In a Feb. 22 research note, Dawson James analyst Jason Kolbert stated that ProPhase Labs Inc. (PRPH:NASDAQ) is well positioned to benefit from the several new federal initiatives to expand COVID-19 testing.
Kolbert listed the Biden administration's recent efforts to increase COVID-19 testing, all of which bode well for ProPhase Labs. The Department of Health and Human Services will partner with the Department of Defense to expand testing for schools and underserved congregate settings through coordination hubs with a $650 million investment. Domestic manufacturing of testing supplies and raw materials will be boosted; $815 million will be directed toward that effort. The Centers for Disease Control and Prevention plans to "increase genomic sequencing of the virus to better prepare for the threat of variants and slow the spread of disease. CDC plans "to invest nearly $200 million to expand genomic sequencing capabilities, including bioinformatics, reporting, and modeling, to increase sequencing three-fold per week.
Kolbert noted that even a small piece of the multimillion-dollar market for COVID tests "has the ability to be transformative to a company such as ProPhase."
"Recognizing the opportunity, the company acquired a CLIA lab (October 2020) capable of processing 1,000 samples in 24 hours (& now expanded to 10k/day). We visited the newest facility in Garden City, which is set to come on-line with the capability to process up to 50,000 samples per day," the analyst explained.
Previously, ProPhase generated revenue solely from sales of its T.K. dietary supplements line and from contract manufacturing of over-the-counter cold/flu and other health products. Those earnings will offset expenses incurred from its new operations, laboratory testing services.
"We see this as a good business and one where the management team, particularly the CEO, has demonstrated the ability to turn around both a falling business and a company," Kolbert wrote. "With that said, we see this business as a means to an end, with the end being diagnostics."
Dawson James has a Buy rating on ProPhase Labs and a target price of $25. The stock is currently trading at around $8.28.
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Disclosures for Dawson James Securities, ProPhase Labs, February 22, 2021
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