Message from Dr. Phillip Frost
Chairman and Chief Executive Officer of OPKO Health, Inc.
To our Stockholders,
I’d like to share with you some thoughts about my vision for OPKO. I also want to acknowledge some challenges that have adversely impacted our performance. While successes and challenges are part of our industry, let me reassure you that my personal dedication and commitment to OPKO, as well as the dedication and commitment of the entire executive team and our 5500 global employees, have never been stronger.
OPKO is a diverse company with assets that span clinical diagnostics, commercial drug products and a robust pipeline of future therapeutics. I strongly believe in the strength of these assets, individually and collectively. We recognize that the significant diversity and complexity in our business make it difficult to value but we believe the true value of our various components is not being recognized within the consolidated group. Our board and senior management team are continuing to explore various strategies to address these inefficiencies and improve our valuation. Most importantly, however, we expect to show progress and improvement throughout our operations.
Let me give you a few examples of what we are doing to turn the tide and increase stockholder value.
At BioReference Laboratories, over the past 13 months, we assembled a leadership team that is second to none. Quite frankly, it took us some time to secure the executives we now have in place, but that was time well spent. Jon Cohen and Geoff Monk have deep lab sector experience and bring both their individual and shared successes at Quest to the helm of BioReference. I have great confidence in their plans for the lab, and look forward to sharing news of our future progress.
The clinical reference laboratory business is being challenged by various industry-wide factors outside OPKO’s control, including declining reimbursement rates and increases in patient responsibility for the cost of services. While we can’t control these elements, one way to address them is to increase the sample volume and efficiency. In addition, we can work to contract with, and become in-network providers for the nation’s significant payors and health plans to make our testing more available and affordable to plan participants.
In the short time this leadership team has been in place, BioReference and its GeneDx subsidiary were selected for inclusion in the UnitedHealthcare Preferred Lab Network. More than 300 laboratories were invited to apply, and only seven – including our two laboratories – earned a place in the Preferred Lab Network. In addition, BioReference and GeneDx are now in-network providers with Humana, adding access to some 11 million lives. The team has been working hard to secure contracts with large independent physician groups, federally qualified health centers, and other large users of diagnostic services. Negotiations and contracts with these larger groups take longer, of course, to secure, but we are confident our efforts will bear fruit in the relatively near future.
We announced on June 20th that we have submitted a De Novo request to the U.S. FDA seeking regulatory clearance for our 4Kscore and continue to pursue Medicare coverage for the test. We believe the 4Kscore is an important tool in the prostate cancer diagnostic paradigm – providing vital information from a simple blood draw to men and their physicians about the likelihood of aggressive prostate cancer in men with elevated PSA levels.
We are encouraged that despite some reimbursement challenges with Medicare, 4Kscore continues to post strong utilization, and we are optimistic that obtaining FDA approval for the 4Kscore test will help enable us to expand coverage and reimbursement for the test. Our GeneDx unit also continues to be a star in our portfolio, with continued innovation in test menu offerings and growth in test volume.
Other recent successes with our diagnostics business include the recent approval of our point-of-care Sangia Total PSA test with the Claros 1 Analyzer. We are now working with the FDA to secure the necessary CLIA waiver and will also need to scale up manufacturing in order to introduce the test to the market. We plan to submit a second 510(k) to the FDA later this year for testosterone with the Claros 1 platform. We have received a number of questions regarding our strategy to launch and sell Claros. I will say simply that we are continuing to evaluate a number of commercialization strategies for Claros, including potential expansion of the test menu prior to commercialization. Although we have no current plans to outlicense the Claros technology, we frequently explore opportunities to grow and maximize value for our diagnostics business.
Turning now to the therapeutics side of OPKO, we are continuing to progress our pipeline. Utilizing our technology platform to extend duration of drug action, we expect to advance preclinical and clinical development for four new rare disease product candidates over the coming months.
I am growing more optimistic about Rayaldee’s progress. From the time we launched Rayaldee, we knew, and we stated publicly that the commercial uptake would take time as we educated physicians about the features and benefits of this drug. I’m pleased with the sustained momentum we have seen in the number of new prescriptions for Rayaldee, the number of prescribers and the number of patients taking our product. Supporting these trends are a larger sales force, new clinical trials to expand the product’s label, and a growing number of publications that make the case for treatment with Rayaldee.
Regarding our long-acting human growth hormone product, somatrogon, we remain on track to report data from our important Phase 3 trial in children in the fourth quarter of this year. This is a pivotal, non-inferiority study comparing a single weekly injection of somatrogon for 12 months with daily injections of Genotropin. We have a worldwide collaboration and profit-sharing agreement with Pfizer who will commercialize this product. The growth hormone market is approximately $3.5 billion and growing, with the pediatric indications representing over 80%.
These are among the multiple opportunities we have to create value for our shareholders.
I want to conclude by reiterating my personal commitment and the commitment of our senior management team, our employees and the Board of Directors to the success of OPKO Health. As a team, we have worked hard to advance our work and to be transparent about our successes and our challenges. We are energized by the prospects for all of our businesses.
I extend thanks to all of you who have maintained your support for OPKO through the years. I know it hasn’t been easy, but we look toward the future with optimism regarding our ability to have a positive impact on human health, and to build value for our stockholders.
Dr. Phillip Frost,
Chairman and Chief Executive Officer