Q4 2021 OPKO Health Inc Earnings Call

February 24, 2022

[music].

Good day, ladies and gentlemen, and welcome to the Opco Health, Inc. Fourth quarter 2021 financial results conference call at.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should you require assistance during the conference. Please press Star then zero on your Touchtone telephone.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to MS. Yvonne Briggs with LHC.

Yes.

Thank you operator. Good afternoon. This is Yvonne Briggs with L. A J. Thank you all for joining today's call to discuss <unk> financial results for the fourth quarter of 2021.

I would like to remind you that any statements made during this call by management other.

Other than statements of historical fact will be considered forward looking.

As such will be subject to risks and uncertainties that could materially affect the company's expected results.

Those forward looking statements include without limitation the various risks described in the company's SEC filings, including the annual report on Form 10-K for the year ended December 31, 2021, and in 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 24th 2022.

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 me review the format for today's call Dr. Phillip Frost, Chairman and Chief Executive Officer will open the call.

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 Companys 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 today's call to discuss our fourth quarter financial results and business update.

121 was a record year for Opco hills with revenue of more than $1 $7 billion.

Starting with our pharmaceutical division, we were pleased to announce and.

And Jean Luc approval in several major markets, including the European Union, and Japan, as well as in Canada, and Australia and.

In general is the brand name for <unk> for the treatment of pediatric growth hormone deficiency.

Pfizer launch in general in Canada on February 16th and we look forward to launches in other territories as they receive pricing determinations.

In the U S. We were disappointed with the Fda's issuance of a complete response letter.

However, pfizer in Opco or evaluating the Fda's comments, and we will work with the FDA to better understand their requirements for a path forward.

Pfizer and <unk> are committed to bringing this product and its benefits to growth hormone deficient children globally.

Since the start of the pandemic the bio reference laboratories team has responded to the nation's needs with efficiency and innovative testing services as a result, Barbara referenced exceeded sales expectations for the quarter and closed out a record year with $1 6 billion in revenue.

For the past two years bio reference has effectively manage its resources and pivoted its operations to be prepared with testing capacity.

Moreover, The addition of our digital Health service Scarlet Health has made it more convenient for patients requiring both COVID-19 and routine tests and we expect <unk> to be a growth driver in the future.

John will provide further details on bio reference and its performance in a moment.

As part of our strategy to unlock the value of <unk> assets and maximize value for shareholders.

We entered into a definitive agreement to sell Dream Dx December four for $150 million in cash and $80 million number four shares upon the closing of the transaction.

We're also entitled to receive up to $150 million of potential milestones.

Kathryn <unk> CEO of <unk> will become co CEO of the combined companies.

With a significant equity stake in <unk>.

Hosing kosher.

<unk> shareholders will continue to participate in the growing genomics market without significant investment of capital.

Before <unk>, our commercial partner for rail in Europe , and other markets outside the U S launch the product in Germany earlier this month.

This is the first launch of <unk> outside the United States and we're enthusiastic about rollout plans with the launch in Switzerland anticipated mix.

In December we announced top line results for our phase III clinical trial with reality in COVID-19 patients.

The preliminary data demonstrated that improving vitamin D status with oral reality results in earlier resolution of respiratory symptoms.

Last time, I mentioned, an opco dream or small Latin American business.

Finished the year with record sales and profits and is now planning to expand into Ecuador and from its unit in Spain enter fronts.

As I've stated in the past, we believe the market doesn't adequately value of those assets presently the <unk> Dx transaction is one step towards better recognition.

Actual value.

I'll now turn the call over to Steve Rubin, who will provide further commentary on our pharmaceutical business Steve Thanks, Phil.

Good afternoon, everyone and thank you for joining us today as Phil mentioned, we are reporting record revenue for the year with bio reference was able to effectively respond to services surges in COVID-19 testing, while it's core business.

And return to pre pandemic volumes.

Regarding our pharmaceutical business, we recently jointly announced with Pfizer.

<unk> was approved in the EU and Japan in general.

Once weekly long acting recombinant human growth hormone for the treatment of pediatric patients who have growth failure due to inadequate secretion of endogenous growth hormone and the.

Fourth quarter, Australia, and Canada granted approvals for in general as well.

As Joe mentioned Pfizer launched in general in Canada on February 16th.

Under the worldwide agreement with Pfizer.

Copco is eligible to receive milestone payments upon regulatory approval and pricing determinations in major markets outside of the U S, which is expected within the next 12 months at both Europe and Japan.

In addition, upon launching the primary regions of the U S Europe , and Japan, we're entitled to tiered gross profit sharing on sales of both <unk> and Pfizer's daily Ghd drug <unk>.

Within the respective regions.

Pending the commencement of profit sharing within a region opco will receive tiered double digit royalties on net sales of summit program.

In the U S. We were disappointed that the FDA issued a complete response letter to Pfizer for the U S BLA submission.

We are collaborating with Pfizer to evaluate the fda's comments and intend to work with the agency to determine the best path forward.

We look forward to provide an update once we are able to do so after we gain greater clarity from the FDA regarding their requirements.

In the meantime.

Pfizer is seeking pricing approvals and preparing launch plans in Europe , Japan and other territories.

The product has been approved around the world.

When Pfizer remains committed to bringing the potential treatment benefits of cemetery, Oregon.

Pediatric ghd patients around the world.

Turning now to reality.

Our treatment for secondary hyperparathyroidism in adults with stage, three or four chronic kidney disease.

And low vitamin D levels in <unk>.

<unk> for the quarter breakdown as follows.

Total prescriptions for reality in Q4 2021 as reported by <unk>.

<unk> essentially unchanged from the previous quarter and were approximately 11450, representing a decrease from approximately 15100 in Q4 of 2020.

New patient starts decreased by 6% in Q4 versus Q3.

Since the product was launched nearly 30000 patients have had reality prescribed by approximately 4100 positions.

More than 150 positions or nearly 10% of the total number of prescribers, where new reality prescribers in Q4.

Earlier this month <unk> launched <unk> in Germany, with a sales kickoff led by presentation from several nephrology key opinion leaders and before executives.

<unk> has received marketing authorization for reality in 11 European countries and expect to launch in additional markets. Later. This later this year.

With the launch in Switzerland being expected in March.

Europe represents a large market opportunity for Realogy with an estimated 26 million people suffering from stage three or four <unk>.

We received a $3 million payment triggered by the first marketing approval of reality in Europe and are eligible to receive up to an additional $17 million in regulatory milestones and $210 million in milestone payments tied to launch pricing and sales as well as tiered double digit royalties.

Reality sales continued to be impacted by pandemic related challenges and Onboarding new patients during Q4 'twenty one.

The downward trend in sales, which started at the onset of the pandemic bottomed out in Q1, 'twenty, one and sales remained stable for the duration of the year during.

During the pandemic, we've aggressively reduced the size of our commercial team by approximately 40% to 57 individuals in order to maintain profitability with a reduced level of sales.

We expect that sales will gradually rise again as the pandemic subsides.

We rebuilt our commercial infrastructure we.

