As Data Rolls Out, Multiple Catalysts Equal Value Creation For Opko
Gould Partners share the bullish sentiment of Billionaire Dr. Frost on Opko Health.
(PRWEB) July 31, 2012
Opko Health, a pharmaceutical and diagnostic company, has several catalysts that are likely to drive value creation over the near and long-term. Aside from the fact that the firm continues to bought on the open market by its billionaire Chairman & CEO Dr. Phillip Frost, Opko provides compelling risk/reward on the product-side. Finishing 1Q12 with $62M in cash and little cash burn, the company's financial position is solid and analysts find that no additional financing is needed over the visible term. Below, we review several of the company's catalysts.
First there is Claros - a potentially billion dollar plus solution that helps transition in-vitro medical diagnostics and away from the laboratory and into the bedroom. Providing quality blood tests in just 10 minutes, Claros will not only save customers costs but improve consumer satisfaction. The technology is expected to launch in the European Union this year.
The diagnostic firm also has major developments in treating Alzheimer's. Its Dx platform has shown 90% specificity and sensitivity in microarray assays. And to address any commercialization challenges, the platform has transitioned into enzyme-linked immunosorbent assay, where 72% sensitivity and 86% specificity has been shown shown. More data will be coming out in 2H12.
One catalyst that the market has failed to cover is 4Kscore, a next-generation prostate cancer screener that combines serine proteases and prostate specific antigen markers to improve accuracy. 1.2M prostate cancer biopsies are performed each year and a stunning 62.5% of them, according to Opko, are deemed unnecessary. While still being developed, 4Kscore appropriately targets positive secular demands. As the baby boomer generation hits retirement and healthcare costs grow, more demand will be placed on accurate and efficient cancer tests.
Then there is Rolapitant, which is currently in its Phase III trial, and has thus far demonstrated solid efficacy in preventing chemotherapy-induced nausea and vomiting. Phase II data demonstrated a rapid onset of action that substantially improved time-to-first emesis over the first 24 hours after chemotherapy. The benefit was frequently sustained through 120 hours. Whereas 32.2% of the control group reported emesis in 24 hours, only 9% of rolapitant patients did - a clinically significant amount. Since rolapitant has the potential for superior dosing than Emend, it may become the standard of care solution for delayed CINV patients and generate north of $700M in revenue at peak. Opko's valuation is less than 2x amount - indicating a considerable value discount on the market. Phase III data will come out some time in the second half of 2013.
As we get closer to the release of new data, increased speculation will help elevate multiples as the firm develops its other solutions that have failed to receive the necessary market attention. Next-generation PSA markets are still being developed, and a launch of NMO & AD Dx solutions are expected at least within the next three years (most likely by 2014). US prevalence of NMO, neuromyelitis optica, is estimated at 4K, but the US prevalence of multiple sclerosis is 350K and the Dx technology can be moved to this larger market if necessary. Accordingly, the upside is both strong and diversified.
From billion dollar developments in Alzheimer's, CINV, cancer, and blood testing to continued insider buying and investments in emerging markets, Opko has multiple value drivers and capital support. Fortunately, the way data results and commercialization dates have been scheduled, Opko has multiple products and multiple markets to fall back on should any one fail. The preponderance of existing data, however, has already demonstrated positive solutions to highly unmet medical needs, and we expect future data to yield similar results.
Disclaimer: The distributor of this research report, Gould Partners, is not a licensed investment adviser or broker dealer. We are a consultant to a third-party representing Opko and have been commissioned one thousand dollars for independent research. Investors are cautioned to perform their own due diligence as information contained within this report has been derived from public sources and cannot be guaranteed by us to be fully accurate. Always discuss investments with a licensed professional before making any financial decision. Statements made herein are often "forward-looking statements" as defined under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. Since these statements are uncertain, actual results may be materially different from those expected.
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