Prophase Labs Inc (PRPH) 2023 Q4 法說會逐字稿

Hello, and good morning, everyone. Welcome to today's presentation. My name is Noel Alexander, young virtual, that moderator here at Rentrak Financial Communications. On behalf of our team, we want to thank everyone for joining us today for Prophage labs Fourth Quarter and Year End 2023. Coface is trading on the NASDAQ under the ticker symbol PRP. Presenting today is type carcass Chief Executive Officer.

Following the presentation is acute question and answer session for which you can participate in that on the top right-hand corner of your screen docking, I will now hand the floor over to Ted.

Thank you, Noah, and thank you, everyone, for joining today for our I guess, this call the year end, even though we're about to start the second quarter of the following year. We're doing things a little differently today. For those of you that don't know, we have this fantastic relationship with red mark financial and we do non-deal roadshows, virtual non-deal roadshows regularly where the rent mark, we have for quite some time. We think it's a great format. And this way, I can show all of you slides and talk through them. I think it's a much better format after the call. You can let me know if you like the old format better where it's talking, but you don't see me and you don't see the slide. And so in any event you want to be updated regularly. We do at least once a month, we'll do a virtual non-deal roadshow presentation with red mark with Noel Noel as our fantastic moderator. I always love having our by my side, we will I'll do about a 30-minute presentation, and then we'll have about a 30 minute Q&A. If you have questions, please submit your questions to Noel, and I'll get to as many questions as possible. I hope have a lively Q&A. So please don't hesitate to send your questions. And I often forget to say things in the presentation, but it all comes out in the Q&A.

So with that, I'd also like to highlight just very quickly. We also had a fantastic relationship with Think Equity or investment bankers who we have had a 3.5 year relationship where they raised a bunch capital for three years ago, but they were also instrumental in helping us to buy additional make additional acquisitions that are now going to bear fruit as we go forward. That's what I'm going to be getting into in today's call. Also appreciate HC Wainwright who follows us on an analytical basis. They do excellent research as well as done equity research and the latest as to the table, Dave Gentry at Red Chip, just to call out there creating some fantastic PR, which is going to bring great brand awareness, not only to propane's labs, the public company, but also to Nebula genomics. So I think it's going to be a win-win. And I think you're going to start to see that in the coming weeks. You're going to start to see amongst other things and different initiatives that include some presence on CNBC. And so really excited for what's to come.

And so with that, let's let's get into the presentation. So first, of course, forward-looking statement. I'm sorry, I have to read this at least our attorneys this year gave me a shorter version before we get started. I'd like to remind you of the Company's Safe Harbor language. During this presentation, we will make forward looking statements, including statements regarding our strategies, plans, objectives and initiatives and underlying assumptions. 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 necessary regulatory approvals, general economic conditions, consumer demand for our 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 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 to our website. All right.

This is a much shorter slide presentation than I usually give it's more focused on what's going on this year. For those of you that haven't seen the presentation. I would say probably half of you have have have you have not this is fine tuned. It is updated with all the latest information. There's some really nice updates, and I'm excited to talk about.

So first of all, I always like to say our best is yet to come. We have a we have a performance track record that I would put up against most. You can always find the one in 1,000 companies that becomes a multi-billion dollar company.

Great. If you found the right tech company, 10 years ago, they probably outperformed us. In fact, even some of the great ones haven't outperformed that in the last 10 years for all the other micro-cap company, we've outperformed 95% to make a long story short, I turned around the Company that was virtually going bankrupt in 2012. I did the same thing with a company called ID Biomedical, which instead of going bankrupt, we sold to GlaxoSmithKline for $1.4 billion. I was instrumental in the turnaround there. And with that experience, I did the same thing here. We had a $0.65 stock about 11 or 12 years ago, we now have paid out $2.40 in special dividends to stock up nine times. So overall, we're up about 11 times. If you include the special dividend and 11 years, not a not a bad track record, more more recently about three years ago. So we turned around the cold. These brands sold it for $50 million kept the manufacturing facility. I'm going to talk about that very shortly. We got into COVID testing and we had never been in the lab business before we had never been in the COVID testing business before and we got into it my son, Jason carcass within a short period of time, you went from a consultant to a salesman to basically taking over. We moved out the senior executive who weren't getting the job done. Jason took over the roughly $200 million business over two years, unheard of very few companies in the country did anything similar, and we had never been in the business before. So it's a history of execution, and it's like deja vu because now we're going to do the exact same thing with Nebula genomics that we did with ConvaTec.

All right. So in addition to that, so to be clear, what we did differently from what other microcap companies that think equity were they did a fantastic job raising capital for us three-plus years ago. Back then we were in the Super Bowl market were just based on a story where the pipeline stockprice, they raised a bunch of money for it. But unlike all the other companies that spent all that money in or out of business now or the stock's down to $0.10. We strategically transitioned and plan for the future that included with Think Equity and making acquisitions, one of which was Nebula genomics, another, which is our biggest market, esophageal cancer tests. Another one is equity or we're going to be talking about all those over the next 20 minutes and in the Q&A. So all of this, we've been strategically planning for several years. And now we transitioned from a COVID testing business, which ended early last year to now as we go into 2024 and 25, we expect to have some very explosive businesses, which I'm going to get into momentarily. So we have a history of executing on behalf of the shareholders. And as I'd like to say, our the best is yet to come.

All right. So let's start with formulas, which I actually find kind of humorous because historically, farmlands was a sleepy business. I never really even used to focus on it when we sold the call these brand humorous way. If the company that acquired Colby's from Atos had asked for formulas, I might have thrown at it. And this five years ago. So we maintain formalized because it kept our infrastructure in place for selling products into 40,000 food drug and mass store. We can do not only manufacturing we can do packaging, distribution, logistics, you name it. We can do soup-to-nuts. We have a turnkey solution for selling products into retail stores around the country. That's why we kept it. But what's interesting is the global demand for lozenges has gone through the roof and the capacity globally as well as in this country has actually struck, especially when we're talking about reliable capacity. It doesn't exist. We have global brands that literally are panicking trying to figure out how to solve their problem. They're basically given mandates. What do we do in the United States and North America to solve our lack of license manufacturing capabilities. And so what's interesting is we've started to build our capacity as we build it. You know, the saying if you build it, they will come it's already happening.

