Hello, welcome to the ProPhase Labs financial results for the year ended December 31st, 2022 conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chairman of the Board and CEO of ProPhase Labs , Ted Karkus. Please go ahead.
Thank you, MJ, thank you all for joining me today. Before we get started, I have to read the forward-looking statement. Fortunately, our attorneys gave me a shorter version today. Thank God. 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 the underlying assumptions. While 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. I'm sorry.
These risks and uncertainties include, but are not limited to, our ability to obtain and maintain necessary regulatory approvals, 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 in 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. Now that I got that out of the way. Again, I wanna thank everybody for joining me today. I don't want to reread the press release, and quite frankly, the press release is pretty self-explanatory.
If you don't get what's going on from the press release, then you're wasting your time, and I don't know why you're on this call. First and foremost. by the way, First of all, a couple things just to mention. One, we have two fantastic investment bankers, investment banking firms that we work with. That's critically important. When you're a small cap development space company, it is critically important to have good relationships with investment banking firms and particularly high-quality investment banking firms. In our case, with small cap development stage companies, you want investment banking firms that focus on small cap development stage companies like ours. Small cap, I don't think of our company as small cap. In fact, I think our company is gonna be larger than small cap soon.
In any event, I'm talking about ThinkEquity and H.C. Wainwright. They both cover our stock. They both do a great job, and I appreciate both firms. In addition to that, we work with Renmark Financial for primarily for retail investors. If you've never seen a Renmark virtual non-deal roadshow call, I do these probably every two or three weeks. If you wanna get updated, feel free to reach out to Renmark and sign up for the next one. Also on our website, we have two company presentations. One is on the whole company. One is just on the biopharma division. The main company presentation probably updated every couple of weeks. You can go there to learn more information. With that, the tone of this call is simple.
I'm going to try and keep it brief and then go into a Q&A. Hopefully, there are questions in the Q&A so I can go into more detail. First and foremost, I said this in the press release, if you're investing in our company or you're investing in any small cap development stage company, you have to be investing in management. I learned that when I was on Wall Street 30 and 40 years ago. If your management doesn't execute, I don't care what your product or service is, it's probably gonna turn out to be a bad investment. The one thing I can tell you is you can look at my track record, the track record of your management team, our company, over the past 10 years, and honestly, we've killed it. All right? We had a $0.65 stock 10 years ago.
Since that time, we paid out $2.40 in special dividends, our stock is up, you know, however many multiples, you know, from when it was $0.65. I'd say the majority of our shareholders in our company have probably been with me 10 years or longer, and they've been well rewarded for their patience, and I thank you for your patience. Having said that, not just over the last 10 years, but even over the last two years, our performance has been phenomenal. We turned around and sold the Cold-EEZE brand for $50 million, I didn't squander a penny of that money. Everything I do is towards building value in the company long term. I pay attention on a per share basis, and that's why we do stock buybacks.
I think about terminal value on a per share basis. What's the value of our company divided by the number of shares outstanding? What's the value of our company gonna be years from now divided by the number of shares outstanding years from now? That's how I think. That's from my Wall Street background. Every CEO of every company should think that way. Anybody that doesn't like stock buybacks or stock dividends should have their head examined. In any event, I'm the largest shareholder in the company. Everything I do, I am therefore aligned with our shareholders. Everything I do is for the shareholders. Believe me, I put our shareholders above myself and before myself.
Having said that, look, when we sold the Cold-EEZE brand, we did the stock buybacks, we paid the dividends, and we waited for the right opportunity came along to come along, and it came along with COVID. We quickly pivoted, built out a fantastic lab, the last two years' results speak for themselves. You know, frankly, they're pretty phenomenal. You know, we raised $37.5 million in January two years ago, and now we have over $40 million in net working capital. That's after spending tens of millions of dollars in stock buybacks, tens of millions of dollars, you know, between stock buybacks, dividends, and acquiring several companies that we're now going to build out that hopefully my goal is it turns us into a multi-billion dollar company. That's the goal.
We pivoted, demonstrated that we executed. Obviously, you know, look at the numbers. I'll just tell you very briefly, our revenues for 2022, $122.6 million of revenues. That's an all-time record in the 30+ year history of the company. $18.5 million net income, all-time record. $38.6 million adjusted EBITDA, all-time record. We still have $44.6 million in net working capital as of year-end. That's after all the acquisitions that are going to transform our company. We were primarily a COVID testing company, you know, COVID and flu upper respiratory company for two years. We are now a well-diversified company. It has been transformed.
Moving forward, as COVID slows, I know that's why the stock pulled back and blah, blah, I've explained this ad nauseam over the last couple of months for anybody that watched Renmark VNDR. We're now transforming our company where the underlying value from the other assets in our company are growing rapidly, the growth in value of these other assets is going to more than make up for the decline in value of our COVID testing business. The truth of the matter is, we never got a multiple on our COVID testing business anyway. Quite frankly, it's apples and oranges. It almost doesn't matter. You have to look into some of the pieces, there's a lot of value in the pieces of our company. I'll mention very briefly our manufacturing facility.
You can go back to our last roughly six press releases. I've given updates on most of our subsidiaries. Our manufacturing is growing like wildfire. The lozenges business is a growth industry right now, combined with the fact that our largest competitor was acquired by private equity a couple of years ago, and they really screwed up the business. They're unreliable. Several of the largest lozenge brands in the world are all coming to us. They all want us to be their primary manufacturer of their lozenges. They're willing to sign long-term contracts. They want us to build out, you know, the equipment and build out our capacity. Some of them are even willing to invest in the equipment necessary to build our capacity. That's how much they are impressed by how we do business.
