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Opko Q3 Revenues Up 108 Percent on Strength of BioReference Sales

NEW YORK (GenomeWeb) – Opko Health reported after the close of the market Monday that its third quarter revenues jumped 108 percent compared to Q3 2015, driven primarily by revenues from clinical lab BioReference Laboratories, which it acquired in August 2015.

For the three-month period ended Sept. 30, Opko's revenues rose to $298.0 million from $143.0 million a year ago, missing Wall Street analysts' consensus estimate for revenues of $322.0 million.

"This increase in revenue was generated by our diagnostics business at BioReference," Opko Executive Vice President Steven Rubin said during a conference call with analysts after the release of the results.

"During the quarter, we continued to make improvements in the financial performance at BioReference through a revenue cycle management program that was initiated during the second quarter of 2016," Rubin said. "The most critical component of this program was the successful implementation of a new billing system [that] will provide us with the power to more effectively manage our billing process as well as our payor relationships while … effectively appealing coverage denial."

Rubin added that the company "posted solid revenue during the quarter, with the bulk coming from traditional reference lab testing, along with modest sequential quarter growth with 4Kscore. Our goal is to continue to grow this segment through increased sales in core lab and genetic testing services, 4Kscore, and the Claros 1 point of care test.”

Opko's net loss for the quarter was $15.0 million, or a loss of $.03 a share, compared with net income of $128.2 million, or $.18 a share, in the same period last year. The loss per share matched analysts' consensus estimate. The 2015 period included a non-recurring income tax benefit related to the release of a valuation allowance against the firm's deferred tax assets because of the BioReference acquisition.

R&D spending in the first quarter rose 29 percent to $24.4 million from $18.9 million, while SG&A costs increased 126 percent to $124.9 million from $55.3 million. The increase in selling, general, and administrative expenses was primarily due to the acquisition of BioReference in August 2015, which accounted for $100.3 million and $35.3 million of SG&A expenses in the third quarter of 2016 and 2015, respectively.

The firm ended the quarter with $144.6 million in cash and cash equivalents.

"Our BioReference Laboratories and its GeneDx unit continue to grow, and the utilization of our innovative 4Kscore test for predicting the probability of aggressive prostate cancer remains strong," said Phillip Frost, chairman and CEO of Opko, said in a statement.

The firm said that it is working to obtain positive coverage for the test by its local Medicare administrator.

During Q3 around 16,000 4Kscore tests were performed, a 9 percent increase from the quarter ended June 30, and a 365 percent increase over Q3 2015.

Rubin noted during the call that the firm is working with payors to secure favorable reimbursement and is making incremental progress.

"Last year, the American Medical Association granted a CPT-1 code for 4Kscore, which will be effective as of January 1, 2017. We have a number of pricing agreements already in place with payors," he said.

Opko has engaged with Novitas Solutions — the Medicare administrative contractor that governs the BioReference facility in New Jersey, where Opko runs the 4Kscore test — to reinstate a positive local coverage decision.

"We have submitted a complete clinical dossier to Novitas, which included background information, physician experience, and extensive clinical validation," Rubin said. "We expect Novitas to include 4Kscore in its February review cycle for a draft local coverage determination." In the meantime, he noted, Novitas has been paying and continues to pay for 4Kscore Medicare submissions.

The firm expects to commence a multi-center clinical study of its Claros POC diagnostic test for prostate specific antigen later this year. Claros 1 is designed to run a wide array of immunodiagnostic tests in the physician's office, or hospital nurses' station, using a single drop of blood, negating the need for a centralized reference laboratory for many common tests, Rubin said.

The firm expects to submit its application to the US Food and Drug Administration for approval of the assay in mid-2017, and commence an additional multi-center clinical study for its POC testosterone test in 2017 followed by a 510(k) submission in late 2017.

Shares of Opko were down almost 1 percent to $9.66 in after-hours trading today on the Nasdaq.