ProPhase Labs Inc. Q1 2023 Earnings Call
Speaker 1: So I that P.
Speaker 2: I.
Speaker 3: labs being first quarter 2023 financial results and corporate update conference call. 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.
Speaker 4: After today's presentation, there will be an opportunity to ask questions.
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Speaker 7: please press star and 2. Please note this event is being recorded.
Speaker 8: I would now like to turn the conference over to Ted Karkus, CEO and Chairman of the Board of Prophase Labs. Please go ahead. Thank you, Sarah. And thank you, everybody, for joining me today. Before we get started, I would like to remind you of the company, Safe Harbor Language. In this presentation, we will make forward-looking statements.
Speaker 9: including statements regarding our strategies, plans, objectives, and initiatives, and the underlying assumptions.
Speaker 10: While we believe that these forward-looking statements are reasonable as and when made, forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to our ability to obtain and maintain.
Speaker 11: necessary regulatory approvals, general economic conditions, consumer demand, or 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 filings with the SEC filings. This call will present non-GAAP financial measures.
Speaker 12: such as adjusted EBITDA. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC prior to this call and available on our website.
Speaker 13: All right, now that we got the forward looking statement out of the way, I want to welcome you all and really appreciate you joining me and appreciate your interest in our company, Prophase Labs. Just a couple of quick shout outs. First of all, we work with a company called Renmark.
Speaker 14: that creates...
Speaker 15: Virtual non-deal road shows, I do these approximately twice per month. If you are interested in hearing updates on our company, our company is constantly evolving. We are a dynamic company. We are growing in so many different areas. We are working on so many exciting things. There is so much going on. And so I like to keep our shareholders up to date. If you are interested in keeping up to date, please contact Remark. Find out. Sign up for them. Find out.
Speaker 16: on our website, we have two presentations. One is just for our biotech division, and the other is our company presentation that was significantly updated recently. So if you haven't looked at it, you might want to go through our company presentation. It was updated I think just in the last couple of weeks.
Speaker 17: So go to our website, it is really a wealth of information. I also want to just highlight, we are now covered by four companies, ThinkEquity, AC Wainwright, Joshua Levine at Confluence and Diamond, and our most recent Diamond Equity research.
Speaker 18: All four of these analysts that are following our company have estimated to lose money this year while having stock price objectives of roughly $15 to $20 for share. The most recently updated research report from Diamond Equity.
Speaker 19: has us with a $20 stock price objective. The reason I highlight this is because we are not an earning story this year. Anybody that's focused on us for earnings.
Speaker 20: You're invested or following the wrong company and let you know less I guess you're short And you think that you're gonna make money short hair stock while we're developing Underline assets which we believe have multi-billion dollar potential. That's up to you. But the the Point is we took advantage of
Speaker 21: an opportunity with COVID, which was a wonderful windfall for the company and for the shareholders. We got to help people while making an awful lot of money. We always knew that was not going to be the future of the company.
Speaker 22: with COVID, which was a wonderful windfall for the company and for the shareholders. We got to help people while making an awful lot of money. We always knew that was not going to be the future of the company. But we took advantage of the fact that we were able to make a lot of money
Speaker 23: a two and a half year bear market or a two year bear market in the microcap biotech stocks.
Speaker 24: And so while we were making all of this money, we were planning for our future by building out the underlying value of our company with some fantastic...
Speaker 25: two and a half years doing not COVID testing. COVID testing generated revenues.
Speaker 26: I look long term, I always tell people, I believe it is my destiny to build a multi-billion dollar company. I believe that we have the platform and the infrastructure now to do so. We didn't have that before. And so what the COVID testing did is it gave us that opportunity. The other thing I would point out to you,
Speaker 27: is that when we raise capital with ThinkEquity two and a half years ago, we did not take that capital for granted.
Speaker 28: We use that capital to grow a substantial.
Speaker 29: clear lab in New York and clear lab business with the COVID and the flu and the upper respiratory testing. We also use that capital to build out all these businesses that I'm going to talk about in the coming minutes and all you know all of these subsidiaries that we're developing now.
Speaker 30: And at the end of the day, we still have more working capital now than what they raised for us 2 ½ years ago. So because we executed ThinkEquity,
Speaker 31: and AT Wainwright and the other investment bankers that we work with trust us and know that we are here to protect the shareholders and develop the underlying value of our company on behalf of the shareholders. I do not take a single dollar in our company for granted. And so we spent these last years...
