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OPKO Health (OPK) Posts Narrower-than-Estimated Loss in Q2

Zacks

OPKO Health, Inc. OPK reported loss of 4 cents per share in the second quarter of 2017, as against earnings of 2 cents a year ago. However, in the reported quarter, the loss was narrower than the Zacks Consensus Estimate of a loss of 5 cents.

Revenues

In the second quarter, OPKO Health reported total revenues of $314.2 million, down 12% year over year from $357.1 million. However, revenues in the second quarter included a $10.0-million payment from TESARO associated with the commercial launch of VARUBY in Europe in comparison to the $50-million payment related to a RAYALDEE license to Vifor Fresenius in the same quarter in 2016. The reported figure also missed the Zacks Consensus Estimate of $325 million.

Gross profit in the second quarter was $156.8 million, down 23% year over year. Gross margin contracted a massive 710 basis points (bps) to 49.9%.Research and development expenses totaled $32.6 million, up 4.2%, while selling, general and administrative expenses amounted to $128.3 million, up 9.2% year over year. Consequently, loss from operations came in at $4.1 million, highlighting a significant decline from an operating income of $54.9 million in the prior-year quarter.The decline can be attributed to a rise in operating expenses owing to the company’s significant investments associated with the commercial launch of RAYALDEE along with consistent investments in the pharmaceutical pipeline.


Opko Health, Inc. Price, Consensus and EPS Surprise

Financials

OPKO Health exited second-quarter 2017 with cash and cash equivalents and marketable securities of $130.5 million, compared with $131.1 million recorded at the end of the first quarter.

Our Take

OPKO Health exited the second quarter on a mixed note with narrower-than-expected loss and a revenue miss.

Nonetheless, we are encouraged by the company’s progress in all of its businesses, which include diagnostics business as Bio-Reference Laboratories, pharmaceutical business andbiologics business. We are also upbeat about the company’s recent developments in GeneDx, Bio-Reference's genetic testing unit. In this context, the company expanded association with the University of California Health System to offer molecular, genetic and genomic testing services in Jun 2017.

However, the rise in operating expenses may continue to mar the company’s financials.

Zacks Rank & Key Picks

OPKO Health currently has a Zacks Rank #3 (Hold). A few better-rankedmedical stocks are Edwards Lifesciences Corp. EW, Steris Plc STE and Align Technology, Inc. ALGN. Edwards Lifesciences and Align Technology sport a Zacks Rank #1 (Strong Buy), while Steris carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences’ second-quarter 2017 adjusted earnings improved a stupendous 42.1% year over year, primarily driven by strong sales growth at the company’s transcatheter heart valves business. The stock has gained around 3.5% over the last three months.

Steris reported first-quarter fiscal 2018 adjusted earnings per share of 85 cents, up 7.6% from the year-ago quarter. Also, adjusted gross margin improved 410 basis points year over year to 42.3% in the reported quarter. The stock has gained 12.6% over the last three months.

Align Technology’s second-quarter 2017 adjusted EPS of 85 cents were up a substantial 37.1% year over year. Revenues grew 32.3% year over year to $356.5 million. The stock has rallied roughly 24.6% over the last three months.

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