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Client Id: 77 THOMSON REUTERS STREETEVENTS PRELIMINARY TRANSCRIPT OPK Q4 2017 OPKO Health Inc Earnings Call EVENT DATE/TIME: MARCH
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Client Id: 77 C O R P O R A T E P A R T I C I P A N T S Adam E. Logal Opko Health, Inc. - CFO, CAO, SVP and Treasurer Anne Marie Fields
Lippert/Heilshorn & Associates, Inc. - SVP Charles W. Bishop Opko Health, Inc. - CEO of OPKO Renal Philip Frost Opko Health, Inc. - Chairman and CEO Steven D. Rubin Opko Health, Inc. - EVP of Administration and Director C O N F E R E N C E C A L
L P A R T I C I P A N T S Eric William Joseph JP Morgan Chase & Co, Research Division - Analyst I-Eh Jen Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst Kevin M. DeGeeter
Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research Louise Alesandra Chen Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD Michael John Petusky Barrington Research Associates, Inc., Research
Division - MD & Senior Investment Analyst P R E S E N T A T I O N Operator Welcome to the OPKO Health Inc. Business Update Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, Thursday, March 1, 2018. I
would now like to turn the conference over to Anne Marie Fields. Please go ahead ma am. Anne Marie Fields - Lippert/Heilshorn & Associates, Inc. - SVP Thank you, operator. Good afternoon. This is Anne Marie Fields with LHA Investor
Relations. Thank you all for joining today s call. I d like to remind you that any statements made during this call 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. Those forward-looking statements include, without limitation, the various risks described in the company s annual report on Form 10-K for the year ended December
31, 2017, as filed this afternoon. Before we begin, let me review the format for today s call. Dr. Phillip Frost, Chairman and Chief Executive Officer, will open the call; followed by Steve Rubin, OPKO s Executive Vice President who will
provide an update on the company s various businesses and clinical programs. After that Adam Logal, OPKO s Chief Financial Officer, will review the company s 2017 fourth quarter and full year financial performance. Finally, Dr. Frost
will provide his closing remarks and then we ll open the call to your questions. Now, let me turn the call over to Dr. Frost. Dr. Frost? Philip Frost - Opko Health, Inc. - Chairman and CEO Thank you. Good afternoon. 2017 was a challenging year
for OPKO. There were a number of headwinds at Bio-Reference, a slower-than-expected ramp-up in sales of RAYALDEE and some unexpected onetime impacts on our financial performance. The other hand, we ve made significant 2 THOMSON REUTERS
Thomson Reuters. Thomson Reuters and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. PRELIMINARY MARCH 01, 2018 / 9:30PM, OPK - Q4 2017 OPKO Health Inc Earnings Call
progress. We re in the process
of selecting the next President of Bio-Reference from a group of highly qualified candidates that we re hopeful --
and we re hopeful that early signs of
improved results there will continue.
RAYALDEE sales have been increasing steadily. The recent results appear to indicate a more rapid upward trend. We also
recently signed a RAYALDEE
licensing agreement with the Torii Pharmaceutical Division of Japan Tabacco. Given the breadth and potential of Opko s assets and
ever upon our future, and as described in today s filing, I ve confirmed that confidence by investing an additional $25 million into the
alongside my colleague, Dr. James (inaudible) and a highly successful Asian businessman, already an OPKO investor, for a total of $55 million.
As you ve heard me say before, I can t think of a better investment for my money. We re all working hard on our strategy to build OPKO into the
leading diversified healthcare company it was meant to be.
And I ll now pass you on to
Steve who will provide more details on our commercial and clinical programs as well as our plans for the future.
Steven D. Rubin - Opko Health, Inc. - EVP of
Administration and Director
Thanks, Phil, and good afternoon, everyone and thank you for joining us on today s call. As Dr. Frost just noted, despite facing
in 2017, we made meaningful progress across a number of key areas critical to OPKO s growth. On today s call, I will discuss our
strategies to address
some of these challenges, as well as our plans to continue to advance our clinical and commercial programs. My discussion will include a
of our diagnostics, pharmaceuticals and clinical development programs.
