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Edited Transcript of OPK earnings conference call or presentation 5-Nov-19 9:30pm GMT

Q3 2019 OPKO Health Inc Earnings Call

MIAMI Nov 13, 2019 (Thomson StreetEvents) -- Edited Transcript of OPKO Health Inc earnings conference call or presentation Tuesday, November 5, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adam E. Logal

OPKO Health, Inc. - Senior VP, CFO, CAO & Treasurer

* Antonio F. Cruz

Transition Therapeutics Inc. - Chairman of the Board and CEO

* Jane H. Hsiao

OPKO Health, Inc. - Vice Chairman & Chief Technical Officer

* Jon R. Cohen

BioReference Laboratories, Inc. - Executive Chairman

* Phillip Frost

OPKO Health, Inc. - Chairman & CEO

* Steven D. Rubin

OPKO Health, Inc. - Executive VP of Administration & Director

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Conference Call Participants

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* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

* Miriam Weber Miller

LHA Investor Relations - SVP

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Presentation

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Operator [1]

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Welcome to the OPKO Health third quarter conference call. (Operator Instructions)

As a reminder, this call is being recorded today, November 5, 2019. I would now like to turn the conference over to Miriam Miller. Please go ahead, ma'am.

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Miriam Weber Miller, LHA Investor Relations - SVP [2]

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Can you hear me?

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Phillip Frost, OPKO Health, Inc. - Chairman & CEO [3]

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Yes.

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Miriam Weber Miller, LHA Investor Relations - SVP [4]

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Thank you, operator. Good afternoon. This is Miriam Miller with LHA. Thank you all for joining today's call.

I'd like to remind you that any statements made during this call by management other than statements of historical facts will be considered forward-looking, and as such, will be subject to risks and uncertainties that could materially affect the company's expected results. Those forward-looking statements include, without limitation, the various risks described in the company's annual report on Form 10-K for the year ended December 31, 2018, and subsequent filings with the SEC.

Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 5, 2019. Except as required by law, OPKO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Before we begin, let me review the format for the call. Dr. Phillip Frost, Chairman and Chief Executive Officer, will open the call. Then Steve Rubin, OPKO's Executive Vice President, will provide a business update and pipeline review. And Dr. Jon Cohen will discuss BioReference Laboratories. After that, Adam Logal, OPKO's CFO, will review the company's third quarter financial results, and then we'll open the call to discuss -- to questions.

Now let me turn the call over to Dr. Frost.

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Phillip Frost, OPKO Health, Inc. - Chairman & CEO [5]

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Good afternoon, and thank you for joining the call today. We've had an eventful quarter with important progress across several business units.

I'll start by saying we're pleased to announce jointly with Pfizer positive top line results from our pediatric global Phase III trial comparing once-weekly somatrogon to once-daily GENOTROPIN. Steve will share more detail about the data later in the call, but I want to say that we're optimistic about the potential of somatrogon to positively impact the lives of children with growth hormone deficiency as well as their families.

It's clear that once-weekly dosing is a more acceptable way to manage the condition and improve compliance. We're grateful to the health care professionals and patients who participated in this trial in clinical trial sites around the world. We also appreciate the support we've received from our partner, Pfizer, over the past 5 years, and we look forward to the presentation of detailed data in an upcoming scientific conference.

BioReference Laboratories continues to progress under the leadership of Jon Cohen and Geoff Monk. Recently, we received a new proposed local coverage determination from Novitas for the 4Kscore test. The final coverage determination is still pending. But if issued, it will once again provide reimbursement for Medicare patients who meet specific criteria. It's been a long road for the 4Kscore test, but our conviction of the potential importance of this test in the diagnostic paradigm for caring for prostate cancer is solid. And we appreciate the support of physicians and patients who have continued to champion the value of the 4Kscore test.

Our drug RAYALDEE continued to boost sales in the third quarter. Total prescriptions reported by IQVIA increased 83% this quarter compared with the 2018 quarter. Again, Steve will get into the sales numbers in a little more detail, but I want to point out that we continued to increase RAYALDEE revenue and prescriber penetration quarter-over-quarter, making crucial progress in product adoption.

I'm going to turn the call over to Steve now to expand on these themes. Steve?

