Earnings Call Transcript - OPK Q3 2025

Operator, Operator

Good afternoon, and welcome to the OPKO Health Third Quarter 2025 Financial Results Conference Call. Please note, this event is being recorded. I would like to now turn the conference over to Yvonne Briggs. Please go ahead.

Yvonne Briggs, Alliance Advisors IR

Thank you, operator, and good afternoon. This is Yvonne Briggs with Alliance Advisors IR. Thank you all for joining today's call to discuss OPKO Health's financial results for the third quarter of 2025. 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, are subject to risks and uncertainties that could materially affect the company's 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, 2024, and subsequently filed SEC reports. Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, October 29, 2025. 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. Regarding the format of today's call, Dr. Phillip Frost, Chairman and Chief Executive Officer, will provide opening remarks. Dr. Elias Zerhouni, Vice Chairman and President, will then provide an overview of BioReference Health and OPKO's Therapeutics segment. After that, Adam Logal, OPKO's CFO, will review the company's third quarter financial results and discuss OPKO's financial outlook, and then we'll open the call to questions. Now I'd like to turn the call over to Dr. Frost.

Phillip Frost, CEO

Good evening and thank you for joining us today. During the third quarter, OPKO Health continued to execute well against our strategic priorities. We completed the sale of BioReference Health's oncology division and related testing services. This transaction is a significant milestone designed to streamline our lab business and ensure profitable growth. The sale provided $192.5 million at the closing and $32.5 million in the performance-based earn-out. BioReference is now focused on our core clinical testing operations in the New York, New Jersey region and driving adoption of our 4Kscore test nationwide. We're devoting a portion of the sale proceeds to our stock repurchase program, reinforcing our commitment to increasing shareholder value. So far, during 2025, we repurchased $25.1 million worth of stock. As of September 30, we had $126 million remaining under this program. On the pharmaceutical side, we are advancing our pipeline of innovative therapeutics with four candidates now in the clinic and several more in the pre-IND stage. We're pleased to have significant partnerships to provide nondilutive funding to support the development process for several of these programs. This morning, we announced a research collaboration and license agreement with Regeneron, a leader and innovator in antibody-based therapies. This program will leverage ModeX's MSTAR platform with Regeneron's proprietary binders to discover and develop multispecific antibodies that allow us to explore several indications of mutual interest. Currently, ModeX has three programs in Phase I clinical trials. Our most recent candidate, MDX2004, a multispecific immune rejuvenator, entered the clinic last month. Our most advanced immuno-oncology medicine, MDX2001, is a T cell engager enhancer directed at two tumor antigens, CMet and Trop2, found on a variety of solid tumors. An abstract on this program was presented at the recent ESMO meeting in Berlin, Germany. It has advanced to its fifth cycle of escalation, which is approximately tenfold higher than the initial starting dose with acceptable safety and tolerability. Based on the outcome of these studies, we anticipate further Phase Ib expansion cohorts for next year. Our EBV vaccine being developed in partnership with Merck has advanced for immunogenicity, safety, and tolerability evaluation in Phase I human trials. Enrollment in this ongoing trial is progressing well, and the data will inform the Phase II trial design. Our next immuno-oncology candidate, MDX2003, a tetraspecific T cell engager expander that targets B-cell leukemia and lymphoma. We expect this compound to enter the clinic early next year after appropriate regulatory review. Finally, MDX2301 is our bispecific tetravalent antibody designed to prevent and treat COVID infections. Funded by BARDA, we expect Phase I safety and immunogenicity studies to begin early next year. The ModeX multispecific COVID antibody neutralizes all known strains of the virus, including the most recent variants. It is designed to confer broad protection against evolving outbreaks, particularly for subjects with underlying immune impairment such as cancer patients, diabetics, and the elderly, thus having great medical value potentially and a global health impact. Our collaboration with BARDA continues to advance the development of broadly protective multispecific antibodies for both COVID and influenza viruses. We're progressing our development of OPK-88006 for the treatment of MASH and obesity for both subcutaneous and oral administration. We have partnered with Entera Bio for the development of the oral formulation. The subcutaneous program is expected to enter the clinic in early 2026 with the oral formulation to follow later that year. Our international operations, including OPKO Health Iberoamerica and EirGen Pharma continue to provide steady sales growth and meaningful cash flow to assist in funding our R&D efforts. Overall, we remain highly committed to maximizing shareholder value. Through strategic actions such as the sale of select BioReference assets, the execution of our share repurchase program, the advancement of the ModeX portfolio of products in clinical trials and a new ModeX R&D alliance, we are focusing our operations to provide growth opportunities while returning capital to investors. We are confident in our strategic direction, our team, and our ability to deliver on our milestones. With that overview, I'll turn the call over to Elias.

