ProPhase Labs, Inc. (NASDAQ:PRPH) Q4 2023 Earnings Call Transcript

Page 5 of 12

And understand endoscopies, they cost $2,000 to $4,000. There are people getting endoscopies once a year that insurance companies are reimbursing for it. Just the market for just people with Barrett’s esophagus or with a significant amount of GERD, it’s 7 million tests. Right now, insurance companies are paying up to $28 billion, $14 billion to $28 billion reimbursing for endoscopies just for these people. Now imagine if you add our test to it and we tell you, you’re not at any risk at all, you’re not going to go back to that endoscopy, that’s going to save the insurance going to be $4,000 a year. Or, we say that you’re at low risk, you don’t have to go back for an endoscopy. Or, you’re at high risk, in which case, you immediately go for procedure called an ablation.

It destroys the precancerous cells. All the GIs out there want to do ablations on their patients. The insurance companies won’t reimburse them. But if we give them a test to tell them that there’s a reason to do the ablation, all of a sudden the ablation procedures will go up significantly. The insurance companies will save a fortune because they’re now saving patients’ lives that otherwise are getting cancer and dying and all the hospital bills and all the surgeries because they do a simple ablation procedure. And at the same time, the number of endoscopies goes down dramatically. So, our initial target is 7 million endoscopies. We think we might get reimbursed $1,000 to $2,000. That’s a $7 billion to $14 billion market with no competition out there for a test.

That’s the potential of it. We’re moving forward. Equivir, I can talk about this in the Q&A. I really want to get to the Q&A. We’ve been developing this. This is another one of the products that we acquired during our phase when we were doing COVID testing, we were looking to the future. We’re now looking to roll out Equivir later this year. We’ve had fantastic preclinical studies. We’re almost done. We did a substantive number of clinical studies with a lot more patients. A lot of times, dietary supplements will do 20 patients, 40 patients. The gold standard is 100 patients. And a lot of times, company will split that up into two studies. I learned this from my days of turning around the Cold-EEZE brand and suffering through class action lawsuits, which we would win.

But I learned exactly what you need if you want to be golden. And that’s two 100 patient studies. We’re doing a total of over 300 patients. We’re halfway done. Our results have been great. We’ll be done with the other half shortly. That’ll bolster our claims, give us the best chance of success in rolling out the product. We’re looking to roll that out second half of the year. It’s a broad-based antiviral, just looking for the studies to be completed. We’re on a great track there. I mentioned our management team. I already called out Jed Latkin, who’s doing a phenomenal job with Pharmaloz. Without him, we wouldn’t be there with Pharmaloz. He’s also leading the charge. He has a biotech background. He represented BE-Smart esophageal cancer when we acquired it.

So, he’s leading the charge on that side. Jason did a phenomenal job with COVID testing. The revenues that he’s responsible for generating are the reason why we made these acquisitions. He’s now taking over at Nebula. He and I look at each other almost every day and we say, “Oh my God, it’s deja vu.” Exactly the type of response we got to COVID after we built the COVID lab, the type of response we got from businesses that wanted to do business with us, low-cost, highly-efficient, reliable management team. We’re now doing the exact same thing with Nebula, but the difference is with Nebula, we have some things that are highly proprietary to us, whereas with COVID, there were 100 labs in the country or more doing COVID testing. You don’t have that here.

We don’t have the company. We have more demand and less competition, and proprietary reporting, and sophisticated equipment that nobody else has. So just imagine the dynamics from three years ago, but now with all these extra proprietary elements, and just imagine where we’re going to go with this. And then Sergio, I never give Sergio enough credit. He started his own IT consulting firm after working in the military. As a high-level IT expert, started his own consulting firm with 18 IT consultants. We literally — he’s touched virtually every large company in the country, especially in the lab business. He is so sophisticated. We are so blessed to have him. He does so much more for us than simply our IT. I’m going to have more to talk about with Sergio in the coming weeks as it pertains to our genetic database.

We’re going to save that for another time. Suffice it to say we have a very strong management team. And of course, Kamal, led the way, he was one of the co-founders of Nebula Genomics. He has a great relationship with George Church. Kamal has continued to stay by our side and continue to help us develop our company. And of course, Robert Morse has significant experience in the finance world. And with that, investment highlights. Just very quickly, this is a complete review of everything I just said. Look, we’re expanding Pharmaloz Manufacturing to be one of now the premier lozenge manufacturing companies in the United States. We’re dramatically growing capacity. We’re already profitable for the first time as of Q1. That’s going to accelerate as we build capacity and as we take on more customers.

It’s just how quickly we take on these other customers that we’ve been pushing away in the past. We get one deal with one global brand, game over. Pharmaloz, that day is worth more than the whole market cap of our company. I am hopeful that that happens and that it happens soon. But regardless, we now have two additional brands. Besides the two global brands, we have two other brands that are dying to do business with us. And the business is going to grow, it’s just the matter of how quickly. I’d be guessing to tell you how quickly it’s going to grow. We’re building the capacity as fast as we can because as we do, we believe that the volumes — the revenue volumes are going to continue to catch up to it. Nebula Genomics, I just went through it.

Page 5 of 12