Opko Health, Inc. Q1 FY2024 Earnings Call

Hello, and welcome to the OPKO Health First Quarter 2024 Financial Results Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to your host today, Yvonne Briggs. Please go ahead.

Thank you, operator, and 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 first quarter of 2024. 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. 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, 2023, and in subsequently filed SEC reports. This conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, May 7, 2024. 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, will then provide an overview of BioReference Health followed by OPKO's Pharmaceutical business. And after that, Adam Logal, OPKO's CFO, will review the company's first 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 us today. In March, we announced an agreement to sell certain assets of BioReference Health to LabCorp for $237.5 million. The assets include BioReference's clinical diagnostics and women's health testing services outside of New York and New Jersey. The transaction was specifically structured to increase the likelihood of obtaining expedited clearance from Antitrust Regulators. It also streamlines the remaining operations to advance the path to profitability for our Diagnostics segment. The transaction is expected to close in the second half of this year, pending FTC clearance. In general, our long-acting growth hormone therapy continues to gain traction as our global commercial partner, Pfizer, expands its launch of the product in over 40 global markets. This once-weekly injection product to treat growth hormone deficiency is the first new chemical entity developed at OPKO Biologics in Israel, where we now have other preclinical candidates under development. One is a long-acting form of oxyntomodulin analog, which I mentioned in our last quarterly call. The PEGylated form of this active peptide has been shown to be effective and safe in treating diabetes and obesity in a Phase II study in over 450 patients. The new long-acting form is expected to have the same form oncology profile as the PEGylated form but will permit administering larger doses. We have in development a long-acting Hdh antagonist for the treatment of acromegaly caused by excessive secretion of growth hormone and IGF-1. We are progressing in our work with Entera Bio to develop oral forms of oxyntomodulin and a GLP-2 analog for short bowel syndrome and other disorders involving nutrient malabsorption. We look forward to keeping you apprised of progress with these promising programs. ModeX continues to advance its development work, and two programs are on track to enter the clinic this year: our Epstein-Barr vaccine licensed to Merck and our multi-specific oncology antibody, which has received FDA clearance for a Phase I trial. Our collaboration with BARDA is moving forward and provides nondilutive financing to develop multi-specific antibodies against COVID. As work progresses on this first indication, we will begin to explore alternative targets to tackle other biodefense threats such as influenza. With that brief overview, I'll turn it over to Elias. Elias?

