Q2 2022 Prophase Labs Inc Earnings Call
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Yes.
Yeah.
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Good morning, and welcome to the Prophase Labs second quarter, 2022 financial results and corporate update.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
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Please note this event is being recorded.
I would now like to turn the conference over.
Q, Ted Carcass, CEO and chairman of the board of Prophase Labs. Please go ahead.
Thanks, So much and thank you all for joining me today before we start unfortunately.
I have to read the forward looking statement I'll read it quickly I think you all know what it is before we begin today's call I want to advise everyone that today's conference call will contain forward looking statements, including statements related to our bad debt.
One of them and future events, including statements regarding projected that the results of the third quarter of 2022, our expectations regarding the COVID-19 pandemic future waves of the pandemic and continued demand for diagnostic testing personal funding, but HRS a funding our plans to grow our diagnostic business and expand our lab services.
To grow our genomics business is that with plans to develop why backward echoed here and our expectations regarding the sufficiency of our cash and working capital. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those suggested by the forward looking statements.
Additional information concerning factors that could cause our results to differ material materially from the forward looking statements are contained in the earnings release that we issued earlier today as well as in our public filings with the SEC. The company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise except.
To the extent required by applicable law finally, a conference call is being webcast. The webcast link is available in the Investor Relations section of Prophase Labs got Todd. Thank you Wendi Grasso, our amazing securities attorney or putting together my forward looking statement alright.
Now then how 'bout away a welcome all I really appreciate you joining I really appreciate your support and interest in our company.
It's always hard for me to gauge whether there are some new investors on the call and to what extent I should address them.
As opposed to a longer term investors and analysts and so forth or a couple of quick things just to point out for those that aren't aware of.
First of all I have these two great investment banks that we work with bank equity at a T. Wainwright. They both cover our company from an analyst point of view, but in addition to that they're fantastic companies to work with I have 40 years of experience working on Wall Street, working investment banking firms and so I made sure.
I had a I had a choice of 100 that might be an exaggeration, but a choice of dozens of investment banks to work with it's critically important when your development stage.
Company to have the right relationships with the right investment bankers and we certainly have those I should also mention and that's.
That's more on the institutional side, but you also mentioned on the retail side, we work with Red Mark, which actually Canadian company, but they do a fantastic job they've set up.
Virtual non deal road shows fourth Ah I I've been doing those roughly every week two weeks three weeks you can contact red Mark.
If you were ever interested I do presentations to redo the latest.
It's basically an overview of the company as well as you know the moist any information its public I'm always doing a review and a recap some of our long term shareholders.
Loved those calls even though it is primarily the purpose of it is for new investors I should also point out that on our website, we actually have to slide presentations now one is for the overview of the company as a whole for prophase labs and its five subsidiaries and then we have a separate approximate 30.
A slide presentation, just on propane biopharma.
I promise you we would not have put all of that work into that slide presentation had gone through all of that if I didn't think that it had significant potential I'll get to that momentarily I do want to keep this call short the second quarter earnings release does speak for itself. We are one of the few development stage companies out there that actually earn the money.
Alright, and we earn it every year every quarter and our and our numbers continue to grow year over year, and our working capital growth quarter to quarter, and we paid dividends and we make acquisition.
Somebody on this call.
Find me one company out of the 10000 NASDAQ companies in the universe, you know, they're not all Microcap a final bill any any Microcap company.
That can claim to have done all the things that we continue to accomplish because I can't find one that can grow back and make smart new acquisitions. So that we have the future while at the same time, earning money in the present, it's a it's a rare combination I don't take all the credit for it we have a team that's really fantastic.
And you know, let me get into a couple of things I don't have a lot of prepared remarks I do these presentation every few weeks or even more often with red Mark and the numbers do speak for themselves, but I do want to get to the Q&A early I don't want to have a long call just to listen to me talk.
So a couple of things I do want to point out.
First of all Prophase diagnostics, we got slammed with a curve ball in the second quarter when.
When we found out at the end of the first quarter that hurts their HR I say funding. They had run out of funding. This is the government funding that was paying for people without insurance to get tested we kept hoping that it was going to come back it did.
I give actually Jason carcass, not a coincidence we have the same last name. He is my son.
He took the reins and pivoted our business. So that we could be more insurance oriented we were probably a that's a rough estimate around 70% uninsured.
Going into the second quarter and he put it in and work very closely with our Chief Information Officer, Sergio Marias, who does it absolutely phenomenal job of their IP and they develop together a better IP platform.
But could actually pick up insurance on the spot and so we in any event, we pivoted very quickly and understand you know a lot of our business comes from culture, Our services from 10th on the Street.
People walking up to a 10, so for us to have a sophisticated platform at a test that is being removed on a daily basis I promise you, it's no easy feat.
And so we actually brought a lot of sophistication you know.
For a business to attest that isn't in and of itself, particularly sophisticated so I give them an enormous amount of credit.
Basically 70% of our business went away overnight and it did so during our seasonally weaker quarter and yet we still have these phenomenal results. So I get the two of them an enormous amount of credit.