Hope to soon regain the same strong growth in sales that had been achieved before the pandemic began.

In December we announced topline data from our phase II trial with reality in adult patients with mild to moderate COVID-19.

This multicenter trial in town, a randomized double blind placebo controlled study to evaluate the safety and efficacy of reality, our counselor dial extended release capsules to treat symptomatic patients infected with Sars cov, two or rescue enrolled.

We enrolled 171 symptomatic COVID-19, outpatients from 10 sites across the U S. P.

Patients were randomized one to one to four weeks of treatment with reality 30 micrograms per capsule or matching placebo and a two week follow up.

<unk> was designed to raise serum total 25 hydroxy vitamin D more quickly, but in a controlled progressive manner to a targeted range of 50 to 100 nanograms per mil well before day seven.

34, COVID-19 symptoms were self reported daily by patients.

One primary endpoint with attainment targeted serum <unk> level by day 2014.

<unk> serum 25 D levels increase with reality treatment to 82 nanogram per Mil Baidu.

By day, seven and remained elevated for the duration of the study with 86% of subjects obtaining the targeted level.

Great <unk> of greater than 50% nanogram per mil versus 15% of placebo subjects. A secondary primary endpoint was time to resolution five composite COVID-19 symptoms trouble breathing chest congestion prior hacking cough.

<unk> chose our shipping.

Time to resolution for these five aggregated Simpsons was unchanged by reality given that the two composite non respiratory symptoms responded poorly however, the other three respiratory symptoms trouble breathing chest congestion and dryer Hatton call when analyzed together post hoc resolved right.

Days faster on average when serum 25 D was elevated above baseline at day, seven and 2014.

Chest congestion resolved three four days faster.

Resolution topic chest congestion was four days faster with 25 increases of at least 25 grants were bill.

These data support the conclusion that reality was effective in increasing serum 25, D and COVID-19 allocations, possibly accelerating the resolution of respiratory symptoms and mitigate pneumonia risk.

In January we posted a manuscript on net Rx, which summarize the top line data from this phase II study in more detail.

The manuscript is currently under review for formal publication in a peer reviewed journal.

We're currently completing a full analysis of the data and plan to review them with the FDA in Q2 22, along with a proposed design for a follow on phase III study.

Here's a brief update on our joint venture with <unk> Health group based in Asia.

In September of last year, we granted exclusive rights to manufacture develop and commercialize the once weekly <unk> modulus and Cte factor seven technology in greater China and.

Other Asian territories, we retain the global rights for all other territories.

Since the agreement <unk> has made significant progress in advancing manufacturing preclinical and clinical activities to develop these products in the Asian territories.

In addition to HD http and factor 700, <unk>, we believe that the CTV technology may also be broadly applicable to other therapeutic proteins in a rare disease market and provide a reduction in the number of injections required.

We are currently engaged in research and development efforts to use the Cpt's technology and other drug delivery technologies to develop a long acting therapies and expand our rare disease pipeline.

Our lead targets, our IGF, one Andy growth hormone antagonist or.

Our knowledge and expertise in this area should expedite development.

Finally, as we have previously disclosed that Phil mentioned on January 14th we entered into a definitive agreement for <unk> to acquire our wholly owned subsidiary <unk>.

<unk> provides the opportunity to unlock value and gtx as it offers higher valued genomics testing and fits with 704th business and growth strategy to advance precision medicine as a standard of care.

Based on December 4th closing price as of January 14th the aggregate purchase price was approximately $623 million comprised of 150 million upfront cash 80 million shares of 74 common stock and $150 million of contingent consideration based upon achievement of commercial milestones over the next two years.

As part of the transaction <unk> also entered into definitive agreements for a $200 million private placement of seven four stock from our syndicated institutional investors, including Pfizer.

<unk> is a leader in genomic testing and analysis and together <unk> will be one of the largest and most advanced providers of genomic clinical testing in the U S with a projected $350 million in pro forma 2022 revenue.

Catherine Stevens, President and CEO of Gtx will be appointed at two.

<unk> co CEO and is expected to join the <unk> Board of directors upon completion of the acquisition.

The acquisition and a private placement are expected to close in the second quarter of this year subject to customary closing conditions, including approval by the stockholders December 4th.

Now, let me turn the call over to Jon Cohen to discuss by reference Labs John .

Thanks, Steve and good afternoon, everyone as Phil mentioned bio reference had a better than expected quarter, given the surge in COVID-19 testing volumes due to the omicron variant complemented by the continued normalization of the core clinical lab business the growth in specialty testing and the acceleration of <unk>.

Karla.

I referenced continues to make significant strides relative to patient access with the payers, we executed a national preferred agreement with Aetna for their 24 million covered lives. We are one of only three laboratories in the country with this designation, which means that most patients will have no co pays or out of pocket charges for that.

<unk> services from bio reference this is similar to our preferred status with United Healthcare. We also executed a preferred agreement with Oscar Health, where there's 600000 covered lives.

Our base clinical business volume remains stable year over year, despite the impact of Ami Crunch on the general public in December .

Our women's health vertical volume increased 8% year over year as a result of our announcement that we discussed last quarter relative to our acquisition of the Roche <unk> business.

In IPF tests performed doubled in comparison to 2020 the same period.

In December we announced the FDA approval of our <unk> test score test.

<unk> is approved for the use of <unk> 45 years of age or older who have not had a prior prostate biopsy or our biopsy negative and have an age specific abnormal total psa or an abnormal digital rectal exam.

<unk> test has been used by more than 7700 health care providers, including approximately 4200 urologists.

Over 300000 tests have been performed since its launch as an LDC in 2014 with the new FDA approval. We have developed an aggressive plan aimed at converting additional commercial health plans to positive coverage policies for <unk>. In addition, we have launched the process to utilize our scarlet.

Home draw service to significantly improve patient access to <unk>.

The urology business grew significantly growing in volume by 29% over the prior year and 13% in revenue in Q4, most of the oncology testing returned to pre pandemic Q4, 2019 levels or surpass the volumes in Q4 2019.

This was led by our genomic offerings, which more than doubled the pre pandemic volume.

In 2021 oncology brought in over 200, new accounts, including large partnerships with academic medical centers and cancer centers Scarlet health has been well received by oncologists for many of their patients specifically those that are immuno suppressed and are resistant to go into physician's offices in Q4.

Scarlet health orders for oncology grew 45% compared to Q3.

Our strategic partnership initiatives continues to grow with strong performance and growing our hospital reference business in the last quarter Q4, we added eight new reference clients. In addition, Scarlet health has been rolled out to multiple of our partners, including large medical groups and health systems employed physicians with significance.

Yes.

Now, let me turn my attention to Covid.

During the fourth quarter, we performed $2 7 million COVID-19, PCR tests compared to $2 2 million tests performed in Q3.

Since the pandemic began we have performed more than 22 million COVID-19, molecular tests testing increased significantly in December as a result of bottleneck.

Especially at our Rite aid retail sites.

We also experienced significant increases in our point of care rapid COVID-19 testing offerings with our cruise lines sports employer and retail partners and performed almost almost 600000 rapid tests in Q4, we continued to be one of the largest providers for school based testing test.