Thank you, Phil, and good afternoon, everyone. Let me start by apologizing if you hear background noise; I'm in a noisy environment at the airport. But as Phil said, we were very pleased to announce our agreement with LabCorp to sell certain assets of BioReference Health for a cash purchase price of $237.5 million. These assets generate approximately $100 million of annual revenue and include patient service centers, certain customer contracts, and operating assets associated with testing services focused on clinical diagnostics and women's health across the U.S., but outside of New York and New Jersey. We will retain our national oncology and neurology franchises and our diagnostic services in New York and New Jersey. This complements our efforts to improve efficiencies and enhance operational productivity. This transaction will streamline our laboratory services business and support our work to reestablish profitability in the near future. As Phil mentioned, we expect the sale to close in the second half of 2024, subject to customary closing conditions and applicable regulatory approvals. As an ongoing initiative, we continue to improve BioReference's performance and, in turn, build value. Our focus remains on initiatives to reduce costs, improve efficiency, and enhance productivity. Additionally, we seek to bolster growth through the expansion of service coverage in our higher-value specialty segments of oncology and neurology, with a particular focus on our proprietary 4Kscore test. As you know, the 4Kscore test was first introduced in 2014 as a laboratory-developed test. The FDA published new rules to reform the regulation of lab-developed tests, which will have a minimal impact on BioReference Health, as all our tests are approved by New York State regulators who are exempt from the announced FDA reform. In December 2021, I would like to remind you, the 4Kscore was approved by the FDA, supported by its analytical and clinical data. The FDA concluded that the 4Kscore test had the appropriate sensitivity of 96.9% and negative predictive value of 95.9% to contribute to an overall beneficial clinical decision as to whether a prostate biopsy should be performed and accordingly minimize unnecessary biopsies without excess risk of missing critical significant prostate cancers. In more than 100 independent publications by urologists since then, the 4Kscore has ranked as a best-performing biomarker test for the assessment of risk probability for aggressive prostate cancer. Our urology team delivered strong growth in 4Kscore test volumes in the first quarter, and we expect these volumes to build as the test is included in various clinical guidelines for early detection of prostate cancer, for follow-up after PSA screening, for initial and repeat biopsy risk stratification. In regard to RAYALDEE, the program continues to enjoy stable demand, which we hope will grow with new data that suggests it may delay the onset of dialysis according to our most recent analysis. In Oncology, we are pleased with GenPath's performance due to its innovative testing platform with an expanded hematological malignancy panel and very competitive turnaround plans. We continue to see strong growth in our Oncology business with over 12% growth in volume, Q1 2024 versus Q1 2023. Much of this growth was through collaborations with large cancer centers and mid-level health systems. As healthcare systems are challenged with cost and staffing in the oncology space, they are seeking a reference laboratory to work with for their testing, opening up possibilities for BioReference Health. GenPath has been able to meet their needs with our enhanced and comprehensive menu across all stages of care. This includes the internalization of our hereditary cancer business in late Q4 2023, which now offers clients an internal solution with fast turnaround times for timely decision making. We continue to expand our testing portfolio and expect new tests in Q2 to complement our current onco site advance and onco risk portfolio, enabling GenPath Oncology to evaluate guideline-recommended genetic components of cancer and keeping us at the forefront of precision oncology. Similar to our New York and New Jersey Women's Health and Clinical businesses, our National Oncology Testing segment will remain with BioReference Health under our GenPath Oncology brand upon closing of the transaction with LabCorp. We believe that BioReference Health is well-positioned for further expense reductions and revenue expansion, focusing on the retained businesses in the New York and New Jersey markets after the divestiture. Complementing these efforts to boost performance, we will continue to improve our diagnostic division to further enhance profitability for OPKO Health and best position ourselves as an innovative biopharmaceutical company. Moving to our Pharmaceutical segment. As you've heard, NGENLA has been launched in all major global markets by Pfizer. We believe this drug is well-positioned for significant growth as long-acting growth hormone products become the global standard in treating growth hormone deficiency for children. The launch is progressing as expected with an increasing and significant percentage of patients shifting from daily to the long-acting once-a-week NGENLA product. In addition, we expect our partnership with Pfizer to expand with additional indications including growth hormone deficiency for adults and other pediatric applications. Combined, these approvals for these two indications will entitle OPKO to an additional $100 million in milestone payments. Let me go to ModeX. As for ModeX, we're proud of the progress to date. In March, we announced favorable results from the Phase I clinical study with our trispecific antibody against HIV. These clinical data are the first reported for a trispecific antibody in humans and strongly support the further development of multi-specific multivalent antibodies against HIV. The antibody was found to be safe and well-tolerated at all dose levels, both intravenous and subcutaneous routes, with minimal anti-drug antibodies observed with dosing ranging from 0.3 milligrams per kilogram to 30 milligrams per kilogram with up to four administrations and pharmacokinetics, which remained consistent and similar to standard monoclonal antibodies. We therefore believe, and our partners at NIH believe, that multispecific antibodies will offer a differentiated approach to long-lasting, preventive and therapeutic options against most HIV-1 variants, with the possibility of activating the immune system against the latent virus population to effect a functional cure. We are partnered with NIH for this program. Our collaboration with Merck to develop MDX-2201, which is our Epstein-Barr virus multivalent nanoparticle vaccine, is advancing as planned. We received a $50 million upfront payment upon licensing this vaccine with a potential $872.5 million in development and commercial milestones plus royalties on global sales ranging from single-digit to double-digit percentages. In terms of timing, we expect this program to enter the clinic in the later part of this year. Our collaboration with BARDA is also proceeding on schedule and represents another source of nondilutive funding for the company. We secured an initial $59 million grant to fund R&D and clinical evaluation for a Phase I study of our multispecific antibodies against non-variants of SARS-CoV-2 for the treatment and prevention of COVID-19. Additional funding of up to $109 million may be available from BARDA to develop multispecific antibodies and delivery approaches to target other biodefense threats, such as influenza. The ultimate goal of this research program is to develop a platform with gene-based delivery methods using mRNA or DNA vectors to supplement the body's natural protein production processes, which can then be used efficiently and effectively against future pandemics. Rounding out the ModeX pipeline is our immuno-oncology program, which is focused on hard-to-treat solid tumors as well as certain liquid tumors such as leukemias and lymphomas. We believe our multi-specific antibody candidates can simultaneously target several tumor antigens and enable better control of immune system activation. We expect our Tetraspecific LASER program for solid tumors to enter the clinic this quarter as our first IND application, as indicated by Phil, focused on solid tumors was deemed acceptable to proceed by the FDA. Other immuno-oncology products are advancing through IND enabling studies and are on target to enter clinical studies next year. So as you can see, it's an exciting time for OPKO as we execute our strategy to gain profitability for BioReference Health by rightsizing the diagnostic division to its most profitable areas of activities while advancing our Biopharmaceutical segment with several programs set to enter the clinic this year.

