Great. Thank you, everyone. Welcome to Wells Fargo Healthcare Conference. I have the pleasure today to introduce OPKO Health with Elias and Adam. It would be great to kick start with a brief introduction of yourselves as well as just give us a little rundown of the OPKO Health businesses.
Sure.
Sure. I am Adam Logal. I am the CFO of OPKO. I have been with the company for many years now. OPKO is a diversified company. We have a couple of different business lines between diagnostics and pharmaceuticals. I will just spend a few minutes on the diagnostic side and turn it over to Elias. On the diagnostic side, we have BioReference Health, which we have been working on over the last several years to simplify the business model, focus it from a national basis to a regional basis. We have done a few divestitures. Really focused on the New York, New Jersey clinical lab market with a national presence through our urology sales force selling our proprietary 4Kscore Test, which is a diagnostic for identifying aggressive prostate cancer.
That business has been through a transition over the last several years, and we are step by step making it more on a path to more profitable growth over time.
I am Elias A. Zerhouni. I am the President and Vice Chairman of OPKO. Actually, what he is describing is a sort of transition for the company that I will describe for you. We have decided to become more of a therapeutics company, less of a diagnostics company. As part of that, OPKO bought a company called ModeX Therapeutics, and I am a co-founder of ModeX Therapeutics. Before that, I was the head of R&D for Sanofi for 10 years. I developed about 13 drugs, including DUPIXENT and so on. My colleague, my co-founder and I, decided to create a company, and we did in 2020. By 2022, the market was not so nice. We knew Phil Frost, who is the founder and the Chairman of OPKO, and we decided to come together. We did in 2022. Now we have a pretty diversified portfolio.
ModeX is really a very unique company. It really is the first company in the world to design and put in the clinic what we call high-order multi-specific multifunctional molecules. No one else has ever done that. We are the only company that has put five molecules in the clinic currently in about four years with quadri specifics. There is no such thing in the market. We are in phase I. When you do a new thing, people want to see, can you produce it? CMC has been successful, so much so that we have had Merck come and do a transaction with us around a multivalent vaccine that we developed against the Epstein-Barr. Regeneron came and realized that what we had was pretty unique, so we have a large collaboration with Regeneron on metabolism, immunology, oncology.
We have our own four molecules we drive ourselves that are in phase I, for solid tumor, for hematology, immunology. We are pretty diverse, but focused company in terms of the ability of the platform to apply to different areas. We just finished the phase I for a COVID antibody that the government funded for $200 million and that they wanted for their stockpile, in case COVID comes back. The thing about this antibody, it has four warheads, and we have tested it against every variant that ever showed up, including the ones we did not know about, because we started two years ago, and it is effective against all. That is a pretty powerful statement about the technology. ModeX is in Boston and is really the most advanced arm of OPKO in terms of therapeutics.
OPKO itself has quite a bit of a record, and we have developed in the hormone field with a growth hormone, which is commercialized by Pfizer and generates part of its income. We are developing an anti-growth hormone product, which is now entering development because people have acromegaly, and this is a sort of a niche, rare disease type approach. We also develop a GLP-1 glucagon for obesity and MASH. We are in phase I, and my view is that we should really see if we can differentiate that. If not, then we will not develop it much further. It has potentials because our preclinical data shows that this is a molecule that triggers anti-fibrotic activity in the liver. For reasons that I can explain, but we may not have the time now.
We are trying it because if it has the right half-life, so for expanded treatment, and if it has the right biological activity, which I suspect it has, then we will develop it further, but we are in phase I. In our OPKO Biologics division, which is located in Israel, we are very focused on hormonal treatment. We are developing a PTH, which is a parathyroid hormone, with our collaborators, Entera Bio, which knows how to do it orally. We produce the molecule, and they formulate it so that you can actually take a pill, which is really different than what you have. Then a GLP-2. It is not GLP-1. GLP-2 is a completely different indication, which is really for folks who have malabsorption. They cannot absorb nutrients for various reasons. Either they have had surgery or they have had inflammatory bowel disease.
The word is, we're trying to truly reconcentrate OPKO away from diagnostics with these restructurings that I'm talking about into a main line biotech, biopharma company.
Great. Where are you on your targeted in vivo CAR-T program?
Well, so I was telling you about what's in the clinic, right? Because people say the way I sense things is that investors are interested in what's in the clinic and what's coming next. But we've developed a CAR-T technology which is unique also because we use our multi-specific high-order targeting. So we're the only company that can do the CAR-T cells, the CAR-B cells, the CAR-NK cells, the CAR muscle cell, whatever we want to target. Why? Because we can actually design the antibody and then put it on the surface of the lipid nanoparticle. Right. Others do that, but they do it to activate the T cells or the B cells. We do it for both reasons. We target the cell we want, and we activate the cell we want. We've done all the pre-clinicals.
We are basically doing the CMC for the first clinical trial, which is at the end of the year or beginning of next year. Yeah.
You touched on some of the collaborations. Can you expand on the scope of your collaborations with Merck and Regeneron? How do you envision
Merck is simple. Merck came, we showed them the results that we had, and it's the only vaccine that has multivalent antigens, right? EBV is a very wily virus, right? It comes into your body, it goes to B cells, goes to epithelial cells, and it stays there. The problem is you can't really prevent that unless you stop the virus from entering B cells, entering epithelial cells. We found a way to do that. There was a vaccine that was tried before, against just the B cells, and it was effective 75%, but it's not enough. You need almost like 95% efficacy. We showed in animal models that using our technology, you can actually attack four different antigens on the virus, and that really reduces the ability of the virus to enter any cell. Think of it like COVID.
When things were tried, it was 95% effective preventing the entry. That's what we have. You know Merck. I mean, they say, "Okay, you provide the drug, I mean, the vaccine, and then we'll take it over once we see results, DOD results." That's what happened. They've taken it over, and we are obviously collaborating. I mean, they pay for our expenses, but it's in their hands. They finished about 200, 300 patients. They're looking at the data in different age groups, and they're deciding how to proceed and how to do the CMC also in their levels of productivity and standards. We'll see. We expect them to decide pretty soon. That would be a major. I mean, think of it as Gardasil, right? The vaccine that prevented HPV. That's the equivalent, if you will. That was EBV. Regeneron is a different story.
I worked with Regeneron for 10 years. When I was the head of R&D at Sanofi, we developed drugs together, DUPIXENT and the PD-1, LIBTAYO. We used to work, and they're a top-notch company. I mean, I can tell you, I worked with them, and I liked them. I loved them. We did produce things. But one thing that George Yancopoulos told me, he says, "You know, I can do bispecifics, but it's really hard to do trispecifics or quadrispecifics." I told him, I said, "We have a technology we developed, proprietary, where we can do up to six." We can do bispecific, trispecific, quadrispecific, up to six things. He said, "Well, show it to me. I haven't heard that." We got together, and we exchanged. They've been trying to do that.
Right now, if you think about, for example, obesity, you really can't just do GLP-1. You can see what Eli Lilly is doing with tirzepatide and the new one. Then you have muscle loss, so you want to prevent that. So you have a lot of combinations that you'd love to see, but technically, you really have to have a multi-specific platform. That's why we came together. Not just for metabolism, but also for cancer and for immunology. Immunology, we know because we've done the DUPIXENT development, so we're very expert at that. My co-founder, Gary Nabel, is a world-class immunologist, so our science is very strong.
Do you envision additional partnerships?
Yes. We're not big enough to do everything ourselves and to go forward. So the answer is obviously yes, and we're actively both searching and being searched at the same time. So yeah.
Just to pivot a little bit, but can you provide an update on the clinical trial for OPK-88006?
Which one?
For OPK-88006.
That is the GLP-1 glucagon that I was telling you about. That is for obesity and MASH, which is a disease of the liver, which is affecting a lot of people. So it is in phase I, right? We are going to dose escalation, then we are going to go to phase I-B to see whether the drug is accepted, it is not immunogenic. It is the usual phase I data is safe. So we are going to assess it and really focus, as I said, on differentiating factors. At this point, I will not make any bet until I have data. So that is where we are. We are in the human data acquisition. It has done extremely well in preclinical models, and that is what 8806 is.
Additionally, it would be great to get a status and development plan for OPK-8801001.
Right. That's an anti-growth hormone, and that's developed by our colleagues in Israel. We've basically found a way where you can actually more effectively suppress the activity of the growth hormone. So on the one hand, we're experts at making things grow, and then we've become experts at preventing them from growing. The growth hormone is commercialized by Pfizer, and Adam can tell you the numbers, and we developed this against the growth hormone for patients who have basically overproduction of growth hormone. We are basically at the IND phase. We're going to enter clinical trials in about this month or next month.
And-
I think it's next month, right?
Yes.
Next month, sorry.
Can you touch on BioReference and what the outlook is for
Yeah, I'll let Adam speak to that because I have laryngitis and I need a break.
Sure. BioReference is, we've gone through this transformation that I talked about earlier in the talk. We've been working towards the goal of getting it to breakeven and then profitable growth thereafter. We are approaching that as we go, and still feel confident of our ability to reach breakeven this year and from there, be focused on growth opportunities beyond that. It's not a business we're investing significant capital in, but we want it to maintain its value. As we've sold off different parts, it pretty much helps us get a perspective of what the remaining business is worth. As we harvest the returns out of that business, it should just continue to increase in value for us.
Great. Can you explain and, I guess, describe the background on the $125 million
Sure
financing?
Yeah. We acquired a small company back in 2016 called Transition Therapeutics, and they had established a partnership with Lilly on GLP-1s. We took one, and we're developing it today, as Elias described, and Eli Lilly retained one of those compounds. They subsequently out-licensed it to a company in China called Innovent, and Innovent started commercializing that last year under the name Mounjaro. We've got a small royalty stream. We talked about it a little bit and saw an opportunity to bring cash flows and those royalties forward to help us fund some of these exciting programs Elias described, and saw it as part of the cost of capital was quite attractive. We've got the ability to return capital to shareholders. We entered into this arrangement where we took our three percent royalty that we were receiving and exchanged it for $125 million in cash.
On today's current run rate, it's about 10 years' worth of royalty stream. We did keep the upside, so if that royalty bond gets paid off, we keep all of the upside in the future if Innovent continues to execute well.
Great. Given the strengthened balance sheet, how are you envisioning capital allocation?
Yeah. Capital allocation for us is really a dumbbell approach. We're investing in these high-return assets, but we're also returning capital to our shareholders. We've got an active stock buyback program. We've executed, it's $200 million in total. We only have about $90 million left in the program, so we've bought back about $110 million under that program. We're also, over the last several years, we've deployed about a total of $250 million back into the balance sheet through convertible debt repurchases and stock repurchases. We're committed to investing in the R&D portfolio, in all the highest potential assets, and also returning capital to shareholders.
That's been a big story because I'll tell you what, when we merged and the market being what it is, it was really clear that access to capital was going to be key. So we went into this program of restructuring the company, monetizing some assets that we thought were not really in the future of the company. So we sold a component of our lab business that was outside New York, New Jersey to Labcorp, and then we sold our oncology diagnostics and GeneDx and so on. So we accumulated capital, something like $400 million, $450 million in the bank right now. So that gives us a tremendous amount of leverage in negotiations with third parties and in what we do, and we have brought also non-dilutive capital.
If you look at what Merck is paying, what BARDA, the government agency has given us, and Regeneron in terms of us paying for research, we don't carry the full boat on research. We have non-diluting financing, which has really gotten to this change in the balance sheet situation and allow us to do capital allocation that we wouldn't have been able to do before.
Sure. Before we jump to catalysts, it'd just be great to, I guess, summarize what, if you're looking at ModeX, how does it differ from other multi-specific companies out there?
Right. You know multispecifics started very slowly. People were very skeptical. We started in 2012. You say, "Oh, how come?" Well, because when I went to Sanofi, part of my deal was to create a breakthrough lab. We started to develop that technology inside of Sanofi in 2012. When I stepped down in 2018, I really encouraged them to continue to develop that. DUPIXENT was taking a lot of resources because I launched almost six programs. They said, "We can't really sustain it." That's why we came together. I said, "Why don't we spin it off?" Sanofi agreed to that. That's how we created the company. When you look at that, you say, "Okay, what's unique about it?
Why?" From the get-go, Gary Nabel and myself, and in my previous job at Johns Hopkins and NIH, I knew that you treat diseases not with one drug, one disease. It's usually multiple drugs for one disease, combinations. The problem with that is you have to develop three, four molecules, combine them in different ratios, and so on and so forth. We said, "Why don't we create something pretty unique where you can do bispecific, trispecific with the exact same thing?" What differentiates ModeX is we came up with a technology where you can plug and play any antibody you want into a sort of chain. What we call single-chain design. We've developed 150 patents on that.
