Nano Dimension Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 2 speakers on the call.

Operator

Hello and good morning everyone. Welcome to today's presentation. My name is Noella Alexander Young, virtual event moderator here at Renmark Financial Communications. On behalf of our team, we want to thank everyone for joining us today for Prophase Lab's Q1 2024 results. Prophase is trading on the NASDAQ under the ticker symbol PRPH.

Operator

Presenting today is Ty Karkas, Chairman and Chief Executive Officer. Following the presentation is a Q and A session for which you can participate using the chat box on the top right hand corner of your screen. That being said, I will now hand the floor over to Ted.

Speaker 1

Thank you, Noella. Really appreciate you moderating. As always, big shout out to Redmark. We do virtual non deal roadshows with Renmark approximately once per month. So if you miss anything in any presentation or you want to get be kept up regularly, feel free to sign up with Renmark if you want to be up to date with what's going on with our company.

Speaker 1

I think that these virtual presentations are a great way not only for when I do the VNDRs, but also we are now doing them for the earnings calls as well. Feel free to give me feedback if there's a different approach you think we should take, but I love this approach. Before we get started, forward looking statement, just very quickly for the VNDRs, I don't read them, but for the earnings calls, I think I should. 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.

Speaker 1

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 approval, 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 on our website. So with that, first of all, I just have to give a shout out to ThinkEquity, who we have close to a 4 year relationship with, was instrumental in financing our initiatives when we built out the COVID business that went on to a couple of 100,000,000 in revenues.

Speaker 1

They brought us some fantastic acquisitions that are now developing. So I always give a shout out to ThinkEquity, also to the other companies that follow us on an analytical research analytical basis including H. C. Wainwright and Diamond Equity Research. So with that, I don't want to go through the presentation again.

Speaker 1

Not that much has changed in the presentation itself from the last time I did an earnings call just 6 weeks ago. And so I was going to start the call by saying not that much changes in 6 weeks. But the fact is, if you read the press release today, a lot has developed in the last 6 weeks. So before I get into it, I always like to put a little perspective. I really do believe that a history of execution in a microcap company is critically important.

Speaker 1

When a management executes historically, your probability of success goes up on the next initiatives that management is focusing on as opposed to a management team that's new, that's starting up a company for the first time has some breakthrough technology that they're excited about. The risks are much larger when you have a management team that you can't assess. So I'm not going to go through all this again. But again, in 2012, when I restructured the company, the stock was $0.65 Stock's around $5 and change right now, paid out $2.40 in special dividends. So you're up 11, 10, 11, 12, 13 times in total returns in the last 11 or 12 years.

Speaker 1

More recently, a few years ago, our stock was about $1.5 It's more than tripled. We paid out another $0.90 in special dividend since that time. So even in the last few years, tremendous returns to the shareholders. We are now we've transitioned multiple times now. Some years we're a development stage company spending money to develop assets.

Speaker 1

Some years we're generating revenues and earnings. And it goes back and forth and that's the life and cycle of a development stage company. So first we turned around the Colby's brand, lost money building the brand, sold it for $50,000,000 I did the same thing by the way with IT Biomedical. I was instrumental in the turnaround of the company that ultimately was sold for $1,400,000,000 That was before I did the same thing with our company. So I have a history of doing this.

Speaker 1

It's not just me. We have a great management team in place here. So in any event, after we sold the Kaldi's brand, then we went back really to being a development stage company. Again, we did stock buybacks and dividends at the time. And then we got into COVID testing, generated a lot of revenues, made a lot of money.

Speaker 1

But now we're back to a development stage company again. And so you can expect in a development stage company developing assets, you're going to lose money. I have no interest in focusing on the losses over the last couple of quarters. We're going to lose money next quarter again. But at some point with the new assets that we're developing, they're going to take off in value.

Speaker 1

So the one that I really want to focus on today that's the focus of the earnings report is formalized because there are some interesting new developments. So just very quickly, so we're all on the same page here. PharmaLabs is a business we've owned for decades. The supply demand over the last several years for manufacturing of lozenges has shifted where there is less supply of manufacturing and there's enormous demand both globally and domestically here in the United States. And so for the last 2 years, understand this isn't there's the line about the 20 year overnight success.

Speaker 1

And I actually looked up some quotes about 10 year overnight successes and it takes 10 years to be an overnight success. Well, formalize is all of a sudden going to sound like an overnight success, but besides the fact we've been developing it for a long time, specifically over the last year or 2, we've been specifically focusing on building the capacity so that we can take advantage of the global demand so that we could have an asset worth tremendously more over the next 6 months relative to what it was worth last year. So last year we did about $9,300,000 and actually lost a little bit of money. We increased prices on all of our customers. They all accepted the price increases.

