I added a discussion on PSA tests because I thought that many people would find it helpful. I also showed how our 4Kscore test is far superior to a PSA test and that urologists will be so enthusiastic in using it that our income from the test will ramp up much faster and higher than any of the analysts or commentators or even our company have suggested, and
this will make people take notice of our company. I also tweaked and rewrote some parts of my previous post to make it more readable. So the following discussion is what I would like sticked. Thanks
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In depth discussion and evaluation of OPK's drugs to give people a better understanding of how they will benefit the company, plus a discussion of OPK's prospects going forward.
For years urologists have been deeply dissatisfied with the PSA (Prostate-Specific Antigen) test because it is so inaccurate. The test measures a protein that is produced by the prostate. While the prostate itself produces some PSA, prostate cancer cells produce much higher levels of PSA, and so a rising PSA level can indicate prostate cancer and that is why the PSA level is used as a test for prostate cancer.
For men in their 20's the normal PSA level is 1.0, for men in their 30's it is 1.4, and then it starts rising. For men in their 40's it is 2.5, 50's 3.5 and by the time they are in their 70's it is 6.5. This is because as men get older their prostate tends to increase in size, called benign prostatic hyperplasia (BPH), and the larger the prostate, the more PSA it produces. So a rising PSA level in an older man may not mean that he has prostate cancer.
In addition to that, inflammation of the prostate (prostatitis), which is a fairly common occurrence, can also cause the PSA levels to start rising. Even a urinary tract infection can raise PSA levels. So a high PSA level does not necessarily mean that a man has prostate cancer. But even so, many doctors don't want to take a chance and so they do a biopsy, which can be dangerous because it can cause an infection, or even worse, a nerve might be severed.
Only 1 out of 4 biopsy tests turn out to be positive for prostate cancer, and most of those cancers turn out to be slow growing and don't do anything, and so the biopsy was not needed because it didn't show that the person had an aggressive type of prostate cancer. Taking that into account, a PSA test doesn't get close to even being 25% accurate in predicting if a person has a life threatening aggressive prostate cancer. For years urologists have wanted a test that actually indicates that a man, not only has prostate cancer, but that it is the dangerous aggressive prostate cancer.
Our 4Kscore test shows that a person has cancer, not just an infection, and it is 94% accurate in saying if it is an aggressive type of prostate cancer. If the 4Kscore test is negative, the urologist just monitors his patient and does not do a biopsy. If it is positive, then he does a biopsy. Urologists love this because it eliminates all the unnecessary biopsy's. It will be the gold standard test for prostate cancer.
Analysts and commentators have said that sales of our 4Kscore tests will be increasing, but they do not realize how enthusiastically urologists will embrace it. When a urologist wants to determine if a man has prostate cancer, this is the test that the urologist will order. Its sales will ramp up faster than analysts imagine and that will make people take notice of our company, and as they evaluate our company, they will realize that the drugs we are developing are life changing drugs that will take over their respective markets and turn our company into a pharmacological behemoth. It's nice to be noticed.
Our prostate 4Kscore test has already been approved and OPK is contacting urologists and explaining that its use will greatly decrease the number of prostate biopsies that have to be performed. The test is being accepted by more and more urologists here in America, Europe and now Mexico. In fact, in just the last quarter, the number of urologists that said that they were going to use the test, increased by 50%.
Every procedure done by a doctor has a CPT (Current Procedural Terminology) code number assigned to the procedure, and it is that number that the doctor sends to the insurance company and to Medicare for payment. Without that code, the patient has to pay for the test themselves, and so actual use of the test has been low. We have finally been issued our CPT code, and now use of our 4Kscore test should dramatically increase. According to what I have found in researching the 4Kscore test, the yearly income should eventually be 2 billion dollars, and then climbing, because the number of men being diagnosed with prostate cancer is growing yearly.
