Pharmaloz Manufacturing Accelerates Expansion, Improves Pricing, Boosts Profitability and Secures New Contracts

Rhea-AI Summary

ProPhase Labs, Inc. (NASDAQ: PRPH) announces significant progress at Pharmaloz Manufacturing, Inc. (PMI), its wholly owned subsidiary. PMI has won two new contracts in January, projecting a significant increase in revenues and profitability. The company is in late-stage discussions with two additional large global brands, aiming to triple run-rate of revenues before year-end 2024. PMI has implemented price increases across its product line, acquired automation equipment, and signed deals with top-tier lozenge brands, projecting to inject an additional $5 million in annual revenue and more than $1.25 million in additional yearly pre-tax net profits. The company also plans to double capacity by Q2 2024 and further increase annual production capabilities to a range of $60-$80 million by Q4 2024. The CEO envisions scaling the business to a potential $80-$100 million production capacity with healthy net profit margins by the next 18-24 months.

Insights

Market Research Analyst

The announcement from ProPhase Labs regarding Pharmaloz Manufacturing, Inc.'s (PMI) new contracts and projected revenue increases is a robust signal for the company's growth trajectory and market positioning. The expansion of PMI's production capacity and the signing of deals with top-tier lozenge brands are likely to enhance ProPhase's market share in the lozenge industry. The strategic acquisition of automation equipment and operational efficiencies is expected to drive down costs and improve profit margins, which is critical in an industry where economies of scale can be a significant competitive advantage.

Furthermore, the potential tripling of revenue run-rate before year-end 2024 presents a promising outlook for investors and stakeholders. However, the actualization of these projections will depend on PMI's ability to maintain favorable market conditions and secure additional large global brand partnerships. It's also important to consider the risks associated with scaling up production, such as the need to manage increased complexity and potential supply chain challenges.

Financial Analyst

From a financial perspective, the projected increase in annual revenue by $5 million and pre-tax net profits by more than $1.25 million from the new contracts is significant. This increment in revenue is substantial when compared to PMI's current annual production capability of below $10 million. The enhancement of production capacity to $60-$80 million, based on a limited workweek, indicates a strategic move to optimize labor and operational costs. Investors should monitor the implementation of the second production line and further automation, as these are pivotal for achieving the mentioned financial targets.

While the CEO's statement regarding the goal of reaching $100-$200 million in annual revenues by the end of 2025 is ambitious, it is imperative to approach these projections with caution. The company's ability to deliver on these projections and maintain projected gross margins will be key in evaluating the long-term financial health and stock performance of ProPhase Labs.

Medical Research Analyst

The expansion of PMI's manufacturing capabilities to include comprehensive blister packing and increased lozenge production aligns with the growing demand for over-the-counter healthcare products. The diversification of its manufacturing portfolio to serve major global brands demonstrates PMI's commitment to becoming a more significant player in the lozenge market, which includes products for throat relief and potentially medicinal lozenges. The ability to secure contracts with large global brands also suggests confidence in PMI's quality and delivery capabilities.

Additionally, the mention of offsetting investments and expenses related to the development of Nebula Genomics and the BE-Smart Esophageal Cancer test indicates a strategic use of PMI's profitability to support ProPhase Labs' broader biotech initiatives. The integration of diagnostics and genomics with traditional manufacturing underlines the company's innovative approach to healthcare solutions, which can be appealing to investors looking for companies at the intersection of biotech and consumer health products.

Pharmaloz Wins Two New Contracts in January that are Anticipated to Significantly Increase Lozenge Revenues and Profitability
Company in Late-Stage Discussions with Two Additional Large Global Brands Which, if Consummated, Could more than Triple Run-Rate of Revenues Before Year-End 2024

Garden City, NY, Jan. 23, 2024 (GLOBE NEWSWIRE) -- ProPhase Labs, Inc. (NASDAQ: PRPH) (“ProPhase” or the “Company”), a next generation biotech, genomics, therapeutics and diagnostics company, today announces significant progress at Pharmaloz Manufacturing, Inc. (PMI), its wholly owned subsidiary.

With the implementation of recent price increases across its entire product line, PMI has transitioned to significant projected 2024 profitability starting with Q1 2024. In view of favorable current market conditions and demand for PMI's services and products, PMI is optimistic that it will experience continued favorable pricing for the near to intermediate term.

PMI's operational enhancements have helped drive its current success. PMI recently acquired cutting-edge automation equipment and, with other operating efficiencies, is set to escalate plant capacity by over 50%, raising annual production capability from below $10 million to over $15 million.

In addition to the price increases, increased capacity and transition to profitability, PMI has signed deals with two top-tier lozenge brands. These new arrangements are projected to inject an additional $5 million in annual revenue and more than $1.25 million in additional yearly pre-tax net profits. One of these brands is also poised to leverage PMI's comprehensive blister packing capabilities, further diversifying its manufacturing portfolio.

In addition to the contract awards announced above, PMI has been working on bench samples for the past year for two major global brands. These brands represent two of the largest names in the global lozenge market.

