ProPhase Labs’ COVID-19 testing subsidiaries file for bankruptcy

UNIONDALE, NY - ProPhase Labs, Inc. (NASDAQ:PRPH), a microcap healthcare company with a market value of $18.69 million, announced Tuesday that its three COVID-19 testing laboratory subsidiaries have filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey. According to InvestingPro data, the company has been quickly burning through cash, with negative EBITDA of $25.45 million in the last twelve months.

The bankruptcy filing is limited to the company’s COVID-19 lab testing units, which are reportedly owed "tens of millions of dollars" by insurance companies for completed testing services. The parent company, ProPhase Labs, and its other business divisions are not included in the bankruptcy proceedings.

According to the company’s statement, the reorganization aims to streamline recovery of funds from insurance companies that allegedly underpaid or failed to pay for approved testing services. The filing is part of what the company calls its "Crown Medical Collections initiative."

Ted Karkus, CEO and Chairman of ProPhase Labs, stated that Crown Medical estimates potential net collections of $50 million or more after legal and contingency fees, with possible settlements during the fourth quarter of 2025.

ProPhase Labs maintains that its other business initiatives remain unaffected, including the development of an esophageal cancer test and operations of its Nebula Genomics and DNA Complete subsidiaries.

The company, which describes itself as a "next generation biotech, genomics and consumer products company," is working to transition from its COVID-19 testing focus to other healthcare technology areas.

This information is based on a press release statement from ProPhase Labs.

In other recent news, ProPhase Labs reported its second-quarter earnings for 2025, revealing a narrower-than-expected loss with an earnings per share (EPS) of -$0.11, surpassing the forecasted -$0.15. However, the company’s revenue fell significantly short of expectations, reaching only $1.25 million compared to the anticipated $3.55 million. Additionally, ProPhase Labs has been actively exploring strategic financial moves, including a new cryptocurrency treasury strategy following shareholder approval. The company entered an agreement with ThinkEquity LLC for a $6 million private placement, positioning ThinkEquity as its exclusive advisor and investment banker for this initiative. In another development, ProPhase Labs terminated its equity line agreement with Keystone Capital Partners, which initially allowed for up to $7.7 million in stock sales. This decision was made at the company’s discretion, with no penalties incurred. These recent developments highlight ProPhase Labs’ ongoing efforts to navigate its financial strategies amidst evolving market conditions.

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