Elias Zerhouni, Vice Chairman, President

Thank you, Phil, and good afternoon, everyone. As Phil mentioned, in mid-September, we completed the sale of BioReference Health oncology assets to Labcorp. BioReference is now a focused clinical laboratory that offers core testing services in the New York and New Jersey areas as well as in correctional facilities nationwide. Additionally, the 4Kscore test franchise for prostate cancer risk assessment is set for growth, thanks to a recent FDA label expansion, which allows the test to be used without the need for a digital rectal exam. This opens a significant new market of primary care physicians who perform over 90% of PSA screening tests and rarely conduct digital rectal exams. Excluding the sold assets, BioReference testing volume grew by roughly 5.3% in the third quarter compared to the same period last year. Our strategy is to enhance profitability by focusing on and expanding existing customer segments, optimizing our test menu to improve operating margins, and implementing further operational efficiencies. We're also strengthening our position in the market by establishing new partnerships with accountable care organizations, independent practice associations, federally qualified health centers, regional health systems, and specialty healthcare companies. Additionally, we've started to explore new revenue streams such as direct-to-consumer lab testing companies, employer-based testing, and early-phase clinical trials. In the third quarter, 4Kscore test volume increased by more than 20% compared to the previous year. Regarding our operational efficiency initiatives, BioReference now has a workforce of just over 1,500 employees, reflecting a 25% reduction since January. These expense reduction efforts and strategic divestments have led to improved margins, putting BioReference in a strong position for sustainable growth and profitability moving forward. Now, turning to our Therapeutics segment, we're excited to have entered into a license and collaboration agreement with Regeneron. Through this collaboration, we will utilize our MSTAR platform along with Regeneron’s proprietary binders to develop medicines that target multiple biological pathways within a single molecule for disease indications of interest to both Regeneron and ModeX Therapeutics. Regeneron will cover the entire development and commercialization costs. Under this agreement, we will receive milestone payments related to research, development, clinical, regulatory, and commercial achievements for each program, potentially exceeding $1 billion if multiple programs advance successfully. Additionally, we are entitled to tiered royalties up to the low double digits on global net sales. We are particularly enthusiastic about partnering with Regeneron due to its leadership and expertise in antibody therapeutics. I, along with some of the ModeX team, have previously collaborated with Regeneron's R&D group, and we look forward to rekindling and expanding our joint efforts. Moving on to our most advanced clinical study, our partnership with Merck on the Phase I Epstein-Barr Virus vaccine trial is proceeding as planned, and preliminary data on safety, tolerability, and immunogenicity is becoming available. This data will inform Merck's forthcoming decisions regarding the design and execution of Phase II studies. We have a number of programs in our immuno-oncology and immunology portfolio that are progressing. Our lead product, MDX2001, is a first-in-class tetraspecific T cell engager that targets two cancer markers, CMet and Trop2, using both CD3 and CD28 T cell engagers. It has reached its fifth dose level, which is ten times the starting dose, in a Phase I clinical trial, with acceptable