They're impressed with our customer service, they're impressed with our reliability. Frankly, it's almost like they're desperate. We have one company from another country, household name. I don't even wanna mention the brand. All right. One of the biggest brands in this country, they're actually based in another country. They not only want us to do the manufacturing for them in this country, they potentially want us to do their lozenge manufacturing globally. Our lozenge manufacturing business is going to explode. I'm not guessing about that. Of course, there are no guarantees. But it's basically as fast as we can build the capacity, that business is gonna grow. Just imagine a year from now, we're doing, y ou know, and I put this in a press release.
I believe we are targeted to do about $25 million in revenues in 2024 in our manufacturing. With the type of growth, think about what that business could be worth. I don't know, it could be worth $60 million-$75 million. Just that alone, this one business that nobody pays attention to, plus our net working capital, could be worth, you know, the whole market cap of our company. How ridiculous is that? Okay. Now we get into Nebula Genomics. There are startup companies with $50 million and $100 million valuations that are probably three years behind us. They don't have the relationships that we have. They don't have the infrastructure that we have. They don't have the business or the business model. They're story stocks, and yet they have $50 million and $100 million valuations.
I'm not gonna tell you what Nebula is worth. Nebula is actually potentially growing even faster than our manufacturing facility. Our goal is to be the low-cost provider in the country for whole genome sequencing. I am not going to explain what whole genome sequencing is. I can tell you it is at the heart of the future of something called personalized precision medicine. Whole genome sequencing studies your whole genome, as opposed to competing companies whose products only study a very small percentage of your genome, which is great for ancestry information. It's awful for health-related information. If you want high-level health information, the whole country is going towards trying to be more healthy.
All of the research is all about starting with a whole genome sequencing test and figuring out how your genetic makeup plays a role in your health. This is all in the first inning. This is like where the internet was 20 years ago. We are so perfectly positioned. We have world-renowned George Church, who's a founder, who's on our advisory board, who is a shareholder in our company. We have Russ Altman, equally well known out of Stanford University. They're on our advisory board. We're working with them regularly in building our company.
They're introducing us to some of the largest companies in the world. I said before, we are working not only in this country, but we are in Abu Dhabi and in the UAE and working with some of the largest, o ur little company is working with some of the largest companies in the world on our Nebula Genomics initiatives. A lot more to come. Enormous potential. Our esophageal cancer test. I can't tell you how excited I am. We're going to help so many people save so many lives and make our shareholders an enormous amount of money. That's the goal.
All I can tell you is, since we took over, the number of scientists and people that I've got involved in with this have only further increased my enthusiasm and confidence in our ability to develop our esophageal cancer test. If people want to in the Q&A, I can go into more detail explaining it. The bottom line is we have ongoing studies.
There's a real possibility that we will commercialize this test towards the end of this year in this country as a research use only test for cash pay. Our goal ultimately is to get the insurance companies behind us and backing us with a CPT code. With that CPT code, we believe we'll be reimbursed $1,000-$2,000 per test, our initial target is 2 million people who have Barrett's esophagus, who get endoscopies once per year. 2 million tests times $1,000-$2,000 is a $2 billion-$4 billion market in this country. We believe we could get the CPT codes as early as the beginning of next year. We're working with key opinion leaders, major cancer institutions who are all getting more and more involved in this.
This is going to, I believe, look more and more like a reality as the year goes on. Look at our market cap, just how much of that is reflected in our market cap, right now, given the potential and given how real this is, and given the timeframe for commercialization. Finally, we're working on, you know, Linebacker, a cancer compound. We're not going to break the bank and spend a lot of money on it. It has enormous potential, but that's longer term. Our goal really is just to license that to major pharma sometime next year after we complete a phase one study. You know, sometime maybe late next year.
We won't spend a lot of money on it, but it's possible we could do a licensing deal after the phase I study that's worth the entire market cap of our company. You know, right now, that's something low risk to us because we're not going to spend a lot of money, enormous reward, and it's sort of icing on the cake to everything else we're working on. Of course, we have an Equivir broad-based antiviral that we will be potentially introducing to the marketplace and commercializing later this year. Initially, we would sell it online, ultimately the goal is to get into the retail stores. We are experts in selling antivirals OTC, similar to what we did, you know, with Cold-EEZE. I personally was involved in the turnaround and sale of the Cold-EEZE brand.
We still have the same senior salesman, Joe Brennan, who's been in this business for decades. He kills it. He has relationships with the number one national broker that we work with and with every major retailer. There's so much going on there, both with our current dietary supplements, with Legendz XL and Triple Edge XL, which is actually gaining momentum as we speak. Once he has Equivir to introduce to the marketplace, in addition to that, Nebula Genomics, we can introduce a test, a whole genome sequencing test that we're working on introducing in stores, and that could build into a whole range of health tests. We could actually be the leaders in providing health tests in retail stores. There's so much in so many directions. There's a lot of overlap.
There are a lot of synergies between our various subsidiaries. I'm really excited about the future of the company. Anybody that's focused on us as a COVID testing company, you're completely missing the boat. That's going to be the least important part of our company down the road, and certainly in terms of the value. All right? COVID testing obviously has the revenues, but we never got a multiple of those revenues anyway. Now we have other businesses. esophageal cancer doesn't have zero revenues this year. Yet by the end of this year, who knows what the value of that test could be. Then the kicker is, we're working globally. We have global initiatives that we are working on to commercialize, to develop, and then commercialize our esophageal cancer test in other parts of the world. Just think about it.
Everybody that gets esophageal cancer in this country, guess what? They get in every other country too. It all starts with GERD, gastroesophageal reflux disease. That acid in your stomach that so many people get, a huge percentage of the population in every country gets GERD. Sometimes it develops into Barrett's esophagus, and one out of 50 or one out of 100 people that get Barrett's esophagus, it turns into cancer. Right now, in fact, we just met with one of the scientists last night. He's a surgeon, and he operates on people all the time with esophageal cancer. He was telling me how excited he is for our test and how desperate the industry is for a test like this. It's just sad right now.