So just to go over a few bullet points. We raised prices on every single customer last year, Q4 last year, those price increases all took effect in the first quarter. So we went from being unprofitable to a profitable business with increased revenue just by increasing prices. In addition to that, in January, we announced two new important new license lines that takes our revenues up. So our revenues historically have been around $8 million, $10 million last year. They were a little over $9 million so with our price increases, we went up to, let's say, $11 million. Now we're just kind of $5 million of new business. One of those two customers as we've already started manufacturing for them. The other one should start shortly. So right away, as we entered the second quarter, we should be at a $15 million, $16 million run rate instead of losing money, we should be making at least 20% to 25% net profit margin that's just starting. So just based on that worth worth $3 million to $4 million profitable business just entering on an annualized run rate just entering the second quarter.

What also happened is we purchased automation equipment, which arrive which we install it turned out. The automation equipment works better than we expected. I give our COO, Jed Latkin, who joined us originally. He joined us because he represented he's worked with multiple companies, the CEO, CFO, COO. He was representing the company that it was turning around that sold us the best smart esophageal cancer that he came in as a consultant last year. He got involved with formalize the became full-time consultant, then he became our full-time senior level executive and CCO. And so these have Dan actually have a lot of experience in the manufacturing world by pure coincidence and so he got involved. We started building additional capacity. We brought in some high level senior level executives to work in the company as well as a high level consulting company to work with us to build a master plan to build that capacity over the next one to three years and so forth. And so our gen fleet of Germany to get the best automation equipment in the world. We installed it and our capacity now we had capacity estimates. So to put this in perspective, we estimated a month or two ago that by the third quarter, we have a second license line being installed and by the way, that license line we ordered that more than a year ago. You have to understand it's not like their license lines out there to be. This has tight the capacity as you want to purchase logs at one license line today that the manufacturer by the time they manufacture it ship it to you, you install it can be 0.5. So I understand that the license line that's about to be installed late in the second quarter, early third quarter. We planned on this more than a year ago. I just at the time we were losing money. It was an exciting business, but understand behind the scenes, we've been working on formalize and building this expansion for a year and a half. At the same time, we were talking to two global brands since the beginning of last year as well. So all this has been in the works. This isn't something that this is all about to come together and bear significant fruit right now going forward. So it turns out our automation equipment works better than we expected when we include the license line being installed and in the coming months, we expect by at some point in the third quarter, we will be at a run rate of $30 million to $35 million of capacity will be a run rate of $45 million of capacity. This is an astounding number when you think about the historical value of formalized and what it will be now and understand we might not get to $45 million way to revenues immediately. Are that a lot of that has to do with how quickly we sign on new customers. But we've been pushing customers away up until recently because we have the capacity. And that's why every single customer we have accepted our price increases. And we announced a month or two ago that we have these two major global brands that are interested in doing business with us. We've been doing all their formulation work. We're in the final stages. We've got the FDA inspection with flying colors and those citations. We had to go through audits, all these different things that there's so much bureaucracy involved the bottom line at the 11th hour. So we're going to see what happens with these two major global brands. But since it was interesting, since I last announced two major global ramp. There's another two significant brands out there that wants to do business with. So I don't know the timing of how this all plays out, but farm lots is profitable already and growing, and I couldn't be more excited about it. And so our goal, our longer term goal we already ordered in addition to the license line coming in at a few months. And while the ancillary automation equipment and so forth that we need, we have two more license lines come in and by year end that we're going to install early next year that will take us to $90 million or $100 million or more in capacity. And what's interesting that's based on a 3.5 day work you have to have downtime for cleaning of equipment and so forth. But that 3.5 days that the labor is available, it's possible we could bump it to 4.5 days that $90 million or $100 million capacity number could easily become $110 million, $120 million . The numbers are so large, though, it really is your relevance. Even at the $45 million run rate, we get to a $45 million run rate and we're generating 20% to 25% net profit margin. We're talking much more than $10 million. The value formula could be 50% or 100% more than the entire market cap of our entire company.

Right. Right now we have a market cap of $80 million to $90 million. I think within months, the value of farmland is going to be worth more than the entire market cap of our company, depending on how long, we keep it. And I'm going to have all sorts of strategic alternatives if I choose to go in that direction. When I say I it's May. It's our management team and our Board of Directors, we're going to have lots of options on what to do with us. I'm focused on formalized first because this is an even what I'm excited about but it gives you an idea of the risk reward of investing in our Company that if we have one asset here that I believe is potentially worth more than the entire market value of the Company in the coming months and potentially could be worth double the market cap of our company if we keep it for a year a year and a half. And we got these major license brands. We have Executive flame or refrac from around the world just to meet in Lebanon, Pennsylvania. It's really exciting what we're doing there. So I'll leave it at that performance. I want to give you that as the background. So when we talk about Nebula genomics and our big sport cancer tests and equity are these have enormous potential going forward. But the beauty is you have this tremendous asset value, protecting your downside risks, which in some cases, the most important thing when you invest in micro-cap companies.

So with that, let's get into Nebula a little bit. Yes, founded by George church. Critically important because he's been world-renowned in the field of genomics for 15 or 20 years. And he has relationships with every virtually every major global player in the field of genomics. He's introduced it to so many major players that we are collaborating with and truly helps us in building Nebula genomics. I'm going to get into some detail about in a moment. I'll just tell you he is such a big believer in Nebula. He had a choice of cashing out taking cash when we acquired the company's Co-Founder. And instead he chose to take stock at about $7.50 a share. So region-wise whole-genome sequencing has become so exciting now is because the prices dropped dramatically. All the SSD companies historically had to do the snip based testing where they analyzed less than 1%. Have your data then to do that because whole-genome sequencing is too expensive, even $1,000 for whole genome sequencing in order to make a profit between the lab and their markup. The consumer there and it starts 2000 hours. Nobody's paying $2,000 for an Ancestry tests, but now pricing has come down. So while the Ancestry company has built a whole platform on a different type of test. We can now provide whole genome sequencing. We're tremendous in depth health insight in addition to Ancestry type, and we are now getting to a point where we're going to be able to provide a competitive product to the Ancestry test while giving phenomenally more data about your health. So it's a really exciting opportunity. It's been a work in progress, you're going to see the fruits of our labor play out over this year.

