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Earnings call: OPKO Health Q3 2024 results show promise amid challenges

Published 08/11/2024, 20:36
OPK
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OPKO Health, Inc. (NASDAQ: OPK) reported its financial results for the third quarter of 2024, showcasing mixed performance with a strategic focus on profitability and growth. CEO Dr. Philip Frost emphasized positive developments in the company's diagnostics and pharmaceuticals segments, despite a decrease in quarterly revenue.

The company's financial position remains strong with over $400 million in cash, and a significant turnaround to a net income of $24.9 million compared to the previous year's net loss. OPKO anticipates operational profitability by the end of 2024, with positive cash flow expected in 2025.

Key Takeaways

  • OPKO Health reported a sale of BioReference Health's clinical diagnostics assets for $237.5 million.
  • The company's 4K score test for prostate cancer grew by 16%, and oncology testing volume increased by 6.8% in Q3.
  • ModeX Therapeutics began a Phase 1 trial for MDX-2001, with $51 million in additional funding for COVID and influenza programs.
  • OPKO's collaboration with Merck (NS:PROR) on an Epstein-Barr virus vaccine could lead to milestone payments of up to $872.5 million.
  • Pfizer (NYSE:PFE)'s launch of NGENLA, in partnership with OPKO, is gaining market traction.
  • The company repurchased 24 million shares for $37.3 million under its share buyback program.
  • Q3 2024 revenue decreased to $121.3 million from $131.7 million in Q3 2023, primarily due to lower testing volumes and external disruptions.
  • OPKO reported a consolidated net income of $24.9 million for Q3, a significant improvement from the net loss in the same quarter of the previous year.
  • Future revenue projections for Q4 2024 are between $155 million and $160 million, with anticipated operational profitability by year-end.

Company Outlook

  • OPKO expects to achieve operational profitability by the end of 2024 and projects positive cash flow in 2025.
  • The company plans to present new data on Rayaldee for chronic kidney disease management, aiming for $50 million in annual revenue.
  • Future guidance on BioReference's performance and growth expectations will be provided in Q4.

Bearish Highlights

  • The company experienced a decrease in Q3 revenue year-over-year, partly due to lower testing volumes and the impact of hurricanes.
  • BioReference's expected growth for 2025 is minimal, with details to be specified in Q4.

Bullish Highlights

  • OPKO's pharmaceutical segment saw an increase in revenue to $52.4 million, up from $46.9 million year-over-year.
  • The sale of BioReference Health's clinical diagnostics assets and the increase in oncology testing volume indicate strength in the diagnostics segment.
  • The company's collaborations with Merck and Pfizer could lead to significant milestone payments.

Misses

  • Q3 2024 revenue fell short of the previous year's figures, indicating challenges in the diagnostics segment due to external factors.

Q&A Highlights

  • Discussions during the call highlighted the development strategy for MDX-2001 and the anticipation of clinical data over the next 18 months.
  • The company is considering a partnership for its GLP-1 glucagon coagulant, with a decision on Phase 1 trials expected soon.
  • OPKO is focused on demonstrating efficacy in monotherapy before exploring combination treatments.
  • One-third of the share repurchase authorization has been used, with the possibility of expanding the program if capital allows.

OPKO Health's third-quarter earnings call reflected a company navigating through external challenges while making strategic moves to secure long-term profitability and growth. With a strong cash position and a pipeline of promising pharmaceutical developments, OPKO is poised to capitalize on its investments and research in the coming years.

InvestingPro Insights

OPKO Health's recent financial results and strategic moves align with several key insights from InvestingPro. The company's aggressive share buyback program, as highlighted in one of the InvestingPro Tips, is evident in their repurchase of 24 million shares for $37.3 million. This action demonstrates management's confidence in the company's future prospects and aligns with their focus on enhancing shareholder value.

Despite the reported decrease in quarterly revenue, InvestingPro data shows that OPKO's market capitalization stands at $1.05 billion, reflecting investor confidence in the company's long-term potential. The Price to Book ratio of 0.75 suggests that the stock may be undervalued relative to its book value, which could be attractive for value investors considering the company's strategic initiatives and future growth prospects.

