OPKO Health, Inc. (OPK)

New York State to Pay BioReference Labs $150M for Covid-19 Testing
May 14, 2020
| staff reporter

This article was written by Jonathan Lamantia and was first published May 13 on our sister publication Crain's New York Business.

NEW YORK – New York State has agreed to pay BioReference Laboratories $150 million for analyzing Covid-19 diagnostic and antibody tests through July 25, according to a database of state contracts.

BioReference, a subsidiary of Miami-based Opko Health, tests the samples collected at 11 drive-through facilities around the state, including in New Rochelle and at Jones Beach State Park in Nassau County. It also operates 21 walk-up centers for diagnostic tests, according to the company. The three-month contract period started April 26.

It first announced working with the state on drive-through testing March 13. State records show New York agreed to pay $15 million through the end of March and had paid about $3.7 million of that amount as of Wednesday.

New York City last week announced a separate agreement to test 140,000 residents for antibodies at five locations. BioReference started processing antibody tests for the state April 29 with plans to analyze 400,000 patient samples per day by this point.

Jon Cohen, BioReference's executive chairman, told Crain's last month that his previous public-sector experience helped the company connect quickly with the state and the city to ramp up testing. He was a chief policy adviser to former Gov. David Paterson.

BioReference also announced yesterday it that had entered an agreement with the Westchester Medical Center Health Network to provide laboratory administrative services, operations, reference testing, and outpatient lab services to the 10-hospital health system, headquartered in Valhalla, New York.

$10 price target from a top analyst: OPKO Health (OPK)
Through its unique products, comprehensive diagnostics laboratories and robust research and development pipeline, OPKO Health wants to improve the lives of patients. OPKO shares have surged 162% this year, but at $3.86 apiece, several analysts believe this stock is still undervalued.
Following the announcement that OPK had kicked off the Phase 2 REsCue study of Rayaldee for the treatment of mild-to-moderate COVID-19, 5-star analyst Edward Tenthoff, of Piper Sandler, points out that he has high hopes for the company. Rayaldee is currently approved for secondary hyperparathyroidism (SHPT) in stage 3-4 Chronic Kidney Disease (CKD), and is progressing through a Phase 2 study in dialysis patients.
According to Tenthoff, many of the patients in the COVID study will have stage 3-4 CKD, “where Rayaldee has demonstrated clinical benefit.” On top of this, the analyst thinks boosting serum 25D may augment macrophage immunity by secreting potent antiviral proteins targeting.
Reflecting another positive, service revenue of $251 million in Q2 2020 beat expectations as a result of the 2.2 million SARS-CoV-2 PCR and antibody tests performed at BioReference Labs in the quarter. Adding to the good news, OPK guided for 45,000-55,000 tests per day in Q3 2020 and service revenue of $325-350 million in the quarter. It should be noted that this includes the base diagnostic business, which is starting to bounce back. To this end, Tenthoff estimates service revenue could climb 53% higher to reach $1.1 billion this year.
Tenthoff is also looking forward to the somatrogon, the company’s treatment for pediatric growth hormone deficiency (GHD), regulatory filings. Its partner, Pfizer, plans to submit the BLA this fall, with U.S. approval and market launch potentially coming in 2H21. An open-label European study is expected to wrap up this quarter, and will enable an EMA filing in 2021. In addition, pivotal Phase 3 Japanese data in pediatric GHD patients could support a regulatory filing in the country in 1H21.
Based on the therapy’s Phase 3 trial, in which it met the primary endpoint with height velocity, Tenthoff sees approval as being likely.
In line with his optimistic approach, Tenthoff stays with the bulls. To this end, he keeps an Overweight (i.e Buy) rating and $10 price target on the stock. Investors could be pocketing a gain of 159%, should this target be met in the twelve months ahead. (To watch Tenthoff’s track record, click here)
All in all, other analysts echo Tenthoff’s sentiment. 4 Buys and no Holds or Sells add up to a Strong Buy consensus rating. With an average price target of $8, the upside potential comes in at 107%. (See OPKO stock analysis on TipRanks)