The largest school district in New York City as well as many others in Q4, we brought on 76, new schools for Covid testing programs.

We continue to be one of the largest provider for the cruise lines testing on over 30 ships at 11 ports around the country. In Q4, we were able to assist the city and state of New York with Covid testing in the community opening 28, new locations and under one week's time to meet the rapid demand of the omicron surge.

Coupled with the holiday and travel testing needs.

We also continued to perform a significant amount of testing at large events recently, we provided testing for the Super Bowl. The Pro Bowl the NHL All Star game, the NBA, All star game and the Collegiate Bowl.

Many employers have started using scarlet for COVID-19 testing for their employees needs for returning work in a safe environment.

As I have discussed we continue to see a significant demand for Scarlet health across all of our commercial verticals, including oncology Women's health urology and shows and the strategic venture partners. I'm also proud to announce that multiple national payers have agreed to pay us a premium for scarlet health above or negotiate.

Good rates in December we announced the collaboration with MVP health care to offer their members medically necessary COVID-19 testing blood work and other diagnostic tests in the comfort of their homes MVP is the first insurer in New York State in Vermont to offer this service.

85 million lives now have specific additional in network coverage for Scarlet Health services, which is now available to 92% of the U S population Scarlet helped volume has grown sequentially over 400% through Q4 of 2021.

Over 600 individual providers now use scarlet and we are seeing an increasing number of patients taking advantage of our patient initiated testing service and now I'll turn the call over to our CFO Adam.

Thank you John before I review, the fourth quarter results in more detail I'd like to highlight a few of the significant financial milestones, which we achieved this year.

Overall revenue as Phil mentioned for the year was nearly $1 8 billion with over $1 $6 billion coming from our diagnostics segment as a result of the execution of the Covid test testing strategy John laid out.

In order to achieve these results as John mentioned, we develop non traditional revenue channels through our relationships with sports League retail pharmacies travel and leisure industries as well as partnerships with state and local governments, including testing at the nation's largest school districts more than 75% of our Covid test.

<unk> volumes came from these non traditional clients during 2021 or the result of our team's highly customized testing solutions.

On the pharmaceutical side of our business total revenue was over $167 million and we realized revenue from product sales of more than $141 million, reflecting growth of 18% led by our international operations, including Chile, Mexico, and Spain, which totaled nearly $100 million of revenue.

As a result of the execution.

Their growth plans in each market.

Our revenue growth allowed us to make significant investments in our long term growth initiatives, including the digital transformation of bio references core lab business led by our investment in Scotland, as well as investing in or Germline genetics business Gtx, which during 2021.

Reported an operating loss of approximately $31 million. In addition, we invested $75 million into our R&D projects, which with the recent approval of <unk> as well as the European commercial launch of reality are expected to provide for near term cash flow improvements on the pharmaceutical side of our business.

We ended the year in a strong financial position with about $135 million in cash cash available under our recently renewed credit facility with Jpmorgan, resulting in nearly $200 million.

In liquidity.

In addition, our recently announced transaction with <unk> will result in an approximately $120 million of net cash after considering transaction cost cash escrowed. In addition, we will receive 80 million shares of $7 four at closing.

We can also receive up to $150 million of additional consideration should the gtx business to achieve its forecasted revenue targets for 2022 and 2023.

The combined cash on hand, as well as the proceeds from the <unk> Dx transaction put us in a strong financial position.

Turning to the results of the fourth quarter on a consolidated basis, we reported an operating loss of $63 $1 million compared to 2020 operating income of $49 4 million.

Net loss for the fourth quarter of 2021 was $73 8 million or <unk> 11 per diluted share compared to net income of $32 3 million or <unk> <unk> per share for 2020 period.

The operating losses for the fourth quarter of 2021 were impacted by nonrecurring legal expenses as well as expenses related to our gene Dx transaction.

Our diagnostics segment reported revenue from services significantly higher than our guidance as a result of the increased demand for COVID-19 testing due to the on the Crown Varian.

When comparing the fourth quarter of 2021% to 2000 22020 overall revenue from services decreased to $362 8 million from $457 $9 million for the 2020 period.

As John highlighted we performed nearly 600000 point of care diagnostic tests during the quarter.

In addition, as a significant portion of our test volume came through our retail partnership with Rite aid and as a result of the point of care.

Testing volumes, having a higher cost to serve we saw year over year sequential declines in overall gross margin.

We continue to invest in our commercial organization, including Scarlet Health Digital health platform John mentioned.

We also have invested in a national Phlebotomy network and we increased the investment in our <unk> commercial team.

We remain focused on near term profitable growth on our commercial and digital health operating investments.

Moving to our pharmaceutical segment, we reported revenues of $38 5 million for the fourth quarter of 2021 compared to $36 7 million for the 2020 period.

Revenue from product sales in the fourth quarter increased 14% to $35 3 million, including $7 7 million of revenue from royalty compared to $30 8 million in the 2020 period inclusive of $10 1 million of royalty revenue when.

When looking at revenue from the transfer of intellectual property, we reported $3 $3 million of revenue for the 2021 period compared to $5 9 million a year ago.

Reflecting decreased somewhat brogan R&D related revenue.

Operating loss from the pharmaceutical segment was $14 8 million for the fourth quarter of 2021, the comparable period of 2020 reported an operating loss of $9 million overall research and development expense for the fourth quarter of 2021 was $16 2 million compared to $14 million in 2020, reflecting.

A slight increase in spending on our Soma drug and development program.

As we look into 2022, we've built the following assumptions into our forecast.

We anticipate performing between $2 2 million and $2 6 million COVID-19, PCR point of care and antibody tests during the year.

We have kept capacity well in excess of these levels should demand for testing increase our revenue could expand beyond our guidance through February 20, <unk>. We have already performed approximately $1 6 million Covid tests. So our range of guidance reflects testing demand from our physician and general public testing channels with our more.

Cable channels and sports education, and leisure activities remain.

As we have not assumed any new surge in COVID-19 testing for the remainder of 'twenty two.

Should such a surge occur we could see significantly higher revenue than got it.

Our clinical laboratory business will grow year over year in the mid teens.

We anticipate the <unk> transaction will close during the second quarter of 2022, however, given the shareholder and regulatory approvals required. We have included full year forecast until the transaction closes and not have have not forecasted any gain or loss on the disposal given the 80 million shares.

We receive will be marked at the time of the actual closing.

For <unk>, we anticipate double digit volume and revenue growth and assumption assumes improving access to CK din clinics as a result of the declining COVID-19 infection rates.

We have not assumed Pfizer will obtain pricing in any of the regions and has received regulatory approval that would trigger a milestone payment as a result, we have not forecasted a profit share with Pfizer to begin in 2022, However, we expect.

Have not forecasted royalties on product sales, which we expect to commence during 'twenty two beyond Canada.

<unk> has recently launched <unk> in Germany and has plans to launch in other countries in the coming months, we have forecasted milestones and royalties expected while before establishes pricing throughout their territories.

