Good day, ladies and gentlemen. And welcome to the OPKO Health Inc. Fourth Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Yvonne Briggs, with LHA. Please go ahead.

Thank you, operator. 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 fourth 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, 2021 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, February, 24, 2022. 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 today's school to discuss our fourth quarter financial results and business update. 2021 was a record year for OPKO Health, with revenue of more than $1.7 billion. Starting with our pharmaceutical division, we were pleased to announce NGENLA approval in several major markets, including the European Union and Japan, as well as in Canada and Australia. NGENLA is the brand name for somatrogon for the treatment of pediatric growth hormone deficiency. Pfizer launched NGENLA in Canada on February 16 and we look forward to launch this in other territories, as they receive pricing determinations. In the US, we were disappointed with the FDA’s issuance of a complete response letter. However, Pfizer and OPKO are evaluating the FDA’s comments and will work with the FDA to better understand their requirements for a path forward, where Pfizer and OPKO are committed to bringing this product and its benefits to growth hormone deficient children globally. Since the start of the pandemic, the BioReference laboratories team has responded to the nation's needs with efficiency and innovative testing services. As a result, BioReference exceeded sales expectations for the quarter and closed out a record year with $1.6 billion in revenue. For the past two years BioReference has effectively managed its resources and pivoted its operations to be prepared with testing capacity. Moreover, the addition of our digital health service, Scarlet Health, has made it more convenient for patients requiring both COVID and routine tests. And we expect Scarlet to be a growth driver in the future. Jon will provide further details on BioReference and its performance in a moment. As part of our strategy to unlock the value of OPKO’s assets and maximize value for shareholders, we entered into a definitive agreement to sell GeneDx to Sema4 for…

Thanks. Well, good afternoon, everyone and thank you for joining us today. As Phil mentioned, we are recording record revenue for the year and BioReference was able to effectively respond to services and -- surges in COVID testing, while its core business began to return to pre pandemic volumes. Regarding our pharmaceutical business, we recently jointly announced with Pfizer that NGENLA was approved in the EU and Japan. NGENLA is one-weekly long-acting recombinant human growth hormone for the treatment of pediatric patients who have growth failure due to an inadequate secretion of endogenous growth hormone. In the fourth quarter, Australia and Canada granted approvals for NGENLA as well. As Phil mentioned, Pfizer launched NGENLA in Canada on February 16. Under the worldwide agreement with Pfizer, OPKO is eligible to receive milestone payments upon regulatory approval and pricing determinations in major markets outside of the US, which is expected within the next 12 months in both Europe and Japan. In addition, upon launching in the primary regions of the US, Europe and Japan, we're entitled to tiered gross profit sharing on sales of both somatrogon trogon and Pfizer's daily GHD drug Genotropin within the respective regions. Pending commencement of a profit sharing within a region, OPKO will receive tier double-digit royalties on net sales of Somatrogan. In the US, we were disappointed, yet the FDA issued a complete response letter to Pfizer for the US PLA submission. We are collaborating with Pfizer to evaluate the FDA comments and intend to work with the agency to determine the best path forward. We look forward to providing an update once we are able to do so after we gain greater clarity from the FDA regarding their requirements. In the meantime, Pfizer is seeking pricing approvals and preparing launch plans in Europe, Japan and…

Thanks, Steve. And good afternoon, everyone. As Phil mentioned, BioReference had a better than expected quarter given the surge in COVID testing volumes due to the Omicron variant, complemented by the continued normalization of the core clinical lab business, the growth in specialty testing and the acceleration of Scarlet Health. BioReference continues to make significant strides relative to patient access with the payers. We executed a national preferred agreement with Aetna for their 24 million covered lives. We are one of only three laboratories in the country with this designation, which means that most patients will have no co-pays or out-of-pocket charges for their lab services from BioReference. This is similar to our preferred status with United Healthcare. We also executed a preferred agreement with Oscar health, for their 600,000 covered lives. Our base clinical business volume remained stable year-over-year, despite the impact of Omicron on the general public in December. Our women's health vertical volume increased 8% year-over-year, as a result of our announcement that we discussed last quarter relative to our acquisition of the Roche Ariosa business, NIPS tests performed double in comparison to 2020 the same period. In December, we announced the FDA approval of our 4K test, score test. This test is approved for the use of men 45 years of age or older who have not had a prior prostate biopsy, or are biopsy negative and have an age specific abnormal total PSA or an abnormal digital rectal exam. The 4Kscore test has been used by more than 7,700 healthcare providers including approximately 4,200 urologists. Over 300,000 tests have been performed since its launch as an LDT in 2014. With the new FDA approval, we have developed an aggressive plan aimed at converting additional commercial health plans to positive coverage policies for 4K. In addition,…

Thank you, Jon. Before I review the fourth quarter results in more detail, I’d like to highlight a few of the significant financial milestones, which we achieve this year. Overall revenue, as Phil mentioned, for the year was nearly $1.8 billion, with over $1.6 billion coming from our diagnostic segment as a result of the execution of the COVID testing strategy John laid out. In order to achieve these results, as John mentioned, we develop non-traditional revenue channels through our relationships with sports leagues, retail pharmacies, Travel and Leisure industries, as well as partnerships with state and local governments, including testing at the nation's largest school districts. More than 75% of our COVID testing volumes came from these non-traditional clients during 2021 are the results of our team's highly customized testing solutions. On the pharmaceutical side of our business, total revenue was over $167 million. And we realized revenue from product sales of more than $141 million, reflecting growth of 18% led by our international operations including Chile, Mexico, and Spain, which total nearly $100 million of revenue as a result of the execution of their growth plans in each market. Our revenue growth allowed us to make significant investments in our long-term growth initiatives, including the digital transformation of our references, core lab business, lead bar investment in Scarlet, as well as investing in our Germline Genetics Business, GeneDx which during 2021 reported an operating loss of approximately $31 million. In addition, we invested $75 million into our R&D projects, which with the recent approval of NGENLA, as well as the European commercial launch of reality are also provide for near-term cash flow improvements on the pharmaceutical side of our business. We ended the year in a strong financial position, with about $135 million in cash, along with cash…

Thank you, sir. [Operator Instructions] We have our first question from Jeffrey Cohen with Ladenburg.

Good afternoon. And thank you for taking our questions. So a few, Adam based on your 2022 guidance and projections as far as outline, can you talk about labor a little bit and what you've seen on the labor front, particularly through Q4, and maybe through the beginning of this year and any expectation or anticipation there for the balance of the year?

Yeah. We I think like – like most people on a macro basis, we've seen seeing labor costs increase overall, and during some of the staffing shortages that we saw at the end of the year in the beginning of this year, we did have to – to make some increases to attract talent. So we are we are seeing the probably the same labor pressure across the industry. That everybody is seeing, as you know, we haven't seen that accelerate, but we did come under some pressure to make some adjustments during the end of the year period.

Okay. Got it. Dr. Frost or Steve, could you talk about the current territory now, as a – as it relates to the US as far as the size comparison in European Union, some of Scandinavia as well as Australia and Canada and Japan, please? A – Phillip Frost: So just starting to decide to say what your average, so I mean that, the US is the biggest, Europe is second. Japan is third, and our European approval will be global. And the way our deal works if you remember, once we get pricing or Pfizer gets pricing intuitive majors, it was shipped to a profit share, which would accomplish sales agenda as well throughout the territory, and the same goes for Japan, which actually encompasses rest of world on our geographic selections.

I could just add that the combination of Europe and Japan is about equivalent to what the US market is. And then you have the additional countries such as Australia, Canada and other jurisdictions.

Okay. Got it. That's very helpful. And then Adam back to the – the projection for 2022 testing volumes, if I heard you correctly, was that 22 to 26 for the full year?

Yeah. So Jeff, we've seen testing volumes come down pretty quickly week after week into this year. So we do have testing continuing through the year. But we we've seen a significant drop off and volumes post mid-January.

Okay. So based on your 1.6 number, you're anticipating – from what you understand now or overall look at now that the balance of the year would be less than that first six weeks conservatively?

Yeah. So we're using that forecast based on the remaining school years and sports league testings that we have as well as some of our other leisure activities. But generally seeing significant declines in testing volumes.

Got it. And then lastly, your commentary on cost of goods appeared a bit high for the quarter. And outlook for the quarter -- leverage there can bring that lower?

Yeah, so we spent a significant amount of time and early part of the fourth quarter is taking down our staffing level. It's hard to believe, but the first case of Omicron occurred December 1st in the US and as a result, we had not anticipated the surge that came in, when we saw the surge come, we had to staff up significantly and had to play a little bit of catch-up over the surge time and had to pay significant wage increases to get people in the seats during that surge time. We've been aggressively taking that capacity back down with testing volumes coming down. John mentioned our point-of-care business. It comes at a much higher cost to serve and as a result, you've seen some of the margin basis points declining, as well as our retail channel driving where most of the Omicron testing came from, which come at a lower price point than our traditional testing. So the combination of those two are what drove the decline in overall gross margins.

Okay, perfect. Thanks for taking the questions.

Thanks, Jeff.

Next question is from Maury Raycroft with Jefferies.

