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Opko Health Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2011 06:17AM

Opko Health Inc (OPK) filed Quarterly Report for the period ended 2011-03-31. Opko Health Inc. has a market cap of $1.08 billion; its shares were traded at around $3.81 with and P/S ratio of 29.2.



Highlight of Business Operations:

On January 31, 2011, we acquired all of the outstanding stock of CURNA, Inc. (“CURNA”), a privately held therapeutics company, in exchange for $10.0 million in cash, plus $0.6 million in liabilities, of which, $0.5 million was paid at closing. In addition to the cash consideration, we have agreed to pay to the CURNA sellers a portion of any consideration we receive in connection with certain license, partnership or collaboration agreements we may enter into with third parties in the future relating to the CURNA technology, including, license fees, upfront payments, royalties and milestone payments. CURNA is engaged in the discovery of new drugs for the treatment of a wide variety of illnesses, including cancer, heart disease, metabolic disorders and a range of genetic anomalies.

Selling, general and administrative expense. Selling, general and administrative expense for the three months ended March 31, 2011, was $5.6 million compared to $4.2 million of expense for the comparable period of 2010. The increase in selling, general and administrative expenses is primarily the result of increased warehousing and distribution costs for our Chilean operations, increased equity based compensation expense and a full period of selling, general and administrative expenses for our operations in Mexico. Selling, general and administrative expenses during the first three months of 2011 and 2010 primarily include personnel expenses, including equity-based compensation expense of $1.4 million and $1.0 million, respectively, and professional fees.

Research and development expense. Research and development expense during the three months ended March 31, 2011 and 2010, was $1.6 million and $1.3 million, respectively. The increase in research and development expense primarily is the result of increased personnel expenses including equity based compensation expense. The three months ended March 31, 2011 and 2010, include equity-based compensation expense of $0.4 million and $0.2 million, respectively. During the three months ended March 31, 2011, research and development expense primarily consisted of activities related to our molecular diagnostics development program, research and development expense for our instrumentation business including the development of next generation devices, and development of the technology acquired from CURNA. Research and development expense for the three month period ended March 31, 2010 primarily included activities related to our rolapitant development program, which we out licensed in December 2010, our molecular diagnostics development program and research and development activities for our instrumentation business.

Other income and expenses. Other income, net was $38 thousand for the first three months of 2011 compared to other expense, net of $0.3 million for the comparable 2010 period. Other income primarily consists of interest earned on our cash and cash equivalents and other expense primarily reflects the interest incurred on our line of credit with The Frost Group LLC (the “Frost Group”). On June 2, 2010, we repaid all amounts outstanding on the Frost Group line of credit including $12.0 million in principal and $4.1 million in interest. The Frost Group members include a trust controlled by Dr. Frost, who is the Company’s Chief Executive Officer and Chairman of the board of directors, Dr. Jane H. Hsiao, who is the Vice Chairman of the board of directors and Chief Technical Officer, Steven D. Rubin who is Executive Vice President — Administration and a director of the Company and Rao Uppaluri who is the Chief Financial Officer of the Company.

On January 31, 2011, we acquired all of the outstanding stock of CURNA in exchange for $10.0 million in cash, plus $0.6 million in liabilities, of which, $0.5 million was paid at closing. In addition to the cash consideration, we have agreed to pay to the CURNA sellers a portion of any consideration we receive in connection with certain license, partnership or collaboration agreements we may enter into with third parties in the future relating to the CURNA technology, including, license fees, upfront payments, royalties and milestone payments. As a result, we recorded $0.6 million, as contingent consideration for the future consideration. CURNA is engaged in the discovery of new drugs for the treatment of a wide variety of illnesses, including cancer, heart disease, metabolic disorders and a range of genetic anomalies.

We have outstanding lines of credit in the aggregate amount of $18.9 million with seven financial institutions in Chile, of which, $4.3 million is unused. These lines of credit are used primarily as a source of working capital and for inventory purchases. The average interest rate on these lines of credit is approximately 3%. These lines of credit are short term and are generally due within three months. The highest balance at any time during the three months ended March 31, 2011, was $14.8 million. We intend to continue to enter into these lines of credit as needed. There is no assurance that this or other funding sources will be available to us on acceptable terms, or at all.

Read the The complete Report



Stocks Discussed: OPK,
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