OPKO Health, Inc. OPK continues to benefit from lucrative RAYALDEE and BioReference platforms, solid focus on research and development (R&D), and optimistic outlook for 2020. However, operating losses remain a concern.
Shares of OPKO Health have gained 12.9% against the industry’s decline 3.2% on a year-to-date basis. Meanwhile, the S&P 500 Index declined 7.1% in the same timeframe.
The company, with a market capitalization of $1.11 billion, engages in the diagnostics and pharmaceuticals business in the United States, Ireland, Chile, Spain, Israel and Mexico. It anticipates earnings to improve 10% in the next quarter.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
OPKO Health has an infamous record of incurring huge operating losses. To date, the company has generated limited revenues from pharmaceutical operations in the United States, Chile, Mexico, Israel, Spain and Ireland.
In fourth-quarter 2019, OPKO Health incurred an operating loss of $112.4 million, significantly wider than the year-ago quarter’s loss of $76.1 million.
What’s Favoring the Stock?
Lucrative prospects in RAYALDEE and BioReference platforms have been providing a competitive edge to OPKO Health in the MedTech Industry. RAYALDEE has been witnessing decent momentum, courtesy of successful efforts from the sales team.
OPKO Health’s BioReference platform is the third largest full-service clinical laboratory. BioReference has almost 400 employees in the sales and marketing team and operates a network of approximately 275 patient service centers. Per management, BioReference Laboratories has been making excellent progress when it comes to the improvement of both its top- and bottom-line performance and is poised for growth in 2020.
OPKO Health’s focus on R&D is a positive factor. The company’s strong commitment toward innovation led to product introductions, improvement in existing products, and product-line expansion. Moreover, its commitment resulted in the enhancement of R&D facilities and procurement of new equipment for the same.
Per management, the company will continue to make solid investments in R&D programs throughout 2020. OPKO Health projects R&D expenses of $23-$28 million in first-quarter 2020 and in the range of $85-$125 million for full-year 2020.
Strong outlook for first quarter as well as full-year 2020 instills investor optimism in the stock. Management estimates revenues from Services between $168 million and $173 million in first-quarter 2020. For the full year, revenues are expected within $715-$740 million.
Revenues from Products are anticipated in the range of $30-$32 million in the first quarter. This includes revenues from RAYALDEE between $9.3 million and $10.5 million. Full-year revenues are expected between $130 million and $150 million, which include revenues from RAYALDEE between $50 million and $60 million.
Revenues from Transfer of intellectual property are projected in the range of $20-$30 million for 2020.
Which Way Are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $865.7 million, indicating a decline of 4% from the previous period. The same for earnings stands at a loss of 31 cents per share.
Stocks to Consider
Some other better-ranked stocks from the broader medical space include Accuray Incorporated ARAY, West Pharmaceutical Services, Inc. WST and DexCom, Inc. DXCM, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Accuray has an expected earnings growth rate for the next quarter of 200%.
West Pharmaceutical has an estimated earnings growth rate for the next quarter of 3.4%.
DexCom has a projected long-term earnings growth rate of 36.7%.
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