Good afternoon, ladies and gentlemen and welcome to the OPKO Health Second Quarter 2021 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host Ms. Yvonne Briggs with LHA. Madam please go ahead.

Thank you, operator, and good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining today's call to discuss OPKO Health's financial results for the second quarter of 2021. I'd like to remind you that any statements made during this call by management 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 SEC filings, including the Annual Report on Form 10-K for the year-ended December 31, 2020 and in subsequently filed SEC reports. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, July 29, 2021. Except as required by law, OPKO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Before we begin, let me review the format for today's call. Dr. Phillip Frost, Chairman and Chief Executive Officer, will open the call; and Steve Rubin, OPKO's Executive Vice President, will provide a business update and pipeline review. And then Dr. Jon Cohen will discuss BioReference Laboratories. After that, Adam Logal, OPKO's CFO, will review the company's first quarter financial results, and then we'll open up the call for questions. Now I'd like to turn the call over to Dr. Frost.

Good afternoon and thank you for joining the call today. We're here to discuss our second quarter results, which were right on plan with the financial guidance Adam provided during our last quarterly call. I'll start with by Reference Laboratories. During Q2, BRL generated solid results, even as overall demand for COVID-19 testing declined. BRL continues to meet the testing needs of many significant customers who are now focused on large scale screening in support of the transition from diagnosis to surveillance. Due to BRLs ability to provide accurate test results efficiently, it remains the test provider of choice for large public school systems, as well as all the major sports leagues who are continuing to test this year and possibly into 2022. Furthermore, testing in the travel industry is likely to continue into next year and we are pleased to announce our agreement with Royal Caribbean Group. This so far as we know, is the first COVID-19 testing program for the cruise industry. Due to increase awareness of the high quality of its efficient service, the BRLs core business along with its specialty testing in oncology, urology, women's health in genetics, all continue to rebound toward pre-pandemic levels. It's gratifying to see BRL convert many new COVID-19 relationships into ongoing customers for its core diagnostics offering. I let Jon speak to the great strides were making with Scarlet Health and on demand diagnostic service to expand digital health access to the patient's yourself. We are enthusiastic about this initiative as we continue to position diagnostic services as a key component in the continuum of care to improve patient outcomes. As for our pharmaceutical business, we look forward to symmetric’s upcoming PDUFA date in October, followed by determinations from the European and Japanese Regulatory Authorities next year. As I mentioned…

Thank you, Phil. And good afternoon, everyone. And thank you all for joining us today. As Phil mentioned, we are quite pleased with our second quarter financial results. BioReference Laboratories core business is training back to pre-pandemic volumes while still leveraging its COVID-19 testing capabilities with certain large customers. Somatrogon is our once-weekly long acting recombinant human growth hormone for the treatment of pediatric patients with growth hormone deficiency or GHD. And as you know, Pfizer, our global commercial partner for Somatrogon submitted the initial biologics license application to the FDA, which was accepted and assigned to PDUFA action date in October 2021. In addition, Pfizer expects decisions from both the European Commission and Japanese regulators next year. Under our agreement with Pfizer, OPKO is eligible to receive up to $275 million on the achievement of certain regulatory and pricing milestones. These milestones range from $20 million to $90 million each and are catalyzed by regulatory approval in the U.S., and regulatory and pricing determinations and other major markets. In addition, upon launch, we are entitled to regional tiered gross profit sharing on sales for both Somatrogon and Pfizer's daily GHD drug Genotropin. With respect to RAYALDEE, the numbers for the quarter break down as follows. Total prescriptions for RAYALDEE in Q2 2021, as reported by IQVIA were approximately 11,700 representing a decrease of approximately 36% compared with Q2 of 2020 and a decrease of approximately 5% compared with Q1 of 2021. RAYALDEE sales continue to be impacted by challenges and onboarding new patients. Although this trend is starting to reverse. New patient starts decreased by 5.2% in Q2 versus Q1. Since the product was launched, nearly 26,700 patients have had RAYALDEE prescribed by approximately 3,800 physicians. More than 150 physicians, or nearly 4% of the total number of prescribers…