Thank you, Elias. As Phil and Elias have discussed, we had a busy start to the year, realizing significant value from some of our underlying assets and strengthening our balance sheet. The convertible debt offering in January reduced our cash interest expense. This refinancing provided us the flexibility to align our cash needs for our research and development investments to debt maturities over the next five years. In addition, we used a portion of the proceeds to buy back 55 million shares of our common stock, reducing our outstanding shares by over 7%. We also announced our agreement with LabCorp for the sale of select assets, which was a competitive process. When completed, that will allow us to realign our business operations to focus on core markets and test offerings and to support our path to profitability at BioReference. While we are still within the review window with the Federal Trade Commission, we are diligently working on the profit plan for BioReference to ensure we get to breakeven and then profitability as quickly as possible. The LabCorp deal was the first large step in the multifaceted plan. Moving to our financial results for our Diagnostics segment. We reported revenue for Q1 2024 of $126.9 million, compared with $132.4 million for the 2023 period. Costs and expenses decreased to $161.3 million for the first quarter of 2024 from $172.4 million for the 2023 period. The operating loss for our Diagnostics segment of $34.4 million included approximately $2.2 million of nonrecurring costs related to employee severance and programs associated with our efforts to return to profitability. Depreciation and amortization expense were $7.9 million and $8.7 million for the 2024 and 2023 periods, respectively. Revenues included approximately $27.8 million related to the book of business that is subject to our sale agreement with LabCorp. The costs and expenses related to this business were approximately $34.8 million. As part of the transaction, LabCorp has agreed to offer employment to more than 700 of our impacted employees who support this business. Moving to our Pharmaceuticals segment, revenue decreased to $46.8 million for the first quarter of 2024 from $105.2 million for the comparable period of '23. Revenue from products, including our intellectual property, our International Pharmaceutical businesses decreased by $2.3 million, reflecting lower sales within our Israeli API business, partially offset by higher sales of RAYALDEE. Revenue from the transfer of IP was $8.7 million for the first quarter of 2024, compared to $64.8 million for the 2023 quarter, which included an upfront payment of $50 million from Merck as a result of our EBV vaccine agreement as well as $9.5 million of milestone payments from our partners for RAYALDEE. During the first quarter of 2024, Pfizer was able to substantially reduce the cost of manufacturing of NGENLA by obtaining approval for a significant scale-up of their manufacturing process in order to support the global launch of NGENLA. In turn, Pfizer has revalued its inventory on hand at December 31, amortizing that difference in manufacturing costs during the first four months of 2024, which is their standard accounting policy. As a result, our anticipated gross profit share for the first quarter was less than we anticipated, and we reported gross profit share from Pfizer of $5.8 million, which compares to $3.1 million for the 2023 period. Pfizer has obtained significant payer access in the U.S. in 2024 for NGENLA, and we look forward to the continued execution of their global commercialization plan. In addition, other revenue includes approximately $2.2 million from our underlying agreement with BARDA, which offsets R&D and underlying support expenses for that program. Costs and expenses for our Pharmaceuticals segment were $74.5 million for the first quarter of 2024, compared to $86.3 million for the 2023 period. Research and development expenses for the first quarter of 2024 were $21.2 million, compared to $31.9 million for the 2023 period. The 2023 quarter included nonrecurring $12.5 million of expense related to our payment to Sanofi for their portion of our upfront payment from Merck. Partially offsetting this decrease were increased activities for our ModeX development programs. The resulting operating loss for the quarter ended March 31, 2024, was $27.7 million, compared to