And so Jason has been promoted to president, it's well deserved he's responsible for building the revenue base of the company to just an extra ordinary amount of revenues.
So he has a very bright future at the company is doing a phenomenal job and Sergio has built a an absolute beautiful state of the art IP platform. So we are in great shape I would also like to highlight that Alice Leroy was also promoted two in addition to being C. O O approach.
Diagnostics She's also C O O.
Our new newly formed division a wholly owned subsidiary Prophase Biopharma She was.
Instrumental really integrally involved led the charge and the compounds that we license them in developing the relationships.
With the teams that invented these compounds that we licensed these compounds from she's really taking a lead on all of this is really exciting.
We think the prophase biopharma has enormous upside potential.
And I'll get into that a little more but I just wanted to highlight some of the people behind the same but it really did a fantastic job for us I should also mention that we hired.
Bill White.
We hired him during the second quarter. So does the second quarter highlight he is our new CFO .
He's really integrated himself well into the company. He worked incredibly well with Monica Brady, who continues as both chief accounting officer of the power company as well as CFO of Prophage diagnostics.
Really working well together we're building the team further.
We've hired an additional controller, we have another controller coming on board. We you know, we're really building up the finance Department. So you know I've never felt better.
Bill is going to work with Monica and taking our company you know Monika help take our company from a $10 billion company to $100 million completed $200 million company now we want to take it to a billion or multibillion dollar companies and I believe bill can help get us there.
So that's just and that's just touching the surface on our team who really have a fantastic team here and at the end of the day, what I want to go back to them, it's going to be a little bit of a ramp.
At the end of the day and I know I've told this story before but in Microcap companies. The most important thing is the vaccine and the management team. That's what I learned 30, and 40 years ago, It's what Warren Buffett said for 40 years, but the truth of the matter is so difficult.
Because what happens is you get excited about the product or the service not the management team at every management team is optimistic about the product and so it's critically important.
From an investor point of view to pay attention to do you have a management team that executes, but it's often hard because of the startup companies you often have startup Mexican team. So this is just another situation, where if you're invested in a company you're investing in a management team that has.
Proven track record of success year after year after year after year and look we don't always know what the future is going to bring we don't we didn't know that all of sudden Hearst it wasn't going to be funded and we you know 70% of our business was going to disappear alright, but we responded in other labs didn't and so we we run circles around other labs, we have more supposed.
Kt Tech.
Technology I T. We have more sophisticated equipment, we're much more efficient in processing, we don't lose that knock on wood I don't think we've ever lost a customer of our.
Our customer base continues to grow and Poland isn't going anywhere that I would just mentioned.
We go through waves of Covid going back a year or a year ago everybody thought.
We would have you know COVID-19 for a period of time it would go away and that we'd be a one trick wonder well guess, what COVID-19 is not going anywhere.
It continues to mutate I said three months ago watch out for B, a four b a flight it's now accelerating in this country and this is Gerry what I consider to be our off season for Covid testing and yet we're still earning an enormous amount of money.
And by the way, we're earning money in the third quarter till and.
And again last year at this time.
I think it lost money in the second and third quarter, certainly on an earnings basis on an adjusted EBITDA basis between the two quarters, we were probably about breakeven. So it just gives you an idea of the execution of the company.
And let's let's now I just want to briefly look at the quarter speaks for itself I'll highlight.
Maybe just a couple of things in the quarter.
In terms of the numbers just so you should be aware first of all.
Between the fourth quarter of last year fourth quarter last year and first quarter. This year, we did over 90 million in revenues. When you now include.
The first quarter, which you know almost 30 million of everything we're talking about about $120 million in revenue just in the last three quarters.
Earnings our fourth quarter, $10 6 million and earnings first quarter $12 5 million in earnings.
No.
Yeah.
This quarter.
And I apologize net income up another $7 4 million in earnings.
And then.
Really like the focus on is adjusted EBITDA.
Because adjusted EBITDA takes out all of the noncash charges a lot of these are.
Our expenses that later later get reversed.
Our EBITDA over the last three quarters, it's $43 million at almost $3 a share and EBITDA.
Right.
Undeniable so anyway, that's the execution of our company I'm looking for this in the fourth quarter. This year will be testing not only for COVID-19, but also for flu in upper respiratory we are looking at I know, we always get questions about monkey pox, it's complicated.
We are looking to validate for monkey pox, but you have to put this in perspective you know.
The number of people that are actually going to be tested for monkey pox pales in comparison to the number of people that are being tested for COVID-19 and especially once we get into the flu season and people don't know if they have fluor COVID-19 guess, what they're going to rush to get Covid tested and that's regardless of which variant.
Happens happens to be you know around it that part.
So that's a little bit about prophage diagnostics again, we are diversifying our prophage diagnostics business, we're going to get into full clinical we're gonna be a well diversified diagnostic testing company in the future in parallel we are.
Planning on the build out.
Other genomics lab as well.
So that will really be a fully diversified diagnostic company, that's doing a high complexity molecular lab testing for upper respiratory.
Doing your full blood urine toxicology and so forth and then also a full array of diagnostic genomics testing. So that's on the that's on the lab side.