Speaker 32: developing these other assets which now have not only enormous potential, but some of them are starting to generate significant underlying value to our company right now. So this year will not be an earning story. It's nice that we earned a little money in the first quarter.
And again, I focus on Adjusted EBITDA because we have significant issues with our net income versus our Adjusted EBITDA. I'm sure lots of public companies have this because of acquisitions we made between expensive stock options, expensive things.
So we appreciate over time even while the value of these assets is growing. There are some issues. We have issues with nebula genomics in terms of deferred revenue. And so there are all these complicated issues. So I personally, I like to focus on the adjusted EBITDA. We have a wonderful adjusted EBITDA number in the first quarter. I am not focused this year on earnings. I'm not even focused on adjusted EBITDA.
every business that we're in. So you can expect that the numbers are gonna weaken further, but again, we're not focused on earnings this year, we're focused on building the underlying value of our company.
I'm sure most of the people on this call know our company relatively well and I'm not going to read our earnings release this morning through you, but just a couple of items to highlight.
I've certainly mentioned this on the run mark calls or we'll make sure we're all on the state page. We have a manufacturing facility that is at capacity for which we have enormous demand. We are extremely well thought of in the industry.
And from a Lawson's brand's point of view, reliability of supply is critically important. The retailers.
go ballistic. And I know this from turning around and selling the cold these breath. The number one most important factor to the retailers after having you know they want to carry products on their shelves that consumers want to buy obviously. But then the second most important factor is they want product on the shelves at all times. If there is a shelf that is empty.
They lose out on profitability and that's how these buyers at Walgreens, WalMart, CVS and so forth, that's what the reviews are based on. It's making sure that they're generating profits in every square and it's a shell space. So when there's a shelf that does not have product on it, the retailers literally freak.
And so there are supply chain issues in the Lozins business, rather large business globally. And so we have brands, some of the large brands in the world are coming to us and want us to do their manufacturing. Some of them want us to do all of their manufacturing, not only in the United States but globally.
So the potential for a manufacturing facility is extraordinary. I originally kept this business primarily just to keep our infrastructure and distribution in place so that we touch all 40,000 food, drugs, and gas stores in the United States.
but this is a business that's actually exploding. It's growing almost 100% per year. I've mentioned in the past that I think we have demand for at least $25 million of revenues next year in 2024. And we're just constrained by how quickly we can build out the additional capacity which is going to take this year to do so. — So,
Right now our revenues are running up almost 100% year over year.
And realistically, I'd say $25 million for next year. I don't give estimates, but I've already given this number out there, so I may as well continue to do so. $25 million is a reasonable target for next year for a manufacturing facility. It's the least interesting business we're developing, and even that business has enormous value relative to the market cap of our company.fold
That's going to be an ongoing theme during this call is the market cap of our company relative to the various assets that we're developing that have nothing to do with earnings this year. All right Think about what our manufacturing facility could be worth next year. I Asked me in the back of my head. There's no guarantee certainly, but I think our manufacturing facility
equipment itself.
that we've acquired is probably in the tens of millions of dollars. So we could almost get to a market cap without ever.
we've acquired is probably in the tens of millions of dollars. So we could almost get to a market cap without ever even…
probably in the tens of millions of dollars. So we could almost get to our market cap without ever even thinking about...
our nebula genomics business, our Lyme-Babber cancer compound, our esophageal cancer test. So I just wanted to give you or the full clinical lab business we're building. So let's talk about a few of those things. We have fully diversified our laboratory to have a full clinical lab and then we've also fully diversified it.
to have a state of the art genomic testing lab. We are waiting for the validations, which will take another couple of months, and then we will start to build out those businesses in the second half of this year.
With our whole genome sequencing business, right now we process our specimens abroad.
We cannot aggressively build a B2B business until we are processing these specimens in-house.
So we anticipate building a very nice Nebula Genomics business the second half of this year, particularly in the fourth quarter. In the meantime, our revenues are running up.
more than 100% year over year anyway. So, Nebula Genomics, understand there are similar businesses that are far behind us. We're probably three to five years ahead of some of these other businesses.
And yet they have $1,500 million market caps for these startup genomics businesses. And we believe that we are situated, well situated, to be the low-cost provider of whole genome sequencing in the United States and potentially globally. So our nebulous genomics business...
