OPKO Health Inc.

Quarterly Report • Mar 3, 2018

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 1, 2018

OPKO Health, Inc.

(Exact name of registrant as specified in its charter)

Delaware 001-33528 75-2402409 (State or other jurisdiction of incorporation)

Commission File Number)

(I.R.S. Employer Identification No.)

4400 Biscayne Blvd., Miami, Florida 33137 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (305) 575-4100

Not Applicable Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

ITEM 2.02.Results of Operations and Financial Condition.

On March 1, 2018, OPKO Health, Inc., a Delaware corporation (the "Company"), held a conference call to provide a business update and discuss its operating and financial highlights for the quarter and full year ended December 31, 2017, which included revenue guidance for the first quarter of 2018. A copy of the conference call transcript is being furnished herewith as Exhibit 99.1.

The information included herein and in Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 as amended ("Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 as amended (the "Securities Act") or the Exchange Act, except as expressly set forth by specific reference in such a filing.

ITEM 7.01.Regulation FD Disclosure.

The disclosure contained in Item 2.02 of this Current Report on Form 8-K is incorporated by reference into this Item 7.01.

The information included herein and in Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.

ITEM 9.01.Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.		Description
99.1	Transcript of conference call held on March 1, 2018

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

OPKO Health, Inc.

March 2, 2018 By: /s/ Adam Logal

Name: Adam Logal Title: Senior Vice President-Chief Financial Officer

Exhibit 99.1

Client Id: 77

Thomson Reuters Streetevents PRELIMINARY TRANSCRIPT OPK - Q4 2017 OPKO Health Inc Earnings Call

EVENT DATE/TIME: MARCH 01, 2018 / 9:30PM GMT

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CORPORATE PARTICIPANTS

Adam E. Logal Opko Health, Inc. - CFO, CAO, SVP and Treasurer Anne Marle Flelds Lippert/Heilshorn & Associates, Inc - SVP Charles W. Bishop Opko Health, Inc. - CEO of OPKO Renal Phillp Frost Opko Health, Inc. - Chairman and CEO Steven D. Rubln Opko Health, Inc. - EVP of Administration and Director

CONFERENCE CALL PARTICIPANTS

Eric William Joseph JP Morgan Chase & Co, Research Division - Analyst I-Eh Jen Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Blotechnology Analyst Kevin M. DeGeeter Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research Loulse Allesandra Chen Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD MIchael John Petusky Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

PRESENTATION

Operator

Welcome to the OPKO Health Inc. Business Update Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, Thursday, March 1, 2018.

I would now like to turn the conference over to Anne Marie Fields. Please go ahead ma'am.

Anne Marle Fleids - Lippert/Heilshorn & Associates, Inc. - SVP

Thank you, operator. Good afternoon. This is Anne Marie Fields with LHA Investor Relations. Thank you all for joining today's call.

I'd like to remind you that any statements made during this call other than statements of historical forward-looking and as such, will be subject to risks and uncerially affect the company's expected results. Those forward-looking statements include without limitation, the various risks described in the company's annual report on Form 10-K for the year ended December 31, 2017, as filed this af ternoon.

Before we begin, let me review the format for today's call. Dr. Phillip Frost, Chairnan and Chief Executive Office, will open the call; followed by Steve Rubin, OPKO's Executive Vice President who will provide on the company's various businesses and clinical programs. Atter that AdamLogal, OPKO's Chief Financal Office, will review the company's 2017 four th quarter and full year financial performance Finally Dr. Frostwill provide his dosing remarks and then we'll open the call to your questions.

Now, let me turn the call over to Dr. Frost. Dr. Frost?

Phillp Frost - Opko Health, Inc .- Chairman and CEO

Thank you. Good afternoon. 2017 was a challenging year for OPKO. There were a number of headwinds at Bio-Reference, a slower-than-expected rampup in sales of RAY ALDEE and some unextine impacts on our financial performance. The other hand, we've made significant

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progress. We're in the process of selecting the next President of Bio-Reference from a group of highly qualified candidates that we're hopeful and we're hopeful that early signs of improved results there will continue.

RAYALDEE sales have been increasing steadly. The recent results appear to indicate a more rapid upward tend. We also recently signed a RA YALDEE licensing agreement with the Toril Pharmaceutical Division of Japan Tabacco. Given the breadth and postitive as ever upon our future and as deccribed in today's filing, Ive confirmed that confidence by investing an additional \$2.5 million into the company, alongside my colleague, Dr. James (inaudible) and a highly successful Asian businessman, already an OPKO investor, for a total of \$55 million.

As you've heard me say before, I can't think of a better investment for my money. We're all working hard on our strategy to build OPKO into the leading diversified healthcare company it was meant to be.

And III now pass you on to Steve who will provide more details on our commercial and clinical programs as well as our plans for the future.

