OPKO Health - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue fell to $149.9M from $173.7M YoY and down from $183.6M in Q4 2024; EPS was a loss of $0.10, narrower than $0.12 YoY, but below Wall Street consensus; EBITDA also missed consensus. The quarter reflected volume declines in Diagnostics due to asset sales, partially offset by higher reimbursement and continued cost reductions.
• OPKO announced a definitive agreement to sell BioReference’s oncology and related clinical testing assets to Labcorp for up to $225M and expanded its buyback authorization by $100M to $200M, positioning Diagnostics for profitability later this year and offering capital return flexibility.
• Pharma segment progressed ModeX programs (EBV vaccine with Merck; MDX2001 dose escalation) and moved dual GLP‑1/glucagon OPK‑88006 (injectable and oral) toward INDs; BARDA funding continues to support multispecific antibody platforms.
• FY 2025 guidance was refined: revenues $675–$685M; BARDA revenue lowered; Pfizer profit share trimmed; R&D narrowed; management flagged ~$100M expected operating gain from the Labcorp oncology transaction and ~$90M nonrecurring other expense in Q2 from convertible exchange.
• Key near-term catalysts: closing of Labcorp oncology sale, ModeX dose-escalation readouts and EBV Phase 1 immunogenicity signals, progress on GLP‑1/glucagon INDs, and execution of the buyback program.

What Went Well and What Went Wrong

What Went Well

• “We signed a definitive agreement with Labcorp to sell the oncology and related clinical testing assets of BioReference… for up to $225 million,” accelerating the path to Diagnostics profitability and streamlining operations.
• Management expanded the buyback by $100M to $200M: “We believe OPKO’s shares continue to be significantly undervalued… Our strong cash position provides the ability to return capital to shareholders while adequately funding our pharmaceutical programs”.
• ModeX pipeline advanced: EBV Phase 1 dosing underway with Merck; MDX2001 reached the fourth dose level; multiple multispecific antibody programs progressing with BARDA support.

What Went Wrong

• Diagnostics revenue declined to $102.8M from $126.9M YoY, primarily from lower clinical test volume after asset sales, though partially offset by higher reimbursement; segment operating loss of $23.9M persisted despite cost actions.
• Pfizer gross profit share for NGENLA was $4.5M vs $5.6M YoY; management noted negative quarterly dynamics likely commercial in nature, leading to a slight guide reduction.
• Nonrecurring restructuring costs (~$7.2M in Q1) and severance/facility closures weighed on Diagnostics; management expects another ~$5M nonrecurring costs in Q2.

Transcript

Operator (participant)

Good afternoon, and welcome to the OPKO Health First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchstone phone. To withdraw your question, please press star, then two. Please note this event has been recorded. I would now like to turn the conference over to Yvonne Briggs. Please go ahead.

Yvonne Briggs (Head of Investor Relations)

Thank you, Operator. Good afternoon. This is Yvonne Briggs with Alliance Advisors IR. Thank you all for joining today's call to discuss OPKO Health's financial results for the first quarter of 2025. 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 can materially affect the company's expected results. Those forward-looking statements include, but 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, 2024, and subsequently filed SEC reports. Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast on April 30th, 2025.

Except as 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. Dr. Elias Zerhouni, Vice Chairman and President, will then provide an overview of BioReference Health as well as OPKO's pharmaceutical business. After that, Adam Logal, OPKO's CFO, will review the company's first quarter financial results and discuss OPKO's financial outlook, and then we'll open up the call to questions. Now I'd like to turn the call over to Dr. Frost.

Phillip Frost (Chairman and CEO)

Good afternoon, and thank you for joining us today. We continue to advance our strategic initiatives to drive value for OPKO Health. In March, we announced the sale of BioReference Health's oncology and related clinical testing business to Labcorp. BioReference Health will continue to offer urology diagnostic services nationwide, as well as maintain its core clinical testing operations in New York and New Jersey, which collectively represented approximately $320 million in revenue for 2024. This transaction is our second with Labcorp and unlocks additional value in our diagnostic segment and enhances BioReference Health's path to profitability. Our dual GLP-1 glucagon [audio distortion], OPK-88006, administered subcutaneously, has demonstrated encouraging outcomes in animal models of obesity and MASH. The positive improvements of metabolic parameters, hepatic pathology, and non-alcoholic fatty liver disease activity score, including fibrosis stage, support our decision to develop OPK-88006 as a once-weekly subcutaneous injectable treatment of MASH.

