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Here's Why You Should Hold Onto Opko Health (OPK) Stock Now
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With a market capitalization of approximately $3.28 billion, Opko Health, Inc. (OPK - Free Report) has been riding high on solid prospects in RAYLDEE and BioReference platforms. The company’s consistent focus in R&D bodes well. However, the company faces cutthroat competition in the niche space. The company has been incurring operating losses due to limited revenues from the pharmaceutical operations and sale of the 4Kscore test.
For 2018, the Zacks Consensus Estimate for revenues is pegged at $260.4 million, reflecting a decline of 17.1% year over year. However, the Zacks Consensus Estimate for 2018 is pegged at a loss of 7 cents. The stock has a Zacks Rank #3 (Hold).
Here we take a quick look at the primary factors that have been plaguing Opko Health and discuss the prospects that ensure near-term recovery.
The company has an unimpressive record of incurring huge operating losses. Till date, it has generated only limited revenues from the pharmaceutical operations in the United States, Chile, Mexico, Israel, Spain and Ireland as well as from the sale of the 4Kscore test.
The company persistently incurs substantial research and development (R&D) as well as general and administrative expenses related to operations. Per management, Opko Health allocated most of its financial resources to R&D, including pre-clinical development activities and clinical trials, which dampened margins.
Management is also apprehensive about difficulties in cash flow and profit generation in the recently-launched BioReference and other commercial businesses.
In the first quarter of 2018, operating expenses amounted to $124.4 million, down 8.9% on a year-over-year basis. Notably, Opko Health incurred an operating loss of $42.6 million, down from $45.2 million in the prior-year quarter.
Cutthroat Competition in the Niche Space
The medical instrument industry is highly competitive. The industry calls for extensive research for technological innovation continuously.
Competitors of the diagnostics business include major diagnostic companies, reference laboratories, molecular diagnostic firms, universities and research institutions.
We believe that most of these companies are financially stronger than Opko Health with larger research and development staffs along with more extensive marketing and manufacturing organizations. The strength of these companies is likely to dent Opko Health’s customer base in the quarters to come.
Why Should You Still Hold?
RAYALDEE Gains Prominence
Within the pharmaceutical business, RAYALDEE is Opko Health’s leading renal product in the domestic market since the last two years. RAYALDEE is the first and only therapy approved by the FDA for the treatment of secondary hyperparathyroidism (SHPT) in adults with stage 3 or 4 chronic kidney disease. RAYALDEE has been witnessing a decent momentum, courtesy of successful efforts from the sales team.
In the first quarter of 2018, Opko Health registered $3.7 million of revenues related to sales of RAYALDEE. Total RAYALDEE prescriptions surged approximately 730% on a year-over-year basis and improved 38% from the sequential quarter’s tally. Opko Health invested $7.3 million in the RAYALDEE commercial organization in the first quarter.
Solid R&D Focus
Opko Health’s strong focus in R&D is a positive factor. The company’s strong commitment toward innovation led to the introduction of several products, improvements in the existing products and expansion of product lines as well as enhancements and new equipment in the R&D facilities.
Opko Health’s R&D expenses were approximately $125.2 million, $111.2 million and $99.5 million in 2017, 2016, and 2015, respectively. In the first quarter of 2018, expenses totaled $34.2 million, up 23.9% year over year. By the end of the quarter, the company confirmed to make solid investments in R&D activities in the upcoming quarters.
Solid Guidance
In the second quarter of 2018, Opko Health expects revenues from services in the range of $205-$225 million. Product revenues are expected in the range of $25-$30 million, including RAYALDEE revenues that are projected in the band of $4-$5 million. Revenues from the transfer of intellectual property are projected between $15 million and $20 million.
Operating expenses are expected to be in line with the first quarter’s projection of $295-$310 million. For 2018, effective tax rate is projected to be in single digits.
Price Performance
Shares of Opko Health have outperformed the industry in a month’s time. Notably, the company’s shares have gained 36.2% against the industry's decline of 10%. The current level is also higher than the S&P 500 index's rise of 1%.
Key Picks
A few better-ranked stocks in the broader medical space are Genomic Health , Abiomed and Stryker Corporation (SYK - Free Report) .
Abiomed has a projected long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1.
Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Here's Why You Should Hold Onto Opko Health (OPK) Stock Now
With a market capitalization of approximately $3.28 billion, Opko Health, Inc. (OPK - Free Report) has been riding high on solid prospects in RAYLDEE and BioReference platforms. The company’s consistent focus in R&D bodes well. However, the company faces cutthroat competition in the niche space. The company has been incurring operating losses due to limited revenues from the pharmaceutical operations and sale of the 4Kscore test.
For 2018, the Zacks Consensus Estimate for revenues is pegged at $260.4 million, reflecting a decline of 17.1% year over year. However, the Zacks Consensus Estimate for 2018 is pegged at a loss of 7 cents. The stock has a Zacks Rank #3 (Hold).
Here we take a quick look at the primary factors that have been plaguing Opko Health and discuss the prospects that ensure near-term recovery.
Opko Health, Inc. Price and Consensus
Opko Health, Inc. Price and Consensus | Opko Health, Inc. Quote
What’s Deterring Opko Health?
Infamous History Operating Losses
The company has an unimpressive record of incurring huge operating losses. Till date, it has generated only limited revenues from the pharmaceutical operations in the United States, Chile, Mexico, Israel, Spain and Ireland as well as from the sale of the 4Kscore test.
The company persistently incurs substantial research and development (R&D) as well as general and administrative expenses related to operations. Per management, Opko Health allocated most of its financial resources to R&D, including pre-clinical development activities and clinical trials, which dampened margins.
Management is also apprehensive about difficulties in cash flow and profit generation in the recently-launched BioReference and other commercial businesses.
In the first quarter of 2018, operating expenses amounted to $124.4 million, down 8.9% on a year-over-year basis. Notably, Opko Health incurred an operating loss of $42.6 million, down from $45.2 million in the prior-year quarter.
Cutthroat Competition in the Niche Space
The medical instrument industry is highly competitive. The industry calls for extensive research for technological innovation continuously.
Competitors of the diagnostics business include major diagnostic companies, reference laboratories, molecular diagnostic firms, universities and research institutions.
We believe that most of these companies are financially stronger than Opko Health with larger research and development staffs along with more extensive marketing and manufacturing organizations. The strength of these companies is likely to dent Opko Health’s customer base in the quarters to come.
Why Should You Still Hold?
RAYALDEE Gains Prominence
Within the pharmaceutical business, RAYALDEE is Opko Health’s leading renal product in the domestic market since the last two years. RAYALDEE is the first and only therapy approved by the FDA for the treatment of secondary hyperparathyroidism (SHPT) in adults with stage 3 or 4 chronic kidney disease. RAYALDEE has been witnessing a decent momentum, courtesy of successful efforts from the sales team.
In the first quarter of 2018, Opko Health registered $3.7 million of revenues related to sales of RAYALDEE. Total RAYALDEE prescriptions surged approximately 730% on a year-over-year basis and improved 38% from the sequential quarter’s tally. Opko Health invested $7.3 million in the RAYALDEE commercial organization in the first quarter.
Solid R&D Focus
Opko Health’s strong focus in R&D is a positive factor. The company’s strong commitment toward innovation led to the introduction of several products, improvements in the existing products and expansion of product lines as well as enhancements and new equipment in the R&D facilities.
Opko Health’s R&D expenses were approximately $125.2 million, $111.2 million and $99.5 million in 2017, 2016, and 2015, respectively. In the first quarter of 2018, expenses totaled $34.2 million, up 23.9% year over year. By the end of the quarter, the company confirmed to make solid investments in R&D activities in the upcoming quarters.
Solid Guidance
In the second quarter of 2018, Opko Health expects revenues from services in the range of $205-$225 million. Product revenues are expected in the range of $25-$30 million, including RAYALDEE revenues that are projected in the band of $4-$5 million. Revenues from the transfer of intellectual property are projected between $15 million and $20 million.
Operating expenses are expected to be in line with the first quarter’s projection of $295-$310 million. For 2018, effective tax rate is projected to be in single digits.
Price Performance
Shares of Opko Health have outperformed the industry in a month’s time. Notably, the company’s shares have gained 36.2% against the industry's decline of 10%. The current level is also higher than the S&P 500 index's rise of 1%.
Key Picks
A few better-ranked stocks in the broader medical space are Genomic Health , Abiomed and Stryker Corporation (SYK - Free Report) .
Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abiomed has a projected long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1.
Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>