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Why OPKO Health Stock Jumped Today

By Keith Speights – Jun 28, 2019 at 5:00PM

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A decision by a key Medicare contractor to pay for OPKO's prostate-cancer test provided a nice boost to the stock.

What happened

Shares of OPKO Health (OPK -4.10%) jumped 9.9% higher on Friday after rising as much as 11.7% earlier in the day. The nice gain came after the healthcare company announced that Novitas Solutions issued a new proposed local coverage determination (LCD) that provided reimbursement for OPKO's 4Kscore prostate cancer test.

So what

Novitas' decision is a big win for OPKO Health. The Medicare program is administered by regional contractors that make their own coverage determinations. Novitas serves as the Medicare Administrative Contractor for an area that includes New Jersey, where OPKO's 4Kscore testing is actually performed. This area also includes Arkansas, Colorado, Delaware, the District of Columbia, Louisiana, Maryland, Mississippi, New Mexico, Oklahoma, and Pennsylvania.

Businessman with thumb up

Image source: Getty Images.

Today's announcement comes after Novitas initially issued a negative local coverage determination. But OPKO submitted a request for reconsideration by Novitas. One factor in the reversal by Novitas could be OPKO's filing last week for Food and Drug Administration approval of 4Kscore. OPKO executive Steve Rubin stated in the company's Q1 conference call that Novitas had raised the issue that the test wasn't FDA approved.  

OPKO doesn't provide sales information for 4Kscore in its financial releases. However, the company did report that utilization for 4KScore remained strong in the first quarter with around 19,400 tests performed.

Now what

The turnabout by Novartis provided much-needed good news following a disappointing Q1 performance. There could be some more good news on the way. OPKO hopes to receive European approval for its secondary hyperparathyroidism drug Rayaldee in the not-too-distant future.

In the meantime, the company is taking action to cut costs, particularly in its BioReference Labs segment, which is home to the 4Kscore test. It also continues to work to expand its payer networks.

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

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