Q4 2020 OPKO Health Inc Earnings Call

February 18, 2021

Ladies and gentlemen, todays conference is scheduled to begin shortly please standby.

Please continue the standby thank you for your patience.

[music].

Ladies and gentlemen, and thank you for standing by and moving to the Opco health.

And quarter 2020 financial results conference call at this time all participant lines are on a listen only mode. After the speaker presentation. There will be a question and answer session to ask the question. During the session you will need to push star one on your telephone.

Please be advised that today's conference is being recorded and if you were kind of any further assistance. Please press star zero and went on.

I'd like to hand, the conference to you speak of today, Yvonne Briggs and L. A chain of Investor Relations. Please go ahead ma'am.

Thank you operator and good afternoon. This is of on breaks with all of the H J.

You all for joining today's call to discuss the Opco health and financial results for the fourth quarter of 'twenty and 'twenty.

I'd like to remind you that any statements made during this call by management and other than statements of historical fact will be considered forward looking and as such will be subject to risks and uncertainties that could materially affect the company's expected results. Thus.

Those forward looking statements include without limitation, the various risks described and the Companys SEC filings, including the annual report on form 10-K for the year ended December 31, 'twenty and 'twenty and and subsequently filed SEC reports.

Importantly, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast February 18th 2021.

Except as required by law Opco undertakes no obligation to revise or update any forward looking statements to reflect the events or circumstances. After the date of this call.

Before we begin let me let me review of the format for today's call.

Doctor Phillip Frost, Chairman and Chief Executive Officer will open the call then.

And then Steven Rubin <unk> Executive Vice President will provide a business update and pipeline review and then Dr. Jon Cohen will discuss bio reference laboratories.

After that Adam logo Opco CFO will review the company's fourth quarter financial results and then we'll open the call to questions now I'd like to turn the call over to Dr. Frost.

Good afternoon, and thank you for joining the call today.

Today, we're reporting record revenues earnings and cash from operations for the fourth quarter and full year 'twenty and 'twenty.

Although every aspect of Umpqua health was coach quite COVID-19, during 'twenty and 'twenty on price.

Truthfully proud of her hard work and teams that are of reference laboratories.

And as they rose to the challenge of scaling of the COVID-19 testing services and then.

On the unprecedented pace and a fast moving and highly uncertain environment.

We've made significant investments and human resources and adopted the innovative new testing models with our retail partners and.

And grass seed and the state of the art technologies and reconfigured our laboratories to expand our test and capacity.

And the liver timely results.

The ability to ramp up capacity.

And while maintaining accurate results and rapid turnaround times.

And reflects the talent and dedication of the <unk> management team and employees.

We had record of COVID-19, PCR testing volume during the fourth quarter.

Although our base business with us.

Substantially recovered during the summer and pool stalled towards the end of the fourth quarter due to the surge of COVID-19 cases across the country.

We believe <unk> base business, largely returned to historical levels and beyond.

The right explanation rollout continues and fewer new cases of reported.

We've seen of significant interest and the capability of bio reference to compete on the national stage.

The number and diversity of industries that now seek us too.

To deliver.

Highly complex.

Click on COVID-19 solutions.

While the demand for COVID-19 testing is likely to decline.

Believe it will continue into 'twenty and 'twenty two and beyond.

We're encouraged by the new administrations focus on increasing testing availability of <unk>.

Across the country and the approach to controlling the pandemic.

Expanding the availability of testing supplies and enhancing laboratory testing capacity.

Despite the pandemic our pharmaceutical business has made great strides on.

Highlighted earlier this year was the joined the announcement with our partner Pfizer.

But the FDA accepted for filing the biologics license application for Soma, Droga and our long acting human growth hormone.

In addition, and NDA was submitted in Japan for some of the Trojan and we're expecting Pfizer to assume make a regulatory submission in Europe.

And the U S demand for reality continues to be impacted by the pandemic related restrictions.

And the remains below pre COVID-19 levels.

Overseas our partner <unk> for some of this.

Continues to receive marketing approvals in Europe, and it's one of the promotional launch later this year.

During last year's fourth quarter, we began the phase two trial with reality and COVID-19 patients.

Moving to undertake this drove <unk> numerous independent studies that and.

And the inverse correlation between vitamin D levels, and COVID-19 risk and severity.

This trial is ongoing and we look forward to updating you on the results when they become available.

One of the thank all of employees, who have worked tirelessly over the past year.

And I'm proud of what we've achieved in 2020 and.

Domestic about what we can accomplish in 2021 on.

And now I'll turn the call over to Steve Rubin to further discuss of our business Steve.

Thanks, Bill good afternoon, everyone and thank you for joining us.

2020 was an eventful year for Opco and with the onset of the COVID-19 pandemic.

Bio reference laboratories demonstrated its ability to the leading provider of testing services on a national level not only for COVID-19, PCR testing of the critical specialty and genetic testing as well this leading position.

<unk> and record revenue growth and profitability, which Adam will discuss in more detail.

As Phil mentioned earlier this year, we jointly announced with Pfizer that the FDA accepted for review of the BLA for <unk>. The once weekly previous of charter with the growth hormone deficiency.

The target prescription drug user fee act or <unk> action date for decision by the FDA is October of this year.

<unk> also submitted an NDA to the Ministry of Health Labor.

And welfare and Japan for so much rather ask of Europe price remains on schedule and with respect to a regulatory submission of marketing approval and we expect to announce that submission shortly.

As this is a global program Pfizer has also submitted and we will continue to submit for marketing approval and many different countries across the world.

Under our agreement with Pfizer <unk> eligible to receive up to 275 million upon achievement of certain regulatory and pricing milestones. In addition, upon launch we are entitled to regional tiered gross profit sharing for both <unk> and Pfizer's Jena Compton.

Now I'd like to turn to our commercial pharmaceutical business starting with the reality.

Realogy numbers for the quarter breakdown as follows.

Total prescriptions for reality and Q4 2020 as reported by <unk>.

And were approximately 15000, representing a decrease of approximately 16% compared with Q4 of 2019.

And a 10% decrease compared with Q3 2020.

The reality sales force continues to contend with the impact of COVID-19 on access to physicians as well as the decline and patient visits to the doctor's offices new.

The new patient starts however, increased by 1% and Q4 versus Q3.

And since the product was launched nearly 22700 patients have had reality prescribed by approximately 34 hundreds of physicians.

Approximately 140 positions or about four percentage of the total number of prescribers, we're new to reality of prescribers and Q4.

We anticipate that sales of reality will rebound as COVID-19, vaccinations become more available and new infections decline.

We are pleased to announce that the 4% of yes, our partner for reorder and Europe has secured marketing approval from reality, and Spain, Portugal, Italy, and Switzerland, adding to the seven European countries that have previously approved the product, namely the United Kingdom, Germany, Sweden and Norway.

And when Denmark, and the Netherlands.

The commercial launch is and anticipated in 2021 and pricing negotiations are well advanced.

Our phase II trial with the reality as a treatment for patients with mild and moderate COVID-19 is progressing as we continue enrolling subjects at multiple sites across the U S. The trial is a randomized double blind placebo controlled study and is expected to enroll approximately 160 patients including many.

And with stage, three or four chronic kidney disease, and we're at a higher risk for developing more severe illness.

Our patients are being randomized on a one to one ratio to four weeks of daily treatment with either <unk> or placebo and and monitored for another two weeks and.

Dosing regimen is designed and quickly raise it maintained serum 25 hydroxy vitamin D levels within the range of 50 to 100 nanograms per Mil and order to induce cost of trial production and macrophages.

And thereby enabling them to secrete L. L 37 of potent antimicrobial protein that can destroy Sars COVID-19 two.

The primary efficacy endpoints include raising and maintaining serum total 25 hydroxy vitamin D. Within the range of 50 to 100, and Ghana grants from the oil and time to resolution of COVID-19 symptoms.

Should the trial data from the trial be positive we intend to seek emergency use authorization from the FDA.

<unk> for the syndication.

