To Our Shareholders.

The second quarter of this fiscal year has been another quarter of solid growth for our Company.  Total operating revenues increased to $11,564,000, compared with $11,001,000 for the corresponding period a year ago, an increase of 5. 1 %. Net income rose 15.3% to $1,520,000, compared with $1,318, 000 in the fiscal second quarter last year, and net income per share (both basic and fully diluted) increased 20% to $0.06 per share, compared with $0.05 per share in the corresponding year ago period.

For the fiscal first half, total operating revenues amounted to $23,176, 000, compared with $21,525,000 in the corresponding period a year ago, an increase of 7.6%.  Net income increased 5O% to $3,037,000 or $0.12 per share, compared with $2,023,000, or $0.08 per share in the corresponding period a year ago.

On January 31, 2000, cash and cash equivalents totaled $46,541,000, an increase of $3,323,000 from the fiscal 1999 year-end six months earlier. Working capital amounted to $65,600,000 and shareholders' equity totaled $81,710,000, There is no debt.

Revenues from research products continued to increase, as did our clinical laboratory services business, and we held the line on expenses, resulting in double-digit growth in net income.

During this fiscal quarter, Enzo began trading its shares on the New York Stock Exchange, the largest and most prestigious auction market, Given the profitable growth of our Company and the broadening interest in its common stock, this is a major development in our Company's history and we expect this move to be of significant benefit as we continue to grow Enzo.

Enzo Therapeutics' research and development efforts continue to demonstrate progress.  The clinical study involving our genetic modulation treatment for HIV infected individuals is proceeding satisfactorily and on schedule.  This study is viewed as a critical step forward in the Company's development of a gene medicine for the treatment of HIV-1 infection.

Last month we presented data at the 7th Retroviruses and Opportunistic Infections Conference, showing that stem cells engineered to carry anti-HlV genes have been observed in circulation for a period exceeding four months. To date, these cells have been demonstrated in circulation for even longer - more than six months.  Furthermore, we were able to show that these engineered cells in circulation are persisting and producing antisense RNA.  We are very excited by these early data.  Further studies, as well as an expanded patient population, plans for which are underway, will be necessary in order to confirm our preliminary findings and determine the long-term effect of this medicine.

These results were possible because of several breakthroughs by Enzo scientists.  Enzo's proprietary vector, HGTV43, works to deliver the antisense genes efficiently and quickly to non-growing cells outside the human body.  Thus the process of transduction or adding the genes to the blood stem cells has been reduced to an 18-hour process, from what took several weeks previously, thus protecting the stem cells from undesirable differentiation and giving the patient a greater chance of receiving true stem cells.  In addition, a high rate of transduction in cells from the HIV-1 infected subjects has been achieved consistently throughout the study and has played a major role in our achievements.  The stem cells can be removed from the HIV- 1 infected human subject, transduced overnight and the next day injected back into the subject.  It is important to note that the cells producing antisense RNA are designed to evade undesirable immunological responses which means they are benign in terms of any possible immune reaction.

Our objective with this particular application of Enzo's gene therapy program is to successfully modify white blood cells to render them resistant to HIV-1 infection using the principle of genetic immunity and to reconstitute the patients immune system with these white blood cells.  This Phase 1 trial, which is designed primarily to determine safety and toxicity in patients is not yet completed.  We look forward to the conclusion of the Phase I trial and treatment of additional patients to fully assess this innovative treatment.

Enzo's second clinical trial, based on the Company's proprietary immune modulation technology, for patients infected with hepatitis B virus (HBV) is being conducted at the Liver Unit at Hadassah University Hospital in Jerusalem. During this past fiscal quarter Enzo announced that it had received a grant from the Israel-U.S. Binational Industrial Research and Development Foundation (BIRD) for the expansion of the trial The award by the BIRD Foundation is significant recognition of the program we have in progress at Hadassah.  It is an important step forward in our efforts to develop a treatment for HBV, a disease infecting an estimated 2 billion people, of which as many as 350 million are at risk of death from liver disease.

Enzo recently announced that the Company received a patent from the U. S. Patent and Trademark Office that covers nucleic acid compositions and methods for editing and correcting certain abnormalities in genes.  Abnormalities such as hemophilia, that are caused by single nucleotide alterations or small deletions could be corrected through the insertion or exchange of the correct or desired sequences into the genome of the cell where the error exists.  Potentially, this technology could also be used to correct a mutated p53 gene that controls cell growth.  In the mutated gene, the cell growth is uncontrolled, resulting in cancer.  In the corrected p53 gene, the cell growth would be restored to its normal, non-cancerous state. This new technology provides the Company with an additional therapeutic platform and another unique approach for treating Genetic-based diseases, as well as other applications.

Research and development activities at Enzo Diagnostics have led to an expanded product line for the rapidly growing field of genomic analysis.  The new products, developed and manufactured by Enzo, provide researchers with greater versatility for sample labeling and extend the use of these proprietary products in DNA array assays.  Enzo continues to play an expanding role in this market, fortified by an exceptionally strong patent position, covering broad-based applications.

Enzo continues to make progress in those areas of our business that represent the greatest potential for growth. Our finances remain strong.  And we continue to develop and market new products for the fast-growing genomics market. Our therapeutic subsidiary is on schedule and achieving exciting results. 

We remain committed to further improvement on all fronts and believe the course we are following will help achieve the Company's objectives.

Barry W Weiner
President