Nebula Genomics secures major international B2B deal – Additional significant B2B deals in final stages
Ahead of schedule, Pharmaloz Manufacturing accelerates capacity expansion – set for rapid revenue and profit growth
Completes full transition and right sized operation in Q4 from clinical lab to cutting edge genomics lab
Company to hold a conference call
The end of 2023 marked a period of significant capacity expansion and growth for
There is a significant shortage of lozenge manufacturing capacity in both the
Regarding Nebula Genomics, given the positive reception at major genomics conferences during 2023 and demand for whole genome sequencing, management determined that the opportunity for its business was so significant that it shifted significant laboratory resources to whole genome sequencing and eliminated certain legacy clinical lab initiatives, including equipment and personnel. During this transformative phase to right size and focus the laboratory operations, ProPhase faced numerous one-time charges, including more than
Depending on market conditions, our ability to generate enhanced revenues, and other factors, the Company anticipates that there will be a significant sequential improvement in revenues and EBITDA going forward, driven by strategic advancements across its subsidiaries. Key recent developments include:
- Nebula Genomics has marked a milestone with the execution of an international revenue generating business-to-business (B2B) agreement with
MenaDNA, Inc. This agreement presents the possibility for significant expansion of its global footprint and paves the way for prospective future revenue streams. Several additional and meaningful distribution arrangements, both domestically as well as internationally, are anticipated during the next few months, if not sooner, but cannot be assured. - Our Pharmaloz Manufacturing subsidiary has significantly increased its production capabilities with the addition of new automation equipment and additional equipment to be installed in the coming months. With the recent acquisition of significant new customers, recent price increases and potential additional major deals on the near-term horizon, the Company is already experiencing a dramatic increase in both revenues and profits, which the Company expects to continue as the year progresses subject to market conditions and other factors.
- The BE-Smart Esophageal Cancer Test and the dietary supplement Equivir are both anticipated to be in commercialization in the coming months and may provide significant contributions to both the top and bottom line in the second half of 2024.
Participants can register for the virtual conference call by navigating to:
https://www.renmarkfinancial.com/events/fourth-quarter-year-end-2023- results-virtual-conference-call-nasdaq-prph-2024-03-15-110000
Additional corporate highlights and recent positive developments, include the following:
1) | Nebula Genomics | |
● | Analyzes greater than 99% of human DNA compared to typical ancestry tests that analyze less than 1%. | |
● | Has a world-class, proprietary bioinformatics platform to provide deep genetic health information, rare genetic mutations plus ancestry at highly competitive prices. | |
● | Data protected by world-class cyber security. | |
● | Signed a major international business to business agreement with MenaDNA, a large, well-placed distribution company that will enable us to grow our presence globally. | |
● | On the verge of signing another major long-term international agreement that, if signed, could represent an initial | |
● | Acquired a second high-capacity whole genome sequencing machine and are currently creating an optimized automated workflow to ensure high throughput low fail genomic sequencing runs. | |
● | The second high-capacity machine brings our total low pass (1X WGS) throughput potential to over 2 million specimens per year equating to | |
● | Hired several key industry veterans and streamlined existing clinical laboratory personnel. | |
● | Began offering genetic counseling to our direct consumer customers. |
2) | Pharmaloz Manufacturing | |
● | Generated revenues of just over | |
● | There is a significant shortage of lozenge manufacturing capacity in both the | |
● | The Company estimates that to build a new manufacturing facility from scratch with the capacity that Pharmaloz will have next year might cost $100+ million and take 5+ years to complete with FDA approvals. And of course, this would not include customers. | |
● | Recently announced the signing of two significant deals representing over | |
● | Engineering completed the design of phase 1 and phase 2 plans to take the plant from 1 lozenge line to a potential of up to 7 operational lines within the next four years and a potential of over | |
