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Edited Transcript of OPK.OQ earnings conference call or presentation 18-Feb-21 9:30pm GMT

·37 min read

Q4 2020 OPKO Health Inc Earnings Call MIAMI Feb 19, 2021 (Thomson StreetEvents) -- Edited Transcript of OPKO Health Inc earnings conference call or presentation Thursday, February 18, 2021 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Adam E. Logal OPKO Health, Inc. - Senior VP & CFO * Charles W. Bishop OPKO Health, Inc. - CEO of OPKO Renal * Jon R. Cohen OPKO Health, Inc. - Senior VP & Director * Phillip Frost OPKO Health, Inc. - Chairman & CEO * Steven D. Rubin OPKO Health, Inc. - Executive VP of Administration & Director ================================================================================ Conference Call Participants ================================================================================ * Devin J. Geiman Guggenheim Securities, LLC, Research Division - Associate * Edward Andrew Tenthoff Piper Sandler & Co., Research Division - MD & Senior Research Analyst * I-Eh Jen Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst * Maurice Thomas Raycroft Jefferies LLC, Research Division - Equity Analyst * Michael John Petusky Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst * Yi Chen H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst * Yvonne Briggs LHA Investor Relations - VP ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the OPKO Health Fourth Quarter 2020 Financial Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference to your speaker today, Yvonne Briggs at LHA Investor Relations. Please go ahead, ma'am. -------------------------------------------------------------------------------- Yvonne Briggs, LHA Investor Relations - VP [2] -------------------------------------------------------------------------------- Thank you, operator, and good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining today's call to discuss OPKO Health's financial results for the fourth quarter of 2020. I'd like to remind you that any statements made during this call by management other than statements of historical fact 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 SEC filings, including the annual report on Form 10-K for the year ended December 31, 2019, and in subsequently filed SEC reports. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 18, 2021. Except as is 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 today's 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 then Dr. Jon Cohen will discuss BioReference Laboratories. After that, Adam Logal, OPKO's CFO, will review the company's fourth quarter financial results, and then we'll open the call to questions. Now I'd like to turn the call over to Dr. Frost. -------------------------------------------------------------------------------- Phillip Frost, OPKO Health, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining the call today. Today, we're reporting record revenues, earnings and cash from operations for the fourth quarter and full year 2020. Although every aspect of OPKO Health was touched by COVID-19 during 2020, I'm particularly proud of our hard-working teams at BioReference Laboratories as they rose to the challenge of scaling up COVID-19 testing services at an unprecedented pace in a fast-moving and highly uncertain environment. We've made significant investments in human resources, adopted innovative new testing models with our retail partners, invested in state-of-the-art technologies and reconfigured our laboratories to expand our testing capacity and deliver timely results. The ability to ramp up capacity while maintaining accurate results and rapid turnaround times reflects the talent and dedication of BRL's management team and employees. We had record COVID-19 PCR testing volume during the fourth quarter. Although our base business would have substantially recovered during the summer and fall, stalled towards the end of the fourth quarter due to the surge in COVID-19 cases across the country. We believe BRL's base business will largely return to historical levels and beyond as the vaccination rollout continues and fewer new cases are reported. We've seen a significant interest in the capability of BioReference to compete on the national stage by the number and diversity of industries that now seek us to deliver highly complex COVID-19 solutions. And while demand for COVID-19 testing is likely to decline, we believe it will continue into 2022 and beyond. We're encouraged by the new administration's focus on increasing testing availability across the country and their approach to controlling the pandemic by expanding the availability of testing supplies and enhancing laboratory testing capacity. Despite the pandemic, our pharmaceutical business has made great strides. A highlight earlier this year was the joint announcement with our partner, Pfizer, that the FDA accepted for filing the Biologics License Application for somatrogon, our long-acting human growth hormone. In addition, an NDA was submitted in Japan for Somatrogon and we're expecting Pfizer to soon make a regulatory submission in Europe. In the U.S., demand for RAYALDEE continues to be impacted by the pandemic-related restrictions and remains below pre COVID levels. Overseas, our partner, Vifor Fresenius, continues to receive marketing approvals in Europe and is filing a commercial launch later this year. During last year's fourth quarter, we began a Phase II trial with RAYALDEE in COVID-19 patients. Our decision to undertake this trial follows numerous independent studies that indicate an inverse correlation between vitamin D levels and COVID-19 risk and severity. This trial is ongoing and we look forward to updating you on results when they become available. I want to thank all OPKO employees who have worked tirelessly over the past year. I am proud of what we achieved in 2020 and I'm not pessimistic about what we