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OPKO Health: Current Valuation Creates An Interesting Opportunity

Jun. 02, 2020 7:32 PM ETOPKO Health, Inc. (OPK)38 Comments
Henri Piiksi profile picture
Henri Piiksi


  • OPKO Health ran into SEC-related issues in 2018 and its stock price has plummeted since.
  • OPKO has a long history of operating losses, but it has the potential to change the situation.
  • OPKO's actions after the coronavirus outbreak may have shifted stakeholders' perceptions of the company.
  • OPKO's diagnostics unit is making progress and the company's pharmaceuticals unit is growing nicely.
  • Cheap valuation and current momentum create an interesting chance for both short-term and long-term investors.

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Current situation

OPKO Health (NASDAQ: NASDAQ:OPK) has not been able to regain trust from its investors after its controversies with the SEC in 2018. Lost confidence and slower than expected revenue growth have shown in Opko's stock price, which has plummeted 80% between August 2018 and April 2020. Opko's stock is also highly shorted with around 25% of the stock's float sold short.

However, Opko's important role in coronavirus testing might be the catalyst it has needed to gain back the lost confidence and justify a higher stock price. BioReference Laboratories, Opko's subsidiary, has managed to tie partnerships with different entities and is currently running PCR and antibody tests for coronavirus around the United States. The company has shown remarkable efficiency by setting up a PCR testing capacity of 700 000 in just a few weeks and has received a lot of positive news coverage for that.

Opko's insiders are currently buying the company's stock heavily. Especially CEO Phillip Frost is known for putting his money where his mouth is, and recently he has been buying Opko's stock at an accelerating pace.

Source: Author's calculations from SEC -filings.

Source: Thomson Reuters


Opko's problem has been a long streak of operating losses. Breakdown of Opko's income statement reveals that its expenses are currently unsustainable. For the last three years company's COGS, SG&A and R&D have averaged around 115% of revenues.

Source: Data gathered from Thomson Reuters

To address this problem, management has started a cost-reduction project, which's results should show up in the future. However, some progress has

This article was written by

Henri Piiksi profile picture
Business and economics student who uses his spare time by following the markets. Skilled in financial analysis and data-driven thinking. My investment horizon is mostly long-term (1+ years), but I occasionally take advantage of short-term mispricings in the markets. I'm also very interested in sustainable and behavioral finance and I try to bring that perspective to my analysis whenever I get the chance.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in OPK over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (38)

@henri Piiksi

Do you think OPK will give Q3 guidance in the upcoming Q2 ER?
Henri Piiksi profile picture
@amannheim_100I'm sorry for the delayed answer. But I believe they will give some guidance. However, giving detailed guidance in the current situation is hard since everything is very unpredictable at the moment.
@Henri Piiksi

Thank you for a very informative article. Have you thought of possibly updating your report on OPK in the near future? The stock action since you wrote your report may be telegraphing some substantial developments at OPK. Alternatively, it could be due to a short squeeze.

In any case, even a short updated report from you on OPK would be most welcome.
Henri Piiksi profile picture
@bargainsHi, I'm sorry for the delayed answer. I will update my report in the near future. However, in short, I think that majority of this current rise is due to the new contracts that BioReference has made. Currently, the stock is in a great position because of these contracts and the upcoming success with Rayaldee. Somatrogon is also likely to receive FDA approvement. I don't see much downside in the stock with the current information that we have.
downlimit profile picture
great analysis. charts, and comps: ev/ic, ev/rev, and liquidity. shorts at 26 % getting squeezed by the insider. 1.5 billion market cap. better than average volume day. 8% off a 52 week high. could print new high list this week. like it
OPK going to pop Monday guys, get in while you can.
Doctor's husband profile picture
Presenting data at meetings has never been a market mover for this company. If news does move the stock there's always a nice pullback to reward the careful. Just my opinion.
Ethan Roberts profile picture
If you look at the history of insider buying on OPK, you will see that Philip Frost has been a buyer of his company stock on a regular basis and at all different prices. Much of his shares at this point are probably down 60%-70%, but he's also been a buyer when OPK was scraping bottom, like it is now. It's one of those stocks you can buy a few hundred shares at two bucks and just forget it. One day you'll wake up to find the FDA has finally approved one of their many pipe lines, and the stock will be at $12. But that could be a long time from now.
What is a long tome horizon for u? 3?5?10? years ?
Ethan Roberts profile picture
Well, let's look at the long term history going back 14 years. In 2006, this was a penny stock. It rose to $6 a year later, only to fall back to less than a buck in the 2007-09 recession. Over the next six years it does a slow climb up as high as $17, but mostly on speculation. Meanwhile, Frost is buying up shares at almost every level. But 2015 was the peak, and it fell from there to almost a buck again this year. So now it's at $4. I guess it's a great trading stock if you get in low, but the buy and hold crowd at $16 might not be so happy. My only point was that nobody should get excited that Dr. Frost is buying shares, because he routinely does that no matter what the price.
Rgarga profile picture
did anyone else but Dr frost buy? anyone know anything about his health
AlieGee: Thanks for your response. I won't lose the benefit of the capital loss if I harvest it as I won't violate the wash sale rules if I buy it back. I will probably harvest the loss to offset gains made when I took money off the table earlier in the year. Whether I buy it back or not should be a more informed decision by year's end, or next year. It looks like something may break on the search for a vaccine. Let's hope so. Back to normal would be great. Makes one appreciate what was normal.
How does ASND have the market cap it does and OPK so much less? ASND's TransCon, contrary to what this "sugars" poster says nelow here is excreted water compared to CTP-hGH. But I guess you have to know scientists from PFE to know that.
OPK has a chronic problem of bad management team. Worse, there's nothing they can do about that because the CEO owns half of the company. Over the years, the shorts are making tons of $. And it's still one of the most shorted stock in the market. Unless there's major change of the management team, the stock will remain where it is now, unfortunately.
I have followed OPKO for years, noting Dr. Frost's insider buying. Of course much of this was at much higher levels than now. I am convinced that although Dr. Frost is much smarter than I will ever be, this company is highly speculative and not for the vast majority of investors. Too many other quality drug companies to consider, this one is a dog.
Good luck to you Henri. I read your bio and not much is mentioned about you.....Student, full time investor with years behind you, CPA, ?? etc.