Let s start with our diagnostic business, Bio-Reference Laboratories, which is the country s third largest reference lab. Throughout 2017, we shared
with you some of the challenges we faced with this business and how they were impacting revenue growth in the short term. We have worked
hard to implement system improvements and cost reductions that overtime are expected to be positively impact Bio-Reference labs financial
performance. Adam will elaborate more on these efforts in his financial remarks.
we made a number of leadership changes, including a new Head of Commercial Operations. And we are in the process of recruiting a
new president with the skills and
industry expertise consistent with our vision for Bio-Reference s role in the rapidly evolving diagnostic market.
We are highly impressed by the several
outstanding candidates we have already met with and hope to announce our selection in the near future.
We remain particularly excited about the potential for our
Bio-Reference lab s GeneDx subsidiary, which continues to demonstrate growth and
innovation in its high complexity exome and related test with a 49%
year-over-year increase in exome-based testing volumes. These include new
exome-based test that open up and further expand other clinical areas for testing, such
as for patients with neurologic conditions and critically ill
patients. Our strategy for GeneDx is to continue to expand relationships with large and leading
healthcare systems, to continue to broaden the
testing menu in order to provide testing in many additional healthcare settings, and to form other strategic
alliances with GeneDx can create and
add value to these partnerships.
example of a new test offering is last week s launch of pharmacogenomics testing. Pharmacogenomics is the study of how genes affect a person s
to drugs. This relatively new field combines pharmacology, which is the science of drugs; and genomics, which is the study of genes and
their functions to develop
and prescribe effective, safe medications and doses that will be tailored to a person s individual genetic makeup. In
January, we were delighted to announce a
research collaboration with Radboud University Medical Center in The Netherlands, which is aimed at
identifying novel genes and pathways to help diagnose and
manage human genetic diseases. This supplements GeneDx ongoing large-scale
collaboration, such as with the internationally based deciphering development
disorder study that was formally announce last year.
As a leader in whole exome and genome sequencing, GeneDx has helped discover and contribute to the phenotypic
understanding of over 58
novel disease genes in the last 3 years alone. The shared combination of our data summaries and analytical tools to conduct meta-analysis
GeneDx and its other data sets will help us better understand the genetic basis of human health and disease and to continue to provide differentiated
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MARCH 01, 2018 / 9:30PM, OPK - Q4 2017 OPKO Health Inc Earnings
Moving on, our 4Kscore blood test
gives a man with elevated PSA levels a personalized prediction of his chance of having or developing an
aggressive form of prostate cancer. During the fourth
quarter, 20,600 4Kscore tests were performed, a 15% increase compared with fourth quarter
of 2016. As many of you may have seen, we launched a series of television
ads for the 4Kscore in the New York region at the end of last year and
in Florida in February. We have also increased our presence in social media outlets
including directed digital advertising. We believe that focused
sales and marketing to professionals and expansion of consumer awareness will help increase the
utilization of the 4Kscore test. Prostate cancer
is the most common cancer in men and is projected to account for over 160,000 new cases and over 29,000 deaths in
The 4Kscore test is a simple blood test that has demonstrated strong clinical utility as a follow-up test after an initial screening with DRE or digital
rectal exam. In several prospective clinical validity studies, it s been shown that the 4Kscore test did not miss any aggressive with the Gleason score s
8 cancers and reduced unnecessary biopsies in 21% of men who were scheduled for biopsy.
New payment schedules implement on January 1, 2018, provided a 26% increase in 4Kscore reimbursement. Medicare reimbursement is now $760
per test, up from approximately $600 per test previously. In addition, we have expanded our clinical validity studies in subjects who are diagnosed
at borderline Gleason 6 prostate cancer. For example, the soon-to-be published Homburg Radical Prostatectomy Study has demonstrated that the
4Kscore test can effectively differentiate biopsy Gleason 6 cancer from those men likely to harbor adverse pathology. In November we filed a
Premarket Approval Application with the FDA for our Claros 1 immunoassay analyzer and total PSA test. The Claros 1 immunoassay is a proprietary
diagnostic device that can provide rapid, quantitative blood test results in 10 minutes, right in the physician s office with only a finger stick drop
of whole blood and with precision and accuracy comparable to the PSA test performed in the central lab using a large instrument. The PSA filing
included supportive data from 2 multicenter field studies involving a total of 864 men. We have been active in correspondence with FDA on the
submission and had a bioresearch monitoring audit at our (inaudible) facility and 2 clinical trial sites with no observation issued on form 43. We
are hopeful for an approval during the third quarter of this year.
This new point of care