can accomplish in 2021. I'll now turn the call over to Steve Rubin to further discuss our business. Steve? -------------------------------------------------------------------------------- Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [4] -------------------------------------------------------------------------------- Thanks, Phil. Good afternoon, everyone, and thank you for joining us. 2020 was an eventful year for OPKO with the onset of the COVID-19 pandemic. BioReference Laboratories demonstrated its ability to be a leading provider of testing services on a national level, not only for COVID-19 PCR testing, but also clinical, specialty and genetic testing as well. This leading position resulted in record revenue growth and profitability, which Adam will discuss in more detail. As Phil mentioned, earlier this year, we jointly announced with Pfizer that the FDA accepted for review the BLA for Somatrogon for once-weekly treatment for children with growth hormone deficiency. The target Prescription Drug User Free Act or PDUFA action date for a decision by the FDA is October of this year. Pfizer also submitted an NDA to the Ministry of Health, Labour and Welfare in Japan for somatrogon. As for Europe, Pfizer remains on schedule with respect to regulatory submission for marketing approval and we expect to announce that submission shortly. As this is a global program, Pfizer has also submitted and will continue to submit for marketing approvals in many different countries across the world. Under our agreement with Pfizer, OPKO is eligible to receive up to $275 million upon achievement of certain regulatory and pricing milestones. In addition, upon launch, we are entitled to regional tiered gross profit sharing for both Somatrogon and Pfizer's Genotropin. Now I'd like to turn to our commercial pharmaceutical business, starting with RAYALDEE. RAYALDEE numbers for the quarter break down as follows: total prescriptions for RAYALDEE in Q4 2020, as reported by IQVIA, were approximately 15,000, representing a decrease of approximately 16% compared with Q4 2019 and a 10% decrease compared with Q3 2020. The RAYALDEE sales force continues to contend with the impact of COVID-19 on access to physicians as well as a decline in patient visits to doctors' offices. New patient starts, however, increased by 1% in Q4 versus Q3. And since the product was launched, nearly 22,700 patients have had RAYALDEE prescribed by approximately 3,400 physicians. Approximately 140 physicians or about 4% of the total number of prescribers were new to RAYALDEE prescribers in Q4. We anticipate that sales in RAYALDEE will rebound as COVID-19 vaccinations become more available and new infections decline. We are pleased to announce that Vifor Fresenius, our partner for RAYALDEE in Europe, has secured marketing approvals for RAYALDEE in Spain, Portugal, Italy and Switzerland, adding to the 7 European countries that have previously approved the product, namely the United Kingdom, Germany, Sweden, Norway, Ireland, Denmark and the Netherlands. Commercial launch is anticipated in 2021 and pricing negotiations are well advanced. Our Phase II trial with RAYALDEE as a treatment for patients with mild and moderate COVID-19 is progressing as we continue enrolling subjects at multiple sites across the U.S. The trial is a randomized, double-blind, placebo-controlled study and is expected to enroll approximately 160 patients, including many with stage 3 or 4 chronic kidney disease who are at a higher risk for developing more severe illness. These outpatients are being randomized in a 1:1 ratio to 4 weeks of daily treatment with either RAYALDEE or placebo and they are monitored for another 2 weeks. The dosing regimen is designed to quickly raise and maintain serum 25-hydroxyvitamin D levels within the range of 50 to 100 nanograms per mil in order to induce CASA trial production in macrophages, thereby enabling them to secrete LL-37, a potent antimicrobial protein that can destroy SARS-CoV-2. The primary efficacy endpoints include raising and maintaining serum total 25-hydroxyvitamin D within the range of 50 to 100 nanograms per mil and time to resolution of COVID-19 symptoms. Should the trial -- data from the trial be positive, we intend to see emergency use authorization from the FDA for RAYALDEE for this indication. There have been numerous independent studies reporting an inverse correlation between vitamin D status and COVID-19 risk and severity, which, as Phil mentioned, underscores the rationale for the trial. 2 recent reports from Spain indicate that orally administered immediate release calcifediol is effective in mitigating COVID-19 severity in hospitalized patients. The first report by Castillo in 2020 showed that calcifediol therapy reduced ICU admissions from 50% to 2%. The second report by Nogues in 2021 showed that ICU admission was required by 5.4% of patients treated with calcifediol and 21.1% of patients treated with placebo, and deaths occurred in 6.5% of patients receiving calcifediol versus 15% of those on placebo. The calcifediol dosing regimen in both of these studies was the same, and according to our calculations, likely raise serum total 25-hydroxyvitamin D levels to at least the range of 50 to 100 nanograms per mil. To update you on other RAYALDEE studies, we have completed our Phase IV clinical trial comparing RAYALDEE with 3 common treatment regimens for secondary hyperparathyroidism in adult patients with stage 3 or 4 CKD and vitamin D insufficiency. Top line data are fully consistent with the previously announced interim results, namely that a daily dose of 60 micrograms of RAYALDEE is the only treatment that raised serum total 25-hydroxyvitamin D to the range of 50 to 100 nanograms per mil, a level required to effectively suppress elevated plasma parathyroid hormone levels in patients with stage 3 or 4 CKD. Earlier this week, we completed our Phase II clinical trial, meaning last subject last visit, that's exploring the safety and efficacy of a high-strength formulation of RAYALDEE as a new treatment for secondary hyperparathyroidism in adult patients with vitamin D insufficiency in stage 5 CKD or hemodialysis. Final data analysis is now underway. We are also currently designing a Phase IIb follow-on study with our partners Vifor and Japan Tobacco. We have several programs in our product pipeline that are advancing in preclinical and early clinical development. The focus here is on our long-acting platform technologies in rare diseases. 