Speaker 1

They're kicking in now. We got 2 new orders in from 2 new brands that adds another $5,000,000 of revenues. So between the price increases and the 2 new orders going into the second half of the year, just on existing business on the first manufacturing line, we're going from $9,300,000 losing money to about $16,000,000 in annualized run rate of revenues and making substantial money somewhere in the order of $3,500,000 of profits. That will be our run rate as the current new customers ramp up their business. 1, we've started to ramp up already.

Speaker 1

The other one, we're going to be ramping up probably later in Q2 or we're very close in hand. So going into the Q3, all of a sudden, the numbers dramatically change for Pharmalaz. More importantly, we have a second line of manufacturing equipment. We have additional automation equipment coming in. It's going to significantly increase our capacity, which now for the first time sets us up to be very attractive to very large brands who need capacity.

Speaker 1

And so as I announced today, we are exploring strategic alternatives with formulas. I don't make that statement lightly. It's not just an idea. This is something that's been in the works literally for a year and a half to 2 years in terms of the planning and then the execution of building out the capacity and then starting negotiations with large brands. I mentioned probably, I don't know, I can't remember, it was 2 earnings calls ago that we were in talks.

Speaker 1

So understand even just the talks with the large lozenge brands have been in effect for many, many months. This isn't just some new idea, Oh, we're going to talk strategic alternatives. This is very far along in discussions. And it's the only reason that I even mentioned. Doesn't mean there's a guarantee it's going to happen.

Speaker 1

So it's not a guarantee that we will accept any offer that comes along if there is an offer. And I don't want to get into details because we have lots of options here. We could either sell the facility now potentially or we could negotiate for the 2nd line, which is of course going to have tremendous capacity and will be very attractive to some very large lozenge brands. They may want to lock up the capacity. If they may want if they lock up the capacity, I'm going to want a down payment because it means cutting out all the other customers that we're meeting that want the capacity as well.

Speaker 1

We were recently at an expo. We have potentially a dozen new customers, smaller customers that could potentially fill up the 2nd line as well. So we have different possibilities, couple of opportunities there, couple of possibilities for significant liquidity events. So this is all very exciting. Happy to talk about it more in the Q and A.

Speaker 1

Going to try and get to the Q and A a little earlier today and not too I really don't want to spend a lot of time on slides that I've reviewed in the past. This entire presentation, by the way, is available on our website. When there are updates, go to our website at least once a month. Anytime we have a new press release, we usually update this presentation as well. So feel free to go to the website.

Speaker 1

So that's really exciting for today. Conceptually, before we get into the next slides, we're going to get into nebulagenomics very, very briefly. I just want to explain that when you're developing assets, when you're developing businesses, there are always bumps in the road. There's no such thing as just snapping your fingers and taking a business and making it worth $5,000,000 and all of a sudden it's worth $50,000,000 or $100,000,000 dollars Every once in a great while it happens with a technology company. You only hear about the one technology company that just takes off.

Speaker 1

You don't hear about the other 99 that fail unless you're invested in them. And it's not easy building a new business. And so with Nebula Genomics, we have a new go to market strategy. And I'm not going to go too much into what Nebula Genomics is other than the fact that it was founded by George Church, world renowned in the field of genomics. We have we built a world class lab.

Speaker 1

We converted we were doing COVID testing. We converted to a world class lab here in New York. That lab costs a lot of money to manage right now. We're not generating the business currently to support the lab. However, I believe that 6 12 months from now, the Nebula business is going to take off and we're going to be happy that we have the lab.

Speaker 1

We don't need the lab. Historically, when we acquired Nebula Genomics, it didn't have a lab except all the specimens to a partner lab. But our thought is we could provide testing even less expensively if we did it ourselves, but that's in the long term. But the other part of having a lab, it's not just the P and L of sequencing a specimen in house versus sending it to another lab. There are some other factors at play here.

Speaker 1

One is in the long term, if somebody is interested in our business, it's going to be a lot more attractive if we're vertically integrated and horizontally integrated and we have a lab and we have all of these other pieces. The other part of it is a lot of people are so, worried about data privacy these these days. They don't want you sending your specimens abroad. The fact that, we can do the sequencing right here in New York. And then ultimately, we have 4 world class, latest, greatest state of the art platforms of equipment that allows us to be the most efficient in terms of turnaround times, pricing and so forth.