Let's talk about Nebula genomics just for a moment I just want to put this into a little bit of perspective nebula is growing off of a small base, but it is growing.
It takes time for us to negotiate.
Major deals for lower price whole genome sequencing, we do believe we are the low.
<unk> cost.
Cost offer of whole genome sequencing in the country and that can explain with whole genome sequencing is but if anybody's confuse you can ask them to Q&A.
But again, not only or we walk bringing at the lowest price I believe that only a couple of percent of the country or even those with whole genome sequencing is we believe that there was a massive opportunity to educate consumers about whole genome sequencing, where youre getting whole genome sequence not for ancestry information but.
But for health related information and there's always a growing interest in our country.
For people, who are interested in their health and becoming healthier and it all starts with learning about your personal genetic makeup which in turn can help you lead you into leading a healthier lifestyle based on diseases that you may be predisposed to.
And then if you happen to get a disease in the future analyzing your genetic makeup to help physicians determine what is the best course of treatment for your disease. That's basically what whole genome sequencing is all about the first step in that is getting whole genome sequence, we do provide whole genome sequencing directed.
<unk> online we are working at a feverish pace to offer whole genome sequencing and retail stores. All the major retailers are interested we're fine tuning that it is not a short term proposition, but that's all going extremely well and so we have a business here and that would be a lot.
And understand the whole genome sequencing as in the first inning similar to where the Internet was 20 years ago, and we are so well positioned we have one of the leading authorities and the world over the last 20 years in genomics and in Georgetown George Church.
Ph D a.
Harvard University, and he's a founder and a shareholder of our company on our Advisory Board.
We are so well positioned and I only.
Point this out relative to the fact that theres. Several other companies now in the same space one raised $18 million at we believe around a $15 million valuation another company.
And it's not yet public that they've raised some money, but the raising more and it looks like you're going to be raising approximately $20 million.
Closer to $100 million valuation and I believe that our company is significantly more developed but neither of those properties.
And yet.
Yeah.
W. A genomics.
It's valued at so very little.
In regard to our market cap. So I just wanted to give you that perspective that'd be all that has enormous potential if this was.
A silicon valley start up.
Venture capital, we're just investing in a private round I, probably should the valuations would be significantly greater than what anybody is valuing that'd be allowed in our market cap.
So that's a little bit on Nebula, and then I want to talk about prophase Biopharma. There was a lot of confusion in the last month, when we announced the developments here.
I cannot tell you how excited I am about propylene Biopharma Alex leeway.
And our legal team did an enormous amount of due diligence we work with these companies with global research and development group, we've been working with them for two years.
And so this isn't something where I just quick came up with that idea overnight to announce a deal and this particular deal to license linebacker wanted too.
Six months in the making and what I can tell you is the major University did significant preclinical.
Research on these on these compounds and came back with Great results. We've just had a conference call with them. The other day. They went extremely well they want to continue to work with us they're really excited and so we're just working out the details on that now linebacker in a nutshell and so first of all I just want to put this in perspective. This is something where we paid.
Virtually nothing off price, we pay $50000 of licensees are paid more and legal fees that I didn't like.
This is these are compounds.
But I believe we can get through the animal studies and the first human clinical study.
Within about 12 to 18 months at a cost under $5 million, we earn more than that under a seasonally weaker second quarter.
How how anybody could come away with a conclusion that this is somehow going to impact the value of our company or that all of a sudden out of the blue. After knowing me for 12 years of running our company, but all of a sudden I'm going to burn through our capital. It's just a ridiculous conclusions.
And so I've said publicly now we're going to our budget is under $5 million, we have over $50 million and net working capital today.
And that's after acquiring and developing nebulous after licensing and building prophase Biopharma. It's after building a state of the art.
Laboratory facility was you know I don't know, how many millions of dollars of equipment.
And so on and so on and so on and then of course, all the dividends that we paid out.
I really believe that myself and our management team has executed.
And all fast it's everything that you could ask the management team I believe that we have delivered and then some and I'm simply pointing out the best is yet to come for long term shareholders.
I'm sure it's gonna be bumpy when you are a development stage company.
But understand we're developing.
Products and assets and subsidiaries.
Absolutely enormous potential.
The last thing I want to mention is we've been in a bear market for a year and a half nobody realize we were in a bear market until the beginning of the year.
But micro cap biotech and life science companies had been in a bear market since January or February of 2021, almost a year and a half and so I've been pointing out to everybody who has been so bare at the last few months I've been pointing out that because we've been in a bear market for a year and a half the life science companies don't be so sure that theyre going to continue to drop.
And if you've noticed actually in the last one to two months.
So tech and life science companies have actually led the charge.
On the upside that's no accident alright.
Bear market the stock market.
You know discounts the future. It doesn't you know discounts and pass the discounts the future and so what's interesting just didnt have last week there have been a number of deals in the biotech and life science space.
And I'd like to just bring your attention.
Two a couple of them.
As I mentioned there are at least two genomics companies.
Start up genomics companies with valuations one around 50 million went around 100 million that are raising capital.