When you get diagnosed with esophageal cancer, there's about a 73%-80%. I've seen various numbers. I'm sorry. 79%. I've seen 80%. I've seen as high as 90% of people diagnosed with esophageal cancer die of esophageal cancer. That's because they're diagnosed too late. Our test lets you know well in advance, so you have a chance to do an ablation procedure to kill the pre-cancer cells before they become cancerous, and it's too late. We believe it's going to save a lot of lives. With all these things going on with the company, I'm really excited about the future of the company. I wanna cover a few, a couple of housekeeping items related to the numbers for those of you that are focused on the numbers.
So Q4, reporting our Q4 was complicated because we had a $5.9 million accounts receivable write-off. The write-off was related to testing we did in the first half of the year. HRSA, which is the government-funded entity that was actually paying for all the patients being tested that did not have insurance, and understand people walking out on the streets of New York, most of them didn't have insurance with them. Whatever the case may be, the bottom line is if we couldn't collect the insurance from insurance companies and we couldn't collect the insurance information, HRSA was paid. All of a sudden, that funding stopped. They gave us one week's notice, there was the promise that HRSA was going to be funded again. We continued to test. This went on for many months.
There was the real possibility that we were going to collect on these patients. In addition to that, when HRSA finally became clear it wasn't going to be funded, we looked into potentially tracking down the information on these patients to see if they had insurance, even if we didn't collect it initially. It's a complicated matter. We're talking about tens of thousands of tests, and ultimately, we have a new senior finance team. We hired three fantastic senior level executives in our finance team. They all have, you know, decades of, you know, ten years or more of experience. Probably any one of the three could be our CFO right now. Robert Morris heads our department, but Heather and Greg are equally fantastic.
We have a very strong finance team, and they recommended to be conservative and to be prudent that we take the $5.9 million write-off. What makes it complicated is that we're writing this off at year-end, and even though it's related to testing activity in the first half of the year, when, you know, frankly, if we did $5.9 million less revenues the first half of the year, it wouldn't have even. It would have been negligible. It wouldn't have even been noticed because our revenues were so ridiculously large. Unfortunately, because it's at year-end, if we report fourth quarter net income number, we would have to report it with a $5.9 million write-off, which frankly, I think would have been misleading. Rather than we doing that, we gave you the full year numbers.
Just so you know, our numbers, you know, we still did $21.8 million of revenues. Not counting, of course you got to count the $5.9 million, but I just wanna give you a fair picture on what our fourth quarter looked like. Not counting the $5.9 million, we would have reported $1.8 million of net income. Furthermore, we had performance payments related to our testing activities throughout the year, which actually probably should have been expensed throughout the year as that hit the fourth quarter. Because all that hit the quarter, you know, we had the $1.8 million in net income. If that had been expensed throughout the year, our net income would have been, you know, significantly over $2 million of net income.
We did account for those performance payments in the fourth quarter. Of course, we have the $5.9 million write-off, which I've now explained. Two other things to mention very quickly. Why is our SG&A so high? Actually, it's because of that $5.9 million. That's the jump in SG&A. Finally, our accounts receivable. While our accounts receivable looks like it hasn't changed, understand it's because we're still doing ongoing testing. First of all, part of the accounts receivable is trade receivables related to Nebula Genomics and Pharmaloz Manufacturing. Of course, the bulk is from testing. Understand that as we get paid by insurance companies, we have new tests that creates new accounts receivable.
As I noted, there was a backlog because we had all of these patients that we tested. This is not like walking into a doctor's office where you stop at the front desk, you fill out all these forms, give your insurance card, it takes 15 minutes, it's all in the system. These are people, a lot of our testing were people walking up to a tent and getting a quick COVID test, you know, taking a quick specimen without the sophisticated equipment and without taking the time to properly collect the patient insurance information. What's interesting now, we've now found, we're working with a couple of different companies, one in particular in another country, who has, like, 50 people working on this, working through all of our accounts receivable.
We're talking about literally tens of thousands of tests and patients, and they're working through every single one of them, and they're doing a fantastic job. I can tell you, in fact, my head of billing just walked into the office just before this call, and she said she had great news for me. Basically, we're working through that accounts receivable very quickly. We're always gonna have some accounts receivable while we're doing testing, because at the end of the day, we have to organize the information, get it to the insurance companies, and the insurance companies take, you know, four, six, even eight weeks sometimes to pay. It's high quality accounts receivable, but nonetheless, it still takes that four to eight weeks. It's always gonna be rolling where we always have new accounts receivable replacing old accounts receivable.
Having said that, I believe that our accounts receivable is going to be less when we report first quarter or second quarter, it's going to be significantly less. Anybody who's concerned about our accounts receivable, that was a long-winded way of saying don't be concerned about it at all. It's coming down to reasonable levels. In addition to that, we may be able to find insurance on patients that previously did not provide insurance that is not in our accounts receivable, it is not in our revenues, we may actually get some nice bonuses down the year from that. Not only do we have a squeaky clean financials with our new finance department team of experts, but in addition to that, we may actually have some upside in the coming quarters.
I addressed a few quick questions. I've now, you know, I've now been speaking for about 25 minutes. I covered an awful lot. I just want to review before I open that up to a Q&A if I wanna mention anything else. I think I pretty much covered it. Look, at the end of the day, I personally have executed my entire career. The shareholders that know me for a long time know that. The people that I hire are people that execute, and I tell them that. You know what? For every three senior level people that I hire, one works out, but the one that works out, first of all, I go through an incredible screening process, so the three are all great. Having said that, you never know until you hire somebody.