safety data observed at this level. Following the enrollment of the highest dose cohort, we will concentrate on evaluating efficacy signals in select tumors during the expansion cohort. We are also pleased to present our progress with MDX2001 at ESMO 2025. MDX2004 is a new first-in-class multispecific immune rejuvenator with the potential to treat various oncology and immunology conditions. MDX2004 operates by stimulating T cells to proliferate through three signaling pathways for optimal activation and proliferation. It is notable for being a first-in-class multispecific antibody targeting CD3/CD28 and 4-1BB, stimulating T stem cells to self-renew and generate mature T cells, hence its title as an immune rejuvenator. This week, we announced that Phase I studies for this new medicine have started, with the first patient receiving the drug at the initial dose in Australia, marking another significant milestone for our technology platform. Next week, we’ll present MDX2004 at the Society for Immunotherapy of Cancer Conference. MDX2003, another tetraspecific T cell engager focusing on lymphoma and leukemia, is currently at the pre-IND stage, with clinical entry expected early next year. We continue working with BARDA on our COVID and influenza initiatives, which primarily aim to advance multispecific antibody protein candidates providing broad coverage against all circulating strains in Phase I clinical trials. Our efforts to develop the COVID multispecific antibody focus on addressing the needs of patients with underlying immune impairments, such as those with cancer, diabetes, or the elderly, who have poor vaccination responses and are highly vulnerable to serious complications from COVID infection. We expect to begin Phase I studies early next year. Moreover, we are advancing our pre-IND influenza program targeting both flu A and flu B to achieve universal protection, seeking additional funding to expedite its clinical development. As of the end of the third quarter, we have secured $22 million in non-dilutive funding from BARDA for these two initiatives. We are also progressing with OPK-88006, a novel long-acting GLP-1 glucagon receptor dual agonist for treating MASH and obesity, with a subcutaneous formulation in development and an oral formulation being developed in collaboration with Entera Bio. At the ENDO conference in July, we showcased promising pharmacologic and pharmacokinetic data from our in vivo animal testing, demonstrating excellent bioavailability for the oral tablet formulation. Both projects are in the pre-IND stage, with clinical trials anticipated next year. Additionally, we are collaborating with Entera Bio on an oral GLP-2 tablet for short bowel syndrome, with encouraging pharmacokinetic data from preclinical studies indicating extended half-life and robust oral bioavailability, which was presented recently at the European Society for Clinical Nutrition and Metabolism Congress. This program has the potential to significantly change the treatment approach for patients with short bowel syndrome who currently depend on daily injections. Our international pharmaceutical operations continue to generate cash flows, and despite foreign currency challenges, have successfully pursued growth plans in local markets. Rayaldee has countered volume declines caused by the Inflation Reduction Act by achieving a higher net realized price, resulting in year-over-year revenue growth. In conclusion, we are very pleased with OPKO's strategic direction, as BioReference is well-positioned for both profitability and growth, alongside the advancement of our pharmaceutical programs and partnerships into clinical trials. Now, I will hand the call over to Adam to go over our financial results.