Speaker 1

So it's incredibly well situated. But the truth of the matter is the real value in Nebula, it's in our bioinformatics platform, it's in the reporting system, And separate from that, it's in our database. So I'm not going to I can go more into it in the q and a, but understand the real value of Nebula is in our reporting system and our database that we're going to leverage over time. We're building a very exciting new go to market strategy where we're going to leverage some world class social media and podcast experts. We're potentially going to bring in some well known celebrities to really get behind this.

Speaker 1

I just think of products and I love to think of Prime because it's just a hydration drink that came out of nowhere. It got some celebrities and some social media behind it, you know, and now they've sold a 1,000,000,000 bottles out of nowhere. Now understand it's completely different business, but the concept is the same. I believe we have the right people in place. It took time to figure this out.

Speaker 1

And that's why I say this is a work in progress. Nebula is a work in progress. But so understand, it's nice to have different assets in different stages of development. So that we have formalized is about to kick in with either liquidity events or profitability. And that was 2 years in the making to get it to the point where it is now.

Speaker 1

Nebula will be next. I can't tell you which quarter it's going to take off. It's going to be probably Q4 and Q1 next year. But Nebula is a really exciting business with enormous potential and the different directions we can go at in with it. And again, I'll talk more about it in the Q and A.

Speaker 1

I'm not going to talk more about it now. But then next, we get into our esophageal cancer test. Again, this is all development stage. This is 6 years. Nebula is 6 years in its development.

Speaker 1

BSMART Esophageal Cancer Test is 6 years in its development. It's not an overnight wonder. Nothing happens overnight, but we're going to go from no one paying attention to this test. Clearly, I don't believe there's anything in our market cap for this test. And yet this literally has multi $1,000,000,000 potential.

Speaker 1

This is a breakthrough cancer test that is surely needed in the medical community and more importantly for patients. I sincerely believe this is going to save patients' lives. So and I think it's going to save insurance companies 1,000,000,000 of dollars. So it only makes sense. I can't tell you exactly how we're gonna commercialize this yet.

Speaker 1

But what I can tell you is I work 20 fourseven. Everything I do is for the shareholders. I'm the largest shareholder in the company. Friends of mine are the other largest shareholders. I create value over time.

Speaker 1

It's not a guarantee of the future, but I always have in the past. And frankly, what I'm working and what our management team is working on right now, I'm significantly more excited about than anything I've ever worked on literally my entire career. Forget everything else that I just talked about. PharmaLabs to me is now just crossing T's and dotting I's. That's just a matter of time before we generate some significant value to the shareholders.

Speaker 1

That I highly believe is going to happen one way or another, whether we sell it, sell the second line, the capacity of the second line or whether we just build the business and start generating a lot of revenues and earnings, maybe sell it in 12 or 18 months. That's sort of on a fast track to success now, not very complicated. All right. Nebula Genomics, I think has tremendously more potential than our formalized manufacturing facility, But it's probably, I don't know, 6 months, 9 months behind in terms of the ramp up in revenues and earnings and recognizable value. And then we have our B Smart Esophageal Cancer Test, kind of the same thing.

Speaker 1

But what I like about these assets that we're developing, particularly with B Smart, this is not costing us a lot of money at this point. It's not like a cancer drug where you're spending tens and 100 of 1,000,000 of dollars in 10 years to develop it and all that. We're about to commercialize this. And we're not spending $10,000,000 a year or $15,000,000 a year right now getting it ready for commercialization. We're spending a small fraction of that just to complete.

Speaker 1

Right now, we're not even really doing a lot of studies. We're doing statistical studies, statistical analysis, because originally this was focused on more as a test to tell you whether or not you have cancer. But our test actually does a lot more than that, because we have breakthrough IP, patented discoveries relating to the proteins that shift and are expressed differently when you're developing esophageal cancer. And so our test can recognize those shifts in proteins. That's something that, by the way, doesn't show up in blood until you're far too progressed and it's too late and you're potentially you get diagnosed and you're going to die of esophageal cancer.

Speaker 1

It's great, is it really a great test if it says yes, you're diagnosed with esophageal cancer and 80% to 90% of people that are diagnosed die. And if you get diagnosed and 2 years later, you die of esophageal cancer. Is that a great test? I guess maybe to put your financial affairs in order, But wouldn't you like a test that actually saves your life, that instead it tells you just before you die, it tells you years before that so that you can get an ablation procedure or or take other actions to actually prevent getting the cancer, that's what our test does. So we're actually fine tuning the statistics right now, not only to tell you whether or not you have cancer now, that we can do with a incredibly high degree of accuracy.

