Post by Deleted on Mar 15, 2021 21:30:26 GMT
I have a few questions that I simply cannot figure out, and I was wondering if others had answers, or perhaps I'm thinking about them wrong.
First: In the lawsuit filed against the company last week, which to me mostly seems like nonsense, had one interesting piece: they stated the company has used E&Y every year, as auditor and E&Y states the Company's internal controls are inadequate (rather, the way it works, is they state the inverse: they say we opine these financials are correct from data we have seen, but we do not give an opinion as to the quality of internal controls) which is usually bad since they should. But it appeared to me in the 10-k they did say controls were adequate unless I read it wrong. But why this is of some importance, is, if you look at the the settlement agreement from November (its on Sian's website), the settlement included, as the last provision, kind of out of nowhere given the rest was around frost's involvement with directors and independent committees etc; but the provision said OPK had to use "an audit firm that rotates partners annually". Given financial fraud is one of the rare things this company hasn't been accused of, it strikes me as curious that it would randomly be in the Nov settlement agreement, then the complaint would state this more blatantly.
One reason this is of concern to me, is I cannot reconcile a bunch of OPK numbers. Bioreference is the exclusive tester for all rite aid stores, which is "over 1200 locations" (https://www.riteaid.com/corporate/news/-/pressreleases/news-room/2021/rite-aid-expands-no-charge-covid-19-testing-to-all-drive-through-locations). The last time I asked Rite Aid, they were averaging about 18 tests/day. But also, recall they started with 50 and then gradually grew, and would grow only if it made sense - e.g. if there was demand. The fact they have expanded fully means they have enough demand to make it worthwhile. So Rite Aid should be 22k/day alone for Bioreference. And CVS, as discussed in a previous post, is over 12,000 stores (more than 10x) with more traffic; but BRL is not exclusive, so I just assumed they less than 10% which would be the same 22k = 44k/day. Then they have a number of colleges. The NY MTA. The 100k/month from NYC DOE which is about 3.5k a day. Yesterday, they tested at barclays center, which was just 300 people, but is growing to 1800 a day. and MSG will be 2000 per game. On top of that, 3 weeks ago, BRL announced a new contract with NYC that opens 200 MORE locatioins for testing (https://www.bioreference.com/covid-19-tests-take-priority-as-new-york-city-arenas-seek-normalcy/ ) in CVS and other places. Say each does 10 a day whichseems awfully conservative. That's another 2k. then 200 patient service centers. Their hospital contracts. Their mednax contract.. All the other physician private practices. All the urgent care centers. All the nursing homes. they specifically stated they had contracts in place already with "cruises, employers and airlines". And they must have more NYC DOE type contracts like Fulgent got with other school systems. They also have MLB season starting in 2 weeks - NFL was 1.4mm tests for the season. MLB has less people per team, but has 10x the games, and they are doing more fan testing. I CANNOT understand how 50-60k can be the number. How can all the above be true? I have asked the company 6 ways to sunday, and they wont even respond to me on this anymore, which I find suspicious they cannot reconcile this.
Also, don't forget the Treasurer resigned, with no notice, before the 10-K. that is very very nuts. It is the busiest time of the year for a treasurer: its like a tax accountant quitting on April 2nd. But also, a Treasurer doesn't sign 10-Qs, but I believe he DOES sign the 10-K, which means any fudged numbers wouldn't give him liability until the 10-K, and he left with no notice. the Company didn't tell many investors why he left (includng me). But they told others he went to a SPAC. Except, I have searched quite diligently, and cannot find what SPAC this and the co won't say the name of it. And he won't respond to any calls or emails, so he's been silenced. Has anyone confirmed he is legitimately at a SPAC? Further, giving NO NOTICE in 10-K season: the reasaon they gave for that was the SPAC was imminent so didn't have time for notice. If that were true, then it would definitely be out or marketing by now, and that's not true.
Has anyone else wondered about this, or perhaps has better answers? The Accounting firm E&Y claims are odd, but then put together with the Treasurer, and then the lack of disclosure is because they can't disclose more b/c its not going to reconcile, and the tests above, I just took from public releases/conferences. I am sure I'm missing a ton of tests. For example, surely they have more than 10 colleges. Maybe its 40 colleges. let's not forget their insurance coverage is now materially higher than its ever been, and they expanded into texas, adding more tests. Then I'm befuddled as to Florida. Why aren't they better there? Why does a lab started by a 25 year old charge more money and win more business? How come they can't win any business? And by the way, they also do X games, the NBA minor leagues, etc which have to be another few thousand a day. It appears, contractually, no matter where covid demand is, they should be doing like 75k a day being very very conservative. By the way: with genedx, why did quest and labcorp win the "sequencing of covid" contracts, which were $30mm/month and high margin - that is material to us - 90mm of revenue is 20% increase, and high margin! Isn't this weird?