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

Thanks, Phil, and good afternoon, everyone and thank you for joining us on today's call. As Dr. Frost just noted, desptte facing certain challenges in 2017, wernade meaningful progress across a number of key areas critical to OPKO's call, Will discuss our strategies to address some of these challenges, as well as our plans to continue to advance our clinical and commercial programs. Ny discussion will indude a review of our diagnostics, pharmaceuticals and clinical development programs.

Let's start with our diagnostic business, Bio-Reference Laboratories, which is the country's third largest reference lab. Throughout 2017, we shared with you some of the challenges we faced with this business and how they were impacting revenue growth in the short tem. We have worked hard to implement system improvements and cost reactions that overtime are expected to be positively impact Blo-Reference labs financal performance. Adam will elaborate more on these efforts in his financial remarks.

In addition, we made a number of leadership changes, including a new Head of Commercial Oberations. And we are in the process of reculting a new president with the skills and industry expertsent with our vision for Bo-References role in the rapidy evolving diagnostic market. We are highly impressed by the several outstanding candidates we have already met with and hope to announce our selection in the near future.

We remain particularly excited about the potential for our Bio-Reference lab's GeneDx subsidiary, which continues to demonstrate growth and innovaton in its high complexty erome and reated test with a 49% year-over-year increased testing volumes. There induse new exome-based test that open up and further expand other clinical areas for testing, such as for patients with neurologic conditions and cribcally ill patients. Our strategy for Genebuilt to continue to expand leading healthcare systems, to continue to broaden the testing menu in order to provide testing in many additional healthcare settings and to form other strategic alliances with GeneDx can create and add value to these partnerships.

An example of a new test offering is last week's launch of pharmacogenomics is the study of how genes affect a person's response to drugs. This relatively new field combines of drugs; and genomics, which is the study of genes and their functions to develop and prescribe safe medications and doses that will be talored to a person's individual genete makeup. In January, we were delighted to announce a research collaboration with Racboud University Medical Center in The Netherlands, which is aimed at identifying novel genes and pathways to help diagnose and manage human genetic diseases. This supplements GeneDr. ongerscale collaboration, such as with the internationally based deciprent disorder study that was formally announce last year.

As a leader in whole exome and genome sequencing, Genebx has helped discover and contribute to the phenotypic understanding of over S8 novel disease genes in the last 3 years alone tombination of our data summaries and analytical tools to conduct meta-analysis of GeneDxand its other data sets will help us better understand the genetic basis of human health and disease and to continue to provide offerentiated testing options.

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Moving on, our 4Kscore blood test gives a man with elevated PSA levels a personalized prediction of his chance of having or developing an aggressive form of prostate cance. During the fourth quarter, 20,600 4Kscore tests were performed, a 15% in creater of 2016. As many of you may have seen, we launched a series of television ads for the New York region at the end of last year and in Florida in February. We have also increased our presence in social media outlets induding directed digital advertising. We believe that focused sales and marketing to polessionals and expansion of consumer awareness will help increase the utilization of the 4Kscore test. Prostate cance is the most common cancer in men and is projected to account for over 160,000 new cases and over 29,000 deaths in 2018.

The 4Kscore test is a simple blood test that has demonstrated stong clinical utility as a follow-up test after an initial screening with DRE or durital rectal exam In several prospective clinical validity studies, it's been shown that the 4Kscore test did notmiss any aggress we with the Gleason score's 8 cancers and reduced unnecessary biopsies in 2 1% of men who were scheduled for biopsy.

New payment schedules implement on January 1, 2018, provided a 26% increase in 4Kscore reimbursement is now \$760 per test, up from approximately \$600 per test previously. In addition, we have expanded our clinical validity studies who are diagnosed at borderline Gleason 6 prostate cancer. For example, the soon-to-be published Homburg Radical Prostated that the 4Kscore test can effectively differentiate biopsy Gleason 6 cancer from those men likely to harbor we filed a Premarket Application with the FDA or our Claros 1 immunossay and to talPSA test. The Garos 1 immunoassay is proprietary diagnostic device that can provide rapid, quantitative blood test results in 10 minutes, right in the physician's office with only a finger stick dop of whole blood and with precsion and accuracy comparable to the PSA test performed in the central lab using a large instrument. The PSA filing included supportive data from 2 multicenter field studies involving a total of 864 men. We have been active in correspondence with FDA on the submission and had a bioresearch monitoring audit at our (inaudible) facility and 2 clinical trial sites with no observation issued on form 43. We are hopeful for an approval during the third quarter of this year.

