Enzo Biochem Reports Increased Revenues, Improved Operating Results

NEW YORK–(BUSINESS WIRE)– Enzo Biochem Inc. (NYSE:ENZ) today announced growth in operating results
for the third fiscal quarter and nine months ended April 30, 2017.

Third Quarter Highlights

• Total revenues increased to $27.1 million, a 2% increase from $26.4
  million in the prior year period.
• Clinical Labs revenues totaled $19.6 million, an 8% increase over the
  prior year period and the sixth straight quarterly increase,
  reflecting continued growth in volume of high margin molecular
  diagnostic tests (MDx). Gross margins advanced 300 basis points, to
  42%.
• Consolidated gross margin was 45%, a 200 basis points improvement over
  the prior year period.
• With operating expenses lower, including legal costs, Enzo recorded a
  GAAP loss of $71,000, or $0.00 per share. EBITDA, a non-GAAP measure,
  was $0.7 million, a $1.8 million improvement over the prior year
  period.
• Enzo Life Sciences’ revenue was $7.5 million, an 9% decline from $8.3
  million in the prior year period. This was due to timing of product
  shipments, continued reduction in the product mix to emphasize higher
  margins, and industrywide weakness in the academic and governmental
  markets. Despite reduced revenues, the segment remained profitable and
  cash flow positive.
• Consolidated cash flows from operations in the quarter were $0.9
  million. After investing $0.7 million in capital expenditures related
  to expansion in the Clinical Labs, total cash and cash equivalents
  increased $0.2 million over the second fiscal quarter 2017. Working
  capital at April 30, 2017 was in excess of $70.5 million.
• As previously announced, New York State Department of Health’s recent
  conditional approval of three new diagnostics for the company’s cost
  efficient AmpiProbe® PCR platform paves the way for their additions to
  Enzo’s expected specialized 14-analyte panel, anticipated to be
  available by fall, that will further establish Enzo’s strong MDx
  position in women’s health.

Barry Weiner, President, Comments:

“This was another excellent quarter of operational performance, one of
sustained growth, technological advances and market inroads. Our
transformative strategy to a fully integrated molecular diagnostic
company is being recognized in the marketplace. The quarter was notable
for the steadily increasing performance of our clinical services. It
reflected the addition of new clients, growing interest in our molecular
diagnostic development capabilities, and expanding national reference
services giving recognition of our leading position as a provider of
comprehensive women’s health diagnostics. Enzo Life Sciences was
affected by timing of certain U.S. shipments, and tightening of academic
and government spending, while the segment focuses on product
development and approvals. In a relatively short time, we have
streamlined its product mix to concentrate on higher margin products and
have reduced products by over one-third to free capacity for molecular
diagnostics manufacturing and distribution. At the same time, Enzo Life
Science’s research capabilities, uniquely integrated with our Clinical
Labs, continues to turn out advanced genomic diagnostic products built
around our proprietary technology platforms. This has enabled gross
margin expansion at Enzo and broadens our MDx test menu that offers
greater efficiency and reduced costs to independent laboratory customers.

“The integration of our operations is proving an important aspect of our
activities. We have been able to build a formidable business model
employing our significant patent estate and years of accumulated
know-how to benefit today’s independent lab market. Specifically, we now
provide a growing menu of highly efficient, versatile and cost effective
MDx products and platforms, compatible with current open systems, which
could result in significant savings — in many cases between 30% to 50%.
We also have gone a step further by making our state-of-the-art lab
capabilities available on a reference basis, enabling many independent
labs to utilize our services to continue to respond to their
client-physician needs and maintain margins as one effective way for
dealing with high product costs and shrinking reimbursements.

“Also, Enzo was recently designated as an in-network health care
provider in the U.S. by one of the nation’s leading health services
organizations. Expanding Enzo’s in-network insurance coverage nationwide
is a key component of our growth strategy.

“Lastly, our patent infringement related lawsuits are moving through the
court system in Delaware and we expect some trials may get underway
before the end of the year.”

Fiscal 2017 Third Quarter Consolidated
Operating Results

During the quarter, revenues were $27.1 million compared to $26.4
million a year ago, an increase of $0.7 million or 2%. Gross profit
improved to $12.2 million, from $11.4 million a year ago, with
consolidated gross margin of 45%, an increase of 200 basis points,
principally due to growth in the clinical services. Operating expenses
were $12.4 million, down from $14.0 million in the prior year period,
mainly due to lower legal and SG&A expenses. Operating loss improved
$2.3 million, to ($0.2) million, compared to an operating loss a year
ago of ($2.5) million.

The Company reported a net loss of less than ($0.1) million, compared to
a year ago net loss of ($2.1) million. Basic and fully diluted per share
results were ($0.00) compared to ($0.05) a year ago. Earnings before
interest, depreciation and amortization (EBITDA), a non-GAAP measure,
was $0.7 million, compared to negative EBITDA a year ago of ($1.1)
million.

As of April 30, 2017, cash and cash equivalents and working capital were
$62.6 million and $70.5 million, respectively.