● | New liquid fill equipment ahead of schedule for delivery in Q2 allowing for new higher margin business lines. | |
● | Existing customers accepted an average increase of 15.2% for production beginning in 2024. | |
● | Passed the 3-year FDA audit with no citations. |
3) | BE-Smart Esophageal Cancer Test | |
● | Completed additional samples which are currently being analyzed by | |
● | Commercialization discussions continue with multiple potential global partners. | |
● | Company on track to commercialize BE-Smart in the second half of 2024. | |
● | Development on track with goal to receive Current Procedural Terminology (“CPT”) codes in mid- 2024 for insurance reimbursement. | |
● | Working in collaboration with | |
● | Working in conjunction with multiple groups to fully develop the ‘advanced traffic light’ approach of green, yellow, orange, and red to assess distinct levels of cancer risk, leading to optimized treatment approaches. This approach may lead to insurance companies mandating the use of the BE-Smart test for endoscopies performed on Barrett’s Esophagus patients. | |
● | On track to assess RNA Seq data confirming the presence of the 8 major proteins discovered by the BE-Smart cancer test that are patent protected. Also, in the process of confirming the lack of meaningful expression of other proteins currently used as the gold standard. Ultimately, this will further support BE-Smart’s potential advantage vs. all existing competing technologies. |
4) | Equivir | |
· | Completed enrollment of over 329 patients with last patient starting at the beginning of the 2024. | |
· | Released impressive interim results from 152 patients at the 90-day mark. | |
· | Out of the total number of upper respiratory incidents, 68% were in the placebo group vs only 32% in the Equivir group. | |
· | Initial data was better than initially expected with the full data set anticipated to be available by the end of | |
· | Pharmaloz is planning to ramp up production of the Equivir capsules with a second half 2024 launch timeframe. | |
· | Currently working with our distribution partner to leverage distribution in over 40,000 food, drug and mass retail stores. |
5) | Other financial highlights | |
· | Q4 2023 secured a low interest rate mortgage on the Pharmaloz plant. | |
Subsequent to year-end 2023: | ||
· | Realized over | |
· | Raised over | |
· | Increased monthly accounts receivable collections with current collection partner. |
Pharmaloz, once an undeveloped asset, has emerged as a powerhouse in the lozenge industry, driven by unprecedented demand. Our collaboration with a top engineering firm has enabled a scalable expansion plan, increasing our production capacity significantly without the need for additional labor. This strategic growth, coupled with cutting-edge automation, is set to redefine Pharmaloz's market position, offering substantial value to our stakeholders, high margin revenue and opening avenues for several strategic opportunities.
ProPhase Biopharma has seen remarkable progress, particularly with the BE-Smart technology, which stands to revolutionize gastrointestinal diagnostics and treatment if successful. Our advancements in this area underscore our commitment to innovation and patient care.
The promising interim results from Equivir's trials highlight its potential to significantly impact respiratory health, with plans already underway for a widespread commercial launch. Our established retail network will play a crucial role in making Equivir accessible to a broad audience.
As we move forward, our focus remains on driving value across all subsidiaries, with a clear vision of realizing and maximizing shareholder value. The strategic initiatives and operational advancements in Q4 have laid a solid foundation for future growth. With the current capacity expansions and revenue acceleration at Pharmaloz Manufacturing, I believe that this subsidiary alone, later this year, may be worth more than the entire current market cap of the Company. In parallel, the value of Nebula Genomics should grow considerably in the coming quarters as our B2B initiatives take shape and potentially accelerate revenues in the coming quarters. Suffice it to say, the outlook for
Financial Results
Net revenue for the year ended
Cost of revenues for the year ended
We realized a gross profit of
Diagnostic expenses for the year ended
General and administration expenses increased
Research and development costs for the year ended
As a result of the effects described above, net loss for the year ended
Our aggregate cash, cash equivalents and restricted cash as of
Webcast Details
Investors interested in participating in this live event will need to register using the link below. After the event, a replay will be available on The Company’s Investor website.
