ProPhase Labs, Inc. (PRPH) Q3 2023 Earnings Call Transcript

ProPhase Labs, Inc. (NASDAQ:PRPH) Q3 2023 Earnings Conference Call November 9, 2023 11:00 AM ET

Company Participants

Ted Karkus – Chairman and CEO

Conference Call Participants

Adam Waldo – Lismore Partners

Yi Chen – H.C. Wainwright

Hunter Diamond – Diamond Equity

Dennis Waldman – Barrett Productions

Operator

Good day and welcome the ProPhase Labs Incorporated Third Quarter 2023 Financial Results and Corporate Update. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there’ll be an opportunity to ask questions. Please note that this event is being recorded.

I like to turn the conference over to Mr. Ted Karkus, CEO. Please go ahead.

Ted Karkus

Thank you, Nick. And thank you everybody for joining. I’m actually really excited to have this call today, because we are at an inflection point in the company. In fact, we’re going through an inflection point in our company over the last couple of quarters and over the next couple of quarters. But I am tickled pink with how well things are going in our development stage subsidiaries.

With that said, I want to start with the forward-looking statement. Before we get started, I would 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. Well, 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 and 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.

All right, couple of — I always like to start with a couple of shout outs. Number one, I think equity done a phenomenal job working with our investment bankers over the last three years not only did they do a large race for us, but they were instrumental in finding some great assets that we acquired over the last three years. And some of those assets are the assets that are going to bear very significant fruit I believe on behalf of our company going forward. We also have excellent coverage by H.C. Wainwright by Joshua Levine at Third Stream Research, and of course, love Diamond Equity Research, Hunter Diamond shout out to Hunter. So thank you all so much.

And finally, Renmark I do virtual non deal roadshows presentations. Right now about once a month, we actually have one coming up next Thursday the 16th. I like to keep our shareholders up to date on what’s going on. So I like to do a VR — it’s a virtual presentation, we go through the company presentation, which is on our website. I update that presentation regularly, I believe we just updated very, very recently. So feel free to go to our website, if you want to get into more details about our company.

Okay. So with that said, I don’t like to prepare a lot of remarks to these coils. And everybody knows I love to talk, but I love to get into the Q&A. So I’m going to give everybody sort of stream of consciousness just off the top of my head, because I live and breathe our company every day. And I live and breathe everything that we’re doing. And I just like to explain to everyone what we’re doing, because I think that you will feel very good at the end of this call as I speak that way, as opposed to reading two pages, that I so in any event.

Where do I start? Why don’t I start with our accounts receivable actually, because people ask questions about that every quarter. I’m sure I’m going to get some questions as quarter about it. People are going to ask about our finances. We’re in a bear market for microcap development stage companies. We came out of it for a little while, late last year, and at some point this year with interest rates just really took off. It really just killed the ability to raise capital and that kills microcap development space companies that are burning cash that need more cash. And I believe in the biotech industry, the valuations relative to liquidating value relative to cash on hand, the valuations have never been lower. So it’s an incredibly difficult time for microcap development stage companies.

So and then people ask, Well, what about our accounts receivable? Because then they worry do we have the capital that we need to develop the assets? And I make it very clear in our press releases, I’m the largest shareholder in our company. I care about our shareholders more than anything. I even tell the employees that I’m very loyal to our employees. We have a great set of employees that have really evolved over the last year. But number one shareholders come first. I don’t dilute shareholders if I don’t absolutely have to, I never have I’m not aware of ever diluting shareholders with any of the races that we’ve ever done. And I have no current intention, nor are there any prospects of having to dilute shareholders now or anytime soon, which also means for those that are still short out there. I have no idea how you’re going to cover because it’s not because we’re going to do a raise at some point because there’s absolutely nothing planned to do a raise for our parent company ProPhase Labs.

As specifically as far as the accounts receivable is concerned, our accounts receivable, as I’ve explained in the past, is based on a combination of collecting on those receivables, but also operating a business that generates new accounts receivable. So at year end, for example, we had about $37 million at year-end 2022, we had about $37 million in accounts receivable. We in the first half of the year, I believe we collected on a little less than half of that amount. But we had new accounts receivable because we were still doing COVID testing business in the first half of the year. That’s what we’re collecting on that.

Given that we’re no longer — it’s no longer a public health emergency, and a significant percentage of accounts receivable is from COVID testing, the insurance companies are now paying more slowly than they used to, but they are paying but they’re dragging it out. And there’s nothing that we can do about it. So we do have dollars coming in from accounts receivable in fact from — and I’d also point out that from the second quarter to the third quarter, our accounts receivable dropped from $39 million to $33.4 million so they dropped more than $5 million while we were still doing business and understand we’re also doing business now with Nebula Genomics for which we have accounts receivable. In fact, we have some significant accounts receivable at Nebula Genomics and also with Pharmaloz.

So the accounts receivable we are collecting, and then it just becomes a question of time and the accounts receivable with the dollars flowing in to the dollars flowing out and developing our company to build our Nebula Genomics lab required acquiring a lot of state-of-the-art equipment, hiring a lot of people, building a lot of infrastructure. And we believe it’s going to pay off in a huge way in the current year. And I’m going to get and going into next year, and I’m going to get into that in a moment. But I just want to give you sort of the big picture.

And honestly, this is the one frustration I have is that the accounts receivable comes in slowly, I’ll be honestly. It puts pressure on me as the CEO, but we have plenty of avenues. So we’re watching the accounts receivable flowing on a weekly basis. And if we need more capital, I don’t know that we do we have access to a mortgage at Pharmaloz. We own a substantial building we own 12 acres across from a Walmart, it’s valuable land and property. We have the significant accounts receivable that we could set up a credit line again.

So to the extent that we need to raise additional capital, we can do so without doing an equity raise and without doing anything that would harm our shareholders. All right, so I just want to put that to rest because that seems to be a major concern at virtually every development stage company at the current time.

All right, having said that, let’s talk about some really positive things. And what I’m also going to say is the punchline to all this is I’m going to talk about Pharmaloz. And I’m going to talk about that’s our largest manufacturing facility. I’m going to talk about Nebula Genomics, both of these subsidiaries are growing dramatically in value as we speak. And I believe that sometime early next year, it is possible that we could create liquidity effects for some of these subsidiaries. And there’s a number of different possibilities for what we could do. But it would represent values that collectively, I believe, would be significantly greater than the entire market cap of the company.

So I only mentioned this now because my point is, why would we raise capital for ProPhase Labs the public company and dilute shareholders when we have underlying assets that are so valuable, that we potentially could raise capital for without diluting our shareholders. And because I am shareholder friendly, this is the way I say. My background is on Wall Street. So rest assured, I believe, if you’re worried about the stock price, I believe that the future is very bright from a capital markets point of view.

