After peaking at over $18 per share in 2015, Opko Health's (NASDAQ:OPK) shares have since sold off thanks to lackluster sales of its first commercial-stage products, declining performance at its laboratory services business, and a high-profile, clinical-stage trial failure. Recently, shares have been rallying on hopes that Opko Health can turn it around. Are this company's worst days behind it?

A slate of setbacks

Despite the fact that historically, 90% of clinical-stage drugs fail to make it to market, Opko Health has already seen two of its drugs cross the regulatory finish line: Varubi and Rayaldee. Unfortunately, sales of these drugs have failed to live up to expectations.

A woman shrugging in front of a chalkboard covered in question marks.

IMAGE SOURCE: GETTY IMAGES.

Opko Health licensed the chemotherapy-induced nausea and vomiting drug Varubi from Schering-Plough in 2009, and then it turned around and out-licensed it to Tesaro, Inc. (NASDAQ:TSRO) in 2010. Tesaro won FDA approval of an oral formulation of Varubi in 2015, but Varubi's sales have been slow to grow since its launch.

In 2016, Varubi's sales were only $5.2 million and in 2017, they clocked in at just shy of $12 million following the launch of an IV formulation in October 2017. Unfortunately, post-launch reports of anaphylaxis in patients receiving the IV version have led to Tesaro suspending distribution of that formulation, casting serious doubt on Varubi's future. 

Opko Health's vitamin D prohormone, Rayaldee, has fared better than Varubi, but its sales have been disappointing, too. It won an OK to boost vitamin D in chronic kidney disease (CKD) patients in 2016, but its sales totaled just $3.7 million in Q1 2018. 

As if lackluster sales of those drugs weren't enough to frustrate investors, Opko investors were dealt more bad news when its long-lasting human growth hormone, hGh-CTP, failed to outperform placebo in adults during phase 3 trials. A win there could have resulted in hundreds of millions in milestones and, eventually, royalties from Pfizer, its collaboration partner on the drug.

Additionally, Opko Health's $1.5 billion acquisition of BioReference Labs in 2015 hasn't lived up to expectations, either. When Opko Health acquired it, BioReference was growing at a 20% annual pace, but a drop-off in pricing and volume at BioReference resulted in sales declining to $889 million in 2017 from $1.01 billion in 2016.

Hope springs eternal

That full slate of disappointments make it easy to understand why Opko Health's stock was a dismal performer last year, but shares are rallying in 2018, and there's still reason to believe that Opko Health can turn a corner and become a winner.

OPK Chart

OPK data by YCharts.

Varubi isn't likely to move the needle for Opko Health, but Rayaldee still could. There are over 20 million patients with CKD, and vitamin D deficiency is a big problem for many of them. In 40% to 82% of stage 3 or 4 CKD patients, low vitamin D can cause secondary hyperparathyroidism (SHPT), a condition that causes excessive calcium and phosphorus to be released from bone.

Arguably, Rayaldee's sales were slow to grow last year because it lacked widespread insurance coverage. That overhang appears to be disappearing. Opko Health says 79% of patients now have access to Rayaldee through their insurance, and as a result, Rayaldee prescriptions grew 38% from Q4 2017 to Q1 2018. 

There's also the chance that BioReference Labs' business stabilizes. One of the reasons Opko bought it was to leverage it to drive demand for the diagnostic tests it's creating, including prostate cancer test 4KScore and in-office lab screening machine Claros 1. A new television campaign could boost awareness and use of the 4KScore test, and the FDA is currently reviewing a PSA test for Claros 1.

Also, Opko Health's phase 3 trial of hGH-CTP in children is still under way, and although odds of success dimmed following its failure in adults, there's still a chance that the data reported in 2019 is good. If so, then Opko has a shot at nine figures in sales because an approval would allow it to split sales on that drug and Genotropin, Pfizer's existing human growth hormone for children. Genotropin's sales were $140 million in Q2 2018.

Furthermore, phase 2b trials are progressing for a type 2 diabetes drug, OPK88003, and a benign prostatic hypertrophy (BPH) drug, OPK88004. These drugs will have to deliver positive data in their current studies before entering phase 3 trials, but they are targeting large patient populations, so it's worth keeping tabs on their progress.

Is this a bargain to buy?

It's anyone's guess if Rayaldee can grow into a top seller, or if business at BioReference Labs will recover, but Opko Health's founder and CEO Philip Frost appears undaunted. One of healthcare's most successful billionaire entrepreneurs, Frost has consistently been acquiring more shares. For example, he bought 262,500 shares in July alone, and that brought his total stake in Opko Health to over 188 million shares. Clearly, he believes Opko Health's best days are in front of it, but until this company starts delivering better quarterly results, only aggressive investors ought to own it.

Todd Campbell owns shares of Pfizer. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.