2 of our most advanced compounds are our long-acting recombinant Factor VII compound for the treatment and prevention of bleeding episodes in patients with hemophilia A or B with inhibitors to Factor VIII or Factor IX and our long-acting GLP-2 analog for short bowel syndrome. Our Factor VII compound has successfully completed a Phase I study with subcutaneous administration in healthy subjects and a Phase I/IIA study with intravenous administration in hemophilia patients. Our GLP-2 molecule for the treatment of short bowel syndrome is expected to enter clinical trials in late 2021. Patients with short bowel syndrome typically have undergone massive internal surgery resulting in significantly reduced or complete loss of intestinal function. We believe our long-acting technologies will offer clinical benefits over current products on the market. Now let me turn the call over to Jon Cohen to discuss our BioReference Lab business. Jon? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [5] -------------------------------------------------------------------------------- Thanks, Steve, and good afternoon, everybody. I'm going to start my remarks with a review of our core business, which includes routine clinical testing and our specialty testing services comprising oncology, urology, women's health and genetic testing. Overall, sample volume in our core business in Q4 of 2020 was down 7% compared to Q4 of 2019. We saw a decrease in Q4 versus Q3 of this year of about 4%. In Q4 of this year -- of last year, our women's health business was stable compared to Q3, our oncology business grew 4% Q4 versus Q3, and our 4Kscore grew 1% Q4 versus Q3. We believe that the core business will remain 5% to 10% lower for the period compared to 2019 as many patients are still reluctant to visit their physicians. In addition, telemedicine continues to have a significant impact on physician office visits. We expect trends to improve at a moderate pace during the second half of this year. We are pleased with the performance of GeneDx as its volumes have remained stable to pre COVID levels Q4 of this year compared to Q4 of 2019. The Q4 volumes for GeneDx was up 11.6% versus Q3 in 2020. Last month, we announced that GeneDx launched several new genetic tests, including repeat expansion analysis for spinocerebellar ataxia, Friedreich's ataxia and other common forms of hereditary ataxias. With these additions, GeneDx has created a comprehensive and affordable offering that covers the vast majority of genes involved with pediatric onset and adult onset ataxias. Also in January, we were excited to formally announce the expansion of our digital home testing service under the Scarlet brand. Scarlet is an in-home, fully integrated digital platform that provides access to on-demand diagnostic services. After visiting with a health care provider, a patient receives a link where they can elect to utilize Scarlett and schedule an in-person visit by choosing a date, time and location for a qualified health care professional to collect their test specimen. That location could be at the patient's home or office. Patients then receive real-time updates and relevant information such as learning how to prepare for the visit or tracking the health care professional's arrival. Once collected, the specimens are sent to BioReference for testing and the results are securely available online to the patient and to their ordering health care provider. We believe Scarlet delivers an innovative and highly convenient alternative to the traditional patient service center for patients for specimen collection and is the first of many future initiatives to advance BioReference's digital health strategy focused on providing flexibility and convenience for patients. Now let me turn my attention to COVID testing. In the last year, we dramatically scaled the company to accommodate the need for more testing. In the last 10 months, we have gone from performing 40,000 requisitions a day to 115,000 requisitions a day. We increased our employee headcount from 4,000 to 8,100. We increased our clinical staff from 120 to 300, and we now serve 19 million patients per year, which is up from 11 million patients a year in 2019. As for COVID testing, to date, we have performed more than 12.5 million COVID-19 PCR tests in the nation. In the fourth quarter, we performed about 4.5 million COVID-19 molecular tests, which is up 24% from the 3.5 million tests performed in the third quarter. We are averaging between 50,000 and 60,000 tests a day with a current capacity to do more than 100,000 PCR tests per day with an average turnaround time of less than 48 hours in most cases. BioReference remains committed to providing innovative solutions to the COVID-19 testing needs of the physicians, health systems, long-term facilities, governments, schools, employers, sports teams, entertainment venues, transportation, hospitality and the general public through our relationships with Rite-Aid and CVS with now over 1,500 locations around the country. We believe that rapid testing with point-of-care devices will play an increasingly important role in detecting the disease in situations where a timely result is important. We have validated multiple different point-of-care platforms and have partnered with several manufacturers to provide customized solutions for many different