Thanks, Steve. And good afternoon, everyone. BioReference's core clinical business continues to make progress to return to a normalized pre-pandemic levels as more patients are visiting their physicians in person and sales people are allowed back into the offices. In fact, many of our clinical counts have already returned to pre-pandemic levels. BioReference's core testing volume at the end of the second quarter was up 55% versus the prior year period. Specifically, our women's health specialty testing business has been coming back nicely in the last couple of months with the clinical women's health business with an increased volume by 25% and revenue 35% when comparing Q2 2021 versus Q2 2020. Our oncology business also continues to make great progress with significant growth compared to 2019. Solid tumor is 140% over 2019 hematological malignancies liquid tumors is 105% over 2019. Cancer genomics is 107% over 2019 and myeloid is 209% since 2019. We continue to make investments in all these areas, particularly in the myeloid offerings with some new testing options. Our partnership initiative including large medical groups FQHCs, ACOs and health systems continue to experience month-over-month increases in patient visits. We have added several new ACOs and signed lab service agreements with several new hospitals this quarter. In addition, our business development efforts in partnering with large physician groups managing their physician office labs is paying-off with increased volumes. Our payer relations teams has increased our access across the country. And during the second quarter we received our renewal for the United Healthcare preferred lab network for an additional three years. In addition, BioReference and GeneDx will now provide us a high mark of Delaware 236,000 lives formerly exclusive to lab core. At the beginning of the year, we formally launched Scarlet Health, the on demand diagnostic service to…

Thank you, Jon. For the fifth straight quarter, we've reported consolidated income from operations. Across both of our segments our operating companies continue to execute on their plans. Our diagnostic segment reported revenue from services of $397 million compared to $250 million for the 2020 period. This increase reflects the continued demand for COVID testing, as well as the recovery of our routine clinical and genetic testing volumes. As Jon mentioned, our clinical test volumes are continued to be below historical levels, but are significantly higher than 2020. While our genetic testing volumes are higher than 2020 and 2019 levels. The diagnostic segment reported operating income of $30 million compared to operating income of $41 million during 2020. Recall that the 2020 period benefited from two significant items. The first was nearly $11 million from the successful Medicare appeal for the 4Kscore, and second was the $6 million we received under the CARES Act. Total costs and expenses were $367.2 million compared to 2020 which had $216.2 million of cost and expense. The increase primarily reflects the increased testing volumes. In addition, we have continued to invest in our commercial activities, as Jon outlined related to our base business, including our efforts within Scarlet, resulting an increased selling general and administrative expenses. Moving to our pharmaceutical segment, we reported revenues of $45.2 million for the second quarter of 2021 compared to $44 million for the 2020 period. Product revenue increased $6.3 million to $35.7 million driven by a strong performance by our Latin American operations. International revenue increases were partially offset by a decrease in sales of RAYALDEE. RAYALDEE’s continue to be negatively impacted by physician office restrict -- physician offices restricting product sales representatives from making sales calls, as well as a decrease in Medicare patients utilizing RAYALDEE. In…

[Operator Instructions]. Your first question comes from the line of Maurice Raycroft from Jefferies. Your line is open.

Hi, everyone. Thanks for taking my questions. First question is on just the commentary on the base business. you've provided a little bit more granularity in the past on where you're at compared to pre-COVID levels. And so I'm just wondering if you can do that at this point, and talk a little bit more about the trajectory going forward for the base business. And also if you can comment more on that genetic testing to which it sounds like that's doing well. And so what are your growth expectations for the genetic testing?

Jon you want to take it or you allow me to.

You could start I'll jump back in.

Sure. We were down on the base business against 2019 somewhere around in the low teens, I think it was 13% or 14% overall. I think our expectation is the base business is going to slowly return as we look at it for the overall file reference base. GeneDx to your point, we had a pretty strong quarter up significantly against last year but also up significantly against 2019 levels. And that remains our expectations that'll continue to grow and accelerate as we go throughout the year.