Segment Quarterly Results

Enzo Clinical Labs reported revenues of $19.6 million compared to
$18.2 million a year ago, an increase of $1.4 million or 8%. Molecular
testing continues to grow, as well as new accounts added beyond existing
regional areas, especially in the women’s health segment where Enzo has
increased its market share in the New York metropolitan area. Gross
profit was $8.3 million, with gross margin of 42%, up 300 basis points
from the prior year. Total operating expenses were $6.8 million compared
to $6.7 million in the prior year. Operating income amounted to $1.5
million, compared to $0.3 million a year ago, a five-fold increase.

Enzo Life Sciences revenues were $7.5 million compared to $8.3
million in the prior year period, a decrease of $0.8 million or 9%, due
to lower product sales resulting from timing of certain U.S. shipments
that are expected to be picked up in subsequent quarters, as well as
continued weakness in the academic and industrial markets due to reduced
funding, amid industry pricing pressures. Gross profit was $3.9 million
with gross margin of 52%. Operating income was $0.6 million, a decrease
from $0.9 million a year ago.

Fiscal 2017 Nine Months Consolidated Operating
Results

Year to date revenues increased to $79.6 million compared to $76.2
million from a year ago, an increase of $3.5 million or 5%. Gross profit
increased 7% to $35.9 million and gross margin increased 100 basis
points to 45%. Operating expenses were $38.4 million compared to $42.4
million before licensing and legal settlements, a decrease of $3.9
million or 9%, principally due to lower legal fees offset in part by
higher SG&A costs.

Year to date net loss was ($2.6) million compared to a year ago net
income of $9.1 million, which included $18.5 million in licensing and
legal settlements. Basic and fully diluted per share loss equaled
($0.06), versus per share income of $0.20 last year.

Conference Call

The Company will conduct a conference call Friday, June 9, 2017 at 8:30
AM ET. The call can be accessed by dialing 1-888-459-5609. International
callers can dial 1-973-321-1024. Please reference PIN number 34280145.
Interested parties may also listen over the Internet at http://tinyurl.com/h5vvpm4
To listen to the live call on the Internet, please go to the web site at
least fifteen minutes early to register, download and install any
necessary audio software. For those who cannot listen to the live
broadcast, a replay will be available approximately two hours after the
end of the live call, through midnight (ET) on Friday, June 30, 2017.
The replay of the conference call can be accessed by dialing
1-800-585-8367, and when prompted, use PIN number 34280145.
International callers can dial 1-404-537-3406, using the same PIN number.

NON-GAAP Financial Measures

To comply with Regulation G promulgated pursuant to the Sarbanes-Oxley
Act, Enzo Biochem attached to this news release and will post to the
Company’s investor relations web site (www.enzo.com)
any reconciliation of differences between non-GAAP financial information
that may be required in connection with issuing the Company’s quarterly
financial results.

The Company uses EBITDA as a measure of performance to demonstrate
earnings exclusive of interest, taxes, depreciation and amortization.
Adjustments to EBITDA are for items of a non-recurring nature and are
reconciled on the table provided. The Company manages its business based
on its operating cash flows. The Company, in its daily management of its
business affairs and analysis of its monthly, quarterly and annual
performance, makes its decisions based on cash flows, not on the
amortization of assets obtained through historical activities. The
Company, in managing its current and future affairs, cannot affect the
amortization of the intangible assets to any material degree, and
therefore uses EBITDA as its primary management guide. Since an outside
investor may base its evaluation of the Company’s performance based on
the Company’s net loss not its cash flows, there is a limitation to the
EBITDA measurement. EBITDA is not, and should not be considered, an
alternative to net loss, loss from operations, or any other measure for
determining operating performance of liquidity, as determined under
accounting principles generally accepted in the United States (GAAP).
The most directly comparable GAAP reference in the Company’s case is the
removal of interest, taxes, depreciation and amortization.

We refer you to the tables attached to this press release which includes
reconciliation tables of GAAP to Non-GAAP net income (loss) and EBITDA
to Adjusted EBITDA.

About
Enzo Biochem

Enzo Biochem is a pioneer in molecular diagnostics, leading the
convergence of clinical laboratories, life sciences and intellectual
property through the development of unique diagnostic platform
technologies that provide numerous advantages over previous standards. A
global company, Enzo Biochem utilizes cross-functional teams to develop
and deploy products, systems and services that meet the ever-changing
and rapidly growing needs of health care today and into the future.
Underpinning Enzo Biochem’s products and technologies is a broad and
deep intellectual property portfolio, with patent coverage across a
number of key enabling technologies.

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 which 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,
litigation, and general business conditions. See Risk Factors in the
Company’s Form 10-K for the fiscal year ended July 31, 2016. 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 press release.

The following table presents a reconciliation of reported net income
(loss) and basic and diluted net income (loss) per share to non-GAAP net
income (loss) and basic and diluted net income (loss) per share for the
three and nine months ended April 30, 2017 and 2016:

The following table presents a reconciliation of reported net income
(loss) for the three and nine months ended April 30, 2017 and 2016 to
EBITDA and Adjusted EBITDA:

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