Welcome, everyone. I'm Sanjibita with JP Morgan Healthcare, and we are pleased to have with us Dr. Elias Zerhouni, President and Vice Chairman of OPKO Health. For logistic purposes, please reserve any questions you may have till the end of the presentation.
Thank you. Well, thank you very much, and thank you all for attending. Last year, we presented the fact that OPKO had acquired a company called ModeX Therapeutics, of which I was a co-founder, and since then, we've achieved quite a bit of milestones. But across the company, very important milestones occurred in 2023, which really announced a transformation, something that we've been strategizing to make happen over the previous years. Because one of the major milestones that was met this year was in fact the approval of our long-acting growth hormone product, somatrogon, known as NGENLA, which was approved by the FDA in June, and it's one of the leading long-acting growth hormone products in the world, partnered with Pfizer, and now approved in 44 markets, launching in the US in August.
But at the same time, we've really advanced our technology to the point of really validated partnerships with major pharmaceutical companies like Merck, who licensed our Epstein-Barr virus, and I'll tell you more about why they were so interested in doing so. And BARDA, the government agency, who came to us and wanted to support us to really grow multi-specific antibodies platforms for a viral diseases, viral infections, starting with COVID, which they think is not going to go away anytime soon. So that was really... Those are very important milestones, but we also initiated the final steps to enter phase I in the first half of 2024 with our first multi-specific LASER antibody for solid tumors. We completed a phase I evaluation of our first version of a multi-specific for HIV, and we are- we've been successful.
This was supported by NIH, and then because of the success of that first phase I, we are now moving into actually a more potent next-generation tetraspecific antibody, the first one being a trispecific. And we have also seen improvement in our diagnostics division, BioReference Laboratories. As you know, it did extremely well during COVID, and obviously, the drop in COVID revenues created a challenge, which we've worked on in terms of operational efficiency, productivity gain, and restructuring strategies. And I think the rest of the businesses of OPKO have achieved stable growth and stable revenues. So let me just go and talk a little bit about what it meant financially to have these milestones achieved.
So when Pfizer obviously obtained the approval from the FDA, it triggered a $90 million payment, which is part of the series of milestones that we are entitled to. And in that case, we still have $100 million of milestones coming for additional indications and gross profit share on global sales. As we reach certain levels, we're entitled to milestones, and we can give you more details with my friend, Adam, our CFO. At Merck, we received a $50 million upfront for the license of the EBV vaccine, and all of the expenses are being reimbursed as we go, all the way to the point of phase I, which we believe will happen this year.
We have $872 million in total milestones that are essentially both development and commercial milestones, with royalties going from single-digit to double-digit, depending on the amount of global sales. In terms of the COVID-19 multispecific program, the government identified a $168 million contract, with the phase I committed of $59 million. So you can see that the year has really validated both the fact that our companies now are fully integrated, second, the fact that we have been able to attract interest from very expert entities like Merck and BARDA.
If you look at the human growth hormone franchise, remember that, you know, we did this because children are getting 365 injections a year, a year, once a day, and therefore, there's a question of adherence. And adherence is much better with a long-acting product. This has been shown for multiple medications, other drugs, and so, you know, there's no question that the acceptance of a long-acting, once-a-week product is going to really convert the market to a great extent. It's a growing global market. It's $5.5 billion today, but it's expected to expand by about 12.3% annually. And it's really an innovation, especially for children, and really well-managed by Pfizer, our partner, our commercial...
who, who has the commercial lead and has led the program in, in partnership with us. So when you look at the current market, it's about 5.5. About seven competitors are providing daily treatments, but at the end of the day, there will be three, one of which will be the, uh, NGENLA product, and the growth is 12.3. And as you can see here, the light blue is what we expect the conversion with the growth to be from once a day to once a week acting. So you can see that, in fact, this will really be of great benefit to OPKO because we have a global profit share, which depends actually on the conversion ratio. The more the conversion to the long-acting our drug, the more the royalty equivalent of our revenues will grow.
