Good afternoon, everyone, and welcome to the OPKO Health Fourth Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to hand the conference over to your speaker today, Ms. Yvonne Briggs.

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 fourth quarter of 2019. I’d like to remind you that any statements made during this call by management other than statements of historical facts 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 report including the annual report on Form 10-K for the year ended December 31, 2019 to be filed within the next few days. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today February 26, 2020. 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. Then Steve Rubin, OPKO’s Executive Vice President, will provide a business update and pipeline review. And Dr. Jon Cohen will discuss BioReference Laboratories. After that, Adam Logal, OPKO’s CFO, will review the company’s fourth quarter financial results, and then we’ll open the call to questions. Now, let me turn the call over to Dr. Frost.

Good afternoon, and thank you for joining the call today. 2019 was a noteworthy year for OPKO with significant accomplishments across the company’s business units. We reported favorable top line results for the somatrogon Phase 3 trial in children with growth hormone deficiency, meeting our endpoint of noninferiority for somatrogon injected weekly versus the current standard of daily injections. Now, we’re looking forward to the ENDO Conference at the end of March, where more detailed Phase 3 trial data will be presented. Under the new executive leadership that’s been in place since the beginning of last year, BioReference Laboratories is making great progress to improve its top and bottom-line financial performance. We believe that business is stable and is poised for growth in 2020. In November, our 4Kscore test received a final Local Coverage Determination effective December 30, 2019, to reestablish reimbursement for the important Medicare patient populations. Also, RAYALDEE continues to make good progress each quarter in terms of sales, number of prescriptions and number of prescribers with clinical trials underway to expand the spectrum of indications. With these milestones now behind us, we point to focus on execution to realize the value of OPKO’s assets. I’m going to turn the call over to Steve now to get into more detail on our business units.

Thanks, Phil. Good afternoon, everyone. Thank you for joining us today. As Phil indicated, we are very pleased with the company’s accomplishments with progress across multiple programs and important milestones. One of the year’s biggest highlights was obtained the favorable top line results of our global Phase 3 trial evaluating somatrogon dosed once-weekly in pre-pubertal children with growth hormone deficiency. Somatrogon represents a significant advance in the treatment of children with growth hormone deficiency that should improve adherence to treatment and enhance quality of life compared with the current standard of daily injections. The trial successfully met its primary endpoint of noninferiority to GENOTROPIN injected daily with respect to height velocity after 12 months. We are delighted that two abstracts of the dataset have been accepted for oral presentation at the Endocrine Society’s 2020 meeting in San Francisco in March. One, pertaining to the results of our pivotal Phase 3 study and the other to insulin-like growth factor or IGF-1 levels following administration of somatrogon. It is worth noting that our Phase 3 trial included 83 sites in 21 countries including parts of Asia and Latin America. The global enrollment is part of a strategy that enables Pfizer, our commercial partner to seek approval to commercialize somatrogon on a worldwide basis. We expect Pfizer to submit the Biologics License Application to the FDA in the second half of 2020. In Europe, we expect a market authorization application to be submitted upon the completion of an open label study demonstrating greater benefit and compliance with reduced treatment burden, which is expected to be completed in the third quarter of 2020. The registration study in pediatric GHD patients in Japan is on track for completion by the end of the first quarter with top line data readout expected in the second half…