In March, we entered into a collaborative agreement with EnteraBio to advance the development of an oral tablet form of OPK-88006. Using Entera's proprietary NTEP technology, oral bioavailability studies in several animal models suggest that therapeutic levels can be achieved for human use. MoDEx has two programs in phase I clinical trials: our Epstein-Barr virus vaccine candidate in collaboration with Merck, and MDX-2001, a tetra-specific antibody for the treatment of solid tumor cancers. We look forward to keeping you updated on the progress of these trials. Our Latin American business and Arrigen Pharma, our Irish contract pharmaceutical development and manufacturing unit, continue to show revenue and profit growth. As we continue to advance our strategies for each business segment, we're confident in our ability to drive value for OPKO shareholders.

In addition to the BioReference asset sale, the board approved a $100 million increase to our common stock repurchase program, bringing the total to $200 million. We believe OPKO shares continue to be significantly undervalued, and our strong cash position provides the ability to return capital to shareholders while adequately funding our pharmaceutical programs. In addition, we entered into a note exchange agreement to bolster our capital structure. Adam will provide details on the agreement and related benefits in a moment. Now I'll turn the call over to Elias.

Elias Zerhouni (Vice Chairman and President)

Thank you, Phil, and thank you all for joining today. Let me start with the diagnostic segment where our restructuring efforts are continuing. First, as mentioned by Phil, we signed a definitive agreement with LabCorp to sell the oncology and related clinical testing assets of BioReference Health. The transaction includes the sale of BioReference's laboratory testing businesses focused on oncology and oncology-related clinical testing services for up to $225 million, including $192.5 million payable at closing and up to $32.5 million in an earnout based on performance. Although our oncology business has grown over the years, its scale was not sufficiently large to support its costs. Hence, our decision to divest from this line of business, which will improve profitability of the remaining business of BioReference. Excuse me.

BioReference Health will continue to offer urology diagnostic services, including our proprietary 4Kscore Test for prostate cancer assessment nationwide and our corrections clinical services nationwide, as well as maintain its core clinical testing operations in New York and New Jersey, which represented approximately $320 million in revenues for 2024. The transaction is anticipated to close in the second half of 2025. Overall, business volume at BioReference, excluding oncology, grew modestly, Q1 2025 versus Q1 2024, while our 4KScore Test reported another impressive quarter with 14.5% growth year over year. BioReference Health continues to make progress in driving efficiencies and aligning operations with current volumes. In Q1 2025, we made great strides in continuing both the reduction of employee costs and footprint consolidation. Specifically, during this quarter, the first quarter, BioReference Health eliminated an additional 136 positions, which represents about a 7% workforce reduction.

Total cost savings from actions initiated during Q1 are estimated at approximately $19 million on an annualized run rate, $14 million for employee costs, and $5 million in footprint consolidation. Our current headcount now stands at 1,962, which is down from a high of 3,099 in Q1 2024. Once the oncology transaction is closed in Q3-Q4, our headcount will stand at about 1,600 with revenue of about $320 million. We continue to re-engineer operations in our main laboratory with automation and other approaches for greater efficiency and service levels. Our stated objective, as we have mentioned before, remains to reach profitability within this year. On the commercial front, BioReference Health strategically expanded its patient access service center locations during the first quarter in the New Jersey-New York area, adding infrastructure in key geography in the New York-New Jersey market.

This will not only add revenue to the organization but will also improve the patient and client experience in the region. In addition, BioReference Health continued its work to enter new clinical markets by enhancing its service levels and test offerings, including, for example, respiratory pathogens and recently FDA-approved self-collection options for sexual health. Now, let me go to the therapeutic segment. MoDEx continues its advances in clinical development. As you've heard from Phil, enrollment and dosing are well underway by our partner, Merck, in the phase I Epstein-Barr virus vaccine trial. This investigational vaccine, based on MoDEx's Ferritin Nanoparticle vaccine platform, is being evaluated for safety and tolerability in up to 200 healthy adults. Commencement of this study triggered a milestone payment to MoDEx in Q4 2024. In addition, MoDEx continues to advance its immuno-oncology and immunology portfolio, with four potential clinical candidates progressing in the pipeline.