industries. We have developed proprietary software for several point-of-care devices to deliver and report results in a timely fashion. To date, we have performed 100,000 rapid tests for different clients and our point-of-care test volume grew 260% from Q3 to Q4. Last month, we announced COVID-19 testing agreements for players and officials as well as the team and league staff for the 2020 and 2021 seasons for the National Basketball Association and for the National Hockey League. We continue to dominate the sports vertical with our contracts with the NFL with 32 teams in 30 cities, the NBA with 30 teams in 28 cities and the NHL with 24 U.S. teams in 22 cities, with a rapidly growing services organization and a logistics operation to support these venues across the country. I want to call out our partnership with the NFL. We performed 1.23 million COVID-19 tests for 5,000 staff, coaches and players every day for 7 months and around 15,000 logistic routes so that 268 games could be played that culminated in the Super Bowl on February 7. Testing was just one part of the NFL's multiple mitigation strategy and the compulsive commitment to safety that resulted in an infection rate of less than 1%. I'm also proud to announce today that we have an agreement now to provide COVID-19 testing for all major 30 major league baseball teams around the country. At this point, BioReference performs COVID-19 testing for all 5 of the major U.S. professional sports leagues, namely football, baseball, basketball, soccer and hockey. In addition, BioReference successfully supported the Winter X Games in Aspen and is supporting the U.S. soccer's women's and men's national teams and the NBA G League in Orlando. We are performing fan testing for several of these teams and partnered recently with the Buffalo Bills organization to allow 7,000 fans to attend each of their 2 playoff games. This program was the first of its kind in the U.S. and required all fans to obtain COVID-19 PCR results from BioReference within 72 hours of the game. BioReference's quick response to the pandemic has highlighted our position as a leading national laboratory and has led to numerous high-profile private and government contracts for COVID-19 testing. We are one of the largest providers of testing for public school students in the country. With our preferred relationship to test students in New York City, we have now tested almost 300,000 students with a program that tests almost 1,200 schools weekly. Our custom solutions utilizing both lab-based PCR and point-of-care tests has positioned us as the leading provider of large-scale COVID screening programs in the country. And now I'd like to turn it over to our CFO, Adam. -------------------------------------------------------------------------------- Adam E. Logal, OPKO Health, Inc. - Senior VP & CFO [6] -------------------------------------------------------------------------------- Thank you, Jon. For the fourth -- the fourth quarter financial results reflect the tremendous effort that Steve and Jon highlighted. As I will cover in more detail shortly, despite all of the challenges, our commercial teams have delivered solid performances across all portions of our business, resulting in operating profit led by BioReference, but also positive operating profit contributions by our RAYALDEE commercial team along with most of our international operating companies. Total revenue for the quarter was $495 million, an increase of more than 120% over 2019's $224 million. Our diagnostics segment reported revenue from services of $458 million compared to $178 million for the 2019 period. The increase in net revenue was driven by the execution of our COVID-19 testing strategy as well as continued sequential improvements in our volumes for our base business, as Jon mentioned. Combining our routine testing business and our COVID testing business, volumes overall increased over 170% compared to historical levels. Overall routine clinical testing, however, remained below historical levels, while genetic testing improved each month, resulting in overall quarterly genetic testing volumes being flat compared to the 2019 period. The diagnostics segment reported operating income of $69.9 million compared to an operating loss of $45.4 million, an improvement of $115.3 million over the 2019 period. The fourth quarter of 2019 included a noncash impairment charge of $38 million related to our Claros point-of-care development program. Overall, selling, general and administrative research and development expense decreased as a percentage of revenue from 33% down to 18%, reflecting overall operating leverage improvements. Total costs and expenses increased by $164.6 million compared to 2019, including increased cost of revenues of $176 million due to the overall increase in testing. Moving to our pharmaceutical segment. We reported revenues of $36.7 million for the fourth quarter of 2020 compared to $46.4 million for the 2019 period. Revenue from product sales for the fourth quarter of 2020 decreased slightly to $30.8 million, including $10.1 million of revenue from RAYALDEE, compared to $32 million in the fourth quarter of 2019, which included $12.6 million of revenue from RAYALDEE. The growth rate of RAYALDEE has been negatively impacted by the stay at home orders and physician office restrictions, which restrict product sales representatives for making calls and overall reduced patient office visits. However, we saw a sequential improvement in the gross to net price realization. When looking at revenue from the transfer of intellectual property, we reported $5.9 million of revenue for the 2020 period compared to $14.4 million a year ago, reflecting the completion of our Somatrogon Phase III clinical trial. As a reminder, we had been amortizing our upfront payment from Pfizer over the development period and now have fully amortized that upfront payment. Loss from operations from