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OPKO HEALTH, INC. (OPK)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue was $182.2M; net loss improved to $10.3M ($0.01 loss per share) as non-cash other income from the GeneDx mark-to-market offset an operating loss driven by lapping 2023 milestones .
  • Diagnostics execution improved: services revenue rose to $129.4M (+2% YoY) and operating loss narrowed to $26.6M (vs. $44.3M YoY), reflecting progress on cost reductions and mix/pricing tailwinds .
  • Pharmaceuticals revenue from products was $40.5M; NGENLA gross profit share and Genotropin royalties reached $6.3M, while ModeX advanced MDX2001 into Phase 1 and BARDA-funded COVID multispecifics progressed to pre-IND enabling stage .
  • Liquidity and capital allocation catalysts: $250M HCR royalty financing secured by NGENLA profit share, $100M share repurchase authorization, and the expected $237.5M BioReference asset sale closing at quarter-end; management guided Q3 revenue to $180–$185M and expects a $114–$120M gain on the Labcorp closing .
  • Consensus estimates comparison unavailable in this report due to an S&P Global request limit; investors should focus on the near-term catalyst path (Labcorp closing, Pfizer NGENLA scaling benefits, ModeX clinical milestones) and operational cost takeout shaping Diagnostics profitability .

What Went Well and What Went Wrong

What Went Well

  • Diagnostics segment improved: services revenue rose to $129.4M (+$2.4M YoY) and operating loss narrowed by ~40% to $26.6M; management highlighted cost-reduction traction and oncology demand momentum .
  • NGENLA scaling: gross profit share and Genotropin royalties grew to $6.3M (+$2.5M YoY), and Pfizer’s global launch continues across major markets; OPKO expects higher gross profit share in H2 as manufacturing scale benefits emerge .
  • Balance sheet optimization and capital return: $250M HCR financing provides non-dilutive capital; Board authorized a $100M share repurchase; management emphasized flexibility to fund ModeX R&D and opportunistic note/share buybacks (“we expect to have a significant cash balance…invest in our highest priority R&D…return capital to shareholders”) .

What Went Wrong

  • Operating performance weakened YoY on milestone compare: pharmaceuticals operating loss of $24.8M vs. prior-year operating income, and consolidated operating loss of $61.7M due to the absence of the 2023 $90M NGENLA approval milestone .
  • NGENLA profit share timing: guidance narrowed/trimmed vs. prior commentary due to inventory adjustments in certain territories; “final pull-through…looks like it’s going to be late third quarter…annual range came down to kind of the mid-30s” (context: gross profit share cadence) .
  • Rayaldee growth remains subdued: Q2 revenue $7.2M (vs. $7.7M YoY); management acknowledged nephrology practice-change timelines and emphasized outcome-led adoption efforts and publications, implying slower near-term uptake .

Financial Results

Consolidated Results vs. Prior Quarters

MetricQ4 2023Q1 2024Q2 2024
Total Revenues ($M)$181.9 $173.7 $182.2
Operating Income (Loss) ($M)$(69.1) $(71.5) $(61.7)
Other Income (Expense), net ($M)$(3.4) $(11.7) $51.1
Net Loss ($M)$(65.5) $(81.8) $(10.3)
Loss per Share (Basic & Diluted)$(0.09) $(0.12) $(0.01)
Cash & Cash Equivalents ($M)$95.9 $75.6 $40.6

Segment Breakdown and Key Drivers

Segment MetricQ4 2023Q1 2024Q2 2024
Diagnostics – Revenue from Services ($M)$124.2 $126.9 $129.4
Diagnostics – Costs & Expenses ($M)$166.4 $161.3 $156.0
Diagnostics – Operating Loss ($M)$(42.3) $(34.4) $(26.6)
Pharmaceuticals – Revenue from Products ($M)$43.0 $38.1 $40.5
Pharmaceuticals – Revenue from Transfer of IP & Other ($M)$14.7 $8.7 $12.3
NGENLA Gross Profit Share & Genotropin Royalties ($M)$12.2 (incl. catch-up) $5.6 $6.3
Rayaldee Sales ($M)$9.3 $6.9 $7.2
Pharmaceuticals – Costs & Expenses ($M)$73.8 $74.5 $77.6
Pharmaceuticals – Operating Income (Loss) ($M)$(16.0) $(27.7) $(24.8)

Selected KPIs

KPIQ2 2024
Services revenue from assets to be sold to Labcorp ($M)~$25.5
Costs/expenses tied to assets being acquired by Labcorp ($M)~$32.5
Investments – market value of liquid equities (primarily GeneDx) ($M)$101.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues ($M)Q3 2024Not disclosed$180–$185 Newly provided
Revenue from Services ($M)Q3 2024Not disclosed$125–$129 (incl. $24–$25 from assets to be sold to Labcorp) Newly provided
Revenue from Product Sales ($M)Q3 2024Not disclosed$40–$43 Newly provided
Other Revenue ($M)Q3 2024Not disclosed$10–$14 (incl. Pfizer gross profit share) Newly provided
Pfizer Gross Profit Share ($M)Q3 2024Not disclosed$7–$9 Newly provided
Pfizer Gross Profit Share ($M)2H 2024Not disclosed$15–$20 Newly provided
Diagnostics Costs & Expenses ($M)Q3 2024Not disclosed~$153–$156 excluding ~$33M for assets conveyed; before nonrecurring costs Newly provided
Consolidated Costs & Expenses ($M)Q3 2024Not disclosed$238–$245 (excl. nonrecurring) Newly provided
R&D Expense ($M)Q3 2024Not disclosed$24–$28 Newly provided
Depreciation & Amortization ($M)Q3 2024Not disclosed~ $24 Newly provided
Gain on Labcorp Closing ($M)Q3 2024 CloseNot disclosed~$114–$120 Newly provided
Annualized Savings ($M)By YE 2024~$25 (previous narrative)~$25 confirmed Maintained
Price Increase – Annual Revenue Impact ($M)Starting Q3 2024Not disclosed~$8–$10 Newly provided
One-time Costs to Achieve Savings ($M)2024; cash through 2028Not disclosed~$40 Newly provided

