Good afternoon, and welcome to OPKO Health's first quarter 2022 financial results conference call. All participants will be in a 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 telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Yvonne Briggs with LHA. Please go ahead.
Thank you, operator. Good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining today's call to discuss OPKO Health's financial results for the first quarter of 2022, as well as the recently announced ModeX Therapeutics acquisition. 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. These 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, 2021, 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, May 9, 2022.
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, which will be a bit different given the exciting announcement about ModeX. Dr. Philip Frost, Chairman and Chief Executive Officer, will open up the call. Dr. Elias Zerhouni, the incoming President and Vice Chairman of OPKO, will then provide an overview of ModeX Therapeutics. Then Dr. Jon Cohen will discuss BioReference Laboratories. After that, Adam Logal, OPKO's CFO, will review the company's first quarter financial results. Following, we'll open the call to questions. Now I'd like to turn the call over to Dr. Philip Frost.
Good afternoon, and thank you for joining today's call to discuss our first quarter financial results and business progress. Earlier today, we made an important announcement, and that is that OPKO has acquired ModeX Therapeutics. ModeX is a privately held biotechnology company focused on developing innovative multi-specific immunotherapies for cancer and infectious diseases. Dr. Elias Zerhouni, Co-founder and Chairman of ModeX, has been appointed President of OPKO Health and has joined our board of directors as Vice Chairman. Dr. Zerhouni is not only a leading authority on emerging trends and issues in medical care and biomedical research and development, but he also has a long entrepreneurial and distinguished academic, government, and industry career. He served under President George W. Bush for six years as Director of the National Institutes of Health, after which he became President of Global Research and Development for Sanofi for nine years.
Elias will provide some detail about the rest of the team, but I'd like to also welcome Dr. Gary Nabel and Alexis Borisy to our board of directors, both of whom have impressive scientific and business backgrounds. Dr. Nabel will become our Chief Innovation Officer, and his wife, Betsy, our Chief Medical Officer. You'll have the opportunity to hear directly from Dr. Zerhouni shortly, and Adam will provide further detail on the transaction. I want to highlight the significant progress we and our partner, Pfizer, have made with NGENLA. Pfizer recently launched NGENLA in the major markets of Germany and Japan, as well as in Canada and Australia. In the US, Pfizer has continued to work with the FDA to resolve any remaining issues to bring NGENLA to patients in the US as soon as possible. On May 2, Sema4 Holdings Corporation announced the completion of their acquisition of GeneDx.
We believe this is another step towards unlocking the inherent value of OPKO assets while providing our shareholders the opportunity to continue to participate in the growing genomics market without a significant investment of capital. John will go into more detail on BioReference, another OPKO asset which we consider to be of great value. With that, I will turn the call over to Elias.
Well, thank you, Phil, and good afternoon, everyone. Today, I think that OPKO and ModeX have taken a transformative step for both companies. I have to say, I'm really excited to have the opportunity to work with Phil, who I have known for a long time, and benefit from his long and successful experience, as well as with the entire OPKO leadership team, to realize a common vision to build a future for OPKO based on leading-edge therapeutic technologies and synergy between OPKO and ModeX programs. While ModeX was formally founded and created a little over 18 months ago, I think it's important to know that it's based on over 10 years of foundational work when we created the breakthrough lab at Sanofi, which was led by Dr.
Gary Nabel, that has advanced unique trispecific antibodies for HIV and cancer into early clinical development. In fact, the team composed of the scientists from that lab all decided to join us at ModeX because of the prospects of further advancing the next generation of multifunctional therapeutics that can, if you will, simultaneously attack multiple disease pathways in a single multi-specific antibody molecule containing up to six specificities and functionalities. In the way that we design it's a versatile, very plug-and-play approach that allows us to explore hundreds of configurations very efficiently. That allows us, and we've demonstrated that, in our platforms, to achieve broad targeting and functional capabilities, simpler manufacturing, and potentially better specificity and safety, which provides, I think, significant differentiation from competing platforms.