Adam Logal, CFO

Thank you, Elias. We ended the third quarter with over $428 million in cash, cash equivalents, and restricted cash, more than sufficient to fund our ongoing operations and development plans. Capital allocation remains on track within our plans. Our strong cash position allowed us to repurchase 11.1 million shares during the third quarter of 2025. And for the full year, we have repurchased nearly 25 million shares for approximately $33.5 million. We have $126 million remaining authorized under our buyback program and expect to continue to make additional common stock repurchases throughout the end of the year. We have deployed nearly $100 million so far this year in convertible note repurchases and conversions and common stock repurchases and over $215 million since the start of 2024, demonstrating our commitment to strengthening our balance sheet and returning capital to our shareholders. Let us turn to our financial performance, starting with our Diagnostics business. Revenue for Q3 2025 was $95.2 million, including $19.5 million from the oncology assets recently sold to Labcorp. This compares to $121.3 million in Q3 2024, with the decline primarily due to revenue attributable to the Labcorp transactions that closed in September 2024 and 2025. Revenue in our continuing business has delivered strong growth, highlighted by an increase in 4Kscore volumes and resulting revenues of nearly 20%. Total costs and expenses were $115.2 million, down from $184.2 million last year. This includes $25.2 million related to the oncology assets that we sold and approximately $4.2 million in expected nonrecurring costs for severance during the 2025 quarter. Costs and expenses were partially offset by the gains recorded related to our transactions with Labcorp with $101.6 million in gains recorded in 2025 and $121.5 million recorded in the 2024 quarter. As a result, our diagnostic operating income improved to $81.6 million compared to $58.5 million in the third quarter of 2024. Depreciation and amortization expense came in at $4.7 million, down from $6.1 million in 2024. Importantly, the actions we've taken throughout the year are expected to deliver over $25 million in annualized cost savings, and we remain on track to achieve breakeven operating results in Q4 2025 and are well positioned as we head into 2026 for sustained and growing profitability. Turning to our Pharmaceutical business. Revenue was $56.4 million, up 8% or $4.1 million from 2024's $52.4 million. Product revenue was $37.7 million, down slightly from 2024's $39.1 million, reflecting lower sales in Chile as well as foreign currency headwinds within our Latin American businesses. These sales were partially offset by increased revenue from Rayaldee. Rayaldee contributed $7.5 million during Q3 2025, a 29% increase from 2024's $5.8 million, primarily reflecting lower government rebates during the 2025 period, which more than offset an approximately 20% decline in volumes. IP transfer revenue rose to $18.7 million, up from $13.2 million, which includes our Pfizer profit share payments of $8.8 million, reflecting a 25% increase from 2024's $7 million. We remain optimistic about the efforts Pfizer has made and we expect them to make throughout the remainder of 2025 and into 2026 on the effectiveness of their global commercialization program. In addition, BARDA funding increased to $8.2 million from $5.5 million, reflecting expanded activity for our infectious disease antibody programs. Costs and expenses were $80.6 million, down from $84.6 million, driven by cost containment activities throughout our Iberoamerica and Rayaldee commercial organizations, partially offset by increased R&D investment. R&D for 2025 totaled $29.6 million, up slightly from $28.2 million for the 2024 quarter, primarily due to our ModeX development activities. As a result, our pharmaceutical operating loss was $24.2 million, a 25% improvement compared to last year's operating loss of $32.2 million. Depreciation and amortization expense was $18 million in both periods. For our consolidated financial results, consolidated operating income of $48.1 million improved from 2024's $14.2 million as a result of the improved results at BioReference. Both periods benefit from gains from the disposition of assets, resulting in net income in Q3 2025 of $21.6 million or $0.03 per basic and diluted share compared to $24.9 million or $0.04 per basic share and $0.03 per diluted share in Q3 2024. You will recall the 2024 period benefited from gains on certain underlying investments. Looking forward, we're continuing to execute our multi-phase plan to drive profitability within our Diagnostics segment by reducing the fixed infrastructure cost and improving operating efficiency. Following the oncology transaction closing in September, the remaining BioReference business has a clear path to cash flow positive and profitable growth, excluding any nonrecurring or noncash items. We are resetting the Q4 outlook for 2025 to reflect the disposition of the oncology business. As a result, we expect total revenue to be between $135 million to $140 million, with revenue from services of $70 million to $75 million, revenue from products of $40 million to $45 million and other revenue of $25 million to $30 million, including our Pfizer profit share of $10 million to $12 million and revenue from BARDA of $7 million to $9 million. Total costs and expenses are expected to be between $175 million and $180 million, excluding any nonrecurring or restructuring costs. Research and development expense is expected to be between $30 million and $35 million, offset partially by the BARDA revenue. And depreciation and amortization expense is expected to be approximately $24 million. As we look forward to 2026, we're providing some high-level guidance, which will more fully detail early in 2026. We expect BioReference to be profitable and to grow revenue in the low single-digit percentages. We expect to see our in-line pharmaceutical businesses, including Rayaldee, to grow in the mid-single-digit percentages and to improve its operating income by approximately low double-digit percentages. We expect NGENLA profit share payments to increase to approximately $32 million to $35 million. Finally, we plan to invest up to $100 million in our R&D programs, net of any partnering reimbursement, as we expect to have up to six Phase I programs enrolling patients during 2026. This concludes our prepared remarks. Operator, let's open the call for some questions.

Operator, Operator

Our first question comes from Maury Raycroft of Jefferies.

Maurice Raycroft, Analyst

Congrats on the progress. I had one for MDX2001. Wondering if you could say how many patients you've dosed at the fifth dose level? And will you proceed to dose level 6 with the program? And is there anything more you can share on the safety profile and potentially whether you're seeing any efficacy signals at this point as well?