Let’s get into the businesses a little bit and then I’ll go to the Q&A. Happy to start, Pharmaloz, we did a press release not that long ago. I reviewed everything. I don’t want to go too much into it today. Read our last press release on Pharmaloz and, of course, our press release today. The bottom line is we’re in a sweet spot in an industry where we’ve owned a state-of-the-art manufacturing facility for 30 years.

And it just so happens we’re at a point in time where capacity around the country and around, I believe globally has diminished significantly. And demand has virtually never been greater. And so we have large, some of the largest lozenges brands in the world want to give us as much business as we can handle? I believe theoretically, that if we had the capacity right now, we could be doing $100 million of revenues right now, and earning pretax $20 million to $25 million on that business.

Now, we’re not doing $100 million revenues right now, we’re upgrading at like $8 million to $10 million, we have equipment coming in short term this month, that’s going to increase our capacity to $15 million in the month of December. So going into the first quarter, our revenues are going to be up dramatically, because we already have demand for that $15 million a business. And we also instituted price increases.

So when our base business, our margins are going to improve significantly and under new business, our margins are even better. So all of a sudden Pharmaloz is going to start generating nice profits that will contribute to the bottom line.

And then taking it one step further in the second quarter, we have a new lozenge line and all the ancillary automated equipment that should take us to $30 million or even $35 million of capacity, one rate by the end of the second quarter, which means starting the third quarter, our goal is to be generating at least $30 million in revenues, and generating pretax profits of at least $6 million to $7 million, or even $8 million of pretax profit. Those are serious numbers. So think about the swing in our earnings and in our cash flow and in our EBITDA just in the next quarter to just from formalize and understand when I talked about $30 million to $35 million of capacity. We already have the demand for that as well right now. And that’s without the too big loss and spreads that want to give us another business.

So it gives you an idea of the dynamics of formalizing what’s going on there. And I have been told, don’t quote me on this, but the private equity will pay 10 to 15 times pretax. So you can start to see what the numbers could look like and feel like very quickly in the coming quarters. And again, if you read the press releases, and we’re doing this, we already have the plans for it. We have two more lozenge lines already ordered, that are coming in late next year, that are going to take us up to and depending on which press release in which presentation.

And you know the numbers, it’s not an exact science. We’re talking $60 million to $80 million revenues, but understand that’s based on a three and a half day work week. Now you have to have downtime for maintenance and things like that. But you don’t need three and a half days of downtime. And it’s a matter of making sure we have enough employees and it’s one of the reasons why we’re bringing a lot more automated equipment. But in addition to that, we have to find the supply of employees to build it out.

So we don’t know sitting here today what the numbers are going to be. But there’s a potential that potential that our capacity could be $80 million to $200 million by the end of next year. And could you imagine if we were generating $20 million $25 million of pretax and multiply 10 to 15 times that, I mean, we’re talking about a facility that could be worth $300 million.

Now, I don’t want to get carried away. I’m not suggesting it’s going to be worth that I’m not saying that’s even our objective. But the point is with that kind of potential, and a market cap of our company that trades around $70 million to $80 million, we have a manufacturing facility that could be worth significantly more than the whole market cap of our company next year by itself. And again, my background is in investment banking, on Wall Street. And so I’d be silly not to pursue all avenues in that regard.

So I can talk more in the Q&A, but it just gives you a little bit of background and I’m not suggesting we’re actually doing a race on one of our subsidiaries or that we’re doing anything at present. I’m just explaining that we do have options available to us so that our shareholders are rest assured that I’m not going to do what so many other microcap development stage companies do and that’s blindside you with a an equity raise. It’s simply not happening at ProPhase Labs, the parent company.

All right. And I can guarantee at some point in the future something will change but I can tell you for the foreseeable future don’t have the slightest interest in such an activity. Okay?

Nebula Genomics. Now, Pharmaloz to me, I don’t want to sell to anybody to me it’s sort of a boring ho-hum business. One of our senior employees here who’s working on this, says no, Ted, this is very exciting. And yeah, it is very exciting. From a numbers point of view, it’s not exciting from the point of view, it’s not like biotech. It’s not like development, stage cancer testing, cancer therapeutics and things of that nature. But Pharmaloz, obviously, it’s exciting from a numbers point of view. The demand is there, just how quickly we can execute on building the capacity.

And the one thing I can tell you look at my history, for 40 years, I’ve done nothing but execute. And this is executing for Pharmaloz, to me is a no brainer. Probably one of the easiest things I’ve ever had to do. All right, and I’m not hands on personally, but it’s the easiest thing as a company that I’ve ever seen. It’s not a guarantee it’s going to happen. But I can’t see why we’re not going to execute on a significant — truly in a significant way.

Now, Nebula Genomics, what’s interesting about that completely different set of dynamics, and yet the future potential is even greater than Pharmaloz. So what’s interesting about Nebula Genomics is that whole genome sequencing, this was truly the vision of George Church 20 years ago, and it’s just coming together now. And what’s interesting is whole genome sequence testing didn’t explode in a big way previously, for no reason other than price. And now the price is coming down. Medical doctors, physicians, academic researchers, medical research, is all starting to look much more seriously at whole genome sequence. And that’s not to say that the academicians and the researchers weren’t already doing whole genome sequence research.

But I’m talking about levels of research, where this business is now literally exploding before our eyes because the price. And you got to understand there was one company that had a monopoly on whole genome sequencing for a very long period of time, they kept their pricing very high. And because they kept their pricing so high, it demotivated consumers and demotivated medical researchers from doing more research.

Now, a new company, not a new company, but new to this country, just settled litigation at the beginning of the year where they can bring in equipment into this country. We are the first laboratory in the country, to have their high throughput, extremely efficient equipment for whole genome sequencing, where we can provide pricing at a lower price than any laboratory in the country. It is such an incredible statement. I can’t believe our microcap company is making this statement and yes, it’s an accurate statement.

And so it was interesting when we were just selling direct to consumer online, it didn’t really feel the business taking off the way it should. And more — it was growing very nicely. Don’t get me wrong. But from a small base. And so if we say it’s growing 50% or 100%, from a small base, like big deal, it’s not meaningful to the numbers. And we had to advertise to generate that business.

But now, we have a business that doesn’t require any advertising, no cost advertising. It just getting the word out that we’re the low cost provider of whole genome sequencing in the country. And the business is coming to us. We were just at a genomics conference. And the responses were tremendous. And I have a team here that is doing a phenomenal job now of building that business. So yes, he is my son. He doesn’t just have the same last night Jason Karkus built the COVID testing business, which was doing $100 million a year revenues. He’s now building our genomics business, along with Jed Laskin [ph] and who is becoming a senior employee of our company. And I believe that they’re going to kill it the same way they did with the COVID testing.