operating income of $19 million for the first quarter of 2023, which previously benefited from this $57.5 million of milestone payments received in the quarter. Amortization expense related to intangible assets remained unchanged at $16.4 million for both periods. Turning to our consolidated results, the first quarter of 2024 reported an operating loss of $71.5 million, compared with an operating loss of $30.6 million for the 2023 quarter. The net loss for the 2024 period included approximately $26.2 million related to the fair value change on embedded derivatives related to our convertible notes issued in January. For both periods, we recorded noncash unrealized gains on our investment in GeneDx of $22.7 million and $16.8 million, respectively, for the 2024 and 2023 periods. As a result, the net loss for the first quarter of 2024 was $81.8 million or $0.12 per share, compared with a net loss of $18.3 million or $0.02 per share for the 2023 quarter. Looking ahead, we're providing financial guidance with the following assumptions. For our Pharmaceuticals segment, there are a number of factors that will continue to impact our gross profit share payments from Pfizer, including revenue from product sales from GENOTROPIN and NGENLA. Global sales of GENOTROPIN for the first quarter of 2024, as reported by Pfizer, were $130 million, and Pfizer has not separately reported sales of NGENLA. However, we have continued to observe consistent prescription growth globally for NGENLA as reported by IQVIA and Symphony. After adjusting for the expected accounting impact for the improved gross margins associated with the increased manufacturing scale of NGENLA, we have revised our estimated gross profit share to be between $30 million and $40 million versus our previous estimate of $40 million to $50 million. We also assume a stable foreign exchange rate for our U.S. ex U.S. pharmaceutical businesses, which will allow for continued profitable growth. R&D expenses for the second quarter of 2024 will reflect higher activities related to our ModeX programs, including CMC, and efforts related to the initiation of our first immuno-oncology clinical trial. A portion of these increased activities will continue to be funded through our BARDA agreement. For our Diagnostics segment, the timing of our LabCorp transaction closing remains uncertain and is under FTC review, so we have not revised our guidance to exclude this business from our second quarter estimates. As previously mentioned, we are striving to align the business for a cash flow breakeven run rate by mid-2024 and profitability by year-end, both contingent on the LabCorp transaction's closing timing. This effort involves consolidating our geographic presence and optimizing our testing offerings, as we anticipate our client mix will enhance our cost structure and support our future strategy. During this transition period, we anticipate stable core testing volumes with a slight rise in the average price per patient collection, driven by our revenue cycle management initiatives. Excluding any nonrecurring costs from our restructuring and other one-time expenses, we project a decline in costs and expenses for Q2 by about $5 million, bringing the total to an estimate of approximately $154 million to $157 million, not accounting for the roughly $35 million related to the assets involved in the LabCorp transaction. As a result, we expect the following for the second quarter of 2024: Total revenue between $182 million and $187 million, revenue from services between $127 million and $130 million, including $26 million to $27 million from assets related to the LabCorp transaction, revenue from product sales of $40 million to $45 million and other revenue between $10 million and $14 million, inclusive of the Pfizer gross profit share estimates, which are between $7 million and $10 million. We expect second-quarter costs and expenses to be between $234 million and $243 million, again, excluding any nonrecurring expenses and expenses related to the restructuring of BioReference. It will also include approximately $20 million to $26 million for R&D expense. The range is based on the timing of certain CMC activities for our ModeX programs, as well as depreciation and amortization expense of $24 million. That concludes our prepared remarks. Thank you for your attention. Now operator, let's open the call for questions.

