OPKO Health, Inc. (NASDAQ:OPK) Q1 2025 Earnings Call Transcript

OPKO Health, Inc. (NASDAQ:OPK) Q1 2025 Earnings Call Transcript April 30, 2025

Operator: Good afternoon, and welcome to the OPKO Health First Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Yvonne Briggs. Please go ahead.

Yvonne Briggs: Thank you, operator. Good afternoon. This is Yvonne Briggs with Alliance Advisors IR. Thank you all for joining today’s call to discuss OPKO Health’s financial results for the first quarter of 2025. I’d like to remind you that any statements made during this call by management other than statements of historical fact will be considered forward-looking, and as such, will be subject to risks and uncertainties that could materially affect the company’s expected results. These forward-looking statements include, without limitation, the various risks described in the company’s SEC filings, including the annual report on Form 10-K for the year ended December 31, 2024, and subsequently filed SEC reports. Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, on April 30, 2025.

Except as required by law, OPKO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Before we begin, let me review the format for today’s call. Dr. Phillip Frost, Chairman and Chief Executive Officer, will open the call. Dr. Elias Zerhouni, Vice Chairman and President, will then provide an overview of BioReference Health, as well as OPKO’s Pharmaceuticals business. After that, Adam Logal, OPKO’s CFO, will review the company’s first quarter financial results and discuss OPKO’s financial outlook. And then we’ll open up the call for questions. Now, I’d like to turn the call over to Dr. Frost.

Dr. Phillip Frost: Good afternoon, and thank you for joining us today. We continue to advance our strategic initiatives to drive value for OPKO Health. In March, we announced the sale of BioReference’s health oncology and related clinical testing business to Labcorp. BioReference will continue to offer urology diagnostic services nationwide as well as maintain its core clinical testing operations in New York and New Jersey, which collectively represented approximately $320 million in revenue for 2024. This transaction is our second with Labcorp and then unlocks additional value in our diagnostic segment and enhances BioReference’s path to profitability. Our dual-GLP-1 glucagon agonist, OPKO-88006 administered subcutaneously has demonstrated encouraging outcomes in animal models of obesity and MASH.

The positive improvements of metabolic parameters, hepatic pathology, and non-alcoholic fatty liver disease activity score, including fibrosis stage, support our decision to develop OPK-88006 as a once-weekly subcutaneous injectable treatment of MASH. In March, we entered into a collaborative agreement with Entera Bio to advance the development of an oral tablet form of OPKO-88006. Using Entera’s proprietary N-Tab technology, oral bioavailability studies in several animal models suggest that therapeutic levels can be achieved for human use. ModeX has two programs in Phase 1 clinical trials. Our Epstein-Barr virus vaccine candidate in collaboration with Merck, and MDX2001, a tetraspecific antibody for the treatment of solid tumor cancers. We look forward to keeping you updated on the progress of these trials.

Our Latin American business EirGen [ph] Pharma, our Irish contract pharmaceutical development and manufacturing unit, continue to show revenue and profit growth. As we continue to advance our strategy for each business segment, we’re confident in our ability to drive value for OPKO shareholders. In addition to the buyer reference asset sale, the Board approved a $100 million increase to our common stock repurchase program, bringing the total to $200 million. We believe OPKO shares continue to be significantly undervalued, and our strong cash position provides the ability to return capital to shareholders while adequately funding our pharmaceutical programs. In addition, we entered into a note exchange agreement to bolster our capital structure.

Adam will provide details on the agreement and related benefits in a moment. Now, I’ll turn the call over to Elias.

Dr. Elias Zerhouni: Well, thank you, Phil, and thank you all for joining today. Let me start with the Diagnostics segment where our restructuring efforts are continuing. First, as mentioned by Phil, we signed a definitive agreement with Labcorp to sell the oncology and related clinical testing assets of BioReference Health. The transaction includes the sale of BioReference’s laboratory testing businesses focused on oncology and oncology-related clinical testing services for up to $225 million, including $192.5 million payable at closing and up to $32.5 million in an earn out based on performance. Although our oncology business has grown over the years, its scale was not sufficiently large to support its costs. Hence our decision to divest from this line of business, which will improve profitability of the remaining business of BioReference.