This new point of care diagnostic offers a significant market opportunity as there more than 25 million PSA test performed annually in the United States In addition, we continue to advance and develop an additional Claros I test indication to interface with our other products and programs, such as testesterone and vitamin D. In the coming months, we plan to initiate clinical validation studies for a Claros 1 test and file a 510(0 application for approval with the FDA

Turning now to our pharmaceutical business, let me start by discussing RAYALDEE, the first and only the FDA that both raises 25-hydroxy vitamin D and lowers parathyoid hormone levels in patients with a safety profile similar to placebo. For 2017, our first full year of launch, MS reported that nearly 8,000 prescriptions of RAYALDEE were fulfilled. It is a level of acceptance and success that we find very encouraging due to the products ever escalating favorable trends. We believe RAYALDEE's market peretration was slow at first due to a number of factors: The gradual ramp of in RA PALDEE are not unlike all newly launched innovative drugs; the need to educate physicians about RA YALDEE's ability to safely teat secondary hyperparathy roidismas well as importance of lowering hyperparathyroidism hormone levels to reduce the risk of vascular calcification, a major cause of mortality in chronic kidney diseases. We are continuing to build sales mornentum and we have seen steady, week in creases in total precriptions since the start of the year. We have also increased the number of heathcare providers who preccribe RAYALDE. We had almost 600 active preceibers in Q4, an increase of 38% from Q3, demonstrating inceasing adoption by targeted providers. We ended 2017 with access to RATALDEE being available from 51% of covered lives in the Medicare space and for over 79% of all covered lives. In view of this insurance coverage, we expanded our sales force from 35 to 64 reps last October and expect significantimpact on sales in 2018. Currently, in meeting out-of-pocket patient cost for RAYALDEE is less than \$5 after available financial assistance. We are more confident than ever in the importance of RAY ALDEE for developing chronic kidney disease patients and our business. Adam will elaborate on RAYALDEE revenue in his financial discussion.

In the nextfew months, our renal team will be active at several important clinical meetings. The Renal Physicians Association in Orlando al e National Kidney Foundation Spring Clincal Meeting in Austin; and the Rmual Meeting of the Endocrinology Society in Chicago. Our team's activities at these meetings enhance our reach to revide the clinical data and support needed to increase adoption and ublization of a new treatment option ike RAYALDEE. In addition, we expanded the global market potential for RAYALDEE by entering into an exclusive agreement with the Tori Pharmaceutical unit of Japan Tobeco for the development and commercialization of RAYALDEE in Japan as a treatment for HSPT in nondialysis and dialey disease patients. Under the agreement, Toni will be responsible for all regulatory approvals and commercial activities in Japan.

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Turning to VARUBI, we are disappinted with TESARO's decision a couple of days ago to suspend distribution of the intravenous or the IV form of VARUBI. As TESARO noted, they will continue to support the or all formulation of the drug. We believe that recently reported safety issues arise from the formulation of the V version of the drug itself. And I tend to seek more information concerning TESARO's commercialization efforts for the drug. No episode of anaphylactic shock or any other serious hypersensitivity reactions have been reported with respect to the oral formulation of VARUBI since its launch in 2015.

Let's turn now to our clinical development programs. Our strategy is to build addressing a number of indications with significant unmet medical need, limited treatment options and large markets. We have a robust candidates at varying stages of development which we believe mitigates the risk inherent in relying to any one product program our study. This pipeline provides attractive opportunities for creating both near and long-term value for our shareholders.

Let me start with the crograms in our renal business. (naudible) another of clobal partners filed a new drug submission with Health Canada is on track to file in the third quarter of this year a Marketing Authorization with the European Medicines Agency for RATALDEE as a reatment for SHPT in chronic kidney disesse patient. Vifor Freserius is an ideal partner for RAYALDEE as they are a world-leading renal pharmageutical company with a strong presence in Europe and other territories. We are also continuing with our plans to initial trial trial trial trial trial trial of a higher strength RAYALDEE in patients with stage 5 chronic kidney disease in Vitamin D' deficiency who require require regular drailzed regulatory strategy in trial design with our partners Vifor Fresenius and JP Torii and expect to initiate the study in the second quarter of this year. The Phasell study has a randomized dose-anging placebo-controlled design and will proceed in 2 successive cohorts, with the first expected to erroll approximately 40 catients for 6-months of treatment and a second to enroll more than 200 patients for up to 12 months of treatment. OPKO expects to share the cost of the study with its development partners.

In addition to this Phase II study, we plan to augment our growing presence in the renal market with synegistic products that address other significant unmet needs. We plan to coming months a single dose Phase Ila dinical study with our N-1R antagonist for ureric pruritus or itching which is a serious problem for more than half of the patients on dialysis. This study will evaluate the safety and pharmacokinetics of OPK88002 in the dialysis population.

Turning now to our cinical pipeline and metabolic and endoctinology fees. We have a number of big stage programs underway or nearing initiation that should be important inflection points throughout this year.