In two deals.
Deals to announce at least one gilead is buying microbiome for $405 million all of their assets are either preclinical or I believe they have one asset go in and just starting to go into phase one.
Alright, and they're being acquired for $405 million and so that's why I tell you we have a made a potential.
Major breakthrough in cancer research with the compounds that we are developing and I believe it will we could be at the same stage of development in 12 to 18 months ago, and then of course, Amgen pay $3 $7 billion for chemo centrex.
So yeah.
There were major deals starting to happen in the market starting to wake up and that's why you see biotech the lifesize lifesize companies starting to wake up. So it's just an interesting trend we're in the right place at the right time and in the meantime, we have a diagnostic business, where we're literally just kill it.
So with that I'd really like it if people want to ask.
Questions I'd love to have a lively Q&A.
If the shareholders want.
When we do the one mark.
Presentations that is almost all new investors. So they always have a lot of questions. Hopefully we've got some questions today and I'm happy to talk more about any subject I'm an open book I am a hands on CEO I'm involved in every aspect of our company so feel free to ask away.
And so.
Back to M. J, if you want to open it up to the Q&A I would appreciate that thanks. So much Chad at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys is that anytime. Your question has been addressed and you would like to withdraw your question. Please.
Star then two.
Our first question today comes from Chi Tsang of H C. Wainwright. Please go ahead.
Thank you for taking my questions could you give us a little bit more color.
The potential top line growth third quarter is it going to be.
A similar level.
The revenue in the second quarter or is it going to be trend down.
Little bit less do you exhibit a year on year gross over the third quarter of last year.
So here's what I can tell you historically the third quarter is our weakest quarter in fact.
Yeah, that's that's even been throughout history, when we had the colby's brand and we still do have a lot of sense manufacturing facility.
And if you think about it people are buying lozenges.
Coburn November December January February so there there wasn't a lot of activity in the middle of summer months and the same is as really been true with Covid.
If not.
Not besides the waves and Covid, but also you.
You know you don't have flu and colds as much in the summertime. So there wasn't much as much confusion over whether you up COVID-19 or you have a cold. So it's just natural I would I would say going forward I wouldn't even predict this into next year.
I would I would say that the middle of summer months are always going to be our weakest months for our business both for Covid testing as well as.
And our lives as a manufacturing business, but at the same time I would put it I would point out that we're in an interesting situation now whereby.
The rules have been relaxed around called but nobody's wearing masks and more importantly last year, you still had people being homeschooled students staying at home I'm not hearing any of that now all the schools are reopening nobody's wearing masks and so guess, what there's going to be.
An enormous amount of school testing, but that school testing.
We will start you know may be the very last week of August into September .
When we're getting into the fourth as we go into the fourth quarter. So I would expect a strong fourth quarter I would say that second third quarter.
We will likely be less than second quarter in terms of revenues and earnings.
But let's be very clear here, we're still learning a lot of money on a on a daily basis and so our third quarter. We're gonna have a very strong third quarter, but and and I expect two two year over year, our third quarter to be significantly greater than our third quarter of last year. So I said, the six to nine months I actually said that nine months ago.
I said before reported the fourth quarter of 2021, but for the next four quarters or numbers are going to be up year over year significantly and they have been every single quarter and they continue to be the fourth quarter was up our first quarter or second quarter and I I am consistent with that and I continue to believe that our third quarter is going to be up significantly year over year, we're going to be very profitable but.
You can assume it's going to be less in the second quarter.
Simply because the middle summer months are the slowest months of the year and the school season is really only catching the end of the third quarter, but so as we go into the end of the third quarter. The numbers are going to start growing pretty significantly and then as we get into the fourth quarter of course, I would've expect sequentially. Your numbers are going to be going up again.
So for the upcoming school year do you expect to schools to test to all students.
Students, regardless of whether they have symptoms or not or just students have symptoms.
Yes.
Everything I'm hearing and this is still premature and it's on a school by school basis, but I can tell you.
Explain this to shareholders before we have our customers are our specimen collection partners and we have one or two specimen collection partners in particular that specialize in the schools and all indications from them.
That theres going to be a lot of activity.
With the schools coming up in fact, we're ramping up for that right now and we're working with them right now.
And so yes, I expect there to be a lively amount of COVID-19 testing in the schools.
You know certainly the end of the third quarter into the fourth quarter I don't know exactly what the numbers are going to be but it's going to be robust.
So going forward the knockoffs HRA sorry, the lack of H R. S. A funding should have minimum impact on your revenue collection going forward well it was going to have impact it would've had an impact on the second quarter, alright, so whatever impact it had it had as far as I'm concerned.
We're planning for HRS, they not coming back, but with it not coming back and look at how much money. We just started in the second quarter and now in the third quarter, where we're going to be very profitable in the third quarter without it. So I'm I'm, assuming it's not coming back, but whatever impact it had it had we pivoted.
Have a sophisticated IP platform.
Or not really collecting patient data, but also in particular collecting the insurance information and not only collecting the insurance information, but also checking on the validity of the insurance information, which is key and so.