And so what’s interesting about this, Jason and I had the approach three years ago with the COVID testing business, where we took the approach of Kevin [Indiscernible] if you build it, they will come. And we built an enormous COVID testing lab, and then we did enormous amount of business. The issue with that business was the COVID testing lasted two years. Originally, everybody thought it was going to be one year and ended up being two years. Now at this point, the only people getting COVID tested are they’re going into hospital and they get tested in the hospital. So we actually not even in the COVID testing business.

But now it’s interesting, Jason and I had the same reaction, which is, if you build it, they will come with the genomic with the whole genome sequencing testing in our lab. And sure enough, we built the state-of-the-art lab, in Garden City, New York, and they are starting to come. And the difference between the COVID testing business and the genomics businesses COVID testing business wasn’t going to last permanent and the genomics business is and it’s — we’re in its infancy for what’s going to happen to this business is going to explode, going forward.

And we are right now perfectly situated as the leaders in whole genome sequencing. And word is spreading quickly. We have major opportunities, who did an enormous amount of research. And these are companies that scoured the country looking for labs to do whole genome sequencing. And they said to us, there wasn’t anybody that even came close to our pricing.

And our pricing still has healthy profit margins for us. And what’s nice about the B2B business is repeatable business, month after month, year after year, you can rely on it, we have very healthy profit margins. We don’t have to spend on advertising, you can plan it out. And so we’re going from a direct-to-consumer business where we have to spend money on advertising, still making nice money, nice profits to a B2B bsiness that can blow away the direct-to-consumer business. It’s repeatable, it has higher profit margins, and will be viewed as an incredibly valuable business to outsiders.

What’s also interesting is some of the largest labs in the country, they’re dabbling. They’re getting their feet wet in the business of whole genome sequencing. But they aren’t doing it in a big way. And one of the — it’s kind of humorous to see what one of the largest labs in the country offers for pricing for whole genome sequencing, and two and three times the price that we offer. And they have no ability to compete with us back. They’re not even really in the business. In fact, they’re in the business on very expensive on equipment, with expensive consumables, they can’t — even if they want to compete with us, they couldn’t.

And so if somebody wants to build out a lab like ours, they first have to develop a relationship with the company that we have a relationship with. They then have to develop, they would have to build out the lab, acquire the equipment, bring in the genomics professionals. They would have to negotiate for pricing, they would have to do all these things, it’s going to take time. And so I don’t know what our lead time is.

But our lead time might be a year might be year and a half. And if somebody else gets into the business, there’s going to be so much business to go around that it’s not like they will be taking business from us. They’ll just — they’ll finally be in a year or a year and a half, there might be another lab that can do what we do. But short term there isn’t a lab in the country that can we do what we do.

So that gives you a little bit about Nebula Genomics. I can clarify further in our Q&A. I would just like to mention, I don’t often spend a lot of time on the pure biotech plays, that’s our esophageal cancer test, or linebacker, cancer therapeutic linebacker. I’m not going to mention on this call, the stock market doesn’t care. I just want you to know that we have ongoing studies where we’re getting really, really great results. I don’t think the markets going to care anytime soon. So I don’t even bother to mention it. We’re not spending a lot of money on it. But it’s a hidden asset that can be very valuable one day.

And our esophageal cancer test we have so many avenues of excitement with our esophageal cancer test. And I’m again, I’m not going to explain too much of this call. I’ve explained what are esophageal cancer tests on prior calls. But we have multiple avenues for this test, including testing not only for whether or not you have esophageal cancer today, but whether you’re at high risk or low risk, and that’s what the insurance companies tell us they’re really interested in. That is a really big deal.

We also have the ability with our technology to potentially provide this test without an endoscopy. If we do that, forget about it. It’s game over. We’re developing that now. And finally, we may with our technology and our know how, be able to develop a esophageal cancer therapeutic. So we’re going in a lot of directions with it. We are absolutely — our time frames are totally in line with what I’ve guided our shareholders over a year, we’re looking to commercialize it early next year, get CPT codes early next year. And quite frankly, we’re continuing to get really great results. And I’m really looking forward to developing our esophageal cancer test.

And finally, I mentioned in the press release, Aquiver [ph] is getting close at hand, we have this great clinical study going on. It was oversubscribed with patients. And the results so far had been really, really good. And so I can’t wait to get some of the preliminary results that we can use to finalize the claims that we’ll put on the packaging. So we can actually commercialize the product.

And so with that, I just want to check a couple of quick notes if there’s anything I want to mention. I will just mention one more thing on our Nebula Genomics with our GAAP versus non-GAAP, we have subscriptions, where we have to recognize the revenue over three years, even though we get the revenue upfront. And there’s minimal costs to provide the services of the subscription. It’s a little frustrating.

We are correcting that now. But the beauty of the B2B is they’ll that’s a different business model, there may not even be subscriptions involved. So there will we won’t have these GAAP versus non-GAAP delays, you will see, I believe very strong numbers from Nebula next year. And understand when that happens, we go from a company losing money quarterly to company making money quarterly. I can’t tell you which quarter, we’re going to have that change. But when we do, the numbers are going to start growing, I believe they’re going to start growing dramatically every quarter sequentially thereafter.

Both businesses are going to explode in revenues, and profitability and therefore earnings next year. I can’t tell you which quarter exactly right now, and I don’t want you to hold me to it. But the point is the amount of money we’re losing, when you look at our adjusted EBITDA, it’s minimal compared to the opportunity and what we’re building and managing the cash flow.

So it’s not an issue. So we have exciting times ahead and just matter of patience for when we get out of the bear market. But last point and then I’ll hand it over the Q&A. It doesn’t matter if we’re in a bull market or a bear market, we’re building the underlying value of the company. Bull markets and bear markets are have no effect on our ability to build the capacity and generate revenues and earnings for Pharmaloz. And the same is true for Nebula Genomics.

So if you look at it from that perspective, the underlying value of our company, I believe, is growing every single day. At some point, the stock market will recognize it next year, if not later this year. But whether it does or doesn’t, I will bring out the value in other ways regardless of whether we’re in a bull market or bear market. So I just want to give you all that perspective.

And with that, Nick, I’d love to hand it over, I hit the 30 minute mark. And I’d love to hand it over for Q&A.

Question-and-Answer Session

Thank you, sir. Will now begin the question-and-answer session. [Operator Instructions] First question will be from Adam Waldo of Lismore Partners LLC. Please go ahead.

Q – Adam Waldo

Good day, Ted, I hope you can hear me. Okay. Thanks for taking my questions.

Ted Karkus

Yes, sir.

Adam Waldo

So when we met last quarter, in second week, in August, you outline for the market a couple of different ways that you could access near term bridge liquidity from your existing balance sheet capacity to bridge the modest free cash flow negative performance that you expect over the next couple of quarters until Pharmaloz. And the other businesses really start to generate significant free cash flow, which based on your commentary this quarter looks like it’s going to be in the second half of 24.

