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Opko Health Q1 Revenues Down 13 Percent

NEW YORK (360Dx) – Opko Health said after the close of the market on Tuesday that its first quarter revenues decreased 13 percent year over year.

For the three months ended March 31, the firm reported revenues of $222.5 million, down from $254.9 million in Q1 2018, and below the consensus Wall Street estimate of $241.3 million.

Service revenues were down 15 percent at $179.0 million from $211.3 million last year, and product revenues fell 9 percent to $25.3 million from $27.9 million, while revenues from the transfer of intellectual property rose 17 percent to $18.3 million from $15.7 million.

The company's R&D costs increased 11 percent year over year to $36.5 million from $32.9 million, while its SG&A spending rose 4 percent to $95.2 million from $91.5 million.

Opko posted a net loss of $80.8 million, or $.14 per share, for Q1 2019, compared to a net loss of $43.1 million, or $.08 per share, in Q1 2018. It fell short of the consensus Wall Street estimate of a loss of $.09 per share.

On a conference call following the release of the Q1 results, Opko Chairman and CEO Phillip Frost said that the company experienced a drop in sales of its 4kscore prostate cancer test during the quarter while its BioReference Laboratories business suffered from lower reimbursements driven by cuts made under the Protecting Access to Medicare Act of 2014 (PAMA).

Steven Rubin, Opko's executive VP of administration, said during the call that Opko processed roughly 19,400 4Kscore tests during the quarter, down 8 percent from Q1 2018. On Jan. 31 2019, Medicare administrator Novitas Solutions issued a notice of future non-coverage determination of the test that went into effect March 20, 2019. Rubin said the company has submitted a request to Novitas for reconsideration of the LCD and added that it plans this year to submit the test for US Food & Drug Administration approval or clearance.

Opko CFO Adam Logal noted that the decline in the company's service revenues reflected "the ever-challenging environment within payors for our laboratory business, specifically the compounding of the PAMA rate decreases along with payors implementing preauthorization requirements and enhanced denial rates on both our clinical laboratory testing as well as our genomic testing."

He added that the company was "aggressively working to manage these pay procedural changes and are increasing our appeals efforts" in hopes of improving reimbursement for its clinical testing.

Logal said Opko expects service revenues in Q2 to be between $170 million and $180 million, a year-over-year decline that he said would largely be due to "continued reimbursement pressures."

He projected Q2 product revenues in the range of $27 million to $29 million and Q2 expenses of between $280 million and $290 million.

Opko's GeneDx business saw a 17 percent growth in accessions compared to Q1 2018 with GeneDx launching new tests during the quarter for chronic kidney disease risk and hematologic, cardiac, and prenatal conditions. Rubin said GeneDx has more than 40 tests planned for launch this year, including for " renal, urologic, gastrointestinal, pulmonary, skeletal and other conditions."

Both BioReference and GeneDx were chosen as participants in UnitedHealthcare's Preferred Lab Network starting July 1, 2019. Additionally, as of April 1, 2019, both are in-network providers with Humana, giving them access to an additional 11 million lives.

The company exited Q1 with $207.3 million in cash, cash equivalents, and marketable securities.

On Wednesday morning trading on Nasdaq, Opko shares were down 6 percent to $2.21.