While 70% of our business before with HRS, a funded that all went away we've become more sophisticated and so we're very profitable in the business. We're doing the total number of tests we're doing.
The run rate is obviously going to be less.
If we're not testing that people that are uninsured, but we're much more sophisticated and collecting the information of the people that are so that we get reimbursed for them and in those numbers or you know trending art shrunk.
Got it and with respect to the personal genomics business shall we still expect some significant marketing event to occur before the end of this year.
Well by marketing event, there's there's oh my goodness, there's really two or three things one is getting into retail stores and the retailers are have been very receptive.
And.
The complicated part of it actually isn't the retailers. The complicated part is the logistics on where we're doing the whole genome sequencing and what price we're doing and that we are negotiating I think I've mentioned I know I've mentioned before we are negotiating with.
With the company.
In the.
And then in the UAE and this is a multibillion dollar company and they love us They don't have a presence in the United States and they want to.
Work with us and so you'll you'll hear more about that in the coming months is not a doubt in my mind about that.
But then in addition to that we're also coordinating our efforts with regard to doing the whole genome keep asking at a lower price does this company does you know like 10 times as much whole genome sequencing as anybody else in the world. So they can provide us with the best pricing. So we're working on that they also want to work with us on.
Building a lab in the United States that does whole genome sequencing. So there are some complicated factors there too there's really alumina is the only company in the United States. They have sort of a monopoly on whole genome sequencing. This year and then they're at very high prices and that's why we're forced to work with international companies, but the patents that.
The monopoly short it goes away in January of next year, and so their biggest competitor will be entering the United States and we expect the pricing dynamic to change dramatically and then that makes things make makes things more complicated because I don't want to enter a long term agreement for whole genome sequencing with one of these companies and.
Find out in January of next year, the pricing brought below our long term contract and so that's why I'm, just giving you a taste of how complicated things are which is also a reason why shareholders need to bet out a management team that actually can work through these complicated details, but that's what we're doing having said that I'm very confident.
We're going to be dropping the pricing of whole genome sequencing I am very confident that we're going to be.
Be providing whole genome sequencing and major retailers I am very confident that we are going to be.
Working on strategic relationships with other major companies and when you put that altogether.
But you know.
The market cap of nebula, yeah, it could be worth more than the entire market cap of our company and this is a company that has over 50 million in net working capital and the reason I say that I'm just looking at.
And I call them competing companies, which are not really competing companies.
There are two companies out there that are startup companies that are one of them is actually completely copied.
Story of our business model into the story and they have they ever.
They have I've I've been told they have a $50 million market cap pretty money and then theres. Another one with 100 million. So it's really interesting, but theres huge potential here. We are international companies that are very interested in tabular and so I would expect before year end, we will have at least one if not two significant developments to be honest.
And I would expect when we go into next year.
The perceived market value of nebula is gonna be dramatically greater than it is now.
Okay. Thank you.
Yeah.
Thank you again and.
I've got a shout out to your China at H C. Wainwright, who does a fantastic job of following our company I really appreciate it.
We can go to the next caller that has a question. Please of course. The next question is from private Investor Patrick Patterson. Please go ahead.
Hello can you hear me.
I can hear you just fine and I loved the E. I would hate for you to introduce yourself without being in the middle.
[laughter] well, that's kind of how do you understand.
You and your team have executed.
Yeah.
Patrick you broke up I think I lost you. It appears that we have lost Patrick we can go okay excellent question.
Thank you Polly which comes from Dennis Waldman.
Productions L. L. C. Please go ahead.
Hi, Ted.
All I can say is wow, congratulations on a fantastic quarter.
It was much better than my highest expectations I do have two questions.
First for 2021, you made 41 cents.
For the first six months of this year, you've already done $1.29.
So for 2022, I don't see you, making anything less than $2 a share.
That's five times, what you did last year.
Yet our stock is just selling at six times P E.
What are your plans to bring more visibility to pro fees in the investment community.
[laughter] Alright, that's a great question I really like the way you calculate those numbers I personally like the focus on EBITDA more than earnings and when you focus on the EBITDA. The numbers are even greater in fact grow substantially greater but even even with your earnings.
I agree it's an interesting situation, where a tremendous growth company at a very low P E.
Besides having some great investment banks that we work with.
For which.
I am likely to do non deal roadshows with institutional investors in the future I also as I mentioned, we worked with Glenmark lately I've probably been been conducting a.
Virtual non deal roadshow, either once a week once every other week, we actually had one scheduled for this week, but I didn't think it was appropriate to.
To do that presentation of the day before reported earnings. So I believe we have the V N D R.
Next week and look at the other day, we've been in a bear market for a year and a half so as much as you can say that are you and this does as you I can't say that but you know you were saying that our stock is severely undervalued I can simply point out that even though it's severely undervalued.
At today's prices, it's dramatically outperform.
Virtually every.
Biotech and life Science company over the last year, plus given that we'd been in a significant delbarco. It appears we're just coming out of that now it doesn't mean, we're not going to back and fill but.
It's not just that the biotech and life science companies have trended higher over the last six to eight week. It's the fact that deals are starting to happen.