We are in the final stages of getting approval for Rayaldee for end stage renal patients. It is the first and only modified slow release formula of calcifediol, a major transport form of vitamin D. It turns out that patients with end stage renal disease, when they take vitamin D, the body produces an abnormal enzyme CYP24, which destroys it. Even taking very high doses of vitamin D will not overcome this destructive process. This causes patients with kidney disease to have extremely low levels of vitamin D which causes the bones to lose calcium into the blood stream. The calcium is then deposited into the soft tissues, such as the veins, and causes severe cardiovascular disease and other problems. Rayaldee is a first in class slow released vitamin D drug and the Phase I and II tests have shown that since it is released so slowly into the blood stream, it does not cause the release of CYP24, and therefore it is able to raise vitamin D levels back to normal levels.
Dr. John Cannell, an acknowledged expert on calcifediol, was so impressed with our Rayaldee drug that on 6 January 2014 he wrote that he had invested his life savings in OPK. OPK stock at that time was in the $8 to $9 range and has now climbed far above that level.
Opko Health, in a press release, said that sales of Rayaldee should reach $6 billion a year. This may sound like a lot, but analyst reports that I have read, put the amount at $12 billion to $24 billion dollars a year if it is used world wide and $6 billion just for the U.S. market. And since the company plans on selling it in Europe, Mexico + Central America, and Asia, I would think that sales of $6 billion a year is conservative. In fact, OPK, in its official SEC Form 8K filing, lists it as worth $12 billion a year.
OPK owns global rights to a heparin-derived oligosaccharide intended for therapeutic use in asthma and COPD (chronic obstructive pulmonary disease) as well as cystic fibrosis and other respiratory diseases. It is more efficient than current asthma medications and doesn't have their side effects.
Initial studies, using animals, have demonstrated successful anti-inflammatory and anti-allergic activity when administered orally or inhaled with inhalers or nebulizers. Human feasibility studies for asthma have also proven successful.
OPK also has an advanced inhaler which is superior to present inhalers and easier to use.
Inspiromatic™ offers improved drug deposition to the lower airways of patients and real time data for patient compliance monitoring. The device has an internal microcontroller and flow sensor that controls the delivery of the medication and, using micro-pump technology, dispenses the drug particles at the right speed without the need for forceful inhalation. It also provides instant feedback to the patient with a green or red flasher light to indicate proper inhalation and a beeper after the dose has been delivered. For physicians, Inspiromatic™ provides a built-in logger that stores patient use data for easy access and transmission by electronic devices such as smart phones.
In a recently completed, First In Man double blind clinical study, conducted with 30 asthmatic children, comparing Inspiromatic™ to a market leading inhaler, it demonstrated superior pulmonary delivery of the active drug.
The present drug of choice is Advair, which also uses an inhaler. Its annual sales are +$2 billion a year. OPK's drug is more effective and has less side effects, plus its inhaler is much more effective, so it will probably win over much of the market and should end up with yearly sales in the range of $2 billion.
OPK’s Factor VIIa hemophilia drug is unlike any of the hemophilia drugs now in use. It has received an orphan drug designation, so that means it will be fast tracked to approval. All the hemophilia drugs in use today have to be given by IV and are short acting, only staying active in the body for about a day. Bayer, and two other companies, are developing a longer acting drug that only has to be given once a week, but those drugs also have to be given by intravenous injection. This is especially difficult for infants and children because they have such tiny veins, but it is also awkward and painful for adults. Either a needle has to be inserted into their vein, which is painful and causes scaring of the vein, which over time makes the vein unusable, or a port has to be inserted, and long term IV ports have a risk factor of becoming infected.
OPK has developed a long acting drug, which also only has to be given once a week, but it is given subcutaneously. Subcutaneously means under the skin. The medicine is drawn up into a syringe and then, using a tiny needle, it is injected under the skin into the layer of fat located just below the skin. The fatty tissue is filled with tiny capillaries which slowly absorb the medication.
