SA: OPK: Looking For Buyers To Enter At The $3.50 Level
Jul 14, 2021 13:07:44 GMT
icemandios, c2crusher, and 2 more like this
Post by gutset on Jul 14, 2021 13:07:44 GMT
OPKO Health: Looking For Buyers To Enter At The $3.50 Level (Support)
Jul. 14, 2021 7:41 AM ETOPKO Health, Inc. (OPK)2 Likes
Summary
We remain bullish on OPKO Health although July trading has been poor thus far.
The firm's balance sheet, valuation, and fundamentals should mean downside risk is limited in this stock.
The market is looking for a catalyst. Let's hope the company can provide it soon enough.
We wrote about OPKO Health (NASDAQ:OPK) back in March when we stated that the company needed to take advantage of the significant increase in testing for covid-19. Although the firm witnessed excellent sales from this segment in the fourth quarter, we cautioned investors to remain focused on the core business. The reason being is that we continue to foresee a drop in the testing side of the business as more and more people get vaccinated over time.
Although OPKO continues to deliver strong profitability in its numbers with respect to testing, the company actually reported a sequential decline of approximately 400,000 tests in Q1 this year. We acknowledge that approximately 45,000 tests are being carried out every day and that Bio-Reference remains at the forefront with respect to testing for professional sports teams, and it is fair to say that this market has transitioned from diagnostic testing to screening & surveillance. OPKO has done a good job here in pivoting its resources to cater more for the latter group. The firm has done this through point-of-care platforms and custom software to run the numbers. With a large percentage of people still unvaccinated, OPKO can continue to make gains in testing in the likes of sporting events, travel through cruises and the like, and hospitality. Furthermore, margins in some areas may be able to compensate for the likely drop in volume which is expected to come.
WHY OPKO HEALTH INC. SHARES ARE GOING TO HAVE SUFFICIENT ...
Source: Company
Here is the issue though with OPKO's target market (which is people who use shared services repeatedly). A friend of mine travels repeatedly due to his job but was not in any rush to get the vaccine. After a few months of traveling where he had to undertake uncomfortable repeated PCR tests, he totally changed his mind and actually ended up getting his vaccine ahead of time. Suffice it to say, with respect to testing, there can be a cost issue, a time issue, as well as a comfort issue with continuous Covid tests. These trends all point towards more reluctant people getting vaccinated over time.
Since the market is a forward-looking or predictive mechanism, we continue to believe that the long-term fate of this stock is tied to its pharmaceutical business. Top-line sales in this segment increased by almost $3 million in the first quarter but RAYALDEE sales continue to suffer. Bulls will state that we will most likely recover the significant drop in prescriptions compared to pre-Covid (33%) but this remains an unknown at this point. The reason being is that access to physicians may never return to what it once was. Management has been astute in that it has pivoted its sales team to explore other strategies in order to maximize sales. Various marketing programs have also been planned to build awareness. These efforts should complement growing access to the physicians which will be obviously helped by the ongoing vaccination efforts.
Despite the headwinds RAYALDEE has had to deal with, first quarter numbers still showed 170 additional physicians who prescribed the product in this period. This trend demonstrated the sustained demand for the core product in what has been a very difficult market for the sales team. We also saw promising results in the phase II trial with respect to RAYALDEE being used on patients with high levels of chronic kidney disease. OPKO is still firmly in the game here with this potential treatment and the encouraging aspect for the bulls is that there is a high unmet need. The trial concerning RAYALDEE for Covid patients is still ongoing and the encouraging aspect of this trial is that results are due over the next months. Suffice it to say, if the data is encouraging, OPKO will be in a strong position to get the treatment fast-tracked for approval. This is another catalyst which could move the needle here in the near term.
Over the past few months, we witnessed an end to the Japanese deal concerning the commercialization of RAYALDEE but a new deal in China came on the scene with Nicoya to develop the treatment in that country. OPKO continues to look for partnership and licensing opportunities in order to reduce risk and improve the firm's probabilities of generating increasing cash flow. This is a sound strategy in the short term but obviously adversely affects long-term profitability especially if products become a hit in those respective regions.
From a valuation perspective, the shares continue to look undervalued from both an assets and sales standpoint. In fact, when we combine the firm's fundamentals with what we are seeing on the technical chart, we continue to believe that the recent share-price action looks more bullish (ascending triangle) than bearish (potential double top). Support not far below the current share price needs to hold here to keep the bullish argument intact.
To sum up, concerning OPKO Health, we are dealing with a profitable firm which has a very strong balance sheet and an attractive valuation. Yes, concerns remain regarding the sustainability of the testing business, but this uncertainty is well covered by the stock's current valuation in our opinion. It is all about staying in the game as much as possible so the firm's pipeline and the likes of Somatrogon can really deliver for shareholders. We look forward to continued coverage.
