ProPhase Labs Announces Excellent Progress with Crown Medical Collections Targeting Over $50 Million in Net Near-Term Cash Recovery from COVID-19 Receivables

Rhea-AI Summary

ProPhase Labs (NASDAQ: PRPH) is pursuing two major initiatives for immediate cash generation: collection of COVID-19 testing receivables and potential sale of its genomics assets. The company has partnered with Crown Medical Collections to recover over $150 million in uncollected COVID-19 testing receivables from insurance companies. Crown estimates potential net collections exceeding $50 million, which is more than double ProPhase's current market cap, with cash flow expected to begin by June/July 2025.

The company is also exploring strategic alternatives, including the potential sale of Nebula Genomics and DNA Complete. Nebula Genomics possesses a database of over 65,000 whole genome sequenced customers, equivalent to more than 150 million typical ancestry tests. The company will present these initiatives during a Virtual Non-Deal Roadshow on February 25, 2025.

Positive

• Potential recovery of over $50M net from COVID-19 receivables through Crown Medical Collections
• Expected cash flow from collections starting June/July 2025
• Valuable genomics asset portfolio with Nebula's database of 65,000 whole genome sequences
• Multiple immediate cash generation opportunities through asset sales and receivables collection

Negative

• Large amount ($150M) of uncollected COVID-19 testing receivables requiring legal action
• Potential sale of key genomics assets suggests possible cash flow concerns

Insights

Financial Analyst

This announcement represents a potentially transformative liquidity event for ProPhase Labs, with the combined initiatives targeting cash generation that could substantially exceed the company's current $10.5M market capitalization. The Crown Medical Collections initiative is particularly noteworthy, as it leverages the legal framework of the CARES Act to pursue $150M in receivables, with an expected net recovery of $50M.

The collection strategy's credibility is enhanced by Crown Medical's specialized approach and track record of successful recoveries from their $3B portfolio. However, investors should note that healthcare receivables collections typically face challenges including denial management, documentation requirements, and potential legal delays. The projected timeline for initial cash flows starting in June/July 2025 appears aggressive but achievable given Crown's direct engagement with insurance companies' legal departments.

The strategic review of the genomics assets presents another significant value creation opportunity. Nebula Genomics' database of 65,000 whole genome sequences represents a valuable asset in the rapidly evolving genomics market. Recent market validation through Nucleus Genomics' $14M Series A funding provides a relevant benchmark, though the actual value could vary significantly based on data quality, commercialization potential, and strategic buyer interest.

The company's multi-pronged approach to value creation, including these initiatives plus the BE-Smart Esophageal Cancer Test development, suggests a comprehensive strategy to unlock shareholder value. The potential success of these initiatives could provide ProPhase with significant financial flexibility for future growth investments or capital returns to shareholders.

Company Actively Pursuing Strategic Alternatives Including the Potential Sale of Nebula Genomics and DNA Complete to Unlock Immediate Cash

GARDEN CITY, NY, Feb. 20, 2025 (GLOBE NEWSWIRE) -- ProPhase Labs, Inc. (NASDAQ: PRPH) ("ProPhase" or the "Company"), a next-generation biotech, genomics, and consumer products company, is focused on immediate cash generation through two key initiatives: strategic alternatives including a potential sale of its genomics assets and the aggressive collection of outstanding COVID-19 receivables. These initiatives are expected to generate significant liquidity starting in the next few months and strengthen the company’s balance sheet.

Ted Karkus, CEO of ProPhase Labs will present to shareholders during the live Virtual Non-Deal Roadshow Series on February 25, 2025. The details are available below.

Crown Medical Collections Initiative

ProPhase has been collaborating with Crown Medical Collections to pursue over $150 million in uncollected COVID-19 testing receivables from more than 1,100 insurance companies. Crown’s legal strategy is unique and targets insurance companies and their unwillingness to reimburse valid Covid-19 claims as defined in the Cares Act. This law requires all insurance companies to pay claims regardless of network and plan status. Crown Medical Collections has over $3 billion dollars currently in collections and employs an experienced team of attorneys to negotiate settlements and litigate when necessary. This method has been highly effective in other cases and is projected to maximize the Company’s recoveries.