Another relevant InvestingPro Tip indicates that net income is expected to grow this year. This aligns with OPKO's reported turnaround to a net income of $24.9 million in Q3 2024, compared to a net loss in the previous year. The company's projection of operational profitability by the end of 2024 and positive cash flow in 2025 further supports this outlook.

It's worth noting that InvestingPro offers 6 additional tips for OPKO Health, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given the mixed performance reported in the latest earnings call and the company's ongoing strategic shifts.

Full transcript - Opko Health (NASDAQ:OPK) Q3 2024:

Operator: Good day, and welcome to the OPKO Health Third Quarter of 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Yvonne Briggs. Please go ahead.

Yvonne Briggs: Thank you, operator, and good afternoon. This is Yvonne Briggs with Alliance Advisors Investor Relations. Thank you all for joining today's call to discuss OPKO Health's financial results for the third quarter of 2024. 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 could materially affect the company's expected results. Those forward-looking statements include, 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, 2023, and in subsequently filed SEC reports. This conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 7, 2024. 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. Philip 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 third quarter financial results and provide fourth quarter financial guidance, and then we'll open up the call to questions. Now I'd like to turn the call over to Dr. Frost.

Phillip Frost: Good afternoon, and thank you for joining us today. We had a good third quarter with positive developments in both our diagnostics and pharmaceutical segments. Significant progress has been made to put BioReference on a clear path to profitability after selling certain assets to LabCorp. We continue the development of the ModeX technology product portfolio. Pfizer has successfully launched NGENLA in all priority markets, and we continue to be enthusiastic about positive animal studies of our once-weekly injectable dual-GLP-1 glucagon agonist program. Our collaboration with Entera Bio (NASDAQ:ENTX) on an orally delivered once-daily version of our oxyntomodulin also shows great promise in animal studies. We bolstered our balance sheet with significant cash infusions to ensure adequate funding for our pharmaceutical pipeline and to return capital to our shareholders through a stock repurchase program. As we continue to execute our strategy, we expect these important catalysts to ultimately be reflected in a closer alignment of the value of our assets and our stock price. Our currently portfolio consists of a variety of segments that investors need to evaluate. We plan to operate these segments to drive value for OPKO with additional partnerships, business development initiatives, and asset sales. We're confident in our business and strategy and will consider expansion of our shared buyback program as appropriate. OPKO is structured around five key businesses. BioReference, ModeX, our growth hormone franchise with Pfizer, our global healthcare business, and our pipeline assets. We have the ability to explore partnerships and sales or business development activities with each in order to build value, unlock value, and return capital to OPKO. We've seen some evidence of this so far in 2024, and we hope to continue the process in 2025. We look forward to keeping you apprised of our progress. With that introduction, I'll turn the call over to Elias.

