Yep, I'm good.
Good and back. Okay. Hi, everyone. My name is Maury Raycroft, and I'm one of the biotech analysts at Jefferies. It's with great pleasure that I'd like to welcome the team from OPKO. We've got Elias Zerhouni, President, and then Adam Logal, CFO. Thanks so much for joining us today. We're going to do a fireside chat format. Maybe to start things off, for those who are new to the company, if you can give a one-minute intro to OPKO.
Yeah, so OPKO Health is a diversified pharmaceutical and diagnostic services company. It was created in 1991 at the beginning and by Phil Frost, who was the founder of the company. The company has a pharmaceutical business that is revenue-producing in both Latin America and here with Ngenla, which is a growth hormone product that was partnered with Pfizer. We have diagnostic tests, like the 4K test for prostate cancer, and then a BioReference Laboratories. She is one of the top 10 laboratories in the country at this point. On the other side, we have a pharmaceutical discovery business, R&D, a biotech company called ModeX Therapeutics, which specialized in multispecific antibodies, which is basically a form of antibodies that has been developed to attack not just one target, but multiple targets at once. Think of it as multiple warhead capabilities. Then vaccine platforms.
ModeX joined OPKO, was merged with OPKO in 2022, and is the biotech side of the business. Think of it as a diagnostic branch and a therapeutic branch and developing new novel products on the therapeutic branch, and then having a diagnostic and inline pharmaceutical business.
Got it. Yeah, that's a great summary and overview. I wanted to start with the diagnostics part of the company because you've had some updates recently there. On March 11th, you announced the second sale to Labcorp, which includes all oncology and oncology-related diagnostics. That was $192.5 million upfront in cash with up to an additional $32.5 million earn-out upon clearing of certain accounts. Just wondering, how does this sale help you streamline operations and increase profitability for the remaining diagnostics business?
I'll let Adam speak to that. Starting by this, the BioReference Laboratories had done extremely well during COVID and expanded very rapidly after COVID. When the testing for COVID dropped, that presented a need for restructuring. When we analyzed the company, it was clear that out of the $520 million revenue, $300 million at the core were very solid. That was the New York, New Jersey area. When you looked at the expansion outside of that, it was more costly to run the laboratories in California. That was the first transaction that we did to divest and monetize, in fact, that part of the company. In oncology, the fact is that in oncology, we had the best turnaround time, very high-quality services, but we did not have the scale.
That was the other reason why we decided to go down to our most profitable core, which is the New York, New Jersey market. I'll let Adam tell you about the financial status of that.
Yeah, thanks, Elias. The business itself continues to do well at the core. We expect the business to be profitable starting effectively now, but throughout 2025, continuing to see the EBITDA improve of that core business that we're retaining, principally driven through the consolidation efforts that Elias mentioned, as well as the 4Kscore test, which is a high-margin, high-profitable test. Making great progress there. Got it. How does that set you up for just, I guess for the deal to close, are there specific gating factors that have to happen?
It's really, at this point, it's the integration steps that are required. There are a couple of state regulatory approvals that are needed. We expect to have all of those shortly. It's really the integration efforts to ensure the continuity of care for the patients and physicians.
Got it. Part of this deal is the $32.5 million earn-out when specific accounts are integrated with Labcorp's business. Is there any perspective you can provide on that, just from a timeline perspective on when that could happen, just the chances of that happening?
Yeah, it's measured six months post-closing of how much of that business came across for specified accounts. We continue to have good, positive conversations with those clients that are moving over, but it'll be measured six months post-close.
Got it. Okay. Wondering what your thoughts are with the rest of the business. Is this something you continue to try to optimize, or could you potentially sell the rest of the business? With this second sale of the diagnostic assets to Labcorp, it was approximately 2-2.5x multiple on sales versus the first sale of diagnostics assets for 2.5x multiple. What do you think would be an appropriate multiple for the remaining diagnostics business?
We continue to focus on the profitability and the growth of the remaining business, knowing that by owning a growing and profitable business, it will become more valuable overall. We think that the relative trading multiples are 2-3 times revenue, and that's where we've seen those initial transactions. And with this remaining business being profitable and growing, should see that range of multiples.
Got it. So not really committing to trying to sell it. You wanted to make it more profitable, and you'll see what happens, whatever makes the most sense.
The optionality is what we're looking for. That's right.