Deals are starting to happen that sort of tells the marketplace, if larger biotech biotech and major pharmaceutical companies are acquiring the smaller.
Biotech and life science companies, it's telling you that there's tremendous value.
Many of these stocks are oversold and undervalued now rigs.
Regardless of what's going on with inflation and gas prices and the economy in wars around the world and everything else. So I think I'm doing all the right things and to some extent.
It's market dictated but by the same token we don't need capital.
And we're generating enormous capital and I've always operated the company.
From the point of view, we're going to build value on a per share basis. The stock price will take care of itself as long as we continue to build value and that's what we've done over time and that's why our stock has performed over the last decade, we were 65 stock.
And now we've paid out $2 40 in dividends and we have another 10 or $11 talk I mean, you know our stock price up almost 20 times, while paying out a significant amount of dividend so as far as I'm concerned we're doing all the right things and the stock price will take care of itself, if we continue to execute and the.
The businesses that we are working on now have enormous upside potential I can't tell you on a month to month basis, what's going to happen, but I can tell you.
That you know over the next year and a half.
Between the potential of nebula, and the potential propane biopharma, while diversifying our diagnostics business.
There is still significant upside from where we are now I can't guarantee what month what quarter.
But all the things we're working on Berry and what I like about it is the things we're working on not only they have enormous potential but they are minimal downside risk.
I mentioned all of our businesses take propane biopharma out of the equation. Our other four businesses combined are all growing and.
And generating significant cash flow so the only business really at risk in terms of losing money is propane biopharma and I've said repeatedly now our budgets under $5 million I think for our budget under $5 million, we potentially have a division that a year and a half from now it could be worth literally hundreds of millions of dollars. So I look for opera.
<unk> with high reward and low risk and in the case of Nebula, we're leveraging all the tremendous synergies we're leveraging all the assets of the company between our distribution of food drug and mass stores.
Our.
History of marketing consumer products, et cetera, et cetera et cetera.
Prophase Biopharma.
And interestingly historically, we had a pharmaceutical division.
Before and Unfortunately, a management and do a great job of managing it but I'm really.
Really excited this has been in my blood for 40 years, I've always investing in biotech companies and I think we're on to something big.
I hope that answers your question, that's what essentially you.
You can call. It that is just the first part do you see other analyst picking us up besides the three that are covering us now.
It it look it's possible if I wanted to spend my time.
I'm, calling on an investment.
One of the issues.
With analysts.
Even though there is a wall between the analysts and the investment banker.
It gets it gets a little complicated and.
I'm, a very loyal guy and I like to believe that.
Well look I'm not really going to go there, but the Bottomline is sure I don't I don't see why other analysts one hour.
Our performance is fantastic.
And it's just a matter of how much time I want to spend marketing two new analysts to pick up coverage versus focusing on building the company and and where I think that my value. My time is best spent and honestly.
More interested in building the value of the company's stock price will take care of itself for short term traders no I don't honestly care, whether at this point short term traders or not I'm, just looking to build the value of the company, we don't need capital right now.
So we're in a great situation, if we get more coverage great am I working on it.
Yes, I would but that's not where my full time effort and you want to actually watch out for managements, whose full time effort is getting analyst coverage because they're all they're doing is promoting a worthless company I'm doing the opposite I'm building a valuable company and then let the stock price and the cover to take care of itself.
I understand one final question.
Spoiled us with these incredible quarterly dividends.
You had a great quarter, great cash flow this Q2.
Is this still appears to be extremely strong yet no dividend.
Do we have to wait another quarter before finding out if theres going be a dividend.
Chance, we could see something sooner alright, so here's the deal you actually just proves my point of my concern, which is that I don't want shareholders to expect a regular quarterly dividend.
Also it gets very complicated from an IRS.
Point of view and a legal point of view.
We start making it look like we pay a regular quarterly dividend every time, we announce earnings so and and truthfully right now we're in a situation where we have an enormous amount of capital that's growing we certainly could pay a dividend but at the same time. We also have a stock buyback in place, which we have not initiated yet I don't think were.
Loud too until.
A few days after we report earnings and let's see if the shorts want to try and play games.
And if they do we're happy to buy all the stock that they want to sell to us.
So I'd like to see how the stock buyback goes and at the same time I don't want to create the.
That we pay a regular quarterly dividend at the end of the day, we are a development stage life Science company and.
I have to manage the company prudently, having said that we certainly have the ability to pay more dividends in the future I personally love dividend I know that our shareholders love dividend, It's a way for all of US This year and the success of the company together. So believe me you know you you know full well that I am.
Motivated to pay dividends I, just wanted to be prudent about it and I also don't want to do it as a regular quarterly dividend. Because then if we have a quarter, where we don't pay a dividend everybody gets upset and everybody expects it and I don't want to do it just because people expect it and it doesn't matter to me, whether we pay a dividend now or a month or two from now.
So does that answer your question I'm not guaranteed.
Again.
Great. Thank you thank you and congratulations again.
Appreciate it next question. Please the next question is from private Investor Fred Mcdonald. Please go ahead.