With that we expect overall revenue for 2020 to be between one one and $1 $2 billion, including revenue from services of $940 million to $1 billion revenue from products of $145 million to $155 million and other revenue of $18 million to $22 million.

We expect costs and expenses to be between $1, one to $1 $3 billion, which reflect various assumptions of testing volumes as well as our investment levels and commercial initiatives at bio reference, which we may choose to accelerate or delay depending on the uptake levels.

Operating results include approximately $100 million.

Noncash depreciation and amortization amortization expense as well as an expectation of research and development expense of $85 million to $97 million.

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

Thank you Sir.

Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone is there a question has been answered or you wish to remove yourself from the queue. Please press the pound key.

We have our first question from Jeffrey Cohen with Ladenburg.

Okay.

And thank you for taking your questions.

So.

A few Adam based on your 2022.

Go ahead, and some projections furnished outlined can you talk about the labor a little bit and what <unk> seen on the labor front, particularly through Q4 and maybe through it at the beginning of this year.

Expectation anticipation there for the balance of the year.

Yes.

I think like most people on a macro basis, we've seen seen labor costs increase overall.

And during some of the staffing shortages that we saw at the end of the year and the beginning of this year, we did have to.

To make some increases.

Correct.

Attract talent and so we are we are seeing probably the same labor labor pressure across across the industry, but everybody is seeing we haven't seen that accelerate but we did come under some pressure to make some adjustments during the end of the year period.

Okay go ahead, and torture foster Steve as far as social maturing goes could you talk about the commentary for sure now.

Sure.

As it relates to the U S as far as the size comparison European Union, Scandinavia, Russia, Australia, Canada and Japan.

I couldn't understand.

So just so I understand what youre asking.

U S is the biggest market.

Japan is.

From pricing wise is probably as big as Europe , but size U S is the biggest share of its second.

And Japan is third and our European approval will be global.

Our <unk> if you remember.

Once we get pricing or pricing, it's pricing and two of the majors who are shipped to a.

The profit share which would encompass.

Sales of Gina troponin as well throughout the territory and the same goes for Japanese Japan.

Oxy accomplishes rest of world on our geographic selections.

We will comment.

I can just add that the combination of Europe , and Japan, it's about equivalent to what the U S market.

And then you have the additional countries, such as Australia, Canada and other jurisdictions.

Okay got it that's very helpful and then back on the.

The projection for 2022.

Testing volumes from heard you correctly.

Two two to two six for the full year.

Yes so.

Jeff we've seen testing volumes come down pretty pretty quickly week after week into this year. So we do have testing continuing through the year.

But we've seen a significant drop off in volumes.

Post mid January .

Okay. So based on your own.

Six number youre anticipating.

From what you all understand now our overall look at it now.

The balance of the year would be.

Yes.

That first six six weeks.

Yes.

Yeah, So we're using that forecast based on the.

The remaining school years and sports League testing that we have as well as some of our other.

Leisure activities, but generally seeing significant declines in testing volumes.

Got it and then lastly for us in your commentary on cost of goods in a period of a bit high for the quarter and outlook going forward to really leverage there that can.

Can we can bring that lower.

Yes. So we spent a significant amount of time in early as part of the fourth quarter, taking down our staffing levels.

It's hard to believe but on the crown. The first cases on the chronic occurred December 1st in the U S and as a result, we had not anticipated the surge that came in when we saw the surge come we had to stay.

Staff up significantly.

And add to it.

Had to play a little bit of catch up over over the search time and had to.

Pay significant wage.

Wage increases to get people in the seats during that search time, we've been aggressively taking that capacity back down with the testing volumes coming down.

John mentioned, our point of care business. It comes at a much higher cost to serve and as a result.

<unk> seen some of the margin basis points declining as well as our retail channel driving where most of the on the ground testing came from.

Which comes at a lower price point than our traditional testing so the combination of those two.

What drove the decline in overall gross margins.

Okay perfect. Thanks for taking the questions.

Thanks, Joe.

Next question is from Maury Raycroft with Jefferies.

Hi, This is Kevin on for Maury, Thanks for taking my question.

Okay.

The one I had was just.

About <unk> could you sort of say what the share of revenue and expenses was.

<unk> in 2021.

How the how the sale impacts our near term growth and long term goals for the base business.

Sure.

Thanks, So <unk> generated about $115 million of revenue during during 2000.

'twenty, one we reported an operating loss from that business of about $31 million. So it does it does have.

A small small part of the overall piece of the puzzle today.

We expect that business to grow significantly Catherine joining.

Expanded out our commercial outreach and capabilities so.

So we do expect that business to grow meaningfully.

We've set a target of $160 million in revenue for 2022.

So meaningful growth on that piece of the business, but overall not a significant component of our reference I think the important thing is it does allow us to improve the overall profitability of our diagnostics segment by moving those operating losses, which we had forecasted to expand over the near term.

Okay, great. Thanks, and then just.

This was sort of mentioned earlier, but.

In terms of copper testing for the rest of the year.

You mentioned before that.

Yes.

References differences you have a relatively higher ratio of contracts versus retail.

So do you see a scenario where COVID-19 becomes endemic and you still.

Have these contracts going forward or.

Is that not not a likely scenario.

Hi, it's John so.

Thanks, Kevin.

Yeah.

A little bit.

A lot of independent factors right now first of all.

There will be some impact on whether or not.

How many children take the vaccine.

And then there'll be an impact of whether or not the vaccine is going to be approved for kids under five which they've held off on the reason I say that is if this goes into that certainly going to be up to June .

Mike I would this is an opinion is I think that the fall.

<unk> system will probably still test in certain areas.

I don't think theyre going to back off that quickly because I don't think theres going to be you would have this opinion about kids get vaccinated go into school. So a lot of schools and got to decide what they're going to want to do with him back Veda kits. So thats the first thing.

I think the cruise line quite honestly I don't.

I don't think theyre going to back off I think that they're going to continue to test.

Through the end of the year, but that again is a guest but because they are so.

Floating.

Petri dishes, where do you want to call them that there's a lot of issues on cruises in the past.

I think they're going to be the bigger ones are probably resistant backing off their protocols right now.

The sports leagues are are going to go for a while.

Obviously.

The NFL and some others, who finished I can't predict what they're going to do right now.

Yes. It does go through a good part of the year right now.

Did.

I had mentioned.

The script, but we've opened up.

Multiple multiple NBA sites for spring training for Covid testing.

It's a long winded answer to basically tell you I think a lot of it goes through on a contractual surveillance testing through the end of the year, but I can't tell you for sure.

Great. Thank you.

And our next question is from <unk> Chen with H C. Wainwright.

Yes.

Hey, Pete.

On behalf of <unk>.

<unk>.

I have two questions.

One being the commercial plan for <unk>.

The 14th quarter Paul.

<unk>.

Essentially looking at how reimbursement will pan out.

And any other plans.

And I know you've answered previously, but maybe also comment on.

Any potential business opportunities moving.

Moving forward obviously.

So all of these things are dependent on Covid testing.

And finally.

I know you spoke about the revenue guidance for testing this year.

My apologies, if I missed it but any any guidance on.

