Audio Transcript

Transcript courtsey of Reed Williams, MD

TRANSCRIPT of Audio of ON24/StreetAdvisor.com: Enzo, the Biotech Elder - Friday June 16, 5:41 pm Eastern Time.

Enzo Biochem [ENZ] was the first biotech company that ever went public. That was back in 1980, and since then, the company has steadily grown. We are taking a look at the company for the first time and initiating coverage with a hold rating.

Yesterday, the company reported third quarter earnings of $0.08 a share, up from $0.07 a year ago. Net income increased 19 percent to $2m, despite a 29.5 percent increase in R&D spending. The additional spending was the result of increased development of new products for the life sciences market and outlays for laboratory and clinical studies.

Enzo has been profitable every quarter since December 1996. Enzo Clinical Labs, a subsidiary of the biotech, is largely responsible for the this, accounting for 63 percent of sales. However, the company is now trying to distance itself from the clinical testing business by diversifying into drug development, a decision that we think is sound.

Phase II clinical trials recently began for EHT899, an oral medicine targeting Chronic Hepatitis B, which affects about 350m people worldwide. The drug holds a great deal of promise, but many of the patients it could help are in less-developed countries.

Also making the news this month was Enzo’s antisense gene therapy product for HIV, HGTV-43. Results from phase I trials show an unprecedented eight-month survival of engineered cells in an HIV-infected individual. The trial, used to determine safety and toxicity, has been deemed a significant step toward the goal of providing a lifelong immune response for HIV-infected patients.

Enzo is also in early stages of developing a treatment that could alleviate the debilitating side effects of bone marrow transplants. None of the clinical trials are adequately advanced to have a good feel for the overall potential of the drugs.

Enzo has enough cash and income from operations to continue funding clinical trials at its current spending rate for another year and a half. We anticipate R&D expenses will rise substantially in the quarters ahead, requiring the company to raise cash or partner with another pharmaceutical company to develop its pipeline.

Currently a small R&D company, Enzo has long-term potential to become a larger player. At the moment, we feel the company is appropriately valued, but look for Enzo to make progress and profit well into the future.