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Opko Health Inc Reports Operating Results (10-Q)

August 08, 2009 | About:

Opko Health Inc (OPK) filed Quarterly Report for the period ended 2009-06-30.

eXegenics Inc. is biopharmaceutical company specializing in the development of therapeutic and diagnostic products for human diseases with an emphasis on the treatment and prevention of cancer and infectious diseases. Its research and development activities relate principally to its proprietary Paclitaxel production system using fermentation and genetic engineering in agreements with Bristol-Myers Squibb the treatment of Polycystic Kidney Disease using paclitaxel Quantum Core Technology our proprietary rational drug design targeting the human genome. Opko Health Inc has a market cap of $450.4 million; its shares were traded at around $2.04 with and P/S ratio of 47.7.

Highlight of Business Operations:

Selling, general and administrative expense. Selling, general and administrative expense for the three months ended June 30, 2009, was $2.9 million compared to $3.2 million of expense for the comparable period of 2008. Selling, general and administrative expenses during the three months ended June 30, 2009 and 2008, primarily include personnel expenses, including equity-based compensation expense of $0.8 million and $0.9 million, respectively, and professional fees. The decrease in selling, general and administrative expenses primarily reflects decreased personnel costs and sales commissions to our international distributors.

Research and development expense. Research and development expense during the three months ended June 30, 2009, was $2.5 million compared to $5.5 million for the comparable period of 2008. The decrease for the three months ended June 30, 2009, primarily reflects the decision in March 2009 to terminate the Phase III clinical trial for bevasiranib. All site close-out activities were completed during the first half of the second quarter of 2009 and we anticipate that all activities for the Phase III trial will be complete during the third quarter of 2009. The decrease in research and development expense in the 2009 period as a result of the clinical trial shut down was partially offset by increased costs relating to the Aquashunt clinical trial which began in the first quarter of 2009 and ongoing development costs for our ophthalmic instrumentation business, which are primarily personnel related expenses. The 2008 period primarily reflects the cost of our Phase III clinical trial for bevasiranib, including costs of clinical trial site and monitoring expenses, personnel costs and outside professional fees. The amount for the three months ended June 30, 2009, includes equity-based compensation expense of $0.4 million, compared to the 2008 period which includes $0.6 million of equity-based compensation expense.

Selling, general and administrative expense. Selling, general and administrative expense for the six months ended June 30, 2009, was $6.2 million compared to $8.6 million of expense for the comparable period of 2008. Selling, general and administrative expenses during the first six months of 2009 and 2008, primarily include personnel expenses, including equity-based compensation expense of $1.5 million and $2.9 million, respectively, and professional fees. The decrease in selling, general and administrative expenses primarily reflects decreased personnel costs, including severance and approximately $1.4 million related to the acceleration of vesting for stock options in connection with the termination of certain employees in 2008. In addition, there were decreased sales commissions to our international distributors in the six months of 2009. Partially offsetting these decreases was an increase in professional fees during the six months ended June 30, 2009, as compared to the 2008 period. We anticipate selling, general and administrative expenses will increase during the remainder of 2009 while we increase our sales and marketing activities to promote and support our OCT/SLO product, including the launch costs in the U.S. and participation in additional tradeshows in the U.S. and internationally.

Research and development expense. Research and development expense during the six months ended June 30, 2009, was $8.2 million compared to $9.8 million for the comparable period of 2008. The decrease for the six months ended June 30, 2009, primarily reflects the decrease in activity of the Phase III clinical trial for bevasiranib which was terminated in March 2009. The 2008 period primarily reflects the cost of our Phase III clinical trial for bevasiranib, including costs of clinical trial site and monitoring expenses, personnel costs and outside professional fees. The decrease in research and development expense also reflects the decrease in personnel costs, including equity-based compensation partially offset by increased costs relating to the AquaShunt clinical trial which began in the first quarter of 2009 and ongoing development costs for our ophthalmic instrumentation business, which are primarily personnel related expenses. The amount for the six months ended June 30, 2009, includes equity-based compensation expense of $0.2 million, compared to the 2008 period which includes $1.3 million of equity-based compensation expense. The amount for the 2009 period includes the estimated shutdown costs of the trial, including transitioning patients from the trial onto the standard of care therapy and the costs of analyzing the data collected and performing statistical analysis. We anticipate all activities related to this trial will cease in the third quarter of 2009.

On February 23, 2009, we entered into a stock purchase agreement with the Gamma Trust pursuant to which the Gamma Trust agreed to make a $20.0 million investment in exchange for 20,000,000 shares of our common stock, par value $.01 (the Shares), at $1.00 per share, representing an approximately 20% discount to the average closing price of our common stock on the NYSE Amex exchange for the five trading days immediately preceding the effective date of Audit Committee and stockholder approval of the transaction. We issued the Shares and received the proceeds of $20.0 million on April 27, 2009.

A group of investors led by the Frost Group (the Frost Investors) previously invested $5 million in Cocrystal Discovery, Inc., a privately held biopharmaceutical company, and agreed to invest an additional $5 million payable in two equal tranches. As a result of an amendment to the Frost Investor agreements dated June 9, 2009, OPKO, rather than the Frost Investors, intends to make the first tranche investment ($2.5 million) on or around September 18, 2009 pursuant to a definitive agreement to be entered by OPKO at the time of the investment on the same terms as those previously agreed by the Frost Investors. Following the second tranche investment of $2.5 million in Cocrystal by the Frost Investors, OPKO will own approximately 16% of Cocrystal and the Frost Group will own approximately 42% of Cocrystal, each on a fully diluted basis. Dr. Frost, Steve Rubin, and Jane Hsiao currently serve on the Board of Directors of Cocrystal.

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