Volume.

The patient volume and behind the Haynesville.

<unk>.

Forward.

Has it been.

Dramatic but they.

They live in.

Thank you so much.

Sure. So I'll take the first two we have.

<unk> very assertive plan for <unk> quite honestly, we have it as you may know we have a designated sales force that sells into urology offices only.

Which we continue to add to across the country.

In addition.

We are you may have heard me we have.

We already have a significant plan already in market to talk to the commercial payers based on the FDA approval of <unk>, which we announced.

<unk>.

About four weeks ago.

And then in addition, we've had an interesting uptake on <unk> relative to Scarlet because it makes it much easier.

For the urologists to order the test and have US do the home job because as you can imagine a lot of urology offices, some do have lobotomy, but many of them. So it provides increased access across the country for <unk>.

On the Scarlet I mentioned, there continues to be multiple multiple opportunities in multiple segments, including.

What we refer to as non traditional clients with which a lot of people who have interesting home products.

That need to have blood drawn so the.

The Scarlet.

I think we're entering hopefully more than hopefully into more of a scarlet hockey stick in terms of its volume for 2022, and then I'll turn it over the guidance question to Adam.

Yes, so the remaining remaining testing volume that we forecasted as.

Principally coming off the surveillance contracts that John mentioned between the school of sports and leisure contracts that we have in place we're not expecting in our guidance anyhow any any meaningful volumes coming from our retail partnerships and the general public testing.

Thank you so much.

I am showing no further questions at this time I would now like to turn the conference back to Dr. Phillip Frost.

Alright, thank everybody for participating and we look forward to communicating with you after the next quarter.

Ladies and gentlemen. This concludes today's conference. Thank you again for your participation and have a wonderful day you may all disconnect.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

In the UK.

Great.

Okay.

Sure.

Great.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Good day, ladies and gentlemen, and welcome to the Opco Health, Inc. Fourth quarter 2021 financial results conference call.

At this time all participants are in a listen only mode.

We will conduct a question and answer session and instructions will follow what that time.

If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to MS. Yvonne Briggs with LHC.

Thank you operator. Good afternoon. This is Yvonne Briggs with L. A J. Thank you all for joining today's call to discuss off go Health's financial results for the fourth quarter of 2021.

I'd like to remind you that any statements made during this call by 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 there.

These forward looking statements include without limitation the various risks described in the company's SEC filings, including the annual report on Form 10-K for the year ended December 31, 2021, and in 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 24th 2022.

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 me review the format for today's call Dr. Phillip Frost, Chairman and Chief Executive Officer will open the call.

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 today's call to discuss our fourth quarter financial results and business update.

2021 was a record year for Opco health with revenue of more than $1 $7 billion.

Starting with our pharmaceutical division, we were pleased to announce.

Jean Luc approval in several major markets, including the European Union, and Japan, as well as in Canada and Australia.

In general is the brand name for <unk> for the treatment of pediatric growth hormone deficiency.

Pfizer launched in general in Canada on February 16th and we look forward to launches in other territories as they received pricing determinations.

In the U S. We were disappointed with the Fda's issuance of a complete response letter however, pfizer in opco or evaluating the Fda's comments, and we will work with the FDA to better understand their requirements for our path forward.

Both Pfizer and <unk> are committed to bringing this product and its benefits to growth hormone deficient children globally.

For the past two years bio reference has effectively manage its resources and pivoted its operations to be prepared with testing capacity.

Moreover, The addition of our digital Health service Scarlet Health has made it more convenient for patients requiring both Colgate and routine test and we expect <unk> to be a growth driver in the future.

John will provide further details on bio reference and its performance in a moment.

As part of our strategy to unlock the value of <unk> assets and maximize value for shareholders.

We entered into a definitive agreement to sell Dream Dx December four for $150 million in cash and $80 million number four shares upon the closing of the transaction.

We're also entitled to receive up to $150 million of potential milestones.

Kathryn <unk> CEO of <unk> will become co CEO of the combined companies.

With a significant equity stake in summer for closing.

Shareholders will continue to participate in the growing genomics market without significant investment of capital.

Before <unk>, our commercial partner for rail in Europe , and in other markets outside the U S launch the product in Germany earlier this month.

This is the first launch of <unk> outside the United States and we're enthusiastic about rollout plans with the launch in Switzerland anticipated next.

In December we announced top line results for our phase III clinical trial with reality in COVID-19 patients.

The preliminary data demonstrated that improving vitamin D status with oral reality results in earlier resolution of respiratory symptoms.

Last time, I mentioned, an opco, Jim are small Latin American business.

Initially a year with record sales and profits and is now planning to expand into Ecuador and from its unit in Spain enter fronts.

As I've stated in the past, we believe the market doesn't adequately value of <unk> assets presently.

The <unk> Dx transaction is one step towards better recognition of our actual value.

I'll now turn the call over to Steve Rubin, who will provide further commentary on our pharmaceutical business Dave Thanks, Phil.

And return to pre pandemic volumes.

Regarding our pharmaceutical business, we recently jointly announced with Pfizer.

<unk> was approved in the EU and Japan in General is a once weekly long acting we're competent human growth hormone for the treatment of pediatric patients who have growth failure due to inadequate secretion of endogenous growth hormone.

In the fourth quarter, Australia, and Canada, greater approvals for in general as well as Phil mentioned Pfizer launched in general in Canada on February 16th.

Under the worldwide agreement with Pfizer Com.

<unk> is eligible to receive milestone payments upon regulatory approval and pricing determinations in major markets outside of the U S, which is expected within the next 12 months in both Europe and Japan.

In addition, upon launching our primary regions of the U S Europe , and Japan, we're entitled to Tier gross profit sharing on sales of both <unk> and Pfizer's daily Ghd drug Gina dropping.

Within the respective regions.

Pending the commencement of profit sharing within a region opco will receive tiered double digit royalties on net sales of summit program.

In the U S. We were disappointed the FAA FDA issued a complete response letter to Pfizer for the U S BLA submission.

We are collaborating with Pfizer to evaluate the fda's comments and intend to work with the agency to determine the best path forward.

We look forward to provide an update once we are able to do so after we gain greater clarity from the FDA regarding their requirements.

In the meantime.

Pfizer is seeking pricing approvals and preparing large players in Europe , Japan and other territories.

The product has been approved around the world.

Pfizer remains committed to bringing the potential treatment benefits of cemetery, Oregon.

Pediatric ghd patients around the world.

Turning now to reality.

Our treatment for secondary hyperparathyroidism in adults with stage, three or four chronic kidney disease.

And low vitamin D levels in <unk>.

<unk> for the quarter breakdown as follows.

Total prescriptions for reality in Q4 2021 as reported by <unk>.

Essentially unchanged from the previous quarter and were approximately 11450, representing a decrease from approximately 15100 at Q4 of 2020.

New patient starts decreased by 6% in Q4 versus Q3.

Since the product was launched nearly 30000 patients have had reality prescribed by approximately 4100 positions.

More than 150 positions or nearly 10% of the total number of subscribers with new reality prescribers in Q4.