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [6]

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Thanks, Bill. Good afternoon, everyone, and thank you for joining us today. As Phil indicated, it's been an eventful quarter. We achieved progress across multiple programs and reached important milestones, particularly on the somatrogon project.

We were very pleased with the results in our global Phase III trial evaluating somatrogon dosed once weekly in prepubertal children with growth hormone deficiency. The trial successfully met its primary end point of noninferiority to GENOTROPIN injected daily with respect to height velocity after 12 months. Various sensitivity analyses showed that weekly somatrogon was consistently higher and not inferior to daily GENOTROPIN with respect to height velocity.

Key secondary end points were also achieved. Change in height standard deviation scores, or SDS, at 6 and 12 months were higher with somatrogon compared to GENOTROPIN. At 6 months, change at height velocity was also higher with somatrogon compared to GENOTROPIN. These common measures of growth are employed in a clinical setting to measure the potential level of catch-up growth that children may experience relative to height for age and gender-matched peers.

Finally, as a safety, somatrogon was generally well tolerated and comparable to GENOTROPIN dosed daily with the respect to the type, number and severity of adverse events. We are concluding immunogenicity testing and analysis of additional data, and we look forward to presentation of the full results of the study at a future scientific meeting.

Recall that we have over 4 years of safety and efficacy data in growth hormone deficiency in pediatric patients from our Phase II extension study in children with growth hormone deficiency. 48 children with growth hormone deficiency that completed the main Phase II study continued in the open-label extension, or OLE, Phase II study. 40 subjects are still continuing in the OLE study with the pen device using the same dose, 0.66 milligrams per kg per week, as used in the Phase III study. Safety and tolerability data from the OLE study remain comparable to those obtained with daily growth hormone treatment. Mean annualized height velocity over 3 years in the OLE study show that long-term somatrogon treatment resulted in sustained growth. Height SDS value showed height normalization over time. Important to note, IGF-1 and IGF-binding protein 3 levels remained within the normal range with the ongoing somatrogon therapy. No other long-acting growth hormone therapy under development has safety and efficacy data for as long as we have with somatrogon.

I also want to highlight that our Phase III trial was global with over 80 clinical sites across more than 20 countries, including parts of Asia and Latin America. The global enrollment, including our separate ongoing study in Japan, is part of a strategy that provides Pfizer the ability to seek global approval and global commercialization of somatrogon.

It is important to note that the purpose of growth hormone replacement therapy for pediatric growth hormone deficiency is to provide a level of growth hormone to children similar to the level that would have occurred naturally had they not had growth hormone deficiency. We developed our once-weekly somatrogon with that concept in mind: to mimic the activity of the growth hormone therapies that have been safely and effectively used on a daily basis in children for over 24 years. We believe we have demonstrated that objective through our Phase III trial, which compared our once-weekly somatrogon to once-a-day GENOTROPIN.

If you give a child greater levels of growth hormone, they may grow taller. But that could also result in higher-than-normal levels of IGF-1 with its attendant potential safety issues. For this reason, with long-acting formulations administered once weekly, IGF-1 SDS is used as a biomarker to evaluate efficacy and safety of hGH replacement, and mean IGF-1 SDS levels are used to guide clinical decisions-making on dosing. Patients with sustained mean IGF-1 SDS levels of greater than 2 may require a dose reduction.

In the previous Phase II pediatric trial, somatrogon demonstrated that mean IGF-1 SDS levels occurred at 96 hours post-dose in pediatric GHD patients, and that less than 2% of the patients had IGF-1 SDS levels greater than 2. In our Phase III study, we observed similar results with somatrogon where the mean IGF-1 SDS levels were as estimated using a pharmacokinetic, pharmacodynamic model. These data suggest that weekly somatrogon dosing result in patients maintaining IGF-1 SDS levels within a normal range over the 12-month treatment period. An in-depth analysis of the IGF-1 SDS levels and other study outcome data is expected to be submitted for a presentation at the endocrinology conference in March 2020.

Based on these results, we anticipate that Pfizer will submit the Biologics License Application to the FDA and a Marketing Authorization Application in Europe for somatrogon in the second half of 2020. The pediatric registration study in Japan comparing our weekly somatrogon to daily GENOTROPIN continues to progress, with over 65% of subjects already having completed 12 months of treatment and entered the open-label extension. We expect top line data readout for that study in the second half of next year.