There have been numerous independent studies reporting and inverse correlation between vitamin D status, and COVID-19 risk and severity, which as Phil mentioned underscores the rationale for the trial.

Two recent reports from Spain indicate that orally administered immediate release cost of a dial is affected and mitigating COVID-19, and severities and <unk>.

Hospitalized patients.

The first report by Castillo and 2020.

<unk> the cost of the dial therapy reduced ICU admissions from 50% and 2%. The second report by <unk> and 2021 showed the ICU admission required by five 4% of patients treated with accounts of the dial and 21, 1% of patients treated with <unk>.

And.

And deaths occurred and six 5% of patients receive and accounts for dial versus 15% of those on placebo.

The cost of a dial of dosing regimen and both of these studies was the same and according to our calculations likely raise year 'twenty serum total 25 hydroxy vitamin D levels to at least the range of 50 to 100 and of grants from Neil.

To update you on other of Radiology studies, we have completed our phase four clinical trial, comparing the reality with three common treatment regimens for secondary hyperparathyroidism and adult patients with stage three or four <unk> and vitamin D. Insufficiency top line data are fully consistent with the previously announced interim results.

Namely the daily dose of 60 micrograms of <unk> is the only treatment that raise serum total 25 hydroxy vitamin D to the range of 50 to 100 and a gradual mill.

Level required to effectively suppress elevated plasma parathyroid hormone levels and patients with stage three or four <unk>.

Earlier this week, we completed our phase III clinical trial.

The last subject last visit that is exploring the safety and efficacy of of high strength formulation of reality as a new treatment for secondary hyperparathyroidism and adult patients with vitamin D insufficiency and stage of <unk> on hemodialysis.

Final data analysis and now underway.

We are also currently design of phase <unk> follow on study with our partners before and Japan tobacco.

We have several programs and our product pipeline. They are advancing in preclinical and early clinical development. The focus here is on our long acting platform technologies and rare diseases. Two of our most advanced compounds are long acting recombinant factor seven compound for the treatment and prevention of bleeding episodes and patients with HAE.

Hopefully a or b with inhibitors to factor eight or factor nine and our long acting clip to analog for short bowel syndrome.

Our factor seven compound has successfully completed the phase one study with subcutaneous administration and healthy subjects.

And the phase <unk> study with intravenous administration in hemophilia patients.

Our <unk> two molecule for the treatment of short bowel syndrome is expected to enter clinical trials and late 2021.

Patients with short bowel syndrome, typically have undergone massive and Charles surgery.

And significantly reduced our complete loss of intestinal function.

We believe our long acting technologies will offer clinical benefits over current products on the market.

Now, let me turn the call over to Jon Cohen to discuss our by our revenue SaaS business John.

Thanks, Steve and good afternoon, everybody I'm going to start my remarks, with a review of our core business, which includes routine clinical testing and our specialty testing services, comprising oncology urology women's health and genetic testing.

Overall sample volume on our core business and Q4 of 2020 was down 7% compared to Q4 of 2019.

We saw a decrease in Q4 versus Q3 of this year of about 4%.

And Q4 of this year of last year, our women's health business was stable compared to Q3, our oncology business grew 4% Q4 versus Q3, and our four K score of grew 1% Q4 versus Q3.

We believe that the core business will remain 5% to 10% lower.

For the period compared to 2019 as many patients are still reluctant to visit their physicians and.

In addition, telemedicine continues to have a significant impact on physician office visits we expect trends to improve at a moderate pace during the second half of this year.

We are pleased with the performance of G&A ex as its volumes have remained stable to pre COVID-19 levels Q4 of this year compared to Q4 of 2019.

The Q4 volumes for <unk> Dx was up 11, 6% versus Q3 and 2020.

Last month, we announced the G&A ex launched several new genetic tests, including repeat expansion analysis of spinal cerebellar.

Cerebellar ataxia, friedrichs ataxia, and other common forms of hereditary ataxia as well.

These additions GB ex has created a comprehensive and affordable offering that covers the vast majority of genes involved with pediatric onset and adult onset pay taxes.

Also in January we were excited to formally announce the expansion of our digital home testing service under the Scarlet brand.

Scarlet is and in home fully integrated digital platform that provides access to on demand diagnostic services after visiting with the health care provider of patient receives the link where they can elect and utilized scarlet and <unk>.

Schedule and in person visits by choosing of date.

And location for qualified health care professional to collect the test specimen.

That location could be at the patient's home or office and patients that receive real time updates and relevant information such as learning how the prepare for the visit or tracking the health care professionals arrival once collected the specimens of sense of bio reference for testing and the results of securely available online to the patient and so.

They're ordering health care providers.

We believe scarlet delivers and innovative and highly convenient alternative to the traditional patient service center for patients per specimen collection and.

And is the first of many future initiatives to advanced bio references of digital health strategy focused on providing flexibility and convenience for patients.

Now, let me turn my attention to Covid testing.

And the last year, we dramatically scale of the company to accommodate the need for more testing and the.

The last 10 months, we've gone from performing 40000 of requisitions. The day two of 115000 requisitioned. The day, we increased our employee head count. The 4000 to 8000 of 100, we increased our clinical staff from 120 to 300, and we now serve 19 million.

And patients per year, which is up from 11 million patients a year and 2019.

As for Covid testing to date, we have performed more than $12 5 million COVID-19, PCR tests and the nation and the fourth quarter. We performed about $4 5 million of COVID-19, molecular tests, which was up 24% from the $3 5 million tests performed and the third quarter.

We are averaging between 50 and 60000 tests a day with the current capacity to do more than 100000, PCR tests per day with an average turnaround time of less than 48 hours and most cases.

Bio reference remains committed to providing innovative solutions to the COVID-19 testing new.

Leads of the physicians health systems long term facilities governments schools employers sports teams entertainment venues transportation hospitality and the general public through our relationships with Rite aid and Cvs with now over 1500 locations around.

On the country and we.

Believe that rapid testing with point of care devices will play an increasingly important role and detecting the disease and situations where timely result is important.

We have validated multiple different point of care platforms and of partnered with several manufacturers to provide customized solutions for many different industries. We have developed proprietary software for several of point of care of devices to deliver and report results in a timely fashion to date, we have performed the 100000 rapid.

The tests for different clients and our point of care tests volume grew 260% of Q3 to Q4.

Last month, we announced COVID-19 testing agreements for players and officials as well as the team and leaks that sort of the 2020 and 2021 seasons for the National Basketball Association and sort of the National Hockey League. We continued to dominate the sports vertical with our contracts with the and.

F L. The 30, <unk> and 30 cities the M. B, a with 30 teams and 28 cities and the NHL with 24 U S teams and 22 cities with a rapidly growing services organization and the logistics operation to support these venues across the country.

I want to call out our partnership with the NFL we.

And we performed one 3 million of COVID-19 tests for 5000 and staff coaches and players every day for seven months and ran.

15000 logistic routes so that 268 games could be played that culminated in the Super Bowl on February 7th.

Last thing was just one part of the NFL multiple mitigation strategies and the compulsive took the commitment to safety that resulted in an infection rate of less than 1%.

I'm also proud to announce today and we.

Have an agreement now to provide COVID-19 testing for all major 30 Major League baseball teams around the country.

At this point bio reference performs COVID-19 testing for all five of the major U S professional sports leagues, namely football baseball basketball soccer and hockey.

In addition, bio reference successfully supported the winter X games, and Aspen and the supporting the U S soccer is women's and men's national teams and the M. B, a G League and Orlando.

We are performing fine testing for several of these teams and partnered recently with the Buffalo Bills. The organization to allow 7000 and fans to attend each of their two playoff games. This program was the first of its kind of in the U S and required all fans. So to obtain COVID-19, PCR results for bio reference with the 70.

And two hours of the game.

Bio references quick response of the pandemic has highlighted our position as the leading National Laboratory that has led to numerous high profile of private and government contracts. The COVID-19 testing. We are one of the largest providers of testing for public school students in the country with our preferred relationship the test students and New York City.