Elias Zerhouni, Vice Chairman, President

Well, I'll let Gary answer that question. Gary, would you like to give those details?

Gary Nabel, CEO of ModeX

Sure. We are in our fifth patient at the fifth dose level. And again, when the suitable observation period has been complete, then we'd go on to the next. In terms of signals, I think at this point, it would be probably not wise to comment on efficacy because any responses that you see with this small number of patients are anecdotal. And I think that really the time to take a look at efficacy would be, as Elias and Phil were mentioned, when we go to the expansion cohorts in Phase Ib. We're just as interested as you are and can't wait to get those results, but I'm afraid we just have to follow the process, and we'll certainly share any news as soon as it becomes available.

Elias Zerhouni, Vice Chairman, President

Just to be clear, Maury, Gary is mentioning 5 patients at the current dose level, but the total number of patients is higher, obviously, that we've exposed. And obviously, we're interested in continuing, which based on all the data we have.

Maurice Raycroft, Analyst

Got it. Yes. It’s okay.

Phillip Frost, CEO

Total numbers are close to 30 or so, but yes, 5 in this cohort, as Elias mentioned.

Maurice Raycroft, Analyst

Okay. And you will go to dose level 6 as well?

Phillip Frost, CEO

We would expect.

Maurice Raycroft, Analyst

Okay. Okay. That's helpful. And I had a quick question on the 4Kscore. For that label expansion and the 20% growth that you mentioned, is the growth directly related to the expansion? And how should we think about the importance of this product as a contributor going forward?

Elias Zerhouni, Vice Chairman, President

Yes, that's a good question, Maury. No, it's not. The growth is really based on the former label. The label was changed this quarter. This change expands the market to primary care doctors. Previously, urologists had to order the test to decide if a biopsy or MRI was needed. Now, since the digital rectal exam is no longer required, which we've proven with data, Dr. Jane Hsiao informed the FDA that it didn’t significantly enhance the accuracy of the test. This was a concern from primary care doctors, who expressed a desire to perform the test after the PSA tests. This is the expanded market we are discussing. We are just beginning this effort. As you know, the 4Kscore franchise is a national initiative, so it will take time to gain momentum. Currently, it is performing well with the old label, and we anticipate it will grow significantly with the new label.

Adam Logal, CFO

Yes, Maury, just to put a little bit of an explanation point on that. Through June, I think we were up either 12% or 14%. And we saw the acceleration picking up before that label change came through. So we are certainly excited about that. And obviously, we are working with payers to ensure we align volume potential with the payer policies as it relates to the DRE.

Maurice Raycroft, Analyst

Got it. Okay. That's helpful. And is this something you could provide more granularity on going forward just with helping us better track the progress there.

Adam Logal, CFO

Yes, for sure.

Operator, Operator

Our next question comes from Yi Chen of H.C. Wainwright.

Yi Chen, Analyst

My first question is, could you give us some more color on the Regeneron collaboration, whether the program is exclusively focused on oncology or it could be some candidates in other therapeutic sectors? And also, can you comment on how many total programs are currently ongoing?

Elias Zerhouni, Vice Chairman, President

Let me start and then I'll give it over to you. So there's nothing exclusive on the field, oncology or immunology. We've really agreed to work on four programs, which may have more than one product, obviously, but four specific programs for specific indications, which cover metabolism, oncology, as well as immunology. And with that, I'll turn it over to Gary to give you more specifications on how exactly the collaboration is going to work forward.

Gary Nabel, CEO of ModeX

Yes. Thanks, Elias. As Elias mentioned, one of the reasons we're excited about this collaboration is that it will allow us to work in areas that we haven't worked on in the past, and they would include the areas of metabolism and more activity in the area of immunology as well as some selected oncology opportunities. As you know, Regeneron has a very deep library of human antibodies that are monoclonals. We have the capacity to put those together into the formats that allow us to make multispecifics. So together, we can do things that neither of us can do alone. And that's always the mark of a good collaboration. As Elias pointed out and as in our press release, there are four targets to start with, but the agreement is written in a way where that can be expanded should we find something of interest. So a lot of work to do to explore the initial candidates, but we're very excited to work with them because of their deep expertise in the antibody area and their success in bringing products to patients in the past.