In addition to what Phil mentioned, we have assembled a top management team with the joining of John Mascola, CSO, John was the most recent head of the vaccine research center and work closely with Madonna to develop the COVID vaccine, Vijay Shahlani to lead our growing CMC activities, and Ji Zhang as COO, as well as mentioned by Phil, Elizabeth Nabel as Chief Medical Officer, and you'll see all of whom have extensive experience in academia, government, industry. Our early efforts are focused on infectious diseases and immunology, but the technology is so versatile that it can also be extended to other disease areas. We currently have a clinical multi-specific antibody phase l program against HIV in progress, supported by NIH, that shows how advantageous it could be relative to the current approach of having cocktails of several antibodies as practiced today.
We have several programs in late preclinical stages against COVID and its variants, supported in part by DARPA, an Epstein-Barr vaccine, and several quadrispecific antibodies against solid tumors and lymphomas that we hope will enter clinical development in 2023. Many of these programs have also garnered strong interest from other pharmaceutical companies for potential collaborations, which we're exploring at the present time. We will provide you with more details about all our platforms and products in the near future, and I look forward to your questions. In the meantime, let me turn it over to Jon Cohen.
Thanks, Elias, and good afternoon, everybody. As COVID testing has waned, BioReference continues to focus on its strategy to grow our core diagnostic business, grow our specialty testing segments in women's health, urology, and oncology with also our strategic ventures and Scarlet Health. Our commercial payer interactions continue to be successful with our preferred status with Aetna, which became effective on the first of this year. Volume in our clinical base business increased 4% versus the fourth quarter, driven by our preferred status with UnitedHealthcare and Aetna. Within our women's health business, our non-invasive prenatal testing business grew substantially. Excuse me. Up almost 16,000 samples year-over-year or a 219% increase. Our STIs, our sexually transmitted disease focus, and cervical cancer business both grew year-over-year.
For the first quarter of 2022, oncology was up 5% over the prior year and surpassed pre-pandemic volumes for almost all lines of the oncology business, with especially strong performance in our hematology portfolio and cancer genetics. Cancer genetics, largely made up of our OncoCyte suite of testing, has more than doubled in volume in the last 12 months. We continue to bring on additional testing with our OncoCyte investment to include the recent addition of multiple myeloma, which has built out our hematology offering as truly best in class. Regarding our 4Kscore test, with the FDA approval announced in December, we have developed a growth plan to capture additional reimbursement coverage from the commercial health plans.
This test is approved for men age 45 and older who have not had a prior prostate biopsy or who are biopsy negative and had an age-specific abnormal total PSA or an abnormal digital rectal exam. Our reference business from hospitals continues to expand as we add more hospitals each month, and our partnerships continue to grow as we add more care centers, hospitals, and employed physicians within those networks. As expected, our COVID volume trended down in February and March after the Omicron surge in December and January. During the first quarter, we performed 2 million COVID-19 PCR tests compared to 2.7 million tests performed in Q4 of last year. COVID volume currently remains stable and steady on a day-to-day basis as a result of our surveillance testing and ongoing testing for schools, cruise lines, and the sports industry.
We have added several new schools and several additional ships during the quarter. Point of care COVID testing remains strong, and BioReference has performed over 1.6 million point of care tests to date. We perform point of care testing at the Super Bowl and at the NBA All-Star game, and we'll continue to provide testing for the NBA through the finals. In continuation of our point of care strategy, we announced an agreement with Cue Health to bring point of care testing into the clinical setting. It's been a little over a year since we formally introduced our at-home digital initiative named Scarlet Health, and I'm delighted with the progress we have made to date. We launched Scarlet as a way to offer patients a more convenient and efficient way to meet their diagnostic testing needs. Scarlet services are now available in most of the continental United States.