Speaker 1

But in addition to that, right now what we're working on are the statistics to tell you if you're in high risk or low risk. If you're a high risk, go out and get an ablation procedure immediately to save your life. If you're low risk, you don't have to get an endoscopy every year. Right now, the insurance companies are spending 1,000,000,000 and 1,000,000,000 of dollars on unnecessary endoscopies. They're doing that because they don't know.

Speaker 1

The GI doesn't know if you should be getting an endoscopy every year or not. But our test will help guide the proper diagnosis and prognosis, best course of treatment for the patient based on whether you're low risk, medium risk, high risk, or you have esophageal cancer right now. So this is an incredible test. It's just remarkable to me that there's nothing in our stock price for it. And listen, as CEO, I don't know why I should say this or not.

Speaker 1

There's no guarantee this is going to happen. Maybe somehow we just don't figure out how to commercialize it. It. I don't know how if there's even a possibility that we would fail in this. I guess there's some forward looking statement, no guarantees.

Speaker 1

I don't see how this isn't going to be a monster test. You look at a company like Exact Sciences with a $10,000,000,000 $11,000,000 dollars 12,000,000,000 market cap. And by the way, they came out with earnings and said that they have competition now. Right? We don't have any competition for our test.

Speaker 1

And what's the value of it in our stock? I don't know, 0. What's the potential? It's not an at home test now, but we're also going to develop Stage 2 and Phase 3 of this test. Who knows one day, it might be, but right now what we're focused on are the endoscopies because there's millions and millions of endoscopies performed every year.

Speaker 1

And we're not telling people get endoscopies, but if you're getting one, take our test alongside of it, and it'll give you a high degree of accuracy for diagnosis and prognosis and course of treatment that you don't have without our test. So, I think I stated pretty clearly the excitement of this test. So if we have formalized that we're going to realize significant value knock on wood very shortly, whether through the whether it's through sale or sale of the second line or through just building revenues and earnings for it. And then behind that, we have Nebula and our B Smart Esophageal Cancer Test. And I'm not going to go more into the numbers again.

Speaker 1

I can do that in the Q and A. Again, our focus is 7,000,000 endoscopies per year. Our goal, once we get CPT codes, assuming we get them, I believe we're going to very soon, if we get them that the insurance will reimburse somewhere around $1,000 to $2,000 It makes it a $7,000,000,000 to $14,000,000,000 market with no competition. Pretty incredible. Elsewhere, Equivir just really quickly.

Speaker 1

Again, we're developing this at very, very little cost. At this point, we're just completing one study, typically a dietary supplement. The class action attorney jump all over you if you don't have 2 studies that total 100 patients. We're totaling over 300 patients. So we're doing this the right way.

Speaker 1

I learned from ColDes, I turned around ColDes myself. Eprovir is a broad based antiviral. We're going to sell it in the same stores. We're going to market it the same way. I don't want to talk about Kaldi.

Speaker 1

It's not right. We actually still manufacture Kaldi's for the owners of Kaldi's. So I don't want to get into that. But I can tell you Equivir has a lot of potential in the marketplace. We have all the infrastructure in place to roll this out ourselves.

Speaker 1

We don't need consultants and advisors. We don't need other companies for manufacturing and distribution and logistics or selling. We have all that in place. It's a turnkey solution to rolling this out. We're going to roll it out online first in order to get into stores always takes longer, so I don't want to mislead anyone about that.

Speaker 1

But it has nice potential, no value in our stock price. It's a nice 4th asset or initiative to mention. I don't make a big deal about it right now, but it'll fit in nicely. We also have a product called Legends XL that's already in the store. It does 2 and a half, dollars 3,000,000 a year of business, makes about a half a 1000000 a year.

Speaker 1

It's a nice little product. I think Equivir can be a lot bigger than that. And actually with the social media podcast experts that are working on Nebula Genomics, we may spread out to a bunch of different health tests that may include things like our Legends XL product, like Equivir. So we could with the social media podcast infrastructure we're building, we ultimately should be able to leverage that not only with Nebula Genomics, but with other health tests and other health products and dietary supplements like Legends, XL and Equivir. So that's an awful lot.

Speaker 1

I'm going to leave it there. I did that in about 24 minutes. I'm happy I hope there's a bunch of questions. I love the Q and A. And I want to thank you all for joining me today.