Again, right now we're only selling direct to consumers. We're looking to leverage this business in the second half of this year. I don't know when, but all of the, several of the major drug retailers are doing tests right now. The tests are going very well, and at some point I believe that we will get our whole genome sequencing test....
on store shelves like Walgreens and CVS and so forth. And then we have this fantastic B2B business. I'm not going to explain again what personalized precision medicine is, but it is the future of medicine, it's the future of research, and at the heart of it is a whole genome sequencing test, and we expect to be the low-cost provider of whole genome sequencing in this country.
retail stores. I'm happy in the Q&A if you have specific questions about nebula genomics. It is a very valuable business.
and I'm looking forward to building it further. Again, we have world-renowned experts, George Church and Russ Altman from Stanford University. George Church, of course, is world-renowned in genomics. They're on our advisory board. We talk to them regularly. We just had a call with them a couple of days ago.
and they are really involved in helping us build this business, introducing us to global players in the genomics field. There's just enormous potential. This is where the Internet was 25 years ago. We are so well situated. And so then...
Everyone knows I'm very excited about our esophageal cancer test.
In fact, it's really kind of mind blowing that we have the market cap we do and we have a cancer test that literally could be commercialized early next year that has the potential.
of our esophageal cancer test. So I just, you know, it's interesting. I just happened to know, it's just the other day, there was a company called.
they have a product called Cologuard, which is a test
For colon cancer, we have a test for esophageal cancer. We believe that we are going to have CPT codes and be able to commercialize our tests early next year.
So just to put that in perspective, if our test, our South Asia cancer test, if we're 10% as successful as exact scientists as exact science is, and we're at a point where we're
the value of our company would be almost 10 times what it is today. I just want to put it in that perspective for you and
when you look at our test versus theirs, and it's really apples and oranges because they're a colon cancer test and it's a test that consumers can take at home.
look at our test versus theirs and it's really apples and oranges because they're a colon cancer test and it's a test that consumers can take at home. Our test...
has higher sensitivity and higher specificity. In the 200 specimens that we tested, our test was accurate on all 200 to tell you whether or not you were going to get esophageal cancer.
It's really a remarkable test. We're just looking to do more studies similar to the ones that we've already done. And then we're looking to commercialize this next year. I don't know what the ramp up looks like, but the potential for our esophageal cancer test is enormous and put it in the perspective of an exact science.
and the sciences, it's really scary. And so again, that's why I go back to it's silly to focus on revenues. And I say that, I did a strip out into the Midwest a few weeks ago, and I met with several institutional investors and they were focused on revenues and earnings. So, you're going to focus on that again.
Invested in the wrong company. We're building enormous value what you should take away from the last two and a half years
We're building enormous value. What you should take away from the last two and a half years is that we have yet again
executed on behalf of the shareholders. I've been investing in small cap development stage companies for 40 years. The one thing I have learned is that 95% of the time, the managements don't execute on behalf of the shareholders. This is all we've done. This is all I've done my entire life. And this is what we're doing right now. And I'm excited to take you to the next exciting event today.
We have potential multi-billion dollar assets to develop and execute on. Before they were smaller projects. Turning around and selling the cold-dese brand, we sold it for $50 million. That was a huge win for us. Huge.
But it is going to have the potential of the types of activities that we're working on now. And then we can talk about Linebacker. And I'm not going to go into too much detail and then I'll open it up for Q&A. And again, you can go to our Redmark presentations if you want to hear the full presentation on each of our subsidiaries. Thank you very much.
By the linebacker, we're continuing to get...
really exciting results. It's one thing when you acquire technologies and you do your due diligence. It's another thing when you're actually doing the studies yourself. And what I can tell you is that...
Unanimously, every single scientist, medical doctor.
every single scientist, medical doctor, professional.
in the biotech industry that we are working with on our esophageal cancer test and on our linebacker cancer compound.
in the biotech industry that we are working with on our esophageal cancer test and on our linebacker cancer compound.
truly excited about what they're working on. Dr. Chris Hartley at Mayo Clinic is so excited, we will talk to him on almost a daily basis, he's so excited about our esophageal cancer test.
And you know Mayo Clinic is not just based in New York or I'm sorry in the United States they're actually But they also have offices in other places around the world including in Abu Dhabi and And as you all know we are developing ties
into Abu Dhabi and I'll have more to talk about that in the future. So there's just so much and if you think about it, what we're developing with esophageal cancer with nebulogenomics and with linebacker.
these are all initiatives that should be developed around the world. If we're going to save lives in the United States, why wouldn't we also save lives around the world? And so with our esophageal cancer, in particular, it turns out there are other parts of the world, such as in the MENA region, where the incidence of GERD in Barrett's esophagus are actually higher than the average age of the human.
than in the United States. So there's just tremendous potential.
