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How Things Look for Opko Health, Inc. in 3 Charts

By Keith Speights – Jun 26, 2017 at 4:26PM

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It hasn't been a great year so far for Opko Health, but the future could be brighter.

Opko Health, Inc. (OPK -3.47%) has gone through significant changes over the last couple of years. It launched secondary hyperparathyroidism drug Rayaldee. Opko's partner, Tesaro (NASDAQ: TSRO), launched Varubi as a treatment for chemotherapy-induced nausea and vomiting. Opko also made a big acquisition of Bio-Reference Laboratories.

The Opko of today is much different than the Opko of not too long ago. But how are things looking for the company now? These three charts tell the story.

Holding eyeglasses

Image source: Getty Images.

1. Stock performance

Opko stock went through plenty of ups and downs last year. So far in 2017, however, it's been pretty much all downhill.

OPK Chart

OPK data by YCharts.

A big reason behind Oko's dismal stock performance this year was the announcement of disappointing results from a late-stage study of experimental long-acting human growth hormone product (hGH-CTP). Basically, the drug didn't show any improvement in patients taking it. At first, this news seemed to doom the chances for hGH-CTP, which Pfizer (PFE -0.63%) had licensed from Opko in 2014.

However, Opko identified some outliers that a subsequent analysis of the data found skewed the results. Excluding these outliers, patients taking hGH-CTP did show a statistically significant improvement on the primary outcome of the study -- change in trunk fat mass.

2. Financial performance

There's good news and bad news related to Opko Health's financial performance. The good news is that revenue is much higher than in the past. The bad news is that the company continues to lose money.

OPK Revenue (Quarterly) Chart

OPK Revenue (Quarterly). Data by YCharts.

Opko's 2015 acquisition of Bio-Reference Laboratories provided a big boost to sales. So far, however, the company hasn't recognized any revenue from Rayaldee, even though the drug launched in November 2016. Tesaro also hasn't generated huge sales from Varubi yet ($6.9 million last year and $2.1 million in the first quarter of 2017). Opko receives double-digit percentage royalties on the drug, but it's not enough to make much of a different yet. 

The company still isn't operating at breakeven, in large part because its costs for providing diagnostics services are sky-high. While revenue from Opko's diagnostics segment increased to more than $255 million in the first quarter, the segment's operating loss widened to $3.1 million. 

3. Earnings growth estimates

Is the situation bleak for Opko Health? Wall Street doesn't think so. Analysts don't have great expectations for this year, but they see significant improvement next year and reasonable earnings growth over the next few years.

Opko Health projected earnings growth chart

Data source: Yahoo! Finance. Chart by author.

This optimism likely stems in part from anticipation that Rayaldee will pick up sales momentum. There are at least some positive signs on this front. Opko announced a few weeks ago that it had entered into agreements with several large Medicare Part D plans as well as more commercial insurance plans for reimbursement of Rayaldee. With these deals, around 68% of Americans now have access to the drug. By the end of the year, Opko hopes to increase that level to 75%.

There's also still hope for hGH-CTP. Opko has a late-stage study underway for the human growth hormone in pediatric patients. However, neither Opko nor Pfizer have announced any definitive next steps regarding plans for hGH-CTP in treating adults. 

Tesaro is launching Varubi in Europe (under the brand name Varuby). The biotech also hopes to launch an intravenous version of the drug in the U.S. this year. If Tesaro is successful with these launches, Opko could potentially see higher revenue from Varubi in the future.

Wall Street analysts also probably see potential for Opko's 4Kscore prostate cancer test and its Claros 1 in-office immunoassay platform that's in development. These products fit well with the large and growing Bio-Reference Labs business.

While plenty of unanswered questions remain for Opko, it's possible that the future for the company could be brighter than its past.

Keith Speights owns shares of Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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