Thanks, Steve, and good afternoon, everybody. I am pleased to report that BioReference Laboratories continues to make progress towards its goal to improve top line and bottom line results. We’re beginning to see the positive impact of the organizational changes we put in place to specifically grow our oncology, urology, women’s health and genetic businesses. In addition, our plan to develop a vigorous business development infrastructure to identify, develop and pursue a pipeline of new strategic partnerships to deliver large books of businesses is beginning to bear fruit. We have seen growth in our accounts related to Accountable Care Organizations, IPAs, clinically integrated networks, federally qualified health systems, prisons, large medical groups and physician office labs. We are in various stages of discussions with some additional strategic partners and hope to make some very positive announcements in the next several months. The centerpiece of our strategy remains a commitment to the best possible patient-centric experience and to differentiate ourselves in the market with an obsession to patient service and convenience. The journey is significantly to improve patient experience has just begun and over the next several months we will announce new technology investments and partnerships in this space. We continue to make progress with our initiatives to improve payer access with new in network relationships to an increasing number of health plans. This includes increasing our access to Medicaid patients by a new and expanded contracts with Aetna Better Health, AmeriHealth, Centene and Molina. In addition, we have had successive gaining in network status with local and regional plans such as the Harvard Pilgrim Health Care, Health Net, TRICARE West, Centera, and always health plans for GeneDx. At the same time, as a result of our UnitedHealth preferred provider lab relationship, we continue to aggressively pursue out of network providers…

Thank you, Jon. Overall, we saw an improvement in the financial results from operations starting with BioReference. BioReference revenues were $178 million which exceeded the guidance we provided during our third quarter call. The results from operations for BioReference remained consistent with the third quarter and on a comparative basis to 2018 showing a decreased expenses as controlled by our management team. With the cost reductions that Jon and Geoff and their teams implemented during 2018 and 2019, we are well positioned to show continued improvement in our operating results throughout 2020. Our diagnostics segment had an operating loss during the fourth quarter of 2018 of $27.3 million compared to an operating loss of $45.4 million for the fourth quarter of 2019 which included non-cash impairment charge related to our Claros point of care device of $38.7 million. The year-to-year comparative results reflect the elimination of over $20 million in cost of revenue and selling, general and administrative expense compared to Q4 of 2018. RAYALDEE revenues of $12.6 million also exceeded our guidance attributable primarily to the strong prescription growth that Steve highlighted, and improvement in our net realized price. The non-cash impairment charges we recorded during the quarter were triggered by the decline in our market cap during the fourth quarter and the allocation and timing of capital available to advance certain of our programs. These factors impacted the assumptions and estimated timing of the programs’ future cash flows. The non-cash impairment charges impact both our pharmaceutical and diagnostic operating segments by approximately $53 million and $39 million respectively, totaling approximately $92 million recorded during the fourth quarter. Overall, our costs and expenses including the non-cash impairment charge totaled $337 million for the fourth quarter of 2019 which compares to $311.9 million for the fourth quarter of 2018 which…

[Operator Instructions] And your first question comes from the line of Maurice Raycroft. Maury, your line is now open.

Hi, this is [indiscernible] on from Maury. So the question is regarding the ENDO abstracts that are posted already. And we’re wondering if you can provide some more specifics on what analysis will be included in the update, on the main study and the idea of abstract.

Yes, both – one of the abstracts is demonstrating top line data, particularly the secondary – primary, but also the secondary endpoints. The study showed, I can give you a general overview. I won't get into the specifics of take away anything from the abstract. But generally, as was mentioned earlier, we met our primary endpoint. It favored the somatrogon over genotropin. This was true not only at 12 months but also at six months. We also looked at other secondary endpoints such as IGF1. We also looked at height SDS. And again, it showed a consistent data favoring the somatrogon treatment. Something that I think the data will show. And when you do see it if you later when it's presented is that there's a consistency finding the data favored somatrogon, both in terms of age, when you separate the patients as per age, or gender or also at the baseline, the severity of growth hormone deficiency. So that, I think, consistently really demonstrates well for the program or the product. Also, the safety was, again, comparable to genotropin. And we'll have more details on that. We will also have an analysis, which I think has become important as the IGF-1. On IGG-1. There will be an oral presentation on that were one of our presenters, the person who actually did a lot of statistics on it to demonstrate what are the changes in IGF-1 throughout the treatment, throughout the year. And as you know, it's used as a way to monitor treatment with growth hormone to ensure that we're dosing properly throughout the year. And all I can say is, I think, with the abstract will show is that when you take the IGF-1, the estimated mean IGF-1 for those patients throughout the 12 months, that we have a very low percentage of patients that have higher and in two, which is the what's required is below and IGF-1 SDS below two. So I think we're in very good shape from that aspect. But again, it's going to be presented at the meeting in more detail.

