HC Wainwright's third annual BioConnector Investor Conference at NASDAQ. My name is Yi Chen. I'm an equity research analyst at HC Wainwright. For this session, we are delighted to have Mr. Elias Zerhouni, President and Vice Chairman of OPKO Health, and Mr. Adam Logal, Senior Vice President and Chief Financial Officer of OPKO, join us for a fireside chat. Thank you for joining.
Thank you for having us.
To start, I know OPKO Health had two transactions with LabCorp, one in the second half of last year and the most recent one in the first quarter of this year. Can you explain to us what is the rationale behind these two transactions, and how is that going to affect the financial performance of BioReference Health going forward?
As you know, BioReference Health was acquired by OPKO Health in 2015, something, and then had a really run-up for testing during COVID, right? There was huge expansion, national expansion, and then the COVID wave stopped. The efforts, the analysis that both Adam and I made was, in fact, that we were overextended for the volume that we covered. We had labs in California, Texas, Florida. We really had a period of overextension with none of the margins needed to support that business. You know, when you have to fly an airplane, you know, every night from California, it does not make sense. Stage one was really to look at, you know, the distance from the main lab in New Jersey was a factor in the efficiency of the services, right?
We decided that the first step was to really reduce the footprint, keep some of the high-value businesses like oncology and like corrections. That is what we did in phase I, right? $237 million, it is about $100 million worth of revenue out of a $540 million total. The second phase, we looked at our future and the balance of, you know, operations within OPKO, including MODEX, including other things. We said, you know, the oncology business, the oncology diagnostic business is doing very well in terms of performance. We had the best turnaround time. In liquid tumors, we are really second to none. Again, scale matters. This is where we were approached. Would you consider an oncology-only spinout? We did with LabCorp again. That is our second transaction.
Now we have a reduced footprint, very close logistical links, you know, much easier to manage costs. We think that after this transaction, which will reduce again the infrastructure that we need, and we know the numbers show that that is a profitable business. I do not know if Adam wants to add a couple of things, but.
No, I think you said it well, Elias. The main focus for us has been driving growth and profitability into BioReference. The two transactions that we did with LabCorp allow us to accelerate that process and see a large sustainable business going forward in the markets that we remain in.
Got it. Thank you. I noticed that the sales of the pharmaceutical product had a moderate decline in the first quarter of 2025. Do you expect sales to resume growth in the coming quarters?
Yeah. For the full year, we expect growth. I think the quarterly decline in the first quarter compared to the fourth quarter of last year and the first quarter of the prior year were really driven by two main factors. One, there was a softness in the Angelma gross profit share payments coming from Pfizer, which we've learned have come primarily because of some dynamics in the gross and net in the United States market. Broadly speaking, we continue to see growth in the prescription market for both products in that franchise, which is Angelma, the long-acting form of growth hormone, as well as in Pfizer's daily Genotropin. We're pleased with the progress that's been made and really reiterated the guidance that we have for the full year on Angelma, the gross profit shares. The pharmaceutical products business declined slightly.
Really just a matter of timing for some specific government tenders in our Latin American business, which we fully expect to recover throughout the remainder of the year.
Most of those are a little bit of Forex and, you know, Forex impact.
You are satisfied with the overall trend of the gross profit share with Pfizer, right?
I think we'd always like it to be more, but I think Pfizer has done a great job with the global launch of the product. We think they've got some strong plans to be competitive in the U.S. market as well as in a number of the other major markets. Have done a nice job of building up some programs to do that and have plans for label expansion, which will lead to future growth as well.
What would be the main drivers for the top-line revenue growth for the next 12 to 18 months? Is it BioReference? Is it Angelma sales profit share? Or is it some other products?
Yeah, it's, you know, the Latin American business or the products business that we have, you know, we've set a growth rate of, you know, between 5% and 10%. I think our guidance at the midpoint, it's about 8% growth rate over that time or through the remainder of this year. BioReference, the remaining business, the piece that we're retaining, we expect to continue to grow at low single digits into the foreseeable future. On the financial statements, you'll see a decline because of the businesses that we've sold there. Once we close, those businesses will no longer report revenue. On that remaining business, we expect sustainable growth going forward there.
Got it. Thank you. I understand MODEX is currently developing a tetra-specific antibody, right, for immuno-oncology. How is this technology differentiated from other approaches in the immuno-oncology space?
