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OPKO Health (OPK) Stock Gains 2.1% Despite Q2 Earnings Miss

·6 min read

Shares of OPKO Health, Inc. OPK rose 2.1% till Aug 8, following the company's second-quarter 2022 results announcement on Aug 4.

OPKO Health delivered adjusted loss per share of 4 cents in the second quarter of 2022, wider than the loss of 3 cents per share in the year-ago period. The figure was also wider than the Zacks Consensus Estimate of a loss of 2 cents per share.

Our projection of loss per share was 5 cents.

GAAP loss per share for the quarter was 14 cents, wider than the year-earlier loss of 3 cents per share.

Revenues in Detail

OPKO Health registered revenues of $309.9 million in the second quarter, down 29.9% year over year. The figure lagged the Zacks Consensus Estimate by 3%.

The second-quarter revenue compares to our estimate of $326 million.

Lower revenues from the company’s Diagnostics segment dragged the overall top line.

Segmental Revenues

OPKO Health manages its operations through two reportable segments – Diagnostics and Pharmaceuticals.

Within the Diagnostics arm, revenues from services amounted to $186.8 million in the reported quarter, down 52.9% year over year, primarily due to a fall in COVID-19 testing volume.

BioReference Laboratories (BRL) processed approximately 0.9 million COVID-19 polymerase chain reaction (PCR) tests in the second quarter of 2022, down 67.9% year over year.

Within the Pharmaceuticals arm, revenues from products rose 0.6% to $35.9 million, owing to higher RAYALDEE sales. However, this was partially offset by a fall in OPKO’s pharmaceutical business in Chile due to foreign exchange fluctuations.

Revenues from sales of RAYALDEE in the second quarter of 2022 were $6.2 million, up 24% from the prior-year period.

Revenues from the transfer of intellectual property and other totaled $87.2 million, up by a stupendous 817.9% year over year. This uptick reflects milestone payments for the launch of NGENLA in Europe and Japan.

OPKO Health, Inc. Price, Consensus and EPS Surprise

OPKO Health, Inc. Price, Consensus and EPS Surprise
OPKO Health, Inc. Price, Consensus and EPS Surprise

OPKO Health, Inc. price-consensus-eps-surprise-chart | OPKO Health, Inc. Quote

Margin Analysis

In the quarter under review, OPKO Health’s gross profit fell 22.7% to $115.6 million. Gross margin expanded by a huge 351 basis points (bps) to 37.3%.

We had projected 30.9% of gross margin for Q2.

Selling, general and administrative expenses fell 10.3% to $101.5 million. Research and development expenses fell 5.5% year over year to $17.2 million. Adjusted operating expenses of $118.7 million decreased 9.7% year over year.

Adjusted operating loss totaled $3.1 million against the prior-year quarter’s adjusted operating profit of $18.1 million.

Financial Position

OPKO Health exited the second quarter of 2022 with cash and cash equivalents of $210.5 million compared with $102.3 million at the end of first quarter.

2022 Guidance

OPKO Health has revised its revenue outlook for full-year 2022.

The company expects overall revenues for 2022 to be between $950 million and $1 billion, lower than the previous expectations of $1.1-$1.2 billion. The Zacks Consensus Estimate for the same currently stands at $1.08 billion.

The full-year overall revenues include revenues from services of $700-$750 million (lower than the previously-expected $810-$870 million), $140 million-$150 million (lower than the previously-expected $145-$155 million) in revenues from products and other revenues of $100-$110 million (unchanged).

OPKO Health expects to perform between $3.3 and $3.5 million in COVID PCR point-of-care antibodies tests during the year, including the 3.1 million tests performed during the first six months of the year.

Our Take

OPKO Health exited the second quarter of 2022 with lower-than-expected results. The year-over-year fall in the overall top line and continued loss per share are concerning. Lower Diagnostics revenues as lower BRL testing volumes are also worrying. Persistent operating loss for OPKO Health is another area of concern.

On the positive side, uptick in year-over-year Pharmaceuticals revenues is encouraging. In May, the company acquired ModeX Therapeutics, Inc., thereby gaining proprietary immunotherapy technology. During the reported quarter, Pfizer Inc. launched OPKO Health’s NGENLA (Somatrogon) injection in Germany, Japan and additional global markets. Other developments like BRL’s Scarlet Health announcing a collaboration with Teladoc Health raise our optimism. Improvement in RAYALDEE sales is another plus. Expansion of gross margin also bodes well for the company.

OPKO Health’s strength in its women's health and oncology businesses also augur well. Robust adoption of the company’s digital health services also buoys our optimism.

Zacks Rank and Stocks to Consider

OPKO Health currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, AMN Healthcare Services, Inc. AMN and Zimmer Biomet Holdings, Inc. ZBH.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 6.9% compared with the industry’s 3.9%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

AMN Healthcare, sporting a Zacks Rank #1, reported second-quarter 2022 adjusted EPS of $3.31, which beat the Zacks Consensus Estimate by 11.8%. Revenues of $1.43 billion outpaced the consensus mark by 4.8%.

AMN Healthcare has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed estimates in all the trailing four quarters, the average being 15.7%.

Zimmer Biomet reported second-quarter 2022 adjusted EPS of $1.82, which surpassed the Zacks Consensus Estimate by 11.7%. Second-quarter revenues of $1.78 billion outpaced the Zacks Consensus Estimate by 3.5%. It currently has a Zacks Rank #2.

Zimmer Biomet has an estimated long-term growth rate of 5%. ZBH’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 7.4%.


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