REGISTER HERE: https://www.renmarkfinancial.com/events/fourth-quarter-year-end-2023-results-virtual-conference-call-nasdaq-prph-2024-03-15-110000
About
Forward Looking Statements
Except for the historical information contained herein, this document contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our strategy, plans, objectives and initiatives, including our expectations regarding the future revenue growth potential of each of our subsidiaries, the expected timeline for commercializing our BE-Smart Esophageal Cancer Test, our ability to enter into new domestic and international long-term contracts for our Nebula Genomics business and the financial impact of any such contracts, the anticipated timing for the receipt of new equipment and installation of additional lozenge lines and their ability to increase capacity and revenue, our anticipated expenses, ability to obtain funding for our operations and the sufficiency of our cash resources, and the expected timeline for the launch of Equivir capsules. Management believes that these forward-looking statements are reasonable as and when made. However, such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties include but are not limited to our ability to obtain and maintain necessary regulatory approvals, general economic conditions, consumer demand for our products and services, challenges relating to entering into and growing new business lines, the competitive environment, and the risk factors listed from time to time in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any other
For more information, visit www.ProPhaseLabs.com.
ProPhase Media Relations and Institutional Investor Contact:
267-880-1111
investorrelations@prophaselabs.com
ProPhase Retail Investor Relations Contact:
514-939-3989
Jboidman@renmarkfinancial.com
Source:
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 1,609 | $ | 9,109 | ||||
Restricted cash | 540 | — | ||||||
Marketable securities, available for sale | 3,127 | 8,328 | ||||||
Accounts receivable, net | 36,313 | 37,054 | ||||||
Inventory, net | 3,841 | 3,976 | ||||||
Prepaid expenses and other current assets | 2,155 | 2,366 | ||||||
Total current assets | 47,585 | 60,833 | ||||||
Property, plant and equipment, net | 12,898 | 7,288 | ||||||
Prepaid expenses, net of current portion | 832 | 121 | ||||||
Operating lease right-of-use asset, net | 4,572 | 4,059 | ||||||
Intangible assets, net | 12,333 | 8,475 | ||||||
5,231 | 5,709 | |||||||
Deferred tax asset | 7,313 | — | ||||||
Other assets | 1,163 | 1,163 | ||||||
TOTAL ASSETS | $ | 91,927 | $ | 87,648 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 9,383 | $ | 5,905 | ||||
Accrued diagnostic services | 314 | 1,009 | ||||||
Accrued advertising and other allowances | 24 | 99 | ||||||
Finance lease liabilities | 1,840 | — | ||||||
Operating lease liabilities | 953 | 301 | ||||||
Deferred revenue | 2,382 | 2,499 | ||||||
Income tax payable | 3,278 | 4,190 | ||||||
Other current liabilities | 2,683 | 2,072 | ||||||
Total current liabilities | 20,857 | 16,075 |
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
Continued
(unaudited)
Non-current liabilities: | ||||||||
Long-term debt, net of discount of | $ | 2,924 | $ | — | ||||
Unsecured convertible promissory notes, net | — | 2,400 | ||||||
Unsecured promissory notes, net of discount of | 7,334 | — | ||||||
Due to sellers (see Note 3) | 2,000 | — | ||||||
Deferred revenue, net of current portion | 1,100 | 1,059 | ||||||
Deferred tax liability, net | — | 224 | ||||||
Finance lease liabilities, net of current portion | 4,092 | — | ||||||
Operating lease liabilities, net of current portion | 4,237 | 4,259 | ||||||
Total non-current liabilities | 21,687 | 7,942 | ||||||
Total liabilities | 42,544 | 24,017 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
Stockholders’ equity | ||||||||
Preferred stock authorized 1,000,000, | — | — | ||||||
Common stock authorized 50,000,000, | 18 | 16 | ||||||
Additional paid-in capital | 118,694 | 109,138 | ||||||
Retained earnings (accumulated deficit) | (5,029 | ) | 11,753 | |||||