Thank you.

You’re welcome.

And your next question comes from the Dana Flanders. Dana your line is now open.

Hi, thank you very much for taking my questions. I had just a couple. I guess, my first one on RAYALDEE, obviously, very nice quarter. Just curious how you expect gross to net to kind of trend throughout 2020? And if you could see just a year-over-year improvement in gross to net. I know you talked about it fluctuating by quarter, but just from a year-over-year perspective, should net that price be improving? And then my second question, just on the labs business. Surprised not seeing a bigger step-up in revenue, given the 4Kscore is back in that services line. Can you help us understand some of the pushes and pulls to BioReference. And I know you mentioned PAMA, but just underlying volume versus price? And how we should think about the sustainability of revenue growth for BioReference Labs going forward? And then I have one quick follow-up.

Sure. Thanks, Dan. Just maybe I'll take RAYALDEE first, and then Jon and I can tackle the labs question. So on the gross to net, we still net, we still expect RAYALDEE to be in the low 40% range. We saw fluctuations during 2019 to go between as low as 37% and as high as 47%. So it really depends on the quarter and the utilization. Q1 guidance is expecting the impact of one payor coming on board and seeing how the utilization of that payor impacts the gross to net. But beyond that, we don't expect any other new payer contracts or agreements to come in place to drive pricing down. Actually converse to that, we actually are working hard to bring that net price up and get better realization throughout the year. Jon, do you want to maybe touch on the…

Yes, relative to 4K, just February, the LCD went into effective January 1, which – so we have all of one – almost two months data where we're seeing a turn compared to the decrease significantly that occurred while we had non-reimbursement. So I think we're – as you also heard me talk about, where we basically have doubled the sales force, but we'll be doubling the sales force within the next several months to specifically sell the 4K test. So we remain optimistic and bullish on 4K. In terms of the other revenues and volumes, we've seen a leveling off last year relative to where we are compared to the rest of the industry. We're making significant progress on the strategic partnerships that I've talked about. And in addition to beginning to win new accounts and urology and particularly in the cancer vertical. The women's health, we're still working through with a new leader. What we're going to do relative to the volumes we’re going to tell we're again, relatively optimistic about the churning of health around the reproductive segment, the issues around sexually transmitted diseases and the issues around the path. The only issue on the women's health side is how we continue to address the inherited genetic portion of that business.

Yes. So Dana, with the revenue guide that we provided, it does reflect the impact of PAMA, mostly offset by 4K and then the growth initiatives that Jon is working on the rest of the business. So certainly, as some of that sales pipeline that matures throughout the year, we would likely come back and provide a little bit more clarity on how we think the rest of the year is going to shape up. But as we sit here today, I think that the revenue guide shows a pretty consistent and stable business that should show better profitability within that range as a result of the 4K contributions.

Okay great. And just one quick follow-up. Maybe a bigger picture question, and I know you're not – you haven't given longer-term guidance, but just wondering how you're balancing kind of initiating new R&D programs versus the kind of push to get a cash flow positive. I know you're doing a nice job managing expenses this year and RAYALDEE is growing and you could hopefully have hGH on the market long-acting in the 2021 time frame. So just curious, how big of a push is that for you? And how are you balancing some of the earlier-stage pipeline programs versus that need to start generating some cash flow? Thanks.

Yes, I'll take that. So far as the programs that require a lot of capital. We're going to not go forward without a partner, who will provide the cash to do that. The other projects, as they come along, and we have a couple now, and we may see some other interesting projects, we'll only get involved with if the cash required is limited, so that we don't anticipate that there will be a big jump in the need for cash for R&D during this year.