Earlier this month <unk> launched <unk> in Germany, with a sales kickoff led by presentation from several nephrology key opinion leaders and before executives.

<unk> has received marketing authorizations for reality in 11 European countries and expect to launch in additional markets. Later later this year.

With the launch in Switzerland being expected in March.

Europe represents a large market opportunity for reality with an estimated 26 million people suffering with stage three or four <unk>.

<unk> sales continued to be impacted by pandemic related challenges and Onboarding new patients during Q4 'twenty one.

The downward trend in sales, which started at the onset of the pandemic bottomed out in Q1, 'twenty, one and sales remained stable for the duration of the year during.

During the pandemic, we've aggressively reduced the size of our commercial team by approximately 40% to 57 individuals in order to maintain profitability with a reduced level of sales.

We expect that sales will gradually rise again as the pandemic subsides and we rebuild our commercial infrastructure.

We hope to soon regain the same strong growth in sales that had been achieved before the pandemic began.

In December we announced topline data from our phase II trial with reality in adult patients with mild to moderate COVID-19. This multicenter trial in town a randomized double blind placebo controlled study to evaluate the safety and efficacy of reality or counsellor dial extended release capsules.

To treat symptomatic patients infected with Sars cov, two or rescue.

Enrolled 171, symptomatic COVID-19, outpatients from 10 sites across the U S. P.

Patients were randomized one to one to four weeks of treatment with reality 30 micrograms per capsule or matching placebo and a two week follow up.

<unk> was designed to raise serum total 25 hydroxy vitamin D more quickly, but in a controlled progressive manner to a targeted range of 50 to 100 nanograms per mil well before day seven.

34, COVID-19 symptoms were self reported daily by patients.

<unk> primary endpoint was attainment of a targeted serum 25 D level by day 2014.

Mean serum 25 D levels increase with reality treatment to 82 nanograms per Mil by day, seven and remained elevated for the duration of the study with 86% of subjects obtaining the targeted level.

<unk> of greater than 50% nanogram per mil versus 15% of placebo subjects. A secondary primary endpoint was time to resolution of five composite COVID-19 symptoms trouble breathing.

Congestion.

Higher hacking cough body aches or pains chose our shipping.

Time to resolution for these five aggregated symptoms was unchanged virality given that the two composite non respiratory symptoms responded poorly however.

Other three respiratory symptoms trouble breathing chest congestion and dryer Hatton call when analyzed together post hoc resolved three days faster on average with share of <unk> 25, <unk> was elevated above baseline at day, seven and 2014.

<unk> congestion resolved three four days faster.

Resolution type of chest congestion was four days faster with $25 increases of at least 25 grants were bill. These.

These data support the conclusion that reality was effective in increasing serum 25, D and COVID-19, outpatient, possibly accelerating the resolution of respiratory symptoms and mitigate pneumonia risk.

In January we posted a manuscript on net Rx, which summarize the top line data from this phase III study in more detail the.

A manuscript is currently under review for formal publication in a peer reviewed journal.

Currently completing a full analysis of the data and plan to review that with the FDA in Q2 22, along with a proposed design for a follow on phase III study.

Here's a brief update on our joint venture with the leader Mud Health group based in Asia.

In September of last year, we granted exclusive rights to manufacture develop and commercialize the once weekly <unk> modulus and Cte factor seven technology in greater China and.

Other Asian territories, we retained the global rights for all other territories.

Since the agreement <unk> has made significant progress in advancing manufacturing preclinical and clinical activities to develop these products in the Asian territories.

We are currently engaged in research and development efforts to use the CPT technology and other drug delivery technologies to develop a long acting therapies and expand our rare disease pipeline.

Our lead targets, our IGF, one and a growth hormone antagonist or.

Our knowledge and expertise in this area should expedite development.

Finally, as we have previously disclosed that Phil mentioned on January 14th we entered into a definitive agreement for <unk> to acquire our wholly owned subsidiary <unk>.

The transaction provides the opportunity to unlock value and gtx as it offers higher valued genomics testing.

Fifth with several fourth business and growth strategy to advance precision medicine as a standard of care <unk>.

Just on December 4th closing price as of January 14th the aggregate purchase price was approximately $623 million comprised of 150 million upfront cash.

$80 million shares of <unk> common stock and $150 million of contingent consideration based upon achievement of commercial milestones over the next two years.

As part of the transaction <unk> also entered into definitive agreements for a $200 million private placement of seven four stock from our syndicated institutional investors, including Pfizer.

Catherine Stevens, President and CEO of <unk> will be appointed as <unk> co CEO and is expected to join the <unk> Board of directors upon completion of the acquisition <unk>.

The acquisition and a private placement are expected to close in the second quarter of this year subject to customary closing conditions, including approval by the stockholders of <unk>.

Now, let me turn the call over to Jon Cohen to discuss by reference Labs John .

Thanks, Steve and good afternoon, everyone as Phil mentioned bio reference had a better than expected quarter, given the surge in COVID-19 testing volumes due to the omicron Varian complemented by the continued normalization of the core clinical lab business the growth in specialty testing and the acceleration of <unk>.

Karla.

Bio reference continues to make significant strides relative to patient access with the payers, we executed a national preferred agreement with Aetna for their 24 million covered lives. We are one of only three laboratories in the country with this designation, which means that most patients will have no co pays or out of pocket charges.

For their lab services from bio reference this is similar to our preferred status with United Health care. We also executed a preferred agreement with Oscar Health, where there's 600000 covered lives.

Our base clinical business volume remains stable year over year, despite the impact of Ami crime on the general public in December .

Our women's health vertical volume increased 8% year over year as a result of our announcement that we discussed last quarter relative to our acquisition of the Roche <unk> business and Ips test performed doubled in comparison to 2020 the same period.

In December we announced the FDA approval of our <unk> test score test. This test is approved for the Houston men 45 years of age or older who have not had a prior prostate biopsy or our biopsy negative and have an age specific abnormal total psa or an abnormal digital rec.

It'll exam the.

<unk> test has been used by more than 7700 health care providers, including approximately 4200 urologists.

In addition, we have launched the process to utilize our Scarlet health home draw service to significantly improve patient access to <unk>.

The urology business grew significantly growing in volume by 29% over the prior year and 13% in revenue.

In Q4, most of the oncology testing returned to pre pandemic Q4, 2019 levels or surpass the volumes in Q4 2019. This was led by our genomic offering which more than doubled the pre pandemic volume and.

In 2021 oncology brought in over 200, new accounts, including large partnerships with academic medical centers and cancer centers Starlet health has been well received by oncologists for many of their patients specifically those that are immuno suppressed and are resistant to go into physician's offices in Q4.

Scarlet health orders for oncology grew 45% compared to Q3.

Yes.

Now, let me turn my attention to Covid.

During the fourth quarter, we performed $2 7 million COVID-19, PCR tests compared to $2 2 million tests performed in Q3.

Since the pandemic began we have performed more than 22 million COVID-19, molecular tests testing increased significantly in December as a result of <unk>.

Especially at our Rite aid retail sites.