Yes, I would reiterate that, our strategic position in 2019 right before COVID was to make specific investments in women's health and oncology continued 4kscore with urology, and the genetic business and all of those investments are now paying-off. So the other part was we call strategic ventures was the investment in a vertical to bring on health systems reference business, hospital business, ACOs, FQHCs and that's also bearing fruit. So that -- as the physician practices move towards a differentiated decider, where we call it meaning that CEO and COO of large medical groups et cetera making decisions we will continue to see that switch which is the way we strategically placed ourselves.

Got it. Okay, that's helpful. And also wanted to ask a question on somatrogon as well. When you get approval later this year for that one in the United States. Will you disclose more details on the gross profit share and potentially provide guidance on what to expect for [indiscernible] in somatrogon after that?

Yes, so we'll definitely provide some better clarity. I think it obviously has to do with the timing of the approvals and the launches. So until we have those we're not going to add anything on top of it right now, Maurice, but at once we have an approval, we'll provide some better clarity on our expectations.

Got it. Okay, thank you. And I'll hop back in the queue.

Sure.

Your next question comes from the line of [indiscernible] from HC Wainwright. Your line is open.

Hi, this is Matt from HC Wainwright. Thanks for taking my questions. The first kind of centers around the Delta variant, I was wondering to your knowledge, if there are only COVID tests on the market that can differentiate the variant if your customers are asking for it and whether you think it's meaningful at this point to provide this differentiation?

So we are -- we do get asked occasionally by customers, we cooperate obviously with every State Department of Health. We send them positive COVID-19 PCR samples, if they ask for it for a specific genomic sequencing. Frequently, that's for epidemiological purposes, which is what we obviously participate with them to do. Right now, I'm sure the vaccine has had a significant positive effect the Delta variants and all the others. As I mentioned, the testing has not changed. So although there is a request, it's mostly as a result of really the State Department's of Health wanting to know the spread of the virus. As I said, right now, over 80% of the tests that are positive are the other Delta variants. But it doesn't impact on therapy. So it doesn't impact on what patients will do as a result of it.

Okay, understood. And then with regard to the multiplex test for COVID-19 and flu, are you planning to commodify the surveillance data that you capture?

Well, the I guess the question is they will and it is available COVID/flu testing. That may also be available at some point and point-of-care rapid testing. We have today seen almost no. Just essentially no ordering of it. No one has asked for it yet. I think that could change in the fall, what will happen is people will probably show up like symptoms. And the question will be is they'll get either they'll get both, or they'll get a flu test, which will either be positive or negative and that reflects the COVID. It's just, -- it's totally right now and predictable, in terms of what the flu season is going to look like. But it is available.

Okay, makes sense. And just finally, regarding the CAMP4 deal and regarding Dravet syndrome is your intention to shift away from neurology indications or developing compounds with the AntagoNAT platform? Are you planning to reprise these streams once again, once you gain kind of proof of principle?

So CAMP4 has -- of the AntagoNAT platform right now. There are provisions in our license agreement where we can either suggest additional compounds or take them ourselves with another partner. But to begin with, the way is structured is CAMP4 has the platform that lead compound Dravet and then followed by others and we have requirements on both development and commercialization of other drugs within the platform in that agreement.

Okay, thank you. Appreciate you.

Your next question comes from the line of Jeff [indiscernible]. Your line is open.

All right, folks, How are you? Thanks for taking the questions. Firstly, could you talk about the product revenue from Q2 itself a little stronger than the estimated, was there anything in particular to call out there?

So our Latin American businesses, just, they want a few tenders during the quarter that it will allow them to increase their overall businesses. We do expect it to be a strong business for us and growth business for us going forward. But that was the main driver there, Jeff.

Okay. And you mentioned cash Q2, $65.8 million and then you spoke about next quarter reflecting the gain of $30 million. Is it -- so the cash did -- was reflected in the second quarter or will be reflected in the third quarter?

It'll be in the third quarter. So we don't have that cash yet.

