Prophase Labs Inc (PRPH) 2022 Q2 法說會逐字稿

Good morning, and welcome to the ProPhase Labs second-quarter 2022 financial results and corporate update. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Ted Karkus, CEO and Chairman of the Board of ProPhase Labs. Please go ahead.

Thanks so much. Thank you, all, for joining me today. Before 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 relating to our plans, expectations, future performance, and future events, including statements regarding projected financial 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, source of funding, the HRSA funding, our plans to grow our diagnostic business and expand our lab services, our plans to grow our genomics businesses, our plans to develop Linebacker and Equivir, 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 materially from these 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 statements whether as a result of new information, future events, or otherwise, except to the extent required by applicable law.

Finally, the conference call is being webcast. The webcast link is available in the Investor Relations section of prophaselabs.com.

Thank you, Wendy Grasso, our amazing securities attorney, for putting together my forward-looking statements.

All right. Now that I have that away, 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 our longer-term investors and analysts and so forth.

A couple of quick things, just to point out for those that aren't aware, first of all, I have these two great investment banks that we work with, ThinkEquity and H.C. Wainwright. They both cover our company from an analyst's point of view. But in addition to that, they are fantastic companies to work with. I have 40 years of experience working on Wall Street, working in investment banking firms. And so, I made sure 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 you're a 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 more on the institutional side. But I should also mention on the retail side, we work with Renmark, which actually Canadian company, but they do a fantastic job. They set up virtual non-deal roadshows for us. I've been doing those roughly every week, two weeks, three weeks. You can contact Renmark if you're ever interested. I do presentations that review the latest.

It's basically an overview of the company as well as -- I'm always -- any information that's public. I'm always doing a review and a recap. Some of our long-term shareholders love 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 two 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-page slide presentation, just on ProPhase BioPharma.

I promise you we would not have put all that work into that slide presentation and gone through all of this if I didn't think that it has significant potential. I will 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 earns money. All right, and we earn it every year, every quarter. And our numbers continue to grow year over year, and our working capital grows quarter to quarter. And we pay dividends, and we make acquisitions.

Please, somebody on this call, find me one company out of the 10,000 Nasdaq companies in the universe. They're not all micro-cap, but find any micro-cap company that can claim to have done all the things that we continue to accomplish because I can't find one -- that can grow, that can make smart new acquisitions so that we have a future while at the same time earning money in the present.

It's a rare combination. I don't take all the credit for it. We have a team that's really fantastic. And let me get into a couple of things. I don't have a lot of prepared remarks. I do these presentations every few weeks, or even more often with Renmark. And the numbers do speak for themselves. And I do want to get to the Q&A early. I don't want to have a long clauses 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 curveball in the second quarter when we found out at the end of the first quarter that HRSA, HRSA 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 didn't. I give actually Jason Karkus -- 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 -- this is a rough estimate, around 70% uninsured going into the second quarter. And he pivoted and worked very closely with our Chief Information Officer, Sergio Miralles, who does an absolute phenomenal job with our IT. And they developed together a better IT platform that could actually pick up insurance on the spot. And so we -- in any event, we pivoted very quickly and understand-- a lot of our business comes from concierge services and from tents on the streets. These are people walking up to a tent.

So for us to have a sophisticated IT platform at a tent 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 to a business to a tent that is in and of itself, particularly sophisticated.

So I give them an enormous amount of credit because 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 give 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 extraordinary amount of revenues. So he has a very bright future as the company is doing a phenomenal job.

And Sergio has built an absolute, beautiful state-of-the-art IT platform. So we are in great shape. I would then also like to highlight that Alice Lioi, who was also promoted to -- in addition to being COO of ProPhase Diagnostics, she's also COO of our newly formed division, wholly owned subsidiary, ProPhase BioPharma. She was instrumental really integrally involved, led the charge in the compounds that we licensed and in developing the relationships with the teams that invented these compounds and that we licensed these compounds from. She's really taken a lead on wellness. It's really exciting.

We think that 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 scenes that really did a fantastic job for us.

