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OPK – With Opko Health Hammered, Should You Run or Buy?

Shares of OPK stock are off another 7% this morning

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And it’s promising that Opko is a well-diversified company, whose research includes everything from developing molecular level diagnostic tests to identify biological markers for treating Alzheimer’s disease and several types of cancers. In addition to U.S. sales, many of products are sold overseas in Israel, Mexico and Chile … to name a few.

Plus, an FDA decision is due soon on the company’s Phase 3 Rolapitant drug, which prevents chemotherapy induced nausea and vomiting. Opko says that Rolapitant, once fully approved, has the potential to gross up to $1.25 billion.

OPK Stock Remains Risky

Despite those tailwinds, investors should keep in mind that OPK is a high-risk stock right now for several reasons, including:

  1. There is no guarantee of FDA approval of any of the drugs, and should approval be delayed, OPK stock could take another dive.
  2. OPK stock fundamentals are still very mixed. There are negative earnings of 31 cents per share and thus no P/E ratio. Plus, the price to book ratio is high at 4.41, there is a negative 19.4% ROE, and Opko Health pays no dividend. Net operating cash flow is a negative $37.8 million, much worse than the biotechnology industry average. (Of course, on the other hand, the company has revenue growth of 11.2%, above the industry average, and a 75% growth in revenue over the past year. They also have a very low debt-to-equity ratio of 0.26 and a quick ratio of 3.02.)
  3. Opko Health has competition from other biotech companies, such as L.G. Life Sciences, which is working on similar treatments. Plus, the iShares Biotechnology ETF (IBB) has risen from $135 to $214 per share this year, and remains a much more diversified and safer investment.
  4. Short interest on the stock remains high and will likely continue until and unless one of Opko’s drugs receives FDA approval.

The bottom line is that OPK stock is mainly for investors who are more risk tolerant or have a longer term view.

The company’s endeavors and funding sources are quite well diversified, so should any one of its products be delayed, it still has plenty of other successful business ventures to fall back upon. And of course there is always that ongoing insider buying to provide fodder for momentum players.

As of this writing, Ethan Roberts did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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