It is differentiated as there is nothing like that in the market at all. This is not in the market. This is in the clinic. The reason is very simple is that if you look at the physiology of cancer cells, cancer cells escape detection because if you attack one marker, it will downregulate that marker and then upregulate others. We know that, for example, in the liquid cancers, it is not just CD19. If you just attack CD19, CD20 goes up and CD19 goes down, the tumor escapes. It is what we call tumor escape. The idea that we developed 12 years ago was that multi-specific antibodies that could have not just one specificity, but two, three, four, even five or six would be desirable. Our quadru specific is really the first one to reach the clinic. People were afraid of the CMC, the ability to manufacture.
We have proven that wrong. Our technology works extremely well. We have high yield. We are in the clinic right now with the first one, which is a c-Met/ DLL3. Why did we pick c-Met/ DLL3? It is because there are 14 tumors that are enriched for these markers. On the other hand, we have a strategy of what we call enhanced T-cell engagement with not just CD3, but CD3 and CD28 because those two signals, CD3 engages, you know, it engages the T-cell, activates them, but the signal is not long-lasting. CD28 makes the signal last longer and the proliferation last longer. We expect, and we are already in the fifth level of dose without too unusual side effects. We expect to get into the efficacy range by the end of this year, second half of this year. We will see, you know.
It is differentiated in the sense that there's nothing out there that I know of that has dual targeting on the tumors and dual activation on the T-cells.
Okay. So what is the current status of the phase I trial in solid tumor? How many patients are enrolled? When can we expect to see top-line results?
Yeah. So, you know, FDA is very careful about these tumors. I mean, these drugs are very potent. We start low dose and go up by cohorts. We are the fifth cohort right now. The sixth is when we get to what we think is the efficacy range, even though we're seeing effects right now, but you can't really report anything but safety. We're ongoing. We're at the fifth one. There's one more. Then we'll start doing what we call the basket trial, where we're going to get the tumors that we think are the most likely to respond because they have more drop two, more c-Met. We'll see. It's really, really, really exciting because it's never been done. It's really what the world needs because what you see, the responses right now, they're not long-lasting.
We think the responses here would be stronger and longer lasting.
Got it. Thank you. I know OPKO and Entera Bio is having a collaboration on a GLP-1 glucagon peptide dual agonist, which is a once-daily tablet for obesity and weight management. How exactly does the technology work and why is it better than GLP-1 drugs currently on the market?
It's a good question. You should know that OPKO has had a GLP-1/ Glucagon Co-agonist , which was, you know, pegulated. We carried it all the way to phase II. The problem with that is that it required a high dose, you know, 70 milligrams. We decided to change that and to come up with a different technology, which is acetylated molecule. Then we looked at the molecule that we had and we realized there were two amino acids that, you know, if we could change that, it would be much more active. That's what we've proven in the preclinical stage. It's a molecule that has the same coagonist combination as the one from Boehringer Ingelheim.
It is very, very effective, especially in liver disease because, as you know, GLP-1 receptors do not exist or are very little in the liver, but glucagon does, and it changes the metabolic balance. That is why we pursued that in injectable form. That is pre-IND right now. We are going to test it soon in terms of the safety, but we know already the molecule was already in clinical development. We are not worried about that. In terms of what you are saying about the oral form, the Entera biology has a technology, which is a formulation technology, which protects the peptide as it goes through the stomach. You get a percentage into the bloodstream.
When we did the PK data, the PK studies with Entera, we realized that their TAB technology actually does protect our peptide and does allow it to go up into the bloodstream at a very good PK and PD. This is on preclinical models. We thought that it was a good idea because when you look at the effect of GLP-1 glucagon, yeah, there is an effect on weight, but there's also the issue of sustaining the effect over a long time. The problem with GLP-1 is that you lose a lot of muscle. Doing it, you know, where you have maybe a dual period, injectable first and then sustained through oral might actually make sense. There are clear regions of the world where injectables are not desired, and even in the United States.
We think it's an interesting molecule that really is not being tested. The other ones are GLP-1, GIP, and so on. You ask the question, why is it better than just GLP-1, right? The issue is what I said. GLP-1, as it's being tested, shows no effect really on the liver because there's no receptor of GLP-1 there or very little. That's the idea, that you're really combining two effects, which is what tirzepatide does, which is what really everybody thinks needs to be done. We think that having an injectable and an oral that could be combined with other drugs may have a huge impact on fibrosis in the liver and other conditions and expand from there.
Got it. Now that Novo Nordisk and Eli Lilly are providing lower-priced cash pay access to semaglutide and tirzepatide, do you think there is still an attractive market opportunity out there for a dual agonist oral tablet?