our pharmaceutical segment was $9 million for the fourth quarter of 2020 compared to $56.8 million for the 2019 period. The 2019 period included an impairment charge of $53.7 million related to 2 of our acquired development programs. Overall research and development expense for the fourth quarter of 2020 was $17.5 million compared to $23 million in 2019, reflecting reduced spending on our Somatrogon development program. On a consolidated basis, the fourth quarter of 2020 had an operating profit of $49.3 million, a significant improvement of the $162 million over 2019's operating loss of $112.5 million. Our net income for the fourth quarter of 2020 was $32.3 million or $0.05 per diluted share compared to a net loss of $112.4 million or $0.18 per share for the 2019 period. Finally, for the fourth quarter of 2020, we generated $34 million of cash from operations, resulting in a cash balance at December 31 of $72.2 million. We have approximately $158 million available under our lines of credit. The combination of our cash on hand and lines of credit provide us with a strong balance sheet and adequate capital resources heading into 2021. As we look forward into the first quarter of 2021, we see a significant opportunity to continue to generate operating profits and cash flows. Given the uncertainty of the testing demand for 2019, we are limiting our forward-looking guidance to the first quarter and look forward to providing greater insights into the remainder of 2021 as we see how demand for testing evolves. For the first quarter of 2021, we have built the following assumptions into our forecast. We anticipate performing between 4.2 million and 4.8 million COVID-19 PCR, point-of-care and antibody tests during the first quarter. As Jon mentioned, we have capacity well in excess of these levels. Should demand for testing increase, our revenue could expand beyond our guidance. We assume our base business for both routine clinical and genetic testing will remain at current levels, which, overall, were in the mid- to high single digits behind 2019's levels. We anticipate RAYALDEE sales to remain behind 2019 and the first quarter of 2020's levels until our sales force is able to fully return to the promotional activities, at which time we expect RAYALDEE to return to growth. With that, overall, we expect revenue for the first quarter of 2021 to be between $450 million and $500 million, including revenue from services of $420 million to $475 million, revenue from products of $27 million to $32 million and other revenue of $3 million to $6 million. We expect costs and expenses to be between $430 million to $460 million, resulting in an operating profit of $20 million to $40 million at various points between the revenue and expense assumptions. Operating profit includes approximately $22 million of noncash depreciation and amortization expense as well as an expectation of research and development expense of $20 million to $22 million. With that, I will open up the call for questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question will come from the line of Mauri Raycroft from Jefferies. -------------------------------------------------------------------------------- Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [2] -------------------------------------------------------------------------------- Congrats on all the progress and the updates today. First question is just checking to see if you can provide perspective into pricing and reimbursement pressure with COVID-19 testing saturation and increased competition? I guess, how should we think about reimbursement for the PCR testing going forward? -------------------------------------------------------------------------------- Phillip Frost, OPKO Health, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Jon? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [4] -------------------------------------------------------------------------------- I don't know. Adam, you want to or you want me to go into the point-of-care? -------------------------------------------------------------------------------- Adam E. Logal, OPKO Health, Inc. - Senior VP & CFO [5] -------------------------------------------------------------------------------- Yes. So we continued to see kind of mid level -- mid-60s overall reimbursement for PCR. I think our view is that it's going to continue to be stable during the first quarter. Despite some of the changes that have been enacted under Medicare, I think we're -- our overall pricing and reimbursement should remain at those levels. -------------------------------------------------------------------------------- Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [6] -------------------------------------------------------------------------------- Got it. Okay. And then also wondering how you think about conversion of COVID-19 testing costs and personnel back to what the new base business will be as COVID-19 testing demand retreats over time? How are you guys thinking about that? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [7] -------------------------------------------------------------------------------- You know what? I think the -- I don't want to confuse or -- the PCR testing long-term with what's happening on the rapid point-of-care side. So there is still a fairly large amount of interest and contractual relationships being established between multiple different industries relative to their desire to continue to test, whether it's lab-based PCR or point-of-care or rapid testing. So eventually, which -- I don't know when that will be, quite honestly. So I don't -- there's no plan yet to downsize any of the workforce relative to what's going on for COVID because of the huge demand that we're seeing on the point-of-care rapid side for multiple industries. -------------------------------------------------------------------------------- Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [8] -------------------------------------------------------------------------------- Got