We've gone through a transformation in terms of our management team over the last couple of years, where it just gets better and better and better. We have a kickass management team, literally. Not just our finance department, all the people in it. It starts with my son, Jason Karkus. Our head of IT is amazing. Sergio Miralles. Alice Lioi , who does so much not only in the lab, but also on the biopharma side. These are the most loyal people in the world that I've worked with for the last couple of years. Sam Beeler has been an unbelievable addition to our team. He's leading the way in Abu Dhabi. He has a multi-year relationship with some very big players in Abu Dhabi and around the world and helping us become a global company. I don't wanna leave anybody out.
Those are some of the senior people. We hired a great guy, Jed Latkin, who may become a senior executive. Right now, he's a senior advisor to our company, but he's working virtually full-time with us. He has decades of experience as an entrepreneur and as a CEO of other small cap development phase companies. I'm sure I'm leaving somebody out. I apologize if I am. I'm really excited about the team that we have, and I'm really excited about the assets that we're now developing. It is my destiny to build a multi-billion dollar company, and I believe that we now have the assets to develop that can make that a reality. Again, I just want to highlight. Everything that I tell you, I believe in my heart, number one.
Number two, if I tell you we're working on something, we're really working on it. If I tell you we're working on global initiatives, our little company is really working on global initiatives. Please stay tuned. I think that there's a lot more to come. With that, MJ, I would like to open it up to questions. I hope that there are some questions lining up. I'll hand it back over to you.
Perfect. Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Yi Chen with H.C. Wainwright. Please go ahead.
Thank you for taking my questions. My first question is, could you comment on the current trend of COVID testing at your lab?
Sure. It's obvious it's slowing. I think it was Labcorp, one of the largest labs in the country, said that they expect the COVID testing to be down 90% this year. What's interesting about our testing is that we blanket New York City with tents, and people are still spontaneously walking up to these tents to get tested. There's still people, when it's convenient for them, they still wanna get tested. It's not like the testing is going away. It's no different than when I walk into the gym and there are still people wearing masks. All right? People are still being cautious. If you get COVID, you know, the best thing you can do is get tested or to confirm you have COVID. If you do, it's to quarantine.
People finally realize that vaccines don't prevent you from getting COVID, and now it's coming out that vaccines might actually be more dangerous than getting COVID. People are still getting tested. Our testing is clearly dropping, and it's becoming a less and less significant or important piece of our company. Certainly from a value proposition point of view, I highlighted all the other divisions that are doing so much better. There's no question that the trend in COVID testing is going to continue to drop. Having said that, you know, I have to figure out what I can and cannot say right now. We're still gonna have a solid first quarter, and we're still doing COVID testing. When we got into the business, we blew away 95% of labs, and I bet we're still outperforming 95% of labs.
While our COVID testing is dropping, it's not dropping as much as it is in the industry. I apologize to you that I can't. You know, we don't give, you know, future estimates, and we don't give more detailed information. I hope that answers your question. That's the best I can do on the call for now.
Thanks. You mentioned that you expect Nebula Genomics to grow more than 100% in 2023, and also the manufacturing sub-subsidiary could grow up to 100% year-over-year this year. I don't know if you can provide some general comments regarding the total revenue top line growth in 2023 in terms of your expectations compared to 2022?
Sure. With our Pharmaloz manufacturing, and I don't have the exact numbers, and I don't know that we reported them, so I don't want to give numbers that were not reported. Maybe I'll do an updated press release. I know with Pharmaloz, I believe off the top of my head, we did about $7 million or $8 million in revenues last year, and our goal is about $25 million in 2024. I think that we will continue to grow after 2024. Quite frankly, I think we could do $50 million I think we have demand for $50 million of business annually if we had the capacity. It's just a matter of how quickly we build out the capacity. We're buying individual pieces of equipment right now that are ramping up as we speak.
There are larger pieces of equipment and a whole new lozenges line that we're building that'll happen in the fourth quarter this year. Our fourth quarter is really gonna jump once that's operational. Our numbers are growing. We're at capacity. It's not clear exactly what our numbers will be this year. They're gonna grow significantly this year, but between 2022, where we did $7 million-$8 million, you know, right now we're targeting $25 million approximately in 2024. It'll be somewhere in between. As far as Nebula Genomics is concerned, that's a little more complicated because people order tests and then sometimes it takes them a while before they send in the test to be processed. In some cases, they aren't billed for the subscription. Where we really make the money is in the subscription. We'll sell the test at cost.
That's how we will continue to be the low-cost provider of whole genome sequencing in this country. Nobody can compete with us. This business is in its first inning. The business is going to explode. There's no question about that. Right now, where our business model works is when you purchase a test, which we're selling approximately at cost, the real money is made on the subscription. Although if you don't send it in, then we make the money on purchasing the test, not the subscription, but we didn't have to process the test, so we saved a lot of money there. We still make a lot of money. In any event, we don't get to book the revenues for the subscription until they send the test in. There's a lot with deferred revenues.
The other thing is that happened was historically, the lifetime subscriptions, we had to book the revenues over three years. There's a lot of deferred revenues. I think we have fixed that issue now. We have changed the agreements that you sign when you purchase a test so that we will be able to book the revenues the same within 12 months of purchasing, so, you know, a lifetime subscription. I mean, it's really kind of silly. It's an accounting issue where we sell a subscription, we get the money up front, but we can't book it as revenues until we've provided the service for that subscription. Now we're working that in a way where we're actually getting paid for the setup as opposed to the ongoing subscription. In any event, I apologize.