So I think this is extremely positive news. This is a revenue-generating opportunity for us that will support the company going forward. On the innovation pipeline, let me take a little minute to tell you what am I talking about when I say technology platform or proprietary platforms? These came from work that my colleague, Gary Nabel, and myself directed when I was the head of R&D for Sanofi. In 2012, we started what we call the Breakthrough Lab, and the concept was very simple: You needed to have multi-targeting in a disease process to be able to be effective. You know that in medicine, we use combination therapies all the time. Except that in a combination therapy, you have to develop each component separately, which is extremely costly because you have four developments.
What if you could develop an antibody that, instead of having one specificity, had two, three, four, five, or six? Then you could really combine the therapeutic action into one molecule. So it's one molecule, multiple medicines concept, and it can be served, as we say, in immune oncology, and I'll show you examples of that, in infectious diseases. This is why DARPA and BARDA were interested in working with us because we can attack a virus not from one specificity, but four. And when a virus is attacked simultaneously by four binders, if you will, that attach to it, it is neutralized. So when you look at that proprietary platform, this has about 40 patents around it. It's well protected, and it is the core of our multispecific antibody approaches.
On the other side, the multivalent nanoparticle vaccines is the technology that Merck was very attracted to, and that really is underlying the EBV virus. Why? Because we use a ferritin particle, which we can engineer to contain multiple antigens, not just one. And so when you think about vaccines against a virus, you want to have as many antigens as possible on your platform to immunize the patient against that virus. So the key thing here is to understand that these platforms are plug and play, so it's not like one platform for one product. We can essentially exchange every single part of the non-variable, the variable part for the antibodies. We can make bispecifics or trispecifics, quadri, all the way to six specificities, and we can interchange them in silico. We can design an antibody in a very fast fashion.
I'm talking about weeks, not months. And we can essentially exchange the code for the particular, you know, warhead that we want very, very quickly. The same is true, but to a lesser extent, in the multivalent nanoparticle vaccines, because sometimes we can't not build too many antigens on any one particle, so sometimes you have to use two types of antigenic valencies on the particles to make a vaccine that has a broad coverage. So that's the technology. That's what the company is based on. If you look at the Epstein-Barr virus, why did Merck approach us to license this vaccine? It's because it's the virus that is creating infectious mononucleosis. It's the kissing disease, you know? It's what people call the kissing disease, because the virus creates a disease called infectious mononucleosis.
The problem is that that disease really is associated with over 200,000 cancers per year. So it's a cancer-provoking, cancer-associated virus, and more recently, it was shown to be probably closely related to multiple sclerosis. And so when you think about the implications of a vaccine like this, if you can prevent its entry into the human population, you'll probably decrease the number of EBV-related cancers and EBV-related multiple sclerosis. So it's a program that Merck is very excited about. It's a great partnership. It's advancing extremely well, and hopefully, will be in the clinic very soon. When you look about infectious diseases, because of what I, I said, to you about the platform, which allows essentially a selection of the best antibodies out there.
So the way we do it is we work with monoclonals, with folks who have neutralizing antibodies against, whether it be COVID or HIV or flu, whatever. We test them to see how neutralizing they can be on any one part of the virus. We know structurally where that antibody is docking, and then once we have that information, we design a multispecific in a plug-and-play fashion. And then we can design up to 150, 200 versions and assay them. And very quickly, we've identified essentially the more potent antibody possible against any one particular virus, and that's what BARDA was very interested in. We can do it very quickly. But there is another aspect, and that is that we can design this into a single, single RNA chain.
Whereas if you do design a monoclonal antibody or a bispecific, you need four different plasmids, four different codes to encode that antibody, and then you hope that it will assemble properly. We found a way, and we patented this technology, that can allow you to do it in one long code with the appropriate linkers, which leads to a self-assembly of the antibody. It assembles itself in the proper way because it's designed that way. And so the quickness and the ability to attack the virus from multiple points does two things: It's more potent, the doses have to be lower, it has the potential to be given by mRNA rather than antibodies themselves, and more important, the virus does not escape.
It's not like what we've seen with the monoclonals, where after a few months, a new variant emerges, and it's very difficult for that antibody to remain efficacious. In fact, the antibody that BARDA was interested in was tested now against the new variant, JN.1, which just emerged, and is just as active against the new one as it was against the old ones, even though we didn't know about the new one when we designed that antibody. So in COVID-19, it's funded by BARDA. It will really lead to the ability for us to protect, especially immunocompromised patients. 5%-10% of the population cannot develop antibodies through vaccines. Sometimes their immune system is limited.