Now that we're getting into the B2B business, I just want to explain a little bit more about it. And then I'll also I'll talk about the opportunities in the B2B world and why we're going in the direction we're going.

And just to explain, in addition to Ancestry what we provide in health. First of all, we have an incredible database which has an amazing hidden asset value. It is a gem that I will be talking to you further about in the coming weeks, not for this call, but understand if an Ancestry database study in less than 1% of your DNA is valuable, just imagine whole-genome sequencing, which studies virtually 100% greater than 99% of your DNA, providing between 1,000 and 5,000 times more data points than an Ancestry test. Imagine what our database could be worth. So I hope to update you in the coming weeks on that. But so understand we also built a proprietary reporting system, a bio informatics based on this tremendous database that we've already built. We don't know of any other bioinformatics in the world that compare to ours. So we have these B2B businesses that are all over us for a number of reasons, including our reporting. So this is an idea. These are two of our report. I gave one example. I change up the example of gastroesophageal reflux disease guard guard leads to esophageal cancer guarded, the first-ever fasting stomach. It eats away at the bottom of your stomach and can create cancer cells, pre-cancer cells. That's a condition known as Barrett's Esophagus one and 50 to one and 100 people can develop a topic you'll cancer. I'm going to get more into that when we talk about our cancer test now we're developing but the bottom line is, if you know you're at high risk like this person in this example is in the 92nd percentile, you might want to go to your GI. more off and you might want to really check on that happening. And it's done that cannot just take Tom's sport and you might want to get an endoscopy once in a while if you're at high risk and because within endoscopy, hopefully you can learn if you have esophageal cancer at an earlier stage and hopefully save your life. So that's just one example, knowing that you're at high risk based on your DNA makeup, another example, if based on your genetic makeup, you're at high risk of breast cancer, you're going to be motivated to get your checkups much more often or colon cancer, you'll get colonoscopy is more often and at an earlier rate, the list goes on and on and on. So we provide this fantastic report. But look, let's get more into the actual opportunities from a business point of view.

So as you all know, we have been historically a direct to consumer seller of whole-genome sequencing. We have completely revamped marketing campaigns, which is all going to roll out in the next few months. And at the same time, we built out a lab The reason we built out the lab, yes, it's because we start going to these genomics conferences and they're all these businesses that never did whole-genome sequencing, but they are directly related to it through the health care systems. And they're like, Oh, my God, we have to offer whole genome sequencing to our customers. So we have a lab in New York. So your specimen doesn't have to leave the country. We have some of the best pricing, not only in the country, but in the world. This all started because we've been in the business for six years and we have the best relationships there, our company's genomics companies in other countries with some of the best equipment and consumables in the world that are willing to partner with us and build with us because they want a presence in the United States. And we are the first lab in the country to have some of their highly efficient high capacity equipment. It gives us the ability. So we work with large businesses and potentially offer them high capacity, low price, whole-genome sequencing. A lot of these businesses have never offered it to their customers before. So when we went to these genomics conferences, we were like, oh, my God, this is such a big opportunity. We made that strategic decision to exit our initiative with the clinical lab business, we could have been very successful in the clinical lab business, but maybe in a few years, it would be a $10 million or $20 million business and it could be worth $30 million or $40 million, whatever it is. We want to do it. There's a real opportunity, but the opportunity in Nebula genomics is 10 times. And so we have all these businesses that we're in late-stage negotiations with that could literally explode our business going forward. So on, as I mentioned, we have we used to have 300 reports and then 325 reports, about 340 reports and growing on the labs around the world. Most of them pale in comparison, we're now getting reports that there are other labs even in this country that are providing whole-genome sequencing, they promise a certain turnaround time on the website. There's no reality to it. Furthermore, they advertise certain prices on the website, but there's no reality to that either. Because then to buy the reports you have to buy individual reports, we provide 300 to 340 report, they'll provide 10 reports when you add their 10 reports to their cost of whole genome sequencing. It turns out to be dramatically greater than our water. So we are price competitive. We have highly efficient turnaround times that are responsible reliable. We have this fantastic proprietary reporting system, so the sky is the limit. So Jason carcass now became President Nebula what he did with COVID testing. He's now doing with Nebula. And I can tell you that the response has been enormous. We announced the first deal today we didn't get too specific about it. We just signed the contract literally, I don't know, 24, 48 hours ago. There are more coming. We will get into more details and some of the other contracts we're working on. Suffice it to say some are significant. Some are very significant. One example one contract in late stages, we're talking about a $10 million to $20 million. Our run rate of revenue is the 1st year and then growing from there. Another one, the numbers could be even dramatically larger. We're talking to a telemedicine platform with 2000 physicians and 6 million to 8 million patients. You understand if they turn on the switch and say go to these 2000 and the owner says we're going to reach out to these 2000 physicians. The next time you meet with your patients suggest to them to order a Nebula genomics test kit. You have any idea how large this could be this is this is what we're working on going forward. So that's a little bit about the Nebula road map. I can discuss more in the Q&A and I already mentioned our be smart tech a little bit. We have this cutting-edge test. I'll talk more about it in the Q&A. If somebody asked the question, the bottom line, as I said a guard becomes Barrett's esophagus, which becomes soft. The GI cancer. We have a test that will tell you now understand when you get into endoscopy, they take 70 nine's tissue biopsies out of your esophagus to different pathologists study, the same specimen under a microscope. One will tell you have esophageal cancer. The other tell you, thus it's incredibly inexact science. Meanwhile, it's one of the deadliest cancers, 80% to 90% of people once diagnosed will die of esophageal cancer. It is definitely it's right up there with pancreatic cancer. So it's amazing how deadly it is and how and Exact Sciences for diagnosing it. We have a test that will tell you with 99% certainty whether or not you have esophageal cancer right now or not. But what's interesting is we met with the heads of many of the leading insurance companies. They said what's more important to them. He's telling them whether a patient is at high risk or low risk. So we've isolated the eight key proteins that are responsible for when they ship. That gives you the signal that you're developing esophageal cancer this is proprietary to us to our test. And so what we're doing right now, and while the studies we've been doing, we're going back and going through all the studies have been done over the last number of years. And we're actually creating a green yellow arms' red strike zone for our test for reporting so that your grain oil system is clear you don't have esophageal cancer are at low risk or no risk at all. You don't have to get an endoscopy every year. And I understand endoscopy that close to the $4,000 there. People getting adopted these once a year that insurance companies are reimbursing just the market for just people with Barrett's Esophagus or with a significant amount of dirt at 7 million tests right now, insurance companies are paying up to $28 billion, $14 billion to 28 billion reimbursing for an database just for these people. Now imagine if you add our test to it. And we tell you your age you're on at any risk at all. You're not going to go back to that and ask me that it's going to take the insurance going to be $4,000 a year or we say that you're a low risk, you don't have to go back for an endoscopy or you're at high risk in which case you'll immediately go for procedure calls and ablation. It destroys the pre-cancer cells. All the GI. is out there wants to do ablations on their patients. The insurance companies want reimbursement, but if we give them a test to tell them that there's a reason to do the ablation. All of a sudden the ablation procedures will go up significantly the insurance companies will save a fortune because they're now saving patients' lives that otherwise are getting cancer and dine and all the hospital bills of all the surgeries because they do a simple ablation procedure. And at the same time, the number of endoscopy's goes down dramatically. So our initial target is 7 million endoscopy. We think we might get reimbursed $1,000 to $2,000 at the $7 billion to $14 billion market with no competition out there for a test. That's the potential more and moving forward equity or I can talk about this in the Q&A, I really want to get to the Q&A. We've been developing this. This is another one of the products that we acquired during our phase when we were doing COVID testing. We were looking to the future. We're now looking to rollout equity or later this year. We've had fantastic preclinical studies. We're almost done. We did a substantive number of clinical studies with a lot more patients. A lot of times dietary supplements will do 20 patients, 40 patients. The gold standard is a 100 patients and a lot of times companies will split that up into two study. I learned this from my days of turning around the cold these brands, and we're suffering through class-action lawsuits, which we would win. But I learned exactly what you need if you want to be Golden, and that's to 100 patient study. We're doing a total of over 300 patients. We're halfway done, our results have been great will be done with the other half shortly that will bolster our claims, give us the best chance of success in rolling out the product. We're looking to roll that out second half of the year. It's a broad-based antiviral. Just looking for the studies to be completed, we're in a great track. I mentioned or manage maintain I already called that Jed Latkin has done a phenomenal job with formalized without him. We wouldn't be there with formalized. He is also leading the charge is a biotech background. He represented the smart salvage you'll get from when we acquired it. So he's leading the charge on that side. Jason did a phenomenal job with COVID testing the revenues that he's responsible for generating or the reason why we made these acquisitions. He's now taken over at Nebula. Can I look at each other almost every day? And we say, Oh, my God, it's deja vu of exactly the type of response we got the COVID after we built the COVID, the COVID lab, the type of response we got from businesses, the ones that do business with us, low cost, highly efficient, reliable management team. We're now doing the exact same thing with Nebula, but the differences with Nebula, we have some things that are highly proprietary to us, whereas we target 100 labs in the country or more doing COVID testing, you don't have any or we don't have the company. We have more demand and less competition and proprietary report and sophisticated equipment that nobody else has. So just imagine the dynamics were three years ago, but now with all these extra proprietary elements and just imagine where we're going to go with it. And then Sergio, I never give Sergio enough credit. He started his own IT consulting firm after working in the military as a high level IT expert started his own consulting firm with 18 IT consultants. We literally touch virtually every large company in the country, especially in the lab business. He is so sophisticated. We are so blessed to have them feed that so much more for us than simply our IT.