I should also mention that we hired Bill White. I believe we hired him during the second quarter. So it is the second quarter highlight. He is our new CFO. He's really integrated himself well into the company. He works incredibly well with Monica Brady, who continues as both Chief Accounting Officer of the power company as well as CFO of ProPhase Diagnostics.

So really working well together, we're building the team further. We've hired an additional controller. We have another controller coming on board. We're really building up the finance department. So I've never felt better. And Bill is going to work with Monica and taking our company. Monica helped take our company from a $10 million company to $100 million company to $200 million company. Now we want to take it to a billion or multibillion-dollar company. And I believe those can help us get there.

So that's -- and that's just touching the surface of our team. We really have a fantastic team here. At the end of the day, when I want to go back, it's going to be a little bit of a risk.

At the end of the day, and I know I've told the story before. But in micro-cap companies, the most important thing is investing in the management team. That's what I learned 30 and 40 years ago. It's what Warren Buffett has 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, and 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 the startup companies -- you often have startup management team.

So this is just another situation where if you're invested in a company, you're invested in a management team that has a 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 a sudden, HRSA wasn't going to be funded. And we -- 70% of our business was going to disappear.

All right, but we responded. And other labs didn't. And so we run circles around other labs. We have more sophisticated technology, IT. We have more sophisticated equipment. We're much more efficient and processing.

We don't lose -- not knock on wood, I don't think we've ever lost a customer. Our customer base continues to grow, and COVID isn't going anywhere. Next, I would just mention -- we go through waves of COVID. Going back a year ago, everybody thought we would have COVID for a period of time, it would go away, and that we'd be a one-trick wonder. Well, guess what, COVID is not going anywhere. It continues to mutate.

I said three months ago, watch out for BA.4, BA.5. It's now accelerating in this country. And this is during 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 too. And again, last year at the time, I think we lost money in the second and third quarter, certainly on an earnings base, at 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 now -- I just want to briefly -- look, 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 and first quarter this year, we did over $90 million in revenues. When you now include the first quarter with almost $30 million revenues, we're talking about $120 million in revenue, just in the last three quarters.

Earnings -- fourth quarter, $10.6 million in earnings; first quarter, $12.5 million in earnings. And now, this quarter -- and I apologize, net income of another $7.4 million in earnings. And then a number I really like to focus on is adjusted EBITDA because adjusted EBITDA takes out all of the non-cash charges. A lot of these are expenses that later get reversed.

Regardless, our EBITDA over the last three quarters is $43 million. It's almost $3 a share in EBITDA, right? It's undeniable. So anyway, that's the execution of our company. Looking for this, in the fourth quarter of this year, we'll be testing not only for COVID but also for flu and upper respiratory.

We are looking -- I know we always get questions about monkeypox. It's complicated. We are looking to validate for monkeypox. But you have to put this in perspective -- the number of people that are actually going to be tested for monkeypox tells in comparison to the number of people that are being tested for COVID. And especially, once we get into flu season and people don't know if they have flu or COVID, guess what, they're going to rush to get COVID tested. And that's regardless of which variant happens to be around at that time.

So that's a little bit about ProPhase Diagnostics. Again, we are diversifying our ProPhase Diagnostics business. We're going to get into full clinical. We're going to be a well-diversified diagnostic testing company in the future. In parallel, we are planning on the build out of a genomics lab as well. So then, we'll really be a fully diversified diagnostic company that's doing high complexity, molecular lab testing for upper respiratory, doing your full blood, urine toxicologies and so forth, and then also a full array of diagnostic genomics testing. So that's on the lab side.

Let's talk about Nebula Genomics just for a moment. I just want to put this in to 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-cost offer of whole genome sequencing in the country. I'm not going to explain what whole genome sequencing is. But if anybody's confused, you can ask in the Q&A.

But again, not only are we offering at the lowest price. I believe that only a couple percent of the country even knows what whole genome sequencing is. We believe that there is a massive opportunity to educate consumers about whole genome sequencing, where you're getting a whole genome sequence, not for ancestry information 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 sequenced. We do provide whole genome sequencing direct to consumers online. We are working at a feverish pace to offer whole genome sequencing in 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 in Nebula, which -- and understand whole genome sequencing is in the first setting, similar to where the Internet was 20 years ago. And we are so well positioned. We have one of the leading authorities in the world over the last 20 years in genomics. And George Church, a Ph.D. at Harvard University -- and he's a founder and a shareholder of our company. He's on our advisory board. I'm telling you we are so well positioned.