And so on the linebacker, as I was saying, we're getting fantastic results. We recently announced very positive results in some initial studies and analysis that we did.
with your efforts. And I'm looking forward to updating our shareholder's further.
And I'm looking forward to updating our shareholders further in the coming weeks.
with regard to the studies that we're doing at Dana-Forber Cancer Institute and Harvard University site. So there's a lot.
to talk about there. And so while I gave the example of exact sciences
to talk about there. And so while I gave the example of exact sciences and how that potentially relates
to our esophageal cancer test. By the same token, I just happened to notice this the other day, there's a company called Biomea Fusion, BMEA. The stock in the last year went from $3 to $30.
on some positive phase two results. And in fact, in one day, the market value increased by over $500 million.
on some positive phase two results. And in fact, in one day, the market value increased by over $500 million. Over that year, the market value increased by $500 million.
their mark cap went from 100 million to over a billion dollars. I put that in perspective with us developing Linebacker, because it's interesting, you always want to argue that the market is efficient, but was the market efficient if the stock was $3 a year ago, $30, it had 100 million mark cap, now has a billion dollar mark cap.
10 times in one year and we are developing assets with the same type of potential. So I don't really want to focus on stock price but I do want to let our shareholders know we're developing assets that have the potential to dwarf the market cap of our company and that's why my suggestion is.
focus less on revenues and earnings. This is a transition year. I used the word transition in our press release today. Focus on the underlying value of the assets that we're building, because that underlying value, I believe, is enormous relative to our market cap. And I believe that long-term investors will be well rewarded if you continue to follow our stock.
And so that just gives you a little bit of perspective on how I'm thinking. I could obviously talk for another half an hour or another hour. I'm not going to. I'm sure there are going to be some questions in our Q&A. And again, I just want to thank you all for joining me today.
And I hope that there are some good questions out there and we can get more into details on some of these various subsidiaries.
So with that, Sara, I would like to hand it over to you for questions. Thank you. We will now begin our question and answer session. To ask a question, you may press star, then one on your touch-tone phone at this time. If you are using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question, please press star then Q. At this time, we will pause momentarily to assemble our roster.
Our first question will come from Fred McDonald. investor, please go ahead.
The first question will come from Fred McDonald, investor. Please go ahead. Hi Ted, how you doing? Hi Ted, how you doing?
directly. All right, so we have differences in the areas. You have to understand.
All right, so we have different subsidiaries. You have to understand, linebacker is a cancer compound.
that, and maybe I should go into this a little bit. You know, and this is why I love questions because, you know, kind of motivates me to go into a little bit more detail.
And so I'm going to go on a little bit of a tangent. I'm going to answer your question. With Linebacker, originally we were focused on this.
from the point of view that it's a great co-therapy that could work with some of the leading cancer drugs.
like Dr. Rubison, where we found that with these other cancer drugs, critically important with the FDA that use the lowest possible dose that will still generate a therapeutic effect. And the reason for that is these cancer drugs, while they're killing cancerous cells, they also kill healthy cells. So they're very dangerous and you want...
the lowest possible dose. So originally we focused on linebacker as a co-therapy because we found that it inhibits the growth of the cancer and we were focused on a growth factor called PIM kinase. There are multiple different kinases and we found that it worked particularly well on the PIM kinase and so we found that in combination.
you can take a lower dose of doxorubicin and get a better result. And of course this is in preclinical studies. And so this is what we are focused on. The reason why the announcement the other day was so important is that we found that there are other scientists have discovered other kinases and they are screaming at the major pharma.
to start developing drugs that directly affect these other kinases. There are kinases out there for which there is no known drug or compound, even, forget about commercialized, even under development for some of these other kinases. And yet we're finding that linebacker's inhibiting these other kinases up to 99%. My point is there is enormous.
potential for linebacker, not only as a co-therapy, but as an individual cancer drug that potentially could work better than many of the multi-billion dollar cancer drugs out there.
not only as a co-therapy but as an individual cancer drug that potentially could work better than many of the multi-billion dollar cancer drugs out there. The reason I went down this tangent
is because this isn't just for the United States. You know, and historically, I didn't think globally. The last thing on my mind was to think globally. I was just, you know, when I turned around the cold, we turned around in the United States. And even with the COVID testing, we're doing that in the United States. Now, we're developing businesses. Why can't we save lives around the world? Why would we only save lives in the United States? So why wouldn't we collaborate on developing Linebacker in other parts of the world? And then the same goes.
