Hello and welcome to the OPKO Health Third Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would like now to turn the conference over to Yvonne Briggs. Please go ahead.

Thank you, operator. Good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining today's call to discuss OPKO Health's Financial Results for the Third Quarter of 2023. 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 can 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, 2022, and its subsequently filed SEC reports. This conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 6th, 2023. Except as required by law, OPKO 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. Dr. Elias Zerhouni, Vice Chairman and President of OPKO, will then provide an overview of OPKO's pharmaceutical business as well as BioReference Health. After that, Adam Logal, OPKO's CFO, will review the company's third quarter financial results, and then we'll open up the call to questions. Now I'd like to turn the call over to Dr. Frost.

Good afternoon and thank you for joining us today. The third quarter was quite active at OPKO with several key accomplishments. In September, we announced that ModeX was awarded a contract from the Biomedical Advanced Research and Development Authority, known as BARDA, to develop novel multi-specific antibodies against viral infectious diseases that are deemed to be public health threats. The BARDA contract provides $59 million of initial funding for the development of multi-specific antibodies against known variants of SARS-CoV-2, and another $109 million in funding may be available to develop multi-specific antibodies targeting other viral antigens, pathogens such as influenza. This non-dilutive funding provides ModeX with significant financial support to advance its extremely promising pipeline with the potential to provide benefits for patients worldwide. This BARDA award represents a second major collaboration for ModeX in 2023 and is further validation of its differentiated and valuable technology platform. You may recall that earlier this year, ModeX entered into an exclusive worldwide license and collaboration agreement with Merck to develop its nanoparticle vaccine candidate for Epstein-Barr virus. As for NGENLA, our once-weekly injectable growth hormone therapy, it is now approved in over 48 countries, including the US, as we announced in June. Pfizer, our global commercial partner, launched NGENLA in the US in August, in addition to launches today in over 23 major markets including Japan, Germany, the United Kingdom, and all other priority global markets. We expect to see a material ramp-up in sales for NGENLA as Pfizer increases its market penetration globally. At our OPKO Biologics unit in Israel, where NGENLA was developed, work has continued on other long-acting peptides utilizing new technology. One, GLP-2 to treat short bowel syndrome, is being developed into a once-daily oral form jointly with Entera, whose oral peptide delivery system containing parathyroid hormone recently successfully completed a Phase 2 trial. We're also considering work with Entera on one of our oxyntomodulin peptides for weight loss. Our profitable OPKO Ibero-America unit continues to perform well, as does FineTech, our small specialty API company in Israel. EirGen, our pharmaceutical development and manufacturing company in Waterford, Ireland, is also doing well and is about to embark on a growth program. At BioReference Health, our cost-cutting initiatives continue as we are focused on returning this segment to profitability in the near term. In addition, we are working to increase revenue by enhancing our test menu offering and expanding our customer base. With that overview, I'll turn the call over to Elias to provide further discussion and commentary on our pharmaceutical and diagnostic businesses.