They also have not won a single govt contract and can't get any money from the government. Sonic Labs is a $10b, well capitalized, global AUSTRALIAN company. Yet the NIH subsidized their capacity to go OVER BRL's, and also gave t hem "mission critical" contracts: www.sonichealthcareusa.com/about-us/news/2020/09/sonic-healthcare-usa-to-expand-covid-19-testing-capacity-in-the-united-states-in-collaboration-with-the-nih-radx-initiative/
Or, Curative, again, a company started by a 25 year old LESS THAN A YEAR AGO wins this contract from the DoD: www.defense.gov/Newsroom/Releases/Release/Article/2296901/dod-announces-contract-for-250000-curative-inc-covid-19-test-kits/ . The DoD gave them the exclusive contract for 250,000 tests - at a price of $168/test. So Bioreference, with "billionaire philantropist" phil frost, 3rd largest lab and one of 3 national labs, gets $50 contracts from municipalities, and these idiots are getting $168/test FROMT HE GOVERNMENT? And by the way, b/c I know brevity matters, I am not sending you their $140/test Air force contract, and multiple others (at one point, they did 95% of all covid testing in Los Angeles county). Then they strolled into florida in July, and leapfrogged Bioreference. Again, I have asked, given we have put people in DC in "strategic venture" roles; and we are established for years andone of 3 national labs, shouldn't govt contracts be going to us? And also, doesnt the govt usually pay less? Why are they paying a 68% premium? and why aer we getting 1/3 per test. I remind you of the math just this quarter: instead of $32mm of ebitda, it would be $125mm of ebitda. If this company printed $125mm of ebitda; 4x higher, and guided to higher ebitda next quarter there would be a 1 in front of the $4 for $14. Which would still be lower than where it was in 2015. I truly do not understand this. Is it b/c he was sec indicted? and if so, then its their duty to toss him, because he is huritng the business. Ladenberg, where he was chairman, threw him out after the SEC pump and dump, like a responsible board.
Also, last analyst day in June, they were asked about one of their pipeline products (maybe Claros), and Frost said "they were in talks with a manufacturer for partnership". I have asked every 2 months for an update to no avail. I would bet money there was no discussions of any kind and it was just a lie. But how come they can get away with not answering this? Relatedly, I have tried to ask a question on every single conference call, andthey will not take a single SH question.
Rayaldee/Covid: its MARCH 15TH. They need 160 patients, and enrolled first patient oct 26th. Why can't they enroll ONE PATIENT A DAY. There is no question there is extraordinary shadiness there. It appears other shareholders accept their nonsense, but I am happy to have that debate (and would love to be wrong, but I don't think I am).
Vifor was supposed to start selling Rayaldee Jan 1. they have marketing approvals in a bunch of countries....what is the delay, what is going on? Why can't they start selling in the 11 countries they have? And whatever country is left, what is taking so long? Rayaldee has the safety of aplacebo.
I'd also like to remind investors that in early summer Covid times, OPK discussed how they had tons of new customers they never had before, because people were sending covid tests to whoever they could, and they signed contracts with, say, detroit, which they didn't have before. They discussed how these relationships did two things; while some just send covid tests, others might send more than just covid: say general flu test and covid, to see which it is. Or a blood test at the same time, etc. Secondly, when covid went away, many of these relationships would stay b/c Bioreference was always returning within 2 days and had high customer service and increased insurance meant more of them were covered. If that is true, why isn't routine biz doing better? There was a debate on another thread about Genmark's growth vs. BRL (95% growth in 2020). Genmark made the exact same covid comment re: customers. Except for them, it was true, the growth came (one of their main products is e-plex which tests for a number of bacteria for infectious disease in the upper respiratory tract, so it was easy to add SARS test to that assay which they did, which aided their growth); and despite COVID dropping, their growth stayed because once the customer was using them, they continued using them for upper respiratory tests, even without COVID. In fact, it was that fact that led to the buyer interest as the covid volatility mattered less, especiallly to a Roche type where its plug and play: eliminate 60% of costs, use Roche sales force to sell tests in existing hospitals/offices and sales shoot up and costs down.
