Ladies and gentlemen, thank you for standing by, and welcome to the OPKO Health Fourth Quarter 2020 Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference to your speaker today, Yvonne Briggs at LHA Investor Relations. Please go ahead, ma'am.

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 fourth quarter of 2020. 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 filings, including the annual report on Form 10-K for the year ended December 31, 2020, and in subsequently filed SEC reports. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 18, 2021. 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 of today's call. Dr. Phillip Frost, Chairman and Chief Executive Officer, will open the call; then Steven Rubin, OPKO's Executive Vice President, will provide a business update and pipeline review; and then 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, I’d like to turn the call over to Dr. Frost.

Good afternoon, and thank you for joining the call today. Today, we're reporting record revenues, earnings and cash from operations for the fourth quarter and full-year 2020. Although every aspect of OPKO Health was touched by COVID-19 during 2020, I'm particularly proud of our hard working teams at BioReference Laboratories, as they rose to the challenge of scaling up COVID-19 testing services at an unprecedented pace in a fast-moving and highly uncertain environment. We've made significant investments in human resources, adopted innovative new testing models with our retail partners, invested in state-of-the-art technologies and reconfigured our laboratories to expand our testing capacity and deliver timely results. The ability to ramp up capacity, while maintaining accurate results and rapid turnaround times reflects the talent and dedication of BRL’s management team and employees. We had record COVID-19 PCR testing volume during the fourth quarter. Although our base business would have substantially recovered during the summer and fall stalled towards the end of the fourth quarter due to the surge in COVID-19 cases across the country. We believe BRL’s base business will largely return to historical levels and beyond as the vaccination rollout continues and fewer new cases are reported. We've seen a significant interest in the capability of BioReference to compete on the national stage by the number and diversity of industries that now seek us to deliver highly complex COVID-19 solutions. And while demand for COVID-19 testing is likely to decline, we believe it will continue into 2022 and beyond. We're encouraged by the new administration's focus on increasing testing availability across the country and our approach to controlling the pandemic by expanding the availability of testing supplies, and enhancing laboratory testing capacity. Despite the pandemic, our pharmaceutical business has made great strides. Our highlight earlier this year was the joint announcement with our partner, Pfizer, that the FDA accepted for filing the Biologics License Application for somatrogon, our long-acting human growth hormone. In addition, an NDA was submitted in Japan for somatrogon, and we're expecting Pfizer to soon make a regulatory submission in Europe. In U.S., demand for RAYALDEE continues to be impacted by the pandemic-related restrictions and remains below pre-COVID levels. Overseas, our partner, Vifor Fresenius, continues to receive marketing approvals in Europe and is planning a commercial launch later this year. During last year's fourth quarter, we began a Phase 2 trial with RAYALDEE in COVID-19 patients. Our decision to undertake this trial follows numerous independent studies that indicate an inverse correlation between vitamin D levels and COVID-19 risk and severity. This trial is ongoing. We look forward to updating you on results when they become available. I want to thank all OPKO employees who have worked tirelessly over the past year. I am proud of what we've achieved in 2020 and I am optimistic about what we can accomplish in 2021. I'll now turn the call over to Steve Rubin to further discuss our business. Steve?

Thanks, Phil. Good afternoon, everyone, and thank you for joining us. 2020 was an eventful year for OPKO with the onset of the COVID-19 pandemic. BioReference Laboratories demonstrated its ability to be a leading provider of testing services on a national level, not only for COVID-19 PCR testing, but the critical specialty and genetic testing as well. This leading position resulted in record revenue growth and profitability, which Adam will discuss in more detail. As Phil mentioned, earlier this year, we jointly announced with Pfizer that the FDA accepted for review the BLA for somatrogon for once weekly treatment for children with growth hormone deficiency. The target Prescription Drug User Fee Act or PDUFA action date for decision by the FDA is October of this year. Pfizer also submitted an NDA to the Ministry of Health, Labor, and Welfare in Japan for somatrogon. As for Europe, Pfizer remains on schedule with respect to a regulatory submission for marketing approval, and we expect to announce that submission shortly. As this is a global program, Pfizer has also submitted and will continue to submit for marketing approvals in many different countries across the world. Under our agreement with Pfizer, OPKO is eligible to receive up to $275 million upon achievement of certain regulatory and pricing milestones. In addition, upon launch, we're entitled to regional, tiered gross profit sharing for both somatrogon and Pfizer’s Genotropin. Now, I'd like to turn to our commercial pharmaceutical business, starting with RAYALDEE. RAYALDEE numbers for the quarter break down as follows. Total prescriptions for RAYALDEE in Q4 2020, as reported by IQVIA, were approximately 15,000, representing a decrease of approximately 16% compared with Q4 2019 and a 10% decrease compared with Q3 2020. The RAYALDEE sales force continues to contend with the impact of COVID-19 on access…

