Good afternoon. Welcome back. Thanks for joining us for another session at the 44th J.P. Morgan Healthcare Conference. I'm Brian Cheng. I'm one of the senior biotech analysts here at the firm. On stage, we have the team from OPKO Health. And the session here is a fireside session with the team. Maybe the OPKO team can introduce themselves. Who do we have on this stage?
Hi. Sorry. Can you hear me OK?
Yes.
I'm Elias Zerhouni. I'm the president of OPKO Health. I became president of OPKO Health because I co-founded a company called ModeX Therapeutics, which was acquired by OPKO Health in 2022. As part of that, I ended up being president of the acquiring company, and I'm a former head of R&D at Sanofi. I'm a former head of NIH, and I'm also a former academic at Johns Hopkins University.
I'm Adam Logal. I'm the CFO of OPKO Health.
Elias, it would be great to kick off our conversation here. For those people that are in the audience who don't fully know the OPKO Health story, it would be great to get an overview of what you're working on. If you can kind of go through the different components of the business and how you're thinking about the catalysts looking forward, that would be great.
Yeah, thank you, Brian. First of all, let me say that OPKO Health represents a large range of companies going from a clinical diagnostic laboratory known as BioReference Health to a biotech company called ModeX Therapeutics. And so it's really a large span of biopharma that is covered by OPKO Health. So let me cover for you the relevant things that have happened over the past year, year and a half, so you understand. Our strategy has been to truly focus on therapeutics as much as possible and also divest from clinical diagnostics as much as possible to rebalance our balance sheet. And Adam can talk to you about that. We're in a very strong position now. We've been able to divest about 40% of our clinical diagnostic business because of its overextension around the country, which was quite expensive and negative in terms of profitability.
We're reaching now break-even and profitability with the remaining business, which is centered in New York and New Jersey, and with services both in terms of clinical diagnostic but also cancer diagnostics with our lead cancer test called the 4Kscore. We can give you more detail about that. On the other hand of the clinical diagnostic business, we have the biotech business, ModeX Therapeutics, which was co-founded by Dr. Gary Nabel and myself as part of a spinout of a laboratory that both of us created at Sanofi. As we moved out of Sanofi, we realized that Sanofi was not going to pursue the research we started. We made a decision to create a separate company and recover our lab. We did that. Now, the laboratory of ModeX and the idea behind ModeX Therapeutics is the following.
There's no single disease that you can name that has a single treatment, I mean, a single therapy. They usually use combination therapies. Whether it be cancer or immune diseases, it's very hard in biology to modify a biological system with a single drug. So we came up with a concept of multi-specific platforms, multi-specific antibodies, multi-specific vaccines. And we put that in place. And we created a company in 2020. And then we quickly generated quite a bit of interest. So the significant things that I can bring to you for today is, number one, we had a licensing by Merck of one of our vaccines called the EBV vaccines, Epstein-Barr Virus. And we licensed the vaccine to Merck for $50 million upfront and milestones of about $870 million in royalties.
And we were able to, with the support of Merck financially, develop the vaccine all the way to phase one, at the beginning of phase one, at which time Merck took that and developed the vaccine further at their cost. And phase one is completed. And the major event this year is going to be whether or not this vaccine, which has the potential of being one of the most widespread cancer vaccines and also a vaccine against multiple sclerosis, potentially, will progress. And that's really a major event if the company Merck, and we don't control that, goes from phase one to phase two. Because everybody knows in the vaccine trials, that's the moment where you really have confidence that the vaccine is performing according to plan. In addition to that, we wanted to become a more clinical company.
We have two other products that have entered the clinics. One is MDX-2001, which is a cancer solid tumor product which has two targets on cancer, c-Met TROP2, and two targets on T-cells. So it's a T-cell engager. And it's been going on through its phase 1A. It's almost at the end of phase 1A. And we've treated 23 patients so far. And we think we have an effective dose. And we're going to go to phase 1B this year to try to focus on the tumors that respond best. And we have some evidence of that already, although our main goal is really safety and tolerability. We have entered another drug in the portfolio called MDX-2004. It is a unique, first-in-class, never done before molecule. Why?
Because one of the fundamental issues that you face in health care today is that many interventions lead to immunosuppression. And if you look at cancer, if you look at patients who receive other drugs, there's a common link, in fact, that the immune system weakens, basically becomes exhausted, unresponsive. Or with aging, you have what we call immunosenescence. And no surprise, you see that lots of infectious diseases, COVID, flu, RSV, others, pneumonias occur in older age. And with age comes frailty. And so the idea we had was, can we come up with one compound that can rev up and rejuvenate the immune system? And we think we have that in a trispecific antibody that we created, trispecific molecules that have two antibody binders and then one ligand. It's called CD3 CD28 4-1BB. And it's in the clinic already with about four patients done.
So I can't comment very much. But that's a signal development. In addition, we're going to enter two more molecules in the development pathway. One is supported by the government, by BARDA, for COVID and also potentially flu. And we've gotten clearance from BARDA. And we've applied to the or applying to the FDA. And then the last one is MDX- 2003, which is a quadrispecific. It's the first quadrispecific against lymphoma and against leukemia and liquid cancers in general. In addition to that, we entered into a very unique relationship this year with Regeneron. And Regeneron, as you know, is a major innovator in antibody technology. And we've decided to collaborate with using their binders, which have been developed over the years, and using our platform, which is the only one that can really do more than bispecifics. We can do trispecifics, quadrispecifics, or penta or hexaspecifics.
We decided to work on four programs together. That has already started. Again, it's a non-dilutive financing. That allows us to expand our portfolio at pretty much low risk. It involves obesity and metabolism. It involves cancer. It involves immunology. Those are the areas with very specific targets that we've defined jointly. Last but not least, over two years ago, we realized the potential of in vivo CAR T cells. We've developed a product, a platform called in vivo CAR T. The difference with our platform is that we can target it using multi-specific antibody. We can target it to any cell type. On top of that, we can create multi-specific chimeric antigen receptors. The versatility and the technology we develop, which is really unique and they're free to operate, really, is attracting a lot of interest.
In addition, our main line businesses, and Adam can tell you, are doing well. Our international pharmaceutical branch is doing well. Our Rayaldee product is doing well. So we've balanced the balance sheet as well by retaining royalty, I mean, monetizing some royalty from NGENLA. And I'll really let Adam give you the total financial picture. But the punchline is we've really rebalanced the company to a company that had a lot of risk in the clinical diagnostic business to one that has pretty much rebalanced that to break-even and profitable, essentially, hopefully this year. Other revenues, a lot of non-diluting financing with Merck, with government, with Regeneron. And now a portfolio that is essentially very rich in inflection points over the next year, year and a half.
Great. Well, thanks for that great overview. So maybe just focusing on the diagnostic piece of the business first. And then we can spend the latter half of our conversation on more of the pipeline. As we think about the lab testing core business, can you talk about just how we should think about projection? How confident are you in terms of reaching that break-even profitability milestone? And what are some of the goalposts along the way that investors and also analysts should really hone in on?
Sure. So for the clinical lab business, we've spent the last couple of years restructuring that business, as Elias talked about, taking out nonprofitable segments of the business, segments of the business that had a high cost of delivery, and really focused and concentrated it on the New York, New Jersey markets for that clinical lab business. In addition, the 4Kscore is sold nationally through into urology practices, which is a high-margin test and has a potential for high growth as well. This year, delivered over 15% growth in testing. That test by itself does about $25-$30 million. And we think that's just scratching the surface for what is potentially possible for growth there. So it's one of the main accelerants for profitability as well as top-line growth.
We guided for 2026 on a top line of about 3%-5% of revenue growth off a base from 2025 of about $300 million of the business that remains. So it's still going to be a slow growth where our focus is not investing deeply into the commercial organization. Rather, we're going to continue to focus on operating efficiency and delivering profitability. It's been a few years since that business has generated profit. So that's really where our key focus is. We feel very good about where we're at. We saw the fourth quarter continue to operate. We're still working through the financial close process. But we will have our update in a few weeks on that. But our guide is to deliver single-digit EBITDA on that business in 2026 with cash flow positive operations by the end of the year.