Elias Zerhouni: Well, thank you, Phil, and good afternoon, everyone. As Phil mentioned, OPKO completed the sale of BioReference Health's laboratory testing businesses focused on clinical diagnostics and women's health nationwide, but excluding operations in New York and New Jersey, which we retained. The sale was for $237.5 million. BioReference Health will continue to offer specialty oncology and neurology diagnostic services nationwide, as well as maintain a comprehensive menu of core services in New York and New Jersey. This will allow us to streamline our overall infrastructure and reduce operating costs to better position the division for sustained growth and profitability. The assets we sold had annual revenue of about $100 million. Now, net sales from the remaining operations, continuing and BioReference Health, exceeded $400 million in 2023, as an indication. Our high-specialty, high-value testing segments continue to perform well, with oncology testing volume in the third quarter of this year was up 6.8% compared to the third quarter of 2023. And this reflects both the depth and the innovation of our testing portfolio and expanded collaborations with large cancer centers and health systems. Additionally, in Q3, BioReference received New York State approval for OPKO HRD testing for homologous recombination deficiency in breast, ovarian, prostate, and pancreatic cancers, where PARP inhibitors, like Lynparza from AstraZeneca (NASDAQ:AZN), for example, are a unique therapeutic option. These tests are necessary to guide the patient for the best therapy. And so this makes BioReference one of the few labs to offer a full comprehensive tumor sequencing menu with our OPKO advanced next-gen sequencing testing, germline testing with OPKO Risk, and now an HRD option in OPKO HRD for patients with these common cancers. And this combined offering provides patients and clinicians with the most comprehensive view of a patient's cancer subtype and the therapeutic options to be considered by their treating physicians. As for our urology segment, the 4K score tests, which is an FDA-approved blood biomarker test indicated for use in men age 45 and above with elevated PSAs who are at risk of prostate cancer and require prostate biopsy for confirmation. Here today, the four 4K score test delivered a strong growth of 16% over the same period in 2023. The 4K score test provides an individual's probability score of finding aggressive prostate cancer defined as a Gleason score equal or greater than 7 prior to a biopsy decision. And a recent publication in the European Association of Urology Journal regarding the review of 49 clinical studies concluded that among eight different liquid biomarker tests for prostate cancer assessment, the highest diagnostic performance and ratio is the 4K score test. In the last decade, several European countries have initiated population-based prostate cancer screening trials to evaluate whether a screening algorithm that included both PSA and biomarker tests can reduce over-diagnosis of prostate cancer. And the 4K score test has been included in several of these mass screening trials and demonstrated the value of the 4K score test in stratifying men with elevated PSA and the high probability of prostate cancer. Now switching gears to our pharmaceutical segments, our ModeX Therapeutics programs are progressing nicely. A tetraspecific antibody, MDX-2001, initiated a phase one trial and is currently dosing patients. This open-label trial at four sites is expected to enroll 45 patients with a variety of solid tumors including lung, breast, prostate, and pancreatic cancers. The Phase 1A portion of the study is primarily designed to evaluate the safety and immunogenicity of ascending doses of MDX-2001 and to establish a biologically active dose in humans. Our other immunopology programs, MDX-2003, a tetraspecific antibody for liquid tumors and autoimmune indications, as well as MDX-2004, an immune modulator, multispecific antibody, are progressing to INDs and expected to enter the clinic next year. A year of notes, last month we were awarded $51 million of additional funding under our existing BARDA contract to develop COVID multispecific antibodies and to initiate an influenza program leveraging our mSTAR