I'm sharing a complicated GAAP accounting matter, and we're working through that now. I'll give more details maybe in a press release. What I can tell you is Nebula Genomics numbers are growing dramatically. I wanna say that we have a target. I guess if I don't know if I'm allowed to say this or not. Let's move on to your next question. Suffice it to say, our Nebula Genomics is probably growing at an even faster rate than our manufacturing. I would say that our revenues in Nebula Genomics are going to be greater than our manufacturing revenues this year. How much greater? I just don't wanna get more specific.
But, Nebula Genomics is the type of business, you know, where we could be doing $100 million, $200 million in revenues or more. They could be valued at $1 billion one day. I'm not saying we'll still own it then, but certainly I think it's worth a lot more than what's represented in the stock price today.
Got it. My last question is the operating expenses in the first quarter appeared to be significantly higher. Do you expect to maintain this operating expenses level in 2023? Also, do you have sufficient capital to do that while continue to buy back shares?
Yeah. Great question. First of all, I will never buy back shares if it puts us in jeopardy. It's number one. The buyback of shares is not significant relative to the amount of working capital and even cash that we have. You know, we have a significant amount of cash on our books and our net working capital is over $40 million. Buying back stock doesn't really play a role. That's number one. Number two, as I mentioned, with the fourth quarter, that one-time SG&A write-off is what hit the fourth quarter, which made our operating expenses look high. I make a point to be very efficient with our operating expenses.
When we had performance payouts that we're gonna try and spread that out, them out over the year going forward as opposed to them just hitting the fourth quarter. Because those performance payouts were paid out in the fourth quarter, expense in the fourth quarter, that showed up in our fourth quarter, which really understates how strong our fourth quarter really was. Having said that, the bigger expense was the SG&A. That was a one-time event.
As I explained before, if anything, we're now in the opposite position where we have done testing that is not on our books, that is not in our accounts receivable, that we believe that we're now going to find insurance for some of these patients because there are ways, there are companies that can do research to actually find insurance on patients that have been tested even though they didn't provide their insurance information. We're now starting to uncover that information. If anything, our operating expense are going to be less, let me just pull back a second on that statement. We're building four or five subsidiaries that have enormous potential. All right?
Pharmaloz, we're building, although our revenues are growing at such a fast clip, it's gonna be profitable no matter how much we spend. It's just a question of how much of that, with the equipment we purchase, is gonna be capitalized and how much of it is going to be expensed. We have an enormous amount of equipment that gets depreciated very, very quickly. Even though that equipment could last us 20 years, it gets depreciated very, very quickly. A lot of these, you know, are non-cash expenses. That's just the cost of building our businesses. We're growing at a rapid rate. We're building businesses that I think ultimately could make us a multi-billion dollar company. You have to put it in that perspective.
I can't tell you exactly what the operating expenses are, but I can tell you the amount of management we have, overhead that we have, pales in comparison to the value of the businesses that we're building. I really believe we're one of the most efficient, efficiently run small cap development stage companies that you'll ever come across. That's why all these other companies that raised capital two years ago, burned through their capital, their stocks trade down 90%, aren't coming back, can't raise capital. We did the opposite. Every dollar that we spent, we generated and created $2 or $3 or $5 of value. That's why after we raised capital, two years later, we still have more capital than what we raised two years ago, while building out all these fantastic businesses, making all these fantastic acquisitions.
So, our operating expenses, y eah, I know you're an analyst and you're gonna get into the numbers. Our operating expenses, you have to take out the SG&A, which is one time, and the performance payouts will be spread out over time instead of hitting the fourth quarter in the future. I would not take our fourth quarter number and say, those are our operating expenses going forward. They're not.
Okay, thank you.
Got it. Yi, thank you so much. Thanks so much for following our company. Really appreciate your support, and thank you so much for the question. MJ, can we go to the next caller, please?
Yes. The next question is from Hunter Diamond with Diamond Equity Research. Please go ahead.
Firstly, congratulations on the recent progress. Can you provide more details on the esophageal diagnostic test and potential economics?
Yeah. Great. Thanks. Excellent question. Sure. First of all, we can commercialize this as a cash-only test, but until the key opinion leaders and cancer institutions and the insurance companies get behind you, the question is, how effective will we be in distributing that test? Therefore, even if we commercialize it later this year, I have no idea what the numbers are. I'm certainly not gonna project it or rely on revenues from this year from a cash-only test. It'll be a good way to start. We might hire some sales people to get the business off the ground, but where the real money is when we get the CPT codes. All right? Again, as the CPT codes, what you get reimbursed, is based on the complexity of the test.
We believe, we estimate that the CPT code will potentially reimburse us for $1,000-$2,000. Right now, I want to estimate that the test costs us under $500. That means, you know, the gross profit margins could be anywhere, you know, from, let's say 50%-75%. Once we start doing those tests in volume, it's possible that test will cost us $300 or $250 or even less. At that point, the gross profit margins become ridiculously large. Again, we're going after. First of all, there's over 70 million endoscopies performed per year. Specific to GIs, it's over 50 million. I only focused on the first 2 million, which are people with Barrett's esophagus. Understand, this test could be performed on more people than just people with Barrett's esophagus.
The starting point is to go after those 2 million people that get an endoscopy every year. Understand, in an endoscopy, they're removing biopsy, seven or eight tissue samples. We're simply taking a sliver of a tissue sample, running it through our test to predict whether or not you're going to get esophageal cancer. If you have Barrett's esophagus and you have, you know, one out of 50 or one out of 100 people get esophageal cancer that have Barrett's esophagus. That may not sound like a lot unless you're the person with Barrett's esophagus. All of a sudden you'll think, "Oh my God, I may die." All right? Just think about it. You're the person.