Entry into a Material Definitive
On May 12, 2020, OPKO Health, Inc. (OPKO) entered into an amendment (the Amendment) to that certain Development, Commercialization License Agreement, dated December 13, 2014 (the Original License Agreement), by and among OPKO, OPKO Ireland Ltd. (OPKO Ireland, and together with OPKO, the Company), and Pfizer, Inc. (Pfizer) for the Companys long-acting human growth hormone product (hGH-CTP) for the treatment of growth hormone deficiency (GHD) and growth failure in children born small for gestational age (PSGA).
Under the terms of the Amendment, effective January 1, 2020, OPKO and Pfizer have agreed to share equally all costs for the remaining development of hGH-CTP for pediatric GHD (PGHD), including manufacturing costs and post-marketing studies. In addit ion, the parties updated and amended the Development Plan and Development Budget under the Original License Agreement. The milestone payments, royalties and profit share provisions under the Original License Agreement remain unchanged.
Pursuant to the Amendment, the parties have also agreed to work together to identify an additional pediatric indication for development other than PGHD on or before December 1, 2020. Development of the additional pediatric indication is subject to subsequent mutual agreement of the parties but, if agreed, all development costs for such indication shall be shared equally by the parties.
In addition, the parties also agreed on a process whereby Pfizer may, based on subsequent feedback from the US Food & Drug Administration, and in its reasonable discretion, submit a supplemental BLA for GHD in adults following receipt of regulatory approval of a biologics license application (BLA) for PGHD.
SIGNATURES
Pursuant to the requirements of th e Securi ties Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
OPKO Health, Inc.

Overall, a positive Annual Meeting of Shareholders. Nothing negative. One explanation to note was the recent debt exchange for common shares. It appears mostly that it was a reaction to a large holder that wanted to dispose of its debt holdings. In a situation like that the company could have just let the holder try to sell the debt, which may have negatively impacted the market for that debt (speculation on my part). Another choice could have been to use cash to buy the notes and retire them, but that would have used cash that is nice to have for other working capital needs. A third choice would have been to do the exchange for common and that's what they did. The positive of that move is that it preserves the debt market and cash. The negative was some dilution and, perhaps more importantly, could have created common share selling pressure for an unknown amount of the shares received by the exchange participant(s). That helps explain why the stock price has not advanced.
The good news is that the company is progressing on several fronts. If it accomplishes a large event or transaction, the resultant demand for shares could fairly quickly absorb the extra shares, reducing the selling pressure and the stock price could advance. In that regard, I liked that the company is having discussion with many companies that could result in a partnership, etc. that could rapidly accelerate the growth of units like Scarlet. That is a situation where a negotiated deal could change the trajectory of growth and the stock price overnight.
An interesting conundrum is the Rayaldee situation. While it appears useful in treating Covid and other viral infections, the study of that has been delayed due to Covid. Also, while it is particularly useful for kidney patients, sales to that group have slowed due to Covid -- clinics limiting access to salespersons and patient visits still off due to concerns about Covid. So, a drug that would help patients with Covid is not getting to them due as rapidly to Covid. The good news is that when the study is done and when access is restored, sales and adoption of Rayaldee should gain traction more quickly, it seems.
Good luck, longs.

Revised Rough calculations...The total COVID testing volume in USA over last three months has now very close to 2X over total testing count of 3 months in the previous quarter (July -Sept) .. Last quarter OPK did 3.5 million COVID tests ..assuming their testing market share remains same/flat ( This may be higher as their capacity increased and Rite-aid started free testing which uses OPK) they will do at least 6.5/7 Million tests ( (Their max testing capacity in Q4 is expected to be 6.2- 7.5 million) ... In terms of revenue their Diagnosis segment revenue in Q3 was 392.5 Million so that may end up to 700 plus Million in Q4 with possible Operating income from that segment 90 to 100 million compare to 46 million in Q3 ... In addition Rayaldee will see accelerated /sustained growth due to marketing authorization in Europe and Covid Play .... Net income expected will be 32-35 million which is also 50% up from Q3 assuming everything else is flat ..And we may hear anytime on Somatogron FDA approval which may haven filed by Pfizer in Q4 and FDA takes 60 days for approval ..