11 begin with our long-acting human groduct, hGH-CTP, which is partnered with Pfizer for worldwide commercialization. We have good momentumin patient enrollment in our global pediatic Phase III hGH-CTP study in growth hormone deficient or GHD children, which represents more than 80% of the GHD marker This is a protating a single weekly dose of (GH-CTP with daily injections of GENOTROPIN, a currently marketed growth hormone. This study uses the per device and formulation that will be launched commecially upon approval. The pediatic subjects we treated weekly or 12 months. Last summer, we launched a pediatic hGHCTP registration study in Japan to assess pharmacolinetics and compare effically of weekly hGH-CP to daily CENOTROPIN in 44 prepubertal HDC subjects. We expect to complete enrollment in 4 studies before the end of this year. Our Phase II open-label extension study continues without interruption, with some patients now having been exposed to our hGH-CTP for more than 3 years, which important long-term safety and efficacy data.

Turning now to our progress with the adult hGH-CTP Phase III study. As you know, we completed a post ho evaluate the influence of statistical outlies on the primary end suits using preplanned analysis probool. We have the a meeting with FDA regarding and yis of the efficacy and safety data and any additional work required for a potential BLA submission in this indication.

Let's turn now to OPK8004, our once daily oral selective androgen receptor model, or SARM, which are developing for benign (naudible) also known as PP or enlarged prostate and other metabolic conditions. PPH affects 1/2 of all men aged 51 to 60 and 90% of men over the age of 80. In November, we commenced our Phase IIb of CPK88004 to treat people with BPH. This trial is expected to enroll approximately 125 patients at 30 sites in the U.S., to identify appropriate doses given over at or educe prostate size, the primary efficacy endpoint of the study. The study will also assess additional endpoints including blood PSA levels, lean body mass and fat mass. We expect to complete enrollment during the second half of this program is supported by precinical data that demonstrate the ability of OPK88004 to induce prostate size in animals and PSA levels in human trials. In addition, a Phase II study of 350 elderly male subjects being

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studied for another indication, utilizing OPK88004 showed a significant increase in lean body mass and muscle strength and significant for mass reduction. The study also showed an acceptable safety profile to permit clinical development.

We are excited to have initiated this Phaselle study in men suffering from BPH as current treatment options, such as alpha blockers and (naudible) reductase inhibitors, have undesired side effects. Surgical procedures that treat BPH are often associated with complications and late recovery times

Let me now update you on our long-acting Factor Wa-CTP for the treatment of bleeding edisodes in hemochilia A or patients inhibitors that Factor VII or Factor IX. The phase II a dose escalation study of the IVR intravenous formulation of Factor VIIa-CTP is nearing completion and are dosing in the Phase I dose escalate study of the subcutaneous formulation of Factor VIIa-CTP has completed and no serious safety even has been reported. Given the recent approval of alternative therapies for hemophila in cluding Roche's monoclonal antibody 8910, we intend to fur the evaluate the commercial potential for our productincluding potential partnerships for prior to initiating the next round of clinical trials.

Let's turn now to CPK3003, our on ce weekly (inaudible) agonist the treatment of type 2 diabetes and obesity. We are in the final planning stages for a Phase II b dose escalation study in approximately 110 type2 diabetes patients. Enrollment is expected to corrmence in the second quarter of this year and patients will be treated with a dose escalation regiment over 3 months to optimize the dose levels, increase body weight loss and reduce adverse effects, such as nausea and vorniting. Patients will be treated for the study. The key primary endpoint will be HbAt c, a marker for blood glucose levels; and secondary endpoints, such as weight loss, lipid profile and safety will also be analyzed.

Our decision to pursue OPK8803 supported from data with 420 diabetic patients that show greater weight loss compared with the approved extended release exerative and placebo. In addition, the data also showed improvement in the HBa t levels compared with the approved once weekly product.

Moving forward into 2018, weekpectour investments in expans and clinical studies will result in continued revenue growth for RAY ALDEE and (inaudible). We are advancing a obust clinical novel program that addresses a number of large markets with great unmet need. Throughout 2018, we expect to make meaningful progress with these programs and to achieve anumber of important milestones. We look.forward to appointing a new President for Bo-Reference lab and expect that this new leadership along with our ongoing investment in operational efficies and continued growth and expansion will allow us to return our laboratory business back to growth model We look forward to keeping you apprised of our progress in all our businesses. With that over to Adam for a discussion of our 2017 financial performance. Adam?

Adam E. Logal - Opko Health, Inc - CFO, CAO, SVP and Treasurer

Thank you. Steve, and good afternoon, while we made substantial progess on the business initiatives Steve discussed, our financial performance in the fourth quarter lagged behind our expected tems, which I'll provide additional color on shortly. I lillalso provide top line revenue guidance for Bio-Reference and RAYALDEE, to provide clarity on our expectations as we start the year.

