Ladenburg: Let's have another chat

Opko Health Presentation Ladenburg Thalmann 2021 Healthcare
2021-07-13 13:39:19.13 GMT

Event Date: 07/13/2021
Company Name: Opko Health
Event Description:Ladenburg Thalmann 2021 Healthcare Conference
Source: Opko Health
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Ladenburg Thalmann 2021 Healthcare Conference

Presentation

Jeffrey S. Cohen, Analyst:
Hello, this is Jeff Cohen, Ladenburg Thalmann. Thanks for joining us. Next up
we have a chat with OPKO Health care. Thank you for joining us. I'm joined by
my associate Destiny Hance. I'm also joined by Steve Rubin from OPKO who's
Executive VP and a Director. I'm also joined by Adam Logal, Senior VP and
CFO. Bob Cohen also joined by Dr. Jonathan Cohen, Senior VP and

Steve Rubin, Executive Vice President, Administration:
Director. OPKO's health so. We want to thank you all for joining us. And
we're going to do this fireside chat style, so that we can walk through some
of the pertinent issues and what's the reason what's going on at OPKO.
So I'm going to start with Steve and Adam with some OPKO related questions
before we get into some of the specific lab questions, so could you talk
about Somatrogon where we are now with where you know with your partner as
far as the first anticipated and eventual approval and talk to us about how
the trial when then also talk to us a little bit about the expanded
indications, which could come afterwards and also some of the geographies,
and thanks again in advance.

Unidentified Speaker:
Sure. Thank you, Jeff. So, as everybody probably knows, we have a PDUFA date
in the United States for at the end of October of this year. So our
submission is now been in front of the FDA for I guess just about seven
months, there has been typically interaction, discussion of our potential
inspections and the like nothing out of the ordinary at this point.
We also had, as you probably know, we have submitted approvals in other major
territories and particularly for Europe, as well as Japan in weeks, same
thing we're interacting with the regulatory authorities. We use the timing
for approval in Europe and Japan, it's going to be the first half of next
year.
It was a worldwide study. So it will be worldwide approvals for seeking
Pfizer. Just as a reminder, is in charge of both at this point interaction
with FDA. The submission and also commercialization as well as manufacturer
of the drug product and the pen device. Obviously, we're thrilled to have
partners or partner given their expertise in this space is one of the leaders
in the daily injection.
So we are highly anticipating probably good news in October. Per label
expansions, we have agreed to do one additional indication to share the
expense of more additional indication Pfizer will be responsible for any
further label build-out at that point we have agreed on what additional
indications will be, it is a pediatric indications actually more than one.
However, that's still subject to budget and approval by the joint development
committee. So we're a premature for me to discuss at this point. Reminder
that we have significant milestones still coming at -- $275 million. Sorry, I
missed that number $275 million with additional milestones which are
regulatory based milestones, not Archie commercial and

Steve Rubin, Executive Vice President, Administration:
The economics are, it is a gross profit share. So the day we get approval in
the United States, it is a franchise where you include all sales of Pfizer's
daily Genotropin for all indications and all sales of our product and you
were combined down and we would get a share of the gross profits resales,
United States, the same thing will happen upon approval in Europe.
Now we're with Japan, and Japan being in a territory that's considered rest
of world. So at the end of the day, hopefully after sometime in first half
next year, we will enjoy the global profit share of growth hormone sales by
Pfizer and that percentage of gross profit increases as our contribution of
our drug increases for the whole franchise.
In other words, day 1, you wouldn't expect us to take a very significant
share of Pfizer sales of their products, since we haven't sold anything yet,
but as our product becomes more meaningful as the market become shift more
towards the long-acting in a waste we're gaining a we will get a more
meaningful gross profit share.

Jeffrey S. Cohen, Analyst:
Yes, that's super helpful. Steve maybe talk to us a little bit about how you
came to that type of agreement and how you and or Pfizer were are thinking
about how that plays out from daily to weekly injections for both existing
patients as well as new patients coming on?