Speaker 1

Thank you all for those of you that are shareholders for supporting us. I think that I guess I shouldn't really talk about risk reward. But given the value of some of our assets, the fact that we may realize some pretty significant value in the short to intermediate term for pharma laws, should provide a lot of comfort in terms of downside support. And the upside, as I just laid out, we have several initiatives with enormous upside and a management team with a history of success and execution. And with that, Noella, thank you for being with me today.

Speaker 1

I'll turn it back over to Noella for the Q and A. Don't be shy, feel free to ask a question. I love to be an open book and talk about our company.

Operator

Thank you, Ted, for the presentation. So now we'll begin the Q and A. The first question is, we're interested in the growth plans of Nebula Genomics.

Speaker 1

I'm sorry. It said we're interested in?

Operator

Yes.

Speaker 1

Okay. I'm interested too. Is that a question? It's not

Operator

a statement, but I'm assuming

Speaker 1

Okay. Okay. That's an interesting way to kick off the Q and A. Listen, I'm interested in the growth plans for Nebula as well. We are evolving and developing the best go to market strategy.

Speaker 1

There are a couple of core assets to Nebula that have enormous potential. Among them are our reporting our bioinformatics reporting system, which is one of the best in the world. Another is our database, which is one of the biggest, most diverse in the world. It's equivalent of 150,000,000 ancestry tests. We can leverage that potentially in enormous ways.

Speaker 1

I didn't even talk about, I'm sorry because it was in the slides, our most recent AI initiative, which is actually a very big deal. In our AI initiative, we built a world class AI platform that's going to leverage this database and it's also going to leverage the knowledge that we've learned the IP proprietary discoveries that we've learned with our esophageal cancer test and our initial focus are ABCs, anti drug conjugates that source the cancer cells directly and kill the cancer cells leaving the healthy cells alone. This is the next stage of medical research. It's a very big deal, what we're working on. It's relatively in its early stage, but understand that our database was 6 years in the making, 130 countries worth of testing, patients from 130 countries, 6 years in the making of developing the esophageal cancer test and the proprietary knowledge we have.

Speaker 1

So again, it's one of these overnight successes, but some very big things could happen from the AI leveraging our Nebula. Separately, in terms of go to market strategy, there are several different strategies. Understand from the B2B perspective, when we built out the lab and attracted businesses that don't want to send their specimens abroad. But a lot of these businesses are new businesses. They haven't done whole genome sequencing before.

Speaker 1

So for instance, I talk about this telemedicine platform. They're moving slowly. It's frustrating, but it's very real and the potential is very large. But this is an organization that hasn't done whole genome sequencing before. So they want to do it the right way.

Speaker 1

Planning and details and big deals like that take several quarters, not several weeks, but several quarters to develop. So we're in the stage of developing many business like this, both here and abroad. We announced 1 deal abroad. Again, that's just the beginning. We have one of our lead sales guys in another part of the world right now meeting with big players who are very interested in what Nebula is doing.

Speaker 1

So there's a lot going on on the B2B side, it's going to take time. On the direct to consumer side, I already mentioned we are working with world class social media experts, very involved in the podcasting world. And I can just tell you, and this this Jason Kark is overseen. It's a young man's world for dealing with podcasts and social media and all that stuff. I don't even want to be involved.

Speaker 1

I'm happy from a distance to oversee and make sure strategically we do this the right way. I think it's going to be very, very big. But it's going to take time. It's going to take a couple of quarters before you start to see the results of that. Thank you, Noella.

Speaker 1

What's the next question, please?

Operator

Next is, why did you enter into a standstill agreement with ThinkEquity on April 18th without explanation?

Speaker 1

So, I don't get into investment banking decisions. By its very nature, when you're working with an investment bank, it's usually proprietary and sometimes material non public information. But it's kind of interesting the responses that I got to that. And what I can tell you very specifically, it says that we specifically are not going to issue equity for the next couple of everybody said, oh, this means you're going to issue equity. Actually, it's just the opposite.

Speaker 1

We're not going to issue equity. So we're always working on various strategies. Again, we have a relationship with ThinkEquity going back almost 4 years. They've helped us build tremendous value in our company. And again, I'm the largest shareholder in the company.

Speaker 1

Everything I do is for the best interest of our long term shareholders. Doesn't mean I won't ever do a round of equity financing if it's called for and it's the best strategy for the company. Doesn't mean I won't take other actions. I had a shareholder reach out to me and say, Hey Ted, how come you're not buying back stock? How come you're not paying more dividends?