Okay. Makes sense. I wanted to shift gears and talk about growth hormone and that collaboration with Pfizer. That includes a profit share agreement for the weekly growth hormone in Ngenla, and then Pfizer's daily growth hormone Genotropin as well. You reported lower than expected related revenue of $4.5 million versus $9.6 million in fourth quarter 2024. What has Pfizer cited as the reasons for the lower than expected revenue in the first quarter? What do you expect for second quarter?
Yeah, the primary driver for the shortfall in Q1, and as we only brought our guide down by the shortfall in Q1, we do not expect it to persist throughout the year, was really a gross net issue where we saw higher than expected copay assistance program support for Pfizer that came through during the first quarter. We do think, and Pfizer believes that that is a Q1 event, and most of those patients have gone through that copay assistance program. As we resume the rest of the year, it will return to normal levels. That is where we expect the rest of the year to shape up.
Got it. Okay. In the past, you've said that we can think about this in general profit share like an effective royalty rate in the mid-single digits, and this could grow to mid-20% range. What is the current effective royalty rate for Ngenla, and do you still expect it to reach the mid-20% mark over the long term?
Yeah, the effective royalty rate today on the franchise still sits in the single-digit range. The way it'll grow is as the franchise overall expands, as well as as the long-acting expands as the total piece of the pie. The long-acting conversion has been slower than we expected. I think globally, the long-actings take up around 15%-20% of the overall growth hormone deficiency market. We think that will continue to expand. As the franchise reaches peak, it could reach those mid-20s effective royalty rates.
Got it. And you're guiding to $30-$40 million in growth hormone profit share for 2025. How do you view the profit share evolving longer term, and what could peak look like?
Yeah, so Pfizer's the commercial entity, right? They've in the past said that they think Ngenla could be a $500 million-$1 billion product. We know that Genotropin's peak revenue was in the $700 million-$750 million range. It all sounds right to us, and we think that our participation in the mid-20% will be where that could be. Pfizer's working today to expand the label for the additional pediatric indications and expect those trials to commence late this year.
Later this year. What are some of those potential expansion opportunities?
They're going to run a basket trial looking at all the different indications that have pediatric indications.
Got it. Okay. Okay. I want to shift gear to ModeX. Elias, you mentioned this is kind of the therapeutics platform and part of OPKO. You plan to show a clinical safety update from your tetra-specific antibody 2001 by the end of 2025. Can you provide more specifics on this antibody and especially the CD3 masking approach? And yeah, maybe.
Right. This is actually the first quadrasepecific in the world that has been launched against two cancer targets, cMET, HER2, and two activating signals, CD3, CD28 for T cells. What we have done, we really developed a molecule that does not have masking. Masking is a different thing. Masking is when you cover one of the binders, CD3 in general, and then you hope that it gets to the tumor, and then it opens up. It is not what we have. We adjusted the affinity of the CD3 and the CD28 so that because it is quadrasepecific, there is only one binder, not two. It does not over-activate CD3 until it really locks into the tumor. That is really what this molecule is. Innovative in nature. The platform is unique. We have shown that it can be done.
We can do triple, I mean, bispecific, trispecific, quadri, up to six specificity. Now, in terms of the trial, the clinical trials, the first one to go to the clinic, the big question that people had was, would it be toxic? Would it be too toxic? With the FDA, we did a six-steps process, and we have gone through four, and then we're going to fifth in this month. You don't know how long that takes because it's a cohort at the time. The sixth one till September, October. By the end of the year, we hope to have gone through what we call the safety window with the FDA, and then we'll be at what we think is the beginning of therapeutic doses. Obviously, we'll do a basket trial at that time.
Depending on the results we observe, we will focus on the one or two tumors that have the best responses. These tumors have to have a high expression of CD20, high expression of cMET. There are 14 tumor types that have actually this kind of thing. We need to really narrow it down. We cannot do 14. Eventually, if this works, it would be a pipeline in a single molecule. That is going well. Now we have other programs that are emerging. There will be at least two programs this year that are going to the clinic. The partnership with Merck is going well. As you know, we've had a vaccine that we developed for EBV that they licensed in for $50 million upfront and $870 million in milestones. It's going well.
They financed us because we carried the molecule to phase I. They are developing it. They are in the middle of phase I, and hopefully, we'll hear about it this year.
Got it. Maybe going back to 2001, for where you expect to see efficacy with the dose escalation, should we think that that could be like the sixth dose level, or how are you framing that?
We don't know. We don't know. We are observing some changes right now that tell us that the drug is active. We're looking at some responses. We had fast progressives that are stable now, but that is anecdotal and should not be taken seriously because my experience is that there's a randomness to the response at the beginning, and every patient is different. I think after the sixth dose, that's when it gets serious because we're already seeing that the drug is effective. It's maintaining its efficacy, I mean, its effectiveness. We will know that after the sixth level. That's the plan.
Are you getting some voluntary biopsies from these patients to see what the drop 2 and cMET look like?
We do have biopsy material, so we can measure that. It is not what you call a diagnostic selection criterion. It is really, at this point, it is a phase I, remember? It is really safety. We do patients that are in that third line, fourth line. They have gone through a lot of things. It would not make any sense at this point to sort of say, "I want to see if there is cMET or CD20 in a patient who is really in the fourth stage," and try to see efficacy. You see? After that, we will, in the phase I-B, then we will, in fact, try to get patients with biopsies to see how many CD20 receptors they have, how many cMET receptors they have.
Got it. Okay. You mentioned for the CD3 and CD28 that lower affinity is part of the rationale there. Is that specifically for CD3, or is it?
CD3, yeah. We think that that's the real trigger, CD3. We have been trying to really adjust and fine-tune that with the preclinical data. We think that that might be, in fact, the magic thing because there is a CD3, CD19 that was licensed by Merck for $700 million upfront. That was, in fact, the approach that they used, not masking. They used a tuning strategy.
Got it. Okay. You mentioned some of the other programs for ModeX. You're going to be starting two more phase I studies with 2003 and also your immune rejuvenator 2004 in late 2025 or early 2026. Do you plan to run both of these studies to maximize economics to OPKO, or could you partner out one of the assets in the near term?
Right. Obviously, when you do R&D, like I've done it, what happens is there are two things that really hurt you if your pipeline is empty or your pipeline is too full. If it's full, you have to really finance the clinical development. That's expensive. We are looking at alternatives and trying to see partnering at an early stage for some of the assets so that you can finance, in fact, other assets and keep the economics for that. I cannot tell you what and how. I only can tell you that there's quite a bit of interest now in the multispecific field, and we're talking to multiple parties. I cannot be predictive in any way. We will try to finance our efforts through strategic partnerships, yeah.
Got it. Okay. Can you give more perspective on the targets and mechanism for the immune rejuvenator asset and which oncology or immunology indications do you plan to evaluate in phase I?
Right. So the 2003 is a CD19, CD20, CD3, CD28 quadrasepecific. And in lymphomas and liquid tumors, CD19, CD20 are the main markers that, I mean, targets that people target, whether it be a CD20 antibody or the one from Roche or a CD19 antibody, that's the one from Amgen. We do two. Why? Because these tumors usually have CD19 and CD20. And if you attack CD19, the tumor responds by growing the CD20 cells and vice versa. By attacking the two, we know from preclinical data, it's a lot higher kill ratio and a lot higher response. That's one. The rejuvenator is another idea. The idea is that if you really study what's happening in immuno-oncology, you get 10%-15% responses and long responses, but then it fails. It fails because the immune system is exhausted.
This is what PD-1 is supposed to solve because the immune system has tried to destroy the cancer cells, but it's tired. It's exhausted. You put PD-1, that removes a block. On the accelerator side, what could you do? It turns out there are three signals, what we call signal one, two, and three: CD3, CD28, and 4BB. That signal, 4BB, is the one that gets this thing to be sustained, not just in cancer, but in any case where the immune system is depressed or impaired. Aging, for example, you can see that in aging. That's why older people get more cancers. It's because the immune system is sort of degraded by age. The same thing is true for other conditions where the system gets really older, if you will, even in cases where there's immunosuppression and so on.
We came up with the idea and the realization that we can actually do a rejuvenation approach or reviving or reinforcing the immune system, which will have an enormous number of indications. We're going to test it in cancer first. We're going to try to do that. The trial is going to start. We're already pretty much in the last stages of getting the IND and getting started this year. To me, again, my strategy is always to use a drug that has multiple functionalities so that you can essentially achieve what I call a pipeline in the drug. That's what I did when I was at Sanofi with Dupixent. Dupixent, remember, is a dual-action antibody. That is the future, I think. That's what we're trying to do.
