Welcome to the OPKO Health 2016 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we’ll hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded March 1, 2017. I would now like to turn the conference over to Anne Marie Fields. Please go ahead.

Thank you, Doris. Thank you and good afternoon. This is Anne Marie Fields with LHA. Thank you all for joining today’s call. I’d like to remind you that any statements made during this call other than statements of historical fact will be considered forward-looking and as such will be subject to risks and uncertainties that could materially affect the company’s expected results. Those forward-looking statements include, without limitation, the various risks described in the company’s annual report on Form 10-K for the year ended December 31, 2016 and its subsequent filings with the SEC. Before we begin, let me review the format for today’s call. Dr. Phillip Frost, Chairman and Chief Executive Officer of OPKO, will provide opening remarks; and then he will turn the call over to Steven Rubin, OPKO’s Executive Vice President, he’ll provide an update on the company’s various businesses and clinical programs; he will then turn the call over to Adam Logal, OPKO’s Chief Financial Officer, for review of the financials. After that Dr. Frost will provide closing remarks and then we will take questions. Now, I’d like to turn the call over to Dr. Frost. Dr. Frost?

Thank you. I would like to start by saying that we’re very proud here at OPKO of our achievements during 2016. First milestone that we’re proud of was launch of RAYALDEE, our drug to treat secondary hyperparathyroidism and low vitamin D levels in Phase 3 and 4 patients with chronic kidney disease. We invested quite a lot in building a marketing and sales team and other infrastructure, and we are very confident that this is going to turn out to be a significant product to help these patients. Our second milestone of which we’re proud is the acquisition of Transition Pharmaceuticals. Transition was a small company located in Canada led by an experienced team and headed by Dr. Tony Cruz, a well-known and terrific developer of new drugs. They had several products, two of which we’re extremely excited about. One is an oxyntomodulin molecule, similar in a way to the one that we had working on at OPKO achieved as that we acquired as part of the PROLOR acquisition, but the good thing about their product is that it was further along. It had already been in 400 people and had been shown to be safe and effective. So we will enter a new trial with product, a Phase 2 trial to determine the optimal dosing schedule to achieve maximal efficacy for treating obesity and secondary and type 2 diabetes. The second product, which we are working and that we have a lot of enthusiasm for, is in the category of SARMS, which stands for selective androgen receptor modulator. And although it had been developed to treat a different set of conditions, when we look at the data, it appeared to us that it was an ideal candidate to treat benign prostatic hypertrophy, or BPH. It had already been in…

Thank you, Phil, and good afternoon and thank you all for joining us on today’s call. We are very pleased with our 2016 performance as we increased revenue to over $1.2 billion and made significant clinical and commercial progress that positions us for substantial short-term and long-term growth. For today’s call, I will discuss our progress across our therapeutics and diagnostic businesses. Then I’ll turn the call over to Adam for a review of our financial performance. Let me begin with an update on RAYALDEE, our FDA approved therapy for the treatment of secondary hyperparathyroidism, or SHPT, in adult patients with Stage 3 or 4 chronic kidney disease and vitamin D insufficiency. We launched RAYALDEE at the end of November with a team of 50 highly qualified professionals with considerable experience and notable past successes in the nephrology market, comprised of territory managers, field-based sales reps, and medical science liaisons. We also have over 100 key opinion leaders supporting this launch and they are meeting with physicians in a variety of settings on a continuous basis to educate them on the SHP disease stage and RAYALDEE’s benefits. The input shown by clinicians is strong and the feedback on RAYALDEE has been very positive. We continue to find-tune our commercial strategy and tactics as we learn more about the needs of our target healthcare providers, patients, and our payers. We are undertaking a comprehensive ongoing market education campaign to highlight the unmet medical need of effectively and safely treating SHPT and the underlying vitamin D insufficiency in patients with chronic kidney disease or CKD. RAYALDEE is the only FDA-approved therapy that lowers parathyroid hormone, or PTH levels, by correcting the vitamin D insufficiency. RAYALDEE is approved for treatment of SHPT in adults with Stage 3 or 4 CKD, a population numbering…