So right now, we’re kind of run rate, $3 million to $4 million a quarter in negative free cash flow, forget adjusted EBITDA. You have $38 million in accounts receivable on your balance sheet that you indicate last quarter, very high quality and could be securitized. You have the ability to take a mortgage on the Pharmaloz business and you have various public market and private equity opportunities to raise capital on any of the different subsidiaries.

We’re in a bear market, we’re in a bear market where typically the only way you get your stock to kind of move in the right direction relative to the underlying fundamental value that you’re creating, as you know, as a private and public markets guy is by deploying liquidity to change the trajectory of your stock price. So what steps should we expect you to take over the next quarter so on the accounts receivable securitization front to free up liquidity there, both for funding up operations, operational cash flow needs as well as deploying for share repurchase. And what kind of capital do you think you can raise from a mortgage on the Pharmaloz fixed asset base, separate from any capital markets activities? Thanks.

Ted Karkus

Well, that was a mouthful.

Adam Waldo

Yeah, sorry about that.

Ted Karkus

That’s all right. No, no, I love it. And the truth of the matter, I may have said this on the last call, I don’t remember. But if you ever want to come work for ProPhase Labs, I think you will really well.

Adam Waldo

I don’t have a day job. Thank you.

Ted Karkus

Okay, the answer your question is, you really, to some extent answered your own question. I would just say that in terms of profitability of the company, I think that the profitability, I want to speak out of line, the profitability of the company is going to start improving. It’s just a question of how much it improves in which quarter for which subsidiary, but any subsidiary that improves in profitability, will improve the bottom line as well.

So for example, Pharmaloz we actually have the automation equipment coming in this month, and we have pricing creases that will start to kick in in December, and January. The automation equipment should be up and running by the end of the month. So in the month of December, all of a sudden, the profitability, the revenues and profitability of Pharmaloz are going to improve, actually significantly. And so you look at the first quarter, we’re going to have, we’re going to be at a run rate, that’s probably 50% higher than what we’re doing right now and improve gross profit margins, not only on the existing business, from increasing pricing to everyone, but the new business, which has even higher gross profit margin.

So our Pharmaloz business is going to improve and profitability, short term. And then once we get that second line, it improves dramatically, right. Because then we’re going to double so we’re our business can be a 50%, look, December January. So let me answer your question.

Well, you asked the last question, I’m going to give you the fully after I heard every word of you.

Adam Waldo

Fair, fair enough. Fair enough.

Ted Karkus

Okay, so you’re going to see those numbers improve every quarter, which means that the drag from negative cashflow is going to be less and less each quarter. The same is true of Nebula, I just don’t know the timing. But we have some monster business opportunities that Jason and the Nebula team are developing right now. I can’t tell you which month actually, maybe I can’t tell you which month. I can’t tell you which week they’re going to kick in. But it’s short term.

Once these businesses start to kick in, our revenues are going to improve for Nebula and our profitability. Doesn’t mean we will be profitable, but our losses will be less. What I don’t know is that turning point where we actually have bottom line profits in both subsidiaries actually in formalized should be in December. We should be profitable. And then those profits start to extend.

Nebula is a little more complicated, because we have a lot of overhead to build the business. But once the business starts to take off, the overhead becomes much less significant. And all of a sudden, you see a lot of profits flow to the bottom line. And that’s going to happen could happen very, very quickly, to be honest with you. And that’s why we’re trying we have — we’re the only laboratory in the country with high capacity, whole genome sequencing equipment, at the price — at the low price points that we have. And so — and we’re the first lab in the country to get the next piece of this equipment, we’re next in line, so the next piece of equipment. So our capacity is going to go up significantly. And we have businesses that want to bring us enormous amounts of high margin business to us.

So those numbers are going to start to improve. So whatever the negative cashflow is, now, it’s going to be I believe, it’s going to be less than less each quarter at the same time, and don’t quote me on that on a short term basis. The negative cash flow whether we acquire some more equipment that we depreciate a little bit more things of that nature. But in general, all those numbers are going to be improving. And at the same time, as I mentioned, yes, we do have access to a mortgage at Pharmaloz, the interest rates are higher.

But the way I look at it, even though the interest rates are higher than they would have been six months ago. Whatever the interest expense is on any money that we raise in the debt markets right now, even if it’s at a higher interest rate, the cluster that for one year pales in comparison, it’s a rounding error compared to the opportunity and the revenues and earnings that I think that we’re going to be generating.

So we do have access to capital both mortgage at Pharmaloz as well as that our accounts receivable. Our accounts receivable is improving actually even as I mentioned, just from the second quarter to the third quarter, or accounts receivable went down from $39 million to $33.4 million. It will continue to improve, we continue to receive dollars are flowing in from that. I just don’t know if that’s going to accelerate. That’s the frustrating part. But they are flowing into that.

So I think that between a credit facility and accounts receivable not to mention, we have a very strong asset base, as well as the mortgage that will more than bridge us that don’t quote me, it’s not a guaranteed forward-looking statements. But as of today, that will more than bridges us to when the company is profitable, and will more than bridge us to options that we may have. If we want to explore other ways to bring out value in our subsidiaries. When you have subsidiaries like ours that are exploding in revenues, and earnings and dynamics next year, it will create opportunities for liquidity events if we choose to go down that path.

And I would certainly go down a path like that before I would ever do anything to raise capital for ProPhase labs the entire company. So I hope I answered your question. We took up a lot of time just with you. I would like to move to our next question. But thank you, Adam, for your question. And your support. Much appreciated.

Nick, if you can go to the next question, please.

Operator

Yes, that’ll be from Yi Chen, H.C. Wainwright and company, please go ahead.

Yi Chen

Hi, thank you for taking my questions. Could you give us some color within the total revenue for the third quarter? How much of it was based on testing and whether you expect those testing revenue to pretty much disappear in the fourth quarter?

Ted Karkus

Yeah, so COVID testing has disappeared. It disappeared in the third quarter. I noticed there was a very little bit of testing at the beginning of this quarter, I apologize, I don’t if we didn’t break it out. And I can get those numbers for you afterwards, or CFO can. But I don’t know what the revenues were, it obviously had to be minimal. It was a very small number of tests, we did put that into the press release. So the rest of the revenues are obviously Nebula Genomics and Pharmaloz manufacturing. And, as I mentioned, as you now go into the fourth quarter, those numbers start to pick up and then where they really start to pick up as in first quarter.