Steve Rubin, Executive Vice President, Administration:
Sure. So we actually in this deal back in December of 2014. And we were
somewhat concerned. That Pfizer would not be motivated as one of the leaders
in the daily. We're concerned that they would not be motivated necessarily to
take away their own product. In other words, sort of sales force will be
compensated we feared the sales force will be compensated to get cannibalize
others.
So take from the other companies and keep selling their own where they don't
have to share any profits, so to avoid that potential conflict we structured
that way so that way in terms of the same as a matter of which they sell more
of it and it's really a bit of a moot point because at this point. Yes
there's actually there is a competitor in registration.
So their goal is to be able to capture as much market share as possible
without giving you (inaudible) us now at this point, because if you have
somebody else of the deal at a long-acting and they just have the daily
thereby I think we want to shift to the long-acting fairly rapidly.
So they are highly standardized obviously to push a long-acting product and
capture as much of the market, we can see a significant market as you know,
over $3.1 billion. So it's in growing. So it is a big market To capture, in
order, right now. It's put a mark seven players that number there's one time
has send us is obviously in registration and Novo is in clinical trials so
best case scenario, (inaudible) will take a look at it, you'll go from seven
to three and could be less dependent everybody else gets approved or not.

Jeffrey S. Cohen, Analyst:
Okay, that's super helpful. Jon, I wanted to jump over to you and talk a
little bit about your business, if you could maybe give us a little flavor
for an overall snapshot of some of the areas of interest, and some of the
areas that you're heavily involved in specifically if you could go into
Scarlet a little bit that we really want to know more about and that's -- and
it's geography as well so maybe we'll start there.

Unidentified Speaker:
Well, I think from an overview. We are exiting COVID although not completely.
We will continue to do COVID testing through the end of 2021 and on the
school side and some of the travel probably through 2022 at least the first
half. As you probably know, we were the third largest COVID testing in the
country we've done close to 17 million tests we have particular expertise in
the large-scale screenings.
The result of that, as we continue to have relatively large clients the
sports industry in the cruise industry. We just announced where we're doing
the cruise testing for Royal Caribbean and then of course for the public
schools. We do, it's over 10 school districts, including two of the largest
districts in the country including -- cargo so that will large scale
screenings of the country has moved from diagnostic testing meaning trying to
grow (inaudible) you have a disease to really surveillance or we've moved
with that.
In addition, we do the largest amount of point of care testing for COVID
which is a rapid testing we've been validated multiple platforms and are
using that in the industries that I just mentioned were appropriate, so
that's where COVID is going right now, it's obviously it out to 2021 and into
the beginning of 2022.
In the past BioReference as it -- a full-scale commercial lab. We have
specific expertise in urology with our proprietary test 4K which helps
appointment to get prostate cancer by a prostate biopsies respect as we also
have certificates to piece of women's health, which is historical for
BioReference and then specific expertise in oncology and then of course
genetics with the Genedx.
So those are our specialty focuses. We are continuing to look at other types
of proprietary testing, but that's where our expertise is right now. In
addition, we've stood up two other very specific issues, a very called
strategic ventures

Steve Rubin, Executive Vice President, Administration:
Where we do partnerships with large health systems, hospitals, physician
office labs and that includes large relationships with accountable care
organizations FQHCs, large medical groups, et cetera. So, that's a separate
vertical as we move much more into the partnership mode that we have in the
past.
And then finally there is which we could get into is the launch of Scarlet
which is our home health digital solution. Where we were the physician orders
a lab test we had come to your home or your office wherever location is to a
fully digital experience to get your blood drawn and the results back to you.
So those are, that's a very high level where we are right now as we move
towards the second half of 2021.

Jeffrey S. Cohen, Analyst:
And Scarlet specifically from a geographical standpoint how many geographic
areas currently and what's planned for the next year or so.

Unidentified Speaker:
So we're trying to get to about 60% of American population within the next
couple of months of 80% within the next six months. We are in 11 markets. We
are adding markets pretty much every almost every week at this point a lot of
it depends on the client. So if a client. So there are multiple use cases for
Scarlet physician orders getting labs done before the visit.
But then there is gaps in care or so pharmaceuticals specialty pharma of
course Telehealth is a big issue. So if someone large medical group comes us
to -- say was (Technical Difficulty)
To stand up Scarlet Minneapolis, for instance, we can do that within probably
four weeks. So it's not just the markets that we're expanding until it also
depends on what the partners or the clients are looking for.

Jeffrey S. Cohen, Analyst:
Okay -- as far as growth in forward-looking on some of the segments. Just
from a big picture standpoint Genedx versus 4K versus some of your historic
testing specific to oncology and serology. Could you talk maybe about in call
out a few areas where you're seeing kind of larger growth in others?