The MDX-2001, which is a cMET, TRP2, CD3, CD28 tetra-specific antibody, has advanced in phase I clinical trials to its fourth dose level, with additional continuing phase I and additional phase IB studies in selected solid tumors expected in early 2026. The MDX-2003 product, CD19, CD20, CD3, CD28 tetra-specific antibody for lymphoma and leukemia, and the MDX-2004, which is an immune rejuvenator for multiple oncology and immunology indications, are both expected to begin human trials in late 2025, early 2026. The development of multi-specific antibodies for immune-impaired patients at risk for COVID and influenza A and B continues to progress with support from BARDA, which increased its previous commitment of $59 million by another $51 million in Q4 2024 for a total of $110 million to advance these programs and the related multi-specific antibodies platform.

There's a remaining $95 million commitment dependent upon reaching some milestones, which is still committed by BARDA. I'd like to add here that to date, we have not received any indication that BARDA will defund these grants and these programs as we stand here today. We are hopeful that they will not because COVID antibodies are different than COVID vaccines, and COVID antibodies are needed for the immune-impaired population. As Phil mentioned, we have advanced into the pre-IND stage with our injectable proprietary GLP-1 glucagon long-acting oxytocin modulating analog, OPK-88006. Even very promising preclinical data, for example, the study in male Gandia MASH mice demonstrated improved metabolic and biochemical parameters and hepatic pathology with improved non-alcoholic fatty liver disease activity score called NAS by over two points, supported by quantitative liver histology for steatosis, inflammation, and fibrosis showing improvements.

We also entered into a collaboration agreement with EnteraBio to advance an oral tablet of the OPK-88006 GLP-1 glucagon agonist into the clinic to treat obesity and metabolic disorders using Entera's NTEP technology. Under the terms of the agreement, OPKO and Entera will hold 60% and 40% ownership interests, respectively, in the orally administered product and be responsible for 60% and 40%, respectively, of the program's development costs. In connection with the execution of the agreement, OPKO purchased approximately $3.7 million ordinary shares of Entera for a purchase price equal to $2.17 per share for about $8 million. Entera agreed to utilize the proceeds from this share purchase to fund its 40% share of the program's development costs through the completion of phase one.

Our Rayaldee team continued to produce new analyses and peer-reviewed publications suggesting that Rayaldee in CKD patients with secondary hyperparathyroidism may significantly delay the need for dialysis relative to other vitamin D products, potentially increasing its utilization in this group of patients. In summary, we believe BioReference Health is now in a position of strength with a clear focus on its core testing capabilities, streamlined operations, and expectations of profitability later this year. In addition, we're pleased with the progress of our pharmaceutical segment in advancing our therapeutic and vaccine candidates through the clinic. Let me now turn it over to Adam Logal for our financial report and further information. Adam.

Adam Logal (CFO)

Thank you, Elias. Starting with operating results from our diagnostic segment, revenue of $102.8 million in Q1 2025, including $25.1 million from the assets being sold to Labcorp, compared with $126.9 million for the 2024 period. This decrease was primarily the result of the first Labcorp transaction that closed in September 2024. During the first quarter of 2025, costs and expenses totaled $126.8 million, including $32.4 million related to the assets being sold to Labcorp. This compares with $161.3 million for the comparable period of 2024. Q1 2025 also includes approximately $7.2 million in non-recurring costs and expenses for severance and facility closures, all incurred as expected as we realign our business to ensure sustainable growth and profitability. As Elias mentioned, the actions taken to date will result in annualized cost savings of more than $19 million, which we will benefit from starting in May.

During the first quarter of 2025, operating loss was $23.9 million, compared with an operating loss of $34.4 million for the 2024 quarter. Depreciation and amortization expenses for the diagnostic segment were $5.7 million and $7.9 million for the 2025 and 2024 periods, respectively. Moving to our pharmaceutical segment, revenue was $47.1 million for the first quarter of 2025, compared with $46.8 million for the 2024 period. Revenue from products, including our international pharmaceutical businesses, was $34.8 million, compared with $38.1 million for the comparable 2024 period. In response to the challenging foreign currency environment that has impacted revenue, the profitability of this business continues to meet our expectations through disciplined operating expense constraints. Product revenue includes revenue of royalty of $6.3 million, which was slightly lower than 2024's $6.9 million. The Inflation Reduction Act has resulted in a challenging environment for royalty.

