Time To Go Overweight Opko, J.P. Morgan Says

• Shares of Opko Health, Inc. OPK have risen 7.41 percent over the last five trading days, touching a high of $9.568 on October 15.
• J.P. Morgan’s Dana Flanders has initiated coverage of the company with an Overweight rating and price target of $14.
• Flanders believes that Opko Health is starting out on a healthy growth cycle, which is expected to be driven by several “potentially promising” product launches, across its biologics, pharma and diagnostic businesses.

According to the J.P. Morgan report, “OPKO is a diversified healthcare company with multiple pipeline products launching in the 2016-2019E time frame.”

The pipeline in the company’s diagnostic business is led by 4Kscore tests for prostate cancer and the POC blood test, Claros 1, which is still being developed. The biologics and pharma divisions’ late-stage pipeline includes Rayaldee for stage 3 and 4 kidney patients and Lagova for hGH-CTP, apart from several early stage products that are still in development.

“Additionally, we believe OPKO’s recent acquisition of Bio-Reference Laboratories, Inc. BRLI, the third largest clinical laboratory in the U.S., will support uptake of the company’s diagnostics platform and add a valuable genetics testing franchise (GeneDx),” Flanders stated.

The acquisition is expected to add $1 billion in annual sales, as well as a larger sales force and commercial structure. Flanders believes that these, in combination with expanded reimbursement coverage, could drive the sales of 4Kscore and Claros 1, following their approval.

Flanders expects Opko Health’s “pipeline to drive significant long-term growth,” with total sales growing to $2.2 billion by 2020 from the estimated $500 million in total sales in 2015.

Flanders also believes that the current stock valuation offers an attractive entry point.