PMI is not stopping there. The installation of a second lozenge production line and further automation in Q2 2024 are projected to approximately double capacity to a $30-$35 million potential run-rate. Additional equipment set to arrive by Q4 2024 could increase annual production capabilities to a range of $60-$80 million, based on a 3 ½ day workweek. This production capacity could be further increased, if demand warrants it, with additional staffing to extend the workweek.

Ted Karkus, CEO of ProPhase Labs, reflects on this transformative journey: “What began as a modest manufacturing unit solely dedicated to our Cold-EEZE^® contract manufacturing has evolved into a top-tier facility producing premium lozenges for global brands. Our roadmap envisages scaling this business in the next 18-24 months from under $10 million in annual revenue to a potential $80-$100 million production capacity with healthy net profit margins. With prospective global partnerships, we're collaborating with a leading engineering and consulting firm to potentially enhance production capacity to $100-$200 million in annual revenues by the end of 2025. Of course, there can be no assurance that we will in fact be able to win new business at these levels, or that such new business will deliver the projected gross margins, but that is the goal.”

“The projected increased profitability at PMI will help offset some of the investment and expenses related to the development of our Nebula Genomics business and build out of our world-class whole genome sequencing lab in Garden City, NY, as well as preparation for the commercialization of our BE-Smart Esophageal Cancer test,” Mr. Karkus concluded.

About ProPhase Labs

ProPhase Labs, Inc. (Nasdaq: PRPH) is a next-generation biotech, genomics, therapeutics and diagnostics company. Our goal is to create a healthier world with bold action and the power of insight. We’re revolutionizing healthcare with industry-leading Whole Genome Sequencing solutions, while developing potential game changer diagnostics and therapeutics in the fight against cancer. This includes a potentially life-saving cancer test focused on early detection of esophageal cancer and potential breakthrough cancer therapeutics with novel mechanisms of action. Our world-class CLIA labs and cutting-edge diagnostic technology provide wellness solutions for healthcare providers and consumers. We develop, manufacture, and commercialize health and wellness solutions to enable people to live their best lives. We are committed to executional excellence, smart diversification, and a synergistic, omni-channel approach. ProPhase Labs’ valuable subsidiaries, their synergies, and significant growth underscore our multi-billion-dollar potential.

About Pharmaloz

Pharmaloz Manufacturing, Inc., a wholly-owned subsidiary of ProPhase Labs, Inc., is a full-service contract manufacturer and private label developer of a broad range of non-GMO, organic and natural-based cough drops and lozenges and OTC drug and dietary supplement products. PMI provides consumer product development, pre-commercialization services, production, warehousing and distribution services for its customers. Pharmaloz’s manufacturing facility, which is located in Lebanon, Pennsylvania, is registered with the U.S. Food and Drug Administration, and is certified organic and kosher.

Forward Looking Statements

Except for the historical information contained herein, this document contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our strategy, plans, objectives and initiatives, including our plans to grow our subsidiaries and build a high revenue, highly valued company, our expectation that recent price increases across PMI's product line will increase profitability, our expectation that the acquisition of automation equipment will escalate PMI plant capacity by over 50% and increase annual production, our belief that new commercial contracts with two top-tier lozenge brands will increase annual revenue and profits, our belief that the PMI manufacturing plant will be a steady revenue producer for years to come, and the anticipated timing for delivery of new equipment for the PMI manufacturing plant and its ability to increase capacity and revenue. Management believes that these forward-looking statements are reasonable as and when made. However, such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking statements. 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 Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any other SEC filings. The Company undertakes no obligation to update forward-looking statements except as required by applicable securities laws. Readers are cautioned that forward-looking statements are not guarantees of future performance and are cautioned not to place undue reliance on any forward-looking statements.

For more information, visit www.ProPhaseLabs.com.

ProPhase Media Relations and Institutional Investor Contact:

ProPhase Labs, Inc.
267-880-1111
investorrelations@prophaselabs.com

ProPhase Retail Investor Relations Contact:

Renmark Financial Communications
John Boidman
514-939-3989
Jboidman@renmarkfinancial.com

Source: ProPhase Labs, Inc.

FAQ

What is the ticker symbol for ProPhase Labs, Inc.?

The ticker symbol for ProPhase Labs, Inc. is PRPH.

What contracts did Pharmaloz Manufacturing, Inc. win in January?

Pharmaloz Manufacturing, Inc. won two new contracts in January that are anticipated to significantly increase lozenge revenues and profitability.

What are the projected annual revenues from the new contracts?

The new contracts are projected to inject an additional $5 million in annual revenue and more than $1.25 million in additional yearly pre-tax net profits.

What is the CEO's vision for the company's production capacity?

The CEO envisions scaling the business to a potential $80-$100 million production capacity with healthy net profit margins by the next 18-24 months.

What is the expected increase in annual production capabilities by Q4 2024?

The company plans to increase annual production capabilities to a range of $60-$80 million by Q4 2024.