Checking in on OPKO Long After J.P. Morgan Ends

J.P. Morgan's Healthcare Conference, the annual kickoff for biotechs, is in the books. But long after executives and investors abandon the Westin St. Francis Hotel, the conference continues to live on.

On the Internet, at least.

Most of the companies' presentations are still available to view here, and you can find a link to their slides on the company/presentation info pages.

It's an easy way to get introduced to a company you're thinking of putting on your watchlist. After all of the news-driven presentations are done, each year, I try to go back and listen to at least one presentation by a company I haven't followed closely.

This year's pick? OPKO Health (NYSE: OPK  ) .

I'm not sure how OPKO Health has managed to fly under my radar considering how much the biotech has going on. The company is developing a diagnostic platform, has a pipeline of drugs, and has made quite a few equity investments in other biotechs.

On the diagnostic side, OPKO is developing its Claros immunoassay that would allow doctors to do laboratory testing in-house. The tabletop-sized machine reads a sample on a card and can potentially perform up to 10 tests off one sample.

While doing the tests in the office should be more convenient for patients, the big driver for sales will come from doctor's ability to make more money. If the tests can provide results that are as accurate as the ones done by Laboratory Corporation of America (NYSE: LH  ) or Quest Diagnostics (NYSE: DGX  ) , doctors can bill insurers directly for the test and pocket the difference. The Claros isn't going to put Laboratory Corp. or Quest out of business, but it could take a small chunk of some of their routine tests.

OPKO is also developing a separate test called the 4Kscore to determine patient's risk of developing prostate cancer. A whopping 60% of prostate biopsies are negative. If the 4Kscore can predict which of those biopsies will be negative, they won't have to be performed, producing a compelling value proposition. OPKO estimates eliminating the unnecessary biopsies could save about $1 billion a year, which insurers would presumably be willing to pay to OPKO to run the 4Kscore tests considering a blood test is substantially less invasive than a biopsy.

On the pharmaceutical side, OPKO has five drugs in late-stage development.

A phase 3 trial testing Rayaldy in patients with secondary hyperparathyroidism with chronic kidney disease and vitamin D insufficiency is scheduled to read out in the middle of this year. OPKO worked out a special protocol assessment with the FDA before the trial began, so if the results are positive, an approval toward the end of 2015 or early 2016 seems likely.

OPKO's most advanced drug, Rolapitant, is licensed to Tesaro (NASDAQ: TSRO  ) . Rolapitant, which treats nausea and vomiting associated with chemotherapy and surgical operations, has already passed two phase 3 trials. A third trial is expected to read out early this year, putting Tesaro on target to submit a marketing application in the middle of this year.

Finally Tesaro has a basket of investments in nine different biotechs, including its partner, Tesaro. As Phillip Frost, OPKO's Chairman and CEO put it, the company likes to have "fingers in many pies."

The only problem is that can be very messy, figuratively and literally.

A Foolish challenge
From what I heard on the webcast, OPKO isn't my cup of tea. With so much going on, it's very difficult to determine a fair value for the company. If you like companies with multiple shots on goal, I encourage you to listen to the webcast; there's even more going on at the company than I was able to cover here.

Or listen to a presentation of a different company you'd like to know more about. Just don't let the resource go to waste.

The Fool has another resource for finding companies to add to your watchlist. Check out what stock The Motley Fool's chief investment officer has selected as his No. 1 stock for 2014 in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 29, 2014, at 9:49 AM, classic216 wrote:

    Thanks for the informative article. I agree that they may be a difficult company to value, but their diversity is one of their biggest assets. They have so much going on that there's bound to be some successful developments among them. Every week I keep seeing a new article saying that their CEO keepings buying more shares, this guy must be a true believer. Dr. Frost has done this (quite successfully) before, and he is reminding everyone how he became a billionaire. Opko is like a mini-berkshire hathaway for biotech, but there's a big difference between Frost and Buffett: Buffett's present-day investing style is conservative and doesn't implement the same strategies that got him wealthy to begin with. Dr. Frost is still utilizing risky but rewarding strategies even after accumulating his wealth.

  • Report this Comment On January 29, 2014, at 9:57 PM, Roguesuerte wrote:

    The 4k test score has already been released in the UK. Recently their OPKO's UK affiliate conducted a charity related prostate cancer screening in a local foodstore utilizing 4k and their claros machine. This is the first non-clinical(i.e. outside of a hospital type setting) testing of this nature that has been done to date. I am long opko and suggest doing your own due diligence on this. But can you imagine being able to forego the anal probe via the biopsy and the related risks involved, in favor of a pinprick at the local foodstore. The 4k is supposed to be more accurate than a biopsy and the current PSA tests on the market.I have also read that the Claros machines are current being employed to detect AIDS in africa, as well.

  • Report this Comment On January 29, 2014, at 11:49 PM, stockanal45 wrote:

    Dr. Frost has been buying thousands of OPK shares almost everyday for the past year. He has a little over 100 million shares YTD. Maybe, the doctor is on to something?

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