Speaker 1

Well, if we had a large block of cash that we didn't need right now, I probably wouldn't be buying back stock, but that's just not a possibility right now. There's no reality to that statement. To be a shareholder, of course, you always want to be buying back stock and paying stock dividends. I do it when strategically it makes sense. Right now it doesn't strategically make sense.

Speaker 1

So by the same token, work with ThinkEquity. We're always working on various strategies and various planning and I'll leave it at that. But at the present time, I didn't put in the press release, we have no interest at the present time of any sort of equity financings. And in fact, to the contrary, I just mentioned there are 3 I mentioned in the press release, there's 3 potential liquidity events that could occur in the next couple of quarters. That's what I'm focused on.

Speaker 1

Now if none of those happened, then I'd have to reconsider. But as of right now, I'm not even considering anything like equity offerings. Thank you.

Operator

Thank you for clarifying. Your next question is, do you think prophase will have to raise money in the 2nd or Q3 this year?

Speaker 1

I just answered that question. I don't I don't need to repeat myself. As of right now, the answer is no.

Operator

Thank you, Ted. Next, why not do an IPO for Nebula or PharmaLaws or both and raise all the growth capital you need for expansion and also create a market value for these assets that The Street is totally overlooking?

Speaker 1

That's a great question. It's something that I've considered for quite a long period of time. One issue is that the books and records of both subsidiaries have to have completely separate audited financials to spin them off. That takes time to completely set them out. They are wholly owned subsidiaries, but right now it's a little complicated.

Speaker 1

You need independent you need our orders to do an independent review of all the finances and sign off on separate financials for each company so that in effect, they're have their own fully audited statements. And then the timing has to be right with the market. For Microcaps, we've been in a bear market for 3 years. For the larger companies, they had a great year last year, all indications were this would that money would start to flow into the microcaps. It actually started to in the Q1.

Speaker 1

Things look great and then all of a sudden inflation rears its head. Fed talks about we thought we were going to start cutting interest rates, now we're not. That put a damper on things. We had a significant sell off in April in the micro caps that in fact there were a lot of IPOs that were canceled. So yes, I think it's a great idea at the right time, but I'm not going to do an IPO for either one of those subsidiaries at the wrong time in the wrong market conditions because instead of getting a large valuation and raising money at a high valuation, We do an IPO at a low valuation.

Speaker 1

The money you raise you're giving away a big chunk of the company. And again, I think about what's best for the shareholders long term. So I would love to do an IPO of either subsidiary under the right market conditions. By the same token with Formless, there's also the possibility that we just sell and we don't have to do the IPO. So we'll see.

Speaker 1

Again, these are decisions, these are strategic decisions and discussions that I'm having on virtually a daily basis. I live, breathe and think about our company 20 fourseven and these are some of the things that I think about literally all the time. Thank you for that question. It's a great question. I'm sorry I don't have a better answer, but honestly, a part of it is market conditions and a part of it is strategically what's best for the company and how to optimize value for the company and its shareholders on a long term basis, not to get a pop in the stock short term.

Operator

Thank you, Ted. Next, a viewer asked, can you provide additional information on the valuation seen in sales licensing transactions for CDMO?

Speaker 1

MO? I don't understand the question. I don't know what's subsidiary I apologize. I don't understand the context. If the person who asked the question wants to send a question in clarifying, I'm happy to take the question if you want to put them back in the queue.

Speaker 1

If we go to the next question, please.

Operator

Certainly. Your next question is, regarding pharma laws, are we in the early stage of negotiation negotiating a sale or a late stage?

Speaker 1

It's a great question. I have to be very careful and sensitive. You never know who's watching these presentations. I don't want to say or do anything inappropriate. So I'm not sure how to answer the question except to tell you there isn't anything I put in our press releases to hype the stock or to pump people up.

Speaker 1

Everything I say in our press releases is real. That's what I truly believe. And so if I put a statement, which is one of our headlines of our earnings release that PharmaLaz is exploring strategic alternatives. We're not at the beginning stages of exploring strategic alternatives if that's the headline of our press release. I think that answers your question.

Speaker 1

If it didn't, then replay this tape because I'm pretty sure I answered the question. Noella, what's next, please?

Operator

Next, when can we expect meaningful revenue from Nebula? Keep hearing about all the potential, yet to see anything being sold.

Speaker 1

Yeah. So I addressed that in the presentation. We have completely transitioned our go to market strategy, including hiring some great people, a new management team, some great people, as I said, we're podcast and social media experts. We are putting together a plan. The assets are there at Nebula.

Speaker 1

We've developed them, All right? As I said, the database, the reporting system, we've continually fine tuned the reporting system, building out the lab. We have all the right pieces. But as I said, there's no such thing as an overnight success. And I'm pretty sure I addressed I know I addressed in my presentation a short while ago that it's going to take a couple of quarters and we're going to lose money at Nebula for a couple of quarters.

Speaker 1

The money being lost in the company right now is combination of the overhead of the company and the cost of running the lab. If I didn't think that the potential was enormous and that the lab was a part of that, I would just shut down the lab. I can do that tomorrow. But I believe we have liquidity events that are going to dwarf the cost of keeping the lab. So I'd rather keep the lab for a year and see how that plays out.

Speaker 1

But as far as generating the revenues, we have multiple avenues or paths to success. We're working on all of them. And it will but it will take time. And I feel like I'd say I'm sorry. It's going to take an extra 2 or 3 quarters.

Speaker 1

But as I said, I build the value of the company long term for shareholders, not short term. And in the meantime, people should be really excited about what we're doing with PharmaLabs today, which then gives us the flexibility without wiping out to shareholders with big dilutive rounds of financing. It gives us the flexibility to develop these other assets, Nebula being one of them.

Operator

Excellent. Thank you, Ted. Next question. With the Equivir study coming to completion, can you share with us what claims you expect to put on the package?

Speaker 1

Those are actually a work in progress. I'd rather not misstate that. I mean, I can just imagine a class action attorney, you know, 6 or 9 months from now, we commercialize the product and they say, oh, Ted said on a conference call 9 months ago that it could do such and such. So I have to be very careful. It's premature to talk about the claims.

Speaker 1

What I can tell you is our study, it was a really great study that was done over a long period of time with more than 300 patients, which is an enormous study for a dietary supplement. And we tested it all through the entire cough cold season, the entire viral season, and we tested and compared people who got COVID, cough cold, flu with people that didn't, people that took our product versus took a placebo, and the results so far have been fantastic. Now it doesn't mean we can make a COVID claim, doesn't mean we can make an RSV claim, doesn't mean we can make a flu claim, but the results are palpable. If you have 150 people over here and 150 people over here and randomly they're in one group versus the other and the group that took our product got significantly less sick and the group that didn't take the placebo got significantly more sick with all of these viruses, flus, COVIDs and so forth, the results are pretty impressive. What we can say is claims on the packaging, we're going to work that out with the attorneys.

Speaker 1

We want to complete the study first, then work with the attorneys, get the right claims on the packaging, create the packaging, and then we're off to the races. And so to get to the market quickly, we will go online first with our product. It will take longer to get into the stores, but we will demonstrate the success of the product online. And then ultimately, we anticipate distribution in the stores thereafter.

Operator

Excellent. Thank you, Ted, for that response. Next is, since we're almost halfway through the Q2, what growth in revenue do you expect in Q2 as compared to Q1?

Speaker 1

So I can't comment on Q2 today. I haven't even looked at Q2 numbers. Consider Nebula, Esophageal Cancer Test, Equivir are all development stage. As I mentioned, Nebula really isn't going to ramp up maybe 4th, maybe 3rd quarter, hopefully maybe Q4. I can't tell you that's all guessing.

Speaker 1

Pharmalaz is really going to start to ramp up 3rd quarter. So 2nd quarter, and I'm not putting I never put out projections and I have to be careful what I say on this conference call right now. But based on what I just said, I wouldn't expect much in our Q2. I will tell you that our adjusted EBITDA, our cash flow improved dramatically in the Q1 versus Q4 of last year. But the next significant jump also understand PharmaLabs, we're in our seasonally weakest period right now.

Speaker 1

But then come Q3, it starts getting it starts heating up. I believe that for our first line of manufacturing, PharmaLaz will we built the capacity on the first line. I believe we'll be running at full capacity. I believe we already have the demand for full capacity for the Q3. And then it just quickly how a question of how quickly we open up the second line and bring in customers for the second line.

Speaker 1

And again, we're in strategic discussions right now, and so it's a little complicated, not sure how the second line plays out or when it plays out. But the numbers of formalized are improving now, certainly from the Q4 last year. I mean, they're going to improve, but the real improvement at Pharmalyze is going to occur the second half of the year. Hope that answers your question.

Operator

Thank you, Ted. We're coming up on your last two questions. The first one is, in the earnings release, share count jumped from 18,000,000 last year to 90,000,000 this year. I missed the 72,000,000 share insurance. Please explain.