And I only point this out relative to the fact that there's several other companies now in the same space. One raised $18 million that we believe around a $50 million valuation. Another company -- and it's not yet public, yet they've raised some money, but they're raising more. And it looks like they're going to be raising approximately $20 million at closer to $100 million valuation. And I believe that our company is significantly more developed than either of those companies. And yet, Nebula Genomics is valued at so very little in regard to our market caps.

So I just want to give you that perspective -- that Nebula has enormous potential. If this was a Silicon Valley startup, where venture capital would just investing in a private round, I probably should have the valuations would be significantly greater than what anybody is valuing Nebula 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 ProPhase BioPharma. Alice Lioi and our legal team did an enormous amounts 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 an idea overnight to announce a deal. And this particular deal for licensed Linebacker-1 and -2 was six months in the making. And what I can tell you is a major university did significant pre-clinical research on these compounds and came back with great results. We just had a conference call with them the other day, so what 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 something where we paid virtually nothing upfront. I think we paid $50,000 of licensing fees. I paid more in legal fees than I did in licensing fee.

This is -- these are compounds that 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 are in more than that on our seasonally weaker second quarter. So how anybody could come away with the 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, that all of a sudden I'm going to burn through our capital? It's just a ridiculous conclusion.

And so I said publicly now, we're going to -- our budget is under $5 million. We have over $50 million in net working capital today. And that's after acquiring and developing Nebula, after licensing and building ProPhase BioPharma. It's after building a state-of-the-art laboratory facility with -- 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.

So I really believe that myself and our management team have executed. And all facets, everything that you can ask of a management team, I believe that we have delivered and then some. And I'm simply pointing out the best is yet to come to long-term shareholders. I'm sure it's going to be bumpy when you're a development-stage company. But understand we're developing products and assets and subsidiaries with absolutely enormous potential.

The last thing I want to mention is we've been at a bear market for 1.5 years. Nobody realized we were in a bear market until the beginning of the year. But micro-cap and biotech and life science companies have been in a bear market since January or February of 2021, almost 1.5 years.

So I've been pointing out to everybody who's been so bearish the last few months -- I've been pointing out that because we've been in a bear market for 1.5 years, the life science companies -- don't be so sure that they're going to continue to drop. And if you've noticed actually, in the last one to two months, biotech and life science companies have actually led the charge on the upside. That's no accident, all right.

Bear markets -- the stock market discounts the future. It doesn't discount the past; it discounts the future. And so what's interesting, just in the 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 to a couple of them.

As I mentioned, there are at least two genomics companies, startup genomics companies with valuations -- one around $50 million, one around $100 million that are raising capital. There have been two deals announced -- at least two, one Gilead is buying Microbio (sic - "Mirobio") for $405 million. All of their assets are either pre-clinical, or I believe, they have one asset going in -- just starting to go into Phase 1, right? And they're being acquired for $405 million.

And so that's why I tell you, we have made -- a potential major breakthrough in cancer research with the compounds that we are developing. And I believe that we'll -- we could be at the same stage of development in 12, 18 months now. And then, of course, Amgen paying $3.7 billion for ChemoCentryx.

So there were major deals starting to happen, and the market is starting to wake up. And that's why you see biotech and life science companies are 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 killing 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 Renmark presentations, that is for almost all new investors, so they always have a lot of questions. Hopefully, we get 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 MJ. If you want to open it up to the Q&A, I would appreciate that.

Thanks so much, Ted. (Operator Instructions) Yi Chen, H.C. Wainwright.

Thank you for taking my questions. Could you give us a little bit more color on the potential topline growth in the third quarter? Is it going to be a similar level as the revenue in the second quarter? Or is it going to be trimmed down a little bit but still exhibit a year-over-year growth over the third quarter of last year?