is because this isn't just for the United States. You know, and historically, I didn't think globally. It was the last thing on my mind was to think globally. I was just, you know, when I turned around the cold, we turned around in the United States. And even with the COVID testing, we're doing that in the United States. Now we're developing businesses. Why can't we save lives around the world? Why would we only save lives in the United States? So why wouldn't we collaborate on developing Linebacker in other parts of the world? And then the same goes for our esophageal cancer test.
which we're looking to commercialize in the United States next year. Why shouldn't we be developing a esophageal cancer test in other parts of the universe? This is life-saving. It'll change people's lives. I truly believe that. The scientists working on this truly believe it.
if you can let somebody know a year or two earlier that they're going to get esophageal cancer, the current methodology or the current standard of care is for pathologists to look at a biopsy under a microscope.
It's an inexact science. They diagnose you way too late and that's why people are dying in such high percentages. 80 to 90% of people diagnosed with esophageal cancer will die of esophageal cancer. It's because it's an inexact science and the pathologist is recognizing it's under a microscope too late. Our esophageal cancer test recognizes esophageal cancer earlier.
And there's a higher incidence of GERD, which is gastrostophageal reflux disease, and baris esophagus, which is the precursor to esophageal cancer. The incidence on a percentage base is actually higher in other parts of the world, including the Middle East. So why aren't we, and why shouldn't we,
develop our esophageal cancer tests over there as well. And finally, nebulous genomics. The world is focused on genomic research, personalized precision medicine. Anyone interested in developing healthcare and helping people.
and developing better science. You're all focused on personalized precision medicine because it's all about learning about how your genetic makeup plays a role in diseases you're predisposed to and how drugs and therapies work on you. As I say, when two people get cancer, they get the exact same cancer, take the exact same drug and it works on one person, and it does work on...
if we're going to be the low-cost provider whole genome sequencing test and...
That's for research, you know, universities and, you know, our B2B business, but also with our consumers where we're selling a subscription to our library, which is highly proprietary, that's updated twice a week. So we have really two or three different ways we can go with Nebula Genomics. We can be doing that in other parts of the world.
not just in the United States but potentially around the world.
So we have all these businesses that we can now go global with, and so it's not a matter of one product or, you know, one service. We have several different subsidiaries that all could potentially go global. And obviously, there's nothing in our market cap. And, you know, and just one last thing, I'm going on a rant. analgesics cut out for the
Anyone on this call? Find me another biotech microcap company in this country that's developing multi-billion dollar assets that made money. I mean I think it's almost unheard of. So again, our focus this year is not on earning money. Our focus is on developing these assets.
and the payback on the development of these assets is huge. I gave the example of BioMeUp 10 times in one year because they got a phase 2 study with some positive results. Exact Sciences, if we are 10% as successful as Exact Sciences, our company's stock price will be up almost 10 times from where it is.
So I just want to give that perspective on what we're developing and the fact that we have a history of execution There's no reason why we're not going to continue to so I know that that didn't directly answer your question The point is there's no short answer to what we potentially could do globally. There's a lot we can do globally. I Have opened up my eyes to working globally
And it's just a pure coincidence that we hired Sam Beeler, a Chief Strategy Officer who has strong ties into Abu Dhabi in the Middle East. And then George Church, we were quite nebulous, he has strong ties to every major genomics company in the world. And we are working very closely with both of them. And then it turns out we also have investment bankers.
who have strong ties into that area. So there is so much potential in other parts of the world in addition to what we're doing in the United States. I hope that answers your question.
Thanks Ted. Hey Ted, one more question. When are you going back to Abu Dhabi? Listen, I have to be more careful what I say publicly and what I don't, and I'm not sure what I should say on a shareholder's conference call.
But I have made it clear, you know, we do have an MOU with G42 Healthcare, G42 Healthcare merged with Mobila Healthcare to form M42. You know, we're talking about companies with billions and billions of dollars. Mobila is a 242 billion dollar company.
There's enormous opportunity over there. We already have an MOU in place. And I am currently traveling back and forth to Abu Dhabi. And I hope to have more to share with our shareholders.
in the short term, in the coming weeks and months. And whether that's weeks or months, I don't want you to hold it. I don't want to say any more than that right now.
Next question comes from Hunter Diamond with Diamond Equity Research. Please go ahead. Firstly, congrats on the results. I saw you recently made a senior level hire in diagnostics. Maybe you talked about within oncology the company's ambitions and then secondly how it kind of ties into your existing assets.
facilities? Sure. So what's interesting is there are synergies between our various subsidiaries. And so what's nice when we work with somebody that brings expertise to developing linebacker, oftentimes this person will also bring expertise in developing our esophageal cancer tests.
