Opko Health Inc. (NYSE:OPK) has finished a recent round of tests for its 4Kscore diagnostic tool, used to test for prostate cancer, and Barrington Research analyst Charley R. Jones is convinced that this Opko Health Inc. (NYSE:OPK) could have multiple billion dollar products on its hands. Jones rates the company Outperform with an $11 twelve month price target (currently $8.5, down from $12.3 in October).
“We came away feeling very confident about each of Opko Health Inc. (NYSE:OPK)’s diagnostic programs. In addition, we came away knowing that OPK now has the right person running that division,” wrote Jones, after meeting with the head of Opko Health Inc. (NYSE:OPK)’s diagnostic division, David Okrongly.
4Kscore prostate cancer test
The prostate-specific antigen (PSA) test, the current standard for initial prostate cancer screenings, results in many false positives and unnecessary biopsies. Jones estimates that 500,000 men in the US have at least 10 unnecessary prostate biopsies and argues that even more opt out of repeat tests because they are painful. Even if the 4K score doesn’t replace the PSA, it’s both cheaper and less intrusive than a biopsy and could become an intermediate test.
Claros diagnostic tool
Jones is nearly as excited about a different diagnostic tool that Opko Health Inc. (NYSE:OPK) is developing called Claros. The long-term goal is to have a device that can take any fluid sample (blood, saliva, amniotic fluid, etc) and then test for practically any relevant disease without having to send the sample off to a lab. Importantly, the Claros device is expected to cost less than $3000 for the machine and about $1 for each disposable cartridge, making it affordable to any size clinic. Right now the device only takes blood samples, but Jones expects it to be approved for use with saliva and urine samples in the near future.
OPKO is a highly speculative pick
While both tools may be exciting (and OPKO does have other products in the pipeline), the 4Kscore has only completed the calibration portion of testing and still has to complete validation before it can be approved, and even then there’s no guarantee that the medical community will adopt the new test. Similarly, Jones’ excitement about the Claros diagnostic tool is based on what it might accomplish in the future more than on its current capabilities.
“At 40x sales, OPK has significant downside potential that cannot be denied if the majority of its large programs are not successful, as we currently expect,” writes Jones.