We closed 2017 with just over 591 million in cash equivalents and marketable securities on our balance sheet with an additional \$10 million of availability under our creditions. As we reported today, we also raised 55 million from existing shareholders in OPK as Dr. Frost mentioned. The investments was in the form of convertible note with a 5-year term, a conversion price of \$5 per share and interest accuing at the rate of S5 - or 5% per year, payable at maturity or conversion. This additional funding provides us with the freming of our development programs while cash flow from operations at Bio-Reference mprove. We continue to be mindful of our cash balance and investments in both our R&D pipeline and commercial activities to align with the anticipation of our improving cash flow from both Bio-Reference and RAYALDEE, both of which remain important drivers of achieving a near-term breakeven point for cash flow from operations.

Moving on to some of the challenges we faced during our fourth quarter of 2017. You will recall that we implemented a new billing system at the clinical lab portion of Bio-Reference. As mentioned last gars of that implementation did not go as smoothy as we had anticipated. While we worked aggressively on daims in the billing process, we were not as successful as we anticipated in cash collections. As we completed our review of the year, it became clear that we would not realize the cash claims and as a result of changed our estimates,

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which negatively affected our fourth quarter revenues. Our billing and sales teams have been working trelessly to improve the collection rates in order to maximize the value of each requirition. We have realized an approximate 225 basis point improvement on the amount of - collected on claims process in the fourth quarter of 2017 in comparison to the fourth quarter of 2016, a significant improvement. Our total cash collections and the speed of which we are getting paid greatly improved during the second half of the year. And going forward, we anticipate our DSO will be significantly improved compared to prior years.

Also significantly and adversely impacting our fourth quatter results was over \$73 million related to reimbursements from daims from daims from daims from daims from daims fr commercial and federal payor programs.

Turning to our pharmaceutical business, we recognized \$9.1 million of revenuer elated to sales of A YALDEE. Of the \$9.1 million related to revenue during the fourth quater are product shipped during our fourth quarter, while the remaining \$6.2 million related to revenues deferred through September 30, 2017.

Moving to operating expenses during the continued to make investments in our pharmaceutical and diagnostics pipeline which resulted in an R&D expense of \$34 million. In addition, our investment in the RAYALDEE commercial organization was \$7.9 million during our four th quarter. As Steve mentioned a few days ago, the team of TESARO announced the discontinuation of VARUBI. As a result of this discontinuation, we recorded a noncash imparment of \$13.2 million, reflecting a decline in the anticipated future cash flows from our royal y stream in VARUBI.

Finally, income tax provision included a charge of approximately \$31 million during the fourth quarter as a result of the recently passed Tax and Jobs Act In addition, werecorded a valuation allowance against our U.S. deferred tax provision during the fourth quarter of \$63 million, compared to a \$31 million income tax benefit for the comparable period of 2016.

After considering these terms, revenue or the quarter ended December 31, 2017, totaled \$193, million, and our net loss was \$213,9 million. The comparable period of 2016 had total revenues of \$275 million and a net loss of \$13.7 million during that period.

With all the complexities we saw in 2017. I'm going to provide top line revenue aujdance for Bo-Reference and RAYALDEE. Before I do, I want to cover some changes to the accounting rules for revenue recognition, which will impact our overall revenue of Bio-Reference. At Bio-Reference, we've historically had bad debterpense of approximately 10% to 11% of revenue recorded within SGA experse Under the accounting pronouncements that went into effect January 2018, bad debt for revenue from our services will move to net revenue, effectively reducing revenue and at the same time reducing SG&A expense by the same an impact on our operating results as a whole but will resultin less net revenuer ecognized. This new accounting literature will have an impact on our other revenue stream as well which If I provide further clarifications on during our first quarter call. Under this new accounting, the first quarter of 2017's revenue from services will be reast in our results to be reflecting approximately \$228 million recorded under the old accounting pronouncements.

I wanted to provide that detail first to set the expectations clearly for Bio-Reference's revenue for the first quarter of 2018 with the proper corrections. For the first quarter of 2018, we are assuming volume dedined at our core dinical at our core dinical laboratory of approximately 3%. As such, we anticipate revenue from services during the 3 months ended March 31, 2018 to be in the range of \$195 million to \$215 million to \$215 million to \$215 million t which include the impact of volume fluctuations, the imbursement targets we faced during 2017, as well as the accounting changes I previously mentioned.

Moving to RAYALDEE, we anticipate first quarter revenues willion and \$5 million, which reflect the range of estimates on our gross to net calculations as well as our expectations for volume trends. In addition, we expect our investments in R&D as well as the RAY ALDEE commercial team to be approximately \$ 35 million, respectively. We'll provide additional guidance as the year progresses. But now, I'll turn the call back to Phil. Phil?

