For the past couple of years, shorting Opko Health Stock has been a winning bet for the bears. Every rally has been an opportunity to re-short and for the bears to keep building their position. However, we think this time is different. The shorts have overplayed their hand and are about to give back all of their previous profits and then some. As we take a closer look, there’s a lot for the bulls to be excited about.
About Opko Health Stock
First up, here’s a little background for those that aren’t familiar with Opko Health stock. Opko Health runs a diversified healthcare business. Its unit known as BioReference Laboratories is one of America’s largest full-service clinical laboratories, providing comprehensive disease testing service. The company also has a pharmaceutical division through which it is engaged in developing treatments for various health conditions, including diabetes and cancers.
BioReference provides comprehensive testing to physicians, clinics, hospitals, employers, government units, correctional institutions, and medical groups. BioReference has been working expeditiously to develop and offer test services that will yield high quality and accurate results, including a molecular test for helping with COVID-19 diagnosis and an antibody test to help indicate possible COVID-19 exposure. The company is in-network with the five largest health plans in the United States, operates a network of 11 laboratory locations, and is backed by a medical staff of more than 120 M.D., Ph.D. and other professional level clinicians and scientists.
Since the beginning of the COVID-19 pandemic, BioReference has performed 222,000 COVID-19 PCR and 3,500 antibody tests in over 350 facilities. Jon R. Cohen, M.D., Executive Chairman of BioReference Laboratories, said:
“Of the 3,500 nursing home staff that we tested, 29% were positive for antibodies. The very high positivity rate of antibodies in this employee group by early May would suggest that a significant number of nursing home employees had active COVID-19 disease early on in the outbreak. Although the overall positivity rate for active infection is now low, over 6,000 employees were identified with an active virus when we tested in May and June. By identifying these individuals, the mandatory testing program most likely prevented the further spread of the virus to thousands of vulnerable nursing home residents. Although it is impossible to calculate, many deaths had to have been prevented. Throughout this unrelenting health crisis, BioReference has made it a priority to provide testing to those at an increased risk of COVID-19 infection, and we are proud of our efforts to help combat the spread of this virus.”
Pharmaceutical sales account for just 20% of revenues, but we think that will change with Rayaldee. Rayaldee treats secondary hyperparathyroidism in patients with stage 3-4 chronic kidney disease (CKD) and vitamin D insufficiency. Opko Health is also currently running phase 2 open-label trials for Rayaldee for patients with stage 5 chronic kidney disease and vitamin D insufficiency. Phase 2 trials for this higher strength Rayaldee are expected to be completed this year.
Rayaldee is the only medicine approved by the FDA to treat secondary hyperparathyroidism in stage 3-4 CKD. According to the National Kidney Foundation, 10% of the population worldwide is affected by chronic kidney disease and millions die each year because they do not have access to affordable treatment. The prevalence of chronic kidney disease is also expected to increase due to obesity, diabetes, hypertension, and an aging population. These factors have created a natural demand for Rayaldee, and no other treatment is close to reaching FDA acceptance.
Rayaldee has already had an amazing 92% YoY CAGR in prescriptions between 2017-2019 and its sales in Q1-2020 were also up 79% from Q1-2019. Rayaldee is also expected to be approved and launched in Europe during the second half of 2020. Current studies of Rayaldee’s effectiveness on stage 5 chronic kidney disease patients have shown very promising results, which are expected to be released fully in the second half of 2020.
Rayaldee already had sales of $66 million in 2019, and its demand is expected to grow. BioReference also has Pfizer as a partner shows how much potential the pharmaceuticals unit truly has. The FDA has also recently authorized a clinical trial to evaluate Rayaldee in COVID-19 patients.
One of the year’s biggest highlights was obtaining the favorable top-line results of the global Phase III trial evaluating somatrogon dosed once weekly in prepubertal children with growth hormone deficiency. Somatrogon represents a significant advance in the treatment of children with a growth hormone deficiency that should improve adherence to treatment and enhance the quality of life compared with the current standard of daily injections.
The trial successfully met its primary endpoint of noninferiority to GENOTROPIN injected daily with respect to height velocity after 12 months. The global enrollment is part of a strategy that enables Pfizer to seek approval to commercialize somatrogon on a worldwide basis. We expect Pfizer to submit the Biologics License Application to the FDA in the second half of 2020. In Europe, we expect a Market Authorization Application to be submitted upon the completion of an open-label study, demonstrating greater benefit and compliance with reduced treatment burden, which is expected to be completed in the third quarter of 2020. The registration study in pediatric GHD patients in Japan is on track for completion by the end of the first quarter with top-line data readout expected in the second half of 2020.
Under Opko’s agreement with Pfizer, Opko Health stock is eligible to receive up to $275 million upon the achievement of certain regulatory and pricing milestones. In addition, following product launches in certain major markets, the company is entitled to regional tiered gross profit sharing for both somatrogon and Pfizer’s GENOTROPIN.
Dr. Phil Frost
No mention of Opko Health Stock can be complete without talking about Dr. Phil Frost. Find me another Chairman and CEO buying stock in their company like Dr. Frost is.
All this buying is just since November of last year and NO selling. Countless investors have made a fortune investing alongside him with Ivax, Teva, Key. Opko may be taking the longest to play out, but it could be the biggest payday yet.
Bullish Trading Activity
As Opko Health stock has slowly climbed, the shorts have been more emboldened. They have increased their short percentage from 20% of the float to now 29%. This is a very high short position and has the makings of an epic short squeeze. The options market thinks this is likely and there’s been a lot of unusual call buying happening at the $4 and $5 strike prices.
Currently trading with a market cap of $2.2 billion, Opko Health stock is one of the most exciting small-cap biotech plays for investors. The dips are to be bought as a short squeeze is coming. It’s not a matter of if, but when, especially when you consider the company’s COVID-19 testing capabilities and its blockbuster drug line-up. Dr. Frost is like an artist and Opko Health stock could be his final masterpiece before he retires. There’s a reason a man worth $2 billion is at the helm of Opko. It’s not the money, but to cement his legacy as a biotech pioneer. That legacy will be Opko Health.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:OPK or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.