Will you be writing about bio only?
Henri Piiksi profile picture
Thank you! I will write about a broad range of stocks. I'm always trying to find new ideas and perspectives. I did a quick update on my bio.
percentages of CAGR, sound nice but bottom line is very little revenue has been generated and barely increased revs expected...with a management team that moves @ Tortoise speed there is so much opportunity elsewhere that unless you want to put a little in a trust for your grand kids there not much going on, there's always potential but so far investors have gotten nothing but older...
Article does not address the blow out potential from CTP-Hgh. ASND has a market cap 5 times OPK's, and its TransCon (competitor of CTP-hGH) is quite iffy given its narrow patient testing base (1/3 of PFE/OPK) and only 2yr safety record. I look at ASND as the corner drug store in comparison to PFE's size, let's call is a big Norteast mall. The numbers on Covid-19 testing I think are not suffiently appreciated, either. Back to CTP-hGH: if PFE can generate $1.7 billion in revenues by 2022, OPK gets half of the profits-- no longer just legacy payments. That completely shifts OPK's forward p/e in a different light.
Henri Piiksi profile picture
Thank you for your feedback. I was aware that the numbers on COVID-19 testing probably were not sufficiently appreciated, but I didn't want to be overly optimistic. I think the revenues from COVID-19 PCR and antibody testing should at least fully compensate for revenue losses resulting from possible declines in non-urgent testing. There is some uncertainty on how much revenue COVID-19 testing could produce, but in the best case, it might be a lot. I agree with you on CTP-Hgh's great potential!
Super blowout CPT-hgh , I doubt it ! Not 5 yrs ago . Not now. Rayaldee, 4kscore, Varubi, and now CPT-HGH. Built up as Potential blockbusters. So far ---- Piddling !!!!
Has anyone heard about this big demand a new Hgh drug?
Be veeeery careful with this company.
mrmeman profile picture
Well Pfizer (HgH drug partner) sold $475M worth of their current HgH drug last year and PFE is in charge of commercialization of the new/improved drug. 1/2B dollars annually seems like decent demand, but you haven't heard of it, so I'm sure its not real.
AlieGee:Where be you? Hopefully you are still aboard. I can't stomach a $20,000 loss at this point in "harvesting" capital losses except it will offset capital gains I have harvested this year. I am up to my limit in single security investments, so don't want to buy more to decrease my average cost basis. I have decided to hang on , at least towards year end. If I need the loss, I will harvest it. Perhaps buying back avoiding applicable 30 day rules. Things appear to be turning on the good side for a change, but they have a long way to go to bail me out.. Hell, I would be happy to get back 50%. What are your thoughts? Be safe out there.
Howdy @NuGy - - I'm here...Thanks for your kind words to be safe...Same to you. I'm hanging in. I don't have the large loss you do so that's why I
will hold. I do see potential but shorts seem to be having a party.....Kind of
like looting we've been seeing.
As far as selling at a loss and then buying back within 31 days, what you
lose is the tax loss benefit. Nothing more, nothing less.

Good luck....
Doctor's husband profile picture
Henri welcome. Please expand your bio info. I appreciate your contribution. My family and I highly respect Dr Frost as a scientist and businessman and know him to be a true humanitarian. That being said, I hope he has another good 3 to 5 years to realize his dreams with OPKO. We can't ignore his advanced age. The fast money amateurs who often don't understand what they are buying, drawn into the stock Covid will likely get beaten by the shorts. That being said, I am increasingly confident the company and will eventually thrive and reward investors .
Henri Piiksi profile picture
Thank you for your words!
I second that Doctor's husband. I lived in Miami and yearly met the Doctor. Made good money on Ivax, teva and Key. This is a difficult one I admit but hanging in.
invest in quality companies not garbage like OPK. There is a reason a stock is a dollar or two.
Swich Research profile picture
Good article but I would have liked to see ratings from large institutions instead of Zacks (no offense) and I would have liked a little more clarity on the share price estimation. I'm still trying to make sense of it.
Henri Piiksi profile picture
Hi, thank you for your feedback. Zacks' rating is based on large institutions' revisions of Opko's earnings estimates, so it implicitly takes into consideration those large institutions. Analysts' mean target price of $4.20 also includes large institutions (e.g. Barrington Research with a price target of $4). As for the clarity of share price estimation, I understand your point. I take that on note for the future.
Swich Research profile picture
Thank you Henri.
If you're looking for the larger brokerage firms to rate, they don't on low priced stocks. I believe the minimum is 10.00
Should have thanks to Dr. Cohen for getting BRL the contracts, PR etc regarding Covid. Other than that great article.
I think it’s all up from here for OPK.

Covid-19 testing will carry them until Rayaldee and 4K Score testing pick up and that will carry them until their new drugs are approved.
4K will be a revenue generator..
very impressive analysis. company still has to overcome its checkered reputation
Henri Piiksi profile picture
Thank you for your words! I agree with you. Opko's bad reputation is clearly causing harm to its stock price performance.
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