We are receiving added reimbursement from payers as a specifically covered service for over 85 million patients through our national and regional plans. We are seeing significant demand for Scarlet across our different commercial verticals, including oncology, women's health, urology, and strategic ventures. We are also finding success with digital health clients, including telehealth, home healthcare, and virtual primary care networks, as well as direct-to-consumer and patient-initiated testing. I am proud to announce today a formal relationship with Teladoc Health, one of the largest providers of telehealth services in the country, with over 14.7 million visits last year. Scarlet is now offered by Teladoc Health as part of their new whole person healthcare experience. We also announced a collaboration with MVP Health Care to offer their members medically necessary COVID testing, routine blood work, and other diagnostic tests in the comfort of their homes.
MVP is a not-for-profit health insurer caring for members who live in New York and Vermont. Lastly, we are making significant progress on our REACH initiative to take out significant costs and improve efficiency in our operations with over 100 separate initiatives in progress looking at every aspect of our business. Now let me turn the call over to our CFO, Adam.
Thank you, Jon. Before I go into the details of our quarter and full year outlook, I wanted to highlight a few details about our ModeX, Sema4, and Pfizer relationships. As Phil outlined, we entered into our transaction to acquire ModeX today and paid a total of $287 million in shares of OPKO, issuing approximately 90 million shares, as well as restricted stock and stock options totaling approximately 6 million shares that will vest over the next four years. The principal sellers of ModeX have agreed to have their shares locked up for the next four years, subject to certain conditions.
On April 29, we closed our transaction with Sema4, with their acquiring GeneDx for $150 million in gross proceeds at closing and 80 million shares of Sema4 stock, which we have agreed to lock up for one year from the closing date. After considering transaction expenses and a $13.4 million cash escrow, net proceeds at closing were approximately $116 million. We're eligible to receive up to an additional $150 million payable in cash or Sema4 shares upon the achievement of certain revenue targets for GeneDx during 2022 and 2023. In addition, as Phil mentioned, Pfizer, our partner for our long-acting growth hormone, recently launched in Japan and Germany, which triggered $85 million in milestone payments, which we will receive in the second quarter of this year.
Moving to the financial results for the quarter. Our diagnostic segment reported revenue of $286 million compared to $507 million for the 2021 period. This decline reflects decreasing testing levels. However, as John highlighted, we performed more than 2 million COVID diagnostic tests during the quarter. As we discussed during our fourth quarter call, margins during the first quarter were impacted by an increase in labor costs while we managed through the surge in testing coming from the Omicron variant, as well as a significant portion of our test volume coming from our point-of-care testing channels, which have a higher cost to serve. Once the Omicron surge subsided, we took aggressive actions to right-size our workforce and began to realize those actions. Our gross margin exit rates were in line with our full-year expectations.
The first quarter margins were also negatively impacted by approximately $13 million related to that labor charge. As John mentioned, our REACH initiative, targeting $40 million in cost reductions, is well underway, and we'll expect to provide additional updates as the year continue. We continue to invest significantly in our commercial organization, including Scarlet Health, our digital health platform, and we accelerated the investment during the quarter in our GeneDx commercial team, which resulted in an increase within SG&A of approximately $10 million. These increases were offset by reduced revenue cycle management costs and commissions due to the decrease in COVID testing. Moving to our pharmaceutical segment. We reported revenues of $42.6 million for the first quarter compared to $38.2 million for the 2021 period.
Revenue from product sales in the first quarter of 2022 increased 8% to $36.7 million, which included $5.1 million of revenue from Rayaldee compared to $33.9 million in the 2021 period, inclusive of $5.8 million related to Rayaldee. With respect to the transfer of intellectual property, we reported $6 million of revenue for the 2022 Q1 period compared to $4.2 million from a year ago, reflecting a milestone payment received for the launch of Rayaldee in Europe, partially offset by decreased Somatrogon R&D related revenue. Operating loss from our pharmaceutical segment was $18.1 million for the first quarter of 2022. The comparable period of 2021 reported an operating loss of $19.2 million.