Thanks, Steve, and good afternoon, everybody. I'm going to start my remarks with a review of our core business, which includes routine clinical testing and especially testing services comprising oncology, urology, women's health and genetic testing. Overall, sample volume in our core business in Q4 of 2020 was down 7% compared to Q4 of 2019. We saw a decrease in Q4 versus Q3 of this year of about 4%. In Q4 of this year -- of last year, our women's health business was stable compared to Q3. Our oncology business grew 4% Q4 versus Q3, and our 4Kscore grew 1% Q4 versus Q3. We believe that the core business will remain 5% to 10% lower for the period, compared to 2019, as many patients are still reluctant to visit their physicians. In addition, telemedicine continues to have a significant impact on physician office visits. We expect trends to improve at a moderate pace during the second half of this year. We are pleased with the performance of GeneDx as its volumes have remained stable to pre-COVID levels Q4 of this year compared to Q4 of 2019. The Q4 volumes for GeneDx was up 11.6% versus Q3 in 2020. Last month, we announced that GeneDx launched several new genetic tests, including repeat expansion analysis for spinal spinocerebellar ataxia, Friedreich ataxia and other common forms of hereditary ataxias. With these additions, GeneDx has created a comprehensive and affordable offering that covers the vast majority of genes involved with pediatric-onset and adult-onset ataxias. Also, in January, we were excited to formally announce the expansion of our digital home testing service under the Scarlet brand. Scarlet is an in-home, fully integrated digital platform that provides access to on-demand diagnostic services. After visiting with a healthcare provider, a patient receives a link where they can…

Thank you, Jon. The fourth quarter financial results reflect the tremendous effort that Steve and Jon highlighted. As I will cover in more detail shortly, despite all of the challenges, our commercial teams have delivered solid performances across all portions of our business, resulting in operating profit led by BioReference, but also positive operating profit contributions by our RAYALDEE commercial team along with most of our international operating companies. Total revenue for the quarter was $495 million, an increase of more than 120% over 2019’s $224 million. Our diagnostics segment reported revenue from services of $458 million, compared to $178 million for the 2019 period. The increase in net revenue was driven by the execution of our COVID-19 testing strategy, as well as continued sequential improvements in our volumes for our base business, as Jon mentioned. Combining our routine testing business and our COVID testing business, volumes overall increased over 170% compared to historical levels. Overall routine clinical testing, however, remained below historical levels, while genetic testing improved each month, resulting in an overall quarterly genetic testing volumes being flat compared to the 2019 period. The diagnostics segment reported operating income of $69.9 million, compared to an operating loss of $45.4 million, an improvement of $115.3 million over the 2019 period. The fourth quarter of 2019 included a noncash impairment charge of $38 million related to our Claros point-of-care development program. Overall, selling, general and administrative research and development expense decreased as a percentage of revenue from 33% down to 18%, reflecting overall operating leverage improvements. Total costs and expenses increased by $164.6 million compared to 2019, including increased costs of revenues of $176 million due to the overall increase in testing. Moving to our pharmaceuticals segment. We reported revenues of $36.7 million for the fourth quarter of 2020, compared…

Hi, everyone. Congrats on all the progress and the updates today and thanks for taking my questions. First question is just checking to see if you can provide perspective into pricing and reimbursement pressure with COVID-19 testing saturation and increased competition. I guess, how should we think about reimbursement for the PCR testing going forward?

Jon?

I don’t know, Adam, you want to or you want me to me go into the point-of-care?

Yes. So, we continue to see kind of mid level, mid-60s, overall reimbursement for PCR. I think, our view is that it’s going to continue to be stable during the first quarter, despite some of the changes that have been enacted under Medicare. I think, we're -- our overall pricing and reimbursement should remain at those levels.

Got it. Okay. And then, also wondering how you think about conversion of COVID-19 testing costs and personnel back to what the new base business will be as COVID-19 testing demand retreats over time. How are you guys thinking about that?

You know, what? I think, the -- I don't want to confuse -- or the PCR testing a long-term with what's happening on the rapid point-of-care side. So, there is still a fairly large amount of interest and contractual relationships being established between multiple different industries relative to their desire to continue to test whether it's lab-based PCR or point-of-care or rapid testing. So eventually, which I don't know when that will be quite honestly. So, I don't -- there's no plan yet to downsize any of the workforce relative to what's going on for COVID because of the huge demand that we're seeing on the point-of-care rapid side for multiple industries.

Got it. Okay, that’s helpful. And then, last question is on RAYALDEE. So, you talked a little bit about the Stage 5 CKD study and that you're going through the data. Can you just talk a little bit more about why you plan on reporting as far as the number of patients and some of the data measures that you plan on reporting as well?