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
NGENLA global rollout & economicsLaunched in all priority markets; OPKO entitled to global gross profit share; approvals in 50+ countries . Q1 reaffirmed global launch and profit share rights .Profit share payment cadence guided ($7–$9M Q3; $15–$20M 2H) as scale lowers costs; some inventory adjustments delay timing .Improving scale; timing normalized late Q3
ModeX immuno-oncology (MDX2001)Oncology program expected to enter clinic in 2024 . IND cleared; first patient expected Q2 .Enrollment underway; 6 sites; basket trial; targets include TROP2 and c-MET; initial safety read in early 2025 .Advancing into clinic
BARDA COVID multispecificsBARDA collaboration established (funding secured) .Program entering pre-IND-enabling; $59M base funding, up to $109M additional potential .Progressing; funded
BioReference restructuring & asset saleREACH cost initiatives; profitability targeted in 2024 . Q1: $237.5M sale announced; closing 2H 2024 .Closing expected late Sep/early Oct; segment loss narrowed; Q3 gain of $114–$120M anticipated; annual savings ~$25M; price increases add $8–$10M .Accelerating to breakeven
Capital allocation (buyback/notes)Convertible notes refinanced; share repurchases referenced . Q1: note exchanges; share buybacks from proceeds .$250M HCR financing; $100M buyback authorized; flexibility to repurchase notes; no timetable set .Increasing flexibility
Rayaldee adoptionQ4: $9.3M sales; steady . Q1: $6.9M; modest .Q2: $7.2M; management highlights outcomes data path and guideline change timelines .Stable; slow adoption

Management Commentary

  • “This transaction [HCR] allows us to retain a significant portion of the near-term profit share payments and…maintain the full benefit of the $100 million of remaining potential milestone payments” .
  • “We expect…gross profit share payments from Pfizer of $7 million to $9 million in Q3 and $15 million to $20 million for the full second half of 2024” .
  • “After [Labcorp] transaction closes, our ongoing diagnostic operations will include our national oncology and urology franchises and our full suite of testing services in New York and New Jersey…to reestablish profitability” .
  • “On the target…quadraspecific antibody…TROP2 and c-MET…present on about 14 different tumors…we hope that [dose escalation] will take about 6 months…readout…first half of ’25” .

Q&A Highlights

  • NGENLA profit share outlook narrowed due to inventory adjustments in certain territories; normalization expected late Q3: “final pull-through…late third quarter…annual range came down to kind of the mid-30s” .
  • Adult GHD indication strategy remains under formulation; pediatric registration studies in planning; no timelines disclosed .
  • Labcorp closing gating items are primarily client integration steps and minor regulatory filings; timing late September/early October .
  • BioReference path to breakeven by year-end supported by $25M annual savings and price actions; management “highly confident” in run-rate realization .
  • Capital allocation: $100M buyback active; potential convertible note repurchases; no set timetable .
  • Rayaldee adoption hinges on outcome evidence and guideline changes; near-term “missionary” effort acknowledged .

Estimates Context

  • S&P Global (Capital IQ) consensus EPS and revenue estimates for Q2 2024 and prior quarters were unavailable in this report due to an API request limit. Values retrieved from S&P Global.*
  • Given the absence of consensus figures, we cannot quantify beats/misses vs. Street. Directionally, consolidated revenue of $182.2M and loss per share of $(0.01) should be evaluated alongside management’s Q3 revenue guidance ($180–$185M) and H2 profit share outlook to assess estimate revisions risk .

Key Takeaways for Investors

  • Diagnostics operational turnaround is progressing: services revenue growth (+2% YoY) and materially narrower operating losses signal that cost actions and pricing/mix are taking hold ahead of Labcorp closing and expected $114–$120M gain .
  • NGENLA economics are improving with scale; near-term profit share cadence ($7–$9M in Q3, $15–$20M in H2) should support cash generation and visibility into Pfizer’s launch trajectory despite short-term inventory timing noise .
  • ModeX pipeline is entering the clinic; 2025 safety read for MDX2001 represents a meaningful optionality event across multiple solid tumors, with BARDA-funded COVID multispecifics de-risking R&D spend .
  • Balance sheet flexibility enables opportunistic capital return and selective R&D acceleration: $250M HCR financing plus $237.5M asset sale proceeds and $100M buyback authorization provide multiple paths to enhance shareholder value .
  • Near-term trading catalysts: Labcorp closing and gain recognition; confirmation of late-Q3 NGENLA profit share step-up; incremental disclosure on adult GHD filing strategy and pediatric registrations .
  • Watch Rayaldee trajectory: management underscores outcome data and guideline changes—expect gradual adoption; any clinical publication/guideline update could re-rate expectations .
  • Monitor Diagnostics price actions ($8–$10M annual uplift) and cost takeout ($25M annualized by YE) into Q3/Q4 to gauge sustainability of margin improvement .