Yeah. So here's what I can tell you. Historically, the third quarter is our weakest quarter. In fact, that's even been throughout history when we had to call these brands and we still do have a lot of things manufacturing facility. And if you think about it, people are buying lozenges in October, November, December, January, February.

So there wasn't a lot of activity in the middle of summer months. And the same has really been true with COVID. If -- not to -- besides the waves in COVID, but also, you don't have flu and colds as much in the summertime, so there isn't much as much confusion over whether you have COVID or you have a cold.

So it's just natural, I would say going forward. I would even predict this into next year. I would say that the middle summer months are always going to be our weakest months for our business, both for COVID testing as well as in our lozenge manufacturing business.

But at the same time, I would point out that we're in an interesting situation now, whereby all the rules have been relaxed around COVID. Nobody's wearing masks. And more importantly, last year, you still have people being homeschooled, yet 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 will start maybe 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 the strong fourth quarter. I would say the second -- third quarter will likely be less than second quarter in terms of revenues and earnings. But let's be very clear here. We're still earning a lot of money on a daily basis. And so our third quarter -- we're going to have a very strong third quarter. But -- and I expect you to -- year over year, our third quarter to be significantly greater than our third quarter of last year.

So I said this six, nine months -- I actually said this nine months ago. I said before we reported the fourth quarter of 2021, that for the next four quarters, our numbers are going to be up year over year. Significantly, they have been, every single quarter, and they continue today.

So fourth quarter was up. Our first quarter, our second quarter -- and 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 than 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 expect sequentially, the numbers are going to be going up again.

So for the upcoming school year, do you expect the schools to test all students? Are the students regardless of whether they have symptoms or not or just students have symptoms?

Yeah. Yes, everything I'm hearing -- and this is still premature. And it's on a school-by-school basis. But I can tell you -- and I've explained 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 are that there's going to be a lot of activity with the schools coming up. In fact, we're ramping up to that right now. And we're working with them right now.

And so yes, I expect there to be a lively amount of COVID testing in the schools. 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 lack of HRA -- sorry, the lack of HRSA funding should have minimum impact on your revenue collection going forward?

Well, if it was going to have impact, it would have had an impact on the second quarter. All right. So whatever impact that hadn't had, as far as I'm concerned, we're planning for HRSA not coming back. But with it not coming back, look at how much money we just earned in the second quarter. And now in the third quarter, we're going be very profitable in the third quarter without it.

So I'm assuming it's not coming back. But whatever impact it had, we pivoted. We have a sophisticated IT platform for not only 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 was HRSA funded, that all went away, we'd become more sophisticated. And so we're very profitable in the business. We're doing the total number of tests we're doing. The one right is obviously going to be less. We're not testing the people that are uninsured. But we're much more sophisticated in collecting the information that people that are so that we get reimbursed for them. And those numbers are -- trending are strong.

Got it. And with respect to the personal genomics business, shall we still expect some significant marketing events to occur before the end of this year?

Well, by marketing event, there's -- oh my goodness, there's really two or three things. One is getting into retail stores. The retailers are -- have been very receptive. And the complicated part of this 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 in that.

We are negotiating -- I think I've mentioned -- I know I've mentioned before we're negotiating with a company in the UAE. And there's 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 hear more about that in the coming months. There's 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 sequencing at a lower price. This company does 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's some complicated factors. There, too -- there's really -- Illumina is the only company in the United States have a monopoly on whole genome sequencing this year, and that there are very high prices. And that's why we're forced to work with international companies.

But the patents that the monopoly 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 more complicated. Because I don't want to enter a long-term agreement for whole genome sequencing with one of these companies, and then find out in January of next year, the pricing drops 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 on a management team that actually can work through these complicated details. And 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 providing whole genome sequencing in 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 all together, so -- the market cap of Nebula could be worth more than the entire market cap of our company. And there's 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 out the story of our business model. And just a story, they have -- I've been told they have a $50 million market cap free money. And then, there's another one with $100 million. So it's really interesting, but there's huge potential here.

We have international companies that are very interested in Nebula. And so I would expect before year end, we will have at least one if not two significant developments in Nebula. And I would expect when we go into next year, the perceived market value of Nebula is going to be dramatically greater than it is now.