Great, thank you.

Next question comes from the line of Ted Tenthoff from Piper Sandler. Ted your line is now open.

Great, thanks. And congrats on a good quarter and a good strong finish to the year. A couple of questions, if I may. Firstly, I saw that you guys follow the PMA for the 4K score. And I want to try to understand sort of what that does for that product? And also, kind of get a little more color on what's leading to the strong RAYALDEE growth? And what should be our expectations from that dialysis readout this quarter? Thank you.

So I’ll take the 4K one. So as you know, and probably the base of your question, we don't need FDA approval to continue to sale because it is fully reimbursed. But it certainly helps on the non-Medicare commercial payers. There's still some out there that want to see that validation. I think it will help on validated for physician purposes as well. Going forward, it has other benefits that you're more restricted with a – just a local clinical approval to a specific side of it and the like, we can expand upon. But for now, I think it's mostly a validation from another regulatory agency of the efficacy of our test.

So this is Charlie Bishop. Regarding RAYALDEE, a number of things were key drivers for the increased RAYALDEE growth that we saw in Q4. One of these, of course, as you know that earlier in the year, we expanded the sales force. That sales force has been fully trained. Has now got time in the field and is getting traction with regard to sales. Secondly, our messaging improved substantially last year with the publication of a seminal paper and the messaging that came out of that. We're getting very good traction with that. And lastly, we had excellent exposure at the American Society of Nephrology meeting that took place in Q4. And I believe that the additional exposure that we got during that meeting with our new messaging has driven substantial sales in the past quarter.

Awesome that’s really helpful. And then just with respect to kind of what we should be expecting from the dialysis readout readout? What will you be sharing with us?

So we have, as Steve mentioned, in the first cohort of a global study ongoing. We do – it's an open-label study, and we do have top line data expected later this quarter. So we will be announcing in March preliminary data from that study. And the goal of the study has been to determine several key things. First, if you administer high doses of RAYALDEE of Vitamin D analog to patients who cannot excrete calcium and phosphorous because they don't make urine, will you see that the drug is tolerated well. So we'll be giving tolerability data first and foremost. Second, there is in the medical literature, a general understanding that RAYALDEE, which is calcifediol cannot be activated unless there's a functional kidney. Dialysis patients don't have functional kidneys. So goal of the study has been to demonstrate that patients who don't have functional kidneys can activate RAYALDEE. So we expect to be announcing the results of that aspect of the study. And lastly, there is considerable concern in the literature that a product like RAYALDEE would be unable to reduce elevated parathyroid hormone levels in patients who have developed substantial secondary hyperparathyroidism. The advanced disease causes the glands to become hyperplastic and less responsive to a product like RAYALDEE. So we will be divulging whether or not patients with advanced secondary hyperparathyroidism can indeed respond to RAYALDEE.

Great. Okay, excellent. I’m looking for – that should be really interesting. Thanks a ton Charlie.

With respect to RAYALDEE, I think we should also emphasize that our partner, Vifor in Europe has been working diligently on getting an improved to market. And we are hopeful that the first approval will come sometime this year, perhaps in Germany or one of the large countries. And they are a very good partner.

That’s great. I appreciate that color Phil. You maybe figured just one thing. Jon, you were mentioning the coronavirus testing. And obviously, we've been all reading about this in the press and seeing stocks move up and down and everything on it. Maybe tell us a little bit more about the potential to be testing for coronavirus? What would have to occur to get a test that could be used? Thank you.

