OPKO Health, Inc. (OPK) Q1 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call shows mixed results: positive cash flow expectations and strong R&D funding are offset by increased pharmaceutical costs and operating losses. The collaboration with Merck and the convertible debt exchange are positives, but the lack of clarity on NGENLA's issues and revised BARDA guidance are concerns. The Q&A reveals uncertainties about Pfizer's plans and government tariffs. Given the neutral sentiment and no market cap data, the stock is likely to remain stable with a neutral prediction.

Key Financial Performance

Diagnostics Revenue $102.8 million for Q1 2025, down from $126.9 million in Q1 2024, primarily due to the Labcorp transaction that closed in September 2024.

Diagnostics Costs and Expenses $126.8 million for Q1 2025, down from $161.3 million in Q1 2024, including $32.4 million related to the assets sold to Labcorp.

Diagnostics Operating Loss $23.9 million for Q1 2025, improved from an operating loss of $34.4 million in Q1 2024.

Pharmaceutical Revenue $47.1 million for Q1 2025, slightly up from $46.8 million in Q1 2024.

Pharmaceutical Product Revenue $34.8 million for Q1 2025, down from $38.1 million in Q1 2024, impacted by a challenging foreign currency environment.

Rayaldee Revenue $6.3 million for Q1 2025, down from $6.9 million in Q1 2024, affected by the Inflation Reduction Act.

Revenue from Transfer of IP $12.3 million for Q1 2025, up from $8.7 million in Q1 2024.

Gross Profit Share from Pfizer $4.5 million for Q1 2025, down from $5.6 million in Q1 2024.

R&D Funding $7 million for Q1 2025, up from $2.2 million in Q1 2024, reflecting increased activities supported by BARDA.

Pharmaceutical Costs and Expenses $81.9 million for Q1 2025, up from $74.5 million in Q1 2024.

Pharmaceutical R&D Expenses $30.2 million for Q1 2025, up from $21.2 million in Q1 2024, due to ModeX development activities.

Pharmaceutical Operating Loss $34.8 million for Q1 2025, compared to an operating loss of $27.7 million in Q1 2024.

Net Loss $67.6 million or $0.10 per share for Q1 2025, improved from a net loss of $81.8 million or $0.12 per share in Q1 2024.

Cash Position Approximately $450 million in cash, cash equivalents, and restricted cash at the end of Q1 2025.

Convertible Debt Exchange Completed on April 1, 2025, eliminating $159.2 million of outstanding convertible notes.

Share Repurchase Authorization Approximately $159 million remaining under the share repurchase program.

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Operating Highlights

OPKO-88006 Development: Our dual-GLP-1 glucagon agonist, OPKO-88006, has shown promising results in animal models for obesity and MASH, supporting its development as a once-weekly injectable treatment.

Collaboration with Entera Bio: Entered into a collaboration with Entera Bio to develop an oral tablet form of OPKO-88006, utilizing Entera's N-Tab technology.

ModeX Clinical Trials: ModeX has two programs in Phase 1 clinical trials, including an Epstein-Barr virus vaccine candidate in collaboration with Merck.

Sale of BioReference Assets: Announced the sale of BioReference's oncology and related clinical testing business to Labcorp for up to $225 million, enhancing profitability and focus on core services.

Expansion in Latin America: EirGen Pharma, OPKO's Irish contract pharmaceutical unit, continues to show revenue and profit growth.

Patient Access Service Center Expansion: BioReference expanded its patient access service center locations in New Jersey and New York to improve client experience and revenue.

Cost Savings Initiatives: Actions taken in Q1 2025 are expected to yield annualized cost savings of approximately $19 million.

Workforce Reduction: BioReference eliminated 136 positions, representing a 7% workforce reduction, to streamline operations.

Operational Efficiencies: Continued efforts to reengineer operations with automation for greater efficiency and service levels.

Increased Stock Repurchase Program: The Board approved a $100 million increase to the stock repurchase program, totaling $200 million.

Convertible Debt Exchange: Executed a convertible debt exchange to strengthen capital structure, eliminating $159.2 million of outstanding convertible notes.

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Risk or Challenges

Regulatory Issues: The Inflation Reduction Act has resulted in a challenging environment for Rayaldee, impacting revenue and profitability.

Supply Chain Challenges: The company is navigating challenges related to foreign currency exchange rates, which have affected revenue and profitability in international markets.

Competitive Pressures: The company faces competitive pressures in the pharmaceutical market, particularly with the performance of products like Rayaldee and the need to understand underlying dynamics affecting profit share payments from Pfizer.

Operational Restructuring: The company is undergoing significant restructuring, including workforce reductions and facility consolidations, which pose risks related to employee morale and operational efficiency.

Financial Risks: The company anticipates incurring additional nonrecurring costs related to restructuring activities, which could impact financial performance.

Market Uncertainty: The timing of the Labcorp transaction closing is uncertain, which could affect revenue projections and operational planning.

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Guidance & Outlook

Sale of BioReference's Oncology Business: In March, OPKO announced the sale of BioReference's health oncology and related clinical testing business to Labcorp for up to $225 million, enhancing BioReference's path to profitability.

Development of OPKO-88006: The dual-GLP-1 glucagon agonist OPKO-88006 has shown promising results in animal models, supporting its development as a treatment for obesity and MASH.

Collaboration with Entera Bio: A collaborative agreement was established with Entera Bio to develop an oral tablet form of OPKO-88006, with shared ownership and development costs.