Yi Chen, Analyst

Got it. And could you tell us whether the milestone payments include both preclinical as well as clinical milestones? And also, could you give us a rough estimate as to the time frame for the first milestone? Is this something we can reasonably expect to occur in 2026?

Elias Zerhouni, Vice Chairman, President

The answer is yes and yes. So we have preclinical milestones and then post Phase I milestones if Regeneron takes it over. Regeneron will reimburse us for all the preclinical studies and costs, and then there will be milestones for progression within that all the way to Phase I. And then after that, they take it, and there will be the typical milestones, development, approval, and commercial following that.

Operator, Operator

Our next question comes from Kevin DeGeeter of Ladenburg Thalmann.

Kevin DeGeeter, Analyst

Maybe two for me. The first one is on MDX2001. Can you walk us through your current thinking on how you're thinking looking at patient selection for the Phase Ib expansion cohorts? Are there specific tumor types that makes sense based on how you think about the profile of this molecule?

Elias Zerhouni, Vice Chairman, President

Yes. Well, based on what we've done so far, we obviously read out the safety and tolerability in different types of tumors and then we narrow it down. But I'll let Gary be more specific on that. Gary?

Gary Nabel, CEO of ModeX

Yes. I would say there are criteria that we apply in the first part of Phase I, where we focus on exploring and confirming safety, and we're quite open to various tumor types. Once we have maximized the dose and observed biological activity in our patients, we then assess the tumor types showing the highest levels of CMet and Trop2, as well as those that have demonstrated a greater likelihood of responding to immune therapies. We plan to explore the more challenging targets eventually, but we prefer to establish efficacy in areas where we have a higher chance of success first. Tumors such as lung cancer, particularly non-small cell lung cancer, rank very high on our list. Additionally, depending on patient availability, we will also look into tumors like renal cell carcinoma and maybe some PD-1 failures in melanoma. Beyond that, we have a total of 13 different tumor types expressing CMet and Trop2, and we will work through that list. At some point, we may conduct what is known as an expanded basket trial to search for signals of regression. However, the initial expansion cohorts will focus on expression levels and anticipated responses to immune therapy in humans.

Kevin DeGeeter, Analyst

That's very helpful. And then for my follow-up question, Adam, regarding the guidance to achieve profitability in the diagnostic service business, what assumptions do you have about the sustainable gross margin of your remaining diagnostic services assets?

Adam Logal, CFO

Yes. So gross margins, we expect Q4 to be in the mid-20s. And then with the main reason being in the mid-20s and that the high 20s is just the challenges around the holiday season in December. In the first half of next year, we would expect that number to get into the high 20s to low 30s.

Operator, Operator

Our next question comes from Ted Tenthoff of Piper Sandler.

Edward Tenthoff, Analyst

Congrats on all the progress, including the new Regeneron deal. It really feels to me like ModeX just is the gift that keeps giving. Is there other updates that maybe could be happening on the partner front in infectious diseases beyond obviously, the great EBV deal with Merck?

Elias Zerhouni, Vice Chairman, President

I'll let Gary respond. Gary, can you respond?

Gary Nabel, CEO of ModeX

Yes, we are working on other infectious disease targets in addition to COVID. We are optimistic about the initial results with flu, although it is currently at the preclinical stage. We aim to advance those products into Phase I with BARDA's support. Additionally, we have a program for HIV and are in discussions with key pharmaceutical players in this area to enhance treatments and potentially achieve cures for certain patients using our immune therapies. Furthermore, our new molecule, MDX2004, which just began clinical trials this week as an immune rejuvenator, shows promise for treating various viral and non-viral infections by revitalizing the immune system. Once we confirm its safety in the initial studies, we will explore its potential further. We will keep our partners and prospective partners informed about our advancements and look forward to collaborating with experts in the relevant fields at the right time.

Edward Tenthoff, Analyst

That's really helpful. And I'm so glad you brought up MDX2004. What are other indications where it might make sense to develop this unique multi-specific?

Gary Nabel, CEO of ModeX

There are several possibilities. One that stands out is hepatitis B. We know that a certain percentage of hepatitis B cases can resolve over time if the immune response is sufficiently strong. After addressing safety, this is an area we would like to investigate further, and there are multiple ways to approach it. Even in the case of chronic diseases, such as in diabetics where the immune system is not functioning properly, there’s potential benefit in boosting the immune system to guard against common pathogens and possibly enhance vaccine responses. Chronic HIV is another example. Therefore, we believe that beyond the immuno-oncology applications, there is significant interest in conducting further studies with MDX2004.

Edward Tenthoff, Analyst

And sorry to keep asking, but each of your answers prompts another question. Could you envision a day where you combine MDX2004 with some multispecific cancer assets?

Gary Nabel, CEO of ModeX

Yes, it's a great question. And the answer is yes. We could imagine using combinations of that sort. And it doesn't need to be limited to just the ModeX immunotherapies. You could imagine doing combinations with PD-1s, with CAR T cells. So there is a range of potential, obviously, early days. We need to get some experimental data for it, but there are a number of indications that I think would be worthy of further consideration.

Operator, Operator

Our next question comes from Yale Jen of Laidlaw & Co.

Yale Jen, Analyst

Just a few here. The first one is in terms of the EBV virus vaccine data, first Phase I data, do you anticipate reporting that data in the near term? Or do you think that Merck may not report that data just to go ahead for the Phase II?

Elias Zerhouni, Vice Chairman, President

Yes, yes, you should, you should because you're on the coordinating committee.

Gary Nabel, CEO of ModeX

Thank you for the question. We are in close communication with Merck, which is responsible for conducting the trials. We collaborate closely, reviewing data and discussing the best way to proceed. The timing and location of reporting are decisions that will be made by Merck. We have talked about this, and I believe they recognize their responsibility to present data according to NIH guidelines for clinical studies in humans. Given that Merck is highly focused on science and data, I would expect them to report the findings at the appropriate time, which would be when the data is complete and its implications are clear. As for how this relates to the start of Phase II, I cannot provide specifics at this time. I anticipate it will occur within a timeframe that aligns with their decision-making and progression of the study. They are committed to scientific rigor and responsible clinical development.

Yale Jen, Analyst

And maybe a follow-up on that is that would either Merck or you guys will at least inform the public that the program we are heading to or starting Phase II study?

Gary Nabel, CEO of ModeX

When the decision is finalized, it will be shared. For the Phase II studies on EBV, we're focusing on a specific group. We need subjects who are EBV negative, which is actually a small portion of the population. We're also looking for patients who are particularly vulnerable to infections, especially infectious mono. Therefore, we may need to make the trial public to reach these individuals. A lot of them will likely be early college students who are at risk of getting infectious mono when they start school and come into contact with EBV from their peers. So, once the trial begins, it will definitely be made known to the public.

Yale Jen, Analyst

That's very helpful. My last question is about the program targeting CD19 and CD20 together. It seems that in many tumors, the expression of CD19 and CD20 overlaps significantly. What was the rationale for designing this product considering the overlapping expression period? I'm just curious about that.

Elias Zerhouni, Vice Chairman, President

Yes. Please proceed, Gary.

Gary Nabel, CEO of ModeX

No, I think you summed it up well. Another way to express it is that many lymphomas often exhibit both CD19 and CD20. However, we're increasingly observing that after treatment, particularly with glofitamab as a T cell engager or CAR T cells, which typically target CD19 and sometimes CD20, there's a tendency for those tumors to select against these targets. This leads to the emergence of variants that downregulate the primary antigen, often CD19, resulting in resistance to the therapy. The goal here is that initially, this dual-targeted antibody will help us address the escape mutants that arise from other treatments. If it proves to be effective, and we believe it has a good chance, it could allow us to use this approach earlier in the treatment line, preventing tumors from having the opportunity to downmodulate and escape. Ultimately, we hope this strategy will help to prevent tumor escape and enhance upfront treatment options. There is already some evidence in the realm of CAR T cells showing that dual-targeted CAR T cells targeting both CD19 and CD20 perform better than those targeting only CD19. Our strategy implements this concept using an engager-like molecule, which simplifies administration for patients, and we believe it merits further development to make it accessible to more patients.