So maybe just a little bit more color on 4Kscore adoption. What are you seeing on the ground? And maybe for those who don't fully know the 4Kscore test, maybe just a background on that and also what is giving you a sense of, oh, this is trending the right direction. And this is something that could really be a growth lever for the testing business.
Sure. The 4Kscore is a test that we developed a number of years ago that was designed to assist urologists and physicians to identify patients that are at a high risk of having aggressive prostate cancer. The PSA test is a great screening test. But it's not specific to identifying aggressive prostate cancer. It's a simple blood test. You get basically a score that takes in four kallikrein markers plus some clinical information to use an algorithm to calculate the patient's risk. It helps enrich, essentially, the urologist population for who should be biopsied. Because right now, there are still a lot of men that are being biopsied and re-biopsied that don't necessarily need to be because they've got either an indolent cancer or their PSA has been elevated for another reason.
One of the things that we did in 2025 was we worked with the FDA. It is an FDA-cleared test. So we worked with the FDA to remove the requirement for a digital rectal exam. That was a little bit of a challenge in the marketplace where physicians, particularly non-urology physicians, were a little bit limited in their desire to do a DRE in order to use the test because that was a required component of the algorithm. So we worked with FDA to show them that the algorithmic change does not get influenced significantly enough to change the score and the result, and therefore, we think the potential for prescribing into the broader physician marketplace is there as a result.
Great. Well, let's turn to pipeline. But before we do that, any questions from the audience? So let's switch gear into the pipeline, the Merck partnered assets. Where are you in the process? And I guess, can you give us any color on where the asset is? And what is really the next milestone for the program?
So I can tell you that the phase one is complete. And the phase one involved testing of the antigens that we generated, but also some adjuvants. And there were two adjuvants that were tested. So it involved about 250 patients thereabouts. And the data is being analyzed fully. But what we understand is that both adjuvants are performing. And then the immunogenicity of the fundamental antigen is excellent. So this is what a company should take into account, looking at the different populations, seropositivity, seronegativity, and see how the immunogenicity persists over time. And hopefully, that will drive their decisions to go into phase two and how to go into phase two, which I expect to happen in the first quarter, hopefully.
Do you have a sense of the criteria that your partner is laying the groundwork on? OK, this is the things that I need to line up or things that I want to see in a phase one before greenlighting phase two. Is it regulatory? What components are perhaps the most important things?
Initially, the components are safety, obviously. How much reactivity do you get? And on injecting what you inject, is there a negative response? So that's number one, and from what I gather, that's fine. The second is what we call level of immunogenicity. When you have a patient, you're given a vaccine, you want to see the immune response of the patient because that's what protects the patient, so that measure is an exceptionally important one, and we have references because there were vaccines against EBV that were developed in the past, and so there was a 70%-75% efficacy with a GSK vaccine, so you want to exceed that by a significant amount. Those are the criteria that you immediately want to know when you look at immunogenicity of a patient population, then you have the patients who have been exposed and the patients who have not been exposed.
So you want to see how does the vaccine respond or perform in both populations. Then obviously, as a large company, you have a capital allocation, a strategy. You see, OK, I have a vaccine division. So that's in Merck's control. I can't tell you what those criteria are going to be for them at that time, given their strategy and requirement. The potential of the vaccine is as large as that of Gardasil. Because remember, it's not just a mononucleosis vaccine, but it's an anti-cancer vaccine because 200,000 patients develop cancer as a result of exposure to Epstein-Barr. And more importantly, what has really excited the field is the discovery that, in fact, Epstein-Barr is probably the cause of multiple sclerosis. And because of the number of patients who develop multiple sclerosis, you can imagine the incentive that there will be to do that.
But that market analysis is something that needs to be done by them, not by us.
Are there any financial milestones that are tied to the start of the phase two? And how are you thinking about communicating to the street when they have these milestones?