BioReference will continue to offer urology diagnostic services including our proprietary 4Kscore tests for positive cancer assessment nationwide and our corrections clinical services nationwide as well as maintain its core clinical testing operations in New York and New Jersey, which represented approximately $320 million in revenues for 2024. And the transaction is anticipated to close in the second half of 2025. Overall, business volume at BioReference, excluding oncology, grew modestly, Q1 ’25 versus Q1 ’24, while our 4Kscore test reported another impressive quarter with 14.5% growth year-over-year. BioReference continues to make progress in driving efficiencies and aligning operations with current volumes. In Q1 2025, we made great strides in continuing both the reduction of employee costs and footprint consolidation.

Specifically, during this quarter, the first quarter, BioReference eliminated an additional 136 positions, which represents about a 7% workforce reduction. Total cost savings from actions initiated during Q1 are estimated at approximately $19 million on an annualized run rate, $14 million for employee costs, and $5 million in footprint consolidation. Our current headcount now stands at 1,962, which is down from a high of 3,099 in Q1 2024. And once the oncology transaction is closed in Q3, Q4, our headcount will stand at about 1,600 with revenue of about $320 million. We continue to reengineer operations in our main laboratory with automation and other approaches for greater efficiency and service levels. Our stated objective, as we have mentioned before, remains to reach profitability within this year.

On the commercial front, BioReference strategically expanded its patient access service center locations during the first quarter in the New Jersey and New York area, adding infrastructure and key geography in the New York, New Jersey market, and this will not only add revenue to the organization, but will also improve the patient and client experience in the region. In addition, BioReference continued its work to enter new clinical markets by enhancing its service levels and test offerings, including, for example, respiratory pathogens and recently FDA-approved self-collection options for sexual health. Now let me go to the Therapeutic segment. ModeX continues its advances in clinical development. As you heard from Phil, enrollment and dosing are well underway by our partner Merck in the Phase 1 Epstein-Barr virus vaccine trial.

This investigational vaccine based on ModeX’s ferritin nanoparticle vaccine platform is being evaluated for safety and tolerability in up to 200 healthy adults. And commencement of this study triggered a milestone attainment to ModeX in Q4 2024. In addition, ModeX continues to advance its immuno-oncology and immunology portfolio with four potential clinical candidates progressing in the pipeline. The MDX2001, which is a CMet-Trop2/CD3-CD28 tetraspecific antibody, has advanced in Phase 1 clinical trials to its fourth dose level. With additional continuing Phase 1 and additional Phase 1b studies in selected solid tumors expected in early 2026. The MDX2003 products CD19, CD20, CD3, CD28 tetraspecific antibody for lymphoma and leukemia and the MDX2004, which is an immune rejuvenator for multiple oncology and immunology indications are both expected to begin human trials in late 2025, early 2026.

The development of multi specific antibodies for immune impaired patients at risk for COVID and Influenza A and B continues to progress with support from BARDA, which increased its previous commitment of $59 million by another $51 million in Q4 2024 for a total of $110 million to advance these programs and the related multi specific antibodies platform. There’s a remaining $95 million commitment dependent upon reaching some milestones, which is still committed by BARDA. I’d like to add here that to date, we have not received any indication that BARDA will defund these grants and these programs as we stand here today. And we’re hopeful that they will not because COVID antibodies are different than COVID vaccines and COVID antibodies are needed for the immune impaired population.

As Phil mentioned, we have advanced into the pre-IND stage with our injectable proprietary GLP-1/glucagon long-acting oxyntomodulin analog OPK-88006. Even very promising preclinical data, for example, the study in male GANDIO-MASH mice demonstrated improved metabolic and biochemical parameters and hepatic pathology with improved non-alcoholic fatty liver disease activity score called NASH by over two points supported by quantitative liver histology for steatosis, inflammation and fibrosis showing improvements. We also entered into a collaboration agreement with Entera Bio to advance an oral tablet of the OPK88006 GLP-1/glucagon agonist into the clinic to treat obesity and the thrombotic disorders using Entera’s N-Tab technology. Under the terms of the agreement, OPKO and Entera will hold 60% and 40% ownership interest, respectively in the orally administered product and be responsible for 60%, 40% respectively of the program’s development costs.