(64,000 | ) | (58,033 | ) | |||||
Accumulated other comprehensive loss | (300 | ) | 757 | |||||
Total stockholders’ equity | 49,383 | 63,631 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 91,927 | $ | 87,648 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
(unaudited)
For the years ended | ||||||||
Revenues, net | $ | 45,236 | $ | 122,647 | ||||
Cost of revenues | 28,997 | 51,993 | ||||||
Gross profit | 16,239 | 70,654 | ||||||
Operating expenses: | ||||||||
Diagnostic expenses | 1,932 | 12,022 | ||||||
General and administration | 34,502 | 34,385 | ||||||
Research and development | 1,418 | 652 | ||||||
Total operating expenses | 37,852 | 47,059 | ||||||
(Loss) income from operations | (21,613 | ) | 23,595 | |||||
Interest income, net | 78 | 153 | ||||||
Interest expense | (1,275 | ) | (764 | ) | ||||
Change in fair value of investment securities | — | (76 | ) | |||||
Other income | 10 | — | ||||||
(Loss) income from operations before income taxes | (22,800 | ) | 22,908 | |||||
Income tax benefit (expense) | 6,018 | (4,445 | ) | |||||
Loss (income) from operations after income taxes | $ | (16,782 | ) | $ | 18,463 | |||
Other comprehensive (loss) income: | ||||||||
Unrealized (loss) income on marketable securities | (1,057 | ) | 932 | |||||
Total comprehensive (loss) income | $ | (17,839 | ) | $ | 19,395 | |||
Earnings (loss) per share: | ||||||||
Basic | $ | (0.98 | ) | $ | 1.17 | |||
Diluted | $ | (0.98 | ) | $ | 1.02 | |||
Weighted average common shares outstanding: | ||||||||
Basic | 17,207 | 15,845 | ||||||
Diluted | 17,207 | 18,651 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the years ended | ||||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (16,782 | ) | $ | 18,463 | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Realized loss on marketable debt securities | (3 | ) | 354 | |||||
Depreciation and amortization | 6,277 | 4,718 | ||||||
Amortization of debt discount | 132 | 4 | ||||||
Amortization on right-of-use assets | 433 | 343 | ||||||
Gain on sales of assets | (23 | ) | (127 | ) | ||||
Stock-based compensation expense | 3,536 | 3,986 | ||||||
Change in fair value of investment securities | — | (174 | ) | |||||
Accounts receivable allowances | 718 | (761 | ) | |||||
Inventory valuation reserve | — | (78 | ) | |||||
Bad debt expense, direct write-offs | 91 | 6,163 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (68 | ) | (4,498 | ) | ||||
Inventory | 135 | 702 | ||||||
Prepaid expenses and other current assets | (376 | ) | (617 | ) | ||||
Deferred tax asset | (7,249 | ) | — | |||||
Other assets | — | (555 | ) | |||||
Accounts payable and accrued expenses | 3,478 | (1,121 | ) | |||||
Accrued diagnostic services | (695 | ) | (881 | ) | ||||
Accrued advertising and other allowances | (75 | ) | (5 | ) | ||||
Deferred revenue | (76 | ) | 619 | |||||
Deferred tax liability | (307 | ) | (138 | ) | ||||
Lease liabilities | (193 | ) | (301 | ) | ||||
Income taxes payable | (912 | ) | 2,878 | |||||
Other liabilities | 611 | (423 | ) | |||||
Net cash (used in) provided by operating activities | (11,348 | ) | 28,551 | |||||
Cash flows from investing activities | ||||||||
Business acquisitions, escrow received | 478 | — | ||||||
Business acquisitions, net of cash acquired | (2,904 | ) | — | |||||
Issuance of secured promissory note receivable | — | — | ||||||
Purchase of marketable securities | (3,819 | ) | (6,777 | ) | ||||
Proceeds from sales of marketable securities | 3,817 | 1,047 | ||||||
Proceeds from maturities of marketable securities | 4,168 | 7,120 | ||||||
Proceeds from dispositions of property and other assets, net | 46 | 452 | ||||||
Proceeds from promissory note | — | — | ||||||
Capital expenditures | (3,155 | ) | (3,919 | ) | ||||
Net cash used in investing activities | (1,369 | ) | (2,077 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of note payable | 10,524 | — | ||||||
Proceeds from exercise of warrants | 1,200 | — | ||||||
Repayment of common stock for payment of statutory taxes on cashless exercise of stock options | (5,379 | ) | (7,474 | ) | ||||