Hey, Ted Great job, Hey, the University studying the online backup products.
Do you know what the results we'd be publicized in the press release or a medical journal and can you give us an update what you're hearing.
Yeah.
So that's actually a complicated situation because the university that did these preclinical studies.
And I don't know how much I can get into this or not get into this but because of certain agreements that were in place. So that we're not an in place made things a little complicated for publishing the results that's the.
That's why actually I believe the results could have come out already.
I can tell you that the University is so excited by the results. They want to continue to do more research on linebacker wanted to and in fact, we just had a conference call with them.
Yesterday.
That went extremely well.
And so theres a lot going on there.
I would love to come out with a press release.
Talking about these results.
Honestly it wouldn't change anything from our our company point of view that we're still going to do all the same things, but but then our shareholders would really understand why I'm. So excited.
And just for our shareholders out there and for new shareholders people, who don't understand what.
Linebacker went into it and why I'm so excited about it.
There is a growth factor that is present when you have cancer called pillar I believe its called pen 123 and understand this in layman's terms I'm explaining this to you.
If you think about it logically.
These growth factors are growing the cancer, while you're taking drugs.
Therapy chemotherapy, and so forth to try and keep try and treat the cancer.
So what if there was a compound out there that could inhibit the growth factor the pin.
While you're giving the patient the other drug therapy or treatment to try and carry of the cancer. If you think about it logically.
You would think that the odds of the drug or our chemotherapy treatment will work better if the cancer the growth of the cancer has slowed down and that's exactly the theory behind linebacker one and two so it has enormous potential as a coast therapy. Okay. We had and we had an analyst.
<unk>.
As far as I didn't do a lot of.
Research or pay attention.
And basically you know.
Said something.
Pretty ignorant quite frankly.
But this has enormous potential and so we have a university that a highly.
Regarded university did significant work it was like Oh, My God. This could be a major breakthrough in cancer and so they're excited they want to enter agreements now that we have the rights to that they want to enter agreements with us directly to do a lot more work and what we told them no. We don't want to give them our royalties are.
But you know, we'll collaborate with them and we will hire them and they can have publication rights and they were excited to do that.
And so that gives you kind of.
In very simplistic terms, what we're working with here and so then I point to the fact that just last week.
We had a we had a company that was acquired for 400 and $405 million, where all of their assets were either preclinical or one asset just going into phase one.
And they required for $405 million. So here, we have something that could be a major breakthrough in cancer. We're gonna be there are 12 to 18 months.
So.
And so it was interesting we announced the licensing of light rocker.
And because of one Atlas.
And what it did is it triggered a zach to go from a number one strong buy to I guess the number two by and it created a profit taking a momentum traders who sell the stock and you know I guess, you'll probably algorithms and funds that sell the stock. When you go from all one bite to chew it back so it triggered a domino effect, but that all seems to have played out.
Its course, and so our responses, okay, we'll buy back stock if theyre going to be short term games played with the stock buyback stock.
So obviously.
We believe.
The stock's undervalued to announce a stock buyback and again, we don't need to raise capital now anyway, but it just gives you an idea of the enormity of possibilities for what we're developing and yes. It is very early stage preclinical, but understand there's preclinical work.
We also had Charles River, who he was really very.
Very well thought of scientific organization organization for a clinical research organization.
For doing research and they.
They did this didn't happen overnight, there's been an enormous amount of preclinical work done on these compounds and then we had a major university independent of that.
Doing conducting a research that they're so excited about they don't want to collaborate with us on a longer term agreement.
So there's just nothing but enormous upside we paid virtually nothing for it. The first time, we have to pay a significant.
Milestone as phase three I would expect.
It wouldn't it would not surprise me if a major pharma if we got the phase III major pharma, we're all going to be able to retire on them.
We got to pay for it.
Right.
This is gonna be a joke at $10 are you Kidding me, we're gonna be looking to you know anyway I don't I don't want to go there I think I said more than that but I think I answered. Your question Great question. Thank you.
Hey, Ted one more question do you have any idea when the University study will be completed.
Yeah. So I believe it was completed but as I said and.
Each had asked that question.
It's complicated.
Because the agreement was not with our company and I don't know if you have the appropriate agreements were in place for them.
To be able to publish the study.
There's a there's a complicated issue I actually believe the study with the preclinical study that they did is completed and that's why they want to continue they want to do more studies.
So I don't know, if we're going to be able to publish it or not or when we're going to sort that will allow us I don't have more details now we just did.
Conference call with them yesterday that went extremely well so I can tell you. It's all systems go on development.
Of linebacker wanted to and the work that's been done to date has shown a truly very promising results.
Thank you.
You're quite welcome.
Pardon me. The next question comes from Patrick Patterson Private Investor. Please go ahead.
He's back I can.
Yeah.
It can be back sorry, I lost you there, but my question, Okay, probably boring one you're going to have today, but it's one I'm interested in.
I'll follow him.
And I'll follow Lab Corp, and they're big.
Dollar companies.
No they are in the clinic.
Nickel lab diagnostic testing traditional blood and urine that sort of thing.