antibody platform. Approximately $35 million of these $51 million in additional funding is earmarked for the development of the second novel multispecific antibody to SARS-CoV-2 from preclinical through Phase 1 trials, as well as preclinical work on the gene-based expression of multispecific antibodies to SARS-CoV-2 including mRNA as well as DNA vectors. In addition, BARDA activated funding totaling $16 million from our current contract to begin development of influenza multispecific antibodies with potential gene and protein delivery modalities. So, collectively, this non-diabetic funding brings the total committed support from BARDA actually at $110 million with a potential for a total of $203 million in total if all options and milestones are executed. This additional funding, if granted, will be used to accelerate the COVID program, the flu program, and target other biodefense threats, as well as develop a platform with gene-based delivery methods for use against future pandemics. In addition, our collaboration with Merck for Epstein-Barr virus multivalent nanoparticle vaccine is on track to enter the clinic soon. Preclinical work is being performed by ModeX in collaboration with Merck and has been funded by Merck. After Phase 1 human studies begin, Merck will assume all development activities through to commercialization. I'd like to recall that we received an upfront payment of $15 million and are eligible for milestone payments associated with progress in the development and commercialization of MDX-2201 or the EBV virus vaccine. These milestones add up to about $872.5 million, as well as royalties on global sales. Now, Pfizer's launch of our pediatric long-acting growth hormone drug, NGENLA, continues to gain share as patients shift from the daily product to this more convenient once-weekly drug. Now, OPKO is also entitled to an additional $100 million in potential milestone payments related to additional pediatric and adult medications, and that is unaffected by the no-purchase agreement with healthcare royalty partners. Now, something very interesting has happened, and that is that we have continued to advance the development of our long-acting oxytomodulin analog in both subcutaneous and oral formulations. As you know, oxytomodulin analog are the basis of the peptides that are being used today for diabetic patients, as well as for weight loss. Now, the polyethylene glycol peg linked T-peptide, which we have studied and progressed to Phase 2 clinical trials, as we reviewed the data, we essentially suspended the trials after their completion, did not proceed because of dose-limiting formulation. But the same T-peptide was then redesigned as an acetylated compound and has been confirmed in in vitro assays and animal disease models to be a strong candidate for once-weekly subcutaneous administration. And so in collaboration with Entera Bio, we recently announced results from our ongoing collaborative research combining our novel acetylated compound and Entera's proprietary NTAP technology to see if we could deliver our compound orally. And the program is focused on developing the very first oral dual agonist GLP-1 glucagon peptide. And this could be a potential once-daily treatment for patients with obesity or metabolic disorders, including NASH. The in vivo studies in rodent and pig models showed that a single oral dose administration resulted in a desirable PK profile and bioavailability that would support a once-daily oral treatment regimen. In parallel, we're going to continue to develop our injectable once-a-week formulation and trials for the GLP-1 glucagon peptide we have recently generated. We look forward to presenting these findings at an upcoming clinical conference. So, in summary, we are encouraged by the progress made in both our diagnostic and biopharmaceutical business segments. We're pleased that our internal innovation has attracted significant partnerships to date, while our balance sheet has been bolstered to adequately fund our operations and our growing pipeline of first-in-class products. And so, we remain confident in our business strategy and our ability and capacity to drive progress. With that, I'll now turn the call over to Adam Logal to discuss our third quarter financial results. Adam?