In connection with the execution of the agreement, OPKO purchased approximately 3.7 million ordinary shares of Entera for a purchase price equal to $2.17 per share for about $8 million. Entera agreed to utilize the proceeds from this share purchase to fund its 40% share of the program’s development costs through the completion of Phase 1. Our Rayaldee team continued to produce new analyses in peer reviewed publications suggesting that Rayaldee in CKD patients with secondary hyperparathyroidism may significantly delay the need for dialysis relative to other vitamin D [ph] products, potentially increasing its utilization into the group of patients. In summary, we believe BioReference is now in a position of strength with a clear focus on its core testing capabilities, streamline operations and expectations of profitability later this year.

In addition, we’re pleased with the progress of our Pharmaceutical segment in advancing our therapeutic and vaccine candidates through the clinic. Let me now turn it over to Adam Logal for our financial report and further information. Adam?

Adam Logal: Thank you, Elias. Starting with operating results from our Diagnostics segment. Revenue was $102.8 million for Q1 2025, including $25.1 million from the assets being sold to Labcorp compared with $126.9 million for the 2024 period. This decrease was primarily the result of the first Labcorp transaction that closed in September 2024. During the first quarter of 2025, costs and expenses totaled $126.8 million including $32.4 million related to the assets being sold to Labcorp. This compares with $161.3 million for the comparable period of 2024. Q1 2025 also includes approximately $7.2 million in nonrecurring costs and expenses for severance and facility closures, all incurred as expected as we realign our business to ensure sustainable growth and profitability.

As Elias mentioned, the actions taken to date will result in annualized cost savings of more than $19 million which we will benefit from starting in May. During the first quarter of 2025, operating loss was $23.9 million compared with an operating loss of $34.4 million for the 2024 quarter. Depreciation and amortization expenses for the Diagnostics segment were $5.7 million and $7.9 for the 2025 and 2024 periods, respectively. Moving to our Pharmaceutical segment. Revenue was $47.1 million for the first quarter of 2025 compared with $46.8 million for the 2024 period. Revenue from products, including our international pharmaceutical businesses, was $34.8 million compared with $38.1 million for the comparable 2024 period. In response to the challenging foreign currency environment that has impacted revenue, the profitability of this business continues to meet our expectations through disciplined operating expense constraints.

Product revenue includes revenue of Rayaldee of $6.3 million which was slightly lower than 2024s $6.9 million. The Inflation Reduction Act has resulted in challenging environment for Rayaldee. However, we have realized an increase in the operating margins for Rayaldee as a result of the improved net pricing through lower government rebates, partially offsetting the volume decrease. Revenue from the transfer of IP was $12.3 million for the first quarter of 2025 compared to $8.7 million for the same quarter of 2024. Our gross profit share from Pfizer was $4.5 million during the 2025 quarter versus $5.6 million for the 2024 period. We continue to follow the publicly available prescription data reported by third-party services and remain encouraged by the growth rates.

However, we are working with Pfizer to better understand some of the underlying dynamics that have negatively impacted the first quarter profit share payments. The first quarter of 2025 also includes $7 million in R&D funding compared to $2.2 million for the 2024 period, reflecting increased activities under our program supported by BARDA. Cost of expenses for our Pharmaceutical segment were $81.9 million for the first quarter of 2025 compared with $74.5 million for the 2024 period. Research and development expenses were $30.2 million compared to $21.2 million a year ago. R&D expense increased as a result of our ModeX development activities including the Phase 1 clinical trial for our first oncology program as well as our BARDA supported programs.