After reading the 2/5/2019 press release, why it is important to eliminate the convertible note for cash.

OPKO issued 200,000,000 4 1/2% convertible notes and also allowed a 30,000,000 note over allocation to Jeffries. The notes at the time of issuance were convertible into 236.7424 shares of common per 1000 face value. That means that the notes are convertible into approximately 54.5 million shares of common which bondholders could short and be hedged.

In addition the company gave Jeffries 30 million shares of treasury stock to help facilitate hedging. These shares would prevent the shorts form facing recalls as the price appreciated. It would leave 24.5 million shares hedged, but facing recalls. Jeffries by having the shares to loan received interest free loans for the proceeds of the short sales subject to mark-to-market and probably a short locate fee.

The earliest OPK should call the note is in 2022, under certain market conditions.

When note holders elect to convert, or when OKP can redeem, the notes OPK can pay cash, stock or a combination of cash and stock.

The hedged shorts receive interest on notes, probably credit interest on the short (presuming these are institutional holders) and pay interest on their debit balance.

The way that pressure can be put on the hedgers is by OPK's PPS continuing to increase so that the mark-to-market causes the debits to out weigh the credits while OPK has the cash available to pay cash rather than stock should the note holders try to convert.

My earnings analysis:
Currently there are 5 analysts following OPK.
Here are the expectations: 2Q (8/5): lowest (-10c and highest -2c) revenues consensus $237 mill
Last qtr, 1Q OPK had $211.5 mill in revenues and (-9 c eps). I've used the same margins as they had in 1Q to be conservative even though margins should be better in this qtr. I prefer to expect less but know that more is the most likely outcome.
I believe from my research that revenues are going to be north of $320 mill so here's what i calculated:
$340 mill revenues, eps=+ 1 c $360 mill, eps = +3c $380 mill, eps +5c
For 3Q analyst currently have a consensus of (- 4c), and 4Q (-3c). I'm sure those estimates will be raised significantly once 2Q is announced and analysts have a chance to talk to Cohen.
IMHO in this overpriced overall market is hard to find a company like OPK that has booming business, excellent reputation with States and big business, trust in having the best test kits and results with incredible low expectations because of the last 5 years. On top of that there's a big short position to fuel the coming run.
OPK should be profitable in 2020 and 2021. A realistic valuation considering other biotech companies, (which by the way a lot of them don't make money), should be $15-$17 end of 2020 and $20-$25 for 2021.
My numbers will increase, of course, if Rayaldee gets ok and more contracts for testing in universities, school districts and government employees are signed. Also, they are set up to get a part of the $16 Billion that the government is allocating for testing.
Sorry for the long post. Hope this helps.

The recent news from Opko is good. Even very good. The pps shoud clearly rise substantially in response. 

The shorts are trying to suppress the stock price but they need to invest ever-increasing resources to achieve that old goal of theirs

I think that sooner or later, probably sooner, the shorts will realize that thier game is not profitable for them any longer.

And then the pps will steadily rise (not like long-term and in recent times too - one step forward and two steps backwards), hopefully also with Failing-Frost out of the picture.

Problem is - Failing-Frost will probably stay stuck to the CEO seat till the cows come home !

A ray of ligjt in here is that, I believe, that Frost was playing with the pps for a verylong time and didn't care abot the shareholders one bit, but now, it looks to me, that the dude is changing direction and either is planning to soon sell the company, or, for his own mysterious and hidden reasons - he wants the pps to start rising again, and substantially ! 