Then there's a potential for treatment in HIV, for both prevention and long-term therapy, and that's funded by NIH, and the NIH is committed to fund the clinical trials for these, very, very unique antibodies. So what are we trying to do? We're trying to make OPKO appear as a trusted partner, and extend our footprint initially through partnerships. I mean, these are non-dilutive sources of funding. Pfizer, now we have been able to get an approval in 44 countries. This is the third drug that OPKO gets approved. Merck, which values the scientific innovation and has a need for enhancing their vaccine, portfolio, and has done a terrific job, along with us, but also independently for their own vaccines, like Gardasil, for example. BARDA, that allows us to share risk and cost share.
NIH, DARPA, which is very interested in the application of our technology in terms of protecting the public with a very, very potent mRNA-based gene therapy based on our technology. So this is where we are. This is what 2023 was all about, and I think you will see now that we are going to enter 2024 with clinical developments. One of the things that is most exciting is that when you do this, you can think of structures that can actually help you in immuno-oncology, in a way that no one else can. And this is what we've done with what we call LASER antibodies. And the LASER antibodies are really special, special because they can have two specificities that are specific to cancers, cancer cells, so they can select the tumor.
It's very rare that normal tissue will have the same two targets on the cancer cell. But then on the other arm, it has a CD3 and a CD28, and for those of you who know, CD3 is to activate the immune cell, and CD28 is to extend its survival. That's why we call this lymphocyte activation and survival extension receptor antibodies. So we dock on the T cell, and we make it active and multiplies and survives longer, which makes it a much more active antibody, at least in the preclinical data that we have. We are going to launch this in phase I in second quarter. The FDA is very excited because what is really interesting about an antibody like this is, you can attack 10 different cancers with that, not just one.
So lung cancer, pancreatic cancer, colon cancer, we have several targets that we're gonna to try against. Same thing is true for B-cell malignancies and lymphomas. We have a second molecule, which is not as advanced as the first on the left, MDX-2001, and we'll be talking to you more about this during 2024. So we have a robust pipeline. I think NGENLA is a driver of revenues now. We need to extend the label to adults and other pediatric indications. The tetraspecific LASER for treating solid tumors entering clinic in the first half of 2024. Treatment of leukemia and lymphomas later, and we have a whole series of multispecific immune modulators that can be used both in cancer and in immunology.
And then the antivirals, I told you about them, HIV, the vaccine against the Epstein-Barr, and the COVID multispecific antibodies. And you can see on the right side, all the partners we've been able to attract. Now, one of the issues we face at OPKO is the management of our diagnostics division. It's done extremely well during COVID, but not so after COVID and the drop in revenue. So it's been a transition year, where we've been trying to bring this division back into profitability, because it started losing money. And by addressing several factors. One is basically the cost structure. We had 8,000 employees at the peak of COVID, we now have less than 3,000. We've reduced the cost of operation.
We have also focused on high-growth areas in specialty testing, especially oncology, women's health, and also went after the market of health systems and urology, which remains a very profitable area. We've essentially innovated in this, mostly in oncology, and we have, for example, a full panoply of testing, which is extremely well appreciated. We've been able to grow our oncology business by almost 15% just this year. And then we're expanding our service lines, especially with pharma. Coming from pharma, understanding pharma, what we decided to do was to offer actually services to pharma companies that are in the oncology field, in particular, because of the data that we have, and the ability for us to identify, for clinical trials, the right patients at the right time.
So those led to an improvement in our bottom-line operations, with a 41% improvement from Q2 to Q3 in our operating loss, and I'm hoping that we will become profitable this year and probably, you know, break even towards the middle of the year, is what I hope we will be able to achieve. So the operating businesses continue to do well. Through Q3, we've had $681 million in revenue, so you can see $900 million of revenues for the year. Royalty sales are $21.7 million for the Q3, and about $30 million for the year. And you can see the distribution of revenues from the different entities that OPKO operates, both in Chile, in Mexico, in Spain, in Israel, in Ireland, all of which are, you know, cash positive.