I'm going to have more to talk about with Sergio and the coming. We as it pertains to our genetic database. We're going to save that for another time. Suffice it to say we have a very strong management team and of course, commodity and led the way he was one of the co-founders of Nebula genomics. He has a great relationship with George church. You were going to come. All has continued to stay by our site and continue help us develop our company. And of course, Robert, it has significant experience in the finance world.

And with that investment highlights and just very quickly, there's is a complete review of everything I just said, look, we're expanding formalized manufacturing to be one of now the premier licensed manufacturing companies in the United States. We're dramatically growing capacity were already profitable for the first time as of Q1, that's going to accelerate as we build capacity and as we take on more customers and just how quickly we take on these other customers that we've been pushing away in the past, we get one deal with one global brand game of formalized that day is worth more than the hallmark of our company. I am hopeful that that happens and that will happen soon. But regardless, we now have two additional brands besides the two global brands, we have two other brands that are dying to do business with us and the business is going to grow. It's just a matter of how quickly I'd be guessing to tell you how quickly it's going to grow. We're building the capacity as fast as we can because as we do, we believe that the volumes, the revenue volumes are going to continue to catch up.

Nebula genomics, I just went through. I'm not going to go through it. Again, happy to go through more of the Q&A. Obviously, it's an exciting opportunity for us. So we have these two operating businesses. We have formalized. We have Nebula genomics, exciting operating businesses formalized profitable. Now, Nebula, we're still investing in it. But besides the DTC business that's going to grow. We have a B2B business that's going to explode probably more second half. And so we just have to see how that plays out.

Then we have two other opportunities that our operating businesses now equity try and be smart and where we are we're looking to leverage our infrastructure from when we have the Cold-EEZE brand. We also have a small brand called Legends XL. That said, many of the food drug and mass stores. So we have the whole infrastructure, packaging, shipping distribution, logistics relationships with 40,000 food drug and mass tort. That's where we're looking to leverage and introducing equity or as well as online and then our benchmark assets at multibillion-dollar potential. I like to think that that's a wildcard. We don't need it. We have enough in our operating businesses between formalized and nebulous genomics that if you're an investor, I think you're going to be incredibly pleased over the next one to two years with your investment, especially at current stock prices. But now be smart if that Cliffs from live literally when I say multi-billion dollar potential interest and not just a number of awards that I thought that has no reality to it there's no competition for this test. If this takes hold, it's going to get scary. So we'll see what happens as we move forward. And again, again, I'm really pleased now with how our management team has developed. We recently hired in the past several people in our finance team. So we have much stronger financing than we've ever had before. And we literally just hired in the recent past two very senior level executives to be in our B to B business at Nebula that Jason hired to add to our team. And so we have the right infrastructure in place to really make this whole cycle.

