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OPKO Health (OPK) Q1 Earnings and Revenues Top Estimates

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OPKO Health, Inc. (OPK - Free Report) delivered a loss per share of 2 cents in the first quarter of 2023, narrower than the year-ago period’s loss of 8 cents. The figure was also narrower than the Zacks Consensus Estimate of a loss of 7 cents per share.

Our projection of loss per share was 10 cents.

Revenues in Detail

OPKO Health registered revenues of $237.6 million in the first quarter, down 27.8% year over year. The figure, however, surpassed the Zacks Consensus Estimate by 26.8%.

The first-quarter revenues compare to our estimate of $169.2 million.

Lower revenues from services dragged the overall top line.

Segmental Revenues

OPKO Health manages its operations through two reportable segments – Diagnostics and Pharmaceuticals.

Within the Diagnostics arm, revenues from services amounted to $132.4 million in the reported quarter, down 53.8% year over year, primarily due to a fall in COVID-19 testing volume and the sale of GeneDx in April 2022.

This compares to our projection of $132.8 million from services revenues in the first quarter.

BioReference Laboratories (BRL) processed approximately 68,000 COVID-19 polymerase chain reaction tests in the first quarter of 2023, down 96.6% year over year.

Within the Pharmaceuticals arm, revenues from products rose 10.4% to $40.4 million, primarily on the back of sales in OPKO Health’s international operating companies and increased revenues from RAYALDEE sales.

This compares to our projection of $31 million from products revenues in the first quarter.

Revenues from sales of RAYALDEE in the first quarter of 2023 were $6.6 million, up 29.4% from the prior-year period.

Revenues from the transfer of intellectual property and other totaled $64.8 million compared with the prior-year revenues of $6 million. The first-quarter revenues include $50 million upfront payment from Merck, $7 million milestone payment from Vifor Fresenius Medical Care Renal Pharma triggered by the German price approval related to Rayaldee and $2.5 million milestone payment from Nicoya Therapeutics related to the submission of its investigational new drug application to China's Center for Drug Evaluation for Rayaldee.

This compares to our projection of $5.3 million of revenues from the transfer of intellectual property and other in the first quarter.

OPKO Health, Inc. Price, Consensus and EPS Surprise

OPKO Health, Inc. Price, Consensus and EPS Surprise

OPKO Health, Inc. price-consensus-eps-surprise-chart | OPKO Health, Inc. Quote

Margin Analysis

In the quarter under review, OPKO Health’s gross profit rose 16.4% to $99.3 million. The gross margin expanded by a huge 1588 basis points to 41.8%.

We had projected 13.2% of gross margin for the first quarter.

Selling, general and administrative expenses fell 35.6% to $75.7 million. Research and development expenses climbed 78.1% year over year to $32.6 million. Adjusted operating expenses of $108.3 million decreased 20.3% year over year.

Adjusted operating loss totaled $9 million compared with $50.5 million in the prior-year quarter.

Financial Position

OPKO Health exited first-quarter 2023 with cash and cash equivalents of $110.8 million compared with $153.2 million at the end of 2022.

Net cash flow used in operating activities at the end of first-quarter 2023 was $22.6 million compared with $19.9 million a year ago.

Guidance

OPKO Health has provided its financial outlook for the second quarter of 2023.

For the quarter, it expects its total revenues to be between $165 million and $175 million. The Zacks Consensus Estimate for the same currently stands at $185.8 million.

OPKO Health expects its revenues from services to lie between $127 million and $135 million and revenues from product sales to be in the range of $32 million-$36 million. Other revenues are expected to be between $3 million and $6 million.

OPKO Health has also confirmed that it expects its COVID-19 testing volumes to remain at current levels and continue to decline throughout 2023. However, management assumes consistent core testing volumes with growth in OPKO Health’s higher-margin oncology and women's health and urology specialty lines of testing.

Our Take

OPKO Health exited the first quarter of 2023 with better-than-expected results. The continued sales of OPKO Health’s NGENLA (somatrogon) by Pfizer Inc. in 17 countries, including Japan, Germany and the U.K., looks promising. OPKO Health also confirmed that Pfizer is currently expecting to launch in all priority international markets by the year’s end and is continuing to work with the FDA to obtain approval in the United States. This raises our optimism about OPKO Health.

In March, OPKO Health’s ModeX Therapeutics, Inc. entered into an exclusive worldwide license and collaboration agreement with Merck to develop MDX-2201 for the Epstein-Barr virus. The company also confirmed that BRL is one of the first commercial laboratories to offer a dual-stain triage test (CINtec PLUS Cytology test from Roche Diagnostics) to enhance cervical cancer screenings. These also look promising for the stock.

Robust results from the Pharmaceuticals segment, with solid sales of RAYALDEE, are impressive. The company’s continued strength in its women's health and oncology businesses augurs well. The expansion of the gross margin bodes well.

However, the dismal top-line and bottom-line performances were concerning. Lower Diagnostics revenues and lower BRL testing volumes were also worrying. Management’s expectations of the continued decline of COVID-19 testing volumes throughout 2023 are discouraging from a business perspective. The persistent operating loss for OPKO Health also does not bode well for the company.

Zacks Rank and Other Key Picks

OPKO Health currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .

Edwards Lifesciences, carrying a Zacks Rank #2, reported first-quarter 2023 adjusted earnings per share (EPS) of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences has a long-term estimated growth rate of 6.9%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.

Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.

Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.

Merit Medical reported first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.

Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.

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