Hopefully, if we can improve the situation in the BioReference Laboratory this year, plus NGENLA, I think you'll see basically a earnings per share, a million improvement that we think and we hope will be realized all within 2024. So what are the key takeaways? 2023 was a transition year, a transformation year, and a successful year. We received FDA approval. We created new partnerships with over $1 billion in potential milestone payments that I described to you. We improved the profitability in the diagnostic segment, but we need to do more. And ModeX is now fully integrated into OPKO operations and really going extremely well in terms of our ability to get non-dilutive funding. We opened a new laboratory in Newton, Massachusetts.
Our unit has grown to 50 employees, but more importantly, it's been validated by the reception of other entities in the marketplace to our technology. What are we gonna do in 2024? Expanding NGENLA, trying to help in the conversion from once a day to once a week. Advance our pipeline, as I said. Return to profitability at BioReference. Expanding the pharmaceutical operating businesses, would be Iberoamerica, South America, or here in the U.S., and working on expanding our strategic partnerships with a lot of incoming interactions that we're dealing with at this point. So I'll stop here, and I want to thank you for your attention, and happy to take any questions from the audience. Yes? I'm sorry, go ahead.
Thank you for the presentation. Could you tell us a little more about your expectation for NGENLA going forward?
Expectations for NGENLA?
Yes.
Yeah, you know, I'm going to ask Adam, because he's been very close to with Pfizer and managing the quantitative relationships, not the scientific ones, but Adam?
Yeah. So in 2023, we realized about $5 million in gross profit share during the third quarter. We guided the fourth quarter to receive between $8 million and $10 million. You know, we expect, as Pfizer continues to roll out and launch the product throughout 2024, to see, you know, meaningful growth off the exit run rate that we just discussed.
Okay.
Don't be shy.
Okay, I have a few more questions. You did touch upon the return of profitability at BioReference. Do you have a timeframe by when you expect that would happen?
Great question. Adam knows the financial plans. Maybe you're gonna share that?
Yeah. So Elias mentioned that we would expect to get to break even by midyear this year. So through cost initiatives, through growth plans, as well as rationalization of some of our geographic footprint, will lead us into that break even and profitability as we continue the remainder of 2024.
Okay. Okay, I'll just keep going then. In terms of like, the collaboration that's ongoing with BARDA, what value would you ascribe to it?
Okay, there are two values. There's obviously the fact that they fund our research in a very core area of what we wanna do as a young company. Obviously, when you design these sort of innovative molecules, there are a lot of issues that come up. Like, can you manufacture it? Can you produce it at a reasonable cost? Can it be effective? How stable is it, and so on? BARDA is going to fund all of this in the first phase, and basically, we'll have milestones. They committed $59 million all the way to phase I of that already, and so we're working to get into the clinic, hopefully by the end of next year, beginning of 2025. I can't promise that.
But we know that we need to get into the clinic because getting into the clinic will prove three things: one, that you have an effective molecule, two, you know how to produce it, three, it's doable from the clinical point of view, right? So that's one part of the... The second part is they want us to explore the ability to develop and manufacture at a lower cost. And the advantage of this, of this platform, because it is a single-chain design, it really can be done with a fewer steps, and they want us to try this and try continuous manufacturing. So that's part of the phase I.
If that is successful, then we go to $108 million supplemental to try to basically achieve the same thing with mRNA injections rather than antibody injections, but also extend it to other viruses of concern, including flu. So that's the full aspect of it. Financially, we're completely reimbursed for every work we do, every partner we have, every contractor we have. So it's really great because it supports quite a bit of our infrastructure and our team.
Great. And then moving on to the partnership with Merck, how would you say the EBV vaccine program is progressing?
Well, we signed the agreement in May of 2022. And since then, what we've been doing, we have a joint committee. We work with them and on the different aspects of the program. I would tell you, it's going extremely well. It's going much better than I thought it would be, because working between a small company and a big pharma is not always easy, and it's been much easier than I expected, maybe because we've had that experience on both sides. And it's advancing to the point where today, Merck is quite committed to start the clinical trials this year, if possible.
Now, our role is to produce the particle vaccines, the multivalent vaccine, to show that it's doable, it's manufacturable, and so on, for IND studies, and then enter into phase I, at which time we will receive additional milestones, and they will then take over the clinical development.