Adam Logal: Thank you, Elias. As Phil and Elias have discussed, the third quarter of 2024 was transformational for our business and our balance sheet. We ended September with over $400 million in cash and cash equivalents, which don't include $23.7 million held in escrow related to our LabCorp transaction or a restricted stock of $20 million. We repurchased and retired 14.9 million shares of our common stock for $23.8 million through September 30th. And through yesterday, we repurchased and retired a total of 24 million shares for $37.3 million under our $100 million share repurchase program. This does not include the 55 million shares that we repurchased earlier this year, bringing our total repurchases year-to-date to 79 million shares, or approximately 10% of shares outstanding as of January 1st. Further, we closed our asset-based lending facility with JPMorgan (NYSE:JPM) with the cash inflows from our LabCorp and healthcare royalty transactions. We have a significant cash balance and will be disciplined in what we invest in, including our highest priority R&D programs. We will also continue to fund our opportunistic equity and convertible note repurchases as a demonstration of our commitment to enhancing shareholder value. With that, let's review our financial results for the third quarter. Starting with our diagnostics segment, revenue was $121.3 million for the third quarter of 2024, compared with $131.7 million for the 2023 period. This decrease was primarily the result of lower testing volumes, including the impact of the LabCorp transactions that occurred mid-quarter during the quarter, as well as two hurricanes impacting the Southeast. During the third quarter of 2024, costs and expenses totaled $184.2 million, compared with $160.8 million for the comparable quarter of 2023. Importantly, costs and expenses included approximately $30 million of non-recurring costs and expenses for severance, facility closure costs, and contractual volume shortfalls, all incurred as expected as we rely on our business to ensure sustainable growth and profitability after the LabCorp transaction closing. During the third quarter of 2024, we also recorded a gain of $121.5 million on the transaction with LabCorp, which resulted in operating income of $58.5 million, compared to an operating loss of $29.1 million for the 2023 quarter. Depreciation in the amortization expense for the diagnostic segment was $6.1 million and $8.4 million for the 2024 and 2023 periods, respectively. As we have discussed on previous calls, the LabCorp transaction was a major step for us to return to profitability, and the restructuring activities this transaction allowed and we initiated this quarter put us in a strong position to have the business operating at a break-even run rate by the end of this year and operating cash flow positive and profitability in 2025. Moving to our pharmaceutical segment, revenue was $52.4 million for the third quarter of 2024, compared with $46.9 million for the comparable period of 2023. Revenue from products, including our international pharmaceutical businesses, was $39.1 million, compared to $40.7 million for the comparable period of 2023. Despite the challenging foreign currency environment, the profitability profile of this business continues to improve above our expectations. Product revenue includes revenue from Rayaldee of $5.8 million, which was lower than 2023's $7.3 million, reflecting an increase in the cost of our copay assistance programs and a slight decrease in the number of bottles shipped. Revenue from the transfer of IP was $13.2 million for the third quarter of 2024, compared to $6.2 million for the 2023 quarter. Our gross profit share from Pfizer was $7.4 million during the third quarter of 2024, compared to $4.9 million for the 2023 period. In addition, the third quarter of 2024 includes $5.5 million in R&D funding related to our BARDA agreement. Costs and expenses for our pharmaceutical segment were $84.6 million for the third quarter of 2024, compared to $72.3 million for the 2023 period. Research and development expenses were $28.2 million, compared to $18.9 million a year ago. R&D expense increased as a result of our activities for our ModeX development programs, including the recently commenced Phase 1 clinical trial for our first immuno-oncology program, as well as our BARDA supportive activities. The resulting operating loss for the quarter ended September 30, 2024, was $32.2 million, compared to an operating loss of $25.4 million for the third quarter of 2023. Depreciation and the amortization expense for the quarter increased slightly to $18 million from $17.8 million for the 2023 quarter. Turning to our consolidated financial results, for the third quarter of 2024, we reported net income of $24.9 million, or $0.03 per diluted share, compared with a net loss of $84.5 million, or $0.11 per share for the 2023 period. Net income for the third quarter of 2024 included a non-cash unrealized gain on our investment of GNDX of $45.9 million, compared to a non-cash unrealized loss of $8.3 million for the 2023 period. As we look ahead, we are providing financial guidance with the following assumptions. For our pharmaceutical segment, we expect Pfizer to continue to grow sales of NGENLA and realize the benefits of the expanded gross margin due to the scale-up of its manufacturing processes. We assume a stable foreign currency exchange rate for our ex-U.S. pharmaceutical businesses. And R&D expenses for the fourth quarter of 2024 will reflect higher activities related to our ModeX programs, including CMC efforts and progress with our BARDA agreements. For our diagnostic segment, we are continuing our multi-year, multi-phase program to improve profitability. This program is focused on operational efficiencies and the reduction of fixed infrastructure costs and is expected to deliver annualized savings of approximately $25 million by the end of 2024, some of which we began realizing in the third quarter and will continue throughout the fourth quarter. We expect an additional $14 million of non-recurring costs in the fourth quarter, primarily including severance and facility closure costs, to be paid out through 2028. In addition, we have taken action and are seeing the benefits from our revenue cycle management programs, including implementing price increases that were effective in the third quarter for certain testing modalities, including our oncology offerings. These actions are expected to result in an overall increase in annual revenue of approximately $8 million to $10 million for the full year of 2025. We have established gross margin thresholds and targets for our remaining business to be above 27% and expect positive cash flow for the full year 2025 and have established an additional cost initiative targeting an additional $20 million of annualized cost savings. We look forward to providing further details and guidance during our fourth quarter call. As a result, we expect the following for the fourth quarter of 2024. Total (EPA:TTEF) revenues between $155 and $160 million, with revenue from services between $95 and $98 million, revenue from product sales between $41 million and $44 million, and other revenue between $13 million and $18 million, inclusive of the Pfizer gross profit share estimates between $8 and $10 million, as well as BARDA revenue of $5 million to $8 million. We expect fourth quarter costs and expenses to be between $200 million and $210 million, excluding the nonrecurring expenses related to our restructuring of BioReference. R&D is expected to be between $28 million and $34 million, depending on the timing of certain activities for ModeX programs, with $5 to $8 million being offset by BARDA funding. We finally expect depreciation and an amortization expense to be between $22 and $23 million. That concludes our preparatory remarks, and thank you all for your attention. Operator, let's open the call for questions.

Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Maury Raycroft of Jefferies. Go ahead, please.

Maury Raycroft: Hi. Congrats on the progress, and thank you for taking my questions. Maybe starting off, just wondering what the next steps are for the Oxyntomodulin Analog 88006, now that you have the preclinical data for the subcutaneous form and the oral form as well. Does Entera plan to advance this into a Phase 1 study in 2025? And also, you said you will advance the subcue form in parallel with the oral drug. Is this just for getting PK data or for keeping options open? Maybe talk more about the strategy between the oral and the subcube version.

Elias Zerhouni: That's a good question, Maury. Thank you. So, yes, we're going to continue the development in parallel of the oral with Entera Bio as the collaborator and using the technology. We have early results that say two things. One, it's feasible, and two, it's comparable to other peptides on the market in oral forms. And so we can be competitive there. In terms of the injectable form, we just have to advance the preclinical work. We've done a lot of work on this molecule before even reaching a Phase 2 with a different composition of matter. We think this one is much, much better because it allows you to do once a week injection and lower doses. So, based on our experience, what we need to understand here is that this coagulant for GLP-1 Glucagon is different from most of the other peptides that are on the market today. There's one from Boehringer Ingelheim that is comparable in at least composition of the peptides. And so we need to advance that to the point where we can make a decision as to whether or not we have what we need to go to Phase 1. So, we're in the preclinical phase. It has attractive interest. We're talking to other parties that may have an interest in partnering with us, and the work is ongoing, Maury. So I can't make any more statements than that, but we're actively pursuing it.

Maury Raycroft: Got it. Understood. Okay. And then, for the MDX-2001 study that's ongoing, do you anticipate you could report a data update from that first half of 2025? And I know this is an early study, but can you talk about expectations for what you could show in initial data and how this will influence next steps and continued investment in the program?

Elias Zerhouni: So, just so you know, there are two phases. The first one is basically escalation of the dose to a range where we think there will be an efficacy. So, we have six doses that FDA allowed us to do. Those are done one patient at a time, and you have to wait a month to see if there's no side effect. Once that's done, we'll go to cohorts where we have three patients at a time in different cancers, and then we'll be able to see if we have a response at this time. Now, for the first six, it probably will take another six months to get a read about whether or not we have a good safety profile, it's tolerable, and also finding out if we don't have antibody drug antibodies. So, think of it in two ways. First is the first feasibility toxicology phase, which we'll be reading out in the first half of 2025, more like towards the end of the first half. The second one is a much longer phase, where we're going to test real doses that we believe are going to be effective in a basket trial of about 40 patients. And then that will take a while to read, probably towards the middle of 2026.

Maury Raycroft: Got it. Okay, that's helpful. Thanks for taking my questions. I'll hop back in the queue.

Operator: Our next question comes from Jeff Cohen of Ladenburg Thalmann & Company. Go ahead, please.

Unidentified Analyst: Hi, thank you for taking our questions. This is Bethany on for Jeff. I wanted to start with the 2201 asset. You said you're moving it towards the clinic, and at that point, I know that Merck is going to take over for the associated costs. I'm wondering, who is making that decision since you're both kind of jointly progressing this forward?

Elias Zerhouni: Right, we have a joint program, basically. Merck is the sponsor, so Merck will make the decision. We obviously have participated all the way through this phase here to the entry into the clinic, but that decision is their decision, not our decision. But they have everything they need at this point to actually make that decision.

Unidentified Analyst: Okay, so there's nothing outstanding that really is stopping them from moving forward. It's more of a them thing. Am I understanding correctly?

Elias Zerhouni: Yes, you are. There's nothing in front of us that's an obstacle at this point, except them making a decision.

Unidentified Analyst: Okay, perfect. I want to quickly touch on BioReference. Congratulations on having that closed. I'm wondering if your profitability comments are kind of contingent on the investment that you have to make. I guess, in other words, do you need to invest more into this business in order to reach those profitability goals, or as it currently stands trimming some more of the fat will be sufficient?

Elias Zerhouni: Adam, do you want to answer that?

