SOURCE: ProPhase Labs
August 12, 2010 08:45 ET
ProPhase Labs Reports Second Quarter 2010 Results
DOYLESTOWN, PA--(Marketwire - August 12, 2010) - ProPhase Labs, Inc. (NASDAQ: PRPH) today
reported net sales of $1.1 million for the three months ended June 30,
2010, compared to net sales of $1.7 million for the three months ended June
30, 2009.
The Company incurred a net loss for the three months ended June 30, 2010,
of $2.3 million, or ($0.15) per share, compared to a net loss of $4.6
million, or ($0.36) per share, for the three months ended June 30, 2009.
Net sales declined $617,000 for the three months ended June 30, 2010 as
compared to the three months ended June 30, 2009, principally due to (i) a
reduction of candy and contract manufacturing sales of $442,000 as a
consequence of the closing of our Elizabethtown plant and the
discontinuation of the candy product line and (ii) a net reduction of
$175,000 in our retail customer purchases and stocking principally due to a
lower level of upper respiratory illness in the second quarter 2010 as
compared to the second quarter 2009.
The Company also realized expense reductions of $1.9 million in sales,
marketing and administration expenses and $236,000 in research and
development costs in the quarter. The decrease in these costs was
principally due to (i) a net reduction in personnel costs and other
administrative costs, (ii) elimination of costs incurred in 2009 as a
consequence of the 2009 proxy contest and (iii) a reduction in clinical
study and related costs as a consequence of the de-emphasis of Quigley
Pharma activities.
For the six months ended June 30, 2010, net sales were $3.1 million
compared to net sales of $5.7 million for the six months ended June 30,
2009.
The Company incurred a net loss for the six months ended June 30, 2010, of
$3.3 million, or ($0.24) per share, compared to a net loss of $6.8 million,
or ($0.53) per share, for the six months ended June 30, 2009.
Net sales declined $2.6 million for the six months ended June 30, 2010 as
compared to the six months ended June 30, 2009 principally due to: (i) a
reduction of candy and contract manufacturing sales of $980,000 as a
consequence of the closing of our Elizabethtown plant and discontinuation
of the candy product line and (ii) a net reduction of our retail customer
purchases and stocking principally due to a lower nation-wide level of
upper respiratory illness during the six months ended June 30, 2010 as
compared to the six months ended June 30, 2009. Data suggests that the
highest incidence of upper respiratory illness for the 2009-2010 cold
season occurred in the fourth quarter of Fiscal 2009 while the 2008-2009
cold season realized its concentration of incidences in the first quarter
of Fiscal 2009.
The Company also realized expense reductions of $4.1 million in sales,
marketing and administration expenses and $396,000 in research and
development costs in the quarter. The decrease in these costs was
principally due to the net effects of (i) the implementation of more cost
effective and targeted marketing programs, (ii) improved timing of
marketing campaigns to better match the timing and product demand of the
2009-2010 cold season, (iii) a reduction in personnel costs and other
administrative costs, (iv) elimination of costs incurred in 2009 as a
consequence of the 2009 proxy contest and (v) a reduction in clinical study
related costs as a consequence of the de-emphasis of Quigley Pharma
activities, offset by, (vi) an increase in marketing research and
development costs associated with the development of new product packaging
for our Cold-EEZE® and Kids-EEZE® product lines to be introduced during
the 2010-2011 cold season.
"In the second quarter, we continued to feel the effects of both the retail
overstock created by H1N1 related sales in late 2009 and the lower
incidence of colds in Q1 and Q2 2010 compared to Q1 and Q2 2009," said
ProPhase CEO Ted Karkus.
Mr. Karkus added that, "Operating results for Q2 reflect our success in
stabilizing and strengthening the Company. The Company has reduced
operating overhead and upgraded its software systems to allow us to operate
more cost effectively and to better integrate our operations with our
important retail customers."
"We were able to reduce losses as compared to the same period in 2009 even
though sales revenues decreased in the most recent quarter, in part
because a significant portion of our decrease in revenues arises from
discontinuation of the historically unprofitable candy product line and the
closing of the plant that manufactured that product line," said Mr. Karkus.
As part of its continuing efforts to focus on products and projects that
are believed to be likely to generate sustainable profits, the Company has
continued to examine the commercial viability of its QR-333 compound for
diabetic neuropathy and its QR-448(a) veterinary drug compound. At present,
there are no third parties who have expressed a current interest or
willingness to co-develop, license or otherwise commercially exploit these
compounds. Accordingly, the Company is not likely to expend any significant
additional sums on developing any formulations in the Pharma subsidiary.
Mr. Karkus continued, "We are concentrating on projects which do not carry
the long term risk, inherent delays, and associated expense of launching
products which require the clearance of significant regulatory hurdles to
obtain approval. We are instead focusing on expanding our core franchise,
Cold-EEZE."