The resulting operating loss for the quarter ended March 31, 2025 was $34.8 million compared with an operating loss of $27.7 million for the 2024 quarter. Depreciation and amortization expense for the 2025 quarter decreased slightly to $17.8 million from $18 million for the 2024 quarter. Turning to our consolidated financial results. Net loss for the first quarter of 2025 was $67.6 million or $0.10 per share compared with a net loss of $81.8 million or $0.12 per share for the 2024 period. Turning to our balance sheet. We continue to work on our capital structure and allocate capital as we laid out during our last call. We ended Q1 2025 with approximately $450 million in cash, cash equivalents and restricted cash. And as we noted, we fully exited our position in GeneDx during the first quarter, adding approximately $51 million to our cash balance.

We closed on our convertible debt exchange on April 1, 2025, which used approximately $65 million in cash, and we issued approximately 121 million shares of common stock and eliminated $159.2 million of the company’s outstanding convertible notes, including accrued and unpaid interest. We intend to continue to reduce our remaining convertible debt and through our recently expanded share repurchase authorization, we plan to continue to reduce the number of shares outstanding in the most capital efficient way possible. Under our share repurchase authorization, we have approximately $159 million remaining, which at yesterday’s closing price represents more than 113 million shares or more than 14% of our currently outstanding shares. As Elias mentioned, we anticipate closing our second transaction with Labcorp later this year and we’ll receive $192.5 million at closing and up to $225 million in total.

As we look ahead, the following assumptions influence our financial guidance. For our Pharmaceutical segment, we expect Pfizer to continue to grow sales of NGENLA and the overall HGH franchise. We assume a stable foreign currency exchange rate for our ex US. Pharmaceutical businesses, which has recently been challenged with the large swings in certain territories. Our teams have been definitely navigating those challenges through disciplined expense control and expect that going forward. R&D expenses will reflect higher activities related to our ModeX programs including CMC efforts related to our first oncology trial as well as furthering our GLP-1/glucagon development program. A portion of the increased ModeX activities will continue to be funded through our BARDA agreements.

For our Diagnostics segment, we are executing our multiyear, multiphase program to reach and improve profitability. This program continues to be focused on operational efficiencies and the reduction of fixed infrastructure costs. We expect to incur an additional $5 million in nonrecurring costs during the second quarter, which primarily reflect severance costs. We have established an additional cost reduction initiative targeting a further $10 million of annualized cost savings on top of the $20 million we discussed in our last call. As a result of our recently announced transaction with Labcorp, once closed, the remaining BioReference will be cash flow positive and profitable as measured before nonrecurring and noncash items. In addition, we expect to realize a gain on the Labcorp transaction of approximately $100,000,000 which will be reflected as a reduction to operating expenses and an increase in operating income.

Due to the uncertainty of the timing of closing, we are including revenue costs and expenses for the full year and will adjust the total revenue costs and expenses once the closing date is certain. As a result, we expect the following for the full year 2025. Total revenues between $675 million and $685 million, revenue from services between $400 million and $500 million and $425 million, including revenue from the assets being sold to Labcorp of 95 million to $105 million. Revenue from products between 165 million and $175 million and other revenue between $75 million and $85 million inclusive of the revenue from our Pfizer gross profit share, which is estimated to be between $30 million and $40 million from $35 million to $45 million and BARDA revenue of $38 million to $44 million which was previously guided from $40 million to $48 million.

We expect costs and expenses to be between $825 million and $875 million excluding the nonrecurring expenses related to the restructuring activities for BioReference, which are currently estimated to be between $10 million, $40 million for the full year. And inclusive of costs and expenses related to the assets being sold to Labcorp of $125 million to $135 million. R&D expense is expected to be between $120 million and $130 million, down from $120 million to $140 million which depends on the rate of enrollment of our clinical trial and the timing for certain activities for our ModeX programs, including CMC, with $37 million to $43 million, Thing offset from funding by BARDA. Depreciation and amortization expense is expected to be approximately $90 million.

While we don’t typically provide non-operating income and expense guidance. As a result of our convertible debt exchange, we are providing guidance as we anticipate a nonrecurring other expense item related to that exchange of approximately $90 million. During the second quarter of 2025, which is comprised of interest expense from debt discount, debt issuance fees and inducement expense. That concludes our prepared remarks and thank you all for your attention. Now operator, let’s open the call for questions.

