Opko Pushed by Investor to Conduct Review, Possible Sale

Bookmark

One of the largest investors in Opko Health Inc. is urging the diagnostic and pharmaceutical company to launch a strategic review and consider being taken private, arguing its assets are worth three times the current market value.

Sian Capital believes Opko has several options to unlock that value, according to a presentation it delivered to the company this week. The New York-based asset management firm owns a 3% stake in Opko, and has met with the company’s leadership to express its views, according to people familiar with the matter who asked not to be identified because the discussions were private.

“The public market does not fully appreciate Opko’s prized assets because it has lost confidence in the company’s leadership team, which has failed to address an array of governance, financial, and strategy issues,” according to the presentation, a copy of which was obtained by Bloomberg News.

Sian, which is run by Anish Monga, said more than $3 billion in shareholder value has been lost from Opko over the past five years. It called for the company’s board to be refreshed to help end its underperformance relative to its peers.

A representative for Miami-based Opko didn’t respond to a request for comment. A spokesperson for Sian declined to comment.

Royalty Stream

As part of a recommended strategic review, Sian is pushing for Opko to explore options for the royalty stream from Somatrogon, its human growth hormone therapy. Sian also wants Opko to run a sales process for its diagnostics business, BioReference, and consider a deal to go private. The company should explore opportunities for partnerships, acquisitions, market share growth and cost savings, Sian contends.

Sian estimates that Opko’s pharmaceutical business, including its intellectual property, is worth as much as $4 billion. The diagnostics business, which includes BioReference -- the third-largest U.S. clinical lab after Quest and LabCorp -- is worth as much as $6 billion, the firm argues.

Opko’s shares fell 3.4% Wednesday in New York trading, giving it a market value of $2.68 billion. The shares had gained more than 180% through Tuesday. Its kidney medication Rayaldee is in clinical trials to be used as a potential treatment for mild to moderate cases of Covid-19.

Board Beholden

Seven of Opko’s 11 directors have held their seats for more than a decade, according to Sian. It argues that the entire board is beholden to Chairman and Chief Executive Officer Phillip Frost.

“While we admire his tremendous accomplishments over a long career, he now presides over a potentially conflicted board and management team and an array of questionable investments and priorities,” Sian argues in its presentation.

Changes at Opko would be hard to implement without the support of Frost, who owns more than a third of the company’s shares, according to data compiled by Bloomberg. Sian said if Opko were to pursue a management buyout, any deal should require support from a majority of its unaffiliated investors.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.