Yeah. I mean, obviously, you know, it's always the same thing. Immuno-oncology, I remember when people care of PD-1, said, "What do you want to do? Anything PD-1 again?" I mean, the market is huge in obesity. If you just look around, you're talking about a multi-year, multi-billion dollar market. I think you're going to have differentiation depending on the disease state. A patient who has diabetes is not the same as an obese patient who doesn't have diabetes. You're going to see specialization and indication specificities that will really be different in the future than they are today. We're seeing that already. I mean, you know, you talk about GLP-1, but people are saying, "Well, maybe we need more long-acting, more self-control, less bone muscle loss." You'll see actually a lot of innovation because there's such a market.
We are one of two or three in the GLP-1 glucagon category. We think that there will be a market for us. It's not a big company. We don't need multi-billion dollar drugs.
Yeah. Thank you. OPKO also has a program for Epstein-Barr virus vaccine. What's the current status of that program? For which? Epstein-Barr, EBV?
Right. That is a collaboration with Merck. We developed this technology, which is, again, a multi-specific type of vaccine based on our platform, which is different than the antibody platform. We were able to do four antigens for EBV, which had never been done also. When we showed the data to Merck, they were very excited because of three things. One, it is a very common infection. 95% of people eventually get exposed to EBV. Two, it is responsible for mononucleosis, which is a disease that has long mono and so on. It is associated with 200,000 cancers. It is a little bit like HPV. The thing that really made a difference are the studies that showed that multiple sclerosis, which affects millions of people around the world, has a connection to EBV. We decided to make a partnership in the cave over.
You know, we got upfront of $50 million and then $870 million biobucks. We're already in phase I. We carried the molecule with the phase I. Merck took it over. It's running the phase I trial. It's going well in the first cohort. They're doing the second one. We should know by the end of this year.
Got it. I read that the FDA is going to release a new guidance on vaccine development and approval. Do you think that will have a big impact on your vaccine program?
Yeah, that's a good question. I mean, everybody's wondering, you know, what is this new guidance going to be? Because, you know, it's a big difference between what you call emergency use authorization, which is what COVID was authorized under, and normal use of, you know, in the regular use or non-emergency use, it's pretty known what you need to do. I mean, you know that you have to do your phase II. And phase II is about 3,000-5,000 people. And you know what the statistics of that should be, right? The same is true. I can't tell. I really should not speculate because I don't know what they mean by new guidance, right? Is it on the safety side? Is it on the efficacy side? I don't know. I don't know.
We'll find out.
You'll find out. \
We'll find out.
Does the company currently have a strong cash position to fund all these programs?
Yeah. So we ended March 31 with about $450 million in cash and cash equivalents. You know, we guided this year that we'd use about $100 million of that in operations and then another $100 million in convertible note repurchases as well as acquiring common stock in the open market. In April, we closed on the transaction to take out about $160 million of our convertible notes that used about $65 million in cash. And we've been actively buying back stock as well in connection with that. Our board did authorize an expansion of our existing repurchase program, increasing it up to $200 million. We haven't changed how much cash we're going to deploy this year. As you mentioned, we've got a transaction closing with LabCorp later this year, which will add another $192 million in cash at closing.
You would expect us to continue to be active on both funding operations and R&D as well as deploying capital back to the balance sheet.
Got it. That's very good. Lastly, can you provide a summary of the upcoming catalysts within the next 12 to 18 months?
One thing you did not mention is the work we do with BARDA, the government, on the platform that we have. They are very interested in seeing this platform applied not just to COVID, but to flu and other viral diseases, including pandemic flu. We received $51 million additional this year. We have another $95 million depending on milestones achieved. We are doing very well. We should be in the clinic for the COVID specific by the end of the year. We also have a second immuno-oncology molecule. In terms of news flow, I think we are going to have some flow in the BioReference Health area. You are going to see some flows in the clinic. We are in the clinic already with MDX-2001 and with the EBV vaccine. You are going to hear about that, and then entry into the clinic from our BARDA-funded research.
There is tremendous amount of interest in our technology now. Now that we've reached the clinic and there is no untoward effect, you know, people are always like, "Oh my God, it's a new molecule. Is it rejected by the human body?" No, it's okay. It's fine. That really generates news flow. Hopefully, we'll be able to announce things.
Got it. Let's see if we have any questions from the audience. Maybe not. Thank you very much for joining us.
You're very welcome. Thank you.
Thanks.