as we begin to introduce more products to the market I think it will lend a stability and an appreciation for the consistency of the value proposition of Enzo and we are addressing to do that.

We are keenly focused on the valuation of Enzo. And we are making efforts and steps to address some of what you are alluding to in terms of building a consistent valuation model that will go beyond just the speculative nature of investors.

Thank you.

Norman Hale, Stifel Nicolas.

Good morning, I have several questions here. First on the subject of FlowScript you guys have approval and you are starting to use the product internally and that you've entered into some licensing agreements with certain companies on this product. Is that correct?

No, we have not licensed this product. We are making and selling the product directly.

Okay. And you intend to keep doing it, keep the product internally to the Company, is that correct?

Not necessarily. Right now this product was just approved this quarter. We are using it within our own laboratory.

We have entered into a number of placements with other laboratories who are now testing, using and attempting to adopt this platform. From that may come publications.

At the same time we are in dialogues with other parties over extending the platform utility of this product. This product addresses a market that is based on flow cytometry which is a very large market and the approach that we have taken offers some very unique advantages. So one might see licensing relationships associated with this as well as the direct sale of products.

Okay, and that product I mean that has significant potential. Have you guys considered in terms of keep the domestic sales and license the international sales to another Company? Have you guys considered that?

Well, we do have distributors around the world that will be marketing this as well and so it does flow through our Life Sciences Company. Part of the value proposition of our what we call bifurcated channel approach is that Life Sciences today has a very strong channel into the market and specifically into the types of customers that would be of interest for this particular platform and product.

And we are utilizing that channel. Within that we do have multiple dialogue going on with different parties to apply not only FlowScript but other platforms in areas that might not be specifically in the direct interest of our Company or the capabilities of our Company. So we are approaching many different opportunities end markets and I think in the future as this starts to mature you will start to see values appear from this.

I know it's always hard to predict the revenue potential of a specific product within your portfolio but have you guys come up with any parameters in terms of let's say maybe a couple years down the road what sort of revenue potential this product could produce?

I think one needs to look at the size of the market that we are working with. Maybe I'll ask David to comment on that. When you appreciate the size of the market as well as the potential impact one can infer the potential here.

Yes, hi, Norman. It's David Goldberg. You've got to understand that this is really, this is not just -- this is the first product in what we hope will be a number of products within our proprietary platform.

But just focusing right now on the product that received New York State approval this quarter. There are approximately, and just focusing on the US for a minute, approximately 40 million HPV tests are run each year, high-risk HPV tests. Of that roughly anywhere from 10% to 20% of those come out as high risk positive.

And as we've stated in the past about 70% or 75% of high-risk positive HPVs will spontaneously regress which means they won't progress any further down the cancer pathway. What we believe that we are developing here is a potential tool for clinicians to be able to triage those HPV high-risk positive patients where there may be a higher risk of progressing towards cancer because we're actually measuring in a quantitative manner the overexpression of two key oncogenes that are tied to cancer progression. So if you just took the domestic market and took 15% to 20% of that you'd have somewhere in the neighborhood of 5 million, maybe 10 million tests just domestically, just for cervical cancer and just in the US.

Now as Barry stated on the call we've begun a validation for this product for anal cancers which is actually a much faster growing market then cervical cancer in the US and so that can add even further to the market potential and then you take what goes on overseas. What's interesting overseas is that in some cases you have single payers who would pay for this in individual countries and you also have a much more robust market where consumers, you actually now have more of a bifurcated healthcare system in Europe where you have a number of people that will pay out-of-pocket for tests.

We've just begun to scratch the surface there through our connections through our offices that we have in Europe. So you can see that the potential here could be very, very large.

I agree. It definitely is a large opportunity. What would the approximate in terms of what Enzo would receive per test what would be the dollar amount that Enzo would get paid per test?

It's hard to say. It really depends upon the particular arrangements that we make. We can generate revenue on a per test basis through the Clinical Lab and that would be with regards to the various payer contracts that we have, we would be paid on a per test basis that way.

And then we'd also be potentially getting some revenue for the sale of a product as a research product to other labs who would then validate it themselves. So it could be significant.

Okay, good. Then on to AmpiProbe I heard all your comments and questions that were posed previously. I guess my question on AmpiProbe is assuming that we do get approval relatively soon, let's say sometime this summer, then in terms of -- then you'd have to get additional approvals for specific applications, specific diseases, disease diagnostics, so what time period do you think that would take?

Well the approval of that we are awaiting covers the use of AmpiProbe in the detection of hepatitis C virus. So it is a specific product, a specific test.

Coupled with that the next level of testing products will cover women's health as I mentioned. There are about 14 of them. They are in various levels of completion today for submission and we hope to start to see them obtain approvals before the year-end.

I can't assure that all of them will be approved during that time frame but we certainly are anticipating components of the complete panel and as they obtain approval we will begin to market them. So hopefully within this year we will start to see the first of the returns based on this particular platform.

Okay. And as far as the efficacy of the product you guys believe that this will be a major improvement relative to what is currently available in terms of the diagnostic capacity, the improvement in terms of the information it produces thereby giving the physician a significantly improved ability to determine the course of disease treatment?