Thank you Steve and good afternoon everyone. During the quarter ended December 31, 2016 revenue was $276 million, which was consistent with the comparable period of 2015. Revenue for the 2016 period benefited from an increase of revenue at our BioReference operations of approximately 6%. While the 2015 period benefited from a non-recurring $15 million milestone from TESARO. We continue to make our efforts to improve the financial performance of BioReference through revenue cycle management program. As I mentioned on our last call, the most critical component of this program was the successful implementation of a new billing system which occurred on October 1. We continue to evaluate and improve our overall revenue cycle from the customers we service to improving our positions with the insurance companies and importantly the way we build and collect from our customers and patients. Our investments in our pharmaceutical and diagnostic research and development programs reached nearly $28 million during the quarter, compared to $25 million for the 2015 period. Loss from operations for the three months ended December 31, 2016 was $50 million, compared to $8 million for the comparable period of 2015. As I mentioned the 2015 period benefited from a $15 million milestone payment received from TESARO. During the fourth quarter of 2016, SG&A expense included approximately $13 million related to the launch of Varubi. There were a number of launch initiatives that occurred during the fourth quarter of 2016, including a sales training and launch meetings, as well as the largest trade show of the year where we introduced Varubi due to the nephrology community. This was also the first full quarter with our first full commercial team in place. Our balance sheet remains strong in a position with approximately $160 million of cash and cash equivalents and we also…

I’ll close by just repeating that I personally am very, very satisfied with what we have going on now at OPKO. The products that we have on the market, 4Kscore to identify men at risk for developing prostate cancer or having prostate cancer; RAYALDEE a unique product to treat the stage three and four kidney disease patients who have low Vitamin D levels and secondary hypoparathyroidism. These are both unique products and that’s what I really like. I really like. I like to be able to go out there with products that have their own story with limited competition. The pipeline I can only characterize as being outstanding. You can tell from my tone of voice that I’m very enthusiastic about the SARM, the molecule that we have with the Transition acquisition to treat benign prostatic hypertrophy. You can imagine with the constellation of properties of decreasing body fat, increasing muscle mass and bone strength, and at the same time lowering the PSA and decreasing the size of the prostate and therefore helping with the symptoms of BPH. You can imagine that’s a product whose appeal would be irresistible by physicians and patients who require it. And I should tell you that in the United States alone, there are approximately 50 million men who suffer form BPH. So the market is, to say the least, quite large. The oxyntomodulin product, the dual-acting agonist for treating obesity and type II diabetes, that has the potential to be the best drug in its class to treat these conditions. We will know a little bit more after next trial, but what I said is absolutely true. It can be the best drug in its class. And so far as BioReference is concerned, you heard that we are working on making it more efficient. It already is generating nice cash flow. We’re hoping that that will only increase. It’s helping with the marketing of the 4K product. And it wasn’t beyond that you can only imagine that we are very open to a new initiatives that will take that whole business to another level. We spent time considering such possibilities. With that I will open the floor to questions.

[Operator Instructions] One moment please for the first question. Our first question is from the line of Dana Flanders with JPMorgan.

Hi, thank you for the questions. Just my first can you provide some more color on just what you’re seeing in the RAYALDEE launch. I know it’s still relatively early and Scripps have picked up in the last couple weeks, but so far it’s running a little bit below our expectations and maybe if you could just comment on what you think you’re doing well, what needs to be worked on and just how you plan to accelerate Scripps going forward? And then I have a few follow-ups.

We have with us Director of Marketing and Sales, Tom Nusbickel. So he’d be happy to have a try at that.

Yes. So the product has been very well received in the marketplace by the physicians. But again the physicians are also very busy and they need to continue to be educated in regards to what the significant consequences are of Vitamin D insufficiency and as I speak to you in this CKD 3 and 4 population. And so we have been working to ensure that we are getting closely aligned sales and medical calls to address the key concerns that physicians have and to create champions who will go forward and basically help us continue to grow the business quickly. We’ve been seeing a lot of physicians now that are writing multiple prescriptions that are in the large practices, they are local and national though leaders. So we’re excited about we have found the mix and that we will continue to increase the business. And as was mentioned earlier, as we continue to improve our reimbursement situation through continued to negotiate contracts with the [indiscernible] payors, we expect that will also help us to take off even more quickly.