Okay, perfect. I got it. And one more if I may. Any insight into the composition of PCR versus antibody, Dr. Cohen, and maybe talk a little bit about that, and how you expect the composition to be reflected going forward?

Yes, I -- there is, some demand for antibody testing, as I think, by all indications, not what anybody would have predicted early on. I think that we're fairly conservative in our estimates of what that would look like the if you follow the CDC/administration reports relative to their views of antibody, they have been fairly negative about antibody testing as a reflection of immunology -- immunological status. So there is very little data to indicate, unfortunately, whether or not high or low levels of antibodies are really convert over to whether or not someone is truly immune or not. So what I mean by that if someone has a low antibody level, that does not mean that they don't have a high T-Cell memory, that really is much more important. So the result of all that is that a lot of it being ordered currently now. That could change with what's going on with the Delta variant, and where people may say, well, I really would like to know what my antibody status is or if there's a recommendation for a -- another dose of the vaccine, there will be some people who will say, well, do I need this next dose or not? Will antibodies give me enough -- will antibody levels give me enough indication about whether or not I should take the next dose? Those are all the -- that's what everybody is talking about? But the answer is nobody knows what the antibody testing will look like in the next couple of months.

Got it. That's super helpful. And lastly, for me, Adam anything's it's specific to call out on the -- below the line item on investment loss in income tax provision of note for the quarter?

For income taxes, it's again, taxes principally that we're paying and incurring in our international businesses, and as those continuing to do well and be taxpayers. On the other income and expenses it really relates 100% to our convertible note exchange. So it's just the fair value of the underlying shares taking out the $55 million in debt.

Okay. And the investment loss of 11.3 for the quarter?

The --that's the other income expense line. That's the $11 million or so.

Got it. Okay. Perfect. Thanks for taking my questions.

Sure.

Your next question comes from the line of Edward Tenthoff from Piper Sandler. Your line is open.

Great. Thank you very much, guys. And thanks for taking the question. A couple housekeeping ones if I may. The $55 million in debt was that converted into number of shares? And where do you expect to recognize the EirGen gain in the P&L?

So the debt was exchanged for common shares. And that's the loss of recorded. Gain from EirGen will be an operating income line item. It'll be -- yes, it'll be an offset to the operating expense.

Okay, great. And how many shares of it?

I don't have it at my fingertips in the queue that --

No worry. No worry Adam a. Thanks so much. I'll talk to…

Your next -- and your last question comes from the line of I Eh Jen from Laidlaw & Company. Your line is open.

Thanks for taking the questions. I've got two here. The first one is in terms of the pharmaceutical business and you guys have done a lot of our licensing type of activities, are you guys also contemplating any ill-licensing going forward?

So yes, we're always certainly open to opportunity, if it's there. I mean, I guess we're not looking for any early stage project at this point. But certainly there's something that's synergistic, for example, something that would supplement the real side or something that we already have a sales force that would be [indiscernible] to us. But this currently, we're not looking for any additional development self projects. We have a fair amount of early stage already as you know.

Yes. I understood. And maybe one more question on the -- by reference side that operate -- the actually income top line. I notice that the last year you guys about [$215 million] this one -- this year is about -- this quarter is about $397 million. And last year have 2 -- this quarter has $2.2 million profit tax and in this quarter has roughly $2.9 million. Should we extrapolate the -- some differences beyond -- besides those 7 – probably 200,000 tested that that will be some sort of basic business growth last year versus this year?

Yes, so remember, the second quarter of last year I Eh had a significant decline in the base business. So a significant portion -- proportion of our revenue last year was tied to COVID. where this year, it's a bit more balanced. Also, there was in most of our volume came last year from our state and local partnerships significantly lower than then where the majority of our volume comes from today. So there is a bit of a price mix component in the revenue differences as well.

Okay, great, that's very helpful, and thanks for answering those questions.

Sure. Thank you.

This concludes our question and answer session. I would now like to turn the conference back to Dr. Phillip Frost for the closing remarks.

All right thank everybody for participating. And we look forward to spending time with you again for our next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect.