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NOVEMBER 08, 2017 / 9:30PM, OPK - Q3 2017 OPKO Health Inc Earnings Call

CORPORATE PARTICIPANTS

Health, Inc. - CFO, CAO, SVP and Treasurer

Anne Marie Fields Lippert/Heilshorn & Associates, Inc. - SVP

David Okrongly Opko Health, Inc. - President of OPKO Diagnostics

Philip Frost Opko Health, Inc. - Chairman & CEO

Steven D. Rubin Opko Health, Inc. - EVP of Administration and Director

Thomas Nusbickel Opko Health, Inc. - Chief Commercial Officer

CONFERENCE CALL PARTICIPANTS

Trigani Jefferies LLC, Research Division - Equity Associate

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

Samuel Brandon Couillard

Jefferies LLC, Research Division - Equity Analyst

Welcome to the OPKO Health Third Quarter

Business Update Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, November 8, 2017. I would now like to turn the call over to Anne Marie Fields with LHA Investor Relations. Please go ahead, ma am.

Anne Marie Fields - Lippert/Heilshorn & Associates, Inc. - SVP

Thank you, Victoria. 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 risk 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, 2016, and its subsequent

quarterly filings with the SEC.

Before we begin, let me review the format for today s call. Dr. Philip Frost, Chairman and Chief Executive

Officer of OPKO, will open the call; followed by Steve Rubin, OPKO s Executive Vice President, who ll 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 third quarter financial performance. Dr. Frost will then provide his closing remarks, and we ll then take your questions. Now let me turn the call over to Dr. Frost.

Philip Frost - Opko Health, Inc. - Chairman & CEO

Thank you all for joining us today. As you just heard, Steve Rubin will open this discussion followed by Adam Logal, and then I ll make a few comments.

NOVEMBER 08, 2017 / 9:30PM, OPK - Q3 2017 OPKO Health Inc Earnings Call

Steven D. Rubin - Opko Health, Inc. - EVP of Administration and Director

Thanks, Phil. Good afternoon, everyone, and thank you for joining us on today s call. Throughout the third quarter, we continued to make meaningful

progress on a number of our key business objectives. Those include: building momentum in the commercial launch of RAYALDEE, increasing utilization of the 4Kscore test and further expanding its promotion and advancing our clinical development

programs towards commercialization. On this call, I ll discuss our progress across diagnostics, pharmaceuticals and our clinical development program.

Let me begin with a review of our diagnostics business, Bio-Reference Laboratories, which is the country s third

largest reference lab. While impacting Bio-Reference s revenue growth in recent quarters, we continued to make investments in systems efficiencies, cost reductions and new leadership that we expect will

translate into revenue and profit growth as we move into 2018. As Adam will elaborate, we are seeing trends which lead us to expect our efforts at Bio-Reference and GeneDx will result in improved revenues and

operating margins for the remainder of this year and into 2018.

Throughout the quarter and recent weeks, CRL s GeneDx subsidiary continue to

demonstrate its leadership through active engagement with the clinical and scientific community in all aspects of genetic and genomic testing. Among other areas, GeneDx has seen continued ongoing growth in its high complexity exome and related

tests, with a 29% year-over-year increase in exome testing volumes. We were especially pleased to exhibit GeneDx leadership in genetic and genomic testing with more than 40 poster and platform presentations at 2 prestigious industry

conferences last month. We expect advances in GeneDx product lines and gene sequencing panels to add meaningfully to our diagnostics platform. While we face some pricing headwinds for GeneDx year-to-date, we see evidence that those have leveled off. And moving forward, we expect to see improved performance for this unit as we increase patient volumes and add tests in multiple new clinical areas.

Let s turn now to 4Kscore test, our blood test that gives a man with elevated PSA levels a personalized prediction of his chance of having or

developing an aggressive form of prostate cancer. With more of the BRL sales reps promoting 4Kscore, we are investing in enhancing our marketing efforts in order to increase awareness and utilization of the 4Kscore test. These initiatives include

the development of a small urology sales team to complement with BRL sales efforts. The new team is recently trained and deployed.

looking forward to launching a direct-to-consumer campaign in the form of regional television ads, which will begin later this month. We are enthusiastic about this ad

campaign and look forward to its impact. In parallel, we continue to generate data that we believe will support and expand the clinical utility of the 4Kscore test. These new data will support our efforts to secure and expand ongoing favorable

reimbursement as well as drive utilization.

Let s turn now to the Claros 1 immunoassay analyzer, our novel 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. We have now filed for premarket approval, or PMA, of the Claros 1 analyzer and total PSA test with the FDA. Submission

requirements were discussed and agreed with the FDA which, in addition to analytical method validation, also included 2 multicenter field studies involving a total of 864 men. The first study determined the age group distribution of Claros 1 total

PSA test result in a normal healthy population of men aged 50 and older. The second study of men scheduled to undergo a prostate biopsy demonstrated that the Claros 1 total PSA test, at a cutoff point of 4 nanograms per milliliter, increased

sensitivity of a digital rectal exam, or DRE, alone from 32% to 91%, resulting in detection of more cancers than DRE alone. Once approved, we will leverage BRL s marketing, sales and distribution resources to launch the Claros 1 total PSA test

in the United States. With more than 25 million PSA tests performed in the U.S. annually, the Claros 1 total PSA test represents a $625 million market opportunity.

The Claros 1 quick turnaround is a key competitive advantage when we consider that similar lab tests for PSA can take up to a week to obtain results.