I concluded that because the recent four business moves that he took:

1) The selling of the factory in Irland, and

2) The new business agreement that OPKO's subsidiary EirGen Pharma has agreed to develop and commercialize Rayaldee to treat secondary hyperparathyroidism in patients with stage 3/4 chronic kidney disease with Nicoya Therapeutics in Greater China., 

3) and 4) - Two more important news items from today (Tuesday): New (and first ever!) Cruise Testing by Bio Reference, and a new talented president appointed to manage GenDx !!

are both substantial business moves that Frost knows that WS will, pretty soon, will have to take notice of these deals and start to value the company and its stock pps much higher than today's values ! 

And had Frst wanted to keep on lowering the pps - he wouldn't have made these important and substantial deals.

My opinion.

Stay tuned.

P. S. OnMargin - My opinion: don't lose hope and keep on holding on. I believe that the Opko longs shall be rewarded - substantially!

Opko Health price target raised to $4 from $3 at Piper Sandler Piper Sandler analyst Edward Tenthoff raised the firm's price target on Opko Health (OPK) to $4 from $3 and keeps an Overweight rating on the shares after the company and partner Pfizer (PFE) reported positive top-line data for a Japanese Phase 3 trial of once-weekly somatrogan in children with growth hormone deficiency. While the primary endpoint was previously reported, the new data showed greater than 95% of patients had mean IFG-1 SDS levels within normal range, which Tenthoff called "a critical safety finding." He also noted that Opko subsidiary BioReference Labs' SARS-CoV-2 PCR testing leads him to increase his Service revenues estimate to $896M for this year. OPK PFE

Read more at:
https://thefly.com/landingPageNews.php?id=3107694

A couple of things one should note about OPKO in 2021:
1. OPKO is PROFITABLE for the first time in it's history
2. OPKO has ~$100M in cash.
3. Vifor obtained marketing approvals for Rayaldee in ~10 European countries in 4 Q20.
4. Vifor will be making milestone payments to OPKO for the previously cited approvals this year
5. Vifor will begin paying royalties in FY21.
6. OPKO successfully completed the Phase 3 study for Somatrogon
7. Pfizer has filed for marketing approval with the FDA and expects approval in October of 2021.
8. OPKO will receive additional milestone payments from Pfizer on Somatrogon approval, likely in 4Q21, and royalties from both Somatrogon AND Genotropin once the FDA approval comes in FY21.
9. During the pandemic, BRL increased its customer base, making the non pandemic testing market stronger. As detailed in yesterday's conference, they stream lined the order and delivery systems for all testing.
10. GeneDx continued growth which was held back during the pandemic. As detailed yesterday they have an alliance with MEDNAX through Pediatrics Medical Group who operate ~2/3s of the country's NICUs (Neonatal Intensive Care Units).

I contacted IR regarding the status of the PMA for 4KScore. Part of the reply was that the topic was addressed during the annual meeting and a link was provided. I have avoided those calls because I thought they would be boring. I discovered that there is a session where shareholders can submit questions. There were a number of questions and answers that I found interesting.

> With regard to the PMA, it seems that the FDA reviewed OPK's facility in March. The facility passed inspection. The FDA asked some additional questions which were answered by the company. I am hopeful that we receive a ruling from the FDA in Q4.
> An answer regarding GeneDx I found particularly interesting. Someone asked about whether or not the company breaks out P&L for the division. The reply was they do not, but said that they indicated in the past that GeneDx revenue was about 17% of the Diagnostics Group's revenue. If that is the case then going back over the last 4 quarters, Diagnostic's revenue was $1754.6 million which would put GeneDx revenue at about $301.3 million. By comparison NVTA has revenue of $389 million and a market cap of $5.8 billion.
> One other interesting topic that came up was the Rayaldee for Covid trial. The company said that they were exploring the possibility of ending the trial with less than the full complement of volunteers. My interpretation was that the results compiled from volunteers to date was strong enough to send to the FDA.
> Scarlet was also discussed.

The ADM was in April so things obviously could have changed since then.