Okay, thank you.

Thank you, Yi. And I am going to shout out to Yi Chen at H.C. Wainwright, who does a fantastic job of following our company. I really appreciate it. If we can go to the next caller that has a question, please.

Of course, the next question is from private investor, [Patrick E. Patterson]. Please go ahead.

Hello, Ted. Can you hear me?

I can hear you just fine. And I love the E. I would hate for you to introduce yourself without the E in the middle.

Look (multiple speakers) - - you and your team have executed (technical difficulty).

Patrick, you broke up. I think I lost you.

It appears that we have lost Patrick.

Okay, so --

We can go to the next question.

Thank you, please.

Dennis Waldman, Barrett Productions, LLC.

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 $0.41. 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 6 times PE. What are your plans to bring more visibility to ProPhase in the investment community?

All right. That's a great question. I really like the way you calculate those numbers. I personally like to focus on EBITDA more than earnings. And when you focus on EBITDA, the numbers are even greater; in fact, they're substantially greater.

But even with your earnings, I agree it's an interesting situation where a tremendous growth company at a very low PE, so 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 work with Renmark.

Lately, I've probably 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 do that presentation the day before we reported earnings. So I believe we have a VNDR next week. And look, at the other day, we've been in a bear market for 1.5 years.

So as much as you can say that, are you -- and this is you. I can't say this. But you're 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 outperformed virtually every biotech and life science company over the last year plus.

Given that we've been in a significant bear market, it appears we're just coming out of that now. It doesn't mean we're not going to back it fill. But it's not just that the biotech and life science companies have trended higher over the last six, eight weeks. It's the fact that deals are starting to happen, and deals are starting to happen.

That tells the marketplace if larger biotech and major pharmaceutical companies are acquiring the smaller biotech and life science companies. It's telling you that there's tremendous value. And many of these stocks are oversold and undervalued now, regardless of what's going on with inflation and gas prices and the economy and 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 $0.65 stock. And now, we've paid out $2.40 in dividends. And we have another $10 or $11 stock. I mean, you know, our stock price up almost 20 times while paying out a significant amount of dividends. 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 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 over the next 1.5 years, between the potential Nebula and the potential of ProPhase BioPharma while diversifying our diagnostics business, there's still significant upside from where we are now. I can't guarantee what month, what quarter, but all the things we're working on -- very -- and what I like about it is the things we're working on not only they have enormous potential, but they have minimal downside risks.

As I mentioned, all of our businesses, take ProPhase BioPharma out of the equation, or other four businesses combined, they're all growing and generating significant cash flow.

So the only business really at risk, in terms of losing money, is ProPhase BioPharma. And I've said repeatedly now, our budget is under $5 million. I think for a budget under $5 million, we potentially have a division that 1.5 years from now could be worth literally hundreds of millions of dollars.

So I look for opportunities with high reward and low risk. And in the case of Nebula, we're leveraging all their tremendous synergies. We're leveraging all the assets of the company between our distribution of food, drug in mass stores. Our history of marketing consumer products, et cetera, et cetera, et cetera -- and ProPhase BioPharma, interestingly, historically, we had a pharmaceutical division before. And unfortunately, management didn't do a great job of managing it.

But I'm really excited. This has been in my blood for 40 years. I've always invested in biotech companies. And I think we're onto something big. I hope that answers your question (multiple speakers) --

That is the first part. Do you see other analysts picking this up besides the three that are covering now?

Look, it's possible if I want to spend my time, quality time. And that's one of the issues with analysts, even though there is a wall between the analyst and the investment banker, 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. The bottom line is, sure, I don't see why other analysts won't. Our performance is fantastic. And it's just a matter how much time I want to spend marketing to new analysts to pick up coverage versus focusing on building the company.

And where I think that my value, my time is best spent -- and honestly, I'm more interested in building the value of the company. The stock price will take care of itself. For short-term traders, I don't honestly care -- whether I disappoint 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. We get more coverage, great. Am I working on it? Yes, I would. But that's not where my full-time effort is going. And you want to actually watch out for management whose full-time effort is getting analyst coverage because 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 coverage take care of itself.