Even if you had to pay cash, you wouldn't pay $1,000 or $2,000 to either know you're gonna get esophageal cancer down the road and you can do an ablation to destroy the pre-cancer cells before you get esophageal cancer or wouldn't you wanna know for peace of mind, no, you're not gonna get esophageal cancer? Either way, who wouldn't pay that $1,000 or $2,000, especially since you're getting endoscopy anyway? From an insurance company's point of view, we believe they're going to be motivated because people right now that are diagnosed with Barrett's esophagus are getting endoscopies every year, which costs the insurance company $2,000, $3,000, $4,000. They get them every year after year after year. Wouldn't the insurance company rather pay $1,000 or $2,000 one time?
Also, for the people who actually get esophageal cancer, if we can prevent them from getting esophageal cancer, think of how much money that saves the insurance company. We believe that the insurance companies, from a monetary point of view, are going to be motivated to provide us with the CPT codes, and the way to get the CPT codes is to get the key opinion leaders and cancer institutions behind you. That's what we're doing right now a year in advance. That's what we're building right now. When you read about how our scientists are going, as they did just a few weeks ago, to present their findings on our esophageal cancer test at these major conferences, that's all about building momentum and getting the key opinion leaders and cancer institutions behind you. Look, we're involved with Mayo Clinic in the United States.
I mentioned that we're also working globally, which means that we're working with major institutions. And companies in other countries that are just as big as Mayo Clinic. That's only the tip of the iceberg. I haven't even gotten into this, we may be developing a even more effective and easier to use test that could be done on more than just people with endoscopies, and potentially could be done in a doctor's office. It is the potential of this test is enormous, and I can just tell you, we have a phenomenal relationship with Dr. Hartley at Mayo Clinic. My team speaks to him on almost a daily basis. We just met with a gastro surgeon last night who is hugely behind this test, he's just as excited.
We're now working with healthcare companies in other countries who are excited about the test. There's a lot behind this. The numbers have enormous potential, understand it's a development-stage test. It's no different, you know, than a cancer drug that's been under development for 10 years and then one day it gets commercialized and all of a sudden it's worth billions of dollars. We're, I believe, in the eighth inning of developing our esophageal cancer test. I hope that gave you some perspective. I appreciate the question. Hunter, do you have another one for me, please?
No, it definitely did. One. Yeah, one more. No, I agree. Endoscopies are sort of the standard of care, so, I mean, I think it's definitely a needed offering. Shifting over to Nebula, I know you recently announced the pricing, you know, that you're looking to differentiate on lower price.
Right.
Can you comment on other aspects, how you're gonna differentiate other than price, and how much price you view as a component of consumers purchasing, genome sequencing?
Yeah. There's really two components. There's price, and there's turnaround time and reliability and service. Our lab just happens to have better turnaround times, reliability and service than virtually any lab in the country, which is why we won over all these customers two years ago, and why our business exploded, and we outperformed 95% of the labs in the country. We have that down pat. Having said that, we are building out our genomics lab as we speak. Oh, by the way, I didn't mention to everybody, I just walked into our lab downstairs for the first time in a few weeks. It blew me away. The carpeting is in, all the equipment is in. We have a full built-out clinical lab that's absolutely beautiful. Blew my mind. Can't believe how nice it is.
The same thing happened with our genetics lab, you know, our genomics lab that's gonna do the whole genome sequencing. Again, these labs are really impressive. Anybody in the Garden City, New York area, you ever wanna come visit, I promise you will be impressed. I looked at 60 labs to acquire in the last year or two, all paled in comparison to our labs. Number one, from a lab point of view, hands down, people are gonna come to our company to do whole genome sequencing and genomic, you know, testing. Number two, price. Certainly for the universities, price is key, and also the direct to consumer price is key. The reason why the major companies like 23andMe and Ancestry.com never got into whole genome sequencing is because historically it was so expensive.
You can't sell a test to consumers at $1,000. They're just not gonna pay for it. Whole genome sequencing was so expensive, so they instead built their whole model based on a technology that studies a very small percentage of your genome, which is all you need to get fantastic ancestry information, especially when you test as many people as they have around the world. You tie it all together. You don't have to study a big percentage of your genome to get very accurate ancestry information. As they try and get into health-related information, the problem is they're doing it with a test that studies a small percentage of your genome, which means that it's not going to give you the type of results that you get with whole genome sequencing. It's at like apples and oranges.
Technically, our whole genome sequencing test provides more than 1,000 times more data points than what these other companies provide with their tests. That's number one. Number two, universities doing research, clearly they're going to whole genome sequencing. That's not even a question. With the universities, they're on tight budgets, it's critically important to them when they have a certain budget, they wanna test as many people as they can within the budget. Price is critical. First of all, the consumers aren't gonna pay a fortune. If we can provide a whole genome sequencing test at cost, how can anybody compete? First of all, because of our relationships with the global leaders. We literally are working with the global leaders who in turn want us to be their number one lab in the United States representing them.
We literally are getting the best deals of any company in the country for not only for their equipment but for their consumables. At the end of the day, the consumables is what drives price. We don't believe that there's anybody that can actually process a whole genome sequencing test as inexpensively as we can, and then in selling it to the consumers, we can sell it at cost because of our model, our subscription model, where we sell a subscription, we make all the money on the subscription. I don't see how anybody can compete with us. As far as the universities are concerned, I'd say 80% of the decision is actually based on price.
Clearly we're gonna mark up the price if we're not selling them a subscription, we're going to mark up the price so that we make a profit. Even in marking up the price, we're still going to be able to offer it to them than anybody else. Meanwhile, the universities doing research in personalized precision medicine, that business is exploding. We're in the first inning. The amount of research that's going to be ongoing in the coming years is going to be ridiculously large. Again, it's like the internet 20 years ago. We are so well-positioned. Our company is so well-positioned. You know, it's like if you found a leading internet company 20 years ago, and you didn't know it in advance, and you just rode it, you know, and for a few years, it's amazing how much money you would've made.
