Harbert Pushes For Change At Enzo
Funds managed by Harbert Management Corp. (HMC-Birmingham, AL) have purchased an 11.8% equity stake in Enzo Biochem Inc. (New York City) and nominated two new independent directors—Fabian Blank and Peter Clemens—to Enzo’s board. Enzo currently has a fivemember board and the next annual shareholders meeting will take place in early January 2021.
In a September 17 letter to Enzo’s shareholders, Harbert said, “For decades, Enzo has operated as a ‘lifestyle business,’ where management has seemingly placed its own personal and financial interests ahead of its shareholders’ best interests.” Harbert noted that Elazar Rabbani, PhD, age
75, has served as Enzo’s Chairman and CEO since he founded the company in 1976, while his brother in-law Barry Weiner, 68, is President, CFO and board member.
Over the past 10 years (ended August 31), Enzo’s total shareholder return has been -36% versus +199% for the Russell 2000 Index of small cap stocks and +337% for its peer group of lab and biotech companies, according to Harbert. In addition, Harbert notes that Enzo has reported operating losses every year since 2004, with cumulative negative operating income of $180 million, excluding legal expenses and settlements.
Harbert wants Enzo to sell its drug development division as well as non-core patents in its diagnostic products division.
Harbert says Enzo should focus on its clinical lab division, which operates a 44,000 square-foot lab in Long Island and 30 PSCs in New York and New Jersey. Focusing on the densely populated New York City area and prudently cutting costs could return Enzo’s lab segment to profitability,
according to Harbert.
In the nine months ended April 30, 2019, Enzo’s clinical lab division recorded an operating loss of $13.3 million versus operating income of $2.7 million for the same period a year earlier; revenue fell by 32% to $38 million as a result of pricing pressure related to PAMA and lower genetic testing volume due to increased competition.