From the 1Q20 10Q:
:Our equity method investments consist of investments in Pharmsynthez (ownership 9%), Cocrystal Pharma, Inc. (“COCP”) (5%), Non-Invasive Monitoring Systems, Inc. (“NIMS”) (1%), Neovasc, Inc. (“Neovasc”) (3%), InCellDx, Inc. (“InCellDx”) (29%), BioCardia, Inc. (“BioCardia”) (3%), and Xenetic Biosciences, Inc. (“Xenetic”)(3%)... The aggregate value of our equity method investments based on the quoted market prices of their respective shares of common stock and the number of shares held by us as of March 31, 2020 was $5.4 million."

Equity Securities
Our equity securities consist of investments in Phio Pharmaceuticals (“Phio”) (ownership 0.03%), VBI Vaccines Inc. (“VBI”) (4%), ChromaDex Corporation (“ChromaDex”) (0.1%), MabVax Therapeutics Holdings, Inc. (“MabVax”) (1%), and Eloxx Pharmaceuticals, Inc. (“Eloxx”) (3%).... We have determined that our ownership, along with that of our related parties, does not provide us with significant influence over the operations of these investments. Accordingly, we account for our investment in these entities as equity securities, and we record changes in the fair value of these investments in Other income (expense) each reporting period when they have readily determinable fair value."

Security...March 31st.....As I type
COCP.........$0.71...........$1.56
VBIV.........$0.95.............$2.67
ELOX........$1.96.............$3.04
XBIO.........$0.74.............$0.99

Guys, please listen the yesterday $OPK presentation at J.P. Morgan in quiet.
To all upfront $OPK and dr, Frost critics... try to understand... that $OPK has fantastically expanded their lab, diagnostics and scientific capabilities.
That all requires massive investment.. which must not be directly comparable to the revenue from COVID testing.
But all of these investments will pay back withing next 2-3 years massively.

Since I work on pharma deployments I know how demanding and costly all this is...and the most important is the personal potential of newly trained staff and new executives (mentioned in the presentation).

So we should expect return on these investments 2H 2021 onwards.

I estimate the share price of $OPK.. based on revenue v.s. all-in (direct & hidden in personal development) investment as: $8,30 - $9,60 by the end of 2Q 2021, $10,80 - $12,00 by the end of 4Q 2021, and $16,00 -$20,00 mid 2022.

Happy trading, Guys :)

Yahoo Finance raised OPK's 1-year target up a quarter to $8.25. Onward & Upward!

I believe OPK will Pop upward very strongly if one of the below happens:

1. Divest BRL from Pharma bringing out real shareholder value
2. Frost goes away from OPK Mgmt - permanently
3. Buyout always a real possibility since insiders control more than 40% of OPK stock.

BTW: Forget about Sian having any effect whatsoever. In fact, Sian seems to relish mouthing off and driving OPK lower. Every time Sian issues some B.S. release - OPK tanks.

If these above don't occur in a timely fashion, OPK will continue to drift higher and higher anyway since its core businesses are poised for further growth and its financial health has dramatically improved over the last year or so.

Longs take heart & remember: Phillip Frost, age 86, has a very limited time to capitalize on his OPK investment for himself and his family and complete his legacy in a very positive way.

Ok for everyone wondering what happened: Stock market works this way: If reports are worse than expected, even if the news are good, there is a panic mode that made people sell and the price drops temporally. Then it goes back up. If the reports are better than expected, there is a pump, the price increases, and then the prize goes down and corrects.
The news have been very good, but the expectations were so high that we had a momentarily panic mode.
If you are still concerned, just check the report, look at all the stuff see where everything is going by yourself, and will understand how outstanding the potential of all this is.

40.90% of the stock is owned by corporate insiders.