And the first question comes from Maury Raycroft with Jefferies.

I was going to start with a question related to BioReference. With the remaining BioReference Services business, it sounds like you plan to continue to streamline, optimize, and grow that business with the aim to get to profitability. Once the LabCorp deal closes, will you be able to provide more clarity into timing for getting to breakeven and profitability? And what's the longer-term strategy for maximizing value for both the services and pharma parts of the company?

I'll take the first question, Maury. Thanks for the question. The timing for us getting to breakeven is going to be tied to the LabCorp transaction. We're not waiting for that as it relates to the rest of the business, and we're actively working down our fixed cost base. We're exiting certain facilities currently, which will help bring our fixed overhead down. We're also continuing to realign. Our stated goal was to have plans that would execute to have us run rate cash flow breakeven by midyear. I think we're still looking towards that. Obviously, if the FTC takes longer than expected, then that could take longer. But otherwise, that's the path we're on.

Got it. Understood. And then for NGENLA, can you provide any more perspective or clarity into the revised guidance there and the change in gross profit?

Sure. Overall, we've seen NGENLA demand continue to be strong on a global basis where Pfizer has been in the market the longest. Obviously, it's continued to do the best. Really, the change to guidance has to do with an accounting consequence of their revaluing some inventory they had on books and that flows through our gross profit share, which has no reflection on the strength of the program, just on the timing of when we're going to realize the benefits of that improved gross margin that's coming from their scale up.

Got it. Understood. And maybe one question just on some of the ModeX clinical assets. If there are specific catalysts this year that we should be focused on, in particular, for 2001 moving into the clinic. I don't know if there's anything more you can say about that study and when we could see initial data from that?

I'll let Gary, who's on the line and who is the CEO of ModeX, to answer that specific question. Gary?

Yes. As Elias and Phil mentioned, we have the approval to proceed. Currently, we are in the process of setting up sites and looking to enroll patients in the trial. As Elias noted in his comments, we are optimistic that this will occur by the end of the quarter, and we are striving to expedite the process if we can. Regarding clinical results, as you may know, when introducing a new immune therapy in the clinic, we start with a low dose and gradually increase it primarily for safety reasons, which is a strategy we have established in collaboration with the FDA. Therefore, I wouldn't anticipate seeing any data on efficacy until possibly next year, when you might expect to see some form of results.

And the next question comes from Jeff Cohen with Ladenburg Thalmann & Company.

A few from our end. I was wondering if you could talk about NGENLA and who will be paying for the additional studies as far as the couple of expanded labels that are mentioned. Is that Pfizer or yourself?

So the way our partnership works for those additional indications is we'll split the cost 50-50 with Pfizer.

But we're not expecting any additional studies for the adult segment. So it's just the pediatric basket.

Okay. Got it. And for full year '24, what should we anticipate from BARDA reimbursement? I know you called out $2.2 million in the first quarter, should we extrapolate that?

You'd expect that to continue to ramp up, Jeff. So that's part of the reason why the R&D numbers are going up. They're getting ready to do some CMC activities, which will bump that number up. And just as a reminder, there was $2.2 million on the revenue line, the expense line is slightly less than that.

Yes. Okay. Got it. That makes sense. And Adam, can you just clarify on the cash and debt? So it was $75.6 million cash and $230 million plus $71.1 million on the debt side?

That's right.

Okay. You expect to close the LabCorp deal by the end of the year, likely in the latter half, and the total amount is $237 million.

Yes. I mean the large unknown on the timing is just FTC. So once we clear the FTC, assuming we clear the FTC, we'll be working quickly with that LabCorp transaction.

Okay. Got it. You're feeling optimistic on the back half of the year?

Yes, that's our expectation.

And the next question comes from Edward Tenthoff, Piper Sandler.

First, just a quick one, Adam. You mentioned the cost guidance for the second quarter of $234 million, but I didn't catch the final number, was it $237 million?

$243 million. $234 million to $243 million.