However, we have realized an increase in the operating margins for ROYALTY as a result of the improved net pricing through lower government rebates, partially offsetting the volume decreases. Revenue from the transfer of IP was $12.3 million for the first quarter of 2025, compared to $8.7 million for the same quarter of 2024. Our gross profit share from Pfizer was $4.5 million during the 2025 quarter versus $5.6 million for the 2024 period. We continue to follow the publicly available prescription data reported by third-party services and remain encouraged by the growth rates. However, we are working with Pfizer to better understand some of the underlying dynamics that have negatively impacted the first quarter profit share payments. The first quarter of 2025 also includes $7 million in R&D funding compared to $2.2 million for the 2024 period, reflecting increased activities under our program supported by BARDA.

Costs and expenses for our pharmaceutical segment were $81.9 million for the first quarter of 2025, compared with $74.5 million for the 2024 period. Research and development expenses were $30.2 million compared to $21.2 million a year ago. R&D expense increased as a result of our MoDEx development activities, including the phase one clinical trial for our first oncology program, as well as our BARDA-supported programs. The resulting operating loss for the quarter ended March 31, 2025, was $34.8 million, compared with an operating loss of $27.7 million for the 2024 quarter. Depreciation and amortization expense for the 2025 quarter decreased slightly to $17.8 million from $18 million for the 2024 quarter. Turning to our consolidated financial results, net loss for the first quarter of 2025 was $67.6 million or $0.10 per share, compared with a net loss of $81.8 million or $0.12 per share for the 2024 period.

Turning to our balance sheet, we continue to work on our capital structure and allocate capital as we laid out during our last call. We ended Q1 2025 with approximately $450 million in cash, cash equivalents, and restricted cash. As we noted, we fully exited our position in GDX during the first quarter, adding approximately $51 million to our cash balance. We closed on our convertible debt exchange on April 1, 2025, which used approximately $65 million in cash, and we issued approximately 121 million shares of common stock and eliminated $159.2 million of the company's outstanding convertible notes, including accrued and unpaid interest. We intend to continue to reduce our remaining convertible debt, and through our recently expanded share repurchase authorization, we plan to continue to reduce the number of shares outstanding in the most capital-efficient way possible.

Under our share repurchase authorization, we have approximately $159 million remaining, which at yesterday's closing price represents more than 113 million shares, or more than 14% of our currently outstanding shares. As Elias mentioned, we anticipate closing our second transaction with LabCorp later this year, and we'll receive $192.5 million at closing and up to $225 million in total. As we look ahead, the following assumptions influence our financial guidance. For our pharmaceutical segment, we expect Pfizer to continue to grow sales of Ngenla and the overall HGH franchise. We assume a stable foreign currency exchange rate for our ex-U.S. pharmaceutical businesses, which has recently been challenged with large swings in certain territories. Our teams have been diligently navigating those challenges through disciplined expense control and expect that going forward.

R&D expenses will reflect higher activities related to our MoDEx programs, including CMC efforts related to our first oncology trial, as well as furthering our GLP-1 glucagon development program. A portion of the increased MoDEx activities will continue to be funded through our BARDA agreements. For our diagnostic segment, we are executing our multi-year, multi-phase program to reach and improve profitability. This program continues to be focused on operational efficiencies and the reduction of fixed infrastructure costs. We expect to incur an additional $5 million in non-recurring costs during the second quarter, which primarily reflect severance costs. We have established an additional cost reduction initiative targeting a further $10 million of annualized cost savings on top of the $20 million we discussed in our last call.

As a result of our recently announced transaction with Labcorp, once closed, the remaining Bio-Reference Health will be cash flow positive and profitable as measured before non-recurring and non-cash items. In addition, we expect to realize a gain on the Labcorp transaction of approximately $100 million, which will be reflected as a reduction to operating expenses and an increase in operating income. Due to the uncertainty of the timing of closing, we are including revenue costs and expenses for the full year and will adjust the total revenue costs and expenses once the closing date is certain.

As a result, we expect the following for the full year 2025: total revenues between $675 million and $685 million, revenue from services between $405 million and $425 million, including the revenue from the assets being sold to LabCorp of $95 million-$105 million, revenue from products between $165 million and $175 million, and other revenue between $75 million and $85 million, inclusive of the revenue from our Pfizer gross profit share, which is estimated to be between $30 million and $40 million, from $35 million-$45 million, and BARDA revenue of $38 million-$44 million, which was previously guided from $40 million-$48 million.