And so I would expect a significant increase in revenues, and actual profitability for Pharmaloz. And I would also expect a significant pickup in revenues, and profitability for Nebula not counting. I don’t know what the numbers are going to be relative to our overhead. So whether we’re going to be profitable, I don’t want to be quote on which quarter we’re going to be profitable. But the revenues are going to improve significantly in the first quarter. I believe these are my estimates again, forward-looking statements. But I believe based on the indicated demand, and I’m talking about it, as first of all the demand, as Pharmaloz as I said, we have demand already, for when we build our capacity in the second quarter, when we get up to $30 million, we already have that $30 million demand in contract. All right, and then we have these two large lozenge brands who are about to go into contract with us. And it’s just a matter of how much business we can even do with them.

So we’re basically locked in Pharmaloz. With Nebula, this is such a dynamic situation is evolving on a daily basis. As I said, Jason and Jade and the rest of our team, and I don’t want to call them at all, all by name. We’re just at this once a year, major genomics conference, and honestly, we were ahead of the conference. Everybody wanted to meet with us. And everybody knows the words getting a very quickly that we’re the low-cost provider whole genome sequencing. So how quickly can we get build the capacity?

How quickly can we hire more people? How quickly can we get more organized and more efficient? And all that’s going to happen in the next few months. We’re going to have growing pains similar to the experience we had with COVID testing. The first few months we had growing pains, and then the revenues in orange just exploded. I expect the same thing to happen with Nebula. I can’t tell you how many growing pains and I can’t tell you which month.

So I hope that that was a long winded way of answering your question. I can’t give you more specifics on a breakdown of revenues and then what’s reported. But if you do need more information, I’m happy to connect you with our CFO after the call.

Yi Chen

Thank you, will the company feel comfortable to provide some kind of revenue guidance on the 2024 full year results earnings call?

Ted Karkus

Well, I’m certainly not going to do it on this call. And I’m not going to make up a number. And to be honest, Yi, we have never given specific revenue guidance. In fact, even stating I state the capacity numbers, as I say, we have the band for the capacity. I’ve never actually given the numbers.

So let me look into it, but you should have an idea that the, as I said in the third quarter, there was very minimal contribution from our COVID testing. So and you can assume that both Pharmaloz and Nebula genomics revenues will grow in the fourth quarter, but where they’ll really take off is in the fourth quarter. So you can expect a little improvement in the fourth quarter in the revenues of those two subsidiaries, and then the first quarter, it takes off in a really nice way.

Yi Chen

Okay, got it. Thank you.

Ted Karkus

Yi, thanks so much. I always appreciate your support and following our company. If, Nick, if we go to the next question, please.

Operator

Yes, that’ll be from Hunter Diamond of Diamond Equity. Please go ahead.

Hunter Diamond

Hi, great update today. And thank you for the shout out. So I wanted to maybe get some information on the supply demand imbalance for Nebula Genomics and the whole genome sequencing, because you’ve kind of broken it out for the other business. And I wanted to see where you’re seeing that demand is from insurers? Is it from just big corporations? And what are your thoughts on insurers potentially covering whole genome sequencing in the future?

Ted Karkus

Yeah, great question. So none of our business. The beauty of our genomics business, is that none of it is reliant on insurance right now. And so this is an industry that literally is in its infancy. When I talk about us being in the first inning, we literally were in the first inning here. I talked about whole genome sequencing, you know, I’ve been talking about for three years. And, George Church been talking about it for 20 years. And Nebula Genomics are company that we acquired was actually founded six years ago.

But it’s in its infancy, and the gating factor was the price. And that’s why, for instance, the ancestry company, they all, none of them did whole genome sequencing, they didn’t they built their model, they completely built a completely different model, around what are called SNIP [ph] is a type of genomic testing, that study is less than 1% of your genome, which is all you really need for ancestry anyway.

But you don’t get a lot of great data for health. And so we’re just going — we’re in the first inning of going in a health direction with learning about your genetic makeup, how your genetic makeup plays role in diseases that you’re predisposed to, and which drugs or therapies to take based on your genetic makeup. And I always love to say, I mean, I hate that people get cancer, but two people get cancer, they get the exact same cancer, they take the exact same drug and it works on one, it doesn’t work on the other, or it works on both.

But it works better on one and worse on the other and one needs more one needs less. How do you figure that out? Which drugs what therapeutic take, and what the dosing should be? Dosing is critically important with cancer drugs, because they’re deadly. They’re not only killing cancer cells, they get kill healthy cells. These are critically important questions that no one the doctors don’t know the answers too. And so that’s why all the research is going in this direction. And it’s huge. And so what’s happening is, when you say the supply demand, the demand really is based on the pricing. And so it’s opening up doors to companies that didn’t even think about this before.

So what’s interesting is we’re seeing demand from telemedicine companies. These are companies that have networks of not only hundreds, if not thousands, of physicians, but of millions of patients. And just imagine if we did a deal with a telemedicine company that has access to millions of patients, and says, hey, it goes through their physician. So their physician says to the patient, hey, we got this whole genome sequencing test you should get it is actually a very reasonable price right now. We can do this with no advertising on our part.

And so just imagine the unlimited demand that can come in from that and all we have to do, all we have to do is continue to build out our state-of-the-art lab that nobody in the country can compete with. It’s such an incredible statement. I can’t believe I’m making it, but I am making it and everybody remember this a year from now that I told you today, and I told you three months and six months ago, we are in the right place at the right time. And we are a leading, we are the leading lab in the country, in my opinion, and whole genome sequencing based on price.

Yes, you can go to other labs to get whole genome sequencing and it costs a fortune. But for the masses, it’s one whole genome sequencing it was always too expensive so nobody even considered it so it’s like a whole new industry it’s a whole new business. And it’s just starting up. So it’s interesting where the demand is coming from. It’s not just coming from academic institutions doing research.

We’re having other types of interest. And it’s all coming out of the woodwork now that we have this great pricing. They’re saying, my God, we already have the platform to roll out your whole genome sequencing tests on potentially millions of patients. So we’re in the first inning of figuring this all out. There are going to be some growing pains for a couple of quarters. But I’m telling you, if I know anything, I know there are Nebula Genomics business going to be incredibly valuable over the next six months to 12 months, 18 months.

And if people really are long term investors is exactly what you want to invest in. But it’s just amazing. People love to buy high and sell low. So here we are, we have a low price stock. I don’t even want to talk about the stock as CEO, I don’t even think I should talk about the stock. And yet the stocks not trading, and people don’t understand the potential we have here. And as long as they don’t have to dilute the shareholders, the risk reward is phenomenal. So I hope, Hunter, I hope I answered your question. But I really love your support. And I really love your work. And so thanks for being on the call and asking those questions.

You have one more before I go to the next one?

Hunter Diamond

Absolutely. Yeah, that was my only question. I guess it sounds like from what I heard from you, that you’re seeing which I always thought made sense, the enterprise model is kind of the most efficient way. Meaning going to the bigger enterprises versus the D2C direct-to-consumer with ads, that one has worked, but it seems like the easier the layup is sort of reaching all these big telemedicine companies that already have the patients.