A larger longer needle, like the ones given for shots in the buns, ouch, is not used. You don't want the needle to go through the layer of fat and into the muscle, because the muscle is filled with blood vessels, plus there is a lot of movement of the muscle, and so the medicine would be absorbed much faster and so last a shorter time.
People can do the procedure by them selves at home. Or parents can do it for their children. The drug can be used for emergency episodes, such as a cut, but its main use would be self-administration at home for prophylactic use to prevent bleeding episodes. Hemophiliacs can spontaneously start bleeding for no apparent reason, typically into the joints and muscles, and that can cause permanent damage over time. Therefore it would be best to be given on a regular (weekly) basis for life. That is why it would bring in so much money for our company, because it will be given for life and not just for occasional emergency uses. Since our medication is given subcutaneously, instead of by IV, it would be the drug of choice. OPK states it would be worth $3.5 billion a year.
OPK, working with The Scripps Research Institute, is developing the only Parkinson drug that can actually stop the progression of the disease, instead of just delay it. SR 3306, a novel compound discovered by scientists at The Scripps Research Institute, stops the death of the brains cells whose destruction leads to Parkinson's disease. In the mid brain area is a group of dark colored cells, called substantia nigra, which produce a compound called dopamine. The dopamine is transported along the axons of the nigra cells to the stratium cells and it is used by them to control the movement of the muscles.
In Parkinson's disease, the substantia nigra cells die off and as the stratuin muscle controlling cells receive less dopamine, a person loses control of his muscles. Dopamine will not cross the blood brain barrier, bit it turns out that levodopa, a compound produced by certain plants, will travel through the blood stream, cross the blood brain barrier, and enter the brain. Once levodopa has entered the central nervous system, it is converted into dopamine by the enzyme aromatic L-amino acid decarboxylase. Levodopa's effect on Parkinson's disease isn't a new discovery, over 7,000 years ago, in 5,000 BC, there are recordings of people with symptoms identical to Parkinson's and they were treated with the plants that contain levodopa. The extra dopamine that is produced by the levodopa, along with the output of dopamine from the remaining nigra cells, gives a person back normal control of their muscles. The problem is, that the nigra cells continue to die off, and increasing the levodopa to compensate for their loss can't be done because large amounts of levodopa are toxic. Because the nigra cells continue to die off, eventually their production of dopamine isn't enough to maintain muscle control and the person starts a downward spiral to death.
OPK's SR 3306 compound inhibits a class of enzymes called jun-N-terminal kinases (JNK) that are involved in the death of substantia nigra cells in persons with Parkinson's disease.
JNK is involved in apoptosis (self induced cell death) and survival signaling of cells and was identified in the death of neuronal cells. Since people with Parkinson's already have decreased nigra cells, and so don't produce enough dopamine, they will still need to continue taking their levodopa, but they will also be given SR 3306, which will stop the destruction of their remaining nigra cells, and so it will stop the actual progression of the persons Parkinson's disease. This is a life changing event. Something that no other drug can do, and in situations where there is no known drug to stop a disease, the FDA has a special fast tract procedure that they use. Our drug fits in this category.
There are over a million people with Parkinson's disease in America and another 9 million worldwide. The market for our Parkinson's drug would be over a billion dollars a year.
Here is a drug that could be interesting. OPK is working on a new vaccine design that could be applied to vaccines for regular influenza, plus the many strains of influenza such as ‘swine flu’, ‘bird flu’, and perhaps other viral diseases such as Hepatitis C and HIV.
Hemagglutinin is the key molecule that determines the entry of a virus into a host cell. Experiments were done to see how the hemagglutinin protein found on the surface of influenza viruses binds to the host cell, including how glycans (sugar chains) attached to the surface of hemagglutinin affect the binding. The surprising discovery was made that hemagglutinin stripped of most of its glycans bound more strongly to host molecules than fully glycosylated hemagglutinin. Vaccines were constructed and tested on mice. The investigators found that the ‘nearly naked’ mono-glycosylated hemagglutinins were able to neutralize a broader spectrum of virus types than the regular fully glycosylated hemagglutinins. They also found that mice given a vaccine made from hemagglutinins with less glycan attached to the surface and then given a lethal dose of influenza virus, increased survival rate by up to 50% in comparison with unvaccinated animals.