Hi, this is Kevin [ph] on for Maury. Thanks for taking my questions. The first one I had was just about GeneDx. Could you say what the share of revenue and expenses was for GeneDx in 2021, and how the sale impacts your near-term growth and long-term goals for the base business?

Sure. Thanks. So GeneDx generated about $115 million of revenue during 2021. We reported an operating loss from that business of about $31 million. So it does have – it's a small part of the overall piece of the puzzle today. We expect that business to grow significantly and with Katherine's joining, expanded out our commercial outreach in capabilities. So we do expect that business to grow meaningfully and we've set a target of $160 million in revenue for 2022. So meaningful growth on that piece of the business, but overall, not a significant component of our reference. I think the important thing is, is it does allow us to improve the overall profitability of our diagnostic segment by removing those operating losses, which we have forecasted to expand over the near-term.

Okay. Great. Thanks. And then just this was sort of mentioned earlier, but in terms of COVID testing for the rest of the year. You mentioned before that it references, you have a relatively higher ratio of contracts versus retail. So, do you see a scenario where COVID becomes endemic and you still have these contracts going forward or is that not a not a likely scenario?

Hi, It's Jon. So -- thanks, Kevin. It's -- a little bit -- there's a lot of independent factors right now. First off, there will be some impact on whether or not have any children take the vaccine, and then there'll be an impact of whether or not the vaccine is going to be approved for kids under five, which they've held off on. The reason I say that is if this goes into -- it's certainly going to be up to June. I would -- this is an opinion is I think that the fall school system will probably still test in certain areas. I don't think they're going to back off that quickly. Because I don't think there's going to be a unanimous opinion about kids getting vaccinated going to school, so a lot of schools are going to have to decide what they're going to want to do with unvaccinated kids. So that's the first thing. I think the cruise line quite honestly, I don't think they're going to back off. I think that they're going to continue to test through the end of the year, but that again is a guess, but because they are sort of floating petri dishes, whatever they want to call in and there's a lot of issues on cruises in the past. I think they're going to be the bigger ones are probably resistant to backing off their protocols right now. The sports leagues are going to go for a while, except for, obviously, the NFL and some others who finished, I can't predict what they're going to do right now. But the others go through a good part of the year right now. We did -- I did mention on the script that we've opened up multiple, multiple NBA sites for screen training for COVID testing. So it's a longwinded answer. It’s basically tell you, I think, a lot of it goes through on our contractual surveillance testing to the end of the year, but I can't tell you for sure.

Great. Thank you.

And our next question is from Yi Chen with H.C. Wainwright.

Hey, guys. It’s [indiscernible] on behalf of Yi. I have three questions. The first one being your commercial plans for the 4K -- for the 4Kscore Test for the PMA approval, potentially looking at how reimbursement panels and any other plans. And I know you've answered this briefly, but maybe also comment on any potential business opportunities for Scarlet moving forward, obviously, some of your things are dependent on COVID testing depends? And finally, I think you spoke about the revenue guidance for testing this year, but -- and my apologies if I missed it, but any guidance on testing volume or any expectations are there in the volume kind of -- kinds of testing tendency going forward as it relates to asymptomatic is even relevant, et cetera. Thank you so much.

Sure. So I'll take the first two. We have a continued very assertive plan for 4K quite honestly. We have a ton -- you may know we have a designated salesforce that sells into urology offices only, which we continue to add to across the country. In addition, we are -- you may have heard we have a -- we already have a significant plan already in market to talk to the commercial payers based on the FDA approval of 4K, which we announced about four weeks ago. And then in addition, we've had an interesting uptake on 4K relative to Scarlet because it makes it much easier for the urologist in order the test and how about do the home job because as you can imagine a lot of urology offices, I mean some do have Phlebotomy but many of them don't. So provides increased access across the country for 4K. On the Scarlet, I mentioned there is continues to be multiple opportunities and multiple segments including what we refer to as nontraditional clients with -- which a lot of people who have interesting home products that need to have blood drawn. So the scarlet -- I think we're entering hopefully more than hopefully into a more of a stroll and hockey stick [ph] in terms of its volume for 2022. And then I'll turn over the guidance question to Adam.

Yeah, so the remaining testing volume that we forecasted is principally coming off the surveillance contracts that John mentioned between the school, sports and leisure contracts that we have in place. We're not expecting in our guidance anyhow, any meaningful volumes coming from our retail partnerships and the general public testing. Q – Unidentified Analyst: Thank you so much.

I am showing no further questions at this time. I would now like to turn the conference back to Dr. Phillip Frost.

Well, thank you everybody for participating and we look forward to communicating with you after the next quarter.

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