Repayment of note payable | — | (7,044 | ) | |||||
Repurchases of common shares | (588 | ) | (2,152 | ) | ||||
Payment of dividends | — | (9,353 | ) | |||||
Net cash provided by (used in) financing activities | 5,757 | (26,023 | ) | |||||
(Decrease) increase in cash, cash equivalents and restricted cash | (6,960 | ) | 451 | |||||
Cash, cash equivalents and restricted cash, at the beginning of the year | 9,109 | 8,658 | ||||||
Cash, cash equivalents and restricted cash, at the end of the year | $ | 2,149 | $ | 9,109 | ||||
Supplemental disclosures: | ||||||||
Cash paid for income taxes | $ | 3,000 | $ | 1,696 | ||||
Interest payment on the promissory notes | $ | 932 | $ | 763 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Stock-based compensation included in the prepaid expense | $ | 1,024 | $ | — | ||||
Issuance of common shares for debt conversion | $ | 2,400 | $ | 600 | ||||
Net unrealized loss, investments in marketable securities | $ | 1,520 | $ | 1,294 | ||||
Assets obtained in exchange for new finance lease obligations | $ | 5,809 | $ | — | ||||
Issuance of warrants with unsecured promissory note | $ | 398 | $ | — | ||||
Common stock issued in asset acquisition | $ | 1,000 | $ | — |
Non-GAAP Financial Measure and Reconciliation
In an effort to provide investors with additional information regarding our results of operations as determined by accounting principles generally accepted in
We define EBITDA as net income (loss) before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding acquisition costs, other non-cash items, and other unusual or non-recurring charges (as described in the table below).
Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same names and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. We compute non-GAAP financial measures using the same consistent method from quarter to quarter and year to year. We may consider whether other significant items that arise in the future should be excluded from the non-GAAP financial measures.
We use EBITDA and Adjusted EBITDA internally to evaluate and manage the Company’s operations because we believe they provide useful supplemental information regarding the Company’s ongoing economic performance. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our operating results primarily because they exclude amounts that are not considered part of ongoing operating results when planning and forecasting and when assessing the performance of the organization. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and create a misplaced perception that our results have underperformed or exceeded expectations.
The following table sets forth the reconciliations of EBITDA and Adjusted EBITDA excluding other costs to the most comparable GAAP financial measures (in thousands):
For the years ended | ||||||||
(unaudited) | ||||||||
GAAP net income (1) | $ | (16,782 | ) | $ | 18,463 | |||
Interest, net | 1,197 | 611 | ||||||
Income Tax Expense (Benefit) | (6,018 | ) | 4,445 | |||||
Depreciation and amortization | 6,277 | 4,718 | ||||||
EBITDA | (15,326 | ) | 28,237 | |||||
Share-based compensation expense | 4,560 | 3,986 | ||||||
Non-cash rent expense (2) | 117 | 236 | ||||||
Bad debt expense | 91 | 6,163 | ||||||
Adjusted EBITDA | $ | (10,558 | ) | $ | 38,622 |
(1) | We believe that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA measure the Company’s operating performance without regard to certain expenses. EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and the Company’s computation of EBITDA and Adjusted EBITDA may vary from others in the industry. EBITDA and Adjusted EBITDA have important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under GAAP. |
(2) | The non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeds (or is less than) our cash rent payments. For newer leases, our rent expense recognized typically exceeds our cash rent payments, while for more mature leases, rent expense recognized is typically less than our cash rent payments. |
Source:
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