by Sonya Colberg, Senior Investigative Reporter - 11/25/2013 12:28:29 PM
*Another short drama?
We feel confident that the shorts are making a costly mistake in betting against Dr. Frost and OPK. We think this is the kind of misstep with the potential to match the Herbalife debacle, a battle among billionaires poised to lead to “the mother of all short squeezes.”
The most recent shots fired in the Herbalife drama occurred just last week during the same Robin Hood Conference where Mr. Bozza attacked OPK.
On one side is controversial hedge fund manager William Ackman, who vowed he’ll go “to the ends of the Earth” to destroy Herbalife. He told Bloomberg Television that his short position based on the contention that Herbalife is simply a pyramid scheme cost his Pershing Square Capital Management up to $500 million.
Mr. Ackman continued his verbal assault by referring to the investors – Carl Icahn, 77, William Stiritz, 79 and George Soros, 83 – who hold long positions in Herbalife as octogenarians.
“There is no problem with their age, I just think it’s an interesting fact,” Mr. Ackman said.
Mr. Icahn - who shares a history with Dr. Frost in the form of their common interest in the holding company Vector Group which owns a stake in OPK - predicted in January that Mr. Ackman would become the victim of “the mother of all short squeezes.” On Friday, Mr. Icahn called his rival, a “crybaby in the schoolyard.”
Mr. Ackman first announced his large short position in Herbalife last year. Since then, shares have shot up about 100 percent.
We think the OPK scenario could shape up much the same.
*One good-news snap away from taking off
OPK currently has three particularly stunning candidates in Phase 3.
First, there’s an OPK drug for low vitamin D, when combined with another OPK drug, is designed to treat advanced chronic kidney disease. Low vitamin D can cause thyroid problems and demineralization of the bones, which often kills kidney disease patients. OPK acquired the company behind the “Rayaldy” technology in March. The vitamin D drug is so promising that Dr. John Cannell, a physician and vitamin D expert, stunned Seeking Alpha followers with this revelation: “Three weeks ago, I invested all my available funds in OPKO Health Inc. I did that when I learned about its new vitamin D drug, Rayaldy.”
Designed to help 8 million U.S. patients, the drug’s potential market is $24 billion.
Researchers will soon publish results of the Phase 3 trials for this therapy that appears more effective and non-toxic compared with the two competitors.
“It’s important news,” Dr. Frost said. “We don’t expect to get 100 percent of the market but we are certainly interested in capturing several billion.
“That would make the present stock price look very small,” he said of the roughly $10 stock.
Second is the human growth hormone, a once-a-week therapy as opposed to the current daily use. OPK acquired the company behind this technology, Prolor Biotech, in April. The drug is in Phase 3 for adults and Phase 2 for children, aimed at a $3.5 billion market.
Third is a drug for nausea and vomiting caused by chemotherapy – a $1 billion to $1.5 billion market. OPK out-licensed the drug to Tesaro, which is conducting three separate Phase 3 trials on the product designed to help cancer patients up to a week. Following an expected new drug application submission in mid-2014 prior to commercialization, OPK would eventually stand to get about $130 million plus a royalty.
“They’re finishing their trials as we speak,” Dr. Frost said. “They should have top-line results by the end of December.”
Down the pipeline, a hemophilia drug - reaching for an estimated $1 billion market - is set to begin Phase 2 clinical trials in 2014.
Finally, a naturally occurring hormone product for fighting obesity has seen great success in animal studies, said Dr. Frost.
“That could be one of our most important drugs,” he said.
The company is also involved in developing diagnostic tests, including a potentially game-changing “4Kscore” prostate cancer test for patients with elevated PSA (prostate specific antigen). It is designed to cut the 70 percent rate of false positives and reduce unnecessary, costly biopsies of the prostate, which can be difficult and unpleasant. The test for use in laboratories has already launched in the United Kingdom and work has begun on a new version for doctors’ offices. OPK bought a laboratory in Tennessee to facilitate the U.S. launch.
“We’re gearing up to put it on the market right now,” said Dr. Frost.
Additionally OPK owns businesses in Spain, Chile, Israel and Mexico which are selling products, as well as a more recent entry into Brazil.