Up until now, only regular fully glycosylated hemagglutinins have been used in the production of vaccines. The mono-glycosylated hemagglutinin as a vaccine in this study showed a stronger immune response with broader neutralizing activities against H5N1 and H1N1 influenza. The team leader of the investigators in the mouse study, Dr. Chi-Huey Wong, said,”Glycan modeling could pave the way to the development of a universal vaccine against influenza and other human viruses.“ A universal virus vaccine would be a game changer.
Opko Health has been trying to develop a vaccine using this technique for five years, but so far has not come up with a vaccine that meets the criteria for a phase I test. If we ever come up with a vaccine that works, that could be a real money maker.
All the reports that I have read say that our calcifediol end stage kidney disease medication will be our biggest winner at $12 billion a year, while they only mention in passing the drug that I think could actually be our biggest money maker, literally worth tens of billions of dollars a year. In Opko Healths Form 8K filing it stated that the drug would bring in over 15 billion dollars a year. That drug is our weight reducing candidate, and what is interesting, is that it also directly lowers blood sugar levels and cholesterol levels.
Because obesity isn’t a disease, regulators have a low tolerance for worrisome side effects. On the other hand people that are morbidly over weight (and are designated as obese, not just overweight) develop many medical problems, such as diabetes, and die young. Weight loss counseling and the weight loss medications available today do not work on these people. 400,000 people in America die from obesity related problems every year. So far the only treatment available is a gastric bypass surgery called Roux-en-Y, which itself can cause life threatening complications. So if a medication was developed that induced weight loss in this group of people, and thus obviated the need for surgery, the FDA would consider expediting its approval, especially considering the death toll from obesity related problems.
Drug companies have spent decades and over a billion dollars trying to come up with a weight loss drug. Older weight loss medicines made by companies like Sanofi and GlaxoSmithKline Plc stumbled because they were deemed too dangerous or came with unpleasant side effects. In the last few years four new drugs have been approved by the FDA, but so far their sales have been weak.
OPK, along with Prolor Biotech, are working on oxyntomodulin, a peptide hormone produced by cells in the small intestine where It is released into the bloodstream when a person ingests food, and travels to the brain, where it acts to enhance satiety and reduce appetite. Since it is a natural compound produced by the body, previous tests showed that it did not have any side effects. Previous companies have tested it, and it did induce weight loss, but it is short acting and had to be injected subcutaneously multiple times a day, usually just before meals. Which was awkward. How would you like to inject yourself just before you eat at a restaurant? Or even before meals at home or at work.
Other companies tried to make a long acting form of oxyntomodulin, but all the forms that they came up with had only weak weight loss effects. When they changed the structure of the oxyntomodulin molecule, it lost its effectiveness. However, Dr. Frost is famous for either taking previous medications that were ineffective and redesigning them to greatly enhance their properties, or finding and buying companies that had come up with a redesigned medication. He has done it again with oxyntomodulin.
Prolor Biotech, using Reversible PEGylaton technology, which leaves a compound intact, but adds a molecular tail to it to change its characteristics, has developed a long acting oxyntomodulin (dual GLP-1/Glucagon agonist) called MOD-6030. It is a slow release form of the intact oxyntomodulin, enabling a prolonged exposure of the peptide while maintaining its biological activity and the ability of the peptide to pass the blood brain barrier. Tests showed that it only has to be given once a week. Unexpectedly, not only did the drug not lose any of its effectiveness, it had a much stronger weight loss effect than the natural hormone oxytomodulin itself, and it even improved glycemic control, lowering blood sugar levels, thus meaning it could also be used as a diabetic drug, plus it had a large cholesterol lowering effect. It should be noted that diabetics also have problems with elevated cholesterol. It turns out, that since it stays active in the body for days at a time instead of just a few hours, its effects are strongly enhanced and factors that weren't previously apparent, such as its diabetic and cholesterol properties, show up.