Q&A Session

Operator: [Operator Instructions] The first question comes from Maury Raycroft with Jefferies. Please go ahead.

Maury Raycroft: Hi, this is James on for Maury. Thanks for taking our questions. Just to start off, what are some possible explanations for the negative dynamics for NGENLA? Is it more likely competition access issues or something commercial related to Pfizer?

Dr. Phillip Frost: Yes. So we’ve seen the growth rates of the prescriptions to continue along both for NGENLA and GENOTROPIN. So we think it’s more likely to do with some of the commercial environments. We don’t have color further from Pfizer just yet on the dynamic there. But we expect this to be a first quarter only event, which is why we’ve only slightly reduced the guide.

Maury Raycroft: Got it. And could just to add on to that, because also please comment on why you think Pfizer withdrew their EU application for the adult setting? When was the last time you met with Pfizer regarding plans to expand the franchise? And what are those plans for expansion into additional settings?

Dr. Phillip Frost: Yes. So I’ll try to expand on this and then Elias or others could jump in as well. So Pfizer has been working on a strategy to expand the label for NGENLA for some time. We do know that they’re expecting to kick off some trials for the additional pediatric indications. Within Europe, the dynamics are slightly different and I think the Pfizer chose to be more focused on the pediatric indication given the size of the overall market for the pediatric indications in comparison to the adult and wanted to focus their efforts there.

Maury Raycroft: Got it. Thanks for taking our questions. I’ll hop back in the queue.

Operator: Thank you. The next question comes from Yi Chen with H. C. Wainwright. Please go ahead.

Yi Chen: Thank you for taking my question. Could you please provide a rough timeline about development program of the GLP-1/glucagon tablet candidate? When can we expect to see some clinical results? And also what could be the dosing frequency in the clinical trial? Thank you.

Dr. Elias Zerhouni: Thanks, Yi. So the timeline for the development program, we expect to have an IND filed later this year or by the end of this year or early next year with the trial to commence thereafter and could get results from a Phase 1 trial by the end of ’26. As it relates to dosing, it’s expected to be a once weekly dosing.

Dr. Phillip Frost: Sorry, I was on mute. I couldn’t answer before Adam took it and give you a perfect answer.

Yi Chen: So apart from being an oral tablet candidate and once a week dosing, is there any other differentiating factor for this candidate compared to semaglutide or tzepatide?

Dr. Elias Zerhouni: Yes. So let me take that one. First of all, for the oral formulation, it’s once a day. For the subcu, it’s once a week, all right? Now GLP-one and glucagon are a pair of agonist, if you will, of oxyntomodulin. It’s an analog of oxyntomodulin. And it’s really, really interesting because it does glucagon acts on the liver on the metabolism of the liver. And so it’s really focused on whether or not this compound can be of use in NASH and if all of our preclinical works indicates that it is. So if you’re looking at the [indiscernible], which we think GLP-1/glucagon will be superior is really the NASH fatty liver disease group. So that’s really where we’re going and that’s what we’re going to try to develop over the next year.

Yi Chen: Okay. Thank you.

Dr. Phillip Frost: Another way to say that we’re not going into all markets that relate to GLP-1/glucagon, we are focusing our entry indication is going to be in the liver, diseases that are affected by fatty liver disease patients who are affected by fatty liver disease and then we’ll expand from that depending on the results we see in Phase 1 and Phase 1b.

Operator: Thank you. The next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Jeffrey Cohen: Good afternoon. Thanks for taking our questions. Adam, can you comment [indiscernible]. Can you give us a sense of if anything is left on the convertible notes as well as the secured notes and number of shares pro forma?

Adam Logal: Sure. So let me just make sure I heard you right. So on the number of shares, on a pro forma basis, it went from — at March 31, it was about 671 million shares. As part of the convertible note exchange, we increased that by $121 million. So you get to jest about 790 million shares, a little bit more than 790 million shares outstanding at on a pro forma basis. On what’s left on the convertible notes, we have approximately $129 million remaining of principal that’s outstanding on an ongoing basis.