The thing is, once you design the chain in silico, in the computer, you can basically build it, then it folds in a way that allows pretty unique things. People were skeptical because quadrivalent specific is hard. Are you going to be producing them? It turns out it is easier, actually, than do the regular format where you put multiple fragments together. So if you design it as one, you actually have better yield, better performance. Now, the proof is in the pudding. We already know that with our MDX-2001, we have several dozen patients. We know that there is no anti-drug antibodies against our molecule. It is active, we can produce it at good yields. So that is validating. That is why Regeneron came and worked with us because they were comfortable that we could really do what we said we could do.
Then the thing that is really important is the molecules we have, they are all quadrivalent type valent, except one, which is a trispecific. That one is very special because it changes the behavior of the immune system in patients who have immune depression, aged patients, cancer patients. So it is a sort of a pipeline in the drug. That is different than what people do. They usually have a molecule for one indication or two indications. This is like a DUPIXENT because it is really affecting the whole pathway of immune deficiency. Not immune autoimmunity, but immune deficiency. So that is the kind of dream we have. Not being me-tos, being first in class, using actually binders and targets that are already valid, known to be valid, but in combinations that are unique. No one else can do that at that high order.
You can do bispecific, trispecific, but you cannot do 4, 5, 6 like we do.
With 5 assets in the clinic, what are your expectations of the portfolio going forward?
Well, we have five assets in the clinic. We have the CAR-T program, the targeted CAR-T program, multispecific CAR-T that we are going to put in the clinic this year. We've already, obviously, provided non-human primate data on that, and it's competitive with any one company out there so far. We're going to try that. We're going to go to the clinic. We also have the bulk of the work that we're doing with Regeneron, which is probably five products at the end, if we are successful. So far so good. We're also developing, right now, a completely new set of what we call a construct library to go into different areas maybe than what we're in today. We're studying that. There's a flow right now in the company.
We've shown that by using our methodology, we're using in silico design, we're using AI, all the tools. We've reduced the number of experiments we need to do to get to a good molecule from 1,000 to about 250. It's a huge reduction, which allows us to expand the portfolio. Now, to expand the portfolio, you need partners. We're going to look for that.
In your view, what are the key catalysts that investors should look forward to in the next 12 - 18 months?
Well, look, the number one is the results of the phase I for EBV, right? Are we going to phase II? If you do vaccine design, vaccine development, the real thing at the end is, okay, do you have a very, very powerful results at the phase I, right? The analysis is complex because when you do vaccines, you can't really use it in children first. You got to use it in adult populations. So that's the catalyst number one. Second, we did the COVID antibody, and it's really finishing its trial. The beauty of that is that BARDA put a high bar on us, and they wanted us to do continuous flow manufacturing. We did. High yield.
They also said, "Oh, we can't do IV," or, "You got to do it IM or intra, sub-Q." We've done that, and we're in the phase of now showing to the government that actually sub-Q works and because IV would work for a pandemic sort of virus. Those are two. Those are done, and they are going on. The third one is MDX-2001, where we're doing solid tumors with a c-Met Trop-2 CD3 CD28 T-cell engager. Dose escalation is done. It's almost finished, and we're going to focus on the tumors that have responded in our phase I because that's the way you do it. We did multiple types of tumors, and we have some that clearly respond better than others.
We're going to focus now the trial into those two, three tumor types and provide results maybe early next year and see where it goes. Either partner it or go to phase I our own. We don't know. Those are the most proximal one. There is one that's called MDX-2003, which is a CD19 20 CD3 CD28 for liquid tumors. That is already in the clinic, and it started its phase I, and it's attracting a lot of interest because we get B-cell depletion, which means that it could be an anticancer as well as an autoimmune molecule. That we'll know pretty soon. So far, so good. The one that's more unique and original is this MDX-2004, which is what we call the immune rejuvenator.
When you use it, you see a rebound in the memory cells, and it's almost like you're reviving the immune system, which is exhausted. Think of it as like when you do this in cancer, you use PD-1 as a checkpoint inhibitor that removes the checkpoint and CTLA-4. This is basically saying we're not removing the brake, we're putting the accelerator on. That's the image I use. That is ongoing. It's very promising. It has human data now, and that would be the next thing because if it works, you're talking about a pipeline to the drug.
Great. With the time we have left, if there's any questions?
Well, thank you all. As Elias laid out, we have a pretty data-rich next 12 - 18 months coming. We have the capital to fund it, and we will continue to look for external partnerships and funding while we build up our early stage portfolio as well as advancing our next generation of products into the clinic and continue to return capital to shareholders. Thank you all.
Great. Wonderful. Thank you, both.
Thank you, Matt.
Thank you.