Touching briefly on our other therapeutics pipeline projects. We also expect to advance our long-acting rare disease platform, moving several compounds designed to operate advantages over existing medicines into the clinic. These include our long-acting GLP-2 compound for short bowel syndrome; our hGH antagonist CTP for acromegaly; and our IGF-1 CTP for growth failure associated with severe primary insulin-like growth factor deficiency.

A brief update on our SARM, or OPK88004. In previous studies, our SARM was shown to increase lean body mass and physical function without altering PSA levels in aging males. In collaboration with Dr. Shalender Bhasin and his colleagues at Harvard Medical School with support from the NIH, we have just completed a 6-month Phase II trial with approximately 114 patients. This trial is examining the efficacy and safety of our SARM in improving patients' symptoms of androgen deficiency such as sexual function, lean body mass and physical strength and dysfunction endemic with prostate cancer who have undergone radical prostatectomy. In this study to date, we have not observed any safety issues related to treatment with our SARM such as increased PSA or liver enzyme levels. We expect top line efficacy data by the end of this year.

The safety data with our SARM has been compelling. And with this new data, we are considering a late-stage clinical trial evaluating our SARM for the treatment of sarcopenia, an associated physical strength dysfunction in end-stage renal disease patients on dialysis.

Turning now to our pharmaceutical business. Let me start with RAYALDEE. From a commercial perspective, the RAYALDEE numbers for the quarter break down as follows: Total prescriptions of RAYALDEE in Q3, as reported by IQVIA, increased 83% compared with Q3 2018 and showed continual sequential growth with a 14% increase compared with Q2 of this year. New patient starts increased 9% in Q3 versus Q2. Since launch, there has been a total of approximately 13,600 patients on RAYALDEE. As of Q3, over 2,400 patients have written a prescription for RAYALDEE, of which 229 or nearly 10% were new prescribers in Q3. We ended Q3 2019 with approximately 83% of patients having access to RAYALDEE without prior authorization or other restrictions. After assistance, most patients pay a nominal amount out of pocket for RAYALDEE.

Turning now to our clinical development programs, starting with renal. Last September, we initiated a global Phase II trial with a higher-strength RAYALDEE in patients with Stage 5 chronic kidney disease and vitamin D insufficiency who require regular dialysis. This study is progressing well and is proceeding in 2 successive cohorts. The first cohort of approximately 44 patients is being treated for 26 weeks in a randomized, open-label fashion with either RAYALDEE or placebo to identify the appropriate dosing to be studied in a second larger cohort. Treatment of the first cohort is expected to be completed in mid-2020. An interim data readout for this first cohort is expected in Q1 2020. Final data will be available in the second half of 2020. Costs of the study are being shared with Vifor Fresenius and Japan Tobacco.

Other ongoing and upcoming clinical studies for RAYALDEE include: an ongoing 80-patient open-label Phase IV study designed to demonstrate that RAYALDEE is superior to commonly used competitive therapies, namely paricalcitol or Zemplar, immediate-release calcifediol or Hidroferol, and high-dose cholecalciferol or vitamin D3. Enrollment is more than 60% complete, and full enrollment is expected near the end of 2019 or in early 2020. Initial top line data are anticipated in Q2 2020. And we also have a Phase III study with RAYALDEE in pediatric patients as part of a postmarketing requirement, which is expected to start in Q1 2020. The final protocol for this study was approved by the FDA in Q2 of 2019.

With that overview, let me to turn the call over to Jon Cohen for a discussion of our diagnostic business. Jon?

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Jon R. Cohen, BioReference Laboratories, Inc. - Executive Chairman [7]

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Thanks, Steve, and good afternoon, everyone. I am pleased to report that BioReference Laboratories continues to make progress towards its goal to improve both top line and bottom line results.

When I first spoke with you 6 months ago, we committed to improving BRL's performance with a plan to improve operational efficiencies, increase access to health plans, improve billing operations, identify and implement opportunistic cost-cutting measures and increasing testing volume and revenue growth through a focused commercial strategy. We continue to execute against this plan and are making measurable progress. We have recently recruited new leaders for women's health and cancer services and are moving aggressively to pursue a focused strategy in these areas of our expertise. In addition, our plan to develop a vigorous process to identify and pursue new strategic partnerships to deliver large books of business is beginning to bear fruit.