it. Okay. That's helpful. And then last question is on RAYALDEE. So you talked a little bit about the Stage 5 CKD study and that you're going through the data. Can you just talk a little bit more about what you plan on reporting as far as the number of patients and some of the data measures that you plan on reporting as well? -------------------------------------------------------------------------------- Charles W. Bishop, OPKO Health, Inc. - CEO of OPKO Renal [9] -------------------------------------------------------------------------------- Mauri, this is Charlie Bishop. Yes. The study that we just completed is an early Phase II study. It's Phase IIa. It involves a total of 44 subjects. So we'll be reporting on a 3:1 randomization active to placebo. And the design of the study was basically to look at 3 things: one is RAYALDEE tolerated well by dialysis patients, and we used the maximum dose that we thought would be required in order to successfully treat secondary hyperparathyroidism. The data showed that there's absolutely no change in the safety parameters at all even at the highest dose that we chose. Secondly, the goal of the study was to see if RAYALDEE could in fact be activated in patients that don't have functional kidneys. And the medical literature teaches extensively that activation of RAYALDEE is required in the kidney. And we have found contrary to the medical literature that RAYALDEE is activated readily without functional kidneys. And lastly, the study was designed, of course, to see if we could lower PTH. And what we found with the study is that in many patients, we could lower PTH very nicely. In other patients, we can't. And this is part of the drug development process. It's up to us now to figure out why it is that some patients do respond and why others do not. And this will go into our patient selection criteria for the follow-on study, the Phase IIb study. I hope that answered your question. -------------------------------------------------------------------------------- Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [10] -------------------------------------------------------------------------------- Yes, that's very helpful. And maybe last follow-up is just if the COVID-19 RAYALDEE results could be reported at the same time? Or can you provide any more granularity on the time -- when we might see data from both these studies? -------------------------------------------------------------------------------- Charles W. Bishop, OPKO Health, Inc. - CEO of OPKO Renal [11] -------------------------------------------------------------------------------- Well, I wish my crystal ball were really great, because I can't tell you how the pandemic is going to go. But as long as infection rates stay high, we expect that enrollment will be good. You should keep in mind that we've designed the ongoing COVID-19 study not to take all comers. It is a study in outpatients, but most patients have very few symptoms or asymptomatic. And if they are not suitable for study to see if an agent like RAYALDEE can shorten the time to resolution of symptoms, we have to select our patients that have significant symptoms even though they're not hospitalized so that we can see the effect of the drug. So this requires a subset of the total population that's infected with SARS- CoV-2. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- And our next question comes from the line of Devin Geiman from Guggenheim Partners. -------------------------------------------------------------------------------- Devin J. Geiman, Guggenheim Securities, LLC, Research Division - Associate [13] -------------------------------------------------------------------------------- This is Devin on for Dana Flanders. Congrats on the quarter. Thanks, again, for, I guess, some of the guidance that you gave for 1Q. I just had a question on kind of the margin progression throughout 2021. I know there are a lot of moving parts with, I guess, what presumably could be a margin tailwind from improving base business volumes offset maybe by a headwind from potentially lower COVID testing volumes as the vaccine rollout continues. Could you just maybe perhaps contextualize these different levers for us? And do you expect one to more offset than the other? And then I guess, tangential to that, is there -- I know Medicare reimbursement cuts under PAMA this year aren't happening. Do you expect this to be beneficial to margins? Or do you still expect a healthy level of commercial payer pressure in 2021? -------------------------------------------------------------------------------- Phillip Frost, OPKO Health, Inc. - Chairman & CEO [14] -------------------------------------------------------------------------------- Devin, so I'll try to address them. And Jon, please weigh in as well. So I think the margin evolution, what you saw in the third and fourth quarter are pretty consistent. I think as COVID testing volumes continue to move, as Jon highlighted, into the point-of-care, I think those will stay and remain healthy. The PCR margins for us will also stay pretty healthy. I think as the base business is at about 90% to 95% of historical levels, the cost structure is there. So really, the variable costs that come through on our COVID testing is really what's going to drive margin changes, very closely tied to both revenue line items. As it relates to Medicare changes in PAMA, I don't think and we don't expect any meaningful changes to the overall reimbursement in 2021. Obviously, the delay of PAMA into 2022 is fully baked into the numbers that I gave for the first quarter. -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [15] -------------------------------------------------------------------------------- Yes, I think that's right. I mean, I don't see much more discussion of PAMA right now until 2022 at the earliest. And there is -- you probably know if you follow this -- there's an appeal on the way that PAMA was priced. That was won by the ACLA. So there's a lot of muddiness around where PAMA is going to head and the future of PAMA right now. