Good afternoon and welcome to the Enzo Biochem Inc. Fourth Quarter and Fiscal Year 2019 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 maybe 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, 2018. 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 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 its 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 your questions and comments following the presentation. I would now like to turn the floor over to your host. Mr. Weiner, the floor is yours..

molecular, immunohistochemistry, cytology and immunology. We expect to update the market by the end of the calendar year on these discussions. I would like to now highlight some of the key accomplishments of the company over the last year.

In September, Enzo Clinical Labs received New York State Department of Health approval for its AMPIPROBE HBV Hepatitis B virus viral load monitoring assay. And this was based on performance versus an FDA-approved competitive product.

Enzo's growing portfolio in the viral load monitoring market includes previous New York State Department of Health approval for a viral load monitoring assay for Hepatitis C virus or HCV and a viral load monitoring assay under development for immunodeficiency virus.

The company's extending menu will allow Enzo to provide one of the most comprehensive panels for sexually transmitted disease testing, a rapidly growing healthcare segment were reported common STI's in the U.S. have increased for the 5th consecutive year.

Approval of the HBV assay follows the July announcement of New York State Department of Health approval for Gonorrhea and Chlamydia tests for extragenital specimens, and the announcement that Enzo was creating a direct to consumer testing business for STIs.

Furthermore, the company is developing an additional test for human papillomavirus testing it in multiple sample types. Also the company was issued 74 patents worldwide during this fiscal year of 2019. Notably, the company was issued U.S. Patent No.

10,323,272, which is entitled nucleic acid probes for in-situ hybridization on June 18, 2019, which is directed to a new probe technology that allows for significantly more cost-effective, simple and scalable processes across the multibillion dollar diagnostic testing, drug development and academic research marketplaces.

The probes can be used to detect clinically relevant genomic targets, with high sensitivity in cell samples and biopsy tissue. Compared to competitive probes, Enzo's novel approach will be lower cost, decreased complexity, save time and avoid disruptions of sample integrity.

Also in fiscal year 2019, Enzo Life Sciences and Laboratory divisions invested approximately $10 million in strategic growth initiatives, such as developing good manufacturing laboratory practices and facilities, expanding strategic sales force and marketing practices and ramping up R&D and laboratory developed tests initiatives.

This investment is already resulting in cost reductions for the laboratory and diagnostic operations. Currently, approximately $4 million of the company's revenue is associated with these strategic growth initiatives.

Over the past five years, Enzo has systematically introduced its technology onto its clinical production floor through lab developed tests that are validated by the New York State Department of Health.

Over this period, Enzo has run over 100,000 of these Enzo LDTs, resulting in savings of over $5 million by substituting third-party vendor tests with Enzo's own internally-developed tests. We expect annual savings from these tests to increase in the next fiscal year to $3 million and then to $5 million in the following year.

At the lab, it is noteworthy to point out that testing activity in volume is up sequentially this quarter, as overall lab revenues grew 11% in the fourth quarter versus the third quarter of fiscal 2019.

Our expanding panel of STI testing, enhanced by the recent diagnostic approval is one of the most extensive available, including the highly comprehensive women's health diagnostic panel we are offering. I'd like to spend a few minutes reviewing the financial results of the quarter and the year.

Looking at the fourth quarter operating results, total revenues amounted to $21 million compared to $22.8 million in the year-ago period, a decline of 8%, reflecting new sharply lower industry-wide PAMA reimbursement rates. Also, reflecting sequential total testing volume which increased by about 4%.

Sequentially, clinical laboratory services revenue increased 11% from the prior quarter's $11.8 million, while product revenues for the quarter were up 3% over the prior year period, as a result of the successful implementation of new marketing and sales initiatives. Lab revenues declined to $13.1 million from $15.1 million in the year-ago period.

This is due to the reduced insurance reimbursement payments and changes to medical and procedural requirements for genetic testing by payers. Overall, gross profit improved sequentially by 21% to $6.3 million with clinical lab gross profit more than doubling to $1.8 million from $0.8 million and product gross margin increasing 2% to $4.6 million.

As noted previously, clinical services revenues for the fourth quarter and the full year ended July 31, 2019 reflect adoption of new revenue recognition accounting rules on a full retrospective basis. Under the new rules, Enzo reports uncollectible balances associated with patient responsibility as a reduction in net revenues.

Historically, these amounts were separately classified in operating expenses as a provision for uncollectible accounts receivable and amounted to $3.1 million and $3.7 million respectively in the fiscal years ended July 31, 2019 and 2018 and $1 million and $1.7 million for the respective fourth quarter periods.

Consolidated gross margins for the quarter of 30.3% compared with 35.2% a year ago and were up 300 basis points sequentially. Clinical services gross margins were 13.8% compared to 25.4% a year ago and sequentially improved from the third quarter. The improvement reflected both higher testing volume and enhanced efficiency.

Product gross margins for the quarter increased to 58% from 54% and sequentially was up 200 basis points. Operating expenses declined 12% or $1.6 million to $12 million year-over-year and sequentially remained flat, adjusted for net legal settlements.

Legal fee expenses declined by $1 million compared to the fourth quarter last year of $0.3 million and sequentially were flat in both periods. GAAP net loss was $5.4 million or $0.11 per share, an improvement of 7% compared to a year ago quarter net loss of $5.8 million or $0.12 per share.

The non-GAAP net loss was $5.4 million compared to $5.8 million a year ago and $6.7 million in the proceeding quarter. On a per share basis, the non-GAAP loss equals $0.11 per share compared with $0.12 a year ago and $0.14 in the third quarter 2019 on an adjusted basis.

EBITDA loss in the quarter and year ago approximated $5 million and $5.3 million respectively and decreased sequentially from $6.1 million on an adjusted basis.

Looking at full year operating results, total revenues were $81.2 million compared to $101 million a year ago, a decline of 20% and as noted earlier reflected newly instituted reduced reimbursement payments, insurance company claim rejections, and changes to medical and procedural requirements for genetic testing by payers.

Gross profit was $23.2 million compared to $40.7 million the prior year, with gross margins at 28.6% and 40.3% respectively. Legal fees declined by 41% to $3 million and tailed off sharply towards year end, while SG&A declined to $44.2 million from $44.5 million.

GAAP net income amounted to $2.5 million or $0.05 per share on a diluted basis compared to a net loss of $10.3 million or a loss of $0.22 per share a year earlier. Non-GAAP net loss amounted to $26.4 million excluding legal settlements compared to a non-GAAP fiscal 2018 loss of approximately $11.4 million.

EBITDA was $4.5 million compared to a year ago EBITDA loss of $9.1 million. At year-end, cash and cash equivalents and restricted cash totaled close to $70 million and working capital amounted to $65.4 million. I would like to turn this over for questions at this point in time..

[Operator Instructions] Currently there appears to be no further questions at this time..

Thank you very much for your attendance on the call. We look forward to reporting to you in the middle of December on our first quarter. Have a good day..

A replay of this broadcast will be available until Tuesday, October 29 at 12 midnight. You may access this replay by dialing 1855-859-2056. The PIN number is 4196818. The 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..