After closely reviewing these outstanding claims, Crown estimates that ProPhase could collect in excess of $50 million dollars net of fees, potentially almost doubling the current amount of COVID-19 receivables recorded in its financial statements. Incredibly, this amount alone is more than double the entire current market cap of the Company. Crown’s nationwide network of attorneys is highly motivated and has achieved successful outcomes. According to past precedents, material cash flow from these efforts may begin to flow into ProPhase as soon as June or July 2025.

Crown Medical’s Expertise

Crown Medical’s specialization lies in recovering unpaid COVID-19 reimbursements through a robust team of experienced attorneys who communicate directly with insurance companies’ legal departments. By enforcing compliance with all relevant COVID-19 regulations, Crown Medical consistently achieves accelerated success and superior recovery rates compared to traditional methods.

Strategic Initiatives Including the Potential Sale of Nebula Genomics and DNA Complete to Generate Immediate Cash

Nebula Genomics is a leading direct-to-consumer whole genome sequencing provider with an enormous database of over 65,000 whole genome sequenced customers (equivalent in size to more than 150 million typical ancestry tests). This is within a growing market segment that has seen recent market value validation by way of Nucleus Genomics raising $14-million in Series A funding from Seven Six, Founders Fund, Neo, One Eight Capital, Giant Step, Common Metal, Asylum Ventures, Rose Street Capital, Balaji Srinivasan, Amanda Bradford and many others.

CEO Commentary: ProPhase’s Commitment to Cash Generation

Ted Karkus, CEO of ProPhase Labs, stated:

“We are singularly focused on generating immediate liquidity through two highly actionable initiatives—the sale of our genomics assets and the recovery of outstanding COVID-19 receivables. These cash inflows will enable us to strengthen our financial position and drive future value creation. As noted above, the potential estimated collections from the Crown Medical Collections initiative alone could be a multiple of the entire current market cap of the Company. And this does not include our strategic initiatives for our genomics businesses, our BE-Smart Esophageal Cancer Test with a target market of $7-$14 billion and does not include our world class direct-to-consumer multi-media marketing platform that we will discuss in more detail in an upcoming press release. Needless to say, we are excited for the future and the potential that is unfolding.”

CEO to present to Shareholders

ProPhase will also present to shareholders during the live Virtual Non-Deal Roadshow Series on February 25, 2025, hosted by Renmark Financial Communications Inc. During this presentation, Ted Karkus will offer further insights into the Company’s trajectory and respond to investor questions.

REGISTER HERE:
https://www.renmarkfinancial.com/events/renmark-virtual-non-deal-roadshow-nasdaq-prph-fpqZzDMLVH

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About ProPhase Labs

ProPhase Labs Inc. (Nasdaq: PRPH) (“ProPhase”) is a next-generation biotech, genomics and consumer products 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. 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 potential for long-term value.

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 expectations regarding the future revenue growth potential of each of our subsidiaries, our expectations regarding future liquidity events, the success of our efforts to collect accounts receivables and anticipated timeline for any payments relating thereto, and our ability to successfully transition into a consumer products company. 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.

Media & Investor Contact

Institutional Investors & Media:
ProPhase Labs, Inc.
267-880-1111
investorrelations@prophaselabs.com

Retail Investor Relations:
Renmark Financial Communications
John Boidman
212-812-7680
Jboidman@renmarkfinancial.com

FAQ

How much does ProPhase Labs (PRPH) expect to recover from COVID-19 receivables?

Crown Medical Collections estimates ProPhase Labs could collect in excess of $50 million net of fees from over $150 million in uncollected COVID-19 testing receivables.

When will PRPH begin receiving cash flow from COVID-19 receivables collection?

ProPhase Labs expects to begin receiving material cash flow from the collection efforts as soon as June or July 2025.

What genomics assets is ProPhase Labs (PRPH) considering selling?

ProPhase Labs is considering the potential sale of Nebula Genomics and DNA Complete as part of its strategic alternatives to generate immediate cash.

How large is Nebula Genomics' customer database?

Nebula Genomics has a database of over 65,000 whole genome sequenced customers, equivalent to more than 150 million typical ancestry tests.

When is ProPhase Labs' (PRPH) Virtual Non-Deal Roadshow scheduled?

ProPhase Labs' Virtual Non-Deal Roadshow is scheduled for February 25, 2025, where CEO Ted Karkus will present to shareholders.