There are significant milestones. As you know, we had an upfront of $50 million. Then a complete financing of all the research between where we were and where it needed to be for phase one entry. At phase one entry, we received $12.5 million. At phase two entry, also, we will receive an amount I can't disclose. You can imagine $12.5 million-$50 million. It's somewhere there.
So just turning to the ModeX platform, how do you think about this piece when it comes to, I guess, just strategically? You have partnerships. Now, the most recent partnership is Regeneron. You also have Merck layer on top. You also have a diagnostic piece that will reach break-even. And I guess it's just the last piece is the clinical pipeline. You talk about balancing your portfolio in terms of not just risk. It's also just resources. So just kind of start there as how do you think about allocating resources? How do you think about prioritizing what you have to make sure that one of these assets is going to win?
That's always a great question. It's a question you ask yourself every day, so number one, I think BARDA is funding $200 million of all of the antiviral programs, and they give us the green light to go into phase one now for the anti-COVID. We are presenting data to them for the anti-flu antibody, Flu A and Flu B. It's a pan protection against flu, and they asked us to fund also the fundamental platform, and we've achieved really great results in terms of manufacturing, in terms of yield, so they're happy with that, so that portfolio is advancing nicely. We also have a great interest in antibody against HIV, and so there's a strategic relationship, but there, we really decided that because of the risk in developing just your own antivirals, we didn't want to do it without the support of BARDA.
Then on the other one, the other assets, you understand that we're going to have five products in the clinic. Four of them are fully developed by us and paid by us. Now, when you get into the clinic, your preclinical research is sort of overextended. And so what we decided to do was to find strategic partners like Regeneron so they can basically recycle our research capabilities through a partnership. Now, in terms of going forward, we do have the in vivo CAR-T, which we want to continue to own fully. And so the big decision that you have is you say, OK, which assets do you want to own fully and which ones you can partner to sustain the operation and sustain your research engine and your platform? And that's where we are. So we decided to keep 2001, 2003, and 2004 as fully owned assets.
And obviously, the EBV is with Merck. And there will be candidates that we will develop this year through our research with Regeneron, which will become candidates to the portfolio. But then those will be shared assets and paid fully by Regeneron. I mean, all the cost is on Regeneron's side. Now, in terms of the milestones, as you know, it depends on progression. And the amount of milestones with Regeneron is about $1.2 billion. And the timing is going to be determined by whether or not a candidate advances, at which time we'll own a milestone. And we'll be able to tell you through that whether or not it's progressing.
So turning to 2001, we're going to get more phase 1 data this year. What do you think we should look for in terms of obviously safety, but in terms of efficacy? Where do you think the bar is so that we can have a good sense of what the next step looks like?
Well, you know in cancer trials, when you do a cancer trial, you have to understand that you're not taking patients who just developed their cancer. They're patients who are fifth-line where everything else failed. And so you want to see some responses in that patient population, which is pretty much hopeless at the time. And we are seeing that. So that's why it gives us courage to go forward. Second is we have a molecule that can affect 14 different cancers depending on how much TROP2, how much c-Met, how many T cells are there. So that is the explorations we're going through now. Once you finish that phase, you know what dose you have. So far, there's no showstopper or no patient died or stopped the medication for adverse events. And so we know that we are at a therapeutic dose with acceptable tolerability.
Then the question is, you maximize which cancer is going to be the most responsive cancer to your therapy? And in this case, we think it's going to. We've had good data, maybe lung cancer, maybe liver tumors. We don't know. This is the phase 1b. So when you ask me when do I know that you've progressed is when we go into phase 1b this year, and we'll have to talk to the FDA about that.
I guess from a phase 1 update, do you think we'll have a good sense or at least some rough sense of some level of dosing, optimal dose, and also some sense of directionally, which indication that 2001 should fit in?
Right. You will. You will. Look, we don't go into phase 1B unless we see not only tolerability and safety, but also some signals of efficacy. But you can't really count on that because we have 23 patients dosed so far. And you can't have the statistics at that point to decide which tumor is the best. So you need the second phase, the 1B, to concentrate on the one or two tumors where your models and your data are telling you that these are the two most responsive tumors. That's what we're going to do.
