Why 2014 May Be a Big Year for Opko Health, Inc.

Philip Frost has never been shy about backing his investments. Frost, the former founder of IVAX, and Chairman of generic heavyweight Teva Pharmaceuticals, has big stakes in a variety of emerging health-care companies.  However, out of all his investments, he's likely watching Opko Health (NYSE: OPK  ) closest.

Frost has a truly massive stake in Opko that totals nearly 140 million shares, 398,000 of which were bought in March, according to SEC filings. That means Frost owns about 40% of Opko's stock. Since Frost has amassed such an eye-popping stake in Opko, let's take a look at the catalysts that may move Opko's shares this year, including Tesaro's (NASDAQ: TSRO  )  potential FDA filing.

OPK Chart

OPK data by YCharts

First, a bit of background
Frost is no rookie when it comes to building successful companies. His track record includes founding Ivax in 1987 and selling it to Teva for $7 billion in 2006. Frost built Ivax into a generic powerhouse by executing a series of acquisitions, and it appears he's executing a similar strategy with Opko, which has taken stakes in -- or acquired -- a variety of intriguing young companies in the past couple of years.

Last year, Opko acquired Cytochroma to get its hands on Cytochroma's vitamin D prohormone, and PROLOR Biotech, to lock-up technology that makes prohormones last longer so that patients require fewer doses. That technology has already been put to work on a long-acting Factor VIIa treatment for hemophilia that was recently awarded FDA orphan drug designation.

Opko also has an ownership stake in tiny Arno Therapeutics that gives Opko the right to eventually acquire it, and Cocrystal, a company that's working on hepatitis C therapies. In January, Frost helped orchestrate the merger of Biozone, a company in which Opko had previously held a 12% equity stake, with Cocrystal. That deal effectively locks up control of Biozone's technology for improving how topical therapies and OTC products are absorbed through the skin.

Additionally, Opko has an equity stake in Tesaro, the company that licensed Opko's anti-nausea drug Rolapitant, and a 19% equity stake in sRNA company RXi Pharmaceuticals, which Opko received in exchange for all of Opko's RNAi technology in March 2013.

Converting products into profit
Opko was dealt a blow in December when Tesaro reported that Rolapitant failed to meet a secondary endpoint in trials. That dashed investors' hopes for a slam dunk across both the trials' primary and secondary endpoints, sending shares in both Opko and Tesaro reeling. However, Rolapitant did succeed in achieving its primary endpoint for reducing vomiting, and that has Tesaro on track to file for FDA approval later this year. If approved, Opko will collect a milestone payment, as well as double-digit royalties on sales.

Opko is also in the process of launching its 4kscore test. That test provides doctors with a new prostate cancer screening tool that may reduce the number of unnecessary biopsies tied to false positive PSA tests. Opko will conduct those tests at its own lab, and eventually plans to provide the test as part of a point-of-care solution for doctor's offices.

In addition to those two developments, Opko expects to report later this year how its vitamin D drug Rayaldy, acquired in the Cytochroma deal, performed in phase 3. That trial has a scheduled completion date of June 2014.

Fool-worthy final thoughts
A lot is going on at Opko this year that investors will need to track. Investors will get an early read into demand for the 4kscore prostate test during the next couple quarters, should see Tesaro file for Rolapitant approval, and learn how Rayaldy did in trials, too. If Rayaldy's results are favorable, Opko plans to file for FDA approval in 2015. If so, that would mean Rayaldy could begin contributing meaningfully to Opko in 2016.

Opko could use one (or more) of these products to pan out because it's burning through cash. The company exited last quarter with $185 million in cash, but its costs totaled $176 million last year. That handily dwarfed its $96 million in revenue, and suggests that investors should still consider Opko a speculative play, albeit an intriguing one.

These six stock picks are poised for incredible growth, and may have fewer question marks than Opko
They said it couldn't be done. But David Gardner has proved them wrong, time, and time, and time again, with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently, one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (0) | Recommend This Article (5)

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2895111, ~/Articles/ArticleHandler.aspx, 10/1/2014 2:15:04 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement