Opko Health Inc. (OPK) Announces 4Q:16 Financial Results

Opko Health Inc. (NASDAQ:OPK) reports financial and operating results for the three months ended December 31, 2016.

Financial Highlights

  • Consolidated revenues for the three months ended December 31, 2016 of $275.5 million were consistent with the comparable period of 2015 revenue of $276.2 million. The 2016 period benefited from increased revenue from services at BioReference of $12.8 million, which was offset by a non-recurring $15.0 million milestone payment that was received during the comparable period of 2015 related to Varubi™.
  • Net loss for the three months ended December 31, 2016 was $13.7 million compared with net income of $1.6 million for the 2015 period.  The three months ended December 31, 2016 included the launch related activities for RAYALDEE, including the 50 person commercial organization.  Net (loss) income during the three month periods include significant non-recurring and non-cash activities:
    – During the three months ended December 31, 2015, revenue included a $15.0 million milestone payment related to the first commercial sale of Varubi™ by TESARO.
    – Other income and (expense) was $7.7 million and ($15.9) million in the 2016 and 2015 periods, respectively, primarily related to the change in fair value of derivative instruments. The change in fair value is principally related to an embedded derivative in OPKO’s January 2013 convertible senior notes due in 2033. The 2015 period also included a  ($7.3) million temporary impairment charge of an available for sale investment.
  • Cash, cash equivalents and marketable securities were $168.7 million as of December 31, 2016.

Business Highlights

  • U.S. commercial launch of RAYALDEE began in late November:  RAYALDEE was launched with a highly specialized commercial team with deep experience in nephrology and specialty pharmaceuticals.  Since the launch, substantial progress has been made obtaining formulary access for RAYALDEE with approximately 60% of U.S. patients already covered.  Obtaining broad reimbursement coverage is critical to the adoption of RAYALDEE.
  • 4Kscore test utilization continued to grow; Level 1 CPT code and CMS pricing is in place, negotiations with payors continue:  Level 1 CPT code and CMS pricing became effective on January 1, 2017, and the Company is working to secure coverage and favorable pricing with additional payors.  During the quarter ended December 31, 2016, approximately 18,000 4Kscore tests were ordered which represents growth of more than 12% compared to the quarter ended September 30, 2016.  During 2016, the Company obtained positive coverage and pricing with a number of payors including a national healthcare plan. Novitas, the Company’s Medicare administrator, continues to pay for a majority of 4Kscore tests performed.
  • Phase 3 clinical trial for hGH-CTP in pediatric patients initiated; outlier analyses of data for adult study continues; preparations for BLA submission for the adult indication underway: The phase 3 clinical trial for pediatric growth hormone deficient patients is underway.  OPKO has begun a statistical outlier analysis of its Phase 3 trial data from the adult study, and OPKO and Pfizer have begun the preparation of a BLA.
  • Clinical trials for Claros point of care (POC) PSA test commenced in January 2017; PMA filing anticipated in 1H 2017; Claros POC testosterone test clinical trials and 510(k) filing to follow: OPKO has commenced  a multi-center clinical study of its POC diagnostic test for prostate specific antigen (PSA) utilizing its proprietary diagnostic platform. OPKO intends to submit its application to the U.S. Food and Drug Administration for approval of the assay in mid-2017.  OPKO expects to begin an additional multi-center study of its POC testosterone test in 2017 followed by a 510(k) submission.
  • Initiation of three Phase 2 clinical trials anticipated in 2H 2017 and early 2018
    – RAYALDEE line extension in dialysis patients with SHPT:
    OPKO is developing RAYALDEE for Stage 5 CKD patients with SHPT undergoing dialysis with its partner, Vifor Fresenius.  The Company anticipates initiating a Phase 2 clinical trial during the second half of 2017.
    – TT701, an orally administered SARM: The Company plans to initiate a Phase 2b dose-ranging study in the second half of 2017 to evaluate the selective effects of TT701 to reduce prostate size and provide other  therapeutic benefits such as increase in muscle mass and bone strength and decreased fat mass in men with BPH (enlarged prostate).
    – TT401, a once-weekly oxytomodulin dual GLP1/Glucagon agonist for diabetes and obesity: We plan to initiate a Phase 2b study in early 2018 involving a stepwise increase in dose to treat type II diabetes and obesity.

Management Commentary:

“OPKO reached a number of important milestones during 2016,” stated Phillip Frost, M.D., Chairman and Chief Executive Officer of OPKO.  “We launched RAYALDEE, the first new medicine we have developed and launched ourselves.  The commercial team is making great strides in the early days of the launch and has so far secured formulary access for 60% of all U.S. insured patients.”

“Use of our innovative 4Kscore test for predicting the probability of aggressive prostate cancer increased to nearly 18,000 tests ordered in the fourth quarter.  We have now set the stage for continued, profitable growth at BioReference with a revenue cycle management program that is expected to improve financial results on an ongoing basis.

“We have a number of important initiatives ahead of us in 2017 and early 2018.  We will complete the recently initiated clinical trial for our Claros POC diagnostic test for PSA and plan to file a PMA as quickly as possible upon completion.  Along with our partner, Vifor Fresenius, we plan to initiate a Phase 2 trial in dialysis patients with SHPT.  We also plan to initiate a Phase 2b trial for our SARM for the treatment of BPH, a condition that affects approximately 50 million men in the U.S., as well as a Phase 2 dose escalation study for TT401 to treat obesity and type II diabetes.

“We are diligently working to complete analysis of the data from our Phase 3 clinical trial for hGH-CTP in adults and are aggressively advancing our pediatric Phase 3 clinical trial for hGH-CTP,” Dr. Frost concluded.

Shares of Opko Health are down nearly 2% to $8.20 in after-hours trading Wednesday. OPK has a 1-year high of $12.15 and a 1-year low of $7.99. The stock’s 50-day moving average is $8.63 and its 200-day moving average is $9.78.

On the ratings front, OPK has been the subject of a number of recent research reports. In a report issued on January 3, Ladenburg Thalmann analyst Kevin Degeeter maintained a Buy rating on OPK, with a price target of $19.50, which represents a potential upside of 126% from where the stock is currently trading. Separately, on the same day, Barrington Research’s Michael Petusky maintained a Buy rating on the stock and has a price target of $15.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Kevin Degeeter and Michael Petusky have a yearly average return of 7.9% and 16.8% respectively. Degeeter has a success rate of 47% and is ranked #1162 out of 4503 analysts, while Petusky has a success rate of 65% and is ranked #456.

OPKO Health, Inc. is a diversified healthcare company. It operates through Diagnostics, and Pharmaceutical segments. The Diagnostics segment is consists of the pharmaceutical operates that the company acquired in Chile, Mexico, Ireland, Israel, and Spain and its pharmaceutical research and development operations. The Diagnostics segment is primarily comprised of the clinical and laboratory operations tit acquired through the acquisition of Bio-Reference and OPKO Lab and its point-of-care operations.


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