Well, it's the same thing with what we're doing now in the field of genomics with our whole genome sequencing. We're in the first inning. We're a leader in terms of a lab and our reputation and our turnaround times, our customer service. Number two, we're working with the largest companies in the world who are providing us with the least expensive consumables so that nobody can compete with us. In addition to that, we're working on potential strategic initiatives with some of the other largest companies in the world that wanna partner with us, that are really impressed with our library and other strategic initiatives. These are global companies that want to potentially partner with us, not only in Nebula Genomics, but also with our esophageal cancer test and also with our Linebacker.
They might even want to white label our whole genome sequencing test that we're going to be selling into retail stores. They may wanna take our test, our packaging, let us do everything because we're experts at that, and they want us to ship it and distribute it for them in other countries. It's really far-ranging, and it really leverages all the assets of our company. Hope that accurately answered your question.
No, it did. It absolutely did. I think it's a great growth area, like you mentioned, it's just the whole industry is in hypergrowth, right? You're ideally positioning yourself at a very, you know, high growth arena in the market. Again, thank you for taking my questions.
Of course. Hunter, thanks so much. Thanks for your interest in our company as well. MJ, back to our next questioner, please.
Thank you. The next question comes from Patrick E. Patterson, retail investor. Please go ahead.
Morning, Ted. Thanks very much for everything you're working. It just sounds great.
Thank you. Oh, you're quite welcome. Thanks for your continued support, Pat.
Ted, I wanna ask a question about Nebula Genomics also. I mean, it's pretty clear from just your discussion just now that Nebula Genomics is just a really important ingredient in the company's future, and yet it doesn't even seem to be included in our market cap, the stock price. I just wonder if you've given thought to what we could do to try to literally uncork Nebula's pent-up value. Could you talk about that some?
Sure. Sure, sure. Great question. It's interesting you should ask that because I was just having a discussion about that this morning. Look, there's a lot of strategic initiatives that we're working on. There's a lot of things we're doing with our company. When you build a company that has assets with big potential, it gives you a lot of options on what to do with those assets. Now, in my mind, if I think an asset is worth hundreds of millions of dollars, I'm not gonna sell it for $50 million or $100 million. If I think an asset is worth billions of dollars, I'm not gonna sell it for $250 million.
I think somebody asked me, I was on a virtual non-deal roadshow call, and somebody asked me, you know, "Would you sell your esophageal cancer test?" I can't remember if you said $150 million or $250 million. I'm like, "I wouldn't even consider selling it right now." Why? You know, could you imagine, you know, Amazon or Tesla, you know, when whatever the market cap is 10 years ago, somebody said, "Oh, I'll give you know, 50% more for it." They would've been fools to take it. Well, if I really believe in the assets that we're developing, and I really do, why would I sell any of them now? With something like Nebula, honestly, I think that we could sell the business right now and create significant value for shareholders today.
I think that a year from now, Nebula is gonna be worth dramatically more. Quite frankly, I think I mentioned this once before. I was having a conversation with George Church, who's world-renowned in genomics. He could have retired on all the companies he's founded. You know, he's a professor up at Harvard, and he does that because of his love of genomics. He doesn't do it for money. You know, I don't even know. I don't wanna speak out of turn, but he's made an enormous amount of money, probably more than the whole market cap of our company.
One day I was joking with him on a during one of our advisory board meetings, and I said, "You know, we might potentially have a buyer for Nebula Genomics of $100 million." He said, "Don't you dare sell Nebula Genomics for $100 million. Don't." Like, he was mad. He was like, "Don't you even consider it." I said, "No, no, George, don't worry. We're not going to." I hope that gives you some perspective that at the rate of growth, and you gotta understand, over the last two years, the market has not put a multiple on our revenues or earnings because they didn't believe that they would be long-term. They were correct. You know, it turned out our COVID testing lasted a year longer than anybody expected. We did significantly more business than anybody expected.
It lasted a year longer than anybody expected. Yet at the same time, we never got a multiple of those revenues and earnings ever. On the other hand, I believe that as Nebula grows this year and the numbers really start to pop from a small base to a bigger base, we could get an enormous multiple of revenues on a company like Nebula, especially when its peers have no revenues at all, and they have $1,500 million valuations. The type of valuation, hypothetically, we can IPO Nebula. I happen to be working on some other things that I wanna do first. But, hypothetically, there are companies, I think it was Alibaba just announced their stock's up based on the fact that they want to split up into six separate companies.
You can unlock a lot of value with IPOs. It is possible down the road that I could IPO Nebula. I'd rather do that than sell it if I think it's gonna be worth so much more in one, two, and three years. I wouldn't wanna sell it because the company doesn't need the money right now. All of our shareholders, for the most part, are long-term shareholders, and I wanna build value over the next two, three, four, five years. I don't wanna sell it short because we can make a quick buck over the next three to six months. Just, it gives you an idea of how I'm thinking. I'm thinking for long-term shareholders. Having said that, long-term doesn't have to be five to 10 years. It could be one to two years. With what we're working on.
We just have to wait and see how this plays out. An IPO of Nebula is always a possibility. I would consider that before I'd consider sale, just because it has so much potential and it's growing so quickly and all systems are go.
Thank you, Ted. I appreciate it.
Yeah. I really appreciate your continued support, Pat. I really do. Thanks for the call. MJ, on to the next one, please.
The next question is from Fred McDonald, private investor. Please go ahead.
Hi, Ted. How are you doing?
Excellent. Thank you. Thanks for calling in and for your support, Fred. How can I help you today?