Thank you, Phil, and good afternoon, everyone. As Phil said, the third quarter has been quite busy for both the pharmaceutical and diagnostic segments of OPKO Health. As Phil mentioned, we were delighted to announce the significant contract awarded to ModeX Therapeutics by the Biomedical Advanced Research and Development Authority, BARDA. You should know that BARDA is part of the administration for strategic preparedness and response at the US Department of Health and Human Services, and this funding is a part of Project Next-Gen, which is dedicated to advancing innovative vaccines and therapeutic programs against COVID-19. The contract includes an initial $59 million to enable research, development, and clinical evaluation through a Phase 1 study of potent novel ModeX multi-specific antibodies against known variants of SARS-CoV-2, which remain a persistent threat for the millions of immunocompromised patients who may not develop sufficient immunity after vaccination and will need support for treatment and prevention of COVID-19. Our proprietary MSTAR multi-specific antibodies also reduce the possibility of viral resistance, which has made previous mono-specific antibodies ineffective over time. MSTAR is a flexible plug-and-play platform able to incorporate up to six independent antibody binding sites into a single molecule, and this capability dramatically expands the prevention and therapeutic potential of antibodies against many viral diseases while enabling rapid responses to prevent or treat emerging infections and viral variants. Based upon the achievement of certain milestones, additional funding of up to $109 million may be available from BARDA to develop other multi-specific antibodies targeting other viral pathogens, such as influenza. As part of the research program, gene-based delivery methods for the multi-specific antibodies will be developed using mRNA or DNA vectors to supplement the body's natural protein production processes. The BARDA contract, as Phil mentioned, came back six months after the announcement of our collaboration with Merck to develop MDX-2201, our Epstein-Barr virus multivalent nanoparticle vaccine. We're pleased to have secured these two major strategic relationships to date and believe this achievement further validates ModeX's innovative multi-targeting approaches, increasing interest in our proprietary technology. As a quick overview, our EBV vaccine program with Merck leverages ModeX's nanoparticle-based vaccine platform, enabling simultaneous immunization against four major EBV proteins. This multivalent approach holds potential to protect against infection by this virus, which affects up to 95% of the global adult population during their lifetime. Importantly, over 200,000 cases of related cancers per year and multiple sclerosis are associated with infection by this virus, and we're now working with our partner Merck on IND-enabling studies that are progressing extremely well. In addition, our anti-viral multi-specific antibodies program, focused on the treatment and prevention of HIV, is progressing in partnership with the NIH. Our first-generation candidate has been evaluated in a Phase 1 trial, and clinical data will be reported in the near future. We have also developed next-generation candidates for long-acting HIV prevention and treatment that offer up to a ten-fold improvement in potency and breadth of antiviral activity against the majority of globally circulating HIV strains. This is an important program, as there are currently no vaccines or antibodies that can provide long-acting protection and treatment for patients who require options beyond small molecule-based therapies. In parallel, we have also advanced our immuno-oncology programs focused on hard-to-treat solid tumors as well as leukemia and lymphoma. Our multi-specific antibody candidates are designed to optimize T cell function while preventing tumor antigen escape. These programs are now in the final IND-enabling preclinical stage with the expectation that at least one program will enter the clinic in 2024. I also would like to reiterate Phil's comments about NGENLA. We're delighted with the continuing momentum of Pfizer's global launches of the long-acting growth hormone treatment, including the US in August, and Adam will provide further detail on the financials. We look forward to keeping you updated on the progress here. Now let me turn to RAYALDEE, our treatment for secondary hyperparathyroidism or SHPT in adults with Stage 3 or 4 chronic kidney disease or CKD and low vitamin D levels. Sales increased over the prior year quarter as the number of prescriptions continued to grow. More importantly, recently our team presented several posters highlighting favorable RAYALDEE clinical data at the American Society of Nephrology Kidney Week. One poster reported late-breaking clinical data indicating that early sustained and effective treatment of secondary hyperparathyroidism with RAYALDEE is associated with significantly slower progression of CKD in pre-dialysis patients, delaying the onset of dialysis. Another poster presented data demonstrating that effective control of SHPT was achieved