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- And our next question will come from the line of Edward Tenthoff from Piper Sandler. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [17] -------------------------------------------------------------------------------- I had one quick question. I just want to make sure I heard this right, Adam. Did you say that -- the $38.7 million Claros written-down, where was that recognized? -------------------------------------------------------------------------------- Adam E. Logal, OPKO Health, Inc. - Senior VP & CFO [18] -------------------------------------------------------------------------------- No, that was last year, in last September. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [19] -------------------------------------------------------------------------------- Last year, sorry, yes. Okay. And then looking at Somatrogon, can you tell us a little bit about what prep work is being done both on the regulatory side -- do you anticipate that there would be a panel -- and then also in -- over at Pfizer with respect to commercial readiness? -------------------------------------------------------------------------------- Steven D. Rubin, OPKO Health, Inc. - Executive VP of Administration & Director [20] -------------------------------------------------------------------------------- Well, we don't expect a panel, but the work is -- we're responding and Pfizer is responding on a real-time basis to various inquiries. There are inspections going on, some of them -- including down here in Miami. So that's pretty ordinary course at this point as we go through the process. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [21] -------------------------------------------------------------------------------- Okay. And then what about on the commercial side? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [22] -------------------------------------------------------------------------------- Yes. So Pfizer has got the primary responsibility for the commercial activity. So I think you'd have to direct the question to them. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- And our next question will come from the line of Yale Jen from Laidlaw & Company. -------------------------------------------------------------------------------- I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [24] -------------------------------------------------------------------------------- And I'll start putting my congrats on the great quarter. The first question I have is that in terms of your guidance, 4.2 million to 4.8 million tests, PCR tests in the first quarter, do you guys have any thoughts in terms of the trends for the serological tests for 2021, especially as more people getting vaccine? -------------------------------------------------------------------------------- Adam E. Logal, OPKO Health, Inc. - Senior VP & CFO [25] -------------------------------------------------------------------------------- Jon, do you want to…? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [26] -------------------------------------------------------------------------------- Yes. So you're -- this is the -- you're talking about the serology test for antibodies? Is that the question? -------------------------------------------------------------------------------- I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [27] -------------------------------------------------------------------------------- Yes. Yes. -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [28] -------------------------------------------------------------------------------- Yes. So it's still a -- I don't know. We have a very large capacity to do several hundreds of thousands of antibody testing if need be. We have at least 2 different platforms we're running the antibody testing on, which are both quantitative at this point and moving away from the qualitative, actually which was the first one out. So the question of who's going to get antibody testing post vaccine to -- either to document either the effectiveness of the vaccine, which will depend on which vaccine you get quite honestly, or documenting whether you have the disease, there's been an enormous amount of discussion about that right now. But I don't think anybody can predict how much serology testing right now will occur. Some of it will be related to, I believe, travel more than probably the other industries, meaning can you validate whether you either have the vaccine, have the disease or have enough antibodies to travel probably internationally. And I think that maybe its probably biggest role coming up. So that's a guess. -------------------------------------------------------------------------------- I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [29] -------------------------------------------------------------------------------- Okay. Great. One more question is on the COVID-19 RAYALDEE studies. You mentioned there's only selective patient that is relevant. Could you give us some sense of what portion of the COVID patient, the hospitalized patient would be more suitable for treated by RAYALDEE? -------------------------------------------------------------------------------- Charles W. Bishop, OPKO Health, Inc. - CEO of OPKO Renal [30] -------------------------------------------------------------------------------- Yale, what we're using for a primary efficacy endpoint in the ongoing study is a patient-reported outcome tool that's been validated for viral infections. And we require patients to have a score on that tool that's above a certain level in order to get into the study. And what that does is it enables the time