We have now tested almost 300000 students with a program of the tests almost 1200 schools weekly our custom solutions utilizing both lab based PCR and the point of care tests, that's positioned us as the leading provider of large scale of COVID-19 screening programs the country and now like the <unk>.

Turn it over to our CFO Adam.

Thank you John for the fourth the fourth quarter financial results reflect the tremendous effort that Steve and John highlighted as I will cover in more detail. Shortly despite all of the challenges our commercial team so delivered solid performances across all portions of our business.

<unk> and offer and operating profit led by bio reference, but also positive operating profit contributions by our all of the commercial team along with most of our international operating company.

Total revenue for the quarter was 495 billion and increase of more than 120% over 2019 $224 million. Our diagnostics segment reported revenue from services of $458 million compared to $178 million for the 2000 new.

19 period, the increase of net revenue was driven by the execution of our COVID-19 testing strategy as well as continued sequential improvements and our volumes for our base business as John mentioned, combining our routine testing business and our Covid testing business volumes overall increased over 170% compared.

The 100 to historical levels.

Overall routine clinical testing, however remained below historical levels, while the genetic testing improved each month, resulting in an over all of quarterly genetic testing volumes being flat compared to the 2019 period.

The diagnostics segment reported operating income of $69 $9 million compared to an operating loss of $45 $4 million and improvement of $115 $3 million over the 2019 period. The fourth quarter of 2019 included a noncash impairment charge of 38 million.

Related to our clearer of point of care development program.

Overall, selling general and administrative research and development expense decreased as a percentage of revenue from 33% down to 18%, reflecting overall operating leverage improvements total costs and expenses increased by $164 $6 million compared to $2.

19, including increased cost of revenues of $176 million due to the overall increase and testing.

Moving to our pharmaceutical segment, we reported revenues of $36 7 million for the fourth quarter of 2020 compared to $46 $4 million for the 2019 period revenue.

Revenue from product sales for the fourth quarter of 2020 decreased slightly to $38 million, including $10 $1 million of revenue from reality.

Compared to $32 million and the fourth quarter of 2019, which included $12 $6 million of revenue from royalty and the growth rate of royalty has been negatively impacted by the stay at home orders and physician office restrictions, which restrict products sales representatives, who are making calls and over.

<unk> reduced patient office visits however, we saw a sequential improvement and the gross Tonight to net price realization when looking at revenue from the transfer of intellectual property, we reported $5 $9 million of revenue for the 2020 period compared to $14 $4 million a year ago.

So reflecting the completion of our <unk> phase III clinical trial.

As a reminder, we had been amortizing our upfront payment from Pfizer over the development period, and now have fully amortized that upfront payment.

The loss from operations from our pharmaceutical segment was $9 million for the fourth quarter of 2020 compared to $56 $8 million for the 2019 period. The 2019 period included an impairment charge of $53 $7 million related to two of our acquired development programs.

Overall research and development expense for the fourth quarter of 2020 was $17 $5 million.

Compared to $23 million and 2019, reflecting reduced spending on our Soma Trojan development program on.

On a consolidated basis, the fourth quarter of 2020 and had an operating profit of $49 $3 million of significant improvement of $162 million over 2019 operating loss of $112 5 million. Our net income for the fourth quarter of 2020 was $32 3 million or <unk>.

<unk> per diluted share compared to a net loss of $112 $4 million or <unk> 18.

Per share for the 2019 period.

Finally for the fourth quarter of 2020, we generated $34 million of cash from operations, resulting in a cash balance at December 31 of.

$72 $2 million, we of approximately $158 million.

Available under our lines of credit the combination of the our cash on hand and lines of credit provide us with a strong balance sheet and added capital adequate capital resources heading into 2021.

As we look forward into the first quarter of 2021, we see a significant opportunity to continue to generate operating profit and cash flows given the uncertainty of the testing demand for 2019, we are limiting our forward looking guidance to the first quarter and look forward to providing greater insights into the remainder of 2021 as we see how.

Demand for testing of balls.

For the first quarter of 2021, we've built the following assumptions into our forecast, we anticipate performing between $4 2 million and $4 8 million COVID-19, PCR point of care and antibody tests during the first quarter.

As John mentioned, we have capacity well in excess of these levels should demand for testing increase our revenue could expand beyond our guidance.

We assume our base business were both routine clinical and genetic testing will remain at current levels, which overall, we're on the mid to high single digits behind 2019 levels.

We anticipate ryobi sales to meet to remain behind behind 2019, and the first quarter of 2000 Twenty's levels until our sales force is able to fully return to the promotional activities at which time, we expect <unk> to return to growth.

With that overall, we expect revenue for the first quarter of 2021 to be between 450 and $500 million, including revenue from services of $420 million to $475 million revenue from products of $27 million to $32 million and other revenue of $3 million to $6 million we.

Spec costs and expenses.

To be between $430 million to $460 million, resulting in an operating profit of 20% to $40 million at various points between the revenue and expense assumptions.

Operating profit includes approximately $22 million of noncash depreciation and amortization expense as well as an expectation of research and development expense of $20 million to $22 million.

With that I will open up the call for questions operator.

Okay.

As a reminder, ladies and gentlemen asked the question you will need to press star one on smartphones and to withdraw your question press the pound key.

Our first question on comes from the line of Maury Raycroft from Jefferies. You may begin.

Hi, everyone and congrats on all the progress and the update today and thanks for taking my questions.

First question is just the checking to see if you can provide perspective and to your pricing and reimbursement pressure with COVID-19 testing saturation and the increased competition I guess, how should we think about reimbursement for the PCR testing going forward.

John.

I don't know out of new Ontario on me to go into the point of care, Yes, Yeah. So we continue to see kind of mid mid level mid sixties overall reimbursement for PCR I think our view is that is going to continue to be stable during the during the first quarter.

Despite some of the changes that have been enacted under Medicare I think I think we're our overall pricing and reimbursement should should remain at those levels.

Got it okay.

And then.

I'm also wondering how you think about.

Conversion of Covid, 19 testing costs and personnel back too.

What the new base business will be.

As COVID-19 testing demand.

Retreats overtime, how are you guys thinking about that.

Yes, I think the.

You don't want to confuse or the.

The PCR testing long term with what's happening on the <unk>.

Rapid point of care side so.

And there is still a fairly large amount of.

Of interest and.

The contractual relationships being the established between multiple different injury industries relative to their desire to continue to test whether it's the lab based PCR or point of care of rapid testing so.

Eventually.

Sure.

Which.

I don't know when that will be quite honestly.

So I don't there's no plan yet the down.

On size.

And any of the workforce relative to what's going on for Covid and because of the the huge.

Huge demand that we're seeing on the.

On the point of care of rapid side for multiple industries.

Got it Okay. That's helpful. And then last question is on reality, so you talked a little bit about the stage five <unk> star.

The study and that Youre going through the data.

Can you just talk a little bit more about what you plan on reporting as far as the number of patients and some of the data measures that you plan on reporting as well.

And Marty this is Charlie Bishop.

Yes the.

The study that we just completed is an early phase two study the phase Iia.

And involved a total of 44 subjects. So we will be reporting on a three to one randomization and active to placebo and the design of the study was basically to look at three things.

One is reality tolerated well by dialysis patients and we use the maximum dose that we thought.

It would be required in order to successfully treat secondary hyperparathyroidism the data show the Theres, absolutely no change and the safety parameters at all even at the highest dose that we chose the.

Secondly on the goal of the study was to see.

And if reality could in fact be activated in patients that don't have function of kidneys and the medical literature teaches extensively the activation of reality is required in the kidney and we have found contrary to the medical literature of the realities activated readily with that.

<unk> kidneys.

And lastly, the study was designed to of course to see if we could lower PTH and will rebalance. The study is that in many patients we could lower PTH very nicely.

And their patients we can and this is part of the drug development process, it's up to us not and figure out why it is the some patients do respond and why others do not and this will go into our patient selection criteria.

For the follow on study the phase II <unk> study.

And I hope that answered your question.