I understand. One final question, you've spoiled us with these incredible quarterly dividends. You've had a great quarter, great cash flow this Q2. Business still appears to be extremely strong, yet no dividend. Do we have to wait another quarter before finding out if there's going to be a dividend? Or is there a chance we could see something sooner?

All right. So here's the deal. You actually just proved 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 if we start making it look like we pay a regular quarterly dividend every time we announce earnings. So -- and truthfully, right now we're in a situation where we have an enormous amount of capital. It'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 we're allowed to 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 those stocks 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 perception 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 dividends. I know that our shareholders love dividends. It's a way for all of us to share in the success of the company together. So believe me, you know full well that I am motivated to pay dividends.

I just want 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 be paying dividends, 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. All right, so does that answer your question? I'm not guaranteed (multiple speakers).

That was great. Thank you.

All right. Thank you, Dennis.

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 Linebacker products -- do you know if their results will be publicized in a press release or a medical journal? And can you give us an update on what you're hearing?

Yeah. So that's actually a complicated situation because the university that did these pre-clinical 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 and that were not in place make things a little complicated for publishing the results. That's the -- that's why actually, I believe the results could come out already. I can tell you that the university is so excited by the results. They want to continue to do more research, Linebacker-1 and -2.

And in fact, we just had a conference call with them yesterday that went extremely well. And so there's 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 company point of view that we're still going to do all the same things. But then, our shareholders would really understand why I'm so excited.

And just for our shareholders out there and for new shareholders and people that don't understand what Linebacker-1 and -2 is and why I'm so excited about it, there's a growth factor that is present when you have cancer called [PIM]. Believe it's called [PIM 1,2,3]. 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 PIM, while you're giving the patient the other drug therapy or treatment to try and cure you of the cancer?

If you think about it logically, you would think that the odds of the drug or chemotherapy or treatment will work better if the cancer, the growth of the cancer is slowed down. That's exactly the theory behind Linebacker-1 and -2. So it has enormous potential as a co-therapy.

Okay, we had an analyst put that, as far as I'm concerned, didn't do a lot of research or pay attention or -- and basically, said something, it was pretty ignorant, quite frankly.

But this has enormous potential. So we have a university that I highly regarded university did significant work. It was like, Oh my God, this could be a major breakthrough in cancer. So they're excited. They want to enter agreements. Now that we have the rights to this, they want to enter agreements with us directly to do a lot more work.

And what we told them, though, is we don't want to give them royalties. But we'll collaborate with them, and we'll hire them, and they can have publication rights. And they're excited to do that. And so that gives you, 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 company that was acquired for $405 million, where all of their assets were either pre-clinical or one asset, just going into Phase 1. And they were acquired for $405 million. So here we have something that could be a major breakthrough in cancer. We're going to be there 12, 18 months.

So it's interesting we announced the licensing of the Linebacker, and because of one endless, and what it did is it triggered [Zach] to go from a number one strong buy to, I guess, the number two buy. And it created -- profit taking and momentum traders to sell the stock. And I guess you're probably -- algorithms and funds that sell the stock when you go from one buy to two exact.

So it triggered a domino effect. But that's all seems to have played out its course. And so our response was, look, I will buy back stock. If there are going to be short-term games played with the stock, we'll buy back stock. So obviously, we believe the stock is 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 the possibilities for what we're developing. And yes, it is very early stage. It is pre-clinical. But understand, it's pre-clinical, where we also had Charles River, who's really very well thought of scientific organization for clinical research organization for doing research. And they did -- this didn't happen overnight. There's been an enormous amount of pre-clinical work done on these compounds. And then, we had a major university independent of that, doing, conducting research that they're so excited about. They now want to collaborate with us on a longer-term agreement.

