OPKO Health, Inc. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing also reports unaudited fourth-quarter results. OPKO operates diagnostics, principally BioReference Laboratories, and pharmaceuticals, including Rayaldee and a development pipeline.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $1.775 billion | $1.435 billion |
| Operating income | $18.8 million | $57.7 million |
| Net income (loss) | $(30.1) million | $30.6 million |
| Cash from operating activities | $38.3 million | $39.5 million |
| Cash and cash equivalents at year-end | $134.7 million | $72.2 million |
| Total debt disclosed | $205.3 million | $251.2 million |
Revenue grew 24%, primarily from COVID-19 testing. Operating margin was approximately 1.1%, down from 4.0%; net margin was approximately (1.7)%, versus 2.1%. Cost of revenue rose 33%, faster than revenue, while selling, general and administrative expense rose 32%. Research and development expense was $76.9 million, compared with $75.3 million.
Fourth-quarter 2021 revenue was $401.3 million, down from $494.7 million in Q4 2020. The quarter reported a net loss of $73.8 million, or $0.11 per share, versus net income of $32.3 million, or $0.05 per share, a year earlier. The filing does not clearly attribute the entire fourth-quarter loss to a single cause.
Diagnostics generated $1.607 billion of revenue and $98.1 million of operating income, down from $138.9 million. Pharmaceuticals generated $167.6 million of revenue and had a $19.1 million operating loss, improved from a $43.5 million loss. Corporate operating loss increased to $60.3 million from $37.7 million, principally due to higher legal fees.
Current assets were $823.0 million and current liabilities were $330.0 million at year-end. Debt included $119.4 million of 2025 convertible notes, $65.5 million of 2023 convertible notes, $3.1 million of 2033 senior notes, and $13.7 million drawn on Chilean and Spanish credit lines. No balance was drawn on BioReference’s $75 million revolving facility; $64.8 million remained available. Management said available cash, operating cash flow and credit lines were expected to fund operations and debt service beyond 12 months, while emphasizing that assumptions and COVID-related cash flows are uncertain.
Material changes and notable items
- COVID-19 testing contributed to service revenue increasing by $344.9 million year over year. BioReference performed 11.9 million molecular COVID-19 tests and 0.7 million antibody tests in 2021; together these represented 58.5% of total test volume. Demand declined in the second half of the year.
- Excluding COVID-19 testing, genomic and routine clinical test volumes increased 26.4% and 6.9%, respectively, compared with 2020. Management described routine testing as trending toward normalization.
- Rayaldee U.S. sales fell to $27.0 million from $36.8 million. Fourth-quarter prescriptions were down approximately 28.8% year over year; the company cited pandemic-related difficulty onboarding patients. An inventory reserve of $3.8 million was recorded.
- A $31.5 million gain followed the sale of an Irish facility for $65 million in cash, less certain assumed and accrued liabilities. The sale also contributed to investing cash flow; capital expenditures were $32.2 million.
- Positive revenue adjustments of $40.4 million related to estimates for services performed in prior periods were recognized in 2021, versus $0.3 million in 2020. Revenue depends on estimates of payer collections, reimbursement and price concessions.
- OPKO exchanged $55.4 million principal amount of 2025 notes for 19.1 million common shares and recorded an $11.1 million non-cash loss. This reduced debt but increased shares outstanding.
- GeneDx was classified as held for sale at year-end. A January 2022 agreement provides for $150 million cash and 80 million Sema4 shares, plus up to $150 million in revenue-based consideration. The transaction was expected to close in Q2 2022; the share value and potential impairment are uncertain.
Outlook, risks and contingencies
- No quantified 2022 revenue or earnings guidance is provided. Management expects COVID-19 testing demand to remain uncertain and notes that lower testing volumes or reimbursement could pressure results and liquidity.
- Somatrogon received approvals in Canada and Australia in 2021 and in Japan and the EU in early 2022. The FDA issued a Complete Response Letter in January 2022; OPKO and Pfizer were evaluating the agency’s comments. U.S. approval, launch timing and related milestones remain uncertain.
- Rayaldee received FDA approval for the 4Kscore test in December 2021, and a Phase 2 Rayaldee trial for mild-to-moderate COVID-19 reported preliminary results suggesting earlier resolution of respiratory symptoms. Further development and commercial outcomes are not assured.
- BioReference’s DOJ investigation concerns alleged remuneration to healthcare practitioners and related claims. The company reported a verbal agreement on an anticipated settlement of approximately $10 million, excluding attorney fees. A separate relator complaint alleging federal and state false-claims and kickback violations was served in February 2022; the company said it could not determine the merits or potential liability, which could be material.
- OPKO is contesting a foreign tax assessment of approximately $66 million, including interest, which it considers without technical merit. An adverse outcome could materially affect financial results and cash flows.
- Goodwill and other intangible assets totaled approximately $1.4 billion. No impairment was recorded in 2021, but management identified sensitivity to operating performance and assumptions; the Biologics reporting unit’s estimated fair value exceeded carrying value by approximately 19% in the 2021 test.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective. The auditors identified goodwill/IPR&D valuation and service-revenue variable consideration as critical audit matters.
Investor facts to verify
- How much of 2021’s revenue and operating cash flow is repeatable as COVID-19 testing volumes decline, and whether core diagnostic volumes and margins can offset that decline.
- The drivers of Q4 2021’s $73.8 million net loss and the size and sustainability of the $40.4 million prior-period revenue estimate adjustment.
- GeneDx transaction closing, realized value of Sema4 shares, achievement of revenue milestones, and any resulting impairment or cash proceeds.
- The FDA’s Somatrogon follow-up requirements, revised U.S. approval timeline, and effects on expected milestone or profit-share revenue.
- Final resolution and cash cost of the DOJ matters, other government inquiries, and the contested foreign tax assessment.
- Rayaldee prescription trends, reimbursement coverage and commercial performance, as well as the impact of debt maturities, purchase commitments and available credit.