Jul. 14, 2021 7:41 AM ETOPKO Health, Inc. (OPK)2 Likes
Summary
We remain bullish on OPKO Health although July trading has been poor thus far.
The firm's balance sheet, valuation, and fundamentals should mean downside risk is limited in this stock.
The market is looking for a catalyst. Let's hope the company can provide it soon enough.
We wrote about OPKO Health (NASDAQ:OPK) back in March when we stated that the company needed to take advantage of the significant increase in testing for covid-19. Although the firm witnessed excellent sales from this segment in the fourth quarter, we cautioned investors to remain focused on the core business. The reason being is that we continue to foresee a drop in the testing side of the business as more and more people get vaccinated over time.
Although OPKO continues to deliver strong profitability in its numbers with respect to testing, the company actually reported a sequential decline of approximately 400,000 tests in Q1 this year. We acknowledge that approximately 45,000 tests are being carried out every day and that Bio-Reference remains at the forefront with respect to testing for professional sports teams, and it is fair to say that this market has transitioned from diagnostic testing to screening & surveillance. OPKO has done a good job here in pivoting its resources to cater more for the latter group. The firm has done this through point-of-care platforms and custom software to run the numbers. With a large percentage of people still unvaccinated, OPKO can continue to make gains in testing in the likes of sporting events, travel through cruises and the like, and hospitality. Furthermore, margins in some areas may be able to compensate for the likely drop in volume which is expected to come.
WHY OPKO HEALTH INC. SHARES ARE GOING TO HAVE SUFFICIENT ...
Source: Company
Here is the issue though with OPKO's target market (which is people who use shared services repeatedly). A friend of mine travels repeatedly due to his job but was not in any rush to get the vaccine. After a few months of traveling where he had to undertake uncomfortable repeated PCR tests, he totally changed his mind and actually ended up getting his vaccine ahead of time. Suffice it to say, with respect to testing, there can be a cost issue, a time issue, as well as a comfort issue with continuous Covid tests. These trends all point towards more reluctant people getting vaccinated over time.
Since the market is a forward-looking or predictive mechanism, we continue to believe that the long-term fate of this stock is tied to its pharmaceutical business. Top-line sales in this segment increased by almost $3 million in the first quarter but RAYALDEE sales continue to suffer. Bulls will state that we will most likely recover the significant drop in prescriptions compared to pre-Covid (33%) but this remains an unknown at this point. The reason being is that access to physicians may never return to what it once was. Management has been astute in that it has pivoted its sales team to explore other strategies in order to maximize sales. Various marketing programs have also been planned to build awareness. These efforts should complement growing access to the physicians which will be obviously helped by the ongoing vaccination efforts.
Despite the headwinds RAYALDEE has had to deal with, first quarter numbers still showed 170 additional physicians who prescribed the product in this period. This trend demonstrated the sustained demand for the core product in what has been a very difficult market for the sales team. We also saw promising results in the phase II trial with respect to RAYALDEE being used on patients with high levels of chronic kidney disease. OPKO is still firmly in the game here with this potential treatment and the encouraging aspect for the bulls is that there is a high unmet need. The trial concerning RAYALDEE for Covid patients is still ongoing and the encouraging aspect of this trial is that results are due over the next months. Suffice it to say, if the data is encouraging, OPKO will be in a strong position to get the treatment fast-tracked for approval. This is another catalyst which could move the needle here in the near term.
Over the past few months, we witnessed an end to the Japanese deal concerning the commercialization of RAYALDEE but a new deal in China came on the scene with Nicoya to develop the treatment in that country. OPKO continues to look for partnership and licensing opportunities in order to reduce risk and improve the firm's probabilities of generating increasing cash flow. This is a sound strategy in the short term but obviously adversely affects long-term profitability especially if products become a hit in those respective regions.
From a valuation perspective, the shares continue to look undervalued from both an assets and sales standpoint. In fact, when we combine the firm's fundamentals with what we are seeing on the technical chart, we continue to believe that the recent share-price action looks more bullish (ascending triangle) than bearish (potential double top). Support not far below the current share price needs to hold here to keep the bullish argument intact.
To sum up, concerning OPKO Health, we are dealing with a profitable firm which has a very strong balance sheet and an attractive valuation. Yes, concerns remain regarding the sustainability of the testing business, but this uncertainty is well covered by the stock's current valuation in our opinion. It is all about staying in the game as much as possible so the firm's pipeline and the likes of Somatrogon can really deliver for shareholders. We look forward to continued coverage.