Why Is OPKO Health (OPK) Down 17.2% Since Last Earnings Report?
A month has gone by since the last earnings report for OPKO Health (OPK). Shares have lost about 17.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is OPKO Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
OPKO Health Q1 Earnings and Revenues Top Estimates
OPKO Health delivered a loss per share of 2 cents in the first quarter of 2023, narrower than the year-ago period’s loss of 8 cents. The figure was also narrower than the Zacks Consensus Estimate of a loss of 7 cents per share.
Our projection of loss per share was 10 cents.
Revenues in Detail
OPKO Health registered revenues of $237.6 million in the first quarter, down 27.8% year over year. The figure, however, surpassed the Zacks Consensus Estimate by 26.8%.
The first-quarter revenues compare to our estimate of $169.2 million.
Lower revenues from services 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 $132.4 million in the reported quarter, down 53.8% year over year, primarily due to a fall in COVID-19 testing volume and the sale of GeneDx in April 2022.
This compares to our projection of $132.8 million from services revenues in the first quarter.
BioReference processed approximately 68,000 COVID-19 polymerase chain reaction tests in the first quarter of 2023, down 96.6% year over year.
Within the Pharmaceuticals arm, revenues from products rose 10.4% to $40.4 million, primarily on the back of sales in OPKO Health’s international operating companies and increased revenues from RAYALDEE sales.
This compares to our projection of $31 million from products revenues in the first quarter.
Revenues from sales of RAYALDEE in the first quarter of 2023 were $6.6 million, up 29.4% from the prior-year period.
Revenues from the transfer of intellectual property and other totaled $64.8 million compared with the prior-year revenues of $6 million. The first-quarter revenues include $50 million upfront payment from Merck, $7 million milestone payment from Vifor Fresenius Medical Care Renal Pharma triggered by the German price approval related to Rayaldee and $2.5 million milestone payment from Nicoya Therapeutics related to the submission of its investigational new drug application to China's Center for Drug Evaluation for Rayaldee.
This compares to our projection of $5.3 million of revenues from the transfer of intellectual property and other in the first quarter.
Margin Analysis
In the quarter under review, OPKO Health’s gross profit rose 16.4% to $99.3 million. The gross margin expanded by a huge 1588 basis points to 41.8%.
We had projected 13.2% of gross margin for the first quarter.
Selling, general and administrative expenses fell 35.6% to $75.7 million. Research and development expenses climbed 78.1% year over year to $32.6 million. Adjusted operating expenses of $108.3 million decreased 20.3% year over year.
Adjusted operating loss totaled $9 million compared with $50.5 million in the prior-year quarter.
Financial Position
OPKO Health exited first-quarter 2023 with cash and cash equivalents of $110.8 million compared with $153.2 million at the end of 2022.
Net cash flow used in operating activities at the end of first-quarter 2023 was $22.6 million compared with $19.9 million a year ago.
Guidance
OPKO Health has provided its financial outlook for the second quarter of 2023.
For the quarter, it expects its total revenues to be between $165 million and $175 million. The Zacks Consensus Estimate for the same currently stands at $185.8 million.
OPKO Health expects its revenues from services to lie between $127 million and $135 million and revenues from product sales to be in the range of $32 million-$36 million. Other revenues are expected to be between $3 million and $6 million.
OPKO Health has also confirmed that it expects its COVID-19 testing volumes to remain at current levels and continue to decline throughout 2023. However, management assumes consistent core testing volumes with growth in OPKO Health’s higher-margin oncology and women's health and urology specialty lines of testing.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -33.33% due to these changes.
VGM Scores
Currently, OPKO Health has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, OPKO Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
OPKO Health is part of the Zacks Medical - Instruments industry. Over the past month, Nevro (NVRO), a stock from the same industry, has gained 0.3%. The company reported its results for the quarter ended March 2023 more than a month ago.
Nevro reported revenues of $96.33 million in the last reported quarter, representing a year-over-year change of +9.7%. EPS of -$0.98 for the same period compares with -$0.98 a year ago.
For the current quarter, Nevro is expected to post a loss of $0.67 per share, indicating a change of +5.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Nevro. Also, the stock has a VGM Score of F.
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