I would just add that because this is a novel product with a novel mechanism of action it’s something that the physicians are not accustomed to and therefore requires a little more education. But as they learn about it, they become very enthusiastic about it and in my own view is can’t guarantee it of course is that this will start to move geometrically.

Okay great. And on the 4K score, what’s your level of discussion right now with Novitas? I know they’re paying for it but what’s the holdup? And when you expect them to give an answer in their next review cycle or maybe just some more color on timing there.

So Dan Novitas, it’s difficult to tell the timing we haven’t had a lot of constant interaction with Novitas, we provide supplements from time to time as we complete other clinical studies, but and they acknowledge of course receipt of the studies and perhaps ask questions but it’s not a day-to-day interaction so we actually have reached out to them to see when they’re going to do any of their February cycle, but they have done none as I mentioned. So we’re not singled out as they just haven’t no diagnostic test received new LCDs in February, we just have to assume it’s coming up.

Okay. And maybe just my last one and I will turn back into queue. Adam, I know you mentioned better cash conversion on BRL over the course of 2017 and into 2018 and I think you said it was $1 billion of revenue and $120 million in operating cash flow if I have not mistaken. Can you just help us understand the magnitude of better cash conversion that we can see as we go into 2018 just on an annualized basis? Thank you.

Thanks Dana. When we target where from an operating metrics that we think the BioReference should be in on an EBITDA basis somewhere between 15% and 20% on a normalized basis. So I think that’s where we’re striving to go to and I think during 2017 we’ll make good progress on that and be able to realize that during 2017.

Okay great, thanks.

Our next question is from the line of Brandon Couillard with Jefferies.

Thanks, good afternoon. Adam back on RAYALDEE in the context of the IMS script trends could you give us some goalposts some parameters of how to think about revenue contributions from that drug this year?

Yesso Brandon I think from an overall perspective we’re not in the position where we’re going to guide to and I think where we want to make sure we’re focused or certainly make sure you know where we’re focused is working toward getting about 75% to 80% of covered lives, get that market that window open. And then really to measure ourselves on script growth. So I think to the point you made and what Dana made a few minutes ago was the scripts are growing, they’re not where we expect or hope them to be, but we expect to see now that we’re getting more market access to see those numbers start to grow over time. Really the story for us and where we’re measuring ourselves is opening that market access in and see the script grow come.

Maybe one for Steven. Do you have any type of timeline you can share with respect to the hGH program and when you might get – when you might expect to file and get some sign-off from the FDA on the – I guess one outlier analysis?

This is Tony Cruz who’s sitting with us who will respond.

Yes I think Steve already mentioned that we’re working really diligently with Pfizer to make sure that the data is properly validated so that everything is ready including the documentation from the previous studies for support that adult study for FDA inspection ready. And once that’s done then the plan is to progress and do an analysis and find that analysis then do a BLA submission. That is actually going to be carried out by Pfizer. So until that is complete we really don’t have timeline and it’s partially dependent on both Pfizer and OPKO to agree that it’s ready to move forward. So I think over the next few months we’ll have a better idea of the timeline for the submission BLA submission.

Thanks. Just one on Claros. Would you report out any top-line data readouts from the PSA study at any point before the filing and if so when and what [indiscernible] you might that might be?

Hi this is Dave Okrongly. I’ll take that one. We submitted an abstract to the AACC which will hopefully be accepted and we expect to report some data at that meeting, the American Association of Clinical Chemistry meeting.

Super. Well, I think that’s all. Thank you.

Thank you.

Our next question is from the line of Kevin DeGeeter with Ladenburg.

Good afternoon guys. Thanks for taking my questions. Just kind of getting back to the RAYALDEE market access theme, tor the 50% of patients who have plans that require prior authorization, just any sense as to what percentage of patients ultimately are deemed appropriate candidates and how that may evolve as your experience matures with the plans?

The experience that we’ve seen to date is that nearly all of the patients meet their requirements for their prior authorization based on their PTH score their 25-D levels and their indications. But again as with anything, we need to ensure that the proper documentation is submitted and we’ve provided comprehensive services and other programs to ensure that that success rate is as high as possible. But we’re shooting for a 90 are ninety or better.