For this immune rejuvenator for 2004, so it sounds like 4BB is one of the targets?
No, no, no. 4BB is not one of the targets. 4BB is one of the activators. It's not just like CD3 is the first activator. First, you activate the cells. Then the cell has to proliferate. It gives a second signal, which is CD28. The whole response needs to be magnified, right? That's 4BB, the role of 4BB. It's a protein that is attached to the antibody that basically maintains the immune system in activity. In aging, it goes down. We're replacing that, if you will. What we're seeing is that we see a major rejuvenation of the system.
Got it. Okay. But the targets here, you haven't disclosed for 003?
No. Not the cancer targets.
Okay.
Yeah.
Okay. Maybe one quick question too. For 003, is the CD3 affinity the same there, or are there different CD3 affinities?
No, it's a different affinity.
Got it. Okay. Interesting. Maybe let's.
I'm not 100% sure. Now you're really getting down in my mind because we have several. I'll give you the answer later, but it's a tuned affinity. Yeah.
Okay. You mentioned the Merck program too, which they're on track to complete that phase I study in the second quarter of this year and make a go, no-go decision on that program, which would trigger a milestone to OPKO. Wondering if you could say what the milestone payment is and if there's any data from that study that you think you'd be able to disclose this year as well.
I don't recall what the milestone was. I don't know. Do you know, Steve? Do you remember? I think it's $20 million, but I'm not sure. It's something in that range for the beginning of phase II. Yeah. It's going well. I mean, everything I hear from our colleagues at Merck is that it's going well. They've done the first, there's two parts to phase 1-A. One is with one adjuvant, and then the other one with another adjuvant. The one has been already completed, and it's doing well. The second is being completed as we speak. We should hear any time now. The analysis will come up as to whether or not you go to phase II.
Right.
Right. Right, so far, so good.
For phase II, with EBV, there's been a lot of interest in potentially an approach for multiple sclerosis and other diseases as well. Any thoughts on what a phase II approach could look like?
Right. So when you develop a drug, I mean, a vaccine, you first go after the primary target, which is the primary virus that creates the primary disease that you experience, which is mononucleosis, right? So it's the kissing disease. You know kids get that. They get lymph nodes. They get long syndrome and so on. You want to try that first. The phase II is going to be driven against mononucleosis, right? The second thing is you go after the side effects of the viral infection, in this case, cancer. There are 200,000 cases of cancers that are directly due to EBV, lymphomas, and head and neck cancer, and gastric cancer. That's the second phase. You do an expanded trial against that because you want to see if you, in fact, reduce the number of cancers.
The third is basically underneath of that is MS. And because MS is a completely different trial design that you have to do. So it's really three phases. You may have two phase II's or three phase II's, and then you can go on to phase III. Do you see what I mean? The typical thing is mononucleosis first, cancer second, MS third.
Got it. It really helps with some of the strategy, thinking about the strategy there. Why don't we shift gears and talk about Oxymodulin, which is a program where you're partnered with Entera Bio. You plan to develop in obesity and MASH with an IND expected later this year. Can you remind us how this oral drug can differentiate in obesity and MASH with its dual GLP-1 glucagon agonist mechanism?
Let me tell you that the drug is a GLP-1/glucagon coagonist. We developed it with a new composition of matter a couple of years ago. We tested it in preclinical, and it's really doing extremely well in the preclinical area. The logic of it is really different because when you look at the action of GLP-1 and on MASH, I mean, GLP-1, there's no real receptor of GLP-1 in the liver. It's an indirect effect. It's the effect of having lower appetite and losing fat and losing weight. Glucagon, on the other hand, has direct action in the liver. When you look at the physiology of it, glucagon is actually a trigger for antifibrotic downstream effects like FGF21. For example, when you have the molecule, you realize that it increases the level of FGF21.
As you know, FGF21 with Akero, Boston Pharma, and 89bio has shown itself to be more powerful, probably more effective in reducing fibrosis in patients with F1, F2, F3, F4. It is being tested. You know, there is a Madrigal drug, which is a thyroid hormone. You realize that these two are complementary. You definitely have what I call an entry indication in the MASH area, right? You have the GLP-1, and we know that the glucagon maintains metabolism. There may be a different profile to the GLP-1/glucagon as opposed to GLP-1 GIP, which is the Eli Lilly drug. Boehringer Ingelheim has a GLP-1/glucagon. We are comparing that. We think there is a potential for this drug.