Jeffrey Cohen: Okay. Got it. That’s super helpful. I appreciate it. Can you give us a sense of the Diagnostic business and BioReference, I know you outlined some numbers for the year. So we should think of that as a $300-ish million base loan business for the second half of this year as far as thinking of it on an annual basis?

Adam Logal: Yes. On an annualized basis, the kind of remaining business sits between $310 million and $320 million. That’s right, on an annualized basis.

Jeffrey Cohen: Okay. Got it. And timing on the queue will be today or tomorrow?

Adam Logal: Tomorrow evening, yes.

Jeffrey Cohen: Okay. And I got all the metrics. So I think that does it for us. Thanks for taking the questions.

Adam Logal: Thanks, Jeff.

Operator: Thank you. The next question comes from Eric Joseph with JPMorgan. Please go ahead.

Unidentified Analyst: Hi, this is Billy on for Eric. Thanks for taking our questions. Quick one on the EBV trial, if that’s okay first. With the 200 healthy volunteers looking to be read out, are there any sort of efficacy or biomarker signals you might look for in that readout that might derisk the asset from an efficacy perspective?

Dr. Elias Zerhouni: So the 200 patients are divided in different cohorts because we’re also using adjuvants. Merck is using adjuvant testing, different adjuvants for the vaccine, and that’s what is going to be measured. We will get an idea of the immunogenicity of the vaccine with biomarkers. It’s not the intent of Phase 1, it’s mostly tolerability and safety. So, by the end of that trial, we’ll have a good idea of potential efficacy to indirect measures.

Unidentified Analyst: Thanks. And then just quick one if you might, just squeeze in on the TCE candidate, 2001. Is there any update on timelines as to when that safety readout might come out? And then kind of how many dosing cohorts you might expect for that first safety readout?

Adam Logal: So we — the first Phase was 6 levels. We’re in the fourth. We’ve accomplished the fourth. We’re going to fifth and sixth. Hopefully, we’ll have that initial six levels, which are really important because at the end of the six, we get to what we think is the beginning of the efficacy range, even though we’re observing whether or not we have results within these levels that we have now. And as I said before, we should be able to complete that phase before the end of this year and then enter the efficacy part of the trial probably with still a basket trial, a few different cancers, solid cancers that where we have seen some signals and then eventually come down in Phase 1b to one, possibly two cancers that are the most promising. So that’s the way the trial was designed.

Unidentified Analyst: Thanks for taking the question.

Operator: Thank you. The next question comes from Edward Tenthoff with Piper Sandler. Please go ahead.

Edward Tenthoff: Great. Thank you very much. I just want to confirm and make sure I’m getting this right. But what are the next steps for the subcu obesity program, NASH program? And then what is sort of the differential development plan, for oral? How do you anticipate differentiating those? And what do you think the timing is for the study? Thank you.

Adam Logal: So both of them, we’re working diligently to enter Phase I. So we’re in the pre-IND phase for both of them, CMC phase for both of them and have been manufactured. We will have our GMP material ready. We’re completing and interacting with the FDA about the design of these trials. Initially, it would pretty much be safety, as you know, with Phase 1 trials, side effects, measuring dose range and so on. So it’s a prep work, if you will, in view of a more advanced development in Phase 2a and 2b. But what we’re talking about here is Phase 1a and B. To answer that question that you’re just asking, what is the right PKPD and pharmacological behavior that we need to measure before we go further in Phase 2.

Edward Tenthoff: Okay. Thank you.

Operator: The next question comes from Yale Jen with Laidlaw and Company. Please go ahead.

Yale Jen: I got [indiscernible] and thanks for taking the question. I have two here. The first one is that you mentioned a little bit earlier on in terms of tariff situation at this point. Could you elaborate a little bit more in terms of whether you see something more negative or positive at this point? And then I have a follow-up question.

Dr. Elias Zerhouni: Could you repeat the question? I’m not sure I got it.