Yeah. In your press release today, you talk about the global opportunities for BE-Smart. Previously you indicated that you're going over to United Arab Emirates in a couple of weeks. Is this to close a deal with BE-Smart and G42?
Actually, as I mentioned, Sam Beeler has been, he's our Chief Strategy Officer for Nebula, and has tremendous relationships with companies including G42 Healthcare, which was acquired by Mubadala, which is a $43 billion company. They are very, very big in healthcare. It's a primary focus of theirs. They are huge in genomics. They are responsible for the Emirati Genome Program, which is to test 1 million residents in the UAE for whole, you know, to do whole genome sequencing. This is a prime focus of theirs. At the same time, they have a tremendous lab, which I toured. I don't remember the last time I was over in Abu Dhabi. That might have been six weeks ago. I toured their lab, and it's really interesting. We're building our lab here almost in parallel.
It's really interesting, the equipment that's in both. What's an interesting coincidence is we have very specialized equipment that we use to do our esophageal cancer testing. What a coincidence, G42 Healthcare happens to have that exact same equipment. Understand G42 Healthcare isn't the only large company over there that we're talking to. There's a lot going on, both with Nebula Genomics as well as with our BE-Smart esophageal cancer test. It's just not appropriate for me to get more specific. When I have something to announce, I'll announce it. I don't wanna mislead anybody. I don't wanna say we're about to announce a big deal or there's some big deal or anything like that. I'm just working. I'm just working, developing the value of our assets. There's a lot of opportunities.
We're working on a lot of opportunities. What I can tell you is, what we're working on, number one, is very real. Number two, everyone around us, from key opinion leaders to cancer institutions to large healthcare companies, are all interested in what we're doing. They're all taking our calls, they're all talking to us, we're discussing strategies with all of them. As I mentioned, I just spoke to, literally just visited my office, last night was a GI surgeon who is super excited about our esophageal cancer test. At the same time, look, people get esophageal cancer around the world. Everybody gets GERD. That's just in this country. It's growing at a rapid rate, especially with the health.
Apparently people, they gain weight, have more of an issue with GERD, it's taking off around the world. It's a big problem over in the UAE, you know, in the MENA region, in Middle East, North Africa, that whole area. The numbers are taking off for GERD, the numbers are taking off for Barrett's esophagus, and obviously they're taking off for esophageal cancer. Wouldn't the leader in Abu Dhabi, wouldn't he love to take credit for introducing an esophageal cancer test that saves thousands of lives? I mean, it'd be great PR, it would be great motivation. He just happens to back the largest healthcare company. Not to mention he backs the largest bank in Abu Dhabi. There's a lot going on over there.
We have a lot of opportunities and are following up on all of them. When I have more to announce, I promise you, I will update our shareholders as quickly as I can. I hope that answers your question appropriately. I really don't wanna get people too excited, but by the same token, everything we're working on is awfully exciting.
Thanks, Ted.
Fred, I hope that answers your question.
Hey, Ted, one more question. Can the BE-Smart technology be used in other procedures?
The BE-Smart technology is literally taking a sliver of a biopsy of a tissue biopsy. We're actually working on other technologies. What's interesting about it, what it's actually doing, we're studying, and this is proprietary, unique proteins. What happens is, everybody has a mix of proteins. People that develop esophageal cancer, the ratio of certain proteins changes. The key is to find the right protein markers. From what I understand, nobody else has uncovered the protein markers that we're currently working with. Those same protein markers could potentially be used for more than just esophageal cancer. Well, first of all, it could be used for more than just testing to predict esophageal cancer. Ultimately, understanding more about those protein markers could help us develop a therapeutic to treat Esophageal cancer. That's sorta way out there. That's sorta phase II.
Also at the same time, in parallel, I haven't even. You know, this is not something I've even gotten into detail on yet. It's possible we could develop the test to work in a different way where we don't even need an endoscopy, where it's a procedure that could be done in a doctor's office. I don't wanna go into more detail than that now. Those are the first. There's two or three different ways that this esophageal cancer test could play out. All have enormous potential. Doesn't exactly answer your question, but I can tell you that that's what we're focused on at current time.
Great. Thank you, Ted.
Oh, you're quite welcome. I think that concludes our calls, MJ. Is there anyone else?
No more questions in the queue at this time. I'll turn it back to you for closing remarks.
Fantastic. Look, we ended up, this is a one-hour call, which is perfect. That's what I would have targeted. I hope I didn't talk too much. I hope everyone got an idea of what we're working on. Everything we're working on is real. There are no guarantees in life, but if you're gonna invest in small cap development stage companies, at least you're investing in a management team that has historically executed. I'm also the largest shareholder of the company, so you can bet I'm going to continue to execute on behalf of the shareholders. We have a fantastic management team in place. We have a demonstrated history, not only over the last 10 years, but over the last two years of executing. Now we have horses in the race that we never had before.
We have assets that we never had before that have enormous potential. We executed. The other times we had assets, Cold-EEZE when we took it over, I don't even know if that had any potential, and we turned around and sold it for $50 million. What we're working on now has 10x, 20x the potential of what we did with Cold-EEZE. With our lab, again, we got into the business, we executed literally from the first week we were in the business. It was ridiculous how much business we did. Now we have all these different assets, and you can bet with us, bet against us, we're developing all these different assets, and I'd be surprised if at least one of these assets doesn't turn into something really big.
The truth of the matter is, I don't see why all of the assets aren't going to turn into something really big. With that, I really appreciate everybody joining the call today, and I really appreciate your time and your support or your potential support. I look forward to updating all of our shareholders probably in the not too distant future with a lot of good stuff to come. With that, everybody, have a great day, and thank you so much. Thank you, MJ, for hosting the call today.
Thank you, Ted. The call has now concluded. Thank you for attending today's presentation. You may now.