We also experienced significant increases in our point of care rapid COVID-19 testing offerings with our cruise lines sports employer and retail partners and performed almost almost 600000 rapid test in Q4, we continued to be one of the largest providers for school based testing test.

The largest school district in New York City as well as many others in Q4, we brought on 76, new schools for Covid testing programs.

Coupled with the holiday and travel testing needs.

Many employers have started using scarlet for COVID-19 testing for their employees needs for returning work in a safe environment.

As I have discussed we continue to see a significant demand for scarlet help across all of our commercial verticals, including oncology women's health urology and shoes and the strategic venture partners. I'm also proud to announce that multiple national payers have agreed to pay us a premium for Scarlet health above our.

Good rates in December we announced the collaboration with MVP healthcare to offer their members medically necessary COVID-19 testing blood work and other diagnostic tests in the comfort of their homes MVP is the first insurer in New York State in Vermont to offer this service.

85 million lives now have specific additional in network coverage for Scarlet Health services, which is now available to 92% of the U S population Scarlet health volume has grown sequentially over 400% through Q4 of 2021.

Thank you John before I review, the fourth quarter results in more detail I'd like to highlight a few of our significant financial milestones, which we achieved this year.

Overall revenue as Phil mentioned for the year was nearly $1 8 billion with.

With over $1 $6 billion coming from our diagnostics segment as a result of the execution of the Covid tests testing strategy that John laid out.

<unk> volumes came from these non traditional clients during 2021 or the result of our team's highly customized testing solutions.

As a result of the execution.

Their growth plans in each market.

Our revenue growth allowed us to make significant investments in our long term growth initiatives, including the digital transformation of our references core lab business led by our investment in Scotland, as well as investing in or Germline genetics business Gtx, which during 2021.

<unk> reported an operating loss of approximately $31 million. In addition, we invested $75 million into our R&D projects, which with the recent approval of <unk> as well as the European commercial launch of reality are expected to provide for near term cash flow improvements on the pharmaceutical side of our business.

We ended the year in a strong financial position with about $135 million in cash along with cash available under our recently renewed credit facility with JP Morgan, resulting in nearly $200 million in.

In liquidity.

In addition, our recently announced transaction with <unk> will result in an approximately $120 million of net cash after considering transaction cost.

Cash Escrowed. In addition, we will receive 80 million shares of $7 four at closing.

We can also receive up to $150 million of additional consideration should the <unk> business to achieve its forecasted revenue targets for 2022 and 2023.

The combined cash on hand, as well as the proceeds from the <unk> Dx transaction put us in a strong financial position.

Turning to the results of the fourth quarter on a consolidated basis, we reported an operating loss of $63 $1 million compared to 2020 operating income of $49 4 million.

Net loss for the fourth quarter of 2021 was $73 8 million or <unk> 11 per diluted share compared to net income of $32 3 million or <unk> <unk> per share for 2020 period.

The operating losses for the fourth quarter of 2021 were impacted by nonrecurring legal expenses as well as expenses related to our <unk> transaction.

Our diagnostics segment reported revenue from services significantly higher than our guidance as a result of the increased demand for COVID-19 testing due to the omni Crown Varian.

When comparing the fourth quarter of 2021% to 2000 22020 overall revenue from services decreased to $362 8 million from $457 $9 million for the 2020 period.

As John highlighted we performed nearly 600000 point of care diagnostic tests during the quarter.

In addition, as a significant portion of our test volume came through our retail partnership with Rite aid and as a result of the point of care.

Testing volumes, having a higher cost to serve we saw year over year sequential declines in overall gross margin.

We continue to invest in our commercial organization, including Scarlet Health Digital health platform John mentioned.

We also have invested in a national Phlebotomy network and we increased the investment in our <unk> commercial team, we remain focused on near term profitable growth on our commercial and digital health operating investments.

Moving to our pharmaceutical segment, we reported revenues of $38 5 million for the fourth quarter of 2021 compared to $36 $7 million for the 2020 period.

Revenue from product sales in the fourth quarter increased 14% to $35 3 million, including $7 $7 million of revenue from reality compared to $30 8 million in the 2020 period inclusive of $10 1 million of.

Of royalty revenue.

When looking at revenue from the transfer of intellectual property, we reported $3 $3 million of revenue for the 2021 period compared to $5 9 million a year ago.

Reflecting decreased so much rogen R&D related revenue.

A slight increase in spending on our cemetery, Oregon development program.

As we look into 2022, we've built the following assumptions into our forecast.

We anticipate performing between $2 2 million and $2 6 million COVID-19, PCR point of care and antibody tests during the year.

We have kept capacity well in excess of these levels should demand for testing increase our revenue could expand beyond our guidance through February 20, <unk>. We have already performed approximately $1 6 million Covid tests. So our range of guidance reflects testing demand from our position in general public testing channels with our Morris.

Cable channels and sports education, and leisure activities remain.

As we have not assumed any new surge in COVID-19 testing for the remainder of 'twenty two.

Should such a surge occur we could see significantly higher revenue than got it.

Our clinical laboratory business will grow year over year in the mid teens.

We anticipate the <unk> transaction will close during the second quarter of 2022, however, given the shareholder and regulatory approvals required. We have included full year forecast until the transaction closes and not have have not forecasted and a gain or loss on the disposal given the 80 million shares.

We receive will be marked at the time of the actual closing.

For <unk>, we anticipate double digit volume and revenue growth and assumption assumes improving access to CK din clinics as a result of the declining COVID-19 infection rates.

During 'twenty two beyond Canada.

With that we expect overall revenue for 2020 to be between one one and $1 $2 billion, including revenue from services of $940 million to $1 billion revenue from products of 145 to 155 million and other revenue of $18 million to $22 million.

Operating results include approximately $100 million of noncash depreciation and amortization amortization expense as well as an expectation of research and development expense of $85 million to $97 million.

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

Thank you Sir.

Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone is there a question has been answered or you Mr move yourself from the queue. Please press the pound key.

Yes.

We have our first question from Jeffrey Cohen with Ladenburg.

Okay.

And thank you for taking your questions.

So.

A few Adam based on your 2022.

Guidance and projections as furnished outlined can you talk about the labor a little bit and what <unk> seen on the labor front, particularly through Q4 and maybe through it at the beginning of this year.

Expectation anticipation there for the balance of the year.

Yes.

Like most people on a macro basis, we've seen seen labor costs increase overall.

During some of the staffing shortages that we saw at the end of the year and the beginning of this year, we did have to make some increases to.

Correct.

Attract talent and so we are we are seeing probably the same labor labor pressure across across the industry that everybody is seeing as we haven't seen that accelerate but we did come under some pressure to make some.

<unk> during the end of the year period.

Okay got it and Dr Foster, Steve as far as our show maturing goes could you talk about the current territory now.

As it relates to the U S as far as the size comparison.

And Union in Soma, Scandinavia, Russia, Australia, Canada and Japan.

I couldn't understand.

So just so I understand what you're asking so I mean.

U S is the biggest market.

Japan is.

From pricing wise is probably as big as Europe , but <unk>.