Yale Jen: That the government tariff situation — would you that there has any — yes.

Dr. Phillip Frost: Thank you. I’ll let Adam answer for operations overseas and then I’ll answer for R&D.

Adam Logal: Sure. Thanks, Yale. So for [indiscernible] we’re obviously monitoring it. We’re looking throughout our supply chain for mostly for BioReference. We do buy most of our products here from The U.S. Some of it is manufactured internationally. So we’re looking at all the different alternatives to minimize any impact. But as we sit here today, we think it’s a manageable risk, but we’ll continue to monitor it. As it relates to our pharmaceutical products, we do import both Rayaldee and we know Pfizer sells NGENLA and GENOTROPIN and they’re manufactured in Ireland. So continue to monitor those. Obviously, the U. S. Market or the cost of goods is a minor component of the total cost structure. So we wouldn’t expect it to have a significant impact. And obviously, HGH the HGH franchise is global franchise. So it only impacts the U. S. Market.

Yale Jen: And for R&D, we primarily depend on European and also Chinese CROs and CDMOs. That has been essentially a minor amount of services that we need to obtain outside of the U. S. And as far as we can tell, we don’t see a significant impact on R&D operations from tariffs.

Dr. Phillip Frost: Okay, great. Thanks. And maybe the follow-up in terms of the MESH product — MESH development, sorry. Do you anticipate this drug as sort of target for the earlier stage of MESH or MUCH more the later stage in the fibrosis part of it? And thanks.

Dr. Elias Zerhouni: Right. That’s a great question. So we’re still thinking through it. Obviously, we are inclined to really use the product where it’s most needed and that is F3 or F3 NASH or F4 early F4 NASH pre cirrhotic NASH at the beginning. We do not believe there’s as much of a need for F2 and F3, early F3 because of the alternatives that you have on the market right now. So that’s where we are focusing our efforts, but we haven’t yet decided that.

Dr. Phillip Frost: Okay, great. Thanks. Appreciate the response.

Operator: Thank you. The next question comes from Michael Petusky with Barrington Research. Please go ahead.

Michael Petusky: Hi, good evening. Adam, could you repeat, I’m sorry, I’ve got a little garbled on my end, the guide — the revised guidance for BARDA revenue?

Adam Logal: Yes. It’s 38 million to 44 million which is down from 40 million to 48 million.

Michael Petusky: Okay. All right. And then on NGENLA and just the idea that, hey, we think this is a one quarter issue. I mean, is that based on sort of the script data? Or is it based on any kind of conversations with Pfizer, at least preliminary conversation with Pfizer sort of suggesting that? Or can you just sort of [indiscernible].

Adam Logal: Sure. So we talked to Pfizer at least once a quarter just to get general updates. They haven’t indicated that there were anything in first quarter conversation. We haven’t spoken with them since we’ve received these results. But we do look at the script data and the script data continues to indicate a growing franchise so and no significant changes. So we are not certain if it was anything on a gross to net basis that impacted it or on the manufacturing side if there were any charges that came through there that impacted the gross profit share. I’ll note that last year, the first quarter was the low quarter of the year and we would expect, as I guided, that this was a nonrecurring issue for us and it will rebound to historical norms.

Michael Petusky: Okay. All right. And then just on the diagnostics business. If and I understand that the oncology will be sold. But if that business if that asset had not been sold, would you have been able to get to sort of cash flow breakeven this year or not?

Adam Logal: Yes. So we — part of our plans Mike were we had a couple of different ones. One was to work to find a way to monetize it through a transaction like we entered into with Pfizer, [ph] start with Labcorp. The other was to continue to exit certain lines of testing and certain clients that have high demands for service that our scale just wouldn’t allow us to reach. So we had fully expected to get there and certainly could.

Michael Petusky: Okay. All right. Very good. Thanks, guys.

Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Philip Frost, Chairman and Chief Executive Officer for any closing remarks.

Dr. Phillip Frost: I want to thank you all for your participation, for your good questions and we look forward to talking to you again at the end of the next quarter. Thank you again.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.