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Phillp Frost - Opko Health, Inc .- Chairman and CEO

When I spoke to you after the third quarter report. I said we were determined to strengthen all elements of our company. As to RAYALDE sales were off to a slow start, but we've exerted greater of the a bit early to be sure, sales seem to have begun a more rapid growth face. We've increased the size of our sales force from 35 to 64 as Steve mentioned. But more important, we've refined our message to physicians and trained our people to deliver it in a compelling way. As we speak, we have R.A.DEE National Sales Meeting underway which we've introduced our newsales manager, Kurt Miller, a terrific guy who play an active rolein accelerating sales of RAYALDEE, the best-in-class medicine for secondary hyperparathyroidism associated with chronic idness. The # score blood test remains the most teliable predictor of serious prostate cancer in men with an elevated PSA, and we expect its use to continue to expand, hopefully at an accelerated pace. Our clinical development program is in high gear. Of course we can't predict outcomes and truct be products we'redeveloping is great. They all have important market potential.

Our Blo-Reference unit is a valuable asset. 2017 was a year in which we invested in infrastructure and made management changes. After the departure of its President, as we said we began an active search processor, and we've already met with several candidates more than capable of taking Bio-Reference to its next level of better performance. We hope to make a selection soon, but in the meantime the business is being managed in a very positive way by a highly capable team of department leaders working to cPKO.

OPKO is a unique company. Our management team has a history that extends back nearly 2 decades. History that includes many successes. We're very proud of this history, and we believe it's a firm foundation or building OPKO We've developed a diversified product platform with myriad possibilities. It's an exciting time in diagnostics and therapeutic medicine It's an exciting time to be at OPKO.

We've begun 2018 on a strong footing and to achieving value creating milestones that will position CPKO for continued growth in 2018 and beyond. With that, let's open the call to questions.

QUESTIONS AND ANSWERS

Operator

(Operator Instructions) Your first question will come - our first question is from Louise Chen with Cantor.

Loulse Alesandra Chen - Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD

So first question I had is, what is your strategic vision for OPKO and what do you think the market is missing about your story? The second thing is just on the grossmargin in the four the should we think about that and what -- how should we think about your margins in 18 based on what we say in fourth quarter? And when you take a quidance of \$195 million to \$215 million for 800-Reference abs. I'm is t curious if you can provide a bridge on how we get from the fourth quarter number to the first quarter '18 number?

Phillp Frost - Opko Health, Inc .- Chairman and CEO

If I take the vision part, and I'll let my colleagues to do the rest. Basically, what we tried to do is assemble valuable assets. These asses are in the form of products, two which are on the market and others that are under development. The thing that they have in common is that they have potential. We can't be successful, but we don't need them all to be successful for us to have great results. Although there's no resson that those under development now arent likely. Bio-Reference is a great asset. We had envisioned that as a source of cash to help pay for the development program and we still believe that it will work out that way. In fact, we've taken a bit of cash out of our Blo-Reference over the time we've had it. So strategically, it really was a pretty good move. And the actual value that it has, to this day, we believe is far in excess of what we paid for. I think this is what the investment community is missing. We are a company that's in the investment mode, and our results reflect that. RAYALDEE is true was of to a slow start, but we have every confidence that it's going to pick up steam and move forward more rapidly. 4Kscore

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still has the potential for being one of the most in the history of the diagnostics industry. We believe that. I think eventually, the market will begin to understand this. And, for the specific questions ...

Adam E. Logal - Opko Health, Inc - CFO, CAO, SVP and Treasurer

Yes. So on margins, I think the way to this is going to be impacting net revenue. So gross magins will come down as a result. Obviously operating margins will remain consistent. But overall gross margin for Bio-References going to come down as we bring the top line netrevenue -- net revenue number down because of think if you just take that 10% of revenue you just knocked it off of gross margin figure. The bridge from our fourth quarter revenue to the range that I provided about \$148 million of revenue from services. And we had \$73 million impact on related to these payer adjustments. So that would give you an adjusted \$221 million. And then as we talk about that reallocation of bad debt up to net revenue, brings you into that range that I had mentioned.

Operator

Our next question is from Yale Jen with Laidlaw.

I-Eh Jen - Laidlaw & Company (UK) Ltd, Research Division - MD of Healthcare Research & Senior Biotechnology Analyst

Just follow up with the earlier questions. That the first quarter, \$195 million to [5215 million] according to your revenue from the Bio-Reference lab, could we analyze that, this figure to think that might be the sort of annual revenue for 2018? Of there's other consideration you need to put in?

