ProPhase Labs, Inc. (NASDAQ:PRPH) Q3 2023 Earnings Call Transcript

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And what’s nice about the B2B business is repeatable business, month after month, year after year, you can rely on it, we have very healthy profit margins. We don’t have to spend on advertising, you can plan it out. And so we’re going from a direct-to-consumer business where we have to spend money on advertising, still making nice money, nice profits to a B2B bsiness that can blow away the direct-to-consumer business. It’s repeatable, it has higher profit margins, and will be viewed as an incredibly valuable business to outsiders. What’s also interesting is some of the largest labs in the country, they’re dabbling. They’re getting their feet wet in the business of whole genome sequencing. But they aren’t doing it in a big way. And one of the — it’s kind of humorous to see what one of the largest labs in the country offers for pricing for whole genome sequencing, and two and three times the price that we offer.

And they have no ability to compete with us back. They’re not even really in the business. In fact, they’re in the business on very expensive on equipment, with expensive consumables, they can’t — even if they want to compete with us, they couldn’t. And so if somebody wants to build out a lab like ours, they first have to develop a relationship with the company that we have a relationship with. They then have to develop, they would have to build out the lab, acquire the equipment, bring in the genomics professionals. They would have to negotiate for pricing, they would have to do all these things, it’s going to take time. And so I don’t know what our lead time is. But our lead time might be a year might be year and a half. And if somebody else gets into the business, there’s going to be so much business to go around that it’s not like they will be taking business from us.

They’ll just — they’ll finally be in a year or a year and a half, there might be another lab that can do what we do. But short term there isn’t a lab in the country that can we do what we do. So that gives you a little bit about Nebula Genomics. I can clarify further in our Q&A. I would just like to mention, I don’t often spend a lot of time on the pure biotech plays, that’s our esophageal cancer test, or linebacker, cancer therapeutic linebacker. I’m not going to mention on this call, the stock market doesn’t care. I just want you to know that we have ongoing studies where we’re getting really, really great results. I don’t think the markets going to care anytime soon. So I don’t even bother to mention it. We’re not spending a lot of money on it.

But it’s a hidden asset that can be very valuable one day. And our esophageal cancer test we have so many avenues of excitement with our esophageal cancer test. And I’m again, I’m not going to explain too much of this call. I’ve explained what are esophageal cancer tests on prior calls. But we have multiple avenues for this test, including testing not only for whether or not you have esophageal cancer today, but whether you’re at high risk or low risk, and that’s what the insurance companies tell us they’re really interested in. That is a really big deal. We also have the ability with our technology to potentially provide this test without an endoscopy. If we do that, forget about it. It’s game over. We’re developing that now. And finally, we may with our technology and our know how, be able to develop a esophageal cancer therapeutic.

So we’re going in a lot of directions with it. We are absolutely — our time frames are totally in line with what I’ve guided our shareholders over a year, we’re looking to commercialize it early next year, get CPT codes early next year. And quite frankly, we’re continuing to get really great results. And I’m really looking forward to developing our esophageal cancer test. And finally, I mentioned in the press release, Aquiver [ph] is getting close at hand, we have this great clinical study going on. It was oversubscribed with patients. And the results so far had been really, really good. And so I can’t wait to get some of the preliminary results that we can use to finalize the claims that we’ll put on the packaging. So we can actually commercialize the product.

And so with that, I just want to check a couple of quick notes if there’s anything I want to mention. I will just mention one more thing on our Nebula Genomics with our GAAP versus non-GAAP, we have subscriptions, where we have to recognize the revenue over three years, even though we get the revenue upfront. And there’s minimal costs to provide the services of the subscription. It’s a little frustrating. We are correcting that now. But the beauty of the B2B is they’ll that’s a different business model, there may not even be subscriptions involved. So there will we won’t have these GAAP versus non-GAAP delays, you will see, I believe very strong numbers from Nebula next year. And understand when that happens, we go from a company losing money quarterly to company making money quarterly.

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