Speaker 1

I'm not going to get into specifics of share count changes. I appreciate the question. Shares changed insignificantly over time. Let's just leave it at that.

Operator

Thank you, Ted. We actually have another question that came in, so I'll do the first one. Ted, I have two questions regarding B Smart. Have we filed for the insurance code? How extensive will our advertising campaign educating the doctors?

Speaker 1

Yeah. So the CPT codes, we're working on that right now. We're working with consultants. We're making sure we get all the information in at the right time correctly. The application, the CPT codes is coming soon.

Speaker 1

There's only a window, 1 month out of every 3 months. So there's another window in, I want to say in about 6 weeks. And our goal, I think it's, don't quote me on that, but sometime soon there's a window to submit and then it's just a question of how quickly we get a response. But at the same time that we're working on the CPT codes, we are also working with several different groups towards a game plan for commercialization. So we're not waiting for the CPT codes.

Speaker 1

We have other things in progress. We've even talked to a very large company in the past about potentially partnering. But again, all of that is premature, but there's a lot that goes into this and there's a lot behind the scenes. But we're working on several strategies at the same time, one of which is the CPT codes. At the end of the day, you need the CPT codes to go to next steps, But we're planning for getting the CPT codes and we're already planning for the next steps after the CPT codes.

Speaker 1

But the gating issue right now are the CPT codes.

Operator

Thank you, Ted. And this will be your last question. Speaking of partnering, a viewer says, what are the odds of partnering with someone on Bsmart or doing it in house?

Speaker 1

That's interesting. I think I already addressed that. The odds, I can't give odds. We're open to exploring all possibilities. I simply look at risk reward and what's best for the shareholders long term.

Speaker 1

I mean, if Esophageal cancer test, if that test, I really believe it has multibillion dollar potential. It's just hard when you're sitting here and you haven't even commercialized it yet to say, yeah, we're going to generate $2,000,000,000 in year 3. I have no idea what we're going to do with this test. I would hate to sell it short and partner with somebody and get a block of money upfront. And I don't know what that block of money would look like, but it could be very meaningful to the shareholders short term, but it could leave 90% of the value of B Smart on the table for somebody else just because we weren't patient for a year or 2.

Speaker 1

So I really have to see how this plays out. I have to see what the dynamics are. I have to see what the acceptances of the insurance companies, what the acceptance is, what the reception is of the GIs that would actually order the test. All those dynamics until we actually start to sell the test or try to sell the test or commercialize the test, all those dynamics, you don't know how people, how companies are really going to respond until we're actually out there and actually commercializing it. So I think it's really premature to make a decision on that.

Speaker 1

If I told you I knew which way I was going to go, that to me wouldn't be prudent. I wouldn't be doing a great job as our CEO in guiding the company. So these are decisions to be made later in the year.

Operator

Excellent. Well, thank you very much, Ted, for your responses. That concludes the Q and A session. But before we go, I will turn back the floor to Ted for final remarks.

Speaker 1

Thank you, Noella. Thank you all for joining. Again, we do these virtual non deal roadshows with Redmark once a month. So feel free next month to sign in even if it's not an earnings call to sign up with Renmark. And look, I say it in the press release and I mean it when I say the best is yet to come.

Speaker 1

I truly believe the best is yet to come. We're at an interesting turning point in our company. I can't tell you which month the stock is going to be at its bottom, which month it's going to go up. But I can tell you in terms of the value of the company, right now we're at an interesting juncture given the most recent developments at Formulas and from the recent developments of Pharmulaz as those progress that could lead into very significant developments with our esophageal cancer test, with Nebula, with our AI initiative, with the rollout of Equivir and so on and so forth. So I appreciate all of you joining me today and sitting with me for an hour.

Speaker 1

And for those that are shareholders, of course, always appreciate your support. We're on the same side. We're on the same team. And the one thing I can tell you, I am working my butt off to make sure we have a world class management team, that we're working on world class subsidiaries, and that we're doing everything to the best of our ability to really kill it for all of you. Thank you and have a great day.

Speaker 1

Thanks again, Noella.

Operator

Thank you very much, Ted. And thank you, everyone, for joining us today for Prophase Labs' Q1 2024 results. Prophase is trading on the NASDAQ under the ticker symbol PRPH. The playback for this presentation will be available on our website 24 to 48 hours after this presentation under the VNDR Library tab. Please stay tuned for other presentations, and see you next

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Nano Dimension Q1 2024
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