With that, I say thank you all so much for listening. We're going to get to the Q&A now. I know I ran a little bit over, but I had so much to talk about today before we get into the Q&A last year's first half of COVID testing and the second half, we had a significant transition and start-up costs, especially in Q4 this year. Formalized turns profitable in Q1, and we are investing significantly in the ramp up of Nebula B2B. Therefore, we are an entirely different company this year from a financial standpoint as we develop in 2024 compared to last year. Therefore, the goal of this call with the focus on this year's business plan, not last year's financials, especially given that we're about to enter the second quarter last year. Financials, quite frankly, are irrelevant. We are completely different business and business model, we've completely transitioned. So for the analysts out there.

If you have any questions about last year's financials, after you've had a chance to review our financials, please don't hesitate to reach me directly. I'll answer all your questions myself. If they are more complicated than what I can answer, I'll put you on with our finance team and go over everything in glorious detail, would you suffice it to say we anticipate a significant improvement in the top line and bottom line sequentially each quarter moving forward, especially as we enter the second half of this year when Nebula B to be anticipated to truly ramp up. And we have two wildcards, as I mentioned, would be smart and equity or that depending on timing could be significant contributors to both the top line and bottom line. And that's in addition to formalize, which is already profitable and should be growing every quarter, both top line and bottom line going forward.

And with that, Noel, that was a mouthful. I'm going to stop and take a drink and happy to answer questions if there are any.

Thank you. So much, Ted for the presentation. I will now begin the Q&A. The first question, Ted, thanks to you and your team for putting us in position to knock this thing out of the park. My question concerns the competitive advantage of Nebula genomics in the WGS arena. How important is the bio in from infomatics database library, your New York USA location and your Yes.

So frankly, they're all important and they're all important to different customers. And in some cases, all three important to a given customer. I don't think there's lab in the world literally that can offer the package that we have. First of all in this country critically important that we have a laboratory base in this country. Several of the businesses we're talking to now don't want to send their specimens abroad, especially after of the issues at one of the biggest Ester-E companies with data leaks and all that stuff. And that's also why I mentioned Sergio Maria's, Head of IT. We have such a secure platform with has the cybersecurity, our privacy data platform that he's built on. And then the fact that we're based in the US the fact that we're reliable, we have great turnaround times the fact that we have great pricing, the fact that we have George charge behind us by the way as well as Russell Waltman from Stanford. We have four platforms of the best. Not only do we have four platforms from the best company, but because we're one of the newest labs kids on the block. We also have their newest and latest equipment from the best company. As I mentioned, one of those companies, I've never sold one of their highly efficient large-capacity machines in this country, 21 before BP before us were the first one to have the NewCo, and we're ramping that up quickly. So at our bioinformatics, we don't know a company in the world that has our bioinformatics. So we have companies from around the world that have access to distribution to our whole genome sequencing tests. And I can't go into details because I don't want to teach the competition what we're doing, but we have some enormous opportunities to distribute our tests around the world.

Now on a B2B basis, based on the fact that we're using our lab now, which we're just ramping up and our bioinformatics that they couldn't access anywhere else and that package plus great pricing, which they then have room to markup to their customers. It's really, I think, going to be explosive. And in many ways, it's like the COVID testing three years ago where Jason is developing relationships with these B2B customers similar to what he had the specimen collection partners who did all the work at the consumer level. They made a lot of money in doing that, but we made a lot of money and it was just an explosive business because we provided the whole platform. This platform we built is quite serious. It's quite substantial, makes us quite unique and our scan whole genome sequencing as a whole new business. When people don't understand, it's literally the Internet 20 years ago, not the Internet five years ago. This is a new business at 99% of consumers don't even know what whole-genome sequencing this, but at the Ancestry companies now start getting into health studying a very small percentage of your DNA Just imagine as we teach them, what whole-genome sequencing is that it's so in depth and we provide all these great reports and we can provide a financial package that so competitive compared to a simple Ancestry test, the sky's the limit.

I'll also mention I don't know if I should mention this or not. While I'm going to mention this on future calls, there are other avenues that we're working on. I'm just touching the surface here. Suffice to say, obviously, I'm very bullish and I hope that answers.

Thank you so much Ted. Your next question is how large larger mortgage Could you take on for the losses during Q1 2024?

Okay. So for Q1 for Q1, for the first quarter, there were about to exit right now, our run rate of revenues, we haven't reported. That's I guess, the shareholders conference call, so I can talk about this. So we were $8 million to $10 million revenue company last year, we incurred increased prices on. So we were just over $9 million last year if you want to be more exact. And so we increased prices that got us to $11 million. We immediately started manufacturing already for one company. That's $2.5 million. That gets us roughly $13.5 million. The profit margins I can. I'll tell you I'm being conservative. When I say 20% to 25%, it's a very healthy profit margin for the business. Second of the two customers we just signed. It's just a matter of the timing of when we start manufacturing there, lozenges, it will be short term. I can't tell you if it's going to be in one week or four weeks. I can tell you is before the second quarter for as soon as that store and we're at $15 million, $16 million of revenues. But now because of our autumn. I our automation equipment is working so well. Even before we introduced the second line, we may be able to expand our volumes further. The truth of the matter is it's a profitable business is growing very quickly. It doesn't really matter the exact week or month when we get to that next $1 million or $2 million or $3 million or 5 million of revenues the business is going straight up and the sky's the limit, and we're just starting with it. And because the demand globally is so great, we have so many opportunities with different kinds of the two global if either of our global brands that we've been working with for more than a year decides to do business with they could easily and between $10 million and $40 million of revenues very quickly and more thereafter, it forget about pharma as being worth $100 million or $125 million, it could be worth $200 million so it has that kind of potential. So how quickly another $2 million or $4 million comes in?