Okay. Great. Super helpful. And then just kind of a higher-level question. Appreciating what Gary and Elias were saying about the multi-specific antibody getting moving. I think the first one is for hematologic cancer, if I'm not mistaken, or is that for solid tumors? And at a higher level, what do you ultimately expect to do with these different ModeX assets? The stuff under BARDA, could that be further partnered? Should we expect more partnerships like the Merck, EBV deal? Do you expect to keep the cancer stuff and generate some clinical data next year? Higher-level commentary on sort of what the plan is?

I would be happy to address that, and I apologize for any background noise. We are entering the clinic this quarter with a solid tumor molecule. Additionally, we have a liquid tumor molecule that we are currently discussing with several interested parties. Overall, we have two platforms: one focused on vaccines and the other on multispecific antibodies, both of which are generating significant interest. We are looking to establish partnerships, particularly focused on research collaborations funded by third parties, which would allow us to develop more targets and capture a larger segment of the market than we could on our own. We aim to leverage our platform based on the results we have achieved with the EBV and the Phase I trispecific data. I believe this will help us build momentum for collaborations, partnerships, and licensing agreements that can enhance our capabilities. I'll stop here. Gary, do you have anything further to add?

Yes. I think you said it well, Elias. I can say, Ted, that we're open to whatever makes sense in terms of advancing these products to approval and getting them to patients. I think that the advantage of having a platform is that we can take individual products and partner them with third parties. We can reserve some that may have higher value and easier path forward for commercialization. We can take some of those internally as well. So at the end of the day, I suspect that we'll probably partner more than we will develop internally, but we're very open to collaboration.

Well, I think that makes a lot of sense, too, when you think about all the different factors and agents that you can engineer into the multi-specific antibody. A big oncology group who really is doing that multiplex combinatorial analysis makes a lot of sense. That's a lot for you guys to do on your own. And I think you'd really be able to empower some of the bigger players who are looking at ways to combine these different mechanisms. Sorry, I really appreciate what you're saying about the partnering potential for that platform.

And the next question comes from I-Eh Jen with Laidlaw & Company.

Two questions in all regards to the ModeX product to enter the clinic soon. The first one is for the EBV virus vaccine. My question is there's also a competitor of Moderna also developing the vaccine against the same target. So my question is that at least on theoretical ground, how do you compare yours to that of Moderna's? Then I have a follow-up question.

Well, the answer is simple, again. I mean we're better, but I'll let Gary give you the specifics. I'm just kidding.

Moderna is working on similar gene products using mRNA, which we've engineered on the ferritin nanoparticle. Having multiple products being tested is beneficial for patients because their performance in real-world settings can vary. Our platform is protein-based, utilizing adjuvants with established safety profiles in humans. The preclinical data from nonhuman primates and our animal models looks very promising. We are following a structured path with solid immunogens and effective biomarkers related to viral loads and immune responses. We feel confident in our product. I prefer not to delve into details about the competing program, but they are employing a different mRNA platform, which has advantages in speed but also carries uncertainties, especially concerning potential side effects as more patients are treated. Predicting which option will be more effective is challenging. However, we are optimistic about our platform and our partnership with Merck, which has a strong team of experts that can help broaden the trials and impact of our vaccine, particularly in addressing cancer. That’s the best information I can provide at this time.

Okay, that's very helpful and provides a lot of details. Just one more question regarding the 2001 study. Could you share some information about the study design and the targets being pursued?

Yes. We haven't formally disclosed the targets, but we will disclose them in the near future, probably within the next few weeks as we line up to enroll our first patient. What I can tell you is that we've picked two cell surface markers that are found on a number of solid tumors. There actually is a list of about 13 malignancies that express these two antigens, and they include lung, breast, prostate, pancreatic, and the list goes on. There's a fairly large number to be tested. In the initial stages, we'll look at a variety of those tumor types. We'll be looking for signs of some tumor types where we might be seeing more efficacy. Then, if that bears out, we'll focus on the tumor types where we're seeing efficacy and expand the trials in those tumor types.

Okay. Great. That's very helpful. And congrats on moving this program off the ground.

Thank you. We're very excited to see it get to patients.

And the next question comes from Yi Chen with H.C. Wainwright.