Ted Karkus

Hunter, you said it better than I could have that’s spot on. So I inherited when we acquired Nebula Genomics, I hire I inherited a direct-to-consumer model where you have to advertise. And then we built out a lab. So when we first bought the business, I don’t know the exact numbers probably around a breakeven business when we first bought — when we built a lab, we took an enormous amount of overhead and building the genomics lab, we also converted a COVID testing lab to some of the people transferred over. But understand now all of a sudden, we’re not doing COVID testing. And we have all the overhead and expenses of the genomics lab. And we’re not doing the business to support it. And so all of a sudden, we’re losing money. And that’s the situation we’re in now.

But what’s interesting is we’re coming to a point in time, where now that we built it, it’s only a matter of months, not quarters before that business starts to really take off. And you’re exactly right. It’s going after these bigger enterprises that that don’t require advertising that have the platforms and have access to thousands of physicians and millions of patients. And so that’s one of the main avenues that I’m excited about, not the only one. And again, academic institutions, and others also countries. There are countries that want to do whole genome sequencing on their population or percentage of their population. So there’s some monster opportunities out there. Now, as the pricing has come down significantly, people are starting to take notice.

Hunter, thank you so much. Let me go to the next question, we’re going to run out of time. And there’s still a couple of more questions here. Really appreciate your support, Hunter. Have a great day.

Nick, if you got to the next question, please.

Operator

Thank you. Next question will be from Dennis Waldman of Barrett Productions LLC. Please go ahead.

Dennis Waldman

Hi, Ted. Thank you for a great presentation. I am a Nebula user. And I sometimes think that people don’t understand the capabilities and what is affordable to us as a user, the information we receive is just amazing. I think about the fact that there’s these million dollar researches on genetics going on. And I’m able to see how I fit into that. But I didn’t want to comment to reinforce what you’re saying is that my friends in the business and the research business, are telling me because of the drop in price that finally the genetic researchers have the amount that’s going on, it’s just exploding to this reconfirms what’s going on. And the fact that it’s being done domestically, it makes it so much attractive to Nebula.

So the question I have for you is, let’s, you talked about where we’re going to be a year from now. So I’m going to be more specific. We’re going to be on this conference call a year from now. What are you going to be telling me about Nebula and how profitable we are?

Ted Karkus

So it’s interesting, your commentary is spot on. And you just sort of proved my point that this business is in — its infancy, we’re just getting started here, and the demand is about to explode. And we quickly weren’t going to spread around the country. We were the low cost provider. What a great business to be in.

But while you were speaking, it reminded me this critically important. We were about to get into genetic counseling. And so the beauty of that is people that don’t really know anything about whole genome sequencing, get their reports. It’s like, okay, what’s the next step? What do you do with these reports, they will have a genetic counselor review their reports with them. So we’re going to build a business model around that, and a partnership around that, that’s only going to make our offerings even more attractive.

That’s primarily on the consumer side, but also understand when I start talking about, these physician networks, and telemedicine platforms, our genetic counseling could also play an important role there as well. I mean, after all, physicians, typically are not experts in genetics. And so genetic counselors could play a nice role, really complementing the physicians.

So we’re going to be developing that business. Well, I’m really excited about that. When you say a year from now, what am I going to be saying about Nebula? Well, that is honestly, I could be saying, boy it wasn’t a great business that we acquired for so little and sold for so much. All right. That literally could be the conversation we begin, we could have a year from now.

Another conversation we could be having is, well, I can’t believe how significant the revenues are, where do we go from here? And we’ll only be up because at that point, that’s when the big labs are going to say, wow, now we really have to get into this business. How do we get into it? And the largest labs in the country, I think, will be knocking on our door saying we want to buy your business.

And as far as revenues are concerned, I think they’re going to be dramatic. I don’t want to put a number on it makes no sense. We’re in the infancy of building this business, we’re at the starting point, I’m telling you, it’s like when we built out the COVID business three years ago, I didn’t know we’re going to do $100 million a year in revenue. I had no idea, we’d be happy with $10 million a year in revenue, and we did $100 million. Well, it’s the same dynamics with our whole genome sequencing business. So I have no idea. I truly don’t.

What I’m doing is I’m building the capacity, the infrastructure, the efficiency, the pricing, putting all that in place, we have a great team in place to execute. We have a team that’s executed on the COVID testing now they’re going to execute on the Nebula Genomics business. We have great people in place took three years to get the right people in place. And now we’re going to do same thing we did in COVID, and we’re going to do with Nebula Genomics. So it’s not like we’re new to this business. But whereas experience in genomic testing at this point does anybody in the country.

So not only do we have the best equipment and the lowest pricing, but there wasn’t anybody that’s more of an expert that we’re in the lab and actually doing the whole genome sequencing. In fact, we’re at the forefront in the U.S. — in the State of New York, which is the most highly regulated the strictest. We’re basically setting we’re setting precedents with the State of New York, that everybody else is going to follow. That’s how big this is and how serious we are about it. I just can’t believe that I’m the person sitting here in our microcap company talking.

All right, I hope that answers your question. I’m certainly not giving you specifics, given those dynamics, what our revenues are going to be 12 months from, I don’t. It could be, I believe it’s going to be a hell of a lot greater than what it is right now.

Dennis Waldman

Thank you, Ted.

Ted Karkus

Let me, we’re almost out of time, if we can get to the next question. Hey, Dennis, always appreciate your support. That was a great question and great commentary. Thank you very much. Nick, back to you.

Operator

Thank you. Next question will be from Fred [Indiscernible] retail investor. Please go ahead.

Unidentified Analyst

Hi, Ted. How you doing? Ted, you’ve commented numerous times about the profits of Pharmaloz Biopharma and Nebula. But the separate work is worth greater than the current value of ProPhase. Now you say you’re not going to be doing — going to an equity raise at these prices? Would you consider doing an IPO or a spinoff, or one or all these divisions to raise their value?

Ted Karkus

Yeah, so that’s a great question. I don’t know the exact SEC rules. But in general SEC frowns upon talking about IPOs and things of that nature ahead of when you file. And so, I can’t comment other than to say, you hit the nail on the head that we will have, potentially all of these opportunities and options at our fingertips. And you can bet give my Wallstreet background and given our relationships with some great investment banks. And as I said, I’ve worked daily with big equity firms more than three years now. And they are experts in micro caps development stage, biotech and life science companies. So we’re in great hands we have a great working relationship. And I’m sure, based on everything that I described, there are going to be lots of opportunities next year. And we’ll just have to wait and see what they are. And we’ll weigh our options at the time. But the beauty is, that’s why I am very confident that we’re never going to have to do anything diluted for shareholders.