The Company believes that the new packaging and new and improved tastes and
flavors that are being rolled out will favorably impact sales. The Company
is launching a new, 3-product Kids-EEZE line. The Kids-EEZE line has been
expanded from its original chest congestion relief offering from last year,
to include 2 new formulas for cough/cold and allergy relief in strawberry
and grape.
The Company is continuing to pursue new market opportunities presented as a
result of its participation in the Phusion Laboratories joint venture.
Phusion is now focused on developing two new skin-care product lines for
wrinkles and for acne. Phusion is in the early stages of investigating
commercialization of these and other products.
On Wednesday, August 11th, the Company filed a praecipe for a writ of
summons in the Court of Common Pleas for Bucks County, PA. This filing is
the first step in initiating an action against certain former officers and
directors of the Company, and against certain third parties. The Company is
preparing to assert claims arising from, among other things, a variety of
transactions and payments previously made or entered into by the Company.
All of the transactions and events which would be the subject of the
Complaint occurred prior to the installation of the current Board of
Directors in June 2009.
Effective Wednesday, August 11th, John DeShazo resigned from the Board of
Directors of ProPhase Labs in order to be able to devote his full time and
energy to his own business interests. He has confirmed that he has no
disputes with management or with the Board.
About ProPhase Labs
ProPhase Labs is a diversified natural health medical science company. It
is a leading marketer and manufacturer of the Cold-EEZE® family of
lozenges and sugar free tablets clinically proven to significantly reduce
the severity and duration of the common cold. Cold-EEZE customers include
leading national wholesalers and distributors, as well as independent and
chain food, drug and mass merchandise stores and pharmacies. ProPhase Labs
has several wholly owned subsidiaries including a manufacturing unit, which
consists of an FDA approved facility to manufacture Cold-EEZE lozenges and
fulfil other contract manufacturing opportunities, and a Pharma division,
which conducts research in order to develop and commercialize a pipeline of
patented botanical and naturally derived potential prescription drugs.
ProPhase also owns 50% of Phusion Laboratories LLC ("Phusion"). Phusion
licenses a revolutionary proprietary technology that has the potential to
improve the delivery and/or efficacy of many active ingredients or
compounds. The joint venture will formulate and test products to exploit
market opportunities within ProPhase's robust OTC distribution channels.
For more information, visit www.ProPhaseLabs.com.
Forward-Looking Statements
Certain statements in this press release are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
and involve known and unknown risk, uncertainties and other factors that
may cause the Company's actual performance or achievements to be materially
different from the results, performance or achievements expressed or
implied by the forward-looking statement. Factors that impact such
forward-looking statements include, among others, changes in worldwide
general economic conditions; government regulations; the ability of our new
management to successfully implement our business plan and strategy; our
ability to fund our operations including the cost and availability of
capital and credit; our ability to compete effectively including our
ability to maintain and increase our market share in the markets in which
we do business; and our dependence on sales from our main product,
Cold-EEZE, and our ability to successfully develop and commercialize new
products.
ProPhase Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
-------- -------- -------- --------
Net sales $ 1,131 $ 1,748 $ 3,107 $ 5,734
Cost of sales 660 1,457 1,466 3,091
-------- -------- -------- --------
Gross profit 471 291 1,641 2,643
-------- -------- -------- --------
Operating costs and expenses:
Sales and marketing 780 792 1,514 2,816
Administration 1,819 3,742 3,231 6,032
Research and development 150 386 238 634
-------- -------- -------- --------
2,749 4,920 4,983 9,482
-------- -------- -------- --------
Loss from operations (2,278) (4,629) (3,342) (6,839)
-------- -------- -------- --------
Interest and other income 24 4 26 16
-------- -------- -------- --------
Loss from operations before income
taxes (2,254) (4,625) (3,316) (6,823)
-------- -------- -------- --------
Income tax (benefit) - - - -
-------- -------- -------- --------
Net loss $ (2,254) $ (4,625) $ (3,316) $ (6,823)
======== ======== ======== ========
Basic earnings per share
Loss from operations $ (0.15) $ (0.36) $ (0.24) $ (0.53)
-------- -------- -------- --------
Net loss $ (0.15) $ (0.36) $ (0.24) $ (0.53)
======== ======== ======== ========
Diluted earnings per share
Loss from operations $ (0.15) $ (0.36) $ (0.24) $ (0.53)
-------- -------- -------- --------
Net loss $ (0.15) $ (0.36) $ (0.24) $ (0.53)
======== ======== ======== ========
Weighted average common shares
outstanding
Basic 14,593 12,914 13,896 12,911
======== ======== ======== ========
Diluted 14,593 12,914 13,896 12,911
======== ======== ======== ========
ProPhase Labs, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(in thousands)
June 30, December 31,
2010 2009
------------ ------------
(unaudited)
Cash and cash equivalents $ 11,163 $ 12,801
Accounts receivable, net $ 855 $ 3,599
Inventory $ 1,153 $ 1,405
Total current assets $ 13,739 $ 18,746
Total assets $ 19,849 $ 21,330
Total current liabilities $ 6,361 $ 7,271
Total stockholders' equity $ 13,488 $ 14,059