Unidentified Speaker:
Sure. So women's health has come back pretty strong in the last couple of
months Oncology is very, very strong right now. We set up a, it's called
TSO-500 which is the ability to match the ones genetic makeup to the
pharmaceutical needs depending on the cancer that they have. We are ahead of
where we were 2019 in terms of growth on our oncology business.
We also do have specific expertise and hematology oncology but we call liquid
tumors, which is really the leukemias, lymphomas. We have a very, very deep
and vigorous menu relative to bone marrows and the Leukemia, Lymphoma
diagnostic journey. So we see it, we see a lot of strength there. We continue
to see strength in Genedx and genetic testing has come back relatively strong

Steve Rubin, Executive Vice President, Administration:
In the last several months. And then of course we are we've for the lot into
the digital solution for a strong as a tremendous possible growth area. So
those are just some of the highlights.

Jeffrey S. Cohen, Analyst:
Got it, okay. And I wanted to jump over the years for some of the challenges
on COVID testing the company essentially doubled in size for testing last,
end of Q2 and Q3, Q4, Q1, so you've seen us massive background how easier
challenges have been on the leverage side as far as the neighbor and person
how (inaudible) skill set.

Unidentified Speaker:
Yes, that's, it's a great question. So a lot of the efforts been over the
last I'd say weeks is really been to rightsize the organization and make sure
we're staying lockstep with not just missing out on the opportunity, but
controlling the cost structure, so. So Jon and his team have been working
hard to make sure the people part of that leverage is right-sized.
We didn't have significant capital expansion during COVID. We were able to
maintain that within our existing facilities. So it is just really people
exercise to keep the staffing the REIT stocks.

Jeffrey S. Cohen, Analyst:
And Jon, what's your take. I mean, should we think of it as six quarters ago,
you had a $170 million and $210 million quarterly business pre-COVID should
we think of you as maybe at some point if COVID continues to diminish that
you're back to where that was. And then we're looking at growth from that
point forward, or is there a better or different way that we should be
thinking about it.

Unidentified Speaker:
Yes, for me, you're breaking up a little bit. Adam, can you take to say --
Just -- question?

Adam Logal, Chief Financial Officer:
Yes, sure. So, Jeff, I think the way we think about it is, you're right
BioReference is $170 million pre-COVID. I think there is that underlying base
business, which Jon mentioned is coming back or it's come back in a number of
strategic areas for us. That is the base on which we're going to measure so
we're going to continue to do COVID testing as Jon mentioned in different
areas.
For the remainder of this year and then potentially into early 2022, that's
of course going to be fully driven by demand across the country. I think that
$170 million base pre-COVID is the bench that benchmark. We've spent the last
18 months with that base business being down and is now showing the signs
that we want a bit to see where it's coming back.
And then in all the strategic areas that Jon mentioned, we're starting to see
the growth.

Jeffrey S. Cohen, Analyst:
Yes. I got it was challenging to update the topline through COVID it may be
even forward because it was tough to get a gauge on Yes. This month when or
how this quarter winning and how that looks. Is there anything new or
different that we change our minds about our trajectory looks as we come out
of COVID that's been impacted from some of the variants, for example, maybe
that's question for Jon if you can hear me?

Unidentified Speaker:
So relative to the question around the variance and unfortunately for the
country, the variance have not had an impact on both the vaccines on the
testing and the ability to detect now that, Yes. Could that change? Yes, it
could change. It would be a significant change in the genetic code of the
virus itself because of the way that we test -- that will test for and then
of course would have an impact possible impact on the vaccines right now.
But right now the good news is none of that has been not none of that has
occurred.

Jeffrey S. Cohen, Analyst:
Okay. So as we were previously thinking about testing into the back half of
the year. Nothing has changed dramatically. As far as where we --

Unidentified Speaker:
As I said, we are fortunate, we're a little bit different position than some
others, meaning because we are doing these large-scale screening programs
testing the cruise lines. It's going to continue to test for quite some time.
As I said the sports franchises or testing and the schools are definitely
testing until the vaccine is approved for younger kids, which is why we're
contracted and or we have these relationships through 2021 meaning through
the fall semester and we believe that it may go into 2022 right now.

Jeffrey S. Cohen, Analyst:
Okay. Does the company involved with any testing for students and
universities. University testing or schools mostly high schools or public
schools?

Unidentified Speaker:
So we do a significant number of colleges, universities. The question is
going to be what happens in the fall and whether or not they're going to
require the students to be vaccinated. So we have both a turnkey operation on
the College, the University, where we bring the test back we performed the
lab.
We also have some colleges, universities who've asked us for point-of-care
rapid testing facilities so it really depends on the college and the
University.

Jeffrey S. Cohen, Analyst:
Okay. I got it. I think we're running close on time, but I wanted to get a
couple more in. Steve, I wanted to go back to you on Somatrogon so the
(inaudible) inventory for patient trial is four and the filing was for a
pediatric label initially or metal label initially?