I don't know. I don't really care. We're building. We have capacity of $100 million. We actually have a three to 5-year plan that's capacity of over $200 million right now. I'm not saying that we're going to build it ourselves, but then you might have either private equity or strategic buyer covenants says, oh, my God, if the capacity is going to be that big, let me just buy the whole thing now for $125 million because it could be it could be worth to me $250 million or $400 million in a few years or let me buy it now for $200 million because it can be worth. Fortunately, these are the types of numbers that I hope to be talking about and the type of strategies that I'm working on as we progress through the year. And so we understand also from a global brands perspective, they then have to ask themselves, do they want to give us the business or do want they want to acquire the manufacturing facility. So for do we want to spin off formalized to the public? Maybe we spend about 20%, something like that, do an IPO with have all these strategic alternatives as business ramps and as profitable, I have lots of strategic alternatives that we will be figuring out with our investment bankers in the coming months.

Thank you for that question.

Can you tell us a little bit of a online question? The recent news about Activia is preliminary study results show that Activia helps prevent upper respiratory illness doing some research. There is no product that claims prevention of the common cold, all including vitamin C and Zing only help lessen the severity and duration of deals with Aquavan will be able to claim that it helps getting the chemicals.

Okay. So first of all, there is no product out there that's an over-the-counter dietary supplement that will allow you to say cure the common cold claims like that will always be drug prescription claims and no matter how many studies we do unless we're going to go through the FDA, which takes a very long time and a lot more clinical study there. Certain claims can't make. We won't be able make COVID claims. We won't be able to make your claims other than that. There are lots of other claims that we're I believe we are going to make when we get the final results, assuming that they're consistent with the preliminary results. So and the preliminary results there already on 159 patients, which most other companies most most other products, 159 patients would be more than they would even study. So as far as I'm concerned, that's complete study by itself where we've got phenomenal results. But where we really want to be airtight, we also wanted the study to test the two ways one as a preventative so that you take it daily, the other as a therapeutic, meaning if you catch a cold flu virus, I won't be able to say COVID, but we got results on COVID patients still. So I can't say the COVID claim, but the facts are the facts and the studies. So let's see what the final results are, but the bottom line is on at least what we're learning as it's a broad-based antiviral. We may not be able to make a broad-based antiviral claim on packaging Let me be perfectly clear. We are not currently marketing the products, so class action attorneys. We're not even selling the product at right, but we are very confident in what the product does we will figure out what the white claims are to put on the packaging when we roll it out after we complete on this two-pronged study, that is going to be completed shortly, and it has next scope have an investment position with Lantern Pharma. We haven't disclosed that. So I'm not going to disclose disclose that now. And I don't think it's appropriate for me to discuss other companies on this call on we did have a substantial position at one time. The reason we made that investment is we were looking at strategic possibilities with that company a long time ago that did not happen, and I'll just leave it at that. But we had a substantial position. Obviously, the stock is up and I'll just leave it at that for now. Obviously with the stock up, if we sell some stock, it would be nice win and thank you for that response.

Ted, your next question is with formalize. We now have two new additional large potential customers in late stage. One is the sales cycle from the time you receive an inquiry until the time you are recognizing revenue?

Boy, that's a great question. So it's interesting. Smaller brands, smaller companies, the sales cycle can be very quick. These larger brands take a long time. So I'm not going to mention their names and it really doesn't matter who they are. But first, we did an enormous amount of formulation work. Then one of the brands once they were happy with our formulation work, they're ready to go into a bus. We can't discuss this further with you until you have your FDA inspection now FDA inspections that as manufacturing facilities typically happen once every two or three years. And so we had to wait for that. Then the FDA inspection comes back no citations because we are going to be a fantastic facility we've been around for decades. We know what we're doing and we're one of the most reliable license manufacturing companies in the world. And so we finished then they say, okay, now we have to do a full audit after they do their internal want us and they say, okay, now we want an external company. Why don't you say did I follow then they say, Okay. Now we need to review the results of the independent auditing company and they review the results and they have questions that we answer this question. And then we get to the final say, okay, what do you want to do? So it gives you an idea of what we have to go through. So in that one example, we are very late in that process late the late stage and those discussions, the same thing with the other global brands. So how quickly they move now, they're still very, very large companies will see. I will also tell you, though, that ultimately they could be in competition with each other and to get capacity in our manufacturing facility because again, we're building the capacity as quickly as we can. But with our current capacity, they could work with an order that could dwarf our current capacity, either one of them could. So if we sign up with one of them and they lock in they give us some money upfront to lock in some of that capacity. The other one, even if they want to do business with they may have to wait. So we continue to build the capacity. So it's a really interesting situation environment to be in, and we'll just have to see how it plays out at the same time, we have two other significant license lines, maybe not quite as large who have been developing with us. And so that's why I actually announced that we went from two to four significant brands that we're now in discussions with the other two could move much more quickly, although the first of the global brands we've been working with them for so long in effect, they could move very quickly Netto. So we'll just have to see how this all plays out. So we're building capacity as quickly as we can. We think that there's significant demand as we build the capacity and it's a great place to be.

Can you tell us your next question, what quarter do you expect to become and

it's a great question, and I can't I'm not going to give you an answer because formalize some profitable net worth developing our base, more cancer test, our FBR products and some other smaller projects, and I don't need to get into on this call. But most importantly, Nebula, when we decided to build out the lab and the way we're building out the lab. Now we are absorbing an enormous amount of expense to build that out rather than send our specimens abroad. The long-term opportunities are enormous because we made that decision. But in the short term, we're losing money. And then, Bill, how long we lose money for it depends on how quickly the B to B business ramps up because the B to C business, we could have just sent all those specimens abroad and never had a lab never had any of this infrastructure hardware. The reason why we're investing in it is really the same thing that we did with COVID three years ago, we invested heavily in the COVID lab, but an enormous amounts of equipment. Enormous amount of consumables spent an enormous amount of money and that have paid off in a dramatic way.