So what happens is that the CDC already has released the sequences that are needed to run it. So I would tell you that we could get a test up and running very quickly. One of the questions that's come up is right now is that they prefer that you have, what's called a reverse flow airflow lab. So having said that, is you can't get a test up relatively quickly. I'm talking about within a week or two, once the reagents are released. But I will tell you that having personally lived through the issues with H1N1, Zika, there's a certain period to be at which point it will – we hope will actually burn out. Being that it’s now close to the end of February, entering the spring season in the Northeast and other places of the country, that has a significant impact on flu transmission, as you probably know. So I'm not going to sit here and predict at all what this will and will not look like or how much testing will be – will occur. But I will tell you this, as I said in the overview, the State Department of Health are keeping it appropriately, relatively tight because they want to track [indiscernible]. If it does get overwhelming, then they'll at least the commercial labs. So the time is not long to get it out. The question is not long to get it out. The question is this would be weather an updated one.

Okay, great. Thank you guys.

Next question comes from the line of I-Eh Jen of Laidlaw & Company. I-Eh your line is now open.

Thanks for taking the questions. My first question is in terms of the growth hormone for the European open-label studies. Could you give us a little bit more color, what was Intel’s and I guess, you mentioned when that will be completed, but maybe just give me – give us a little bit more detail overall in that?

So it's a test unique to Europe. It's a questionnaire based test really showing that there is a benefit to a – and lifestyle preference to the patient and injecting once a week versus every day. It's a little more complicated that in line to the questionnaire, that's pretty much it.

So it is not any clinical element related, and it's more of, I guess, a survey type of things.

No, there is no clinical element. It's really just determining a benefit and compliance.

It’s a preference.

It’s a preference. Yes, at the end of the day, it's a preference.

No clinical questionnaire based.

And would you remind us what might be the filing time for Europe based on Pfizer's suggestions?

So we said, in – for Europe you're talking talk about Europe…

For Europe.

First half of 2021.

Okay. And maybe one more follow-up question here is that, again, get to the coronavirus. Is this is a rapid test or test with a revenue readout? And how that differ from any other, at least some test in development at this point, mostly PCR test?

Yes. So it will be relatively rapid. I mean, once we have the test up and running, if it will be 24 or 48 hours, if not sooner. It's relatively quick.

Okay. That’s great. Thanks a lot. I appreciate it. And congrats for the quarter.

Next question comes from the line of Mike Petusky of Barrington Research. Mike your line is now open.

Thank you. Good evening. I may have missed this earlier, but was there any catch up in revenue element to the RAYALDEE reported revenue for Q4? Or was that truly a clean number?

Yes, there was no catch up Mike. It was the fourth quarter activity.

Okay, all right. And then I think I heard that the GeneDx volume was up 9%? Or was that revenue? Can you just confirm what that was?

That was that was volume year-over-year was up 9%.

Okay.

And whole lifetime was up 16%.

Okay what about revenue in GeneDx year-over-year?

So we don't break out that separately Mike, we just – it still remains in that 17% to 20% of total revenue from services.

Okay. But you can’t give growth year-over-year?

We haven’t broken that separately.

Okay, all right. And then I was wondering, do you have handy what the EBITDA margin in BRL was in Q4 by any chance?

I don’t Mike we can – the 10-K will come out a little bit later to night if it is not out yet.

Do you know if it was positive?

I do, yes it was.

Okay, all right thanks. That’s all I’ve got. Thanks.

And I'm showing no further questions at this time. I would now like to hand the conference back to Mr. Phillip Frost.

Thank you. I mentioned Vifor is a great partner for RAYALDEE. And that I might also say that Pfizer has been a terrific partner for our human growth hormone product, and from the top of the company, the CEO down to the people with whom we work, there's been a tremendous spirit of cooperation. And at this point, a very high level of energy to get the application for approval of this important product into the FDA. And so they have been working very hard with Jane Hsiao and Tony Cruz, and their staff, both in Israel and in Toronto. And we really appreciate the fact that with a little luck, we may pick up some time on the submission. So I'll leave you with that positive thought, and thank you all for participating.

Thank you so much to our presenters and to everyone who participated. This concludes today's conference call. You may now disconnect. Have a great day.