So it's nice that there's some overlap there because we have true experts that can work on both. As the results for Linebacker, because they're so encouraging and they're so positive and have so much potential, we're hiring more people and doing more studies.
And again, I'm not breaking the banks to do our studies. We're talking about millions of dollars, not tens of millions of dollars to do these studies. And that's why I also said we're focused on building the underlying value of our company this year. You know, we're not focused on earnings for the rest of this year. Although by the fourth quarter, our earnings could start to get very interesting. But for the next couple of quarters, we're going to be primarily.
focused on developing these assets. And so we're hiring people like Dr. Matt Halpert. He has fantastic experience and perspective for developing cancer assets and knowing, it's really, it's a complicated business of figuring exactly where you want to focus because there's so many different cell lines and there's so many different directions we can go with Linebacker. Just even learning recently that.
this could be a fantastic monotherapy as an individual cancer drug and not just as a co-therapy and learning that it inhibits these other kinases for which there is...
there's a lot to be done with regards to linebacker and its future and we're going to explore that and develop it we're going to do it while being very mindful of the capital that we have on hand I always protect the shareholders ang others
with regards to linebacker and its future, and we're going to explore that and develop it. We're going to do it while being very mindful of the capital that we have on hand. I always protect the shareholders' interest. I don't.
You know make moves that hurt the shareholders. So I always have to balance between how much we're going to spend on research and development versus the bottom line and So we spend an extra couple million dollars, you know on linebacker so be it it has literally multi-billion dollar potential I also understand it could take seven years and a hundred million dollars
from now we have major form of writing a check for.
the market cap of our company just to take over the development of it, but we will see how other businesses are doing. If our esophageal cancer test takes off, we could be making so much money on that. I may not be so quick to give up the rights to linebacker even in other countries. So there is a lot to weigh here, but there is a lot of directions to take it in. And a linebacker.
we're just getting started. Esophageal cancer, on the other hand, isn't seven years and $100 million away from commercialization. It's a couple million dollars away and potentially less than a year away from commercialization. So this, and it's really sort of mind boggling if you think about it. And I've reviewed the numbers in the past, but.
Our initial target market are 2 million endoscopies per year for people with baric esophagus and potentially 7 million endoscopies per year for people with baric esophagus.
the more difficult incidents of GERD. And so it's a two to seven million per year testing market we're going after and getting reimbursed $1,000 to $2,000. It's a two to $14 billion market with very little competition.
commercialization potentially around the corner for a life-saving test for which is nothing like it. And something that would save the insurance company is the enormous amount of money. I've reviewed that before. So it's really incredible looking at our market cap relative to the potential of esophageal cancer. But so we're working on both.
Some of the same scientists are working on both. We're collaborating and I put in the press release, I'm not going to review all the names, but we're working with world-class cancer organizations and research universities.
No, it makes perfect sense. I appreciate the color. That's all I have. It was a fairly comprehensive call. Thank you for taking the question. Thank you so much. Next question, please, Sarah.
Our next question comes from Zhi Chen with HC Wainwright. Please go ahead. Great, I see. Hi, hi, Ted, thank you for taking my questions. My first question is could you...
Comment on the current trend of COVID testing, probably in the current quarter, and also the trend of non-COVID testing volume in your clear letter. Sure. So that's probably the least interesting part of our business, but of course, it had the majority of the revenues for the last two years.
So COVID testing is going to continue to slow. The public health emergency has now ended. And so you can expect that the testing volumes in COVID are going to continue to slow. And then also we're going into the summer months where upper respiratory testing is going to continue to slow.
So our lab business for the next couple of – we're about to go into the seasonally weakest quarters for a company. And this is historically, this is for 25 years. The middle of the year has always been the seasonally weakest part of the year for us. So think about it, with cold lozenges.
you know, no one's buying them in the spring and the summer and there's no reason to be manufacturing as much in the spring and summer. So our manufacturing would be weaker. Certainly our COVID testing with the PHE being eliminated and with the fact that there's less incidents of COVID, you know, that testing is slowing.
and our nebulous genomics, that business is growing, although it's at a smaller, albeit a smaller base. But again, seasonally, even with our nebulous, actually our nebulous genomics business, I don't want to get too much into that. That business is growing year over year, more than 100%.