Got it. OK. How are you managing CRS as you escalate into the higher dose? Can you just talk about perhaps some of the tolerability profile that you've seen?
So it's really interesting. I mean, the CRS is really managed at the clinical level by the oncologists who have that experience. And there are very typical protocols for doing that. This is not what it was five years ago when people didn't know. So we know how to do that when there is a CRS. The question really is, how do you design your protocol to really reduce the events of CRS? And that's the experimentation that you do in the first phase. Why? Because if you have, let's say, your dose escalation, that gives you, OK, when do I see a CRS? Second, what we know is like in these drugs, in T-cell engagers, whether it's CD3, T-cell, any step dosing is important. In other words, you don't give the maximum dose day one. You give a lower dose. It's called the first step.
And then you wait. And then you get a second step. And that creates tolerance. And what we see is that once you do that, you get actually better, less CRS symptoms and much more manageable symptoms. And then in some cases, you use steroids as a way of reducing the impact of CRS. So that is pretty well known in the field. I don't think we're inventing anything here. It's pretty recognized that if you use different doses at different, I mean, step dosing and then intervals, you manage the intervals, you find a real window where you can get efficacy at very acceptable tolerability.
So over time, the CRS profile, as you start to figure out the dosing interval, the occurrence of the CRS should moderate.
That's exactly right. And that's what phase one B is going to help us with because we will know what the protocol is, what the interval of injections is, the dose, the steps. And that really helps a lot. And the management of CRS is pretty standard right now. It's not what it used to be.
Right. So maybe just turning to 203, maybe just give us a broad sense of how you come about the trispecific targets.
You mean 204 or 203?
Oh, 204. Yeah, and how soon can we get a sense of the clinical profile?
Right. So the idea there is the following, is that many, many patients experience reduced immune system function. And so it's almost like heart failure. And when you have heart failure, you say, OK, what do I need to do to get the function back? It's the same concept here. I think, like Gary does, my colleague, that there is an immune system failure syndrome that you see, especially in patients who have cancer, in patients who have immunosuppression, patients who are aged patients. So you know that there's a large population of patients that experience the equivalent of heart failure but an immune failure. And as you study the science, you realize that there are signals that are very, very key to maintaining the level of immune response that you need to be protected from cancer, from pneumonias. What is it?
I mean, often when you have a cancer patient, you see the white count, the immune cells count go down, at which times you need to stop the trial. You can't really do anything. So we found that by combining the key three signals of immune function, one is CD3, which activates the T-cells, then CD28, which helps proliferate the T-cell, and then 4-1BB, which really is the most potent factor to prolong the activity of immune cell to prevent the exhaustion. So we found that from experimentation and from animal studies that when you do that and you use that triple combination, you see an enormous increase in T-cell circulation, B-cell circulation, stem cells, and memory B-cells. That tells you that there is a complete sort of rejuvenation of the system. That's what we're trying now in human patients.
And we're observing very similar effects. So the idea here is that to me, when I was doing the R&D at Sanofi, I always focused on what is a molecule that will support a pipeline. So it's a pipeline in the molecules. It's like the Dupixent when we did IL-4, IL-13. And when I was at Sanofi, the reason I was excited about it is there's 14 indications. Now, if you list the indications for the drug that you're referring to, there are like almost 25. So we think that this is really a pipeline in the drug. And hopefully, it will be safe and tolerable.
So in some way, is that, I guess, when you think about some of the other modalities, do you think that the reset of the immune system in some of these autoimmune diseases, do you think that is a much stronger reset in comparison? I mean, it's going to be hard to show. But do you think that there's a fundamental thesis that suggests that?
About the reset?
Yeah, about reset.
It's clearly the case because when you look at an immune system response, it resets itself. When you have an infection, it goes in and then resets itself when it overcomes the infection, when it's successful. Otherwise, you die from sepsis. So there is a natural reset phenomenon. Now, here we're going to try to prove it in a very special population. We're going to compare two populations in phase one. One is a population of cancer patients who did not receive PD-1 or have had PD-1 in the past and patients who received PD-1 but stopped responding, and we're going to see how many of these patients recover their function, and I'm very optimistic that we're going to see, in fact, recovery of PD-1 efficacy.