And the reason is, because we’re building all this underlying value in our company and what’s nice, the under — unlike a pure biotech company that’s spending a fortune developing a cancer drug that knows that they’re going to have to raise more money. If they don’t do a deal with major pharma, people are going to be scared to invest in their company knowing that there’s a race coming.

In our situation we’re building underlying yes, we do have the cancer drug that we’re developing, but that’s at minimal cost. And it’s, it’s a rounding error in the scheme of things of everything else we’re doing. But we have these two subsidiaries, where the revenues are about to take off. And therefore, and then the earnings will follow right behind. And when you have subsidiaries, where the revenues and earnings are taking off, and there’s a perspective that the future is bright. And when you start seeing the demand, I mean, our lozenges, we have demand for when we build our capacity out a year from now.

And when you have that type of visibility, investors will pay big for that because you’re not risking something like a biotech drug that that will fail. You’re talking about a business model, where you can visibly see the revenues and earnings growing, and you’re getting a nice return on your investment.

So my point simply be, I can’t tell you if we’re going to do IPOs, or spin outs, or I shouldn’t even comment on that kind of stuff. But what I can tell you is that those will be options that will be available to us whether we’re in a bull market or a bear market, because we will have businesses that are generating revenues and earnings and have visibility for significantly greater demand.

So I hope that answers your question is spot on. It’s a spot on question is absolutely the way investors should be thinking about a company. And we’ll say. And I believe we have time Nick. Thank you so much for the question. And as always, really appreciate your support.

And, Nick, I think we have time for one more question.

Thank you. That’ll be from Paul Barker [ph] PLA Associates. Please go ahead.

Unidentified Analyst

Hey, Ted, thanks for taking the call. I’m still a little unclear on the accounts receivable issue. And you certainly sound like you have a lot of potential with a lot of things. And I hope that works out. But we also have to look on how execution happens. And one, I don’t know where you got the number $33 million for your accounts receivable when your financials is $38 million at September 30.

Ted Karkus

I apologize. I misquoted, if it’s $38 million at the end of the quarter. Let me look at that.

Unidentified Analyst

And [multiple speakers]

Ted Karkus

Let me cut to the chase. And that’s really funny, because I thought we were out of time. I said, Let me squeeze in one more question. I hope it’s going to be a good question. I’ve spent the enormous amount of time on our accounts receivable already. I’m sorry, if this is the last question. I’ve given you the answer. These are high quality insurance companies. I can’t guarantee we’re going to collect on all the accounts receivable. We’ll make that decision at year end. But we have money coming in every week from our accounts receivable. So it’s not like it’s not a real accounts receivable. And the amount of money coming in is greater than our negative cash flow.

Unidentified Analyst

What are you — what is these [multiple speakers]?

Ted Karkus

Well, let me — let me put it this way. I’m sorry, this is the last question. I don’t want to cut you off. But what is your question that you’re looking for an answer that I didn’t already go over ad naseum?

Unidentified Analyst

Well to me, it looks like you’ve got at least half the accounts receivables that are over a year old, or certainly nine months?

Ted Karkus

And so, we did. Okay, so let me explain. I’ve explained in some prior calls. We did a significant amount of COVID testing the first half of the year. So we collected on a significant amount of accounts receivable from last year. And it was replaced by new accounts receivable from this year. So it’s not the same accounts receivable. So do we still have some accounts receivable from last year? Yes. Are we collecting on it?

Yes. In fact, I’m not going to go into details. We have one major insurance company that owes us a big block of money for last year and we’ve been negotiating with them. And they agree that they owe us the money, but they want to go specimen by specimen now and drag it out instead of come to a settlement. But they’re going to pay us off substantially all of what they owe us.

But it’s coming in dribs and drabs. I’m frustrated by it. Obviously, it sounds like you’re. So –but I don’t know what else do you want me to tell you?

Unidentified Analyst

I mean, I just have —

Ted Karkus

Frustrated by accounts receivable and it’s flowing in. And whatever rate it flows in it flows in. I’m building what I believe are multi $100 million businesses. I believe that we’re going to collect substantially on our accounts receivable. I don’t know what the exact numbers, but money is coming in every week. That’s what’s paying the bills every week.

Unidentified Analyst

Let’s see what the accountant says at year-end.

Ted Karkus

All right, thank you. All right. I think that was — boy that killed my [Indiscernible]. Nick, if you want to ask if there any more questions, or I’m happy to wrap up.

Operator

On moment, please. [Operator Instructions]

Ted Karkus

Okay. It looks like we’re done with questions, and we’ve come up on the hour. Anyway, so let me just wrap it up. It looks like we have one more question. Go ahead. Why don’t you bring in one last question Nick?

Operator

All right, that’ll be from Mr. Patrick Patterson, Ion Publishers LLC [ph]. Please go ahead.

Unidentified Analyst

Kid, I love what you’re doing with every one of the subsidiaries intrinsic value is phenomenal. I know you’re going to realize all that money for us one day. And everybody’s so excited about Nebula, me too. But I want to ask you about the esophageal cancer test. It’s such a life saving thing we already know it works. And I know you’re having to wait for these last samples, and things. So my question is, we get $20 million at ASCO these last year. I mean, I know I was one of them. But just how do you manage to tell all the GI doctors in America that this just is going to be there? And that there is a CPT code and that they ought to do it? In other words, how do you pull it out? Can you talk about that?

Ted Karkus

So that’s — yeah, great question. Great question. Okay, here we go. First of all, we — one of our senior executives at our company just attended a CEO conference for healthcare companies, and insurance — health insurance companies. And universally what all the insurance companies said to us was, if you have a test, we’re happy that the test will tell you whether or not you have captured definitively. And understand right now if you get an endoscopy, and that’s a tissue specimen, it’s studied under a microscope to pathologist can study that specimen and tell you different outcomes, you have false positives and false negatives, it’s really bad.

Our test is virtually 100% accurate for telling you whether or not you have cancer now, which is critically important. But what the insurance companies say is, well, if you tell us that the person has cancer, now, that’s great, but they already have cancer. And once you get diagnosed with esophageal cancer, you die 80 to 90% of the time. So there isn’t much that the insurance companies can do with that other than say, it’s disappointed, too bad this person has esophageal cancer, it’s too bad it wasn’t caught soon. That’s what our test does, it can catch it sooner.

All right. So what the insurance company said was, it’s nice if you can recognize whether or not you have cancer now, but the Holy Grail would be as if you could tell us whether you’re at high risk or low risk. If your test can do that, we will tell we will mandate to the physicians that they have to order your test when somebody comes in for an endoscopy. That’s where we’re going with this.