Now we're doing the same thing with Nebula. The difference being COVID was two years of testing and COVID is over now the reimbursement rates are close to nothing. Nobody cares. There's no more heart. So there's no more public health emergency that business number we got out of that business for all intents purposes entirely. And so we decided to also exit the clinical lab business because this is so the opportunity is so enormous. But our scale, we're investing in a lab where in effect. We don't have revenues associated with it yet because of all of that could have gone two, the labs abroad that we're working with. And so when you look at it that way, we're investing in and building a world-class lab. And so then the question is how quickly do these B2B deals? First, we have to sign them and then we have to get all the infrastructure in place. We have to figure out a game plan and then it has to rollout that's going to happen in states. I can't tell you how quickly that's going to ramp up once it ramps up. The value of Nebula, I believe could be enormous. I don't want to put numbers on it. I believe it's going to be enormous. So we invest fives are tens of millions dollars Nebula and the payback is $50 million or $100 million in revenues were $200 million in revenue. I don't know what the numbers are going to be. I just know that the numbers are going to ramp up over time and Nebula is can be incredibly valued. Nebula was its own stand alone startup company, I would suggest to you that venture capitalists might value is the $50 million or a $100 million dollars right now, but because we're part of a public company and that people want to focus on the earnings right now, but you have to understand you have to look at this as a start-up development stage company and focus on the revenue ramp and the opportunity. It's like a startup Internet company that becomes worth $100 billion in its first five years by to make profit. So profit is a very subjective thing to focus on, but we're profitable pharma up. Obviously, as those profits grow, they can contribute to building out Nebula, but at some point, nebulous can explode. So I hope in the meantime, we have accounts receivable money continues to come in every week from our accounts receivable that also helps fund all of our development. So we're in really good shape right now to build some very valuable businesses.

Thank you very much, Ted. Next we have a question from Hunter Diamond from Diamond Equity Research. Can you discuss the sales process for the D-Smart test, would you sell directly with a sales force or plan to partner what is of gratifying to see growth and profit margin for similar products to this?

I'm sorry, I apologize. For cutting you off. So but I did get the whole question. First of all, we can we can go in several directions. We have to see one example. There's a multibillion-dollar cancer testing company out there that might be interested in just taking this off of our hands and paying us a block of money upfront and a royalty that's one possibility there just may be a company out there that's waiting for our final statistical analysis, which is why we hired an independent well renowned company to go through all of our statistics and you got to understand the amount of data we're talking about is enormous. It takes a month or two not a day or two to go through all of the data and when all this comes together and because we have this new package design for green yellow, orange red is a really exciting prospect for this test. So one, possibly as we just do a deal with a major cancer testing. Another possibility is that when we met with the large insurance companies, they told us there's the possibility that they will mandate the steps I don't know that that will happen or not, but it's a possibility because it saves them billions of dollars. Why wins now?

Yes, it's nice that it will also save lives and will also give people that have Barrett's esophagus, tremendous peace of mind that, you know, you're at low risk because otherwise, 1 in 50 or 1 in 100 people with Barrett's Esophagus will get esophageal cancer, which is close to a death sentence, unfortunately. So if you have Barrett's esophagus, but we say low risk, that's incredible peace of mind. But let's face it insurance companies. What they care about is the bottom dollar. It will save them a fortune if they mandate the G I.s to use our tests. And again, GI.'s they are dying for our test because right now, insurance companies don't want to reimburse of an ablation procedure in the G. I want to give this ablation procedure to everybody. So it's a really interesting dynamic where our task fit been perfectly. There's no competition for our test in the world. There's no test in the world. That does what Eric asked us Thank you. And just my humble opinion.

Next question. LUCD. hasn't as a check test, which is a simple tool which allows precise targeted collection of lower esophageal files for pre-cancer testing. How does this compare to these?

That's a preliminary test. If you think of it, we're probably more we're not I don't think of us as competitors at all if anything, that's a test that you would you would do preliminarily before doing our tests right on their test. I don't really want to talk about competitors. I'm being honest with you not competition, they can't make any of the claims that we make. They're not they're not in the business of high risk, low risk, esophageal cancer assessment. They don't have our proprietary proteins that we discovered that we're using. There's no comparison right now. That's not to say that there isn't potentially a place for their test for early on in the process when you're first getting got gastroesophageal reflux disease, but they're the test, honestly, just because we're in the same industry, doesn't mean we're competing against each other very low income other than the fact that we're in quote the same esophageal cancer testing,

thinking about response or coming up on your last two questions. The first one is what is the size of the Neenah deal and are there growth opportunities?

Sure, tremendous growth opportunities? It's a little complicated. First of all, the region is complicated because we now are developing a lot of relief relationships over in the main region. And secondly, it's complicated because a lot of these companies are actually working in collaboration with each other. And I didn't put numbers in too press release but I am optimistic that we have more deals coming. And with the other deals, there may be guarantees in them and the dollar amounts could be substantial. So I'm waiting everyone's appetite with this deal because I wanted it to be in this press release to understand that this is now that we're actually ramping up. We talked about building the B2B business we talked about conferences previously, but now we're actually starting to sign deals and not to say that we don't have other B2B deals that we're not already doing. We're already doing B2B business, but understand the size of some of the deals we're working on now are enormous or game-changing, so I'll have more to talk about. I promise you I shouldn't use the word promise I anticipate, but there are more deals coming and more updates coming with Nebula, not only in the long term, but in the short term, I can't tell you whether that's weeks or months, although when surprise me this week, we have a lot more coming with Nebula and really excited to share more with you that we're just getting started here.

Thank you so much. And your last question is how do you plan to compete with the major labs and D&E companies such as Quest and 23Me, but our offering low cost WGS. and WES. services.

Great question. So first of all, on Quest and LabCorp completely different business in 23 and me for a second of all, again, the aesthetic and I don't want to talk about 23 me in particular. I don't I don't want to talk about data breaches on. I just can tell you Ancestry companies in general are studying less than 1% of your DNA, their Ancestry testing companies, right? So now they're talking about getting into hello, but with a test that pales in? I mean, is it just no comparison to study in 100%, virtually 100% of your DNA?

The health insights we get are so much more accurate in depth. There is no comparison if you want to health related information, if you know anything, you don't have to know anything we're going to we're going to teach you. That's one of our jobs is we're going to teach the public just how great our test as compared to an Ancestry dot, if you want health related information, the asset-rich companies trying to get into it. They're not going to get into it in a serious way. In the long term. They don't have a whole genome sequencing, which can be a lot more expensive but if they don't have a lab doing the whole genome sequencing, we're the low-cost provider. So how are they going to compete with us, even if they get into actual whole-genome sequencing. They're going to present it to our lab or another lab like ours.

