OPKO Health(OPK) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements OPKO Health reported a significant increase in total revenues to $1.37 billion for the nine months ended September 30, 2021, resulting in a net income of $43.6 million and improved operating cash flow Notes to Condensed Consolidated Financial Statements The notes detail the company's business structure, the impact of COVID-19, accounting policies, and financial components, including asset sales and strategic alliances - The company is a diversified healthcare entity with two main segments: Diagnostics (BioReference Laboratories) and Pharmaceuticals (featuring Rayaldee and Somatrogon)[29] - In Q3 2021, the company sold one of its sterile-fill-finish facilities in Waterford, Ireland to Horizon Therapeutics for $65 million, recognizing a gain of $31.5 million[33] - Revenue from services for Q3 2021 decreased by $42.3 million compared to Q3 2020, primarily due to a decline in COVID-19 testing volumes, though other test volumes increased[35][36] - The company has formed several new strategic alliances, including a joint venture with LeaderMed and exclusive license agreements with CAMP4 Therapeutics and Nicoya[183][186][189] - BioReference has reached a verbal agreement with the U.S. Department of Justice (DOJ) to settle an investigation for approximately $10 million regarding potential violations[149] Condensed Consolidated Balance Sheets (Unaudited) | (In thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $ 557,510 | $ 523,179 | | Total assets | $ 2,417,638 | $ 2,473,063 | | Total current liabilities | $ 283,035 | $ 375,483 | | Total liabilities | $ 652,071 | $ 801,512 | | Total shareholders' equity | $ 1,765,567 | $ 1,671,551 | Condensed Consolidated Statements of Operations (Unaudited) | (In thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $ 385,813 | $ 428,064 | $ 1,373,387 | $ 940,739 | | Operating income | $ 37,826 | $ 21,939 | $ 81,834 | $ 8,358 | | Net income (loss) | $ 28,739 | $ 23,717 | $ 43,631 | $ (1,712) | | Income (loss) per share | $ 0.04 | $ 0.04 | $ 0.07 | $ 0.00 | Condensed Consolidated Statements of Cash Flows (Unaudited) | (In thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $ 43,980 | $ 5,218 | | Net cash provided by (used in) investing activities | $ 44,628 | $ (11,583) | | Net cash used in financing activities | $ (11,183) | $ (43,184) | | Net increase (decrease) in cash and cash equivalents | $ 76,388 | $ (49,158) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a significant increase in operating income for Q3 2021 and year-to-date, driven by an asset sale and strong Diagnostics segment performance, with sufficient liquidity for future operations Results of Operations For Q3 2021, total revenues decreased 10% but operating income rose 72% due to an asset sale, while nine-month revenues grew 46% with an 879% increase in operating income Consolidated Results of Operations - Three Months Ended Sep 30 | (In thousands) | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $ 385,813 | $ 428,064 | $ (42,251) | (10)% | | Revenue from services | $ 340,163 | $ 382,498 | $ (42,335) | (11)% | | Revenue from products | $ 36,882 | $ 28,702 | $ 8,180 | 28% | | Income from operations | $ 37,826 | $ 21,939 | $ 15,887 | 72% | Consolidated Results of Operations - Nine Months Ended Sep 30 | (In thousands) | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $ 1,373,387 | $ 940,739 | $ 432,648 | 46% | | Revenue from services | $ 1,244,312 | $ 804,309 | $ 440,003 | 55% | | Revenue from products | $ 106,490 | $ 89,133 | $ 17,357 | 19% | | Income from operations | $ 81,834 | $ 8,358 | $ 73,476 | 879% | - The Diagnostics segment's Q3 2021 revenue decreased by 13% to $340.2 million, and operating income fell 57% to $19.7 million, primarily due to a decline in COVID-19 testing volume[240] - The Pharmaceutical segment's Q3 2021 operating income was $28.6 million, a significant turnaround from a $14.4 million loss in Q3 2020, mainly due to a $31.5 million gain on the sale of a facility in Ireland[251][258] Liquidity and Capital Resources The company held $148.6 million in cash as of September 30, 2021, generating $44.0 million in operating cash flow for the nine months, and believes it has sufficient liquidity for over 12 months - The company held cash and cash equivalents of $148.6 million at September 30, 2021[296] - Net cash provided by operating activities for the nine months ended September 30, 2021, was $44.0 million, primarily reflecting cash generated by the diagnostics segment from COVID-19 testing[296] - The company closed the sale of a facility in Waterford, Ireland, for $65 million in cash during the third quarter of 2021[297] - In May 2021, the company exchanged $55.4 million in aggregate principal of its 2025 Notes for 19,051,270 shares of common stock, recording an $11.1 million non-cash loss on the exchange[302] Contractual Obligations as of September 30, 2021 | (In thousands) | Total | | :--- | :--- | | Open purchase orders | $ 223,713 | | Operating leases | $ 38,079 | | Convertible Notes & Senior Notes | $ 185,543 | | Lines of credit | $ 14,064 | | Interest commitments | $ 25,871 | | Total | $ 499,223 | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations and interest rate changes, managing the former with forward contracts and deeming the latter minimal due to fixed-rate debt and short-term investments - The company's primary market risks are foreign currency exchange rate fluctuations (Chilean Peso, Mexican Peso, Euro) and changes in interest rates[334][335] - Foreign exchange forward contracts are used to economically hedge forecasted cash flows exposed to foreign currency risk, particularly for the Chilean Peso against the U.S. dollar[336][337] - Interest rate risk is considered minimal as the investment portfolio consists of short-term, low-risk securities, and major debt obligations have fixed interest rates[339][341] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[343] - No material changes were made to the company's internal control over financial reporting during the quarter ended September 30, 2021[344] PART II. OTHER INFORMATION Legal Proceedings The company reports no material changes to legal proceedings disclosed in its 2020 Annual Report on Form 10-K, referring to Note 12 for further details - There have been no material changes to the legal proceedings previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[346] - For information regarding the status of legal proceedings, the report incorporates by reference the details provided in Note 12 to the financial statements[347] Risk Factors There have been no material changes to the company's risk factors as previously disclosed in the 2020 Annual Report on Form 10-K - No material changes to risk factors have occurred since the filing of the 2020 Annual Report on Form 10-K[349] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[350] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[351] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[352] Other Information The company reported no other information required to be disclosed under this item - None[353] Exhibits This section lists the exhibits filed with the quarterly report, including an Amended and Restated Credit Agreement, CEO and CFO certifications (pursuant to Sarbanes-Oxley Sections 302 and 906), and Inline XBRL documents - The report includes several exhibits, such as the Amended and Restated Credit Agreement with JPMorgan Chase Bank, certifications from the CEO and CFO, and XBRL data files[354]