From a numbers perspective, BRL posted sequential quarter growth in revenues. BRL again met its revenue targets for the quarter, and we continue to see growth and improved efficiency from the laboratory. The third quarter is the second full quarter in which 4Kscore was not covered by Medicare. Despite this issue, we processed nearly 18,000 4Kscores for the quarter.

As previously discussed, in late June, we announced that the Medicare Administrative Contractor with jurisdiction over New Jersey issued a new proposed Local Coverage Determination for the 4Kscore. Under this newly issued proposal by Novitas, Medicare would reimburse the test for patients who meet the defined coverage criteria.

With regard to GeneDx, this quarter saw volume increases of 6% compared with 2018 third quarter. As with the case in Q2, institutional hospital and health system-based ordering were especially strong with a 21% year-over-year accession growth. GeneDx continues to leverage strong relationships with leading children's hospitals and academic centers throughout the country to drive increases in growth and revenue. We've also appointed a new commercial leader for GeneDx' sales force, with the goal of restructuring this sales force to provide a more focused strategy to address this rapidly evolving market.

In addition, we're seeing significant interest in the portfolio of tests offered by GeneDx as several new payer contracts were signed in the past quarter. GeneDx has also increased its focus on advanced bioinformatics techniques to provide further test differentiation as well as improved efficiency. GeneDx continues to impact the risk assessment and diagnostic paradigms for illness and disease.

As an example, in the third quarter, the medical journal JAMA Oncology published data from GeneDx' study addressing cancer-risk estimates in patients with pathogenic variance in the gene CDH1 for gastric cancer. These results will directly impact patients with a rare form of hereditary stomach cancer by providing a more personalized risk assessment and allowing for better-informed decision-making.

With that overview, let me turn it over to Adam for a discussion of our third quarter financial performance. Adam?

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Adam E. Logal, OPKO Health, Inc. - Senior VP, CFO, CAO & Treasurer [8]

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Thank you, Jon.

Before I go into the detailed numbers, I want to reiterate what Steve and Jon have mentioned: We are pleased with the progress that we have made within our overall financial performance. Our laboratory business is beginning to benefit from the structural changes we have made in its operations. Geoff and his team continue to improve their overall cost structure. And overall, we saw a decrease of approximately $17 million in the cost of service and SG&A within that business line compared to the third quarter of 2018. The sequential revenue and margin improvements do not include the associated contributions from the 4Kscore test, as Jon mentioned.

A final positive coverage decision could immediately contribute to increased margins and sequential revenue growth. The reimbursement environment is a challenging one. However, with the team we have in place, we believe we are positioned for continued improvement in the financial results.

Turning to RAYALDEE. The third quarter saw the benefit of robust revenue growth in both units and dollars in comparison to the 2018 period as well as sequentially. Our long-term strategy has been to use the cash flow from our commercial businesses to fund our investments in research and development.

Now we'll go into more of the detailed historical results before providing fourth quarter guidance. Net revenues were $228.8 million for the third quarter of 2019 compared to $249.8 million for the 2018 period. Revenue from services for the 3 months ended September 30, 2019, were $181.1 million compared to $202.3 million for the 2018 period. Consistent with the first half of the year, revenue from services has been impacted by challenges within the payer environment, specifically the compounding of the PAMA rate decreases, along with prior authorization requirements and enhanced denial rates on both our clinical laboratory testing as well as our genomic testing. While we saw a slight decline in testing volumes in the clinical laboratory, the increase in volumes within our genetic testing as well as overall improvements in our revenue cycle have stabilized our revenue from services on a sequential basis.

Revenue from product sales during the 3 months ended September 30 were $26.2 million compared to $25.4 million for the comparable period of 2018. Revenue from RAYALDEE was $7.4 million during the quarter compared to $5.8 million for the comparable 2018 period. Year-over-year unit growth of RAYALDEE was partially offset by a decrease in net price as a result of increased utilization by patients covered by Medicare Part D and increased discounting in the utilization of our copay card program. We believe that the impact of gross-to-net declines have stabilized, and future revenue growth will more closely reflect unit growth as we work to minimize discounting for RAYALDEE. We expect to see the benefits of improved gross-to-net during future periods.