We continue to advance development of our other Claros 1 test with an aim to expand the platform to a number of important indications. In particular, we are

working on tests which have synergies with our other products and programs, such as testosterone and vitamin D. Next year, we expect to initiate clinical validation studies and file a 510(k) application for a Claros 1 testosterone test. Beyond that,

we plan on expanding the Claros 1 menu with the development of test for infectious diseases, cardiology, women s health and companion diagnostics.

NOVEMBER 08, 2017 / 9:30PM, OPK - Q3 2017 OPKO Health Inc Earnings Call

Turning now to our pharmaceutical business. Let me start by discussing RAYALDEE, the first and only therapy

approved by the FDA that both raises 25-hydroxy vitamin D and lowers parathyroid hormone levels with a safety profile similar to placebo.

continuing to build sales momentum and have seen week-over-week increases in total prescriptions since the start of the year. Total prescriptions of RAYALDEE in Q3 as reported by IMS increased 66% compared with Q2. And total prescriptions of

RAYALDEE in Q2 increased by 140% compared with Q1.

We recently completed a quantitative awareness tracking and usage market research study which showed

that the percentage of nephrologists who prescribed RAYALDEE in the last 12 months increased to 16% as compared to less than 3% at the end of 2016.

updated KDIGO clinical practice guidelines create a significant opportunity for RAYALDEE as active vitamin D therapies, including Calcitriol, are no longer suggested for routine use in stage 3 or 4 CKD. Plus, nutritional vitamin D supplements, which

are used by a majority of patients with stage 3 or 4 CKD, remain characterized as an unproven treatment for SHPT. We continue to aggressively educate nephrologists on the potential of RAYALDEE to treat this patient population more effectively.

Even with growing sales momentum, increasing market access and new KDIGO guidelines, our sales organization was not large enough to reach all the potential

high-value targets for RAYALDEE at the desired frequency. As a result, in the third quarter, we expanded our field-based sales force from 35 to 71 and expect to see the impact of a larger commercial team in 2018. This past week, our commercial team

was out in force at the American Society of Nephrology annual meeting, Kidney Week 2017, where we had a significant commercial and clinical presence. In addition to 2 large exhibit booths, OPKO sponsored a clinical symposium on the benefits of

RAYALDEE in treating SHPT in stage 3 and 4 CKD. We had favorable outcomes from 2 clinical studies of RAYALDEE presented in 2 posters and had a sizable commercial team detailing nephrologists and key opinion leaders on the benefits of RAYALDEE.

Last month, we were very pleased to announce an exclusive agreement with Japan Tobacco for the development and commercialization of RAYALDEE for the treatment

of SHPT in non-dialysis and dialysis patients with CKD in Japan. We received an upfront payment of $6 million, with another $6 million payment to be made upon initiation of our planned Phase II study

of RAYALDEE in U.S. dialysis patients. We will also be eligible to receive the $31 million in development and regulatory milestones and $75 million in sales-based milestones. We will receive tier double-digit royalties on net product

sales. Japan Tobacco will be responsible for all regulatory approvals and commercial activities pertaining to RAYALDEE in Japan. Japan Tabacco, together with its subsidiary, Torii Pharmaceuticals, has a strong and growing franchise in renal diseases

and hemodialysis, which makes them an ideal partner to bring RAYALDEE to physicians and patients in Japan, where they estimate there are 13.3 million people who have CKD and more than 300,000 are undergoing dialysis, with both patient

populations increasing due to the aging population.

Turning now to VARUBI. At the end of October, we were pleased to see our licensee, TESARO, receive

FDA approval for VARUBI IV for the treatment of delayed nausea and vomiting associated with chemotherapy. TESARO has garnered 50% of the market for the oral products, but intravenous treatments for chemotherapy-induced nausea and vomiting account

for about 90% of the market. The current market for CIMB therapies is $1.2 billion annually and growing to $1.8 billion annually by 2020 according to Transparency Market Research. We look forward to TESARO s continued success in

commercializing the VARUBI product line and expect to see the benefits of the VARUBI IV launch in 2018 as OPKO s entitled to double-digit royalties in both the oral and IV formulations of the drug.

I d now like to review our clinical development programs, which we believe represents significant opportunities for OPKO. These programs are an important

engine for creating both near- and long-term value for our shareholders. Our clinical and regulatory teams continue to work diligently to advance these important programs across a number of indications where there are significant medical needs,

limited treatment options and large markets.

Let me start with the programs in our renal business, where we believe an expanding product line can

leverage our investment in a growing commercial infrastructure we built for RAYALDEE.

First, we are finalizing plans for the initiation of a single dose

Phase IIa clinical study with our NK-1 antagonist for uremic pruritus, which is a serious problem for more than half of the patients on dialysis. We are making final plans for Phase II clinical trial of a higher strain of RAYALDEE for dialysis

patients, which is partnered with Vifor Fresenius for commercialization in Europe and elsewhere. We have received favorable feedback on the trial design from the FDA.

NOVEMBER 08, 2017 / 9:30PM, OPK - Q3 2017 OPKO Health Inc Earnings Call

Turning now to our clinical pipeline candidates in metabolic and endocrinology diseases. We have a number of

important late-stage programs underway or nearing initiation that should reach important inflection points in the coming months and into 2018. I ll start with our long-acting human growth hormone product, hGH-CTP, which is partnered with Pfizer