In my recent article on Opko, I discussed the company in detail, along with increasing insider interest in the company. Since then the company has released its earnings for the latest quarter, the earnings release for the third quarter of 2013 of Opko Health Inc. (OPK) on November 11, 2013, caused the shares to dip slightly as the losses widened. The shares were enjoying a rally following the news, on November 4, of a pivotal clinical validation study initiation for 4KscoreTM test, for predicting prostate cancer before a biopsy.
The shares also surged slightly following the increase in insider purchases by the CEO and chairman of the company Mr. Frost Philip. The shares owned by all insiders and 5% owners are 51% and 12% shares are owned by institutional owners.
In June, OPKO completed the acquisition of Prolor Biotech Inc., an Israeli biopharmaceutical company. The company also made strategic investments in Zebra Biologics and Arno Therapeutics (OTC:ARNI) in October, resulting in an addition in its pipeline. Furthermore, the Spanish subsidiary, Pharmadiet, expects to begin commercialization of citicoline in the first quarter of 2014, resulting in significant sales and earnings.
The company reported cash and equivalents of $180.8 million, as of September 30, 2013, an increase of 6.9% from the previous quarter cash of $169.1 million. The company has sufficient cash to sustain itself, despite posting wider losses and negative cash flows. However, the company will need excessive cash for the launch and commercialization of its prostate cancer test 4KscoreTM.
The revenues for the third quarter increased almost 75% at $20.6 million, as compared to $11.8 million in the relative period of 2012. The reason for the increase was attributed to the RNA interference agreement with RXi Pharmaceuticals (OTC:RXII), resulting in revenue of $12.5 million. The revenue when compared to the last quarter of 2013 fell approximately 13%.
The losses for the third quarter ended September 30 were $60 million as compared to the previous quarter loss of $3.4 million and a $10 million loss in the comparable period of 2012. The company attributed the substantial increase in the loss to increased clinical trial and operating activities and non-cash charges. The non-cash charges include $27.8 million in change in value of derivatives from the company's senior debt and $8.7 million from early conversion of its 2033 senior debts.
The company expects to commercially launch its 4KscoreTM in the first quarter of 2014. The pivotal validation study will be run in 15 different centers in the U.S. with an expected 1,200-patient enrollment. The results of the study will support the CLIA (clinical laboratory improvement amendments) validation as well as help securing the 4KscoreTM reimbursement. This will further strengthen the revenue of the company.
The company's deepened losses do pose a risk, but despite that, it is earning revenues and has enough cash to sustain its operations. Additionally, the company is also expected to receive revenues from its subsidiaries, as a result of sales of the upcoming products.
Opko is a lucrative investment owing to its sound management and upcoming catalysts. The company has been rated a strong buy by the analysts. The stock is expected to rise in the future and with the successful launch of the 4KscoreTM test, the prices will skyrocket and bring in major profits. This earnings report is another reiteration of my buy rating for the stock and also a good opportunity for investors to add to their position following the 4% earnings dip.