Moving to costs and expenses. We continue to make significant investments in our R&D projects, where we recorded $30 million for the third quarter of 2019 compared to $30 million for 2018. Offsetting R&D expense was approximately $3 million of research and development tax credits related to our Irish operations. Our biggest R&D spend was attributable to our pediatric trial within our hGH-CTP long-acting growth hormone product. As you know, we successfully completed our pivotal Phase III study for hGH-CTP in August and announced positive results in October. While we continue to make R&D investments in this program, the largest spend is now behind us.

As I previously mentioned, we continue to make improvements in our cost structure within our laboratory business to partially offset the declining reimbursement rates. The foundation of improved operating efficiencies that Geoff and his team have established within our laboratory business position us for profitable growth going forward.

Despite our increased investment in the commercial organization of RAYALDEE, SG&A overall declined approximately $4 million compared to the 2018 period. A decline in market values of several of our strategic investments had a negative impact on our net loss for the quarter, resulting in $13.5 million of other expense. For the comparable period of 2018, net loss benefited from an income tax benefit recording during that period of $11.6 million. As a result, our net loss during the third quarter of 2019 was $62 million or $0.11 per share compared to a net loss of $27.7 million or $0.05 per share for the comparable period of 2018.

Looking forward to the fourth quarter of 2019, we expect revenue from services to be between $165 million and $175 million, which excludes any revenue from this 4Kscore from Medicare beneficiaries. The revenue range provided is based on a mix of volume and reimbursement assumptions, and that compares to $183 million for the fourth quarter of 2018.

Turning to product revenue. We expect the fourth quarter to come in between $25 million and $29 million, including revenue from RAYALDEE of between $8 million and $9 million, while our revenue from the transfer of intellectual property are expected to be between $16 million and $18 million. RAYALDEE continues to grow in units, and now we expect revenue to more closely align with that strong unit growth.

Looking at anticipated expenses for the fourth quarter. We expect costs and expenses to be between $265 million and $275 million, including research and development expense of $28 million to $31 million. Based on these ranges, we expect our operating loss during the fourth quarter to be between $42 million and $69 million, which includes approximately $25 million of noncash depreciation and amortization.

Our cash position at September 30 was $64 million. And with $70 million of net proceeds from our underwritten public offering, we -- we'll continue to invest in our R&D programs throughout 2020, as Steve mentioned. However, expense rationalization and capital allocation will remain a top priority as we continue into 2020.

Given the guidance, we anticipate utilizing $40 million of cash during the fourth quarter. As we look into 2020, we have expectations for improved cash contributions and financial performance within our diagnostic and RAYALDEE commercial businesses, both of which are important for our continued investments in R&D.

With that, I'll open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Your first question comes from the line of Maury Raycroft with Jefferies.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [2]

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Congrats on the progress, too. So first question is for the somatrogon pediatric growth hormone study. Just wondering if you could talk more about when patients came in for the IGF-1 measures, the importance of timing and getting that IGF-1 measure. And do you have any perspective in how your IGF-1 data compares to the Ascendis' TransCon data?

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Antonio F. Cruz, Transition Therapeutics Inc. - Chairman of the Board and CEO [3]

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Maury, it's Tony Cruz. To interpret the IGF-1 SDS data, it -- you need to understand both the patient (inaudible) to be analyzed because as you know, when you think of weekly therapy, the IGF-1, in our case, the Phase II data would indicate and also that it's consistent in the Phase III, that after 24 -- up to 48 hours, it peaks. And then at -- the average or the mean IGF-1 SDS occurs around 96 hours. And so -- and yes, patients tend to have it analyzed at various time points. So what you do is you evaluate those patients and normalize it to 96 hours to properly interpret the data. That's what we did.

Now just to give you some background in the Phase II data. In the Phase II, we had very good IGF-1 SDS levels, where I think there was only 1 patient that was above 2, for example, in the -- in that patient population in the first year of treatment. Now we haven't obviously released the data yet because we're planning to present it at the ENDO meetings, and that will be analyzed in-depth at that meeting.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [4]

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Got it. And any perspective on how that compares to competitor growth -- weekly growth hormone data out there? And just wondering also...