with RAYALDEE in both randomized clinical trials and in a real-world clinical evidence trial, supporting early initiation of SHPT treatment with RAYALDEE to delay disease progression. In addition, a Phase 3 clinical trial with RAYALDEE in Mainland China began in late Q3, managed by Nicoya Therapeutics in Macau, who is OPKO's partner for the development and commercialization of RAYALDEE in China, Hong Kong, Macau, and Taiwan for the treatment of secondary hyperparathyroidism in patients with Stage 3 or Stage 4 CKD. As mentioned by Phil, our pipeline of long-acting products, similar to NGENLA, remains active. You heard about OPKO Biologics entering into a research collaboration agreement with Entera Bio Limited to develop oral peptide tablet formulations for obesity and intestinal malabsorption syndromes. Under the agreement, OPKO will supply its long-acting GLP-2 peptide and certain oxyntomodulin analogs for the development of oral tablet formulations using Entera's proprietary oral delivery technology. Treatment with glucagon-like peptide-2 analogs has been shown to improve the absorption of nutrients in patients with short bowel syndrome and reduce parenteral support requirements. Oxyntomodulin is a naturally occurring peptide hormone found in the intestine with glucagon-like peptide-1 GLP-1 and glucagon dual agonist activity that suppresses appetite and reduces weight loss. We have developed several proprietary modified oxyntomodulin analogs as potential candidates for treating obesity, including an injectable pegylated peptide that demonstrated significant reductions in weight loss and decreased plasma triglyceride levels in a 420 patient Phase 2b study. Our injectable oxyntomodulin analog, which completed Phase 2 studies in the US, is now being advanced by LeaderMed, our partner in Asia, to initiate Phase 3 studies for diabetics and obesity in China and for diabetics in Southeast Asia in the first quarter of 2024. LeaderMed also plans to launch clinical studies of the long-acting Factor VII, which uses OPKO Biologics CTP technology, in the second quarter of 2024. Now, let me shift gears and I would like to turn to our Diagnostics segment. We've made great strides and we have reduced our operating loss by 41% sequentially from Q2 to Q3 2023 through both expense reduction and revenue growth, so a 41% improvement from Q3 relative to Q2. We continue to implement our reach initiative to improve efficiencies, enhance productivity, and reduce costs. We're particularly focused on driving growth in BioReference in our higher-value specialty testing segments, including oncology, women's health, hospitals and health systems, as well as urology through our proprietary offering, the 4Kscore, while continuing to see growth in standard clinical testing. We have finalized new service agreements with several large clients starting in the fourth quarter, particularly in our oncology division, GenPath, which continues to build what I consider a best-in-class cancer testing portfolio by launching innovative testing that is clinically relevant to both physicians and patients as well as pharmaceutical companies and clinical research institutions. Additionally, in the fourth quarter, we'll be launching a cutting-edge homologous recombination deficiency test, which is important for providing insights into genomic instability, and because PARP inhibitor therapies are related to the presence or absence of genomic instability in terms of their efficacy, it will guide the eligibility of patients for PARP inhibitor therapies for various cancers. We’re also set to unveil an expanded hematological malignancy panel that reinforces our position as a leader in this area. We've also launched a new service line offering access to our high-quality, reliable, and comprehensive data assets and analytics. We realized that we had value embedded in the thousands of tests we have performed in genomics, and this offering caters to a wide range of pharmaceutical and clinical research organizations and has already led to new sources of organic revenues. The 4Kscore test continues to perform, supported by its recent inclusion in the 2023 American Urology Association guidelines for early detection of prostate cancer and follow-up after PSA screening and for initial and repeat biopsy risk stratification. The 4Kscore also received additional coverage under Avalon Healthcare Solutions, which manages many state and regional health plans, as well as Aetna's Medicare Advantage Plan and EmblemHealth. BioReference has also expanded its market access and our team has secured new key payer participation agreements in recent months, including in-network status with CareSource, one of the largest managed Medicaid payers in the country, as well as all EmblemHealth patients. Our revenue collection processes continue to make great strides since the launch of our revenue cycle management program in Q4 of last year. In conclusion, we expect that these efforts will further improve financial metrics and return this segment to profitability in the next few quarters. I will now turn the call over to Adam Logal to discuss our third quarter financial results.

Thank you, Elias, and good afternoon, everyone. Starting with our Pharmaceutical segment, revenue increased to $46.9 million for the third quarter of 2023 from $36.9 million for the comparable period of 2022. Revenue from RAYALDEE and our International Pharmaceutical businesses increased by $8.3 million reflecting improvements in overall prescriptions and net price, as well as improvements in our foreign currency exchange rates in Chile and Mexico. Further, revenue increased due to our gross profit share payments from Pfizer, due to increased revenue from the hGH franchise in the European and Japanese regions before considering any US profit share generated from the launch of NGENLA. In the US, as a result of the initial launch in mid-August, Pfizer delayed reporting our gross profit share amounts, and as such, none are included in our third quarter results, but will be caught up in future periods. Costs and expenses were $72.3 million for the third quarter of 2023 compared to $65.2 million for the 2022 period, reflecting principally increased revenues and the associated costs. Research and development expenses for the third quarter of 2023 were $18.9 million compared to $17.6 million for the comparable period of 2022. This increase reflects activities for our ModeX development programs, partially offset by decreased spending on our NGENLA development activities. The resulting operating loss for the quarter ended September 30th, 2023, was $25.4 million or a $2.9 million improvement from the operating loss of $28.3 million for the third quarter of 2022. Amortization expense related to intangible assets was $16.5 million for both the 2023 and 2022 quarters. Moving to our Diagnostics segment, we reported revenue of $131.7 million compared to $142.9 million for the 2022 period. This decline reflects lower COVID-19 testing volumes. Costs and expenses decreased by $31.6 million to $160.8 million for the third quarter of 2023, down from $192.3 million for the 2022 period. Operating loss for our diagnostics segment improved by $20.4 million or 41% to $29.1 million compared with $49.5 million for the prior year. Depreciation and amortization expense included in operating loss were $8.4 million and $8.7 million for the 2023 and 2022 periods, respectively. Sequentially, revenues increased by $4.6 million or 3.6%, while costs and expenses declined by $10.5 million or 6%, reflecting the focused commercial efforts and expense reduction initiatives Elias described earlier. The team at BioReference continues to focus on growing the specialty lines of business while reducing costs and expenses while enhancing operating efficiencies to improve our operating margins and return to profitability. Turning to our consolidated results for the third quarter, we reported an operating loss of $64.4 million compared to $87.8 million for the 2022 quarter. Net loss for the third quarter was $84.5 million or $0.11 per share compared to a net loss of $86.1 million or $0.11 per share for the 2022 quarter. Net loss for both periods was negatively impacted by the mark-to-market losses from our holdings in GeneDx stock, with declines of $8.3 million and $30.6 million respectively, while the 2022 period benefited from an income tax benefit of $40 million. As we look at the quarter ahead, we're providing financial guidance with the following assumptions. For our Pharmaceutical segment, for the first nine months of 2023, Pfizer reported approximately $349 million of global Genotropin sales. For the fourth quarter, we have assumed $8 million to $10 million in gross profit share from our partnership with Pfizer. We assume a stable foreign exchange rate for our ex-US pharmaceutical business, and we expect R&D expenses to reflect higher activities related to ModeX, partially offset by our recently announced BARDA agreement, as well as lower costs related to the wind-down of our clinical operations for the ongoing open-label pediatric extension studies for NGENLA. For our Diagnostics segment, we have assumed consistent core testing volumes with growth in our higher margin oncology, women's health, and urology specialty lines of testing, as well as a slight increase in the average per-patient collection amounts due to our revenue cycle management initiatives, partially offset by the impact of the year-end holiday season. Further, we anticipate our costs and expenses in the Diagnostics segment to align with the sequential quarters level of spend. As a result, we expect the following for the fourth quarter: total revenues between $170 million and $180 million, revenue from services between $126 million and $132 million, revenue from product sales between $33 million and $36 million, and other revenue between $8 million and $12 million inclusive of the estimated Pfizer gross profit share. We expect Q4 2023 costs and expenses to be between $235 million and $245 million including R&D expense between $18 million and $22 million and depreciation and amortization expense of $26 million. That concludes our prepared remarks. Thank you all for your attention and now, operator, let's open the call for questions.