<unk> U S is the biggest share of its second in Japan is fair and our European approval will be global and we are <unk>. If you remember.

Once we get pricing or pricing, it's pricing and two of the majors it was shipped to a.

A profit share which would encompass.

Sales of genome program as well throughout the territory and the same goes for Japanese Japan.

Oxy accomplishes rest of world on our geographic selections.

We will comment.

I can just add that the combination of Europe , and Japan is about equivalent to what the U S market is.

And then you have the additional countries, such as Australia, Canada and other jurisdictions.

Okay got it that's very helpful and then back on the.

The projection for 2022.

Testing volumes from I heard you correctly.

Two two to two six for the full year.

Yeah. So.

Jeff we've seen testing volumes come down pretty pretty quickly week after week into this year. So we do have testing continuing through the year.

But we've seen a significant drop off in volumes.

Post mid January .

Okay. So based on your own.

Six number youre anticipating.

From what you all understand now our overall look at it now.

The balance of the year would be.

Yes.

That first six six weeks.

Yes sure.

Yes, so we're using that forecast based on the.

The remaining school years, and Sports League test things that we have as well as some of our other.

Leisure activities.

But generally seeing significant declines in testing volumes.

Got it and then lastly for some of your commentary on our cost of goods and appear to a bit high for the quarter and outlook going forward to really leverage there that can.

Can we can bring that lower.

Yes. So we spent a significant amount of time in early part of the fourth quarter, taking down our staffing levels.

It's hard to believe but on the crown. The first case on the chronic occurred December 1st in the U S and as a result, we had not anticipated the surge that came in when we saw the surge com we had to stop.

Staff up significantly.

And that.

Had to play a little bit of catch up over over the search time and had to.

<unk> significant.

Wage increases to get people in the seats during that search time, we've been aggressively taking that capacity back down with the testing volumes coming down.

John mentioned, our point of care business. It comes at a much higher cost to serve and as a result.

<unk> seen some of the margin basis points declining.

As well as our retail channel driving where most of the on the ground testing came from.

Which comes at a lower price point than than our traditional testing. So the combination of those two.

Or what drove the decline in overall gross margins.

Okay perfect. Thanks for taking the questions. Thanks.

Thanks, Jeff.

Next question is from Maury Raycroft with Jefferies.

Hi, This is Kevin on for Maury, Thanks for taking my questions.

First one I had was.

Just about <unk> could you sort of say what the share of revenue and expenses was.

For <unk> in 2021.

How the how the sale impacts our near term growth and long term goals for the base business.

Sure.

Thanks, So <unk> generated about $115 million of revenue during during 2000.

'twenty, one we reported an operating loss from that business of about $31 million. So it does it does have.

A small small part of the overall piece of the puzzle today.

We expect that business to grow significantly and with Catherine joining.

As expanded out our commercial.

Outreach and capabilities.

So we do expect that business to grow meaningfully.

We've set a target of $160 million in revenue for 2022.

So meaningful growth on that piece of the business, but overall not a significant component of our reference I think the important thing is is it does allow us to improve the overall profitability of our diagnostics segment by removing those operating losses, which we had forecasted to expand over the near term.

Okay, great. Thanks, and then just this is sort of mentioned earlier, but.

In terms of copper testing for the rest of the year.

You mentioned before that.

Yes.

References differences you have a relatively higher ratio of contracts versus retail.

So do you see a scenario, where COVID-19 becomes endemic and you're still.

Have these contracts going forward or.

Is that not a likely scenario.

Hi, it's John so.

Thanks, Kevin.

Yeah.

<unk>.

Sure.

There's a lot of independent factor right now first of all.

There will be some impact on whether or not.

How many children take the vaccine.

And then there'll be an impact of whether or not the vaccine is going to be approved for kids under five which they've held off on it.

I say that is.

It goes into the it's certainly going to be.

June .

I would this is an opinion is I think that the fall school system will probably still test in certain areas.

I don't think theyre going to back off that quickly because I don't think theres going to be you did have this opinion about kids get back to me to go to school. So a lot of schools decided what they're going to want to do with them back into kits. So thats the first thing.

I think the cruise line quite honestly I don't.

I don't think theyre going to back off I think that they're going to continue to test.

Through the end of the year, but that again is a guest but because they are.

Sort of floating.

Petri dishes, where do you want to call them that there's a lot of issues on cruises in the past.

I think they're going to be the bigger ones are probably resistant backing off their protocols right now.

These are all good.

To go for a while it except for obviously.

The NFL and some others, who finished I can't predict what they're going to do right now, but yes.

Yes. It does go through a good part of the year right now we do.

Good.

I had mentioned on the <unk>.

Script, but we've opened up.

Multiple multiple NBA sites for spring training for Covid testing.

So it's a long winded answer to basically tell you I think a lot of it goes through on a contractual surveillance testing through the end of the year, but.

Can't tell you for sure.

Great. Thank you.

And our next question is from <unk> Chen with H C. Wainwright.

Yes.

Hey, Pete.

On behalf of <unk>.

<unk>.

I have two questions. The first one being the commercial plan for the 14th 14th contest.

<unk>.

Essentially looking at how reimbursement will pan out.

Any other plans.

And I know you've answered previously, but maybe also comment.

Any potential business opportunities.

Moving forward obviously.

Things are dependent on Covid testing.

And finally.

I know you spoke about the revenue guidance for testing this year.

My apologies, if I missed it but any any guidance on that.

Volume.

Expectations a bit.

And kind of.

Yes.

Pete.

Sure.

Has it been dramatic.

Dramatic.

I live in.

Thank you so much.

Sure. So I'll take the first two we have continued.

Continued.

Or a sort of plan for <unk> quite honestly, we have it as you may know we have a designated sales force that sells into urology offices only.

Which we continue to add to across the country.

In addition.

We are you may have heard me we have.

We already have a significant plan already in market to talk to the commercial payers based on the FDA approval of <unk>, which we announced.

<unk>.

About four weeks ago.

And then in addition, we've had an interesting uptake on <unk> relative to Scarlet because it makes it much easier.

On the Scarlet I mentioned there.

To be multiple multiple opportunities in multiple segments, including what we refer to as non traditional clients with.

People, who have interesting home products.

That need to have blood drawn so the.

The Scarlet.

I think we're entering hopefully more than hopefully into more of a stall in a hockey stick in terms of its volume for 2022, and then I'll turn it over the guidance question to Adam.

Yes, so the remaining remaining testing volume that we forecasted as print.

Principally coming off the surveillance contracts.

That John mentioned between the school of sports and leisure contracts that we have in place we're not expecting in our guidance anyhow any any meaningful volumes coming from our retail partnerships and the general public testing.

Thank you so much.

I am showing no further questions at this time I would now like to turn the conference back to Dr. Phillip Frost.

Alright, thank everybody for participating and we look forward to communicating with you after the next quarter.

Ladies and gentlemen. This concludes today's conference. Thank you again for your participation and have a wonderful day you may all disconnect.

Q4 2021 OPKO Health Inc Earnings Call

Request a DemoDemo

OPK

OPKO Health

Earnings