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Analyst: All Systems Are Go for Testing, Testing and More Testing
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This Dawson James report explains why ProPhase Labs is perfectly positioned to benefit from expanded COVID testing.

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

The Firm does not make a market in the securities of the subject company(s). The Firm has engaged in investment banking relationships with the subject company in the prior twelve months, as a manager or co-manager of a public offering and has received compensation resulting from those relationships. The Firm may seek compensation for investment banking services in the future from the subject company(s). The Firm has not received other compensation from the subject company(s) in the last 12 months for services unrelated to managing or co-managing of a public offering.

Neither the research analyst(s) whose name appears on this report nor any member of his (their) household is an officer, director or advisory board member of these companies. The Firm and/or its directors and employees may own securities of the company(s) in this report and may increase or decrease holdings in the future. As of January 31, 2021, the Firm as a whole did not beneficially own 1% or more of any class of common equity securities of the subject company(s) of this report. The Firm, its officers, directors, analysts or employees may affect transactions in and have long or short positions in the securities (or options or warrants related to those securities) of the company(s) subject to this report. The Firm may affect transactions as principal or agent in those securities.

Analysts receive no direct compensation in connection with the Firm's investment banking business. All Firm employees, including the analyst(s) responsible for preparing this report, may be eligible to receive non-product or service specific monetary bonus compensation that is based upon various factors, including total revenues of the Firm and its affiliates as well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by investment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities referenced in this report.

Analyst Certification: The analyst(s) whose name appears on this research report certifies that 1) all of the views expressed in this report accurately reflect his (their) personal views about any and all of the subject securities or issuers discussed; and 2) no part of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this research report; and 3) all Dawson James employees, including the analyst(s) responsible for preparing this research report, may be eligible to receive non-product or service specific monetary bonus compensation that is based upon various factors, including total revenues of Dawson James and its affiliates as well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by investment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities referenced in this report.

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