Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OPKO Health Inc (OPK, Financial) entered into a $250 million note purchase agreement with HealthCare Royalty, providing financial flexibility for R&D efforts and share repurchases.
- The company authorized a $100 million share repurchase program, representing approximately 10% of shares outstanding.
- NGENLA, the long-acting growth hormone therapy, continues to gain traction globally, with Pfizer expanding its launch.
- The IND for ModeX 2001 was cleared by the FDA, allowing OPKO Health Inc (OPK) to proceed to a Phase I clinical trial for solid tumors.
- The company is on track to begin clinical trials of its Epstein-Barr vaccine candidate with Merck later this year.
Negative Points
- Revenue from the Pharmaceutical segment decreased significantly from $138.4 million in Q2 2023 to $52.8 million in Q2 2024.
- The Diagnostics segment reported an operating loss of $26.6 million for Q2 2024, despite a 2% increase in revenue.
- Research and development expenses increased to $23.7 million in Q2 2024 from $17.5 million a year ago, impacting profitability.
- The company anticipates significant one-time costs of approximately $40 million related to severance and facility closures as part of its cost reduction program.
- Revenue from Rayaldee remained flat, reflecting challenges in gaining traction despite new evidence supporting its efficacy.
Q & A Highlights
Q: Congrats on the progress for the quarter. Maybe first one just on NGENLA. So it seems like the guidance for the second half of this year is narrowing and lowering a little bit. Just checking if anything changed commercially since last quarter? Or is this related to just getting experience with the gross profit share economics? Or is it due to inventory or anything else commercially that Pfizer could be seeing?
A: Yes. No, this is tied into the inventory adjustment that we talked about last quarter, Maury. So it's just the final pull-through of certain territories. That adjustment is getting flushed out. We had hoped it would be earlier in the third quarter. It looks like it's going to be late third quarter based on our internal factors. So that's why the annual range came down to kind of the mid-30s from potentially size 40.
Q: And then is it possible to book and timing for when Pfizer could aim to refile for the adult growth hormone opportunity? And is there more you can say on the status and plans for the additional pediatric indications?
A: So on the pediatric indications, so Pfizer is planning their registration studies to bring those forward for the global launch for those additional indications. We haven't provided any specific timelines for those trials to be completed yet, Maury, but I think more to come. They're definitely actively working on the programs. As it relates to the U.S. for the adult, they're still working with their team to formulate their strategy for the U.S. approval.
Q: Just for the deal closing with BioReference, thanks for providing the clarity into when you expect that to happen. Is there anything else you can share about where you're at with the process? And what are specific gating factors to the closing?
A: Yes. So right now, it's really focused heavily on the integration steps between the clients in Labcorp. So those are the main gating items. There's a couple of minor regulatory filings that just need to get cleared up, but all of the major hurdles are behind us, which is why we have pretty certain clarity, but this transaction will get closed late September, early October.
Q: In terms of closing the Labcorp deals and you mentioned some of the savings. Should that all be realized? Could you give us some sort of quantitative look in terms of how far from that to breakeven and cash breakeven and then we have a follow-up.
A: Yes. So Yale, I think if you step through the numbers and the cost savings plan and the realization of the price increases coupled with the closing of the Labcorp transaction, that will put us to a point where the business is breakeven to slightly profitable. So we only gave the initiatives that will -- we expect or we have in hand that we've -- that we'll initiate upon the closing of the Labcorp transaction. A handful of those are not dependent on the Labcorp transaction closing. Some of the larger ones are as it relates to some of the facility closures. However, we feel highly confident in our ability to deliver the savings that we walked through and the price increases have already been put into effect. So we feel very confident on those numbers being realized in our run rate numbers by the end of the year, which is where we had previously guided to.
Q: On the MDX-2001, which is the first part. Have you guys reviewed what the specific target for the [ tetra-factors ] on the antibody was against? And the second one actually is on the Pfizer study, which you mentioned about 45 patients. Is that just only the Phase 1a, 1b or that's more? I understand the full study also has the 2a portion, Phase 2a portion. So would you be able to clarify a little bit more on the specific?
A: Yes, I can do that. Elias here. Thanks for the question. On the target, I think it's something we have now shared. So I think it's no problem sharing it with you. So it's a quadraspecific antibody that has for tumor targeting has 2 targets. One is TROP2 and the other one is c-MET. These are the 2 targets we chose because they're present on about 14 different tumors in oncology. So that's the answer to that. The size of the study really reflects what you typically do. It's what we do, we call it a basket trial, where you really try different tumor types. We have 11 ones identified, and you try to get signals about the most promising one, which we believe is going to be non-small-cell lung cancer, breast cancer, the solid tumors, pancreatic cancer, we don't know. So that's the first phase of the study. That's what you call the 1a phase. Once we do that, then we'll narrow down to 1 or maybe 2 tumor types, which is contained within the patient volume that we identified for the patient number. And then we'll expand that depending on the results, obviously, the side effects. And so that's clinical development. We need to learn from the basket trial and then decide how we go. And yes, indeed, we have a 1a or 1b phase or go straight to a 2a. That's to be determined by the clinical.
Q: At the end of this year, it seems like a lot of things are sort of converging sort of going in the right direction. Presumably, you'll have approximately $240 million, just under $240 million coming in from the Labcorp. Obviously, you just did something a couple of weeks ago that gives you additional financial flexibility in terms of the $250 million. You'll have a Lab business that presumably by the end of the year won't be losing much money, if losing money at all. Can you just talk about capital allocation priorities as you sort of end this year and look towards the future? I mean what matters the most as far as the sort of unprecedented financial flexibility you guys will have going forward?
A: I'll talk about capital allocation in terms of R&D and BioReference. So when we look at BioReference, it's clear that we will need to grow the business once it becomes profitable. And whether or not we need to allocate capital to that is unclear. But it's clearly true that if you look at the market in New York and New Jersey is still very fragmented. And so definitely accelerate the growth in BioReference for increasing revenues. The second is ModeX. I mean ModeX has a rich portfolio, and we're going to do 2 things. We're going to explore partnerships as we've done with Merck and BARDA and others are in the hopper. But because we have some capital, we can get better economics with a partner that we do the that capital being available. So for example, if you look at certain assets, you get a much higher inflection points in value if you can progress the program to proof-of-concept. And that may be actually the best way to
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