A number of institutional investors have recently bought and sold shares of the stock. BlackRock Inc. lifted its holdings in OPKO Health by 3.5% in the 4th quarter. BlackRock Inc. now owns 37,628,639 shares of the biotechnology company’s stock valued at $148,632,000 after purchasing an additional 1,285,944 shares in the last quarter. Charles Schwab Investment Management Inc. raised its position in shares of OPKO Health by 7.2% in the fourth quarter. Charles Schwab Investment Management Inc. now owns 3,528,264 shares of the biotechnology company’s stock valued at $13,937,000 after buying an additional 236,653 shares during the last quarter. Morgan Stanley lifted its stake in shares of OPKO Health by 152.5% during the third quarter. Morgan Stanley now owns 1,818,438 shares of the biotechnology company’s stock valued at $6,709,000 after buying an additional 1,098,178 shares during the period. Altshuler Shaham Ltd acquired a new stake in OPKO Health during the third quarter worth approximately $5,798,000. Finally, Wells Fargo & Company MN grew its stake in OPKO Health by 55.7% in the 4th quarter. Wells Fargo & Company MN now owns 1,559,598 shares of the biotechnology company’s stock worth $6,160,000 after acquiring an additional 558,101 shares during the period. Hedge funds and other institutional investors own 28.51% of the company’s stock.

I read post after post from both shorts and longs. I have been long this company for quite a while so I have a healthy dose of skepticism/cynicism and optimism guiding my mood on the company. My biggest concern from reading all these posts is that everyone is putting their hopes in this great next quarter of earnings. Don’t get me wrong, things are changing for the better. Covid-19 testing is going to be a driver for this next quarter and at least 1 more....I believe Rayaldee testing for Covid-19 is going to be the catalyst to finally drive sales as what nephrologist In their right mind would not prescribe it for their CKD patients if there is evidence to believe it can help protect them from Covid-19. However, this quarter there is still going to be a huge lag in testing for 4K score, GeneDx tests, and other standard BRL testing, so a lot of this Covid-19 testing will go toward offsetting these losses and let’s also not forget that OPKO was already losing $50M a quarter when all of these revenue generators were running at full force. My fear is the constant bloviating about awesome quarter that will send shorts for the exits creating a short squeeze that will make us all rich will probably not happen...let’s just say that they do blow out the quarter and let’s say they even make enough money that they say they will payoff their long term debt....then what? The shorts will just say that was due to Covid-19 testing and it can’t last forever....they will call this a one trick pony whereby shareholders will have to continue to hope for illness and no return to normalcy just to get another great quarter and do you think OPKO will provide guidance for the next quarter....no way....so it is not like we will get a blow out quarter and guidance for even better things for future quarters because their primary asset stream at the moment is very mercurial and dependent on a virus the best modelers in the world have failed to estimate correctly. OPKO was built from the beginning to be sold...that is Frost’s MO...he builds companies from the dregs, reinvents some old technologies, maybe adds a few new ones, and sells the package deal to a larger competitor. The problem this time is he has spent more money and had more disappointing results with the products (Varubi, 4K score, Rayaldee) and he diluted his company with the purchase of BRL which ironically is what is keeping them afloat at the moment. Look Frost is rich, smart, and determined and if he lives long enough (he’s not getting any younger) he will get the sale he wants, but honestly that is at least 3 to 5 years away IMHO. My warning is to those who think this stock will jump to $5+ at the next earnings report....I think you will be disappointed.....if this things goes up $1 at the next earnings I would be surprised (hope I am wrong). This company is not going to take this Covid-19 testing windfall and pay off debt, buyback stock, or announce a dividend. If they make any money they will invest it in their pipeline trying to bring something along that is better than Varubi, 4K score or Rayaldee....remember Frost has said it many times (paraphrasing of course)....”You only need to find one product in your pipeline that is successful to make a great sale of your company”....and he is right...he has demonstrated it before. So to all us longs out there, we can be excited about what Cohen has done at BRL....he has done a great job bringing value to OPKO, but let’s not oversell this next quarter because it just gives credibility to the shorts when the results don’t match our enthusiasm. Stay the course....in 3 to 5 years (my humble opinion) this stock will give us the value we deserve for our investment and perseverance.