You've been talking about expanding and youre going into there.
I just know you wouldn't be doing that unless you are your customers aren't going to come from can you share some handful of walnuts and what are your customers come from.
That's a great question so.
Here's the best way I can answer that first of all everybody has told US a year and a half ago. We how are we going to compete with Labcorp and quest have they affected us by even one penny could you imagine where startup companies find me another startup company alright.
Alright that in the last nine months of complete startup that just generated $43 million in EBITDA and 100, whatever approximately over $120 million and revenues alright, just in the last three quarter tell me a startup company that you've ever come across in your life that in its first year of operation to generate those kinds of number.
So it is labcorp or quest affect us by even a penny alright second a ball.
As I've explained there.
Infrastructure, they've been in business, a long time, we and their equipment is older and yes, they can buy new equipment and they can build new IP, but you also have to understand.
That.
You know.
They're not all of a sudden all their customers are already locked into their own infrastructure, they're already doing business.
With their equipment, but we built a state of the art lab with all new equipment and and IP platform that is custom made and developed and sophisticated based on the way business is being done today, so as far as I'm concerned our IP platform. Our equipment is as sophisticated as efficient as anybody out there and I do.
You know for a fact that the way we process certainly COVID-19 specimen.
We're one of the lowest cost most efficient processors.
Of specimen.
And that's why we haven't lost a customer none of our customers have gone to those big labs, they've got whatever by the Big Labs every time they go over to them. So separate from that now that doesn't really answer your question.
Interestingly I just had meetings the other day there are <unk>.
Lots of people in this world very connected people that are capable of bringing.
Bringing business wherever they want to bring business to and it's much more attractive to them to work with a company like ours, that's more entrepreneurial, but we'll work closely with them I mean could you imagine if if you're I don't know you are you have the ability to two cents.
'twenty nursing homes.
To do their clinical lab testing to a lab.
Could you imagine, saying yourself why did it called Quest now who am I Gonna call of Quest, and we're gonna be able to talk to the CEO of quest am I going to be able to talk to the president of quest am I going to be able to talk to an executive that's two levels below probably not.
Alright, you come to our company and you can work with US you're really you're working with Jason you're working with me and.
And yet we're meeting with high level people there is enormous potential and look at the end of the day again, you're betting on the jockey you're betting on the management team.
We've executed for more than a decade and more recently, we've executed in the lab business over the last two years. So now we're entering the clinical lab business.
If you want to bet against those executed by all means but I don't know logically why anybody would assume that we're not going to be able to execute I would say just the opposite.
Until proven otherwise you should assume that we will execute I can't give you a better answer than that because it's not like all of a sudden we have a chicken or egg situation nobody's going to commit to bringing us a large amount of business before we have the lab fully set up and operational.
And so it's a chicken or egg situation, there's a small possibility that I could I could buy a small lab not a big lab, that's gonna cripple us, but a small lab that gives us everything turnkey and if I see that we have.
Uh huh.
Customers with significant potential and I can align that with acquiring allowed so we can we can really jumpstart. This I will do that.
So I just want you to know we're working on a number of different angles, we'll have to see how it all plays out again I've I've mentioned previously I've, probably looked at 660 lab acquisitions over the past year. We're so spoiled by our own lab I don't like any of them.
But having said that.
There may be an opportunity that comes along.
And if there was maybe we will buy a lab, which would have a customer business and have all the licenses the choices, but at the same time one of the reasons that would be motivated to do that is because we're currently actually talking to <unk>.
People, who could bring us an enormous amount of business.
So, it's a chicken or egg, but you got to understand the same way we executed on building our lab business.
You know at Lightning speed. There is no reason not to believe that we're not going to execute on our clinical lab business and it's going to happen when it happens then.
Might have growing pains for a quarter or two but I expect to build a very valuable business. The same way that I and we have done over the last decade or so.
I hope that answers your question it was a good question.
No. Thank you very much and I. Appreciate you guys did a great job.
Great job.
Alright, Thank you Pat always appreciate your support.
I think.
And if I go back to our moderator are there any other questions.
At this time there are no more questions in the queue.
Okay. So then I would just like to thank all of our shareholders our analysts our investment bankers and potential investors I want to thank you all for spending the hour with me.
I have a running joke that I love to talk and here's a situation where I got to talking nobody gets it brought me I like to think that what we're talking about is.
Well really exciting and really positive and.
No honestly I've never been more excited about our company and the future of our company and I'm not talking about over the next month or two but over the next 12 to 18 to 24 months.
You could see some dramatic changes, it's not a guarantee but you could see a dramatically positive.
Upside.
In virtually every subsidiary we're working on and in the meantime.
The risk frankly is pretty minimal given that.
Our four operating businesses as a whole are growing year over year, and very profitable and our fifth one our Biopharma division. It has probably more upside than anything else, we're working on and the amount of capital in my mind, it's virtually a rounding error or what we're going to spend to develop it. So I think we're.
Well situated for the future and I appreciate everyone's attention and continued support have to break that.
Yeah.
The conference has now concluded. Thank you for your participation you may now disconnect.