Overall, research and development expense for the first quarter of 2022 was $12.3 million compared to $15.8 million in 2021, reflecting a decrease in spending on our Somatrogon development program. With the approval of Somatrogon, amortization of intangible assets increased to $14.4 million from $5 million, reflecting the start of the amortization of our IP R&D asset. Turning to the consolidated results for the first quarter, we reported an operating loss of $72.4 million compared to operating income of $38.4 million during 2021. Net loss for the first quarter of 2022 was $55.4 million or $0.08 per diluted share compared to net income of $31.1 million or $0.05 per share for the 2021 period.
We ended the quarter in a strong financial position as a result of our overall cash position, the net proceeds from our Sema4 transaction, and the milestone in future royalty and profit share payments from Pfizer, as well as the availability under our credit facility with JP Morgan. As we look into 2022, we have updated our guidance with the following assumptions. We have removed the revenue and expenses related to GeneDx after April 29 as a result of the Sema4 closing. We have added the milestone payments from Pfizer of $85 million. However, we have not forecasted royalty or gross profit share amounts until we develop some actual history throughout 2022. We have added R&D expenses to reflect the development programs at ModeX.
We anticipate performing between 3 and 3.5 million COVID diagnostic tests during 2022, including the 2 million tests we've already performed in the first three months of the year. We have not assumed any new surge in COVID testing for the remainder of 2022, and as such, expect our core clinical laboratory business will continue to improve. We have not made any adjustments to reflect the accounting treatment for the ModeX acquisition or the disposition of GeneDx, aside from removing the associated costs and revenue.
With that, we expect revenue for 2022 to be between $1.1 billion-$1.2 billion, including revenue from services of $810 million-$870 million, revenue from products of $455 million-$555 million, and other revenue of $100 million-$110 million. We expect costs and expenses to be between $1 billion-$1.075 billion, which reflects assumptions of testing volume as well as our levels of commercial investments within BioReference, which may choose to accelerate or delay depending on their uptake levels. Operating results include approximately $100 million of non-cash depreciation and amortization as well as R&D expense of $85 million-$97 million. Thank you all, and I'll open the call for questions. Operator?
We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw a question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Maury Raycroft with Jefferies. Please go ahead.
Hi, this is Kevin on for Maury. Congrats on the acquisition. Just wanted to ask about how we should view R&D spend going forward. Maybe if you could talk about what you're most excited about in the ModeX pipeline and how you're gonna prioritize these programs moving forward.
I'll touch on the R&D expense first and then let Elias and Phil talk on the R&D program. On overall, the ModeX programs are not significantly expensive compared to the clinical products. As we move into the clinic over the next 18 months or so, we'll start to see R&D expense start to increase. You'll notice in our guide today, you know, fairly modest increase in overall R&D spend plan for 2022.
Yes. Thank you for your question, Maury. Fundamentally, we have prioritized our portfolio for near-term opportunities that are related to the products that are most advanced. The ones that are most advanced are the ones that we out licensed from Sanofi on an exclusive basis, meaning the trispecific HIV program, which is being developed in phase l right now in collaboration with NIH, which funds actually the clinical trials at this point. We have backup molecules for that program, obviously. We have also a SARS trispecific and a quadraspecific that we're working on that the government DARPA agency is interested in. We will continue to do that. We have a vaccine that Gary Nabel has led the development of and has just published on against EBV, Epstein-Barr virus.
We are really accelerating this one because we have a lot of incoming interest from large companies that would like to partner with us. Those are the main priorities. We need to execute on those. In parallel, we've developed novel platforms, as I described, very versatile with a lot of specificities and functionalities. We have, in that category, basically three advanced quadrispecifics for cancer.
