OPKO Health, Inc. Q2 FY2025 earnings call

• BioReference Streamlining: Streamlined operations and preparing to close sale of oncology and related clinical testing business to Labcorp to focus on core testing business and improve financial profile.
• Pharmaceutical Pipeline: ModeX has 2 programs in Phase I clinical trials with 3 more expected in late 2025/early 2026. EBV vaccine with Merck in Phase I. OPK-88006 in oral and injectable forms, with oral data showing good bioavailability at ENDO meeting. Collaboration with Entera Bio on oral forms of GLP-2 for short bowel syndrome.
• Balance Sheet: Took strategic steps to improve balance sheet, $200 million common stock repurchase program with $141.5 million remaining capacity as of June 30.

BioReference Health

• Revenue for Q2 2025 was $101.1 million, including $24.9 million from oncology assets being sold. Non-oncology business saw steady growth, with 4Kscore volumes up nearly 12%. After the sale of oncology assets to Labcorp, remaining business is expected to have improving margins. Headcount was ~1,900 in Q2, expected to decrease to 1,450-1,500 post-transaction. Revenue of core clinical operations was ~$300 million in 2024.

Pharmaceutical Business

• Revenue was $55.7 million, up from $52.8 million in 2024. Product revenue was $40.7 million, IP transfer revenue was $15 million. R&D spending increased due to ModeX development programs and BARDA-funded infectious disease antibody programs. NGENLA holds about 1/3 of the global long-acting market, with trends of transition to once-weekly formulation. BARDA funding increased to $6.5 million.

• Full year 2025 revenue expected to be between $640 million and $660 million. Services revenue $405 million to $425 million, products revenue $160 million to $170 million, other revenue $65 million to $75 million. Costs and expenses expected to be between $835 million and $865 million excluding $15 million to $20 million in one-time restructuring costs. Anticipate a $100 million gain on the oncology transaction. BioReference expected to be cash flow positive and profitable post-oncology transaction closing.

• Foreign currency headwinds affecting Latin American Pharmaceutical division and Irish contract pharmaceutical unit.
• Slower global adoption of NGENLA's long-acting form than anticipated.
• Risks associated with clinical trial progress for therapeutic pipeline programs.

Q: Given that new prescriptions and total prescriptions for NGENLA were up in 2Q, do you expect that the $6.1 million in NGENLA/Genotropin profit share in 2Q was due to lower gross-to-net from co-pay assistance in 1Q carrying over to 2Q? And have you received any insights from Pfizer on 2Q sales? Or do you plan to follow up with them for clarification?

A: James, thanks for the questions. And we definitely saw an improvement in the U.S. market as it relates to the prescription trends that you identified. We continue to see some of the international markets that are in the early days of launches continuing to work through some of the higher cost inventory that's set out there. So, we expect the remainder of the year to pick back up to the traditional levels but we saw strength broadly across all of the geographic markets for NGENLA. So, we're pretty optimistic of where that's headed.

Q: How is EBITDA margin for the Diagnostics business tracking in 2Q versus 1Q? And how are you setting expectations for EBITDA profitability in 3Q and 4Q? And kind of going along with that, this approval with the supplemental application for the 4Kscore test. Can you talk about implications for growth in 4Kscore test sales in the coming quarters?

A: Yes. So, let me pull the EBITDA question apart. So, when we think about the Diagnostics segment, we're continuing to see quarter-over-quarter improvements in a lot of the steps we've taken to drive costs down are bearing fruit. If you were to look at the $18.2 million operating loss that resulted in Q2, consider the $2 million of nonrecurring expenses in there, you start to see that $4.5 million comes from the oncology business that is set to close later this year and depreciation and amortization expense of $4.9 million. It gets you to about a $6 million or a couple of million dollar a month loss in that segment. A lot of the costs, as Elias mentioned, are expected to come out when we close the oncology transaction in a couple of months' time and get our headcount even further down. We've been pretty judicious about making sure we maintain that business with the infrastructure at BioReference that's required to get through the closing. But once the closing occurs, we'll be able to bring the overall cost structure down as we planned. We feel we're on track to deliver those cost savings and to get to that cash flow positive basis this year, both from an EBITDA and a cash position. As it relates to 4Kscores, so we've seen really good upward growth on the test this year so far. We mentioned it's about 12% up. I think July, that really have started to accelerate, and that is before we have the FDA label change and really opens up the market for us to think about primary care docs being able to order the test. So, we think the upside is meaningful. And as I mentioned, being at 12% and meaningfully higher in July, we think, again, that the opportunity is pretty important. That test has a strong margin profile with a relatively small sales force calling on docs today.