Speculation for Opko Health Continues Print E-mail
By Brian Wilson   
Thursday, 23 August 2012 06:01
icon_insiderbuysOpko Health (NYSE: OPK) is an up-and-coming medical products company that is often the focus of speculation solely because of its CEO Dr. Phillip Frost, who is holding 128,490,000 shares of the company, which represents about 43% of the company's shares (not counting dilution). What makes it more interesting is the fact that he continues to buy shares even now, despite the stock's stagnation since the start of this year which dropped the company's value by about 11%.

People on both sides of the OPK trade can make many arguments based on Dr. Frost's actions (primarily bulls who argue that Dr. Frost's name guarantees preferential treatment in the deal-making process), but what ultimately matters to the share price is the company's performance and the management of its assets. Opko has been sliding in recent trading due to frustrating lack of development in its bottom-line growth, and some depletion of its assets. This is balanced off by the company's strong revenue growth and its prospects with the arrival of its Alzheimer's diagnostic test, of which Bristol-Myers (BMY) has a partnership in.

There is also the phase III drug called Rolapitant, which is a treatment for nausea and vomiting induced by chemotherapy. Since chemotherapy is still the standard of care for patients in later stages of the disease, Opko is targeting an enormous market with the drug. Although it is not alone, Rolapitant is the drug that really makes this company worth looking at due to the demographic considerations after it's potential FDA approval.

The National Cancer Institute estimated in 2011 that the costs of cancer care will reach somewhere near $158 billion by 2020. Using estimates by the NIH, somewhere around 8% of overall costs for cancer patient care are due to productivity losses due to illnesses, which implies that there is significant unmet need to combat the unwanted side effects of cancer treatment. Chemotherapy-induced nausea and vomiting is at the top of the list, and if Rolapitant can demonstrate itself in phase III trials, Opko will look much more attractive to new investors.

OPK is technically in a downtrend, and it is quite a long wait for the estimated primary completion date of Rolapitant's phase III trials (June 2013), but bearishness is strong enough to at least consider a contrarian point of view (or perhaps a neutral one if you want to be safe). Still, according to the latest data, 22% of floated shares are being shorted (about 31 million). There is major short-squeeze potential, and the company has a very big name (Dr. Phillip Frost) there with deep pockets and extreme success in the past. Knife-catching may prove very lucrative if the stock enters another dip.

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