Great. And then just going over to Claros as well for a moment. As we think about later in 2017 building out and thinking about commercialization potentially of Claros, how should we think about potential synergies between either the BioReference salesforce or even the RAYALDEE salesforce depending on where the menu goes. Should we think about Claros as largely a new and to some extent standalone salesforce?

Well, it’s always been our intention to utilize the BioReference sales team for sales and as our menu, particularly bringing onboard vitamin D and PTH, which is in our menu plans. That would also then play very nicely with the RAYALDEE salesforce, as well.

And then just lastly and then I’ll get back in the queue. Just to follow-up on your observation with regard to menu expansion for Vitamin D. Have all the technical specifications at this point been largely addressed to be able to bring a Vitamin D to test market or is there additional optimization that still needs to be done there, before considering moving forward for potential validation registration study?

Good question and we’ve been working on it here. I’m actually into [indiscernible] facility today. Yes there’s been some progress on the development where we’re not ready to declare victory on the feasibility, but we’re making progress. And we’re confident that we can bring something out here in a reasonable timeframe to support launch of RAYALDEE and really bring the two diagnostics that are really critical for use and monitoring RAYALDEE therapy which is Vitamin D and PTH.

Great thanks so much. I’ll get back into queue.

Our next question is from the line of Yale Jen with Laidlaw.

Good afternoon and thanks for taking the question. I also that where RAYALDEE that the encourage you have roughly 60% of the life covered. Was that to meet your expectations, exceeds that or under that at this point?

I think when we went into the launched not necessarily knowing how all payors would respond, we had set some goals of trying to be at about 60% by June 30. So I think we’re a little ahead of schedule on a couple of the payors. I think for us to get from the current 60% to the 75% to 80% is going to be a much longer discussion. And there are various review meetings scheduled in the summer. So I don’t think we’re going to see further acceleration. But certainly working hard to get as many as we can on in place now.

And second question is about the BioReference lab revenue of the fourth quarter. It seems to be slightly lower than the last year, the same quarter. Do you anticipate financial performance in 2017 and beyond, was that mainly from more streamlining the operation or you anticipate a greater topline growth as well going forward?

Yes so comparing 2016 fourth quarter to the fourth quarter of 2015 we did see about – 6% growth quarter-over-quarter. So that was about a $13 million or so increase in overall revenue. We historically the fourth quarter provide reference and we’ve realized that again this quarter in the fourth quarter of this year is a lighter quarter just based on patient visits to physician office volumes overall in general. So I do think the growth that we saw in 2016 for BioReference revenue our target is certainly to continue to grow in that 10% range on year-on-year basis.

My last question, thanks for that. My last question is for the Factor VII that the IV Phase 1-2 study, anytime you have planned for talking on your reporting the data and what might be the next step to reconcile between the IV and sub-Q openly move forward or are they going to move concurrently into separate formats?

We plan on bringing both to market because you need to have for surgery and rescue you don’t need to have the IV version, the sub-cutaneous would ideally be used for prophylactically. So we intend to bring both forward. So the two-way sub-Q dose range study in patients hemophiliac and the Phase 1 sub-cutaneous sets ongoing now as well as in healthy individuals. So the next step both will be – we’ll meet with FDA and the intention is try to do a Phase 2 that will roll into a Phase 3. That’s really required subsequent meeting with FDA. But again we intended develop both dosage forms.

And this meeting with FDA could be in 2017 or that will be in next year?

It will be in 2017.

Okay great. Thanks a lot I appreciate it.

And that is all the time for questions we have today. Dr. Frost please go ahead with your closing remarks.

I just like to thank everybody for participating and we’re all here to answer any further questions if you wish to give us a call tomorrow. Thank you.

Dr. Frost we do have another question that has come into queue. Do you have time to take that?

Sure.

We do have a follow-up from the line of Brandon Couillard with Jefferies.

Sorry not sure this is worth halting the end of the call. But just curious on what you can share some doc. metrics like number of neurologists or perhaps the size of the GP uptake to a number of doctors if you can share with us there?

So Brandon I think it’s fairly consistent with a little over 5,000 ordering physicians that we’ve had, we’ve talked about in prior calls. I don’t think we’ve expanded the use much more broadly than where we are at in the third quarter.

Okay, thank you.

Great thank you again.

And ladies and gentlemen this does concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.