Elias Zerhouni, Vice Chairman, President

Let me add one point that may escape a lot of folks. Our quadrispecific does not need to engage both CD19 and CD20 to be active. If it engages CD19 alone, it will be effective. If it engages CD20 alone, it will be effective. It doesn't have to be simultaneous. And that's really an important concept because what you see early on, you have a dominant clone, dominant CD19, 90% of the cells are CD19 positive. And then you may have a much lower proportion of CD20s. It doesn't matter because our antibody will attack the CD19, they will regress and then the CD20 will emerge. And then at that point, you attack the CD20 or if they're both equivalently present, then both of them may be engaged and attacked at the same time. You see what I'm saying? We don't depend on having both the CD19 and the CD20 engaged for the therapy to be effective. I think that's an important basic concept.

Yale Jen, Analyst

Okay. Great. That's a very clear explanation. I really appreciate that.

Elias Zerhouni, Vice Chairman, President

By the way, it's the same for MDX2001. You don't have to engage both CMet and Trop2 to make it happen, but it does help in controlling the heterogeneity of the disease, depending on how many CMet or Trop2 receptors you have. The same is true for CD19 and CD20.

Operator, Operator

Our next question comes from Michael Petusky of Barrington Research.

Michael Petusky, Analyst

Adam, I just want to clarify something real quick. The $4.2 million in severance is in addition to the $25.2 million of expenses related to the assets that are being sold. Is that correct?

Adam Logal, CFO

That's right.

Michael Petusky, Analyst

All right. Great. And then I guess one of the earlier callers sort of alluded to increased granularity. I'm going to actually give it a shot and ask for it now. Would you guys be willing to share sort of year-to-date revenues through 9 months of 4Kscore or third quarter revenue associated with the test?

Adam Logal, CFO

We haven't disclosed it separately yet, but we'll gather the information and start providing more clarity on that.

Michael Petusky, Analyst

Could I ask about the high-level guide for '26? Regarding the low single-digit growth expected in the lab business, what are your assumptions about volume growth and pricing? Is pricing a neutral factor or a challenge? Can you share your expectations for volume growth and pricing for '26?

Adam Logal, CFO

Yes. Thanks for the question on that one. So we would expect volume growth to be in the low single-digit numbers. We're assuming stable pricing. I think as we see more success with some of the conversations around 4Kscore, we see potential upside for overall reimbursement, which would drive up total ASPs. But beyond that change, ASPs would be pretty consistent with what we've seen this year.

Michael Petusky, Analyst

Okay. And then just last one and sticking with the ‘26 high-level guide. The Pfizer profit share guide that you gave feels a little lighter than I would have guessed. Can you just talk about what's going on there in terms of conversion to weekly and just any other sort of data points you can share around that relationship and that effort to get that business going?

Adam Logal, CFO

The overall market seems to be converting more slowly than we anticipated, as well as others in the industry. Currently, there aren't many daily patients converting as quickly as we had hoped based on our original models, and this trend is likely to continue. Despite having three players in the market alongside us and two competitors, we believe the market should start gaining traction, although it hasn't yet. Pfizer appears to be performing well on a global scale, with data from Symphony and IMS indicating that they hold about one-third of the long-acting market. They are competing effectively worldwide and are actively working to increase their market share in every territory where they have products. We expect them to be successful in their efforts. We've mentioned the expansion trials that will broaden the number of indications they can access, and we are aware they are pursuing those approvals, which we hope to see in a few years. We have adjusted our profit share forecast upward by 10% to 15% from the current year, and while we'd like to see better results, this aligns with our expectations from this quarter and the previous couple of quarters. I hope that clarifies things.

Michael Petusky, Analyst

Great. It really does. Let me just sneak one last one in. Just around the 4Kscore, I think you mentioned the test volumes were up 20% in the quarter. Would revenue be up approximately 20%? Or would it lag behind that 20% figure?

Adam Logal, CFO

It's similar, both the same.

Operator, Operator

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

Phillip Frost, CEO

Well, I want to thank everyone for your participation and good questions, and we look forward to continuing the conversation three months from now. Thank you.

Operator, Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.