We expect costs and expenses to be between $825 million and $875 million, excluding the non-recurring expenses related to the restructuring activities for BioReference, which are currently estimated to be between $10 million-$14 million for the full year, and inclusive of costs and expenses related to the assets being sold to LabCorp of $125 million-$135 million. R&D expense is expected to be between $120 million and $130 million, down from $120 million- $140 million, which depends on the rate of enrollment of our clinical trial and the timing for certain activities for our MoDEx programs, including CMC, with $37 million-$43 million being offset from funding by BARDA. Depreciation and amortization expense is expected to be approximately $90 million.

While we don't typically provide non-operating income and expense guidance as a result of our convertible debt exchange, we are providing guidance as we anticipate a non-recurring other expense item related to that exchange of approximately $90 million during the second quarter of 2025, which is comprised of interest expense from debt discount, debt issuance fees, and inducement expense. That concludes our prepared remarks, and thank you all for your attention. Now, Operator, let's open the call for questions.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press Star, then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Maury Raycroft with Jefferies. Please go ahead.

Hi, this is James on for Maury. Thanks for taking our questions. Just to start off, what are some possible explanations for the negative dynamics for Ngenla? Is it more likely competition, access issues, or something commercial related to Pfizer?

Adam Logal (CFO)

Yeah, so we've seen the growth rates of the prescriptions to continue along, both for Ngenla and Genotropin. So we think it's more likely to do with some of the commercial environments. We don't have color further from Pfizer just yet on the dynamic there, but we expect this to be a first quarter-only event, which is why we've only slightly reduced the guide.

Got it. Just to add on to that, could you also please comment on why you think Pfizer withdrew their EU application for the adult setting? When was the last time you met with Pfizer regarding plans to expand the franchise, and what are those plans for expansion into additional settings?

Yeah, I'll try to expand on this, and then Elias or others could jump in as well. Pfizer has been working on a strategy to expand the label for Ngenla for some time. We do know that they're expecting to kick off some trials for the additional pediatric indications. Within Europe, the dynamics are slightly different, and I think Pfizer chose to be more focused on the pediatric indication given the size of the overall market for the pediatric indications in comparison to the adult and wanted to focus their efforts there.

Got it. Thanks for taking our questions. I'll hop back in the queue.

Operator (participant)

Thank you. The next question comes from Yi Chen with H.C. Wainwright. Please go ahead.

Yi Chen (Analyst)

Thank you for taking my question. Could you please provide a rough timeline about the development program of the GLP-1 glucagon tablet candidates? When can we expect to see some clinical results? Also, what could be the dosing frequency in the clinical trial? Thank you.

Adam Logal (CFO)

Thanks, Yi. The timeline for the development program, we expect to have an IND filed later this year or by the end of this year or early next year with the trial to commence thereafter and could get results from a phase one trial by the end of 2026. As it relates to dosing, it's expected to be a once-weekly dosing.

Phillip Frost (Chairman and CEO)

Sorry, I was on mute. I couldn't answer before Adam took it and gave you a perfect answer.

Yi Chen (Analyst)

Apart from being an oral tablet candidate and once-a-week dosing, is there any other differentiating factor for this candidate compared to semaglutide or tirzepatide?

Elias Zerhouni (Vice Chairman and President)

Yeah, so let me take that one. First of all, for the oral formulation, it's a once-a-day. For the subQ, it's once a week, all right? Now, GLP-1 and glucagon are a pair of—I'm going to ask you a question too much—oxycomodulin. It's an analog of oxycomodulin. And it's really, really interesting because glucagon acts on the liver, on the metabolism of the liver. It is really focused on whether or not this compound can be of use in MASH. All of our preclinical work indicates that it is. If you're looking at the niche, which we think GLP-1 glucagon will be superior, it is really the MASH fatty liver disease group. That is really where we're going, and that's what we're going to try to develop over the next year.

Yi Chen (Analyst)

Okay, thank you.

Phillip Frost (Chairman and CEO)

Another way to say that we're not going into all markets that relate to GLP-1 glucagon. We're focusing our entry indication is going to be in the liver diseases that are affected by fatty liver disease, patients who are affected by fatty liver disease, and then we'll expand from that depending on the results we see in phase one and phase one B.

