OPKO Health, Inc.

OPK Details

OPKO Health, Inc. (NASDAQ: OPK) is a pharmaceutical and diagnostic research and development business based in the United States. OPKO generates income through Covid19 testing, the 4Kscore test (a laboratory-developed blood test that offers a customized risk score for prostate cancer), and the sale of Rayaldee, a US Food and Drug Administration (FDA) authorized drug for prostate cancer therapy. In addition, OPKO also records revenue from intellectual property licensing, research and development, collaboration, and commercialization agreements. As of October 12, 2021, the company's market capitalization stood at USD 2.55 billion.

Krystal Decode DEB Program: On October 12, 2021, BioReference Laboratories, Inc. (BRL), an OPKO subsidiary, announced a partnership with Krystal Biotech, Inc. (Krystal), a pioneer in re-dosable gene treatments for rare disorders, and GeneDx, Inc., a leader in genomic analysis, to provide free genetic testing for all forms of Epidermolysis Bullosa (EB). The Krystal Decode DEB program's objective is to enable patients with the dystrophic version of this genetic condition, also known as DEB, to acquire a precise diagnosis, using highly reliable results collected from a blood or cheek swab sample.

Extension of BLA review of Somatrogon: According to an announcement from OPKO and Pfizer, Inc. on September 24, 2021, the US Food and Drug Administration (FDA) has extended the review period for the Biologics License Application (BLA) for Somatrogon, a long-acting recombinant human growth hormone, for the treatment of growth hormone deficiency (GHD) in pediatric patients. In addition, the target deadline for the Prescription Drug User Fee Act (PDUFA) has been extended by three months to January 2022 due to Pfizer's submission of additional data to the original BLA.

Robust H1FY21 Results: Due to increased clinical test and genomic test volumes, the business reported a 92.63% rise in total revenues to USD 987.57 million in H1FY21 (ended June 30, 2021) compared to USD 512.67 million in H1FY20. Consequently, OPKO's net income increased to USD 14.89 million in H1FY21, compared to a loss of USD 25.43 million in H1FY20. In addition, it has USD 65.76 million in cash and cash equivalents as of June 30, 2021, and USD 209.77 million in total debt (including convertible notes and financing leases).

Key Risks: As of January 31, 2021, Dr. Phillip Frost, OPKO's CEO and Chairman, controlled about 41.3% of the outstanding common stocks thus gaining substantial control over its operations, which constrains the ability of other shareholders to influence corporate decisions. Furthermore, majority of the company's products are still in development, making them subject to the risks of failure with medication, diagnostic, and medical device developments.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

OPK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: OPK share price has increased 4.21% in the past month and is leaning towards the lower band of the 52-week range of USD 3.02 to USD 6.27. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 50.48. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 3.93. Considering the uptick in the stock price in past one month, new programs, an extension of Somatrogon review, associated risks, and improved fundamentals, we recommend a "Hold" rating on the stock at the closing price of USD 3.71, up 1.07% as of October 12, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.