So what’s interesting is, wow, we’re already — we’re already talking to a potential very large company, where this test would fit right in their wheelhouse. If we wanted to sell it lock, stock and barrel for black money upfront, and a royalty. And it’s possible, we go that route, and the shareholders would be very happy if we go that route.

And what we’re doing right now we hired an independent, highly regarded statistics company, to go through all of the numbers to give a potential acquirer exactly what they would need. Okay. And that’s actually why we mentioned, in our press release that we hired this statistics company.

Now, what’s interesting, though, is — and I’ve touched on this in the past, but this was just confirmed by the CEOs of some of the largest insurance companies in the country, who said, if our test can tell you a higher low risk, that’s the Holy Grail. And guess what, that’s the other part of the study that we’re doing right now is to figure out since our tests already and we have the IP on this.

We isolated the proteins that cause that shift that gives you the indication that you’re developing esophageal cancer. So what we’re working on right now, or the statistics involved in figuring out how biggest shift in those proteins tells you whether or not you’re going to get esophageal cancer whether you’re at high risk or low risk. Because one thing that I realized a while ago, which I discussed with our team, was the fact that one people two people are at high risk of esophageal cancer and one changes their lifestyle and their eating habits. And the risk goes down.

And the other person instead is nervous, depressed, whatever the reason is, eats more, and accelerates the growth of the cancer — of the cancer cells and gets esophageal cancer. That’s out of the control of the test to read the mind of the person taking the test. So it’s thinking, there’s got to be a gray area here, what we call the yellow or orange area, which is the warning zone, where a test will tell you if you’re in the warning zone, but we can’t tell you what the person’s going to do.

So what we can do, though, is review the studies that have already been done and do more studies. And again, these are studies on people where in some cases, we can go back two, three, five years. These are people that may have been biopsied years ago. And we can actually see the outcomes. And we can see based on the shifts in the proteins where they had high risk or low risk. So that’s what we’re developing right now with the statistics.

So that this is more than just a test to tell you whether or not you have cancer now, but whether you’re in high risk or low risk. Once we perfect that it’s quite possible if the insurance companies are so excited about this that we don’t need to sell this to a major company for big amount of money. We’ll be able to, because I don’t know that I want to build a sales force with 100 people that go call on physicians around the country say, hey, we have this great test, you should really use it and blah, blah, blah. I don’t know that one.

So that just wouldn’t be efficient. And that would be a reason to partner with a major cancer testing company. All right.

But on the other hand, if the insurance company says they’re going to mandate, the GI is in the physicians, that’s a whole different ballgame. Now, in addition to that, with the work that we’re doing, and because we isolated the proteins. And now we’ve also developed, I mean, I could go on and on about this, but very quickly, we’re developing a brush technique where you don’t even have to get an endoscopy.

So that we’re developing right now, if that happens, you can go into a GI so if it’s not going to endoscopy. They have you have rumbling your stomach, you have symptoms, or you’ve had an endoscopy in the past, you have [Indiscernible], which is a precursor to esophageal cancer. And will have a brush that goes down your throat. And with the specimens that we’ve picked up from that brush, we’ll be able to run that on our test without any endoscopy, which would be incredible. Because then you’re talking about the market for this. I mean, the numbers would be so big, it’s ridiculous. So that’s game changing.

And then the last piece of this, I don’t want to get into this. But the last piece of this is with the research we’re doing and with the IP that we have, and with the proteins that we’ve isolated, it’s possible that we can actually develop a therapeutic out of this. So that’s much further down the road.

My point while this is simply to say that our esophageal cancer test has enormous potential, everything is going really, really well with it. The only reason I don’t spend more time talking about it is because of the market environment that doesn’t really care about development stage biotech. And we have two operating subsidiaries, between Nebula Genomics, and Pharmaloz, that are going to generate significant revenues and generate significant profits next year. And that’s all we need for our shareholders to be very happy with me and our management team next year. The fact is, we have these other wildcards that can be absolutely huge.

So I hope that was a great question. I appreciate you coming on at the end of the call to ask that, Pat. And with that we ran — I think we ran over time if we wanted to set this to an hour. So I think we’ll conclude the call. Nick. Do you see any other questions or should we go on? Thank you, Pat.

Operator

That was the last question. There’s nobody else in the queue if you want to give closing remarks be perfect right now, sir.

Ted Karkus

Perfect. Okay. Thank you so much, Nick. Look thank you all for joining. Look, obviously I’m really excited about the future of the company. The accounts receivable question. Honestly, his question wasn’t a bad question that was asked three times on the call, but it really wasn’t a bad questions. And yeah, your questions around the accounts receivable, I can’t guarantee we’re going to collect on all the accounts receivable. We may not, what differences make what if we have to write off some of it, we’ll write off some of it. The point is we are collecting on a significant portion of our accounts receivable. It is from major insurance companies and they are paying us and the money comes in every week. And now that we’re not doing COVID testing anymore. New accounts receivable will be even more reliable than old accounts receivable.

I would want to tell you that one of our accounts receivable actually doesn’t even have anything to do with COVID testing. But I’m confident that we’re going to collect it but we bet — I’m not even going to go into it except to tell you that the issue with the accounts receivable tells in comparison to the businesses that were developing. I would also put it into perspective that we did over $200 million of COVID testing, and we’re down to less than one, I’d say it’s $30 million of it is from COVID testing and accounts receivable.

And then the last $30 million or we struggled with it a little bit more so be it. It doesn’t change the fact that it was a hugely successful business. We made an awful lot of money. And right now, that cash flow is paying for our businesses that we’re developing, and the transition to the businesses that we’re developing to being significant revenue generators, and ultimately, significant profit generators is very close at hand.

So with that, I appreciate everybody’s time today. As you can tell, I’m passionate, so I can get aggressive from time to time. But I think that’s what you wanted a CEO, if you want a CEO that actually executes. And that’s what I do. Some people probably don’t like that style. But if you don’t, then don’t invest in ProPhase Labs. But if you want a management team that executes, it’s developing businesses with enormous potential, and its enormous potential, it’s close at hand. And that’s something that we have to spend tens of millions of dollars over the next one two three years developing, this business where we’re, we’re spending millions of dollars, not tens of millions of dollars.

And we’re developing businesses that I believe are going to be worth hundreds or hundreds of millions of dollars. And it’s going to have those kinds of valuations in the short term and intermediate term, not in the long term. So I can’t think of a more attractive investment in the marketplace, if you have the perspective for investing long term in microcap development stage companies.

And with that, I bid everybody the best of luck. There’s nothing more difficult in my mind and investing well, maybe being CEO of a public company while it’s losing money. But I wish you all the best luck. And I really appreciate everybody’s support, and for listening to me talk for the last hour and ten minutes.

Thank you, Nick. Great job setting up the conference call today and thank you so much.

Operator

Thank you for that sir. Conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.