Adam Logal: Sure. So, definitely, the costs that we're incurring, those non-recurring costs, are the key for us to be able to get the business profitable. There's not significant investments that we need to make back into the business. There's not an expansion of the sales force or new product offerings or anything like that. It is simply just, now that we've closed the transaction with LabCorp, giving us the ability to reduce our infrastructure size and an existing footprint to get us to those profitability numbers. So, we're -- I'll call it weeks away from that point.

Elias Zerhouni: Remember that we closed multiple laboratories and facilities from California all the way to Florida as part of the process. So, we think we can definitely improve profitability by focusing also in the New York, New Jersey area, where we have the majority of our resources. And I think focusing there, we believe will provide both efficiencies, because we have right-sized the lab for that market, but also opportunities for growth.

Unidentified Analyst: Okay, got it. I think that does it for me. You addressed everything else in your prepared remarks, so I'll jump back in queue. Thank you.

Operator: The next question comes from Yi Chen of H.C. Wainwright & Company. Go ahead, please.

Yi Chen: Thank you for taking my questions. So, could you comment for OPK-88006, the duo agonist peptide? Do you -- I mean, how much outperformance in terms of efficacy do you expect it to show compared to existing marketed GLP-1 drugs on the market? And also, between weekly subcue version and also the daily oral version, which one do you think could potentially have better market adoption and the reasons for that? Thank you.

Elias Zerhouni: Well, thank you for the question. So, when you look at the market, the way it has evolved, I think it really depends on three factors. One is obviously the composition of the peptide as compared to semaglutide or the tritursipatide or the boring eryngohyne compounds, and they all have differences. And both of the oral forms and the injectable forms will have a place, we think, simply because there's no other oral, there's only one oral semaglutide. And I think you will have, actually phases of the therapy of these patients where oral forms will be necessary. Once you've done, once you've gone through maybe an injectable form, control the weight, then to sustain that over time, it might be better to go to an oral form. But that will all depend on the clinical performance of the molecules in terms of side effects and weight loss and the necessary observation that you have to make. If you notice, we said that this peptide, this coagulant may have a greater role for patients who have liver disease, NASH, steatohepatitis. And then the idea here is to really provide a continuum of care for the patients who will benefit from a glucagon addition. Remember, GLP-1 receptors don't exist in the liver, but glucagon receptors do. So you'll have, we hope, a biological action that will be differentiated from the other ones. And there will be a class of patients, especially those who have evidence of liver malfunction that would be more appropriate for these new peptides. This is all speculation. We'll have to prove it. We're doing that.

Yi Chen: In terms of safety, do you think it could potentially have a better safety profile compared to the semaglutide or to trizeptides?

Elias Zerhouni: I mean, definitely the oral forms certainly will have that ability because you're giving an oral daily dose. And we know that these side effects that we see, nausea, vomiting, diarrhea, are related to what we call the maximum rise of the peptide in the blood. And so because you're giving an oral form, which is much less than what you give every week in terms of the dose received by the patient, you would think that the oral form would be less prone to give you side effects or deleterious side effects. Now, the other one, I would not be able to speculate because there's no evidence one way or the other that it will be either more or less than what is in the market today once a week injectable.

Yi Chen: Okay. Thank you.

Operator: The next question comes from Edward Tenthoff of Piper Sandler. Go ahead, please.

Edward Tenthoff: Great. Thank you for taking my question. And congrats on all the progress, all these moving parts to strengthen the balance sheet and finance the company going forward. My question really has to do with the ModeX cancer efforts. And I'm wondering what we should be expecting in terms of data releases next year. Would this be more likely at a medical meeting? Is this something you'll update kind of as you get things interesting? And what should we really be expecting in terms of escalation and then ultimately guidance with respect to expansion cohorts where you might develop the asset things?