Cost Reduction Initiatives: OPKO is implementing additional cost reduction initiatives targeting $10 million in annualized savings on top of previously discussed savings.

Share Repurchase Program: The Board approved a $100 million increase to the share repurchase program, totaling $200 million, to return capital to shareholders.

2025 Revenue Guidance: Total revenues are expected to be between $675 million and $685 million for 2025.

Diagnostics Segment Profitability: The remaining BioReference is expected to be cash flow positive and profitable post-transaction with Labcorp.

R&D Expense Guidance: R&D expenses are expected to be between $120 million and $130 million for 2025.

Nonrecurring Expenses: Nonrecurring expenses related to restructuring activities are estimated to be between $10 million and $40 million for the full year.

Depreciation and Amortization Expense: Expected to be approximately $90 million for 2025.

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Shareholder Return Plan

Share Repurchase Program: The Board approved a $100 million increase to the common stock repurchase program, bringing the total to $200 million. OPKO believes its shares are significantly undervalued and aims to return capital to shareholders while funding pharmaceutical programs.

Remaining Share Repurchase Authorization: Under the share repurchase authorization, OPKO has approximately $159 million remaining, which represents more than 113 million shares or over 14% of currently outstanding shares.

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Key Q&A

Q:What are some possible explanations for the negative dynamics for NGENLA? Is it more likely competition access issues or something commercial related to Pfizer?

A:We think it’s more likely to do with some of the commercial environments. We don’t have color further from Pfizer just yet on the dynamic there. But we expect this to be a first quarter only event, which is why we’ve only slightly reduced the guide.

Q:Could you comment on why you think Pfizer withdrew their EU application for the adult setting? When was the last time you met with Pfizer regarding plans to expand the franchise?

A:Pfizer has been working on a strategy to expand the label for NGENLA for some time. They’re expecting to kick off some trials for the additional pediatric indications. In Europe, they chose to focus on the pediatric indication given the size of the overall market.

Q:Could you provide a rough timeline about the development program of the GLP-1/glucagon tablet candidate? When can we expect to see some clinical results?

A:We expect to have an IND filed later this year or by the end of this year or early next year with the trial to commence thereafter and could get results from a Phase 1 trial by the end of '26.

Q:Is there any other differentiating factor for this candidate compared to semaglutide or tzepatide?

A:The oral formulation is once a day. For the subcutaneous, it’s once a week. The compound is focused on NASH and fatty liver disease.

Q:Can you give us a sense of the Diagnostic business and BioReference?

A:On an annualized basis, the remaining business sits between $310 million and $320 million.

Q:With the 200 healthy volunteers in the EBV trial, are there any efficacy or biomarker signals you might look for?

A:We will get an idea of the immunogenicity of the vaccine with biomarkers. It’s mostly tolerability and safety.

Q:What are the next steps for the subcu obesity program, NASH program?

A:We’re in the pre-IND phase for both of them and have been manufactured. We will have our GMP material ready.

Q:Could you elaborate on the government tariff situation?

A:We’re monitoring it and looking throughout our supply chain. We think it’s a manageable risk.

Q:Do you anticipate the MESH drug targeting earlier or later stages of MESH?

A:We are inclined to use the product where it’s most needed, which is F3 or F4 NASH.

Q:What is the revised guidance for BARDA revenue?

A:It’s 38 million to 44 million which is down from 40 million to 48 million.

Q:Is the idea that the NGENLA issue is a one quarter issue based on script data or conversations with Pfizer?

A:We haven’t spoken with Pfizer since we’ve received these results. We look at the script data which indicates a growing franchise.

Q:If the oncology business had not been sold, would you have been able to get to cash flow breakeven this year?

A:We had fully expected to get there and certainly could.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the specific reasons for the negative dynamics of NGENLA, stating it was likely due to commercial environments without further details from Pfizer. Additionally, the response about the government tariff situation lacked clarity on potential impacts.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

OPK Transcript

OPKO Health, Inc. (OPK) Q3 2025 Earnings Call Transcript

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The earnings call presents a mixed picture. Financial performance shows some decline in net income, but there's optimism in product development with potential growth in the 4Kscore product and new collaborations. Market strategy is unclear, with slow market conversion for Pfizer products. Expenses are high, impacting financial health. The shareholder return plan is not explicitly positive or negative. The Q&A reveals uncertainties in efficacy and market conversion. Overall, the rating is neutral due to balanced positives and negatives, with no strong catalysts for significant stock price movement.

OPKO Health, Inc. (OPK) Q2 2025 Earnings Call Transcript

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The earnings call shows positive developments: a strategic sale to Labcorp, promising product development, and cost reduction initiatives. The Q&A highlights growth in NGENLA prescriptions, 4Kscore test sales, and potential for oxyntomodulin in obesity/MASH treatment. The share repurchase program and cash flow positive guidance further boost sentiment. Despite some management ambiguity, the overall outlook is positive, with optimistic guidance and strategic initiatives likely to drive a stock price increase in the short term.

OPKO Health, Inc. (OPK) Q1 2025 Earnings Call Transcript

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OPKO Health, Inc. (OPK) Q4 2024 Earnings Call Transcript

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The earnings call presents mixed signals: improved net income and reduced operating losses are positive, but declining diagnostic revenue and increased expenses pose concerns. The Q&A reveals management's reluctance to provide specific guidance, adding uncertainty. The share buyback program is a positive factor, but the reliance on external funding and operational restructuring risks balance out the positives. Overall, the stock reaction is likely to be neutral, as positive and negative factors offset each other.

OPK Report

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