And we're going to also try the drug per se without any, so we'll know what the drug per se does to a patient who has reduced immune function, who's not seen PD-1s or anything, and then patients who have failed PD-1. They had PD-1. They did well. And then they failed. And then you want to rejuvenate at that point. So those are the two subpopulations. And the design of the trial is to give us that answer that you're asking for.
So do you think that ultimately by itself there could be that it will deliver efficacy? Or do you think that you want to have basically hit that button to reset then push PD? What is going to be immune-.
Great questions. But here's the thing. You know that at your age, not mine, viewers, but at your age, basically, the incidence of cancer and pneumonia is very low. So you know that your immune system per se, without any medication, is defending you. So you know that there is an opportunity here to say, I rejuvenate the immune system. And it will defend you against a whole series of mishaps. So that's the recovery, the fundamental function aspect of it. Then you can also see that when you're treated with certain drugs and in certain conditions, the system is exhausted. It fought and it failed. It's failing the battle. It's failing the control of the disease. And that's when you come in and you give them an infusion of supportive measures so that they can recover from the exhaustion, if you will. So those are the two different things.
So you can see the utilization in the case of you have pathology already. And it helps you overcome the pathology, not go into sepsis or into difficult phases and save the patient that way, get a better outcome. But it also can be used as a booster of immunity in patients who have a naturally deficient immunity against many, many diseases. I mean, you can imagine, and this is the dream for us, is that it would be able to really save patients from a range of diseases. It's not like one vaccine protecting you from one thing at a time. But we know that older individuals do not respond well to vaccines. You have to increase the dose. This would be essentially a magnifier of the immune defense.
Maybe we haven't heard much from Adam. So maybe turning to more of a financial question before we wrap up with one or two more pipeline questions. Just on the stock repurchase side, I think you still have about $140 million to go. What's your timeline to execute on the rest? At what point is there a plan to execute on the stock buyback?
Yeah. So the board put that program in place and extended it earlier this in 2025 when we did the second transaction to dispose of more of the BioReference assets. So right now, as we go through our capital allocation program, we think about how much capital gets deployed to returning shareholder capital through either the stock buyback program, convertible debt repurchases, or otherwise, and balancing that with our clinical development pipeline and the performance of our underlying businesses. So we'll continue to be active. We were active in the fourth quarter and continue to pursue that. Last year, we put in over $100 million into returning capital to shareholders. And we'll give a guide on how much we're going to use in February this year.
Just on the Regeneron partnership, it's still fairly early stage. But any color you can give us on potential milestones, what can we expect in the near term in terms of preclinical evidence that can give us a sense of what the next step looks like?
It's very simple. I mean, we have worked on the common research plan, and the contribution of their part is basically the sequence, the DNA sequence of the antibodies that have been already in humans and already effective. So we know that, and then our job is to mount these sort of weapons on our platform and combine them in a maybe quadrispecific, pentaspecific, whatever it takes to be able to attack the disease in a way that shows great results. Now, as I said at the beginning, our idea is always to combine things like the trispecific and so on. Why? Because to affect the disease process, you're going to need multiple points of intervention. So in this case, that's the dream, a joint dream. They thought that our platform can do much better than what they have.
We thought their antibodies can do much better than what we have, so we're coming together and we're attacking a very complex problem in metabolism, and metabolism is, I would say, number one, obesity and things like this where we have ideas about combination of therapies, which, as you know, you see it today. There's not a lot. Look at Eli Lilly. They have a triagonist. They attack three things at the same time, and so we will do that, then how would you know? You will know when we declare a candidate, and we're working very hard to try to declare candidates, meaning that they have developed ability. You can manufacture them. We have a lot of assays to look at the efficacy in vitro and in vivo animals, so we know exactly the roadmap to get to a candidate.
I hope that by the end of the year, beginning of early next year, we will have candidates and milestones paid, which we have to disclose.
Great. Thank you so much for your time today. It's been wonderful to have you. Thank you.
Thank you.