ProPhase targets 'enormous goal,' expects $100M in new revenue from Covid-19 pivot
By John George – Senior Reporter, Philadelphia Business Journal
Jan 13, 2021, 12:34pm EST
A Bucks County over-the-counter health care products and supplements company that late last year pivoted to Covid-19 testing is now performing more than 1,500 such tests a day — and expects that number to grow.
ProPhase Labs of Doylestown was previously best known as the manufacturer of Cold-Eeze zing lozenges for cold sufferers. It sold the Cold-Eeze brand for $50 million in 2017 to Mylan.
In October, ProPhase (NASDAQ: PRPH) signed an agreement to acquire a North Jersey accredited laboratory owned by Confucius Plaza Medical Laboratory Corp. for $2.5 million. The 4,000-square-foot lab in Old Bridge — approved for a variety of medical tests, including Covid-19 and respiratory pathogen panel molecular tests — is now owned by ProPhase’s new subsidiary, ProPhase Diagnostics Inc.
"The opportunity is enormous, both to help people and to generate significant returns for our shareholders," said Ted Karkus, Prophase's chairman and CEO, when asked about the move into Covid testing.
ThinkEquity, a New York City boutique investment firm and division of Fordham Financial Management, just initiated coverage of ProPhase with a "buy" rating based largely on the growth potential of its Covid-19 saliva-based, diagnostic testing business.
The firm's target price for ProPhase's stock, which opened Wednesday at $14.52 per share, is $20.
ThinkEquity analyst Ashok Kumar, in his report initiating coverage of ProPhase, noted the company has indicated the capacity at its North Jersey lab is 10,000 tests per day. The company is also leasing space for a second lab in Garden City, New York, that is expected to be operational later this month and have the capacity for 50,000 tests per day to handle future demand.
"The company is currently at 1,500 tests per day, five days a week," Kumar stated in his report. "We are modeling 2,500 tests per day [during the first quarter of] 2021, increasing to 5,000 tests per day [for the rest of the year]."
Kumar further stated cash customers are paying $50 to $75 per test, with an average insurance payout of $100 per test. He estimated Prophase's 2021 Covid testing revenue at $84 million.
ProPhase posted revenue of $9.4 million during the first three quarters of 2020.
In his analysis, Kumar said he expects the company's legacy revenues from its contract manufacturing and supplement sales businesses to generate $17 million in sales for the company this year.
"For 2021, we forecast continued improvement in profitability along with strong sales growth," Kumar stated. "The success of the company’s new diagnostic testing labs business will depend on both attracting sufficient customers who choose to use the lab to process their test kits, and the ability to successfully operate a new business line."
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Karkus said he believes ThinkEquity's revenue forecast for ProPhase is conservative, and thinks the Covid testing business could generate "well over" $100 million in revenue this year.
"Our new goal is to be processing as many as 10,000 tests per day by March 31," Karkus said. "If we achieve just $30 profit per test, that’s $300,000 per day in daily pre-tax profit. This is an enormous goal and yet we believe that it is achievable."
Karkus said one of the company's top challenges is dealing with specimens that don’t have all of the required information on the collection devices. "This slows down the ability to record patient data, process the specimen and then report the results," he said. "This may not sound like a big challenge when you are processing 500 tests per day, but is incredibly challenging if processing 5,000 or 10,000 tests per day."
ProPhase is providing 24-hour turnaround times for test processing.
"Given all of the problems with turnaround times in the industry, often 3-7 days by the major labs, there is plenty of opportunity for those labs that can execute," Karkus said.