Now looking at Quest or LabCorp, there are huge companies, but whole-genome sequencing as a new business. It was so expensive. Historically, it wasn't a business for a big lab to do because it was too expensive what they had to offer the because what they were charging for whole genome sequence like thousand dollars now, I think there was what we're offering for $200. You're offering for $600, $700, $800, $900. That's also why I love it in B2B deals are starting to form with us and why there's so much excitement out there because a lot of these are distribution companies and come to us for a fantastic whole-genome sequencing test at a lower price than any other virtually any other lab in the country in the world and they can market up so they can handle all the distribution we don't have get involved and the numbers can be huge. Now at our bioinformatics, Landstar bio it better 23 made other Quest LabCorp, though, they're the Quest platform offering than the business and for them to build out our last couple of years. And it's even more complicated because they may never be able to get the equipment that we already have in this country for reasons, I'm not going to go into So Quest LabCorp, they're going to be competitors. There can be competitors two or three years, not today. They're not even in the business that we're in right now called Quest quality lab for us and what a quest for whole-genome sequencing tests with no reports just for the day.

Now I ask them about the reports. So we know what reports, right? They don't have 340 reports to go along with a whole day. There is no comparison. So it's a good question. But what that highlights is the enormity of the opportunity we have right now with this business. As far as I can tell, we have no real competition and the last thing I'll tell you is the few labs out there that could be considered competition to us. They're developing really bad reputation is really quickly. They'll they tell you that they have a six week turnaround times and they're not getting their results. Customers aren't getting the results six months later. The pricing that they charge is significantly greater or they make it in there as they make it sound better. One of the things we're doing is we're revamping our ads and how we present because our actual price is significantly lower when you include the reports. But what they do is they say to you by giving you a price, it's lower than the cost for them too Cequint, but the reporting that they tag-on is enormous and we put it all together, what they're charging is dramatically more than we are. So there's a marketing game here. We're not aware of any real competition with our pricing and our reports in this country, if not in the world, there might be another lab in the world that can compete with us on price, but they don't have our bioinformatics. So there's some really interesting dynamics going here. We're really well-positioned Quest and LabCorp, not even close to being competition to us. And the truth of matter, two years from now when they want to get into the business, they're more likely to buy or allow them to start trying to figure it out and build.

Greg, I want to thank you.

Thank you so much tougher responses. That concludes the Q&A session. But before we go, I will turn back the floor to Ted for final remarks.

Thank you, Noel and shareholders and potential shareholders. I really appreciate your support on the largest shareholder in the company. People. I'm I consider to be very close. Friends have been investors alongside of me that I've had relationships with 10 years, 20 years, 30 years, even longer than 30 years and more. And they've been investors with me in this company since I was an investor and I wasn't the CEO. and they have all seen what I have done after becoming CEO and the bottom line is over a long period of time we execute. We always had it doesn't mean every project, we were kind of going to be successful. There's no reality to that. And the one thing most investors don't understand this very big difference between an investor and expecting versus being the CEO and actually having to do and the bottom line is if you're managing a portfolio, you invest in 10 sites, all 10 don't work out well, the same thing happens as a CEO making strategic decisions. They don't all work as we acquire businesses, they don't all work out. And so what I'm constantly doing and our management team is constantly doing is figuring out how to best optimize the upside of our company on a per-share basis. So that one, two and three years from now our shares are even more valuable I can't control the stock price, but I can continue to build the underlying value. And so formula, for example, I never talked about pharma before the last few months. We've been working with our management team for more than a year on it, but I never talked about it until I saw the light at the end of the tunnel. And I saw it all coming together. And so that's why now I talked about and filter them Nebula, we've been talking about for a long time, but we've been talking about that as a DTC business and wanting to build their own lab. We have a completely different infrastructure and game plan and direction now than we had in the past and the lab cost a lot of money to build, but it pales in comparison to the opportunity at the same thing as COVID. The only differences that cover three years ago, I think equity gave us $37.5 million. And so nobody even paid attention to us losing money for a quarter or two, and then it ramped up and exploded. So Nebula, I expect the same thing to happen. I just don't know the timeframe was going to happen. I actually think that the opportunity Nebula is larger than what we did in Covance. So we'll see how that all plays out. And again, the two wildcards, as I mentioned, are based smart esophageal cancer test. It's not an operating business today. So I don't know how to judge the risk reward. But I can tell you the test, the clinical studies are fantastic. The results are fantastic. It is a sorely needed task, which has no competition. And so it seems like one way or another. It's inevitable to be a very big deal. I just don't know when, but that's a surprise factor. But when you have a underlying asset like formulas that could be worth more than the market cap of the Company today. It certainly should be by the second half of this year. If you have that as the downside and then you have Nebula that we're investing and the other reason we're investing so aggressively. And the other reason we exited the clinical lab business was to build Nebula aggressively Just think about why we're doing this. We're not doing this to play games. It tells stories that's going to be very big. So we can have a lot going on. I'm really excited about the future. I really appreciate all the long-term shareholders. Everything I do. I learn from my decades working on Wall Street, what's the value of the Company today divided by number of shares outstanding. What's the value of the company? One, two, three and five years from now divided by the shares outstanding? Then I always think terminal value on a per-share basis, build the value of the Company longer-term back when we made a lot of money in COVID, you know what to do with stocking that we bought back stock and paid special dividends. Now we're investing in building the business because it's got enormous growth. Two businesses have enormous growth potential, right? What happens in the future when the revenue starts, it will really take off against who knows a year from now, we could be paying special dividends and buy back stock again or spinning off assets or doing all kinds of fun things that's the goal to get to the point where we're back having fun again, I don't think we're too far away from it. I know it's a little long-winded today, but it's only once a year that we got to get to have everybody together like this, the quarterly we'll probably do a quarterly call like that. Everybody can let me know if they like this format better and using the remark, I certainly do remark VMDR once a month, if you want regular update, reached out to red mark and sign up. And then separately on the quarterlies. We may continue to do them this way as well because that way, I can show the slides and I think it's better.

Yes, I can't hear your actual question, but I love working with Noel, and she does a great job of asking questions with that. Have a great day. I wish you all the best of luck.

Noah, I hand it back over to you, and thank you.

Thank you, everyone, for joining us today for the PROS phase labs Fourth Quarter and Year End 2023 results. Once again, pro phases trading on the NASDAQ under the ticker symbol PRPH. Stay tuned for the next quarterly call and soon.