The platform is positioned to deliver what is currently the standard for molecular testing data. The key element of AmpiProbe is its cost. We believe we will be able to deliver a system that will cost significantly less than the current market product lines.

This is critical because we are in an environment right now where reimbursement for clinical labs and diagnostics as a whole is under extreme pressure. The approach we are taking with AmpiProbe is to deliver a capability for those clinical laboratories to be able to perform tests and improve their marginal return in a significant fashion.

I think economics has become a critical driver of survival and marketability in this medical environment today. I think we are addressing a key area, an area that is the largest growing segment of the diagnostics market and the molecular space with a product capability for labs to be able to generate profitable results from performing tests.

So the key here is not necessarily improved performance though there is improved performance. I think one of the key issues which I alluded to is that the reason we are able to get this improved economic performance is because we need a smaller sample which deals with lower-cost in terms of sample preparation and reagents.

It deals with more efficient methods and means for doctors in dealing with their patients in terms of drawing blood and so forth. It may mean more efficiency to the physician because he will be able to get a screen or a pattern of results from this type of test rather than looking at one-off diagnostics for given diseases. So there are multiple reasons for value within the system and it surpasses just improvement of results but it approaches economics.

It approaches ways of performing medical practices. We are driving towards improving the economics of diagnostics. We think this is where the product will have extreme utility and be well received.

I get the point. What sort of a cost-reduction in terms of percentage will your product bring to the market?

Probably 30% to 50%.

Well, that is a compelling -- I mean it's a no-brainer basically. Okay, that's great.

Again on AmpiProbe let's go under the assumption that you get approval, the original approval here this summer, then let's say later this year sometime maybe fourth quarter this year the women's health panel gets approval as well. When we roll into the year 2016, what sort of potential revenues could be generated from AmpiProbe based on those two indications?

The women's health panel has a very large opportunity associated with it. Again it's a little premature to define what market penetration could be but we're talking about a rather significant market segment. It's probably in the I guess tens of millions.

There are about 15 million visits to physicians just for vaginitis alone. And you start to break down the individual testing areas of this particular panel and you start to add up the economics it's rather significant.

We need a relatively small percentage of penetration to make a rather significant impact on our financials. So I mean we are gearing up for this now and I think its value proposition can be very, very strong for us as a Company.

And then, Barry, as you guys progress with AmpiProbe and let's assume that you receive additional approvals for other disease indications or just new ways of selling the product, do you intend to keep all of this internally or do you think you might partner up with some other Company that could help market the product more effectively?

We are exploring partnerships on many different levels as I mentioned. The broad utility of the platform gives it unique opportunity in many different areas.

The diagnostics market space is very large and we as a Company certainly are not capable to exploit all the utility of this platform. So we are seeking and in dialogue over aspects of the platform and specific markets with others so you may very well see partnerships in this area.

Okay. Yes, I think that makes quite a bit of sense. Okay, let's skip over to the litigation arena.

I saw on your news release that you are preparing for a trial later this year in New York in a case that you have against Hoffman-La Roche. Do you believe that the trial will start sometime this year or what's your best guess?

It's very difficult to handicap timing in the legal system. The trial could take place before year-end. It's in the process where we have just completed discovery.

There's experts and summary judgment motions to take place. The judge has set a preliminary schedule but that is a moving target. So it's possible by year-end or sometime thereafter, soon thereafter that we would expect a trial to take place.

Okay. Have you made a determination in terms of what kind of damages you guys would sue for, the dollar amount that you guys would look to ask for?

I mean, that is part of the expert development here and it's something that we tend not to discuss publicly.

Okay, all right. Let's put it this way, it should be something substantial I would imagine. Okay.

The out-of-court settlement with PerkinElmer I know you guys had a dispute over -- a dispute with the attorneys over the fees associated with that. Is that thing getting close to resolution?

That is in process. Again I can't speak to the timing of it but it is in process at the moment.

Okay.

I'm going to have to -- other any other questions because we've been moving along and the time is getting late. I just want to give everyone an opportunity --

I'm through. Go ahead. Thank you.

Anthony Marchese, Insiders Trend Fund.

Hi, good morning. First of all do you have any plans on going out and meeting with investors, marketing the stock?

I guess from my standpoint it seems as though the stock is materially undervalued relative to your prospects relative to competitors. I think in any kind of, not that you're considering it, but any kind of buyout situation the stock would be worth substantially more than what it's trading at. Yet I do think it would be helpful if you go out and participate in some conferences, go out and meet people, thoughts on that?

We actively our marketing, I mean we do participate in many of the industry conferences. We have a regular schedule of talking to investors and potential new funds that have interest in the Company. So we definitely share your view that it is an important function and it is something that we certainly have been doing and we will be doing more of.

I think as positive, definable news it begins to appear specifically on the product front it will give us a very strong capability to really promote the specifics and the opportunity associated with these new platforms. And we will do that.

All right. Thank you very much.

There appear to be no further questions at this time.

Thank you again for joining us. We look forward to reporting our year-end results in the fall.

I believe the next three or four months are going to be exciting ones for the Company and one that I'm optimistic we will have some very material value to share with you at the next call. Thank you.

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