Adam E. Logal - Opko Health, Inc. - CFO, CAO, SVP and Treasurer

Yes. So we only provided first quarter guidance. And I think we - obsidership, I think we want to be cautous about looking too far ahead of ourselves. So that's why we provided that first quarter growth number. And think if you look at the historical trends you could probably come in with some reasonable estimates as you try to annualize that number.

I-Eh Jen - Laidlaw & Company (UK) Ltd, Research Division - MD of Healthcare Research & Senior Blocechnology Analyst

Okay, thanks. And just another follow-up question here is that growth hormone you mentioned in the script that the - the (naudible) earlier completed the study, I mean, analysis and you are in the process, I gues; with the FDA. Could you give us a little bit more color in terms of what the timeline these discussions might take place? As well as what's the patient recruiment for the children's study or maybe some expectation in terms of when we will get some top line results from that study?

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

So for the adult, it's hard to tell. I mean its a me first asked FDA, based upon that analysis we discussed before in essence to get their response to that form of analysis and their willingnes to accept it and ther steps the FDA would deem necessay for us to submit a BLA in the adult. So I can'treally put -- give you a timeline on that. So it's literally in the hands of the FDA on this point. We expect to see a written response and then respond to that and ultimately and may result in a meeting, but a little bit up in the air. For pediatic it's obviously a 1-year trail, it's blinded so it depends when we complete encollment of men is going stong. We certainly expect to complete enrollment before the year end. How far before that it just depends on a lot of factors. So you can just -- we will announce completion of enrollment in the 12 months, but it will be no last patient administered drug. When we can get top line results were probably a few months after that.

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MARCH 01, 2018 / 9:30PM, OPK - Q4 2017 OPKO Health Inc Earnings Call

I-Eh Jen - Laidlaw & Company (UK) Ltd, Research Division - MD of Healthcare Research & Senior Blotechnology Analyst So just to extrapolate from that that could potentially be 2019 event in terms of the top line data if the recruitment is (naudible)

Steven D. Rubln - Opko Health, Inc .- EVP of Administration and Director

Right. That's correct.

Operator

Our next question is from Eric Joseph with JPMorgan

Erlc William Joseph - JP Morgan Chase & Co, Research Division - Analyst

Just looking for some additional color's around sort of the nonecuring reimbursement adjustments that you noted in the fourth quarter. It sounds like these were unexpected, but im r ying to get a sense of their potential -- what gives you confidence in that they worl', I guess, mature going forward? And secondly, is it poper to kind of think about some portion of these (naudible) sot of meeting witte-offs in terns of cash received? And also, you know looking forward, if you could give a little color around tax reform?

Adam E. Logal - Opko Health, Inc. - CFO, CAO, SVP and Treasurer

Sure. I I take the second one first. I think Eric, we've got a number of different data steams, I think in the blended rate, it would likely be in the mid-teens in the out years. But certainly in the majority of our income is being generated in the U.S. So we would be higher than that in the near term. Obviously, we have pretty significant tax assets on our books in the U.S. to offset that So they're going to faily complicated assumption around there Going to the \$73 million, so yes, we looked to claims that were processed from - throughout 2017 and earlier. So we do feel as though that the receivables on our books and in the future will not be negatively impacted in a meaningful way going forward. So that \$73 million is related to prior quarter's numbers.

Operator

Our next question is from Kevin DeGeeter with Ladenburg.

Kevin M. DeGeeter - Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research

With regard to marketing around 4Kscore, company has been active with some drect-to-consumer activities. Can you just provide some metrics to help us appreciate where you've been getting traction with that maketing spend and how that message may be evolving for the course of 2018 to further accelerate volume growth?

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

Kevin, it's still early because we started the TV ads as kind of a pilot test in the New York. Region. And we obviously have an 800 number to ty to track some of the calls of that, and then we saw enough activity that we launched some in Florida. We have a corresponding director digital advertising and web preserce and we will increase some of that spend to kind of optimize where wear e in the web this year. But it's still ealy for me to tell. Obviously i think the more attention and knowledge we get about the more consumers themselves know about it | think it's a plus. But it's hard this early on in the process to give you specific metrics on where they are. Clearly we think it's going to benefit significantly from the marketing effort. But time will tell.

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PRFI MI

MARCH 01, 2018 / 9:30PM, OPK - Q4 2017 OPKO Health Inc Earnings Call

Eric William Joseph - JP Morgan Chase & Co, Research Division - Analyst

And on a separate note with regards to R YALDEE, you mentioned in the prepared corrments, the change in the general setting message, provided by the sales team. Can you just provide your updated thoughts with regard to the right decisioning for RAYALDEE in the market? And in terms of your -- how much of that was driven by data or incremental sort of that was driven by feedback from dinicians in the field?