In a 30 day animal study, animals in the placebo group, which received normal saline injections, showed minimal changes in the study parameters, while the animals receiving MOD-6030 achieved on average a 28% reduction in weight, a 29% reduction in food intake, a 19% reduction in blood glucose levels and a 57% reduction in cholesterol levels. The lead investigator stated, “We believe there is great demand among obese patients and their physicians for therapies that will help patients lose weight and reduce elevated glucose levels." I would add that diabetic doctors would also be interested in the drug, either as a stand alone drug, or for it to be given along with a patients' diabetic drugs. And since diabetic drugs have side effects, some of them serious, adding our drug to their protocol may enable them to lower the dosage of their diabetic drug, thereby decreasing their risk of side effects.
As of January 2015, over 2 billion adults, 18 years or older worldwide, were overweight, and of those, over 600 million were obese. In America over 70 million adults are obese. Because of this, OPK states that its weight loss medication could bring in $15 billion a year. Other analysts put the number even higher. What none of them mentioned was that there are over 400 million diabetics world wide, with 70 million being in America. I would think that a number of those could end up taking our drug, so we could end up making well over 15 billion dollars a year if our weight loss drug works.
We are working on a slow release human growth hormone (hGH), another ground breaking development, since all other hGH drugs are short acting. hGH is given to children 2 years and older that have not reached the minimum normal height range. And increasingly, doctors are also prescribing it for adults. It increases muscle mass in the elderly. It also increases muscle mass in cancer and AIDS patients that have developed cachexia, a condition where the body breaks down muscle mass. In addition to that, hGH increases heart function, stamina, sexual ability in men and reverses vaginal dryness and fragile/thin vaginal skin in older women. It also enhances the immune system. Because of these reasons, and many more, it is being increasingly prescribed for adults. And as the population ages, hGH sales will be in a strong uptrend.
Even though hGH has many properties that would make people want to take it, and make doctors want to prescribe it, many people decide against using it because it has to be taken daily, plus daily injections are expensive. OPK has developed a long acting hGH that only has to be injected once a week. It is in phase III in adults and phase II in children. The present yearly market for hGH drugs is 3 billion dollars a year. Since our drug only needs to be given once a week, instead of daily, it will be the drug of choice. Plus more people will decide to take it since it only needs to be taken once a week, and more people will choose to take it because it will also be less expensive since it is not taken every day.
But even though this was a drug that would be an excellent cash cow if the drug trials could be advanced all the way through FDA approval, we didn't have enough money to finish running the tests on hGH, plus all our other drugs. Dr. Fisher talked to Pfizer, and they came to the rescue. They gave us $295 million up front, which brought us to a cash balance of $348 million, plus they agreed to pay another $275 million dollars to fund both our child and adult studies through to FDA approval. This means that we will end up getting a total of $570 million, over half a billion dollars, and when added to our own cash balance of $53 million it gives a total of $623 million. And once Pfizer starts selling the drug we will get royalty payments.
According to a paper on drug royalties, written by Goldscheider, since a company that develops a drug shoulders most of the expenses, they get a large royalty. And if it is a drug that will not face competition, and thus will be able to be sold for good profits, such as our drug, they will get even larger royalties. The company that acquires the rights to the drug and then starts selling the drug, after expenses, will usually have a profit of 50%. Per Goldscheider, royalties will be 25% of the profit for drugs not facing completion. That would work out to a 12.5% royalty and on revenues of $3 billion yearly, that would mean that OPK would get $375 million a year in royalties.