We will now begin the question-and-answer session. The first question comes from Jeffrey Cohen of Ladenburg Thalmann & Company. Please go ahead.

Good afternoon and thank you for taking our questions. A couple to start with, so is the Phase 3 from Nicoya available online as far as any discussions regarding endpoints and timelines of the trial and any flavor on the trial as far as the number of enrollees and how that's going or number of centers and how that's going?

Hi. This is Charlie Bishop. The trial in China has only very recently begun, so we don't have a good estimate as to the timeline and how recruitment is going to go. We haven't released information on the trial design or the total number of subjects that are going to be involved, but that could change during the course of the study.

Okay, that’s helpful. I have a question for Adam regarding the assumptions for Q4. When you mention NGENLA revenue compared to Q3, if those figures remain at 49 and 14, are you indicating that revenue from the US will be greater than $2.7 million? Additionally, could you clarify the timeline for your Pfizer payments from Q3? Is it typically one quarter behind, or is that still uncertain?

It's always going to be one quarter behind regarding the cash payments coming in. We had about $5 million in sales excluding any contributions from the US. The guidance we provided today was between $8 million to $10 million for the fourth quarter, so you can do the math from there.

Okay, perfect. That's very helpful. And then I heard stable on FX, that's your assumptions for the fourth quarter as compared to the third quarter?

That's right.

Okay, I understand. Finally, regarding the income tax benefit, there is a $40 million benefit associated with the write-downs on GeneDx. Can you clarify if you utilized any of that and what other conditions are involved in using it?

Yes, that benefit actually came from last year, but we would be able to use it when we dispose of the shares, not during the interim.

Okay, you could take the loss when shares are sold. Okay, got it. And then, could you make available or is it on your website the two posters that were presented at ASN a few days ago?

Yeah, they should be up there, Jeff, but I'll make sure you get them.

The next question comes from Maury Raycroft from Jefferies. Please go ahead.

Hi. Thanks for taking my questions. I was going to ask one on NGENLA too. Just wondering if you anticipate being able to break out NGENLA US revenue and profit share details in the fourth quarter update or more like sometime in the first half of '24, and is there any perspective you can share on how the US launch is going so far?

We will not provide individual breakdowns for the regions. Instead, we will share the total amounts. This isn't limited to just one country; the regions are divided evenly, so individual country figures won't be detailed for the profit share amounts we discuss. As for the launch, it's still early. The Pfizer team aims to get on formularies as quickly as possible, which is a significant task in any US launch. However, we are optimistic about the product's growth in international markets and anticipate the US will follow suit soon.

Okay, that's helpful. And are there any more specifics you can share on your collaboration with Entera Bio for oral development of your GLP-2 peptide and oxyntomodulin analogs, specifically, is there any more you can say on the economics and timelines for the next steps?

The relationship is in a very early stage, and so far we're cooperating with the idea that we will be partners in it, but we haven't defined in financial terms exactly what that means.

Got it. Understood. I know there are a couple of studies ongoing with LeaderMed too and wanted to just check on those, if there's any perspective or status update on those studies you can provide?

Those are supposed to start in the next quarter.

Okay.

Both for the Factor VII in the second quarter and for the other in the first quarter of 2024.

Got it. Okay. And maybe last question related to BioReference. You provided some good perspective on the new products and market segments and talked about the expanded customer base and you aim to get to your profitability in the next few quarters. What specific goals either on the revenue or expense side are you aiming to achieve the next few quarters that we should be focused on?

On the revenue side, we want to increase the volume passing through our infrastructure because breaking even requires having sufficient volume to achieve an optimal profile. We have a plan to raise our daily accessions by at least 2,000, aiming for 4,000 to 5,000, which would help us reach break-even. This is our quantitative objective. Qualitatively, we will be announcing new customers we've signed, especially in oncology, in the coming days or weeks, which will also impact our revenue per accession. We improved on our third-quarter numbers compared to the second quarter, and we plan to track revenue per accession moving forward. Including high-value tests, like oncology and specialty tests, should enhance that number and align with our cost targets. We also intend to reduce our cost per test further. These are our three key focus areas, with a fourth being to capture more revenue through improved revenue cycle management. Previously, this area faced issues like denials and pre-authorizations, but we have made significant progress in minimizing denials and unbillables, and this improvement continues from quarter to quarter. We are focusing on increasing quantitative volume, enhancing product mix qualitatively, and improving revenue capture.

Okay.

