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Several Value Creating Events Ahead For OPKO Health


OPKO has achieved several important pipeline and commercial milestones over the last few quarters.

The 4Kscore test has grown to 5,300 a month in June.

The company is preparing for the Rayaldee launch in Q4 and for two important data readouts for two pipeline candidates.

The early/mid-stage pipeline has been expanded by the acquisition of Transition Diagnostics.

Several value-creating events ahead for OPKO.

OPKO Health (NASDAQ:OPK) has achieved a lot over the last few quarters and yet the company's share price is still stuck slightly below $10. The approval of Rayaldee marks a significant milestone for OPKO and the company is preparing for a launch in Q4 2016. The 4Kscore test has grown to 5,300 in the month of June and the broadening reimbursement should help accelerate its growth in 2017. The company also stands to start collecting more meaningful royalties from Varubi, which is marketed by Tesaro (NASDAQ:TSRO). There are also several catalysts that should drive OPKO higher over the next 12-18 months.

4Kscore test doing well; growth to accelerate in 2017

The 4Kscore test continues to do well. The company said on the Q2 call that 5,300 tests were done in June, up from 4,600 in April, helped by an increased sales push by the BioReference team. I noted one of the setbacks the test had in my previous article - OPKO received an initial draft positive coverage determination from Novitas Solutions which was then retired due to potential conflict with another MAC, Palmetto. Management noted that they did not submit complete dossiers to either of the two MACs and that both made coverage decisions on their own. In the meantime, the company has submitted a rebuttal to Palmetto's draft determination and will submit complete packages to both MACs. The company believes that "there is more than enough scientific and clinical data to justify a local positive coverage determination by any MAC." Palmetto should take action in September and the company hopes Novitas will post a draft positive coverage determination in October.

In November 2015, the American Medical Association granted a Category I CPT code for the 4Kscore test which will be effective January 2017. This should be a significant upgrade from the Category III Administrative code, and is a "designation reserved for established diagnostic tests, and will provide broader access to the 4Kscore Test to urologists and their patients across the United States" and "will help streamline claims processing and accelerate further coverage and adoption decisions by payers, physicians, and patients."

Getting positive draft determinations from Novitas Solutions and Palmetto should be a strong catalyst for further adoption of the 4Kscore test as well as the new Category I CPT code. The increasing media attention on unnecessary biopsies could also help with the growth efforts. Forbes reported that more than one million biopsies performed every year are unnecessary, costing the U.S. healthcare system $1.5 billion. 4Kscore offers a non-invasive and less stressful way of diagnosis - this study showed that (emphasis mine):

The 4Kscore Test results influenced biopsy...