So there's just nothing but enormous upside. We pay virtually nothing for it. The first time we have to pay a significant milestone is Phase 3. I would expect -- it would not surprise me if a major pharma -- if we got to Phase 3 and major pharma. We're all going to be able to retire on this if we get to Phase 3. All right, it'll be like this is going to be a joke. It's $10, you kidding me? We're going to be looking at -- anyway, I don't want to go there. I think I said more than enough. And I think I answered your questions. 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 and asked that question, it's complicated because the agreement was not with our company. And I don't know if the appropriate agreements were in place for them to be able to publish the study. So there's a complicated issue. I actually believe the study, the pre-clinical study that they did is completed. And that's why they want to continue, they want to do more studies.

And 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 all out. I don't have more details now. We just had a conference call with them yesterday. That went extremely well. So I can tell you it's all systems go on development of Linebacker-1 and -2. And the work that's been done to date has shown truly very promising results.

Thank you.

You're quite welcome.

Pardon me. [Patrick E. Patterson], private investor.

He's back.

Okay. Thanks for taking me back. Sorry, I lost you there.

Okay.

But my question probably was boring one you're going to have today but it's one I'm interested in. I follow Quest and I follow Labcorp. They're billion-dollar companies. They're in the clinical lab diagnostic testing -- traditional blood and urine, that sort of thing. And that's -- you've been talking about expanding and you're going into there. And I just know you wouldn't be doing that unless you know your customers where going to come from. Can you share some info on this, where your customers come from?

That's a great question. So here's the best way I can answer that. First of all, everybody told us 1.5 years ago that we -- how are we going to compete with Labcorp and Quest? Have they affected us by even one penny? Could you imagine we're a startup company. Find me another startup company, all right, that in the last nine months, a complete startup that just generated $43 million in EBITDA and [$100 million] whatever, approximately over $120 million in revenues.

Since the last three quarters, tell me a startup company that you've ever come across in your life that in its first year in operation generates those kinds of numbers. So the Labcorp or Quest affect us by even a penny?

Second of all, as I've explained, their IT 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 they're not all of a sudden, all their customers are already locked into their old IT infrastructure. They're already doing business very efficiently with their equipment.

But we built a state-of-the-art lab with all new equipment and an IT 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 IT platform, our equipment is as sophisticated, as efficient as anybody out there.

And I do know for a fact that the way we process certainly COVID specimens were one of the lowest cost, most efficient processors of specimens. And that's why we haven't lost a customer. None of our customers have gone to those big labs. They get screwed over 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 lots of people in this world, very connected people that are capable of 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, that will work closely with them.

I mean, could you imagine if you're -- I don't know -- you have the ability to send 20 nursing homes to do their clinical lab testing to a lab? Could you imagine saying yourself, why don't they call Quest? Now whom am I going to call at Quest? Am I going to 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.

You come to our company. You can work with us. You're really -- you're working with Jason. You're working with me. And yet, we're meeting with high-level people. There's 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 lab visits over the last two years. So now, we're entering the clinical lab business.

If you want to bet against us executing, 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 -- it's 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, if it's a chicken-or-egg situation, there's a small possibility that I could buy a small lab, not a big lab that's going to cripple us, but a small lab that gives us everything turnkey. And if I see that we have customers with significant potential and I can align that with acquiring a lab so we can really jumpstart this, I will do that. So I just want you to know we're working a number of different angles, and we'll have to see how it all plays out.

Again, I've mentioned previously, I probably looked at [660] lab acquisitions over the past year. We're so spoiled by our own lab. I didn't like any of them. But having said that, there may be an opportunity that comes along. And if there's maybe, we'll buy a lab, which would have a customer business and have all the licenses insurances. But at the same time, one of the reasons I would be motivated to do that is because we're currently actually talking to 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 at lightning speed, there's 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. And we might have growing pains for a quarter or so. But I expect to build a very valuable business the same way that I am -- we have done over the last decade or so. I hope that answers your question. It was a good question.

Now, thank you very much, Ted. I appreciate it. You guys did a great job. Great job.

All right. 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 like to thank all the 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 get to talk and nobody gets to interrupt me.

I like to think that what we're talking about is all really exciting and really positive. And 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 change. It's not a guarantee, but you could see some 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, has probably more upside than anything else we're working on. And the amount of capital in my mind is virtually around 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 a great day.

The conference is now concluded. Thank you for your participation. You may now disconnect.