Yeah, I think along those lines, you know, Elias did a good job of capturing those, the sequential improvement in operating results are really the main measure for us. I think all of the revenue capture and revenue growth is going to result in better operating margins and we plan to continue to see better operating results sequentially. We had a good step up from Q2 to Q3 and expect that to continue.

Got it. Okay. Thanks for taking my questions.

Our next question comes from Edward Tenthoff from Piper Sandler. Please go ahead.

Great. Thank you and congrats on the progress on really all fronts. I'm intrigued by the new collaboration for the GLIP. Just to kind of understand a little bit better, with respect to Pfizer, say that you will recognize is this all the revenues or just the US revenues that are one quarter delayed? Thank you.

Yeah, so, yeah, so Pfizer was just delayed in reporting the gross profit share for the US region, so we'll have a bit of a catch-up quarter. You know, we stayed conservative in our guide just because we don't have the data yet to quantify how the US numbers will get reflected, but we do believe that we'll see that it will be a one-quarter kind of catch-up and then routine after that.

I got you. So is that $8 million to $10 million in guidance sort of reflective of 3Q and 4Q or is that kind of what you would anticipate just for the fourth quarter? Thanks so much for answering the questions.

Yeah, it's just what we would expect for a normal quarter, it doesn't have a catch-up on unexpected because it's unknown to us at this point.

The next question comes from Yale Jen from Laidlaw and Company. Please go ahead.

Good afternoon and thanks for taking the questions. Congrats on the ModeX collaboration approved by the BARDA. My question is that in terms of the COVID, as well as the future influenza antibodies, are those mostly just for immune-compromised patients, or will they have broader usage?

That's a good question. No, the COVID antibody we're developing is really a multi-specific that will address both active patients who get COVID when there is a surge, but there is a background need, which is the need of immunocompromised patients, estimated between 20 million to 30 million patients in the US, who will need this continuously. So we think the market will have both the baseline, which is immunocompromised patients, and then surges that may occur during that interval of time.

Maybe just a little bit too early currently. In terms of this product, if successful, would that be something OPKO would consider launching, or is this very much a stockpiling type of product?

Yeah, it's too early to say. It really depends on what we're doing now; that we've been funded $59 million to reach the end of Phase 1 and you have to wait for the product profile and then decide what you would want to do, but we haven't decided that; it's too early right now.

Could you discuss oxyntomodulin in relation to its use for obesity and Type 2 diabetes? Given that obesity is currently a very prominent area, can you provide more details about oxyntomodulin's clinical effects in the obesity sector?

Basically, the Phase 2 trial shows a significant weight loss at the doses that we were giving. We believe that the new analogs of oxyntomodulin that we have developed will have a better profile, and obviously, we are developing one for the oral formulation that Entera has the technology for. We want to do the feasibility studies of that, and then decide how to proceed. The injectable form can also be done with the new analogs we are formulating, and that decision as to how far you go on that really again is going to depend on some results.

Okay, great. Thanks a lot and congrats on all those progresses.

Thank you. Thank you, Jen.

Our next question comes from Dipesh Patel of H.C. Wainwright and Company. Please go ahead.

Thank you. This is Dipesh on behalf of Yi Chen. Just a trend question for me. Can you provide more clarity around the prescription trend of NGENLA as well as BioReference's testing volume growth/decrease?

As far as the trend goes for prescriptions for NGENLA, so globally, it continues to do very well. I think it's slow going and similar for most newly launched products in the US market. I think the trend lines are all positive and we think there's great opportunity. Sorry, can you repeat the second question for me?

Yeah. The second one was if you could just provide some more color around that BioReference's testing volume growth or decrease?

Yeah, I was going to say, the total patient volume year-over-year was consistent there. It was plus or minus about 0.5%. Sequentially, it continues to be a stable business as well. We're seeing good growth in the specialty lines of testing that the team has been focused on.

Great. Thank you very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Frost for any closing remarks.

I would like to thank everybody for attending our conference call, and if you have any further questions feel free to call any one of us. We will try to respond, and then we'll look forward to meeting together again at the end of next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.