but there are some factors that play a role in Nebula that have to do with holidays and seasonal promotions and things like that. So I'm giving you kind of a confusing picture. I don't wanna get too specific, but it's pretty obvious. All the analysts have us losing money this year. It's not an unreasonable expectation that we're going to lose money this year, but the underlying value of our assets are growing dramatically.
which I believe dwarfs our market cap and dwarfs any issue related to whether we make or lose a couple million dollars. It was nice that we reported a profit in the first quarter, but it really doesn't make a difference in terms of the value of the company that we are building and our objectives. And I'm not managing the company.
to be profitable. So you can expect the COVID testing is going to continue slow. Our overall testing is going to continue to slow. Our clinical lab, we're not ramping that up until later this year. We have to complete the validations. And then our whole genome sequencing business, I mean that's really going to take off, I believe, once we get the validations and we're doing the whole genome sequencing. We are doing a part of the whole genome sequencing, and we are doing a part of the whole genome sequencing.
have and hold genome sequencing, we built out a state-of-the-art lab. We believe we've built up the leading state-of-the-art whole genome sequencing lab in the country.
That is a bold statement. I really believe in the business, that business is going to be big. But I think I answered your question regarding the rest.
My second question is you use the ExactCensus as an example. I wonder if you can comment on how many sales reps is ExactCensus using to market?
their colorectal cancer test. It's a good question. How many sales reps do you think you would need to successfully market the esophageal cancer test?
And another related question is for colorectal cancer, it is currently recommended by United States Preventive Services Task Force. I mean, is substitute cancer screening test recommended by any national guidelines, and if not, what the company can do to...
get the esophageal cancer test more visibility and recommended by guidelines. Great. So these are great questions. I don't want to get too much into exact sciences. I really just want, and I really don't want to be talking about other companies and I was really...
The same is more for shareholders to give them some perspective in terms of the magnitude of the potential. It might be an interesting case study to see how long it took Exact Sciences to build up into a $12 billion market cap company. By the same token, the dynamics are slightly different because they have a test that they can send to your home. There are issues with patient adherence. As far as the preventative or the recommendations with esophageal cancer, it's not a problem. It's not a problem. It's a problem. It's a problem. It's a problem. It's a problem. It's a problem. It's a problem. It's a problem.
Right now you have gastroenterologists telling you, you should get an endoscopy. They're the ones, this is going to be driven by the physicians with esophageal cancer. You're going to have physicians and with our tests, understand our initial target market is just on people that are already getting the endoscopy. So we don't have to sell them on getting an endoscopy. We don't have to recommend it. We don't need an institute recommending...
we're targeting patients who are already getting the endoscopies. All we're doing is targeting the physicians to say, hey, you're already doing this endoscopy. You already have seven, eight, nine specimens that you're studying under a microscope. We need a sliver of one of those specimens, one of those tissue specimens, to study with our tests to give you much more accurate...
readings on whether or not your patient is developing esophageal cancer. So we don't necessarily need a huge sales force. What we need are the cancer institutions and key opinion leaders to get behind us and to make it well known to the community of physicians and GIs as they need this test.
and that's why we're presenting at the major cancer conferences right now. And a lot of these cancer conferences are very difficult to get into, but because our results are so fantastic, we're being accepted to present. So we're continually presenting at the cancer conferences.
And so we're just working on key opinion leaders and major cancer institutes get behind us. We're working with world's renowned.
institutes in this regard. We're building up the recognition within the community and we're going to continue to do that while we hire an expert that's going to get us a CPT code. So we're doing all the right things in terms of the sales force. Those are logistics that we'll be developing throughout.
the course of the year. But understand the business is a little different because we're dealing with.
physicians, GIs, who are clearly going to hear about our tests. I would say every GI in the country, a year from now, is going to know about our tests. And so we get the CPT codes, which allows reimbursement by insurance. We believe it's going to be a no-brainer. Howard GIs, if you have a test that can save your patient's life, how is a GI not going to say, Oh...
let's add this test on, we're already doing the endoscopy, let's add this test on. And what person who has esophageal cancer and is scared to death of dying of esophageal cancer, what person isn't going to want that test? Even if they paid cash for it. What person on the planet isn't going to pay, you know, I don't care if you're on welfare, you know, if you had to, you could pay $1,000 to $2,000. You could pay $1,000.
for a test to find out if you're gonna die of esophageal cancer. And you find out early enough, you can do a simple ablation procedure to destroy the pre-cancer cells before they become cancer. So the dynamics of the business are a little different than exact sciences. I simply point out that look at the success of exact sciences when their sensitivity and specificity, which is the accuracy of, you know, with false positives and false negatives, is significantly less.
than the accuracy of our tests. So all I'm simply suggesting is we have enormous potential and this is initial target market is on the patients that are already, the GIs are already recommending that they get the endoscopy. So we don't need.
