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OPKO Health's (OPK) Q2 Earnings Lag Estimates, Margins Down

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OPKO Health, Inc. OPK delivered loss per share of 3 cents in the second quarter of 2021 against the year-ago quarter’s earnings per share (“EPS”) of 5 cents. The figure fell shy of the Zacks Consensus Estimate of EPS of 2 cents.

Revenues in Detail

OPKO Health registered revenues of $442.4 million in the second quarter, up 46.9% year over year. The figure again lagged the Zacks Consensus Estimate by 3.3%.

Segmental Revenues

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

Within the Diagnostics arm, revenues from services amounted to $397.2 million in the reported quarter, up 58.2% year over year, driven by continued demand for COVID-19 testing and recovery of OPKO Health’s routine clinical and genetic testing volumes.

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

Within the Pharmaceuticals arm, revenues from products rose 21.8% to $35.7 million, owing to strong performance by the company’s Latin American operations. However, international revenue uptick was partially offset by a decline in sales of RAYALDEE.

Revenues from Transfer of intellectual property totaled $9.5 million, down 54.5% year over year due to a decline in the amortization of payments received from Pfizer associated with somatrogon.

Total RAYALDEE prescriptions declined 36.4% year over year to approximately 11,700 in the second quarter.

Margin Analysis

In the quarter under review, OPKO Health’s gross profit rose 7.9% to $149.5 million. Gross margin contracted a huge 1219 basis points (bps) to 33.8%.

Selling, general & administrative expenses rose 45.7% to $113.2 million. Research and development expenses went up 3.4% year over year to $18.2 million. Adjusted operating expenses of $131.4 million increased 37.9% year over year.

Adjusted operating profit totaled $18.1 million, reflecting a 58.1% decline from the prior-year quarter. Adjusted operating margin in the second quarter contracted a huge 1025 bps to 4.1%.

Financial Position

OPKO Health exited the second quarter of 2021 with cash and cash equivalents of $65.8 million compared with $89.5 million at the end of the first quarter.

Guidance

OPKO Health, due to continued pandemic-led uncertainties, has provided its financial outlook only for the third quarter of 2021.

The company expects its revenues from product sales to be within the range of $30-$35 million and other revenues in the range of $3-$5 million.

Our Take

OPKO Health exited the second quarter with lower-than-expected results. Decline in sales of RAYALDEE is a concern. Contraction in both margins does not bode well for the company. OPKO Health continues to face cut-throat competition in the MedTech space.

However, uptick in year-over-year overall revenues, as well as in both of its reportable segments, is encouraging. Robust demand for OPKO Health’s testing volumes is impressive. BioReference Laboratories’ COVID-19 testing volume witnessed a significant increase in the reported quarter, raising our optimism. The company signed two major agreements over the past few months, which is also encouraging.

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 already announced their quarterly results are Boston Scientific Corporation BSX, West Pharmaceutical Services, Inc. WST and Laboratory Corporation of America Holdings LH or LabCorp, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Boston Scientific reported second-quarter 2021 adjusted EPS of 40 cents, which beat the Zacks Consensus Estimate by 8.1%. Second-quarter revenues of $3.08 billion outpaced the consensus mark by 4.4%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

LabCorp reported second-quarter 2021 adjusted EPS of $6.13, surpassing the Zacks Consensus Estimate by 8.7%. Revenues of $3.84 billion exceeded the Zacks Consensus Estimate by 6.9%.


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