Hey, Maury. This is Charlie Bishop. Yes, the study that we just completed is an early Phase 2 study, it's Phase 2a. It involves a total of 44 subjects. So, we'll be reporting on a 3:1 randomization active to placebo. And the design of the study was basically to look at three things. One is RAYALDEE tolerated well by dialysis patients. And we used the maximum dose that we thought would be required in order to successfully treat secondary hyperparathyroidism. The data showed that there's absolutely no change in the safety parameters at all, even at the highest dose that we chose. Secondly, the goal of the study was to see if RAYALDEE could, in fact, be activated in patients who don't have functional kidneys, and the medical literature teaches extensively that activation of RAYALDEE is required in the kidney. And we have found contrary to the medical literature that RAYALDEE is activated readily without functional kidneys. And lastly, the study was designed, of course, to see if we could lower PTH. And what we found with this study is that in many patients we could lower PTH very nicely. In other patients, we can't. And this is part of the drug development process. It's up to us now to figure out why it is that some patients do respond and why others do not. And this will go into our patient selection criteria for the follow-on study, the Phase 2b study. I hope that answers your question.

Yes. That's very helpful. And maybe last follow-up is just if the COVID-19 RAYALDEE results could be reported at the same time, or can you provide any more granularity on a time, when we might see data from both these studies?

Well, I wish my crystal ball were really great because I can't tell you how the pandemic is going to go. But as long as infection rates stay high, we expect that enrollment will be good. You should keep in mind that we’ve designed the ongoing COVID-19 study, not to take all comers. It is a study in outpatients. But most patients have very few symptoms or asymptomatic, and they are not suitable for study to see if an agent, like RAYALDEE, can shorten the time to resolution of symptoms. We have to select the patients who have significant symptoms, even though they're not hospitalized, so that we can see the effect of the drug. So, this requires a subset of the total population that's infected with SARS-CoV-2.

Got it. That's very helpful. Okay. Thank you for taking my questions.

And our next question will come from line of Devin Geiman from Guggenheim Partners. You may begin.

Hi. This is Devin on for Dana Flanders. Thanks for taking the questions and congrats on the quarter. Thanks again for, I guess, some of the guidance that you gave for 1Q. I just had question on kind of the margin progression throughout 2021. I know there are a lot of moving parts with, I guess, what presumably could be a margin tailwind from improving base business, volumes offset maybe by a headwind from potentially lower COVID testing volumes, as the vaccine rollout continues. Could you just maybe perhaps contextualize these different levers for us? And do you expect one to more offset than the other? And then, I guess, tangential to that, is there -- I know Medicare reimbursement cuts under PAMA this year aren't happening? Do you expect this to be beneficial to margins? Or do you still expect a healthy level of commercial payer pressure in 2021? Thank you.

Thanks, Devin. So, I'll try to address them and Jon, please weigh in as well. So, I think, the margin evolution, what you saw in the third and fourth quarter are pretty conservative. I think as COVID testing volumes continue to move, as Jon highlighted into the point-of-care, I think those will stay and remain healthy. The PCR margins for us will also stay pretty, pretty healthy. I think, as the base business is at about 90% to 95% of historical levels, the cost structure is there. So, really, the variable costs that come through on our COVID testing is really what's going to drive margin changes, very closely tied to both revenue line items. As it relates to the Medicare changes in PAMA, I don't think and we don't expect any meaningful changes to the overall reimbursement in 2021. Obviously, the delay of PAMA into 2022 is pretty much -- is fully baked into the numbers that I gave for the first quarter.

Yes. I think that's right. I mean, I don't see much more discussion of PAMA right now until 2022 at the earliest. And there's -- you probably know if you follow this, there's an appeal on the way that PAMA was priced, that was won by ACLA. So, there is a lot of muddiness around where PAMA is going to head and the future of PAMA right now.

Okay. Great. Thank you very much.

And our next question comes from line of Edward Tenthoff from Piper Sandler. You may begin.

Great. Thank you. And good evening everyone. I want to echo our thank for all of your hard and important work in terms of all of the testing that's being done. I had one quick question. I just want to make sure I heard this right, Adam. Did you say that the $38.7 million Claros write-down. When was that recognized?

That was last year, last December.

And then, looking at somatrogon, can you tell us a little bit about what prep work is being done, both on the regulatory side, do you anticipate that there would be a panel, and then, also over at Pfizer with respect to commercial readiness? Thank you very much.

We don't expect a panel, Ed. The work is, we're responding and Pfizer is responding on real-time basis to various inquiries. There are inspections going on, some including down here in Miami. So, that's pretty ordinary course at this point as we go through the process.

And then, what about on the commercial side?

So, Pfizer has got the primary responsibility for the commercial activities. So I think you'd have to direct the question to them.

And our next question comes from the line of Yale Jen from Laidlaw and Company. You may begin.