That's very helpful. Thank you, Yi. And Sarah, do we have any more questions?
the CLEO lab and
How long will it take? Are you waiting for government approvals? Oh, so the one thing I won't say most proud of because I'm proud of so much within our company, but it's our relationships with New York DOH.
and all the regulatory. New York is the strictest
state in the country when it comes to CLIA labs and you know all the regulatory procedures and we passed everything with flying colors we're in great standing and we've built a fantastic CLIA lab it started with COVID testing in the which is a high complexity molecular lab
But then, as I promised, I would do a completely diversified into a full clinical lab with blood, urine, toxicology, and so forth. And so right now, we're just waiting for the validations to be complete to actually start that testing. So that business will start to ramp up.
later this year. What's nice about that business, you've got to understand, when we did the COVID testing for two years, first of all, everybody thought it was the last year, we ended up getting a windfall and got an extra year out of it.
the market never gave any value to that business because they knew it was going to end. When we build the CLIA lab business, the market is going to give value to that because that's a business that's going to be ongoing that we're going to use the same expertise to build a COVID business that we're going to use to build the full diverse...
clinical lab business. However, that business is going to build a lot more slowly than COVID built, but it's going to have a much bigger value. It's a no brainer for us to do this because we already have the state of the art lab. We're in great standing, we have all the licenses and so we're simply waiting for the validation to be completed which take a couple of months. And the same thing goes with our genomics lab.
lab business. However, that business is going to build a lot more slowly than COVID built, but it's going to have a much bigger value. It's a no brainer for us to do this because we already have the state of the art lab. We're in great standing, we have all the licenses and so we're simply waiting for the validation to be completed, which take a couple of months. And the same thing goes with our genomics lab, which is in the same location.
We have literally world-class equipment. We have relationships with the leading global manufacturers of equipment and consumables. And what's interesting is they don't want to compete with the labs that they're selling the equipment and the consumables to, but there are customers of theirs.
that are looking for processing, they're looking to get that processing on their specific equipment and on their latest and greatest day of the art equipment. We have all that. And so we believe we are also going to get significant referrals from the companies that we're doing business with that we bought the equipment from and we're buying the consumables from. So there's enormous upside in our lab.
for the whole genome sequencing.
for the whole genome sequencing. And then in addition to that, ultimately,
we should be able to provide the esophageal cancer test at the end of the day, that's a diagnostic test. So whether you put that into our biopharma subsidiary or you put that into our diagnostics and lab subsidiary, there's real overlap there. So there's so much more to our lab than simply doing COVID testing. We're going in three different directions with it.
And so our genomic business is already growing like wildfire. And then it's just a matter of time that South Angel Cancer, that's for next year in terms of commercializing it. And in the meantime, we'll also be building a clinical lab and there'll be nice energies because the lab activities are covered by some of the same people, you know, are lab objects.
our accessioners, our customer service people, our IT platform. There's tremendous synergies between these various businesses. So it's just a no-brainer to diversify and develop a clinical lab. But while the equipment is in for clinical labs, we'll be back.
We have, we've built out our genomics lab, and we're waiting for validation. And as we speak, we're also bringing in.
more genomics equipment. What we're doing with our genomics lab is truly incredible. In fact, we have a piece of equipment that wouldn't fit in the elevator. We couldn't get it up to steps. So they literally
had to cut a hole in our roof and take a crane to put this equipment in. What goes on behind the scenes to building the type of company we're building, there's a lot that goes on behind the scenes, but we're doing all the right things. I hope that gave you a little color for what we're doing with our lab.
Yeah, a little more than I asked for, but thanks. You're quite welcome. And, Tara, do we have any other questions? We have no questions left at this time. Okay. Again, if you'd like to ask a question, please press star then 1. Okay. Okay.
get a lot more information if you go to our website and look at the new company presentation which has been updated and goes into much more detail. And of course we also have the RENMark presentations that you're welcome to join and you set up for RENMark. I want to thank the support of our investment bankers. They've been incredibly helpful.
in helping our company build. I appreciate your following. Yi Chen, of course, always in a soup kamur and our latest to follow Hunter Diamond from Diamond Equity Research. I appreciate that report that you wrote on us. I'm really looking forward to the future and thank you all for your time and best of luck, have a great day. And thank you, Sarah.
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