Yes, yes, that's very helpful and maybe the last follow up is just the if the COVID-19 reale. The results could be reported at the same time or can you provide any more granularity on time.

When we might see data from both of these studies.

Well I wish my Crystal ball were really great because I can't tell you how the pandemic is going to go but as long as infection rates stay high we expect that enrollment will be good you should keep in mind that we've designed the ongoing COVID-19 study not to take all comers and it is a steady and outpatient but.

And most patients have very few symptoms are asymptomatic and they are not suitable for study to see if and agent like reality can shorten the time to resolution of symptoms, we have to select the patients that have significant symptoms, even though theyre not hospitalized so that we can see.

And the effect of the drug so and this requires a subset of the total population that's infected with Sars Covid two.

Got it and Thats very helpful. Okay. Thank you for taking my questions.

Okay.

And our next question on comes from the line of Devin Gaming from Guggenheim Partners you may begin.

Hi, This is Kevin on for Dana Flanders. Thanks, Thanks for taking the questions and congrats on the quarter.

Thanks again for I guess some of the guidance that you gave for <unk>.

Had a question on kind of the margin margin progression throughout 2021 and.

There are a lot of moving parts with I guess, what presumably could be at a margin tailwind from input proving base business volumes offset maybe by a headwind from potentially and lower COVID-19 testing volumes.

And as the vaccine rollout continues could.

Could you just maybe perhaps contextualize these different levers for us and do you expect one day more offset.

And the other and then I guess Tim.

Tangential to that.

Is there I know Medicare and reimbursement cuts and Japan this year arent arent happening.

Do you expect this to be beneficial to margins or do you still expect the healthy level of commercial payer pressure in 2021. Thank you.

Thanks Devin.

Try to try to address them and John Please please weigh in as well.

Take the margin evolution and what you saw in the third and fourth quarter are pretty consistent I think as COVID-19.

Covid testing volume continue to move and as John highlighted and to the point of care I think those will stay and remain healthy.

And the PCR margins gross will also stay pretty pretty healthy.

I think as as the base business.

About 90%, 95% of historical levels the cost structure is there so really.

Of really the variable costs.

And that come through on our Covid testing is really what's going to drive margin changes.

Very closely tied to both revenue line items.

And as it relates to the Medicare changes and Pam.

And we don't expect any meaningful meaningful changes to the overall reimbursement in 2021, obviously the delay of Panama into into 2022.

The premium is fully baked into the numbers that I gave for the first quarter.

Yeah.

Yeah, I think the.

And that's right I mean I don't.

I don't see much more of a discussion of Panama right now Paul.

The.

2022 at the earliest and.

And there as you probably know if you followed us.

And on appeal on the way the Tamil as price that was one of the C.

L. A so there's the.

There's a lot of.

Latinas around the where Pam is going ahead of the future of pilot right now.

Yes.

Okay, great. Thank you very much.

And our next question will come from the line of Ed.

And we're 10 calls from Piper Sandler.

And again.

Great. Thank you and good evening, everyone one of them.

Echo our thanks for all of your hard and the important work in terms of all of the testing.

And that's being done and has a one quick question on just make sure I heard this right. Adam did you say that the $38 $7 million.

Claris rights on where was that recognized.

And that was last year and line.

Sorry, yes, okay and.

And then looking at somewhat program.

Can you tell us a little bit about what work is being done both on the regulatory side do you anticipate that there would be a.

Panama and then also in over on Pfizer with respect to our commercial readiness. Thank you very much.

So we don't expect the pad on.

On the work is we're responding and pfizer's binding of real time basis of various inquiries there are inspections going on some of the including down here in Miami.

And so that's pretty ordinary course at this point as we go through the process.

Okay.

And then what about on the commercial side.

Okay.

And so <unk> got the primary responsibility for the commercial activities. So I think it after the direct the questions to them.

Fair enough. Thank you guys.

And our next question comes from the line Yale Jen from Laidlaw and company you may begin.

And good afternoon and.

And my congrats on the great quarters.

The first question and I have it.

Turning to the soft yield guidance at $4 two to.

<unk> $4 eight.

8 million.

The test of a PCR test the in the first quarter.

Do you guys have any thoughts in terms of the the <unk>.

And for the Serological test.

And for the.

For 'twenty and 'twenty, one, especially the small people getting on vaccine.

John do you want to manage better but this is the.

And you're talking about the serology test for for antibody that the.

Of course, yes.

Yeah. So.

It's still a and and now we have the very large capacity.

And do.

And several hundreds of thousands of antibody testing.

The b.

We have.

And at least two different platforms of running the antibody testing on which are both.

On the quantitative at this point and moving away from the qualitative assay, which was the first one out.

So the the requests of of who's going to get.

The antibody testing post vaccine to either to the document.

The the effectiveness of the.

All of the vaccine, which will depend on which vaccine you get put on let's say or.

Or a document and whether you have had the disease. The they've been an enormous amount of discussion about that right now but.

And I don't think anybody to predict.

Average serology testing right now will occur.

Some of it it will be related to I believe travel.

More than probably ever industry's meeting.

The new validate whether you either have the vaccine have the disease or have enough antibodies to.

On to travel.

Internationally, and I think that maybe it's.

Probably the biggest role of coming up.

That's the guests.

Okay great.

No more questions on the call.

19 of reality studies and you've mentioned there is the only step.

The patient that is relevant.

Could you give us the some sense of what portion of the COVID-19 patients hospitalized patients.

The more suitable for treated the bi.

Hi, Yale.

What we're using for primary efficacy endpoint.

And the ongoing study is a patient reported outcome tool that's been validated for viral and.

Infections.

And we require patients to have a score of.

On net tool that's above a certain level in order to get into the study.

And what that does is it enables the time course of the.

The disease.

Be fairly long and quite a few patients and long enough even in those patients who resolved quickly.

That we can hopefully differentiate active versus placebo treatment. So I'm very pleased with the way that we're able to.

Enrolled patients into the study, we see a spread in time to resolution of symptoms ranging from two days to more than 42, and that's exactly what we wanted to see.

So patients fill out this.

The tool every day and we can monitor how the symptoms improve over time.

It's our expectation.

Based on what we're seeing from screening and also from what we see and the literature that somewhere around the range of.

The 20%, maybe a little higher percentages of patients would have severe enough symptoms that they would want to treat to try to accelerate resolution of the symptoms.

It's possible.

In time that we can develop this drug to treat hospitalized patients, but we don't yet have plans to do that.

And I hope I answered your question.

Yes, that's very helpful and.

And again, congrats on the great quarter.

Okay.

Thank you.

And as a reminder that style of one for questions. Our next question comes from the line of each and from H C. W may begin.

Hi, Thank you for taking my question My question is recently.

World Health organization has released the guidance to the laboratories.

Stating that they should reduce the cycle counts and PCR test.

And could lead to the lower number of new COVID-19 cases, the Texas. So what's your opinion on that and what's your current practice.

Yeah. So.

We run.

Elite core platforms now different different manufacturers.

One of them in particular of well there's really two.

If requested we'll report out.

The C P values and cycle time the values.

I don't we're not.

We're not in the position to determine what that should or shouldn't be relative to the platform manufacturers getting their approval or EUA is relative to how they report out the results.

So if we have a platform that reports out C P values and the.

The patient physician and client requests that to be reported we will report it to the client, but we don't make that decision and relative to the changes and how C. P values get reported on the platforms.

That would be of vendor decision.

Okay. Thank you.

Yeah.

Thank you and the next.

Question on comes from the line of Mike <unk> from Barrington Research you may begin.

Thank you.

Good evening guys. Thank you so I.

And I may of I may have.

Not quite caught it but your guidance on Ray All day for Q1 is it was it simply below Q1, 'twenty that was essentially the guidance.

That's right that's right Mike. So it is included and the total number but I didn't break it out separately, Okay, alright, great and then.

The longer term question and I.

And I know that this is sort of and ever ever changing.

As.

We learn more but as you think about.

The COVID-19, PCR tests serology tests over time.

Three years from now is the.

This is still a.