Maybe more of a general question. How would you compare, say, your platform compared to, say, other companies out there? Like, what is truly differentiated in your technology or product platform?
There is no equivalent platform out there that I know of, okay? So if you look at all the multi-specific platforms, they are designed piece by piece. So you design, you know, if you know, you have a plasmid, you have a DNA code that goes into a cell, produces one piece of the antibody, and then another one. The problem with that is that there's a lot of mispairing parts that don't connect with each other. So I'm not aware of any technology that does this in one step, almost with structure and in silico design with our... I wouldn't use the word artificial intelligence. It's too overused, but it's really digitally designed, structure-based coding of the antibodies.
Now, in terms of differentiation, obviously, the differentiation will be in the clinic, and, you know, some would say, "Well, do you really need four, or do you need three?" It doesn't matter to us because we can design bispecific three, four, five, six. So I don't know the value of that and the differential value of that. We'll find out. Clearly, in infectious diseases, it's absolutely effective, and in cancer, we'll find out, right? On the ferritin platform, there are others that have used this platform because this comes from technology that my co-founder, Gary Nabel, developed when he was at the NIH. When I was director of the NIH, we worked on that. And, it is a molecule that self-assemble as well. So the concept that we pursue is to try to mimic nature. Don't try to manufacture things that nature has never done.
Self-assembly is something that nature does very well, but nature never really self-assembled complex molecules, and that's what we're helping. We're essentially designing a molecule that keeps the self-assembly mechanism but enriches it by having multiple targets against the disease process. That's unique.
Okay. I do have maybe, like, one last question. You briefly touched on the oncology products and platform that you have. What would be the clinical strategy for those programs going forward?
Well, so I'll share with you my philosophy in terms of R&D development. It's something that I believed in when I was at the NIH, but I practiced it when I was at Sanofi. And I always said, "Let's try to pick molecules that have a pipeline in the molecule." Meaning that the same product will have multiple indications. So a good example is Dupixent. So when I developed Dupixent with Regeneron, we decided, we picked the targets, IL-4, IL-13, because I knew that these two targets were all involved in allergic diseases, this what we call Th2 immunology. And there were 14 different indications for that particular pathway. So my approach is really a mechanistic approach. We look at the pathway of molecules that are relevant to a particular disease process, and we touch them so that we can, in fact, you have multiple indications.
So in the MDX-2001, that we will disclose the targets pretty soon, there are almost 10 cancers that can be responsive to this. So our strategy is gonna be to do a basket trial, where we you know a few of each one of them, see which ones are responding in the best, better way, and then go to phase I-B and 2. So the strategy is to explore a much wider field than just one indication. But the 10 indications that we think about, and that that is the strategy that we're gonna use. So as we see results, because it's open label, we will decide where to go. Do we get more responses in pancreatic cancer or in gastric cancer, or which ones? And then we'll prioritize that and then enter the pivotal trials.
One question that I know Adam has been asked is: how does that impact your R&D budget? I mean, are you going to break the bank, right? So do you wanna talk about that?
Yeah. So I think the way, you know, all the partnerships that Elias walked through are great ways for us to advance all of the programs that we have in a cost-effective way, where we're choosing programs to self-fund, and we're choosing to partner other or secure non-dilutive financing for other R&D programs. Historically, OPKO has spent, you know, between $60 million and $80 million a year in R&D. We don't see that changing. We'll provide more formal guidance in our February call. But, you know, we would expect that we'll continue to make meaningful investments into R&D, but really leverage our partnerships and relationships to allow us to do more than perhaps those dollars will reflect.
Hmm. I think that's an important question, because when you have a sort of a biotech formation stage, and you say you wonder what that... You need to manage that appropriately. We've been very lucky in the ability for us to attract non-dilutive sources of funding. But at the end of the day, it's a balance across the company, and I think we're in a good position for in 2024 to truly generate what I would call a balanced structure, where you have revenue on one side, expenses on the other, that still end up with a margin that will be respectable. Any other questions or comments? Well, thank you for your attention, and go on. I'll see you in 2024. No, no, 2025. Sorry. Take care.