Finally, their price of COVID tests never made sense. I udnerstood they signed the bad $50 contracts, and to be fair, they didn't know it would increase to $100. so bummer, but it makes ZERO sense, that those contracts wouldn't start rolling off and the new ones would be signed at the proper rates or they renegotiate the contracts with NYC since nobody else is giving them $50. Also others here have also noticed that some of the contracts they got still haven't gotten fulfilled even. So how can a $50 contract signed last March/April, still be dragging our price down so drastically, when it makes up such a small part of the covid teesting business? NFL was $125/test. All sports teams were >$100. Any medicare, 26% of their business, was $100. Their Rite Aid was $100, though Rite Aid got some and PWN Health (btw - i still dont understand what they do) did as well. But also, at the annual meeting Frost said costs were ZERO at Rite Aid: they didn't pay for PPP, rite aid employees did the work, they just picked it up. So margins must have been unbelievable, though that never showed. For example, of their 4.3mm tests performed, think about how many had to be at 50 to average "mid 60s". Literally more than half. If ex-$50, their average number wsa, say, $10 lower than dgx/quest, so $85 then ~2.5mm tests were done at 50. But how is that possible? NYC didn't do that many with us (and again, why wouldn't it be renegotiated). Also, this isn't illegal per se, but when they were saying "low to mid 60s" they were doing like $64.75 a test, which would be mid 60s to any other mgmt team. This last guide they said "mid 60s" b/c now its $66-$67/test, although we have no granularity on POC, which we think is $30 a test (and the NY 200 rapid contract I mentioned is 29.95)...is that additional revenue? is that included in the 4.3-4.8 covid range? If its additional revenue, and they are doing 4.8mm PCR tests, and then another 1mm POC tests, that's a brand new $30mm of rev stream. How is it possible we don't know? What are margins
They never answered the insurance questions: last year they settled the last two lawsuits for 16.5mm, where Frost or OPK paid ~$10mm and insurance paid $6.5mm and the other for $3.1mm where the directors own insurance company paid; so all their premiums got them 6.5mm and then dropped and we paid the lawyers and the money for Frost's pump and dump. They refuse to disclose what insurance is now. When the person who was telling me they were not underguiding b/c they have lots of litigation costs, and they underpromise over deliver, and I pointed out that was contradictory, b/c if they have lots of litigation costs, they are not going to over deliver; and if they don't, then they underguided; but regardless, why not just break it out so we can do the math ourselves. But where the litigation is scary is if they don't have it or if its as bad as last year, and OPK has start paying out big numbers, and every quarter our ebitda keeps getting pulled down by X million. If the person who said they are litigous company is right, i'd like to know what the costs were for those things, and what ebitda would be without it. Because that would get us atrue "business" margin number. And then we couldmake our own assessment as to the recurring nature of those litigation costs: if they are always going to be there, then we should include them, if they are going away (for example, I believe the 2012 medicare fraud from BRL was the last remaining claim from BRL, hooray!)...but if there is financial fraud, oh boy. And if they moved up option grants knowing something (why did they move them up when they never have before? why did they call a special emergency meeting when they saw the stock down to do that and only that: it was the only item on the agenda! My shareholder call with them the next day for follow up questions was cancelled b/c of this "emergency" board meeting to grant themselves optoins.
Anyway: This wasn't meant to be scatterbrained - it was meant as just a series of questions, some possibly connected, that I have not been able to reconcile or have the company reconcile, and maybe others will have more luck, or have thought this through better than I. Maybe otehrs will have more lluck with the company; but I know I've asked too many ways and pointed out errors in their math too many times that the won't talk to me (on these topics).
Am I wrong to be bothered by this? When I model quest or labcorp or NVTA, or any other company, I never have these deep and number of questions. I liked Sian's strategy of ahead of JMP dropping the press release on them to straight up deny that Sian's numbers were right and they couldn't and had to admit they underguided. It seems to be the only way to get them to answer a question. The Barrington ting on thursday is 1x1 meetings as they barely go to any conferences - even ASND is giong to Oppenheimer, and they don't have a product yet. In any case: curious as to your thoughts on any of these, because I am confused and maybe others caught something I didn't or can ask the Company or a sell-side analyst.
Btw: there were some ups and downs, but the stock is up since I joined the board! And thanks to all for your support in being open-minded; enough people have told me i communicate poorly and long winded that i believe it, so I appreciate you putting up with me. And to those that I clearly annoyed..i guess all I can say is sorry; its a little late in life to change how I think and write unfortunately. And to @uncletlzz what a terrific thing you've done here. If any of us have any money left before Opko goes to zero (just kidding everyone, i am not self flaggelating) you deserve some sort of recognition. In fact, if you'd likke to take this offline, you probably have a business idea here. I worked with a company sumzero that is different in that it was posting ideas versus this; but this has utility and I think people would pay for it (but we are grandfathered in so I don't get lynchmobbed by the regulars!). have a good weekend everyone.