Steve Rubin, Executive Vice President, Administration:
If so, is Pediatric growth hormone deficiency.

Jeffrey S. Cohen, Analyst:
You do -- you did a Phase 3 in adults as well.

Steve Rubin, Executive Vice President, Administration:
Correct.

Jeffrey S. Cohen, Analyst:
Which completed so will that be next or that's not entirely your decision.
Year until you're on a joint committee meeting?

Unidentified Speaker:
So the plan with that complicated because we missed an endpoint that we, it
was for an outlier with modified analysis as well as all the biological
markers. We clearly differentiated ourselves placebo. But given the size of
the market with pediatrics side in conversation with Pfizer we decided that
the plan will be, is that after we get approval for pediatric we will submit
the adults.
Now FDA has agreed that we don't need to run another trial we can submit it
along with the data for the pediatric and they will consider the package for
approval. So that's the strategy. So two things. We will submit for the adult
or atleast talk to FDA and make sure still feel the same way after we
received approval for pediatric and then there is an additional pediatric
indication there will add to the label that we will share.
As I mentioned, the cost with Pfizer 50-50.

Jeffrey S. Cohen, Analyst:
Okay, got it. And how does two markets compared to each other? As far as
size-wise the the the the adult market is four or five times smaller than the
pediatric market?

Unidentified Speaker:
At least so the pediatric market when you speak to read is 80% to 85% of the
market the rest is a doubt.

Jeffrey S. Cohen, Analyst:
Okay. I got it, okay. And then, I did want to touch on one more topic that's
reality and maybe Steve talk about the current label with stage stream four
and then going after some clinical work on Stage 5?

Unidentified Speaker:
Correct. So what's our market today is for Stage 3 and Stage 4 chronic kidney
disease for patients with, who have insufficient levels of Vitamin D. So we
conducted a small cohort one study or Stage 5 of the dialysis market under
the theory biologically ours is a prohormone.
So we sit in front of the kidney we originally thought that our drug couldn't
be effective without sufficient kidney activity during our trial we felt
otherwise because gave the same amount of drug for Stage 3 to Stage 4. Stage
4, obviously we have a much less kidney function and the results were the
same on the same dosage.
So clearly we believe somewhat of tissue which help metabolize and convert
our drug to the active form. So we ran a small cohort and in fact, we did get
results that showed that we are effectively lower levels of PTH and increased
levels of serum Vitamin D are clearly our confidence is true.
So now we are when we are structuring and creating the bigger Phase 2 trial
that will

Unidentified Speaker:
Share the costs with 3% to 4% is and that's in process now. So, we intend to
run that study. If I hope we've initiated some times next year.

Jeffrey S. Cohen, Analyst:
Okay, got it. I think I got time for one more. Wanted to jump back to you,
Jon. So in the big picture sense on testing in general testing being all
kinds of testing, do you think that COVID produced a bigger backlog than what
anticipated in that overall, the markets for testing forward will be growing
at greater than the previous 3% or 4% or 5%?

Unidentified Speaker:
Unfortunately, the answer is probably not. I think what happens in the
majority of cases it's people who have skipped as the same as they skipped
their mammograms or skipped other testing whatever tested is whether it's
lab-based or not. They don't come back and then and catch up what they do is
they go back into their cycle.
So the testing that wasn't done is not going to be done, not going to be
caught up with. So there are certain varieties it well so certain amount of
biopsies and certain amount of pathology will to be caught up. But in
general, blood-based testing will go back to where it was slow there.
The real question is going to be at is how many of physician office visits
are back to where they were beforehand, and I don't think that number is yet
100%. I think it's still down probably 68% however, it's been made up to a
significant degree by the result of the impact of telehealth and
telemedicine.
So I do think that the telehealth has changed the landscape forever, or at
least product for at least the next period of time, meaning I think the date
is obvious that at least somewhere between 10% and 20% of visits and
healthcare will now be telehealth visits. So I think it's really the issues,
but I don't think there's going to be a catch-up.

Jeffrey S. Cohen, Analyst:
Yes. So we're going to see looking backwards, more of a gap here that was
just unknown business.

Unidentified Speaker:
That's right.

Jeffrey S. Cohen, Analyst:
(inaudible) our recent quarters. Okay, got it. I think we're out of time. So
Steve, Adam, Jon. Thank you very much. We've very much appreciate the time
and for an update on OPKO. Wish you all the best.

Steve Rubin, Executive Vice President, Administration:
Thanks, Jeff.

Adam Logal, Chief Financial Officer:
Thanks, Jeff

Jeffrey S. Cohen, Analyst:
Thanks