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Antonio F. Cruz, Transition Therapeutics Inc. - Chairman of the Board and CEO [5]

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No, I agree. It's a little bit difficult because we know what our data is, and we haven't -- but generally speaking, our data for the Phase III was similar to Phase II in -- and when we do a further analysis, not identical but similar. And in terms of the Ascendis data, they had -- they measured day 5, plus or minus 1 day -- or day 6, plus or minus 1 day, sorry 5 to 7, I think it was 5 to 7. But their percentage of IGF-1 was higher, but it's hard to understand or correlate with our data.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [6]

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Got it. And it's interesting.

And just wondering if FDA would eventually normalize the Ascendis and the Pfizer-OPKO data sets for IGF-1 when they're reviewing data and the filings. Do you have any perspective into that?

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Antonio F. Cruz, Transition Therapeutics Inc. - Chairman of the Board and CEO [7]

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The mean IGF-1 SDS levels is what's used to make medical decisions about dosing. So if you are going to do an analysis, I think you'd have to convert all the data to the mean values, mean IGF-1 SDS values. I think that, that would be likely. I know we're doing that in preparation for the FDA and also for the -- especially also for the European regulatory body.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [8]

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Got it. Okay. And then for the Phase III, just wondering if you can give a breakdown on geographies and where patients came from and how this could have affected data in both arms of this study? And any perspective on how this compares to the Ascendis Phase III as well?

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Antonio F. Cruz, Transition Therapeutics Inc. - Chairman of the Board and CEO [9]

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Well, we had strategically brought in additional countries, particularly from Asia where we had -- we wanted to achieve approximately 10% of the patients from Korea as part of the criteria to meet that number of patients to be able to receive approval there or to apply there for approval. We also wanted to have approximately 15% to 20% of a Latino patient population in our study. So we have a large population from South America, Mexico, Chile, Colombia and so forth. And so that is a little bit different than I think what Ascendis has. In addition, we had patients, approximately 10% -- over 10%, maybe 12%, from India, which again, is a different population I think than they had. And then the rest is obviously East and Western Europe and North America where the remaining population of patients came from, which is more in -- is similar to what Ascendis did.

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [10]

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So Maury, I think a telling factor is the way the difference in patient growth, if you want to compare our studies, though you really can't, and so the GENOTROPIN and the Ascendis study, which is the same that we used GENOTROPIN in ours, grew almost a full centimeter taller in their studies than they did in ours. And obviously, that's the same drug. So that just shows when you have a range of populations, different genetics and some population grow taller than others, but you can't really compare the trials. Now no one did a head-to-head, for one. And two, as I mentioned in my remarks, the goal isn't to increase the height. The goal is to match the height that they would have achieved in nature or to match the height in the daily if they can achieve that.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [11]

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Right. Right. That's helpful. And then the other question I had on the study was just -- or actually if you can provide any more perspective on Pfizer's plans to file for approval and their plans for introducing somatrogon on top of GENOTROPIN. Do you think they're going to push GENOTROPIN in the same way? Or could that program sort of turn over to the weekly option with somatrogon?

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [12]

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Well, I think Pfizer's goal is to grab additional market share. There's over 7 players in the daily growth hormone market today. It's a fairly split-on market. I mean Pfizer, I think, is #2 or #3 or maybe even dropped a little bit, but it's fairly close towards the top with Novo being the highest. And so clearly, if you go down from 7 to 1 or 2 or 3, your goal is to grab additional market share. So they are heavily incentivized to do just that so as to go out and promote somatrogon.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [13]

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Okay. And any perspective into filing and time lines for filing for approval?

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Adam E. Logal, OPKO Health, Inc. - Senior VP, CFO, CAO & Treasurer [14]

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So we believe it'll be second half, we're hoping in this next summer.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [15]

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Got it. Okay. Okay. And then separately on RAYALDEE, just a quick question there. For the Phase II in CKD 5 hemodialysis patients, what are the plans to use the data from that study? And then also, from the head-to-head data that we're expecting 2Q, what are the plans to use those data sets to expand the RAYALDEE label? I guess what are the next steps? And what else would you have to do to get the label expansion?

