Barrington Research analyst Charley R. Jones reiterate an Outperform rating for Opko Health Inc. (NYSE:OPK) as the Claros and Peptoid diagnostic platforms provide an enticing opportunity for the company.
Opko Health completes the calibration confirmation of its 4KscoreTM algorithm
On Thursday, February 13, Opko Health Inc. (NYSE:OPK) announced the successful completion of the calibration confirmation of its 4KscoreTM algorithm validation study currently underway at 21 urology clinics. We had a chance to meet with the new head, Dr. David Okrongly, Ph.D., of Opko Health ’s diagnostics division recently and we came away feeling very confident about each of OPK’s diagnostic programs. In addition, we came away knowing that Opko Health now has the right person running that division. We believe his background and experience, such as running Siemens molecular diagnostics division, is a perfect fit, because of his large company experience, which we believe will be important for Opko Health as we expect revenues to be far greater than $1 billion eventually. He will also be vital in evaluating new technologies which will be important for Opko Health’s future.
We were first attracted to Opko Health Inc. (NYSE:OPK) because of the Claros and Peptoid diagnostic platforms out of Scripps, but we always recognized that the 4Kscore could have a $500 million potential if the urology community is open to change. We believe it should be and we also believe 4kScore is a great start to getting the best treatment of this disease on track. The confirmation of the 4Kscore algorithm should provide investors some confidence that the investments Opko Health has been making are beginning to ripen. In the case of peptoids, there is unlikely to be an Alzheimer’s test by 2017, however, our confidence that this platform will be vital for a number of autoimmune related diseases remains very high. Finally, the Claros point of care diagnostic platform is going very well and we expect the first test to be approved in 2014 for testosterone. We believe Claros could change the field of diagnostics given the per test cost structure.
Valuation
Although we have focused on Opko Health Inc. (NYSE:OPK)’s diagnostic pipeline in the paragraphs above, we are equally, if not more excited, about several therapeutic platforms such as Rayaldy for Vitamin D deficiency and CTP for sustained release of proteins and single stranded-oglioneucleotides for genetic diseases. It has been our opinion since first being introduced to Opko Health, that Dr. Frost’s goal was to build a diagnostic and biotechnology powerhouse that simultaneously provides society with funding required to more seamlessly bring game changing products to market and the experience and relationships to execute it. We consider Prolor’s CTP technology and single stranded that are each potentially multi-billion dollar platforms with many possible drugs and diseases to benefit. In addition, Rayaldy is in its Phase II for CKD, which could be almost a $10 billion category for Rayaldy. We are reiterating our OUTPERFORM rating and $11 price target.
