Diamond Equity Research Releases In Depth Update Note on ProPhase Labs, Inc. (NASDAQ: PRPH) subsidiary, Pharmaloz Manufacturing, Inc. (PMI)
NEW YORK, Feb. 08, 2024 (GLOBE NEWSWIRE) -- Diamond Equity Research, a leading equity research firm with a focus on small capitalization public companies has released Company Research Report on Pharmaloz Manufacturing Inc., a wholly owned subsidiary of ProPhase Labs Inc. (NASDAQ: PRPH). The in-depth 28-page research report includes detailed information on the Pharmaloz’ business model, services, industry, valuation, and risks.
We hold the belief that Pharmaloz Manufacturing Inc.’s underlying value surpasses the entire current market valuation of ProPhase Labs. Emerging as a promising contender in the Contract Development and Manufacturing Organization (CDMO) space, Pharmaloz Manufacturing has astutely established itself as a trusted and reputable CDMO partner, particularly within the Over- the-Counter (OTC) drug and dietary supplement market. As a wholly owned subsidiary of ProPhase Labs (NASDAQ: PRPH), Pharmaloz is currently experiencing accelerated growth rates in revenues, margins, and net profits. This growth is attributed to strong domestic and global supply demand variables, which signal a robust outlook for both the short term and long term. This report presents a thorough assessment of Pharmaloz Manufacturing’s CDMO capabilities and expansion strategies, emphasizing its interconnectedness with the OTC market. Tailored for stakeholders, investors, and those engaged in the CDMO sector, the report provides valuable insights into the industry’s evolution, while highlighting Pharmaloz Manufacturing’s position within the industry.
The full research report is available here. Highlights from the report include:
Strong Growth Momentum Driven by Key Client Wins - Pharmaloz Manufacturing Inc. (PMI) continues to exhibit strong growth momentum, underscored by a series of strategic moves that position the company favorably in the Contract Development and Manufacturing Organization (CDMO) market, particularly within the over-the-counter (OTC) segment:
The company has implemented an average price increase of 15% across its entire product line, effective in Q1 2024. This development is a direct response to favorable market demands and limited competition, immediately enhancing revenues and profits.
PMI announced two significant contract wins in January 2024 with major lozenge brands, potentially boosting annual revenues by an additional $5 million and pre-tax profits by over $1.25 million. The company anticipates substantially more revenue as the capacity expands. The combination of recently implemented price increases and two new important customers is expected to elevate PMI to a $16 million revenue run rate entering the second quarter of 2024, with anticipated annualized net profits ranging between $3.2 million and $4 million, reflecting a net profit margin of 20-25%. It is imperative to highlight that these projections do not account for the revenues from TK supplements, which are on a run rate of approximately $2.5 to $3 million of profitable revenue.
Business from existing customers, including the recently announced new customers, should continue to grow as PMI increases capacity.
PMI is also in advanced discussions with two major global lozenge brands, either one of which could potentially more than triple its revenue run rate by the end of 2024.
Aggressive Expansion Plans to Satisfy Growing Demand - Operational advancements, including the recent acquisition of state-of-the-art automation equipment, are set to increase production capacity by over 50%, elevating annual production capabilities from below $10 million to a $16 million run rate in the second quarter. Looking ahead, the installation of the second production line and further automation during Q3 2024 are projected to further double the capacity to a $30-$35 million run rate goal, with strong profit margins. Additional enhancements are planned for the fourth quarter, with the introduction of more equipment, potentially boosting annual production values to $60-$80 million targeted between year-end 2024 and the first half of 2025. By expanding the workweek, the company could further increase capacity and potentially achieve $100 million in revenue, generating potentially $20-$25 million in net profit. The management’s vision extends beyond immediate gains, aiming for a long-term goal of potentially expanding production capacity to $200 million in annual revenues over the next three plus years. These efforts by the company to capitalize on positive market reception and favorable OTC market trends indicate a strong growth pathway enabled by significant investments in expanding capabilities.