Operator (participant)

Thank you. The next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Good afternoon. Thanks for taking our questions. Adam, can you comment so pro forma now? Can you give us a sense of if anything's left on the convertible notes as well as the secure notes and number of shares pro forma?

Adam Logal (CFO)

Sure. Let me just make sure I heard you right. On the number of shares on a pro forma basis, it went from—at March 31, it was about 671 million shares. As part of the convertible note exchange, we increased that by 121 million. You get to just about 790 million shares, a little bit more than 790 million shares outstanding on a pro forma basis. On what is left on the convertible notes, we have approximately $129 million remaining of principal that is outstanding on an ongoing basis.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Okay, got it. That's super helpful. I appreciate it. Can you give us a sense of the diagnostic business and Bio-Reference? I know you outlined some numbers for the year. We should think of that as a $300'sh million baseline business for the second half of this year as far as thinking of it on an annual basis?

Adam Logal (CFO)

Yeah, on an annualized basis, the kind of remaining business sits between $310 million and $320 million. That's right, on an annualized basis.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Okay, got it. Timing on the queue will be today or tomorrow?

Adam Logal (CFO)

Tomorrow evening, yeah.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Okay. I got all the metrics. I think that does it for us. Thanks for taking the questions.

Adam Logal (CFO)

Thanks, sir.

Operator (participant)

Thank you. The next question comes from Eric Joseph with JP Morgan. Please go ahead.

Hi, this is Billy on for Eric. Thanks for taking our questions. Quick one on the EBV trial, if that's okay first. With the 200 healthy volunteers looking to be read out, are there any sort of efficacy or biomarker signals we might look for in that readout that might de-risk the asset from an efficacy perspective?

Phillip Frost (Chairman and CEO)

The 200 patients are divided in different cohorts because we're also using adjuvants. Mark is using adjuvant testing, different adjuvants for the vaccine, and that's what is going to be measured. We will get an idea of the immunogenicity of the vaccine with biomarkers. It's not the intent of phase one. It's mostly tolerability and safety. By the end of that trial, we'll have a good idea of the potential efficacy to indirect measures.

Thanks. Just a quick one, if you might, just squeeze in on the TCE candidate, 2001. Is there any update on timelines as to when that safety readout might come out, and then kind of how many dosing cohorts you might expect for that first safety readout?

The first phase was six levels. We're at the fourth. We've accomplished the fourth. We're going to fifth and sixth. Hopefully, we'll have that initial six levels, which are really important because at the end of the six, we get to what we think is the beginning of the efficacy range, even though we're observing whether or not we have results within these levels that we have now. As I said before, we should be able to complete that phase before the end of this year and then enter the efficacy part of the trial, probably with still a basket trial, a few different cancers, solid cancers where we have seen some signals, and then eventually calm down in phase one B to one, possibly two cancers that are the most promising. That's the way the trial is designed.

Thanks. Thanks for the question.

Operator (participant)

Thank you. The next question comes from Edward Tenthoff with Piper Sandler. Please go ahead.

Edward Tenthoff (Senior Research Analyst)

Great. Thank you very much. I just want to confirm and make sure I'm getting this right. What are next steps for the subQ obesity program, MASH program? What is sort of the differential development plan for oral? How do you anticipate differentiating those, and what do you think the timing is for the study? Thank you.

Phillip Frost (Chairman and CEO)

For both of them, we're working diligently to enter phase one. We're in the pre-IND phase for both of them, CMC phase for both of them, and they've been manufactured. We will have our GMP material ready. We're completing and interacting with the FDA about the design of these trials. Initially, it will pretty much be safety, as you know, with phase one trials, measuring side effects, measuring dose range, and so on. It's prep work, if you will, in view of a more advanced development in phase two A and two B. What we're talking about here is phase one A and B. To answer that question that you're just asking, what is the right PKPD and pharmacological behavior that we need to measure before we go further in phase two?

Edward Tenthoff (Senior Research Analyst)

Okay, thank you.

Operator (participant)

The next question comes from Yale Jen with Laidlaw & Company. Please go ahead.

Yale Jen (Managing Director and Healthcare Equity Analyst)

Good afternoon, and thanks for taking the question. I just have two here. The first one is that you mentioned a little bit earlier in terms of tariff situation at this point. Could you elaborate a little bit more in terms of whether you see something more negative or positive at this point? I have a follow-up question.

Elias Zerhouni (Vice Chairman and President)

Could you repeat the question? I'm not sure I got it.