course of the disease to be fairly long in quite a few patients and long enough even in those patients who resolve quickly that we can hopefully differentiate active versus placebo treatment. So I'm very pleased with the way that we're able to enroll patients into the study. We see a spread in time to resolution of symptoms ranging from 2 days to more than 42. That's exactly what we wanted to see. So patients fill out this tool every day and we can monitor how their symptoms improve over time. Now it's our expectation based on what we're seeing from screening and also from what we see in the literature that somewhere around the range of 20%, maybe a little higher percentage of the patients would have severe enough symptoms that they would want to treat to try to accelerate resolution of those symptoms. It's possible in time that we can develop this drug to treat hospitalized patients, but we don't yet have plans to do that. I hope I answered your question. -------------------------------------------------------------------------------- I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [31] -------------------------------------------------------------------------------- And again, congrats on the -- a great quarter. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- (Operator Instructions) Our next question will come from the line of Yi Chen from HCW. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [33] -------------------------------------------------------------------------------- My question is, recently, the World Health Organization has released the guidance to laboratories stating that they should reduce the cycle count in PCR test, which could lead to a lower number of new COVID-19 cases detected. So what's your opinion on that? And what's your current practice? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [34] -------------------------------------------------------------------------------- Yes. So we run at least 4 platforms now, different manufacturers. One of them, in particular -- well, there's really 2. We -- if requested, we'll report out the CT value, the cycle time values. I don't -- we're not in the position to determine what that should or should be relative to the platform manufacturers getting their approval or EUAs relative to how they report out the results. So if we have a platform that reports out CT values and the patient physician/client requests that to be reported, we will report it to that client. But we don't make that decision relative to changes in how CT values get reported on the platforms. That would be a vendor decision. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- And our next question is coming from the line of Mike Petusky from Barrington Research. -------------------------------------------------------------------------------- Michael John Petusky, Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst [36] -------------------------------------------------------------------------------- So Adam, I may have not quite caught it, but your guidance on RAYALDEE for Q1 is just -- was it simply below Q1 '20? That was essentially the guidance in RAYALDEE? -------------------------------------------------------------------------------- Adam E. Logal, OPKO Health, Inc. - Senior VP & CFO [37] -------------------------------------------------------------------------------- That's right. That's right, Mike. So it's included in the total number, but I didn't break it out separately. -------------------------------------------------------------------------------- Michael John Petusky, Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst [38] -------------------------------------------------------------------------------- Okay. All right. Great. And then just a -- I guess, a longer-term question. I know that this is sort of ever-changing as we learn more. But as you think about COVID-19 PCR test, serology tests over time, I mean 3 years from now is this still a -- I suspect it will be much reduced, but is it still a meaningful part of BRL revenue? Or do vaccinations sort of then take such hold and regularity for people that it's not anywhere near materiality 3, 4, 5 years from now? -------------------------------------------------------------------------------- Jon R. Cohen, OPKO Health, Inc. - Senior VP & Director [39] -------------------------------------------------------------------------------- Yes. So that's the -- that's a multibillion-dollar question, right? Nobody has any idea how this will evolve or morph over the next 1 to 2 years. I think everybody hopes that this all goes away. Now having said that, right now all the variants are being treated by the -- or at least mostly, depending on some changing data, by the current existing vaccinations. The question will be, of course, does some other variant emerge that needs some other type of treatment and/or testing. We have not seen that yet, so I, quite honestly, don't think anybody has the answer to that. It's just -- it's the same with the vaccine. Is it vaccination so that you get it one time? Or is it going to be like the flu where everybody needs a COVID vaccine every fall? So I don't think anybody -- right now, I haven't seen can predict 3 years out is what you're asking, the question is. It's just -- it's too far from now -- right now. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- I'm not showing any further questions in the queue. I'd like to turn the call back over to Dr. Frost for any closing remarks. -------------------------------------------------------------------------------- Phillip Frost, OPKO Health, Inc. - Chairman & CEO [41] -------------------------------------------------------------------------------- Thank you all for your participation and good questions. Stay well. And we look forward to being with you again to report the first quarter results. Good night. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.