So, not only will we get over half a billion dollars, enough to fund all our drug studies through to FDA approval, we will also receive $375 million a year from royalties. Prior to our deal with Pfizer, our company was in difficulty because of its high cash burn and commentators were saying that OPK might cease to exist. Most companies would not know what to do, but Dr. Fisher turned a liability into an asset. It is this ability of Dr. Fisher, to see solutions where other people only see disaster, that makes our company so great.
Dr. Fisher is always looking for ways to help the company, and he comes up with solutions that no one else would see. In 2009, Schering-Plough, a large pharmacological company, was working on the drug rolapitant for nausea and vomiting caused by chemotherapy. They hoped that it would be better than present drugs and longer acting, but their phase II trial didn't show that it was effective for either of those cases, so they shelved development of the drug. Dr. Fisher bought the rights to the drug for $2 million, and then sold it to Tesaro for $121 million plus royalties, a huge profit over the $2 million we paid. Also, Tesaro believes that they can get the drug to work, and if so, in the future we will be getting royalty payments, which Tesaro says will be double digit, meaning 10% or higher.
The Pfizer human growth hormone deal gave us a large cash balance, enough to allow us to develop our other drugs, even with our high cash burn. That was why our stock was climbing. And the new maneuver by Dr. Frost, acquiring BRLI for shares instead of cash, puts us in an even better position.
BRLI has a large library of genetic data plus it has proprietary sequencing technologies that will greatly enhance Opko Health's development of drugs. BRLI also has a large sales force, here in America, and also Europe, with connections to insurance companies and doctors, and this will facilitate the ramp up the sales of OPK's prostate 4Kscore blood test, plus their large sales force can be used to sell our other drugs as they are approved.
Combining the two companies will also drastically increase OPK's money flow. BRLI's annual revenue was 832 million dollars last year, almost ten times OPK's revenue of 91 million dollars, plus BRLI had a profit of 47 million dollars, which is growing yearly, and will certainly help us out. Just with this acquisition, we have become a much stronger overall company.
Dr, Fisher keeps acquiring companies that complement our corporation and so make us stronger. On 5 May 20125 we acquired the private Irish company, EirGen Pharma which manufactures high potency drugs such as those used for cancer chemotherapy which are unsuitable for manufacture in normal multi-product facilities due to cross contamination risks. So we will be able to manufacture our drugs in their facilities. They are also a profitable company, and that will add more money to our cash flow.
Over time we will acquire more companies that complement our corporation, including companies that are working on new breakthrough medications, and these will add to our growing portfolio of world class medications. All of this means that we will continue growing and so will our stock price.
Some people might worry that since we have over half a billion shares of stock, that it will be difficult for our stock price to rise, so I compared our company with another pharmacology company with over half a billion shares, way over half a billion shares.
Johnson and Johnson, JNJ, a large health care company, has 2.8 billion shares, which is 5.2 times the number of shares that we will have with our combined companies. JNJ made a profit of 52.2 billion dollars last year, and since it has 5.2 times as many shares as we have, that would be the equivalent of us making a profit of 10 billion dollars: $52.2/5.2 = $10.04 We aren't to the point of making 10 billion dollars in profit at this time, in fact we are losing money, but we have a cash balance of $623 million which will allow us to fund our drug tests through FDA approval, and now we will be getting revenue from our 4Kscore test. When you add up all of the potential revenue we will be getting if all our drugs are approved, eventually we will be getting much more than $10 billion in profits. All our drugs added up, just using the conservative estimates, comes to $30 billion, and since the profit on drugs that are not facing competition is 50%, that comes to $15 billion in profits. JNJ's stock price has been steady around $100/share. So on an equivalent basis, we could reach $100/share, or higher, if we earn profits of over $10 billion a year when all our drugs are approved. Especially since we will probably have more drugs in the pipeline as time goes by.
Another thing to consider. JNJ has a dividend of $3 per share. In the future, when OPK is established and has a steady cash flow, there is a good chance that it will also start paying dividends, and when it does, in a few years of dividend payments, you would make back more money in dividends than you had paid for the stock.