And I suspect it would be much reduced but it is it is it still a meaningful part of BRL revenue or or vaccination and sort of then.

Take it take such hold and regularity for people that that it's at.

It's not anywhere near of materiality of 345 years from now.

Yes, so that's the.

And that's a multi million dollar question right.

Nobody has any idea how.

This will evolve or more over the next you know.

The one to two years we.

And I think everybody hopes that this all goes away.

And now having said that right now all of the variants are being treated by the or at least mostly the timing of some changing data by the the.

The current existing vaccination. So the question will be of course. This does some other very numbers that needs. Some other type of.

Treatment and the handler testing, we have not seen that yet so.

I honestly don't think anybody has the answer to that.

And it's the same with the vaccine is the vaccination. So that you got the one time or is it could it be like the flu where everybody needs the COVID-19 vaccine.

Every fall and so I don't I don't think anybody right now I haven't seem to predict three.

Three years out as much for asking the question is its just its too far from now right now.

Fair enough. Thanks, Thanks, guys I appreciate it.

Thank you.

And I'm not showing any further questions and the queue I'd like to turn the call back over to Dr. Frost for any closing remarks.

Thank you all for your participation and good questions.

Very well.

And.

According to the.

And with you again to reported the first quarter results.

Alright.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Ladies and gentlemen, and thank you for standing by and welcome to the Opco Health fourth quarter 2020 financial results Conference call. At this time all participant lines are on a listen only mode. After the speaker presentation, there will be a question and answer session.

Ask the question during the session you will need to push star one on your telephone please.

Please be advised that today's conference is being recorded and if you were kind of any further assistance. Please press star zero and went.

And I'd like to hand, the conference to you speak of today, Yvonne Briggs and the change of Investor Relations. Please go ahead ma'am.

Thank you operator and good afternoon. This is of on branch without the H J. Thank you all for joining today's call to discuss Opco health financial results for the fourth quarter of 2020.

And I'd like to remind you that any statements made during this call and management other than statements of historical fact will be considered forward looking and as such will be subject to risks and uncertainties that could materially affect the company's expected results. Thus.

And those forward looking statements include without limitation, the various risks described and the Companys SEC filings, including the annual report on form 10-K for the year ended December 31, and 2020 and and subsequently filed SEC reports.

Importantly, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast February 18th 2021.

Except as required by law <unk> undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.

Before we begin let Rami, let me review of the format for today's call.

The Phillip Frost, Chairman and Chief Executive Officer will open the call then.

And Steven Rubin, <unk> Executive Vice President will provide a business update and pipeline revenue and the.

And Dr. Jon Cohen will discuss bio reference laboratories, and after that Adam mogul Opco CFO will review the company's fourth quarter financial results and then we'll open the call to questions now I would like to turn the call over to Dr. Frost.

Good afternoon, and thank you for joining the call today.

Today, we are reporting record revenues earnings and cash from operations for the fourth quarter and full year 'twenty and 'twenty.

Although every aspect of Umpqua health was touched quite COVID-19 during 2020 on <unk>.

Particularly proud of our hard working teams of our reference laboratories and as the.

They rose to the challenge of scaling of COVID-19 testing services and.

And an unprecedented pace and a fast moving and highly uncertain and garner.

And.

We've made significant investments and human resources and adopted innovative new testing models with our retail partners.

And grass seed and the state of the art technologies and reconfigured our laboratories to expand our test and capacity and the.

The liver timely results.

The ability to ramp up capacity.

Maintaining accurate results and rapid turnaround times.

And the talent and dedication of the <unk> management team and employees.

We had record of COVID-19, PCR testing volume during the fourth quarter.

Although our base business.

Substantially recovered during the summer and fall stalled towards the end of the fourth quarter due to the surge of COVID-19 cases across the country.

We believe <unk> based business.

Largely returned to historical levels and beyond is the real explanation rollout continues and and.

Fewer new cases of reported.

We've seen of significant interest and the capability of bio reference to compete on the national stage.

While the number and diversity of industries that now seek us.

To deliver highly complex complex COVID-19 solutions.

While the demand for COVID-19 testing is likely to decline.

Believe it will continue into 2022 and beyond.

We are encouraged by the new administrations focus on increasing testing availability.

Across the country and their approach to controlling the pandemic by expanding the availability of testing supplies and enhancing laboratory testing capacity.

Despite the pandemic are on.

<unk> business has made great strides on.

Highlighted earlier this year was the joined the announcement with our partner Pfizer.

And what the FDA accepted for filing the biologics license application for Soma, Trojan and our long acting human growth hormone.

In addition, and NDA was submitted in Japan for <unk>, and we're expecting Pfizer to assume make a regulatory submission in Europe.

And the U S demand for the reality continues to be impacted by the pandemic related restrictions.

And the remains below pre COVID-19 levels.

Overseas our partner <unk> Fresenius.

<unk> continues to receive marketing approvals in Europe, and it's one of the promotional launch later this year.

During last year's fourth quarter, we began the phase II trial with reality and COVID-19 patients.

Moving to undertake this drove the numerous independent studies and then.

And the inverse correlation between vitamin D levels, and COVID-19 risk and severity.

This trial is ongoing and we look forward to updating you on results when they become available.

I wanted to go ahead of all employees, who have worked tirelessly over the past year.

And I'm proud of what we've achieved in 2020 and.

Domestic about what we can accomplish in 2021 on.

And I will turn the call over to Steve Rubin to further discuss sort of business Steve.

Thanks, Bill good afternoon, everyone and thank you for joining us.

2020 was an eventful year for the Opco with the onset of the COVID-19 pandemic.

Bio reference laboratories demonstrated its ability to be a leading provider of testing services on a national level not only for COVID-19, PCR testing of the clinical specialty and genetic testing as well.

<unk> leading position.

<unk> and record revenue growth and profitability, which Adam will discuss in more detail.

As Phil mentioned earlier this year, we jointly announced the advisor that the FDA accepted for review of the BLA for somewhat program. The once weekly treatment for children with growth hormone deficiency.

The target prescription drug user fee act or <unk> action date for decision by the FDA is October of this year.

<unk> also submitted an NDA to the Ministry of Health Labor.

And welfare and Japan are similar trucking aspira.

The Aspira Europe price.

Remains on schedule and with respect to a regulatory submission and marketing approval and we expect to announce that submission shortly.

And this is a global program Pfizer has also submitted and we will continue to submit for marketing approvals and many different countries across the world.

Under our agreement with Pfizer Opco is eligible to receive up to 275 million upon achievement of certain regulatory and pricing milestones.

In addition, upon launch we are entitled to regional tiered gross profit sharing for both <unk> and Pfizer's Gina Trumping.

Now I'd like to turn to our commercial pharmaceutical business, starting with the reality we.

We all of the numbers for the quarter breakdown as follows.

Total prescriptions for reality and Q4 2020 as reported by <unk>.

We're approximately 15000 <unk>.

Representing the decrease of approximately 16% compared with Q4 2019 and.

And a 10% decrease compared with Q3 2020.

The reality sales force continues to contend with the impact of COVID-19 on access to physicians as well as the decline and patient visits to doctors offices new.

The new patient starts however, increased by 1% and Q4 versus Q3.

And since the product was launched nearly 22700 patients have had reality prescribed by approximately 3400 of physicians.

Approximately 140 positions or about 4% of the total number of prescribers, we're new to reality of prescribers and Q4.

We anticipate that sales of reality will rebound as COVID-19, vaccinations become more available and new infections decline.

We are pleased to announce that the 4% of yes, our partner for reorder and Europe has secured marketing approvals from reality, and Spain, Portugal, Italy, and Switzerland, adding to the seven European countries that have previously approved the product, namely the United Kingdom, Germany, Sweden and Norway.

And when Denmark, and the Netherlands.

The commercial launch is and anticipated in 2021 and pricing negotiations are well advanced.

And with stage three or four chronic kidney disease, who were at a higher risk for developing more severe illness.

Our patients are being randomized on a one to one ratio at the four weeks of daily treatment with either <unk> or placebo and the monetary for another two weeks and.

Dosing regimen is designed to quickly raise it maintained share and 25 hydroxy vitamin D levels within the range of 50 to 100 nanograms per Mil and order to induce cost of trial production and macrophages.

And thereby enabling them to secrete L. L 37 of potent antimicrobial protein that can destroy Sars COVID-19 two.

The primary efficacy endpoints include raising and maintaining serum total 25 hydroxy vitamin D. Within the range of 50 to 100 and anecdotes from the Ela and time to resolution of COVID-19 symptoms.

Should the trial data from the trial be positive we intend to seek emergency use authorization from the FDA.

<unk> for the syndication.

And there have been numerous independent studies reporting and inverse correlation between vitamin D status, and COVID-19 risk and severity, which as Phil mentioned underscores the rationale for the trial.

Two recent reports from Spain indicate the orally administered immediate release cost of a dial is affected and mitigating COVID-19 severity of hospitalized patients.

First report by Castillo and 2020.

Showed the cost of a dial therapy reduced ICU admissions from 50% and 2%. The second report by <unk> and 2021 shows the ICU admission required by five 4% of patients treated with accounts of the dial and 21, one percentage of patients treated with <unk>.

T Mo and deaths occurred and $6.

5% of patients receive and accounts for dayal versus 15% of those on placebo.

The cost of a diode dosing regimen and both of these studies was the same and according to our calculations likely raise here 2000, and Tim total 25 hydroxy vitamin D levels through at least the range of 50 to 100 and the grants from Neil.

To update you on other of Radiology studies, we have completed our phase four clinical trial, comparing reality with three common treatment regimens for secondary hyperparathyroidism and adult patients with stage three or four <unk> and vitamin D. Insufficiency top line data are fully consistent with the previously announced interim results.

Namely the the daily dose of 60 micrograms of priority is the only treatment that raise serum total of 25 hydroxy vitamin D to the range of 50 to 100 and eventual mill a level required to effectively suppress elevated plasma parathyroid hormone levels and patients with stage three or four.

And <unk>.

Earlier this week, we completed our phase III clinical trial.

The final data analysis and now underway.

We are also currently designing the phase II B follow on study with our partners before and Japan tobacco.

We have several programs and our product pipelines are advancing in preclinical and early clinical development. The focus here is on a long acting platform technologies and the rare diseases.

Two of our most advanced compounds are long acting recombinant factor seven compound for the treatment and prevention of bleeding episodes and patients with hemophilia, a or b and <unk>.

<unk> the factor eight of our factor nine and our long acting clip to analog for short bowel syndrome.

Our factor seven compound has successfully completed phase one study with subcutaneous administration healthy subjects.

And the phase one and two a study with intravenous administration in hemophilia patients.

Our <unk> two molecule for the treatment of short bowel syndrome is expected to enter clinical trials and late 2021.

Patients with short bowel syndrome, typically have undergone massive internal surgery.

And significantly reduced our complete loss of intestinal function we.

We believe our long acting technologies will offer clinical benefits of our current products on the market now.

Now, let me turn the call over to Jon Cohen to discuss our buyer of revenue SaaS business John.

Overall sample volume on our core business and Q4 of 'twenty and 'twenty was down 7% compared to Q4 of 2019.

We saw a decrease in Q4 versus Q3 of this year of about 4% and <unk>.

Q4 of this year of last year of our women's health business was stable compared to Q3, our oncology business grew 4% Q4 versus Q3, and our four K score of grew 1% Q4 versus Q3.

We believe that the core business will remain 5% to 10% lower.

For the period compared to 2019 as many patients are still reluctant to visit their positions and.

In addition, telemedicine continues to have a significant impact on physician office visits we expect trends to improve at a moderate pace during the second half of this year.

We are pleased with the performance of gene Dx as its volumes have remained stable to pre COVID-19 levels Q4 of this year compared to Q4 of 2019.

The Q4 volumes and <unk> was up 11, 6% versus Q3 and 2020.

Last month, we announced the G&A ex launched several new genetic tests, including repeat expansion analysis of course spinal cerebellar.

Cerebellar ataxia, friedrichs ataxia, and other common forms of hereditary ataxia as well.

These additions G&A ex has created a comprehensive and affordable offering that covers the vast majority of genes involved with pediatric onset and adult onset a taxes.

Also on January we were excited to formally announce the expansion of our digital home testing service under the Scarlet brand.

Scarlet is and in home fully integrated digital platform that provides access to on demand diagnostic services. After the visiting with a health care provider of patient and received the link where they can elect and utilized scarlet and <unk>.

Schedule and in person visits by choosing of date.

And location for a qualified health care professional to collect their test specimen.

That location could be at the patient's home or office of patients that receive real time updates and relevant information such as learning how to prepare for the visit or tracking the health care professionals arrival once collected the specimens of their sense of bio reference for testing and the results of securely available online to the patient and so.

They're ordering health care providers.

We believe scarlet delivers and innovative and highly convenient alternative to the traditional patient service center for patients per specimen collection and.

And is the first of many future initiatives to advanced bio references of digital health strategy focused on providing flexibility and convenience for patients.

Now, let me turn my attention to Covid testing.

And the last year, we dramatically scale of the company to accommodate the need for more testing and the.

Last 10 months, we've gone from performing 40000 requisitions of day to 115000 requisitioned. The day, we increased our employee head count the 4000 to 8000 of 100, and we increased our clinical staff from 120 to 300, and we now serve 19 million.

And patients per year, which is up from 11 million patients a year and 2019 and.

We are averaging between 50 and 60000 tests a day with the current capacity to do more than 100000, PCR tests per day with an average turnaround time of less than 48 hours and most cases.

Bio reference remains committed to providing innovative solutions to the COVID-19 testing new.

Needs of the physicians health systems long term facilities governments schools employers sports teams entertainment venues transportation hospitality and the general public through our relationships with Rite aid and Cvs with now over 1500 locations around.

On the country and we.

Believe that rapid testing with point of care devices will play an increasingly important role and detecting the disease and situations where timely result is important.

We have validated multiple different point of care platforms and of partnered with several manufacturers to provide customized solutions for many different industries. We have developed proprietary software for several of point of care of devices to deliver and report results in the timely fashion to date, we have performed the 100.

And rapid tests for different clients and our point of care tests volume grew 260% of Q3 to Q4.

Last month, we announced COVID-19 testing agreements for players and officials as well as the team and leaks staff sort of the 2020 and 2021 seasons for the National Basketball Association and sort of the National Hockey League. We continued to dominate the sports vertical with our contracts with the and.

F L. The 32 teams and 30 cities the MBA with 30 teams and 28 cities and the NHL with 24 U S teams and 22 cities with a rapidly growing services organization and the logistics operation to support these venues across the country.

I want to call out our partnership with the NFL. We performed one 3 million of COVID-19 tests for 5000 and staff coaches and players every day for seven months and ran 15000 logistic routes. So that 268 games could be played that culminated in the Super Bowl.

And on February 7th.

Testing was just one part of the NFL multiple mitigation strategies and the compulsive COVID-19 commitment to safety that resulted in an infection rate of less than 1%.

I'm also proud to announce today and we have an agreement now to provide COVID-19 testing for all major 30 Major League baseball teams around the country.

At this point bio reference performs COVID-19 testing for all five of the major U S professional sports leagues, namely football baseball basketball soccer and hockey.

In addition, bio reference successfully supported the winter X games, and Aspen and the supporting the U S soccer is women's and men's national teams and the M. B, a G League and Orlando.

We are performing fine testing for several of these teams and partnered recently with the Buffalo Bills. The organization to allow 7000 and fans to attend each of their two playoff games. This program was the first of its kind of on the U S and required all fans. So to obtain COVID-19, PCR results for bio reference with the 70.

Two hours of the game.

Bio references quick response of the pandemic has highlighted our position as a leading national laboratory that has led to numerous high profile of private and government contracts. The COVID-19 testing. We are one of the largest providers of testing for public school students and the country without preferred relationship the test Stevens and New York City.

We have now tested almost 300000 students with a program of the tests almost 1200 schools weekly our.

Our custom solutions utilizing both lab based PCR and and point of care tests has positioned us as the leading provider of large scale of COVID-19 screening programs the country and now like to turn it over to our CFO Adam.

The thing and offer and operating profit led by bio reference, but also positive operating profit contributions by our all of the commercial team along with most of our international operating company.

Total revenue for the quarter was $495 billion and increase of more than 120% over 2019 $224 million or.

Gnostics segment reported revenue from services of $458 million compared to $178 million for the 2019 period. The increase of net revenue was driven by the execution of our COVID-19 testing strategy as well as continued sequential improvements and our volumes for our base business as John.

Mentioned, combining our routine testing business and our Covid testing business volumes overall increased over 170% compared to 100 to historical levels overall.

On the diagnostics segment reported operating income of $69 $9 million compared to an operating loss of $45 4 million and improvement of $115 $3 million over the 2019 period. The fourth quarter of 2019 included a noncash impairment charge of 38 million.

Related to our Claro and point of care development program.

19, including increased cost of revenues of $176 million due to the overall increase and testing.

Moving to our pharmaceutical segment, we reported revenue of $36 7 million for the fourth quarter of 2020 compared to $46 $4 million for the 2019 period rare.

Revenue from product sales for the fourth quarter of 2020 decreased slightly to $38 million, including $10 $1 million of revenue from reality.

Compared to $32 million and the fourth quarter of 2019, which included $12 $6 million of revenue from ramping the growth rate of royalty has been negatively impacted by the stay at home orders and physician office restrictions, which restrict products sales representatives, who are making calls and over.

<unk> reduced patient office visits however, we saw a sequential improvement and the gross Tonight to net price realizations when looking at revenue from the transfer of intellectual property, we reported $5 $9 million of revenue for the 2020 period compared to $14 $4 million a year ago.

Reflecting the completion of our <unk> phase III clinical trial as a reminder, we had been amortizing our upfront payment from Pfizer over the development period, and now have fully amortized that upfront payment.

Loss from operations from our pharmaceutical segment was $9 million for the fourth quarter of 2020 compared to $56 $8 million for the 2019 period. The 2019 period included an impairment charge of $53 $7 million related to two of our acquired development programs.

The overall research and development expense for the fourth quarter of 2020 was $17 $5 million.

Compared to $23 million and 2019, reflecting reduced spending on our Soma Troeger and development program on.

On a consolidated basis, the fourth quarter of 2020 had on operating profit of $49 $3 million of significant improvement of $162 million over 2019 operating loss of $112 5 million. Our net income for the fourth quarter of 2020 was $32 3 million or <unk>.

<unk> per diluted share compared to a net loss of $112 $4 million or <unk> 18.

Per share for the 2019 period.

Finally for the fourth quarter of 2020, we generated $34 million of cash from operations, resulting in the cash balance at December 31 of.

$72 $2 million, we of approximately $158 million.

Available under our lines of credit the combination of the our cash on hand and lines of credit provide us with a strong balance sheet and added capital adequate capital resources heading into 2021.

Demand for testing of balls.

For the first quarter of 2021, we've built the following assumptions into our forecast, we anticipate performing between $4 2 million and $4 8 million and COVID-19, PCR point of care and the antibody test during the first quarter.

As John mentioned, we have capacity well in excess of these levels should demand for testing increase our revenue could expand beyond our guidance.

We assume our base business were both routine clinical and genetic testing will remain at current levels, which overall, we're on the mid to high single digits behind 2019 levels.

We anticipate ryobi sales to me to remain behind behind 2019, and the first quarter of 2000 Twenty's levels until our sales force was able to fully returned to the promotional activities at which time, we expect <unk> to return to growth.

With that overall, we expect revenue for the first quarter of 2021 to be between 450 and $500 million, including revenue from services of 420 million to $475 million revenue from products of $27 million to $32 million and other revenue of $3 million to $6 million we.

Spec costs and expenses.

To be between $430 million to $460 million, resulting in an operating profit of $20 million to $40 million at various points between the revenue and expense assumptions operating profit includes approximately $22 million of noncash depreciation and amortization expense as well as an expectation of research and.

The expense of $20 million to $22 million.

With that I will open up the call for questions operator.

As a reminder, ladies and gentlemen ask the question you will need to press star one on your telephone and two of drawing question just press the pound key.

Our first question on comes from the line of Maury Raycroft from Jefferies. You may begin.

Hi, everyone and congrats on all of the progress and the update today and thanks for taking my questions.

First question is just the checking to see if you can provide perspective and to pricing and reimbursement pressure with COVID-19 testing saturation and the increased competition I guess, how should we think about reimbursement for the PCR testing going forward.

John.

I don't know out of you want to or you want me to go into the point of care.

Yeah. So we continue to see kind of mid mid level mid sixties overall reimbursement for PCR I think our view is that is going to continue to be stable during the during the first quarter the.

Despite some of the changes that have been enacted under Medicare I think I think we're our overall pricing and reimbursement should should remain at those levels.

Got it okay.

And then.

And also wondering how you think about.

The conversion of COVID-19 testing costs and personnel back too.

What the new base business will be.

As COVID-19 testing demand.

Retreats overtime, how are you guys thinking about that.

Yeah, I think the.

You don't want it to the fuse or the.

And the PCR testing long term with what's happening on the rapid point of care side. So.

And there is still a fairly large amount of.

Of interest and a.

Contractual relationships being established between multiple different injury industries relative to their desire to continue to test whether it's the lab based Pcr.

Or the point of care of rapid testing so.

Eventually.

Which.

I don't know when that will be quite honestly.

So I don't there's no plan yet the downsize.

Any of the workforce relative to what's going on for Covid and because of the day.

Huge demand that we're seeing on the.

On the point of care of rapid side for multiple industries.

Got it Okay. That's helpful. And then last question is on reality, so you talked a little bit about the stage five <unk>.

On study and that Youre going through the data and can you just talk a little bit more about what you plan on reporting as far as the number of patients and some of the data measures that you're planning on reporting as well.

And Marty this is Charlie Bishop.

Yes the.

The study that we just completed and as an early phase two study its phase Iia.

It involves the total of 44 subjects. So we will be reporting on.

On a three to one randomization and active to placebo and the design of the study was basically to look at three things.

One is reality tolerated well by dialysis patients and we use the maximum dose that we thought.

And would be required in order to successfully treat secondary hyperparathyroidism the data show the Theres absolutely no change in the safety parameters at all even at the highest dose that we chose the <unk>.

And secondly, the goal of the study was to see.

And if reality could impact the activated in patients that don't have functional kidneys and the medical literature teaches extensively the activation of reality is required in the kidney and we have found contrary to the medical literature of the reality is activated and readily without <unk>.

And then on kidneys.

And lastly, the study was designed to of course to see if we could lower PTH and what we found that the study is that in many patients we could lower PTH very nicely.

Other patients we can't and this is part of the drug development process, it's up to us not and figure out why it is the some patients do respond and why others do not and this will go into our patient selection criteria.

For the follow on study the phase II study.

And I hope that answered your question.

Yes, yes, that's very helpful and maybe last follow up is just the if the COVID-19 reale. The results could be reported at the same time or can you provide any more granularity on time.

When we might see data from both of these studies.

And the effect of the drug so and this requires a subset of the total population that's infected with Sars Covid two.

Got it and Thats very helpful. Okay. Thank you for taking my questions.

Yeah.

And our next question comes from the line of Devin Gaming from Guggenheim Partners you may begin.

Hi, This is Devon on for Dana Flanders. Thanks, Thanks for taking the questions and congrats on the quarter.

Thanks again for I guess some of the guidance that you gave for <unk>.

Had a question on kind of the market margin progression throughout 2021, another and lot of moving parts with I guess, what presumably could be at a margin tailwind from input proving base business volumes offset maybe by a headwind from potentially lower of Covid testing volumes.

And at the vaccine rollout continues could.

Could you just maybe perhaps contextualize these different levers for us and do you expect one day more offset than the.

The other and then I guess.

The tangential to that.

Is there I know Medicare and reimbursement cuts and Japan this year arent arent happening.

Do you expect this to be beneficial to margins or do you still expect the healthy level of commercial payer pressure and in 2021. Thank you.

Thanks Devin.

Ill try to try to address them and John Please please weigh in as well.

Take the margin evolution of what you saw in the third and fourth quarter are pretty consistent I think as.

Covid testing volume continue to move.

John highlighted and to the point of care I think those will stay and remain healthy.

And the PCR margins for US will also stay pretty pretty healthy.

I think as as the base business.

About 90%, 95% of historical levels and the cost structure is there.

Really the variable costs.

And that come through on our Covid testing is really what's going to drive margin changes.

Very closely tied to both revenue line items.

And as it relates to the Medicare changes and Pam I don't think and we don't expect any meaningful meaningful changes to the overall reimbursement in 2021, obviously the delay of Panama into into 2022.

And is fully baked into the numbers that I gave for the first quarter.

Okay.

Yeah, I think that's the that's right I mean I don't.

The C much more discussion and the Panama right now the toll.

Yeah.

2022 at the earliest and.

And there is probably no if you follow the.

And appeal on the way the panel was price that was won by the body.

The L. A so there's a.

There's a lot of.

Latinas around the where it's going ahead of the.

The future of pilot right now.

Okay, great. Thank you very much.

And our next question will come from the line of Edward <unk> from Piper Sandler you may begin.

Great. Thank you and good evening everyone.

One of the Echo our thanks for all of your hard and the important work in terms of all of the testing.

And that's being done and has a one quick question on just to make sure I heard this right. Adam did you say that the $38 $7 million.

The claris rights on where.

Or was that recognized the.

That was last year and line.

Sorry, yes, okay and.

And then looking at summit program.

Can you tell us a little bit about what work is being done both on the regulatory side do you anticipate that there would be a.

Panama and then also in over on Pfizer with respect to our commercial readiness and thank you very much.

So we don't expect the panel.

Right.

The work is we're responding and pfizer's binding of real time basis of various inquiries there are inspections going on some of the including the out here in Miami.

That's pretty ordinary.

Of course at this point as we go through the process.

Okay.

And then what about on the commercial side.

Yes.

So the.

Yeah.

And so <unk> got the primary responsibility for the commercial activities. So I think it after the direct the questions to them.

Fair enough. Thank you guys.

And our next question comes from the line of Yale Jen from Laidlaw and company you may begin.

And good afternoon and.

All of his thought put in my congrats on the great quarters.

The first question and I have it.

In terms of stuff your guidance for two.

And two full points.

8 million.

The test of a PCR test the in the first quarter.

Do you guys have any thoughts in terms of the the <unk>.

And for the theological test.

And for the.

For 'twenty and 'twenty, one, especially the small people getting on vaccine.

John do you want to manage that.

And you're talking about the serology test for for antibody is that the.

Of course, yes.

Yeah. So.

It's still a and I know, we have a very large capacity.

And do.

Several hundreds of thousands of antibody testing.

The b.

We have.

At least two different platforms of running the antibody testing on which are both.

On the quantitative at this point and moving away from the qualitative assay, which was the first one out of.

So the the requested of of who's going to get.

Antibody testing post vaccine to either to the document.

The the effectiveness of the.

All of the vaccine, which will depend on which vaccine you get put on analyst day or.

Or a document and whether you've had the disease there that day.

On the normal amount of discussion about that right now but I.

And I don't think anybody to predict.

How much serology testing right now will occur.

Some of it and will be related to I believe travel.

And then probably the other industries meeting.

And you validate whether you either have the vaccine have the disease or have enough antibodies to <unk>.

The travel.

Probably internationally and I think that maybe it's <unk>.

Probably the biggest role of coming up with that.

The guests.

Okay great.

And more questions on the call.

19 of reality studies and you mentioned there is the only collected the patient that is relevant.

Could you give us the some sense of what portion of the COVID-19 patients hospitalized patients.

The more suitable for treated the by the Audi.

Hi, Yale.

What we're using for primary efficacy endpoint.

In the ongoing study is a patient reported outcome tool that's been validated provider of rule.

Infections and.

And.

We require patients to have a score on that tool that's above a certain level in order to get into the study.

And what that does is it enables the.

The time course of the disease to be fairly long and quite a few patients and long enough even in those patients who resolved quickly.

And that we can hopefully differentiate active versus placebo treatment. So I'm very pleased with the way that we're able to and.

Enrolled patients into the study, we see a spread in time to resolution of symptoms ranging from two days to more than 42, and that's exactly what we wanted to see.

So patients fill out this.

The tool every day and we can monitor how their symptoms improve over time.

It is our expectation.

Based on what we're seeing from screening and also from what we see and the literature that somewhere around the range of.

The 20%, maybe a little higher percentages of patients would have severe enough symptoms that they would want to treat to try to accelerate resolution of the symptoms.

It's possible.

In time that we can develop the strength to treat hospitalized patients, but we don't yet have plans to do that.

I hope I answered your question.

Yes, that's very helpful and.

And again, congrats on the great quarter.

Okay.

Thank you.

And as a reminder that started one for questions. Our next question comes from the line of each and from H C. W may begin.

Hi, Thank you for taking my question My question is recently.

World Health organization has released the guidance to the laboratories.

Stating that they should reduce the cycle counts and PCR test.

Which could lead to the lower number of new COVID-19 cases, the tech so what's your opinion on that and what's your current practice.

Yeah. So.

We run.

That leaves four platforms now different different manufacturers.

One of them and in particular of well there's really two you know we if requested we'll report out.

C P values and the cycle time values.

I don't we're not where.

We're not and the physician to determine what that should or shouldn't be relative to the platform manufacturers getting their approval or EUA is relative to how they report out the results.

So if we have a platform that reports out C P values and the.

The patient physician and client requests that to be reported we will reported for that client, but we don't make that decision and relative to the changes and how C. P values get reported on the platforms.

It would be of vendor decision.

Okay. Thank you.

Yeah.

Thank you and the next question will come from the line of Mike <unk> from Barrington Research you may begin.

Thank you.

Good evening guys. Thank you so.

And I may of I may have not.

Not quite caught it but your guidance on Ray all day for Q1 as is.

Was it simply below Q1, 'twenty that was the essentially the guidance and cause.

That's right.

And so it is included and the total number but I didn't break it out simple, okay, alright, great and then.

The longer term question and I.

And I know that this is sort of and ever ever changing Oh.

We learn more but as you think about.

The COVID-19, PCR tests serology tests over time.

Three years from now.

This is still a.

I suspect it would be much reduced but it is it is it still a meaningful part of BRL revenue or or vaccination of the sort of then.

Take it take such hold and and regularity for people that that it's at.

It's not anywhere near a materiality of 345 years from now.

Yeah. So that's the.

And that's a multi million dollar question right.

Nobody has any idea how.

This will evolve or or more over the next you know.

The one to two years we.

And I think.

Body hopes that this all goes away.

And now having said that right now all of the variants are being treated by the or at least mostly the timing of some changing data by the the.

Current existing vaccinations, the crusher will be of course. This does some other very numbers that needs. Some other type of.

Treatment and the or testing, we have not seen that yet so.

I cannot see delta of anybody has the answer to that.

And it's the same with the vaccine is the vaccination. So that you've got the one time or is it going to be like the flu where everybody needs of Covid vaccine.

Every fall and so I don't I don't think anybody right now I haven't seen kind of predict three.

Three years out that's what you're asking the question is it's just it's too.

Two parts of them now right now.

Fair enough. Thanks, Thanks, guys I appreciate it.

Thank you.

And I'm not showing any further questions and the queue I'd like to turn the call back over to Dr. Frost for any closing remarks.

Thank you all for your purchase of patient and good questions.

Oh, sorry.

Very well.

And gross to net.

And with you again to reported the first quarter results.

Alright.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Q4 2020 OPKO Health Inc Earnings Call

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