Positive Market Reception - Retailers like Walgreens, Walmart, and CVS prioritize stocking popular products and ensuring constant shelf availability to maximize profits. Empty shelves result in lost revenue, making consistent product supply crucial. Due to supply chain issues in the global lozenges industry, Pharmaloz has attracted interest from major brands, some seeking the company to be their primary manufacturing partner, not only in the U.S. but also on a global scale. Aside from reliability in ensuring a timely supply of drugs, the credibility of Pharmaloz’s CDMO services is reflected through its passing of FDA audits and inspections. Furthermore, with a decrease in industry-wide reliable manufacturing capacity for lozenges, companies like Pharmaloz are likely to benefit from addressing the growing need for a consistent and dependable lozenge manufacturer.
Underlying Industry Trends - Pharmaloz Manufacturing focuses on the OTC drug and dietary supplement market, particularly in the natural cough drops and lozenges sub-segment. OTC drugs, available without prescriptions, play a vital role in treating common conditions, saving the U.S. healthcare system billions of dollars annually. The U.S. OTC drug and Vitamins, Minerals and Supplement (VMS) market is valued at over $100 billion, anticipated to grow at a steady rate over the next decade. Cough, cold, and flu products remain the dominant category, with throat lozenges gaining prominence due to their therapeutic and palatable attributes. Several drivers are steering the growth of the OTC drug market, including an aging population, the FDA’s support for Rx-to-OTC switches, rising self-medication practices, and increased prevalence of minor health conditions. Moreover, the COVID-19 pandemic further heightened the demand for OTC products. With these industry dynamics at play, the OTC drug and dietary supplement market holds a promising future.
Carving out a Niche in an Expanding Market - The CDMO market is a fragmented one, with the top five players accounting for less than 15% of the overall market. The market includes players that operate across one or more sub-segments of the pharmaceutical and nutraceutical domains. Pharmaloz has identified and is focusing on one such sub-segment known as OTC drug development, allowing the company to develop niche expertise in providing specialized services for OTC drug formulations, manufacturing, and regulatory compliance. By concentrating efforts on this specific area, Pharmaloz aims to distinguish itself within the broader pharmaceutical and nutraceutical CDMO landscape, offering tailored solutions and meeting the unique needs of clients seeking non-prescription medication to market efficiently and effectively.
About Pharmaloz Manufacturing Inc.
Pharmaloz Manufacturing, a subsidiary of ProPhase Labs, is a Contract Development and Manufacturing Organization (CDMO) specializing in pharmaceuticals, Over-the-Counter (OTC) drugs, and dietary supplements. Operating from a state-of-the-art, UL and FDA-compliant facility, Pharmaloz focuses on natural cough drops and lozenges, offering quality, organic, and non-GMO products. The company also owns, manufactures, and packages TK Supplements. Pharmaloz’ robust manufacturing capabilities encompass lozenges, blistering, and packaging, all underpinned by stringent quality standards and regulatory compliance. For more information, visit https://www.pharmaloz.com/
About Diamond Equity Research
Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Disclosures:
Diamond Equity Research LLC is being compensated by ProPhase Labs Inc. for producing research materials regarding ProPhase Labs Inc. and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however the views in the report reflect that of Diamond Equity Research. All payments are received upfront and are billed for research engagement. As of 02/08/24 the issuer had paid us $77,500 for our research services which commenced 03/21/23, and is billed annually upfront, consisting of $35,000 for the annual subscription and $2,500 for additional one-time research work and 20,000 for a research report on a subsidiary of ProPhase Labs Inc. and $20,000 for another research report on a subsidiary of ProPhase Labs Inc. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually do not exceed $5,000. The issuer has paid us for non-research-related services as of 02/08/24 consisting of $2,500 for attending a virtual conference. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities including the complete loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for ProPhase Labs Inc.
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