The first question I have is that in terms of your guidance 4.2 million to 4.8 million PCR tests in the first quarter. Do you guys have any thoughts in terms of the trends for the serological test for 2021, especially with more people getting vaccine?

Jon, do you want to manage…?

Are you talking about the serology test for antibodies? Is that the question?

Yes.

Yes. So, it's still -- I don’t know, we have a very large capacity to do several hundreds of thousands of antibody testing, if need be. We have at least two different platforms are running the antibody testing on, which are both quantitative at this point, moving away from the qualitative assay, which was the first one out. So, the question of who's going to get antibody testing post vaccine to either -- to document either the effectiveness of the vaccine, which will depend on which vaccine you get or documenting whether you have a disease. There's a bit of enormous amount of discussion about that right now. But, I don't think anybody could predict how much serology testing right now will occur. Some of it will be related to I believe travel more than probably the other industries, meaning can you validate whether you've either had a vaccine, have a disease or have enough antibodies to travel probably internationally. And I think that's, maybe it's probably biggest role coming up, but that's a guess.

One more question on the COVID-19 RAYALDEE studies. You mentioned there's only selective patient that is relevant. Could you give us a some sense of what portion of the COVID patient, hospitalized patients would be more suitable for treated by RAYALDEE?

What we're using for primary efficacy endpoint in the ongoing study is a patient reported outcome tool that's been validated for viral infections, and we require patients to have a score on that tool that's above a certain level in order to get into the study. And what that does is, it enables the time course of the disease to be fairly long in quite a few patients, and long enough, even in those patients who resolve quickly that we can hopefully differentiate active versus placebo treatment. So, I'm very pleased with the way that we're able to enroll patients into the study. We see a spread in time to resolution of symptoms ranging from 2 days to more than 42, that's exactly what we wanted to see. So, patients fill out this tool every day and we can monitor how their symptoms improve over time. Now, it's our expectation, based on what we're seeing from screening and also from what we see in the literature that somewhere around the range of 20%, maybe a little higher percentage of the patients would have severe enough symptoms that they would want to treat to try to accelerate resolution at the symptoms. It's possible in time that we can develop this drug to treat hospitalized patients, but we don't yet have plans to do that. I hope I answered your question.

Yes. That is very helpful. And again, congrats on the great quarter.

Thank you. [Operator Instructions] Our next question will come from line of Yi Chen from HCW. You may begin.

Hi. Thank you for taking my question. My question is, recently the World Health Organization has released a guidance to laboratories, stating that they should reduce their cycle count in PCR test, which could lead to the lower number of new COVID-19 cases detected. So, what's your opinion on that and what's your current practice?

Yes. So, we run, at least four platforms now, different manufacturers. One of them in particular -- well, there's really two, we, if requested will report out CT values, cycle time values. I don't -- we're not in a position to determine what that should or shouldn't be relative to the platform manufacturers getting their approval or EUAs relative to how they report out their results. So, if we have a platform that reports out CT values and the patient physician, client request that to be reported, we will report it to that client. But we don't make that decision relative to changes in how CT values get reported on the platforms. That would be a vendor decision.

Okay. Thank you.

Thank you. And our next question will come from line of Mike Petusky from Barrington Research. You may begin.

Thank you. Good evening, guys. Thank you. So, Adam, I may have not quite caught it. But, your guidance on RAYALDEE for Q1 is just, it wasn't simply below Q1 '20. That was essentially the guidance…

That's right, Mike. So, included in the total number, but I didn't break it out exactly.

Okay. All right. Great. And then, I guess, a longer term question, and I know that this is sort of an ever-changing, as we learn more. But, as you think about COVID-19 PCR tests, serology tests over time, I mean, three years from now, is this still a -- I suspect to be much reduced, but is it still a meaningful part of BRL revenue or do vaccinations sort of then take such hold and regularity for people that it's not anywhere near materiality 3, 4, 5 years from now? Thanks.

Yes. So, that's the multi-million dollar question, right? Nobody has any idea how this will evolve or morph over the next one to two years. We -- I think, everybody hopes that this all goes away. Now, having said that, right now, all the variants are being treated by the -- or at least mostly, depending on some changing data by the current existing vaccinations. The question will be, of course, as does some other variant emerge that mean some other type of treatment and/or testing? We have not seen that yet. So, I honestly don't think anybody has the answer to that. It's just the same with the vaccine is it vaccination, so that you give it one time, or is it going to be like the flu, where everybody needs COVID vaccine every fall? So, I don't think anybody, right now, I haven't seen can predict three years out. There is much risk. The question is it's just too far from now, right now.

Fair enough. Thanks guys. I appreciate it.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Dr. Frost for any closing remarks.

Thank you all for your participation and good questions. Stay well, and we look forward to meet with you again to report the first quarter results. Good night.