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OPKO Health (OPK) to Restructure After Asset Buyout by Labcorp
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OPKO Health, Inc. (OPK - Free Report) recently entered into an agreement with Laboratory Corporation of America Holdings, Inc. (LH - Free Report) or Labcorp. Per the agreement terms, select assets of BioReference Health, a wholly-owned subsidiary of OPKO Health, will be acquired by Labcorp.
The transaction, expected to close in the second half of 2024, is subject to customary closing conditions and applicable regulatory approvals.
The assets that will be acquired from OPKO Health currently generate approximately $100 million in annual revenues.
The latest announcement is expected to enable OPKO Health to strengthen its foothold in the biopharmaceutical space.
Rationale Behind the Agreement
Through the transaction, OPKO Health’s BioReference Health’s laboratory testing businesses focused on clinical diagnostics and reproductive and women’s health across the United States outside of New York and New Jersey will be acquired by Labcorp. The transaction includes patient service centers and certain customer contracts and operating assets.
However, BioReference Health will continue to offer oncology and urology diagnostic services nationwide and maintain its full operations in New York and New Jersey.
Per OPKO Health’s management, the transaction will likely enable the company to significantly streamline its laboratory services business while retaining its core operations. Moreover, the deal is valued at $237.5 million, which may boost OPK’s cash position. This, in turn, will enable the company to position BioReference Health for sustained growth and profitability.
Labcorp’s management believes that the latest asset acquisition will likely expand access and convenience for patients across the country, thereby leading to better health outcomes for patients.
Industry Prospects
Per a report by Data Bridge Market Research, the global biopharmaceuticals market was $915.6 million in 2022 and is anticipated to reach $2,332.57 million by 2030 at a CAGR of 12.4%. Factors like the rise in demand for personalized medicine and precision therapeutics and the increasing focus on rare diseases and orphan drugs are expected to drive the market.
Given the market potential, the latest agreement is expected to aid OPKO Health to re-establish profitability in its clinical laboratory business.
Notable Development
In February, OPKO Health reported its fourth-quarter 2023 results, wherein management confirmed that BioReference Health continued to implement initiatives to reduce costs and improve productivity by enhancing innovation of its higher-value specialty testing segments. Other efforts to return this business to profitability included expanding into new markets and marketing to new customer segments, such as pharmaceutical companies.
Price Performance
Shares of the company have lost 16.9% in the past year against the industry’s 10.9% rise and the S&P 500's 27.7% growth.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
Currently, OPKO Health carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) and Cardinal Health, Inc. (CAH - Free Report) .
DaVita, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 67.9% compared with the industry’s 23.4% rise in the past year.
Cardinal Health, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.
Cardinal Health has gained 45.4% compared with the industry’s 12.8% rise in the past year.
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OPKO Health (OPK) to Restructure After Asset Buyout by Labcorp
OPKO Health, Inc. (OPK - Free Report) recently entered into an agreement with Laboratory Corporation of America Holdings, Inc. (LH - Free Report) or Labcorp. Per the agreement terms, select assets of BioReference Health, a wholly-owned subsidiary of OPKO Health, will be acquired by Labcorp.
The transaction, expected to close in the second half of 2024, is subject to customary closing conditions and applicable regulatory approvals.
The assets that will be acquired from OPKO Health currently generate approximately $100 million in annual revenues.
The latest announcement is expected to enable OPKO Health to strengthen its foothold in the biopharmaceutical space.
Rationale Behind the Agreement
Through the transaction, OPKO Health’s BioReference Health’s laboratory testing businesses focused on clinical diagnostics and reproductive and women’s health across the United States outside of New York and New Jersey will be acquired by Labcorp. The transaction includes patient service centers and certain customer contracts and operating assets.
However, BioReference Health will continue to offer oncology and urology diagnostic services nationwide and maintain its full operations in New York and New Jersey.
Per OPKO Health’s management, the transaction will likely enable the company to significantly streamline its laboratory services business while retaining its core operations. Moreover, the deal is valued at $237.5 million, which may boost OPK’s cash position. This, in turn, will enable the company to position BioReference Health for sustained growth and profitability.
Labcorp’s management believes that the latest asset acquisition will likely expand access and convenience for patients across the country, thereby leading to better health outcomes for patients.
Industry Prospects
Per a report by Data Bridge Market Research, the global biopharmaceuticals market was $915.6 million in 2022 and is anticipated to reach $2,332.57 million by 2030 at a CAGR of 12.4%. Factors like the rise in demand for personalized medicine and precision therapeutics and the increasing focus on rare diseases and orphan drugs are expected to drive the market.
Given the market potential, the latest agreement is expected to aid OPKO Health to re-establish profitability in its clinical laboratory business.
Notable Development
In February, OPKO Health reported its fourth-quarter 2023 results, wherein management confirmed that BioReference Health continued to implement initiatives to reduce costs and improve productivity by enhancing innovation of its higher-value specialty testing segments. Other efforts to return this business to profitability included expanding into new markets and marketing to new customer segments, such as pharmaceutical companies.
Price Performance
Shares of the company have lost 16.9% in the past year against the industry’s 10.9% rise and the S&P 500's 27.7% growth.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
Currently, OPKO Health carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) and Cardinal Health, Inc. (CAH - Free Report) .
DaVita, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 67.9% compared with the industry’s 23.4% rise in the past year.
Cardinal Health, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.
Cardinal Health has gained 45.4% compared with the industry’s 12.8% rise in the past year.