Elias Zerhouni: Yeah, thanks. We want to obviously inform as we have data coming out. The first is that mid-2025 when we will have the first readouts in humans of the performance of this platform in terms of its ability to be tolerated, any side effects or anti-drug antibodies. Okay. So that's the first data. Because at the end of the day, we have to really show that this platform is well-tolerated in cancer patients. Then comes the second phase for MDX-201, which is the one that is in the clinic, of do we see efficacy in what tumor? So that will be basically middle of 2026, I would think. And then at that time, depending on what the results are, we'll probably go into a pivotal trial to basically get MDX-201 approved, hopefully. So that's one. The second is you have two other molecules, which are really nearing INDs, and then that you will hear about. But clearly we will present medical data on MDX-2001 before anything else. The third sort of news is that we have parties that are interested in our platform to collaborate with us, and that might be a news that we will definitely share if that happens. So those are the three things that you will see in oncology. Emerging programs, you won't have any specific information except targets and the fact that they're in the clinic. Emerging technologies that others want to collaborate with us on. And then MDX-2001 clinical data coming up over the next 18 months.

Edward Tenthoff: That's helpful. And just maybe a quick follow-up. Obviously, this is going to be somewhat data-dependent and dependent on the cancers, where you see activity and sort of what standard of care is. But do you ultimately envision combining your asset with other standard of care agents, whether that be chemotherapy, other IO, or other targeted agents? Or will that just really depend on what we see from the data? Thanks so much.

Elias Zerhouni: Absolutely. You understand it. I mean, it's clear. Your question shows that, number one, we have to show effect as a monotherapy. Once we do and in what cancer, under what subtype, under what conditions, then the combination will be a self-evident stat. As you know, in cancer development, we tend to essentially enter the development in Phase 1 and Phase 2 with patients who've already gone through other forms of therapies and failed. And once we show that we have an effect even on those patients, then we go forward from, let's say, fourth line to third line to second line. And as you go up to first line, we tend to combine with other therapies. Absolutely. Yes. So your question is absolutely on target. And that would be the natural evolution of the development phase of a molecule like MDX-2001.

Edward Tenthoff: Makes a lot of sense. Look forward to seeing you guys soon.

Elias Zerhouni: Thank you. Take care.

Operator: The next question comes from Michael Petusky of Barrington Research. Go ahead, please.

Michael Petusky: Good morning. So, Adam, in terms of your assumptions around BioReference for ‘25, what are the top line expectations? Sort of flat, modest growth, modest decline? What are you thinking in terms of what it's going to take in terms of top line performance to get you to positive cash flow in that business?

Adam Logal: Hey, Mike. Thanks for the question. So the short answer is we're going to give you good guidance in Q4 when we go through our full year guide. But the shorter answer here is we don't expect big, meaningful growth to achieve those numbers.

Michael Petusky: And then in terms of Rayaldee, obviously, this is a situation that really has never lived up to the initial hopes. And I'm just curious, what would it take to get this to a $50 million product? I mean, is it more investment in additional trials? Is it more investment in sales? I mean, is there a pathway to $50 million in annual revenue for Rayaldee over the next few years? Thanks.

Phillip Frost: I'll take it. This is Phil. We're working on several initiatives there, and there is a lot of interest in new data that we recently put together indicating that the lowering of PTH in patients with CKD in whom it's elevated for a certain period of time at a certain level will delay the onset of -- or slow the progression of the chronic kidney disease and delay the requirement for dialysis. So having said that, that is really a mouthful. If that data holds up, and we're hopeful that it will, the data looks good, the thought leaders are buying into it. And we're about to present this as part of a new marketing program. So we'll see what happens.

Michael Petusky: Okay. All right. Very good. Thank you. Actually, Adam, one more, if I could. One more quick one for Adam. The share repurchase, is it likely that you guys, when this initial authorization, I mean, will there be another official authorization? What's sort of the future of the share repurchase, the common stock? Thanks.

Adam Logal: Yeah. So we've used about a third of what the board authorized earlier this year, and to the extent we have capital allocation to a program and we don't have enough under the program, we'll announce an expanded program. Phil alluded to that in his comments. So I'd say that you'll hear about it through another announcement when we get there.

Michael Petusky: All right. Very good. Thanks, guys.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Frost for any closing remarks.

Phillip Frost: Well, thank you for participating and for your excellent questions. We look forward to meeting with you again in a few months. And hopefully we'll have an even more interesting story to tell at that point.

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

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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