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [16]

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So for the Phase II in the dialysis patients, there are sort of 2 points. One is largely picking a dosage, and to some degree it's a little bit of proof of concept, right, to show that our product, which is a prohormone, still will work in a patient with very little of any kidney function. So that will serve 2 approaches: One, assuming it's successful, we'll roll it into a Phase II, which is the second part of our cohort of our Phase II; but it will also help us drive sales of our existing Stage 3 and 4 of chronic kidney disease or the current RAYALDEE that's on the market because there remains skepticism that our sales are going to have to overcome in the field, like why would it work any different than nutritional vitamin D if you have no kidney function because it's a prohormone?

Now we -- based upon our study for RAYALDEE in Stage 3 and 4, we have a high level of confidence because at the exact same dosage levels for Stage 3 and 4, in other words, Stage 4 having a higher -- less kidney function than a 3, we got the exact same results. So -- and we were able to lower PTH at the same levels and safely increase levels of vitamin D. So that will be a useful tool in the -- for our existing sales team on Stage 3 and 4. But more importantly, that will allow us to roll into the stage -- second cohort stage 2 and then probably a subsequent Phase III. Now we've powered that or designed that second cohort to, we believe, be able to allow us to argue with the FDA that will count as one of our Phase IIIs. Maybe we could -- depending on how -- the quality of the data, maybe that will even suffice. If not, we would have an additional Phase III to get it on label, and we would expect that to be a 6-month trial, not too dissimilar from what we did for RAYALDEE itself.

Now the head-to-head is really to a large part driven by our European partner, Vifor, for pricing. So to achieve premium pricing over the existing therapeutics, you need to show that you're a superior drug. So that's the purpose of that trial. So assuming that, that is successful in the head-to-head, then it will allow us to tell Vifor to ask for a premium pricing in the European market.

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Phillip Frost, OPKO Health, Inc. - Chairman & CEO [17]

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Just to clarify, it is thought that primarily, the kidney is involved in activating the vitamin D to the active form. And it -- something that occurs only in the kidney. And the fact that, as Steve pointed out, we got the same results irrespective of to what extent the kidney was not functional, shows that there must be extrarenal production of the active form, too. And that's the uniqueness of our product, that it lends itself to being converted to the active form even outside of the kidney.

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Operator [18]

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Your next question comes from the line of Ted Tenthoff with Piper Jaffray.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [19]

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Just a quick question, if I may, on the status of somatrogon in Japan and when we could expect data? And sort of what you see as steps towards filing in that territory?

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [20]

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So for Japan, it's about 6 months behind. So we expect about sometime, to finish the trial, middle of next year and then hopefully submit to the [authorities] about 6 to 8 months later.

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Jane H. Hsiao, OPKO Health, Inc. - Vice Chairman & Chief Technical Officer [21]

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We say the top line data will be available end of next year. From filing point of view, PMDA, the Japanese health authority, have -- has specifically asked to see the switching data. So our submission will not occur in 2020. It will be later.

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [22]

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The switching data is going on now as we've already enrolled -- rolled 66%.

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Jane H. Hsiao, OPKO Health, Inc. - Vice Chairman & Chief Technical Officer [23]

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65%.

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Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [24]

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65% have already rolled on to somatrogon.

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Phillip Frost, OPKO Health, Inc. - Chairman & CEO [25]

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And that market's important to us because Pfizer has a significant part of the market now, and we expect that they'll continue to lead once they have the once-a-week product.

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Jane H. Hsiao, OPKO Health, Inc. - Vice Chairman & Chief Technical Officer [26]

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The pricing is really (inaudible).

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Phillip Frost, OPKO Health, Inc. - Chairman & CEO [27]

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I don't know whether you heard that, but Dr. Hsiao said that the pricing is exceptionally good in Japan also.

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Operator [28]

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There are no further questions at this time. Please proceed with your presentation or any closing remarks.

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Phillip Frost, OPKO Health, Inc. - Chairman & CEO [29]

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I just want to thank everybody for participating and let you all know that we look forward to meeting with you by phone next year at the end of our -- at the end of the year to give you our yearly results and, of course, then again at the end of the first quarter. So we look forward to that, and happy holidays between now and then. Thank you.

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Operator [30]

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Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.