Just to follow up on the MDX-2001. The Phase I solid tumor trial is an all-comer solid tumor trial, correct? And how many patients do you plan to enroll for this trial?

The trial is divided into parts, starting with a Phase Ia and then a Phase Ib. In the Phase Ia, we will examine various types. After that, we will focus on the types with more activity. We anticipate making some decisions with around 40 patients in the first phase, which will also involve some dose escalation since we need to proceed carefully, regardless of the tumor type. Once we approach what we believe to be a therapeutic level, assuming there are no adverse effects that would limit further expansion, we will treat a larger group.

And just to clarify, did you say that the results from the Phase I trial won't be available until 2026?

I didn't really say when they would be available because I said probably not before next year, as what I said earlier, and I would stand by that. It does take a while to get to the point where you think you're in a therapeutic dose, and then you have to enroll sufficient patients and follow them for a period of time. So expecting to see even early efficacy data. We certainly will have safety data, I think, before the end of this year, which tells us what doses and how well tolerated it is in patients. But I don't expect that we'll begin to start seeing signals until well into next year.

Got it. And could you give us some idea about how many oncology candidates you intend to bring into clinical stage of development before the end of 2025?

I would say that we expect to have between two and four candidates entering the clinic by next year. It's very likely that two will be ready by then, and depending on some partnerships, we may have opportunities to advance another two.

Okay. And for partnerships, is it likely that you will need to generate Phase II level proof-of-concept data to materialize a partnership here?

I think Elias would you like to respond?

No, no. I wanted to just clarify that it's very different in oncology than in other areas. In oncology, it starts with patients. You don't need Phase II data to generate a partnership. You need to have a basket trial with some demonstrable results in a Phase I, Ib, and beginning of II. But you don't need to do what you need to do in other areas, where you need to complete the Phase II to attract a major partner who would like to be a strategic buyer...

No, I very much agree. I think that often in oncology, you can begin to see signals in Phase I. In instances where you don't, it really just depends on the appetite of the partner and of our internal teams in terms of at what point we really want to make those transitions. So I'd say the safe answer is somewhere between Phase I and Phase II.

And the next question comes from Michael Petusky with Barrington Research.

I would like to ask about RAYALDEE. You've been indicating for several months that you have some data and evidence suggesting that the product may slow the progression of chronic kidney disease. Can your sales team share this data with nephrologists, and have you received any anecdotal feedback indicating that this is compelling and could be significant? Can you provide any insights on whether this might help drive the product's success in the future?

I can expand on that. The data that we generated this year was very telling from real-world evidence as well as our own data that you could delay the onset of dialysis by 6 months, if not more. In terms of the reception of that, we're publishing. Obviously, but presented to KOLs and nephrologists, it really makes a difference because no other therapy for secondary hyperparathyroidism has shown an ability to do that. We also have the biomarkers that indicate which patients really need RAYALDEE to delay the onset of dialysis for their CKD4. So the answer is our sales force is out there and talking to nephrologists. We see a lot of late-stage CKD that are likely to go into dialysis, but we think it's valid for CKD3 patients, not just 4. So it's a story in evolution. I think it reinforces the point that treating secondary hyperparathyroidism patients does impact the evolution of the disease, which was one of the questions we always had as a change outcome, and this is the answer that we have so far. The data has been reviewed and it's going to be...

Can I ask a follow-up question? Once the data is published and discussions with doctors begin, how long does it typically take for behavioral changes, like prescribing habits, to happen? Do you think this is more of a long-term effort that could take years rather than quarters to truly change behavior, or is the data compelling enough to facilitate quicker changes?

Absolutely. I think it's the right question. Medicine patterns and clinical guidelines take time to develop. You're talking about a year or two before they make it to the guidelines like RAYALDEE is using the guidelines now. So it's not a rapid process. Depending on the strength and reception in the community of nephrologists who deal with that, it may be faster or slower, but it's not a matter of the quarter or two. It will take time to develop.

And this concludes the question-and-answer session. I would like to return the floor back to Dr. Phillip Frost for any closing comments.

Just want to thank everybody for participating and for your very good questions and discussion. We look forward to being together with you 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.