Those we do not want to partner at this time because we believe they have great potential, and the results that we have observed lead us to believe that we should really drive these molecules to phase ll, or entry into phase two, entry to pivotal, once we've conducted all of the pre-IND studies, which are ongoing at this point, and the early basket trials to identify the best tumors to go after. That's really the prioritization we have in mind. Again, as I said in my discussion, we will organize an R&D Day for you all at some point in the next few weeks, hopefully, to give you a little more color on that.
Yeah, I would just add that what I like about the whole program is not only that it's innovative, but it's practical. One of the advantages of the multi-targeted antibodies and vaccines is that it's cheaper to manufacture one protein than three or four or five proteins. Also, it's less risky. With each one you manufacture, there's a risk of failure at some point along the way. Finally, there's the possibility of greater efficacy and even possible better safety. That is something that will be talked about by Doctors Nabel and Zerhouni in a future time. All in all, it represents a program that is differentiated from the many similar but yet very different programs that are underway elsewhere.
Great. Yeah, thank you so much for that. Just a really quick one on somatrogon. Are you still on track this quarter to start the gross profit share in Japan? Do you have any update on the line of sight for when that might occur in Europe?
On the gross profit share, that the Japanese or the region we call the Japanese region, does start in the second quarter. Once they've established pricing, that region moves into the gross profit share. For Europe, we'll need to achieve pricing in two additional major markets. That, you know, we've kind of projected out that would take about a year from the initial approvals. However, it could come sooner depending on how each individual country moves.
Great. Thanks. I'll hop back in the queue. Thank you.
Thanks, Kevin.
Our next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.
Hi, good afternoon, and thank you for taking our questions, and congratulations on the ModeX deal. I've got a few here. Firstly, is ModeX closed or what's the expected timeline on the closing of the transaction?
Yeah, the closing happened today. We signed and closed simultaneously.
Okay, wonderful. The $85 million milestone from Pfizer, as well as the Sema4 $108 million that you referenced, we should expect both of those to hit the income statement in the second quarter. Is that correct?
Yeah. The $85 million, yes. The cash from Sema4 and the shares will hit the balance sheet. We're still working through the gain and loss calculations.
I got it. Okay. Dr. Cohen, some of your comments on COVID testing. The anticipated for the full year as far as the number of tests, can you give us any additional flavor on point of care versus PCR?
Well, I think what's happened is the point of care has significantly increased at many of our surveillance sites, but not all. We still do both for the cruise lines, although it's become much more point of care. We do both for the sports industries, but most of it's point of care. Many of the schools have stayed with PCR, quite honestly. It is variable, client to client. We have seen an uptick, which is no surprise. I think if you see what's going on and you saw the CDC numbers recently, we have seen an uptick in the general public testing through our partners in the last two weeks.
I think the answer is it's like all the stuff with COVID is unknown. We do have, as I said, a steady flow on the surveillance side, and the general public will continue to go up and down depending on what variant appears next.
Okay. Got it. What's the timing on you filing your Q for the quarter?
It should be out today, Jeff.
Okay. It'll give more clarity on the cost of service versus the cost of product revenue.
Yeah. We'll have it broken down. You will see that the cost to serve on the BioReference side was impacted by labor as we had spoke about.
Yeah. Okay. One more on your guide. The second category, I think I missed that. That was between services and other, that was products. At what range was that? Was that $2-something-$250?
It was just confirmed from what we originally provided, $145-$155.
Okay. Got it. 1:45 to 1:55. Okay, perfect. That does it for us. Thanks for taking the questions.
Thanks, Jeff.
Again, if you have a question, please press star then one. There are no further questions at this time. With this concludes our question and answer session. I would now like to turn the conference back over to Dr. Philip Frost for any closing remarks.
I'd like to thank you all for attending this conference. I will say that the acquisition announced today is an important next chapter in the history of OPKO. We're really thrilled and happy to have the addition of Dr. Zerhouni, Dr. Nabel, and their colleagues to the OPKO family. We look forward to working together with all kinds of successes. With that, I'll invite you to attend the conference call for this quarter's earnings, which we will anticipate being in three or four months. Thank you again.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.