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Over the last couple of years, Opko Health  (NASDAQ: OPK  ) has been adding some exciting assets to its already impressive drug portfolio.

Its two most promising assets are 4Kscore and Rayaldy. Opko is gearing up to launch 4Kscore in the United States and currently testing Rayaldy in phase 3 trials. The launch of 4Kscore and approval of Rayaldy could cause a rally in Opko valuations and offer an intriguing investment opportunity. 

The business
Opko Health is a diagnostics and pharmaceutical company that is involved in discovering, developing, and commercializing proprietary and novel technologies. Opko's diagnostics segment is developing molecular diagnostics tests for identifying non-small-cell lung cancer, Alzheimer's, and other various forms of cancer. It is also developing point of care diagnostics tests to identify prostate specific antigen. Its OURLab facility provides specialized urologic pathology services. The company's pharmaceutical segment is developing treatments for patients with chronic kidney disease and vitamin D insufficiency. The company is also developing Fermagate Tablets to treat hyperphospatemia for patients with renal disease.

Opko has recently acquired Cytochroma to strengthen its renal division. This acquisition gives Opko control over Rayaldy and the phosphate binder Alpharen. Rayaldy is a vitamin D compound in phase 3 of clinical trials. Opko has overtaken the completion of Rayaldy remaining clinical trials. The company has started inducting patients in the first phase 3 trial to assess the effectiveness of the drug in treating patients with secondary hyperparathyroidism, or SHPT, chronic kidney disease, or CKD, and vitamin D insufficiency.

Kidney disease can create vitamin D deficiency in patients and prescription drugs tackle this deficiency. Existing vitamin D treatments lead to increase in the calcium levels, which is further harmful to the kidneys. Rayaldy doesn't have this side effect and thus holds a clear competitive advantage over existing players. The vitamin D market is worth around $12 billion, and Rayaldy can get a significant chunk. The drug is currently undergoing phase 3 trials. The company expects trial data to be available by the second quarter of 2014 and to file an New Drug Application by the first half of 2015. 

Prostate cancer diagnostics
An attractive asset of Opko Diagnostics is the 4Kscore. As the name suggests, 4Kscore is a combination of four tests named Total PSA, Free PSA, Intact PSA and Human Kallikrein 2 (HK2). The aim of 4Kscore is to increase the accuracy of prostate screening. According to Opko, annually approximately 750,000 patients are misdiagnosed by the PSA screening test in the United States. This misdiagnosis leads to highly invasive prostate biopsies. The company believes that the test can reduce this number by approximately 50%. 4Kscore has already been launched in the United Kingdom and costs around $250 per test . 

Partnerships and acquisition
Any discussion of Opko is not complete without mentioning its CEO, Phillip Frost. He is the primary force behind Opko and is a large shareholder in the company. He has also served as the vice chairman of Teva Pharmaceuticals  (NYSE: TEVA  )  and later as the chairman of the board. He was a major part of Ivax Corporation's takeover by Teva Pharmaceutical. Teva has recently signed an agreement with Opko to invest in Cocrystal Discovery, a biopharmaceutical company engaged in the discovery and development of antiviral therapeutics. 

Opko has also recently acquired Prolor Biotech for a whopping $480 million. This acquisition will play a vital role in expanding Opko's specialty drug portfolio. The company is working on developing a human growth hormone (hGH-CTP). The drug has already completed phase 2 trials and has shown the potential to reduce the required dosing frequency of human growth hormones, i.e. from a daily injection to weekly doses. Other than growth hormones, the company's drug portfolio also includes hemophilia, obesity, and diabetes. 

Solid fundamentals are an integral part of any investment decision but are especially important for a company with candidates in the development phase. As discussed above, majority of Opko's notable candidates are still in the development phase, which makes it crucial for investors to monitor its financial health.

The company generated revenues of around $24 million last quarter and reported a loss of $3.4 million. During the quarter, it burned approximately $44 million from its cash pile. However, it doesn't have any immediate concerns as it still has cash and equivalents of around $169 million. The current ratio is 3.9, and quick ratio is 3.5, both above industry averages. Therefore, despite operating at a loss and a number of acquisitions the financial health of Opko is pretty solid. The cash situation and liquidity ratios indicate that Opko should have the ability to continue support ongoing drug trials and any future commercialization efforts of Rayaldy and 4Kscore.

Bottom line
In my opinion, the considerable knowledge of CEO Frost is the driving force behind Opko. Using these assets, Opko is adding substantial assets to its already impressive drug portfolio. Therefore, any investors willing to invest in Opko should do their due diligence on Frost's past performance. Despite making a number of acquisitions, the financial position of Opko is still pretty solid. It certainly has enough cash to continue trials of existing candidates and engage in commercialization of Rayaldy and 4Kscore.

Rayaldy and 4Kscore are two promising candidates with billions in sales potential. The company is gearing up to launch 4Kscore in the United States, and Rayaldy is in phase 3 trials. The FDA approval of Rayaldy and U.S. launch of 4Kscore will have a positive impact on company valuations and offer excellent opportunity for investors. 

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  • Report this Comment On September 25, 2013, at 10:24 AM, vitaminDsun wrote:

    Rayaldy may have a number of potential indications other than the one it is currently in phase 3 trials for. I am E.D of the Vitamin D Council; If you Google "vitamin D," we are the third website on the first page. We are a nonprofit dedicated to vitamin D education. Our website gets 2.5 million visitors a year. I have written a number of articles in peer reviewed journals about vitamin D3..I have been reading, writing, and speaking about vitamin D for more than 12 years.

    Rayaldy is the first modified release formula of the circulating form of vitamin D3, 25(OH)D. It has the same seco-steroid mechanism of action as vitamin D3 and is at least 5 times more potent than vitamin D3.It raises serum 25(OH)D much quicker than does plain D3.

    If tested, I believe Rayaldy would pass phase 3 trials in the treatment of asthma in children, idiopathic cardiomyopathy, atopic eczema, and perhaps a number of autoimmune disorders such as active multiple sclerosis although that is less clear from extant literature. It may even help treat autism. Randomized controlled trials of vitamin D3 in all these conditions are currently underway at dozens, if not hundreds, of medical institutions around the world after smaller phase 2 studies of vitamin D3 were positive in a number of these conditions and after mechanisms of action became clear from in vitro and in vivo studies.

    The only competition so far for Rayaldy is Drisdol (vitamin D2, which is not human vitamin D) and over the counter vitamin D3. The activated vitamin D3 analogs are not competition as they do not raise serum 25(OH)D like Rayaldy and D3 do.

    If Rayaldy is approved by the FDA, it will mean doctors can prescribe a more potent, quicker acting prescription form of vitamin D3. As a practicing physician, I am certain physicians will prescribe Rayaldy rather then telling patients to go to the drug store and buy vitamin D3, although vitamin D3 will be much cheaper.

    If you go to our website,, we post a lot about studies of vitamin D, both positive and negative. I believe Rayaldy may eventually be one of the most commonly prescribed medications in the world, as long as other potential players do not beat Opko to these other indications.

    I did not know about Rayaldy until one month ago. When I found out about it, I invested all my available funds in Opko Health so I am long Opko.

    John Cannell, MD

    Vitamin D Council

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