Yale Jen (Managing Director and Healthcare Equity Analyst)

The government.

The government tariff situation.

Elias Zerhouni (Vice Chairman and President)

Yeah, tariffs.

Yale Jen (Managing Director and Healthcare Equity Analyst)

Yeah.

Elias Zerhouni (Vice Chairman and President)

Yeah. Thank you. I'll let Adam answer for our operations overseas, and then I'll answer for R&D.

Adam Logal (CFO)

Sure. Sure. Thanks, Elias. For tariffs, yeah, we're obviously monitoring it. We're looking throughout our supply chain mostly for BioReference. We do buy most of our products here from the US. Some of it is manufactured internationally. We're looking at all the different alternatives to minimize any impact. As we sit here today, we think it's a manageable risk, but we'll continue to monitor it. As it relates to our pharmaceutical products, we do import both Rayaldee, and we know Pfizer sells Ngenla and Genotropin, and they're manufactured in Ireland. We continue to monitor those. Obviously, the US market or the cost of goods is a minor component of the total cost structure, so we wouldn't expect it to have a significant impact. Obviously, the HGH franchise is a global franchise, so it only impacts the US market.

Elias Zerhouni (Vice Chairman and President)

For R&D, we primarily depend on European and also Chinese CROs and CDMOs. That has been essentially a minor amount of services that we need to obtain outside of the U.S. As far as we can tell, we do not see a significant impact on R&D operations from tariffs.

Yale Jen (Managing Director and Healthcare Equity Analyst)

Okay, great. Thanks. Maybe the follow-up in terms of the MASH product, MASH development, sorry. Do you anticipate this target for the earlier stage of MASH or much more the later stage in the fibrosis part of it in the text?

Elias Zerhouni (Vice Chairman and President)

Right. That's a great question. We are still thinking through it, obviously. We are inclined to really use the product where it's most needed, and that is F3 or F3 NASH or F4, early F4 NASH, pre-cirrhotic NASH at the beginning. We do not believe there's as much of a need for F2 and F3, early F3, because of the alternatives that you have on the market right now. That's where we are focusing our efforts, but we haven't yet decided that.

Adam Logal (CFO)

Okay, great. Thanks, Doc. Appreciate the response.

Operator (participant)

Thank you. The next question comes from Michael Petusky with Barrington Research. Please go ahead.

Michael Petusky (Managing Director)

Hey, good evening. Hey, Adam, could you repeat? I'm sorry. I got a little garbled on my end. The revised guidance for the BARDA revenue?

Adam Logal (CFO)

Yeah, it's 38-44, which is down from 40-48.

Michael Petusky (Managing Director)

Okay. All right. On Ngenla and just the idea that, hey, we think this is a one-quarter issue, I mean, is that based on sort of script data, or is it based on any kind of conversations with Pfizer, at least preliminary conversation with Pfizer sort of suggesting that? Can you just sort of, I guess, dig into that a little bit for me?

Adam Logal (CFO)

Sure. We talked to Pfizer at least once a quarter just to get general updates. They have not indicated that there were anything in our first quarter conversation. We have not spoken with them since we have received these results. We do look at the script data, and the script data continues to indicate a growing franchise and no significant changes. We are not certain if it was anything on a gross-to-net basis that impacted it or on the manufacturing side, if there were any charges that came through there that impacted the gross profit share. I will note that last year, the first quarter was the low quarter of the year, and we would expect, as I guided, that this was a non-recurring issue for us, and it will rebound to historical norms.

Michael Petusky (Managing Director)

Okay. All right. Just on the diagnostics business, I understand that the oncology will be sold, but if that asset had not been sold, would you have been able to get to sort of cash flow break-even this year or not?

Adam Logal (CFO)

Yeah. No, part of our plans, Mike, we had a couple of different ones. One was to work to find a way to monetize it through a transaction like we entered into with LabCorp. The other was to continue to exit certain lines of testing in certain clients that have high demands for service that our scale just would not allow us to reach. We had fully expected to get there and certainly could.

Michael Petusky (Managing Director)

Okay. All right. Very good. Thanks, guys.

Operator (participant)

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Phillip Frost, Chairman and Chief Executive Officer, for any closing remarks.

Phillip Frost (Chairman and CEO)

I want to thank you all for your participation, for your good questions, and we look forward to talking to you again at the end of the next quarter. Thank you again.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.