Charles W. Bishop - Opko Health, Inc .- CEO of OPKO Renal

Hey, Kevin, this is Charlie. We do listen to the field and we adjust our marketing and positioning strategies for RAYALDEE accordingly. And it is a learning process. We do find that physicans are attracted to the effective physiogical characteristics of RAYALDEE. And this is very consistent with the guideline has taken, physiological treatment is probably prefered over pharmacological treatment with active vitamin Dagents. So we emphasize the guidelines in our messaging. We also emphasize the data that show that RAYALDEE very gradually raises 25 hydroxy vitamin D insufficiency, and that correspondingly regularly lowers parathyroid hormonelevels without having any significant impact on side effects, which are eleva ton of calcium and phosphorus.

Operator

Over next question is from Mike Petusky with Barrington Research.

MIchael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

Adam, I guess, what are the current thoughts around EBITDA margins and BRL for '18? Or whatever you can add there will be helpful.

Adam E. Logal - Opko Health, Inc - CFO, CAO, SVP and Treasurer

Yes, Mike, sol think they're going to be in the fregoing to be compressed from the comparable per od of last year, which were in the 109s range. I think well likely be below that we've seen. We have put as Steve mentioned in his remarks, we have put a number of cost control measures in place. And we are working to reduce those cost. But the volume dedine in the fourth quarter, we just didn't take enough cost out of the organization to make up for that. But I do think, once we stabilize the volume and return to growth, well obviously be positioned to see that expand and accelerate.

MIchael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

Any kind of rough guidance for full year?

Adam E. Logal - Opko Health, Inc - CFO, CAO, SVP and Treasurer

No. Sorry. Not that I don't want to get ahead of myself in this call.

MIchael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

Okay. I gues, Steve on the -- and lunderstand its early going, but you obviously, must have seen something in the New York DTC that caused you to say, hey, let's spend alittle bit of money in Florida. I mean can you talk at all about incremental pickup that essentially made you decide, hey, we're going to go spend more money on this in another place?

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PRE IMIN

MARCH 01, 2018 / 9:30PM, OPK - Q4 2017 OPKO Health Inc Earnings Call

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

It's really, I mean, to be frank, the sales have been and use of the product has been growing already on a steady pace, as you've probably seen if you follow us in the quarter to-quarter basis. But t's really the number of calls and clicks to our website that let us lunctioning. So I can't put a number that translates into additional sales, by the amount of activity and interest around our product and the nature and subject matter of the calls let us know that people are paying to learn. And you can't help but thirk that's going to ultimately translate into further growth. That's what triggered it.

MIchael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

So I think you had said on that, that you thought you spend in New York for the 3 months would be under \$1 million. Is that how it came in roughly?

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

Its actually - TV right now is quite inexpersive. Believe it or not, it's a little more expensive to optimize your phrases on the Internet han it is to advertise on TV now.

MIchael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

So it came in under \$1 million?

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

Yes.

Michael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

And what are you expecting them DTC on 4Kscore in 18 or any kind of guidance around that fi t continues to seem to produce results?

Steven D. RubIn - Opko Health, Inc .- EVP of Administration and Director

You know, we don't expect. Unless it will be proportional to sales, so if sales burnp up we'll spend more but we won't regret to be prudent so far. And again, the TV ads are guite inexpensive. So well start on with smaller steps and see where it grows. And as growth justifies it well increase the spend. I can't right now, I wouldn't pencil any higher number than we did for last year. So.

Michael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

Just last question on this. Are you continuing to run ads in New York and Florida? Or are you just shifting your resources to Florida?

Steven D. RubIn - Opko Health, Inc. - EVP of Administration and Director

So the ones in New York have ended. And the ones right now running in Florida and then well revisit going out perhaps on an even broader platform.

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R- M

MARCH 01, 2018 / 9:30PM, OPK - Q4 2017 OPKO Health Inc Earnings Call

Phillp Frost - Opko Health, Inc .- Chairman and CEO

It's really, as Steve said, a pilo toperation to get our responding, particularly the backend to make sure that we realize the most revenue from the effort.

MIchael John Petusky - Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

Okay. All right. And then I guestion, you said you went from 35 to 64 reps. I actually had a note from last quarter that it was up to 71. Did I just get that wrong a few months ago? Or did you guys let some reps go?

Adam E. Logal - Opko Health, Inc - CFO, CAO, SVP and Treasurer

The 71 is indusive of the regional business managers as well as the entire sales organization is up that 71 which is before field reps.

Operator

There are no further questions at this time. Dr. Frost please proceed with your closing remarks at this time.

Phillp Frost - Opko Health, Inc .- Chairman and CEO

I think that ends our session. And we want to thank everybody for participating.

Operator

Ladies and gentlemen, that condudes your conference call for today. We thank you for your participation and ask that your lines.

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