In addition, Entera can deliver it orally, which I think is important because as you look at the patients who lose weight because of GLP-1s, they rebound very quickly. You want to have something that maintains the weight loss over time without a lot of muscle loss. That is the idea behind Oxymodulin.
Got it. Yeah. I think that's a good perspective into how this drug can work. For the phase I-A study to get the right PK and PD dose there, maybe talk about the plan there. Is that going to be in patients with MASH? I guess would you start there, or would you also include obesity?
We're discussing that because recruitment speed is different depending on the disease you have and the competitive nature of it. I cannot tell you. It's a program that Dr. Jane Zhao is running. She's actually evaluating this with key opinion leaders at this time.
Got it. Okay. And for.
We might do both, right? I mean, it could be both. You can select patients that are obese and MASH.
Right. In the same study.
Yes. In the study, yeah.
Makes sense. For showing differentiation, are there specific measures that you would be looking out for?
Oh, absolutely. I mean, the issue fundamentally is going to be, can you indeed achieve greater resolution of fibrosis and MASH than other drugs? Being upstream of the pathway, that theoretically gives you an advantage.
Got it. Let's see. At ADA, you're going to have a poster with preclinical data on the subQ version. Would we be able to compare and contrast that with the Madrigal drug?
Not the Madrigal drug. It's an oral. Madrigal is an oral drug. It's a different mechanism, but you can compare it to Altimmune, I think is the name. And then Boehringer Ingelheim.
Just for my.
Preclinical data.
The effect that we're seeing, and would we be able to compare that? I guess is that kind of the right benchmark?
In preclinical animal data.
Yeah.
Yes. Yeah.
Okay.
I think the benchmark is both Boehringer Ingelheim and Altimmune.
Got it. Okay. Makes sense. Okay. Let's see. Yeah. Anything else about that study that you want to highlight?
Just we're going forward, trying to do it as fast as we can.
Okay. Makes sense. I think those are all the questions we have. Maybe to close out, if you want to highlight cash runway and talk about key catalysts ahead that investors should be focused on.
Sure. Excuse me. We ended the first quarter with about $450 million in cash and cash equivalents. We've committed to two things from a cash use perspective this year. One was $100 million in the operations of the various R&D programs and other operations we have going on, and another $100 million towards a stock buyback and convertible note buybacks. We're continuing to be on pace for both of those. The $450 million in cash and cash equivalents doesn't include the $192 million that we expect to receive from Labcorp when that transaction closes later this year. We continue to think from a cash runway perspective. We're not going to—we wouldn't be deploying cash back into the balance sheet if we needed it for operations. The runway we feel is sufficient to develop the programs to the degree that we have plans around it.
As we think about catalysts, there's probably a handful of clinical development activities that Elias highlighted already. I'll just also mention BioReference in their return to profitability and growth going forward on the remaining businesses is a paramount catalyst for us. The continued development of the Ngenla program for the additional indications and as Pfizer kicks that off, as well as the gross profit share amounts that we receive continuing along.
I would add the fact that we didn't mention it, but remember that the government, BARDA, is funding ModeX to develop multispecific antibodies against COVID and flu. We received $59 million last year, $51 million this year. We have $95 million subject to meeting some milestones. It's going well. It actually funds almost half of the R&D budget of ModeX, okay? That's a non-dilutive source that we use to improve our platform.
We have done a lot of work that applies outside of those disease areas. That is another point that needs to be understood, that our platform has attracted significant non-dilutive funding from the government this time. We are hearing that they are very happy so far, but you never know. So far, we are committed to go to phase I for the first two molecules. We are going to do that as well.
Got it. Maybe last question, just with FDA being kind of a topical point of conversation, how have your interactions been with the?
I tell you, everybody has told me the sky's falling. Every single time we approach them, we just approach them about our COVID program. They responded in time. When you ask for a meeting, they give it to you in time. I haven't seen the sky's falling thing from my point of view. Now, I don't know about everything else, but I can tell you, we've not had a significant delay because of that. I was worried about it, but it's not happening.
Got it. Elias and Adam, thanks so much for joining us today.
Thank you, Mark.
Thank you.