OPKO Health (OPK) Q1 Earnings Miss Estimates, Revenue Declines Y/Y – May 9, 2024

OPKO Health, Inc. (OPK – Free Report) delivered a loss per share of 12 cents in the first quarter of 2024, wider than the loss of 2 cents per share in the same period last year. The figure missed the Zacks Consensus Estimate of a loss of 9 cents per share by 33.3%.

Income in detail

OPKO Health recorded revenues of $173.7 million, down 26.9% year over year. The figure missed the Zacks Consensus Estimate by 5%.

Lower revenues from intellectual property transfers and other items weighed on overall revenue.

Segmental revenues

OPKO Health manages its business through two reportable segments: Diagnostics and Pharmaceuticals.

Within the Diagnostics division, service revenues were $126.9 million, down 4.2% year over year, primarily due to lower clinical testing volumes. This compares to our projection of $126.1 million from services revenue.

The company earlier this year entered into an agreement with Labcorp to divest select assets of BioReference Health, including laboratory testing businesses focused on clinical diagnostics and women’s health, for $237.5 million. The transaction is expected to close in the second half of 2024. BioReference Health will continue to offer diagnostic services in oncology and urology nationwide, and maintain its full operations in New York and New Jersey.

Within the pharmaceutical business, product revenues decreased 5.7% to $38.1 million, primarily due to lower sales at OPKO’s international operating companies and currency fluctuations, partially offset by an increase in Rayaldee sales. This compares to our projection of $41.1 million from product revenue.

Revenue from sales of RAYALDEE in the first quarter was $6.9 million, an increase of 4.5% compared to the same period last year.

Revenues from intellectual property transfers and other matters totaled $8.7 million, compared to $64.8 million in the same period last year. This compares to our projection of $15.8 million in revenue. The company had booked a significant upfront payment of $50 million from Merck and several other milestone payments worth $9.5 million, which were missing in the current quarter, leading to a decline.

Margin analysis

OPKO Health’s gross profit fell 57.7% to $42 million. The gross margin shrank from 41.8% to 24.2%. The significant decline was mainly due to the lack of prepayment by Merck.

Selling, general and administrative expenses decreased 7.3% to $70.2 million. Research and development costs decreased 32.8% year over year to $21.9 million. Operating expenses of $113.5 million decreased 12.6% year over year.

Operating loss was $71.5 million, compared to the previous quarter’s operating loss of $30.6 million.

Financial position

OPKO Health ended the first quarter with cash and cash equivalents of $75.6 million, compared to $95.9 million at the end of 2023.

Accompaniment

OPKO Health has announced its financial outlook for the second quarter of 2024.

The company expects total revenue between $180 million and $185 million. The Zacks Consensus Estimate currently stands at $189.8 million.

OPKO Health expects service revenues to be between $126 million and $130 million and product sales revenues to be between $36 and $40 million. Other revenues are expected to be between $14 million and $18 million, including Pfizer’s estimated gross profit sharing payments between $9 million and $11 million.

Our take

OPKO Health ended the first quarter of 2024 with dismal performance. However, management’s confirmation of approval of NGENLA (somatrogon) in more than 50 countries, including the United States, Japan, EU member states, Canada and Australia, looks promising. OPKO Health’s acquired company, ModeX, has advanced its pipeline of antiviral and immune-oncology programs. This also increases our optimism about the company.

The divestiture of BioReference Health’s select assets appears encouraging as it is likely to streamline the laboratory services business while retaining core businesses to better position the division for sustainable growth and profitability.

However, the dismal top and bottom line performance was worrying. The lower revenues from Diagnostics were also worrying. The contraction in gross margin and continued operating losses also do not bode well for the company.

Zacks Rank and Stocks to Consider

OPKO Health currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN – Free report), Ecolab (ECL – Free report) and Boston Scientific Corporation (BSX – Free report).

Align Technology, which currently has a Zacks Rank of #2 (Buy), reported first-quarter adjusted earnings per share (EPS) of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million exceeded the consensus mark by 2.6%. You can see You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology has an estimated long-term growth rate of 6.9%. ALGN’s earnings exceeded expectations in three of the last four quarters and missed once; the average surprise was 5.9%.

Ecolab, which currently has a Zacks Rank of 2, has an estimated long-term growth rate of 13.3%. ECL’s earnings beat expectations in each of the four subsequent quarters, with an average surprise of 1.7%.

Ecolab shares are up 33.8%, while the industry is down 9.3% over the past year.

Boston Scientific reported first-quarter adjusted earnings per share of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenue of $3.86 billion exceeded the consensus estimate by 4.9%. It currently has a Zacks Rank of 2.

Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings beat expectations in each of the next four quarters, with an average surprise of 7.5%.

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