Diversified healthcare company Opko Health (NASDAQ: OPK)
shares have recently surged to 2018 highs at $6.47 from lows of $1.12 pandemic lows when the S&P 500 index (NYSEARCA: SPY)
plunged (-34%) into March 2020. The diagnostic and pharmaceutical company has been a benefactor of the COVID-19 pandemic by providing lab testing capacity to public and private sectors through its BioReference Laboratories subsidiary. As a leading provider of COVID-19 testing services, the firms has been chosen by the Centers for Disease Control (CDC), states, integrated healthcare networks and even the National Football League (NFL). While OPK is a benefactor from the pandemic, shares continue to have more upside as COVID-19 testing demand continues to surge especially during the restarts as the routine and genetic testing demand is returning with the reopening of outpatient and elective services.
Q2 FY 2020 Earnings Release
On July 20, 2020, Opko released its second-quarter fiscal 2020 results for the quarter ending June 2020. The Company reported earnings of $0.05 per share versus consensus analyst estimates of (-$0.08) per share, beating estimates by $0.13 per share. Revenues surged 33% year-over-year (YoY) to $301.2 million beating analyst estimates by $71.72 million. Opko forecasts Q3 2020 revenues between $360 million to $380 million with services revenues making up $325 to $360 million and operating profits in the $20 million to $30 million range. The Company projects 45,000 to 55,000 COVID-19 tests per-day in Q3 combining both PCR and antibody testing, with the “potential for that number to increase significantly.”, according to Opko Chief Financial Officer Adam Logal. July volumes have been the highest yet. Should demand for COVID-19 testing decline, Opko is confident the base business is positioned to grow organically. The Company has $21.6 million in cash and cash equivalents with a total liquidity of $115.3 million at the end of the second quarter.
Opko has partnered with Pfizer (NYSE: PFE) to submit a biologics license application (BLA) for their somatrogon human growth hormone product to the FDA in Q3. The Company’s RAYALDEE medication received FDA phase 2 trials authorization in helping treat mild-to-moderate COVID-19 patients due to the unique action of vitamin D to produce antimicrobial peptide in humans. RAYALDEE sales saw a 45% surge in prescriptions in Q2 2020 as the Company seeks to expand indications. The Company’s lab business saw a return of the base business back to 80% of pre-COVID levels. The reopening of urology offices have seen the recovery of the 4K business.
COVID-19 Testing Surge
The BioReference Lab is providing COVID-19 testing for high profile and major employers including the NFL, NBA and major league soccer as well as several colleges and universities and over 500 Rite Aid (NYSE: RAD) and CVS Health (NYSE: CVS) locations. The CDC awarded Opko with an “indefinite-delivery, indefinite-quantity contract” to provide antibody testing for COVID-19. The Company has provided over 3.2 million COVID-19 molecular tests with plans to scale up to 100,000 tests per day. The Company performed 2.2 million COVID-19 tests in Q2 2020 with average reimbursement in the low-to-mid $60 per test. Opko has seen demand grow consecutively every month. This resulted in a 46% year-over-year (YoY) spike in services revenues to $251 million compared to $178.5 million in Q2 2019. Stay-at-home orders led to a (-46%) decline in routine and genetic testing services, but that has improved since restrictions were lifted. Risk tolerant investors should watch for either a double top or breakout at the $6.47 level.
OPK Price Trajectories
Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for OPK stock. The monthly rifle chart triggered a market structure low (MSL) buy above $2.85. The monthly stochastic is still rising but the 5-period moving average (MA) support sits at $3.70. The weekly stochastic has peaked a full oscillation to set-up a market structure high (MSH) sell signal below $4.85. There is no reason to chase entries and if the weekly 5-period MA slips then the $4.85 MSH trigger can provide opportunistic pullback levels at the $4.48 Fibonacci (fib) level, $4.03 fib and $3.84 monthly 5-period MA and fib. This stock is ready for multiple expansion due to the pipeline and continued surge in COVID-19 testing demand as economic restarts call for more and sustained testing.
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