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Item 7. Management’s Discussion and Analysis

2021-02-18 compared with 2020-03-02 · 405 added, 277 removed, 355 unchanged (66% of the section changed)

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We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA.

These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

These forward-looking statements reflect our views only as of the date they are made.

We are a diversified healthcare company that seeks to establish industry-leading positions in large and rapidly growing medical markets.

Our diagnostics business includes BioReference Laboratories (“BioReference”), one of the nation’s largest full service laboratories with a core genetic testing business and an almost 300-person sales and marketing team to drive growth and leverage new products, including the 4Kscore test.

Our pharmaceutical business features Rayaldee , an FDA-approved treatment for secondary hyperparathyroidism (“SHPT”) in adults with stage 3 or 4 chronic kidney disease (“CKD”) and vitamin D insufficiency (launched in November 2016), OPK88004, a selective androgen receptor modulator which we are exploring for various potential indications, and OPK88003, a once or twice weekly oxyntomodulin for type 2 diabetes and obesity which is a clinically advanced drug candidate among the new class of GLP-1 glucagon receptor dual agonists (phase 2b).

Our pharmaceutical business also features hGH-CTP, a once-weekly human growth hormone injection for which we have partnered with Pfizer and successfully completed a phase 3 study in August 2019.

We operate established pharmaceutical platforms in Spain, Ireland, Chile and Mexico, which are generating revenue and from which we expect to generate positive cash flow and facilitate future market entry for our products currently in development.

We have a development and commercial supply pharmaceutical company, as well as a global supply chain operation and holding company in Ireland, which we expect will play an important role in the development, manufacturing, distribution and approval of a wide variety of drugs with an emphasis on high potency products.

We also own a specialty active pharmaceutical ingredients (“APIs”) manufacturer in Israel, which we expect will facilitate the development of our pipeline of molecules and compounds for our proprietary molecular diagnostic and therapeutic products.

Our diagnostics business includes BioReference Laboratories, Inc.

(“BioReference”), one of the nation’s largest full service laboratories with a core genetic testing business and an almost 300-person sales and marketing team focused on driving growth and leveraging new products, including the 4Kscore test.

Our pharmaceutical business features Rayaldee , a, U.S.

Food and Drug Administration (“FDA”) approved treatment for secondary hyperparathyroidism (“SHPT”) in adults with stage 3 or 4 chronic kidney disease (“CKD”) and vitamin D insufficiency (launched in November 2016) and a pipeline of products in various stages of development.

Our leading product in development is hGH-CTP (Somatrogon), a once-weekly human growth hormone for which we have partnered with Pfizer Inc.

We have submitted the initial Biologics License Application (“BLA”) with FDA for approval of Somatrogon in the U.S.

as well as a New Drug Application with the Ministry of Health, Labour and Welfare in Japan.

We are incorporated in Delaware, and our principal executive offices are located in leased offices in Miami, Florida.

Through BioReference, we provide laboratory testing services, primarily to customers in the larger metropolitan areas in New York, New Jersey, Florida, Texas, Maryland, California, Pennsylvania, Delaware, Washington, DC, Illinois and Massachusetts, as well as to customers in a number of other states.

We offer a comprehensive test menu of clinical diagnostics for blood, urine and tissue analysis.

This includes hematology, clinical chemistry, immunoassay, infectious diseases, serology, hormones, and toxicology assays, as well as Pap smear, anatomic pathology (biopsies) and other types of tissue analysis.

We market our laboratory testing services directly to physicians, geneticists, hospitals, clinics, correctional and other health facilities.

We operate established pharmaceutical platforms in Ireland, Chile, Spain, and Mexico, which are generating revenue and from which we expect to generate positive cash flow and facilitate future market entry for our products currently in development.

In addition, we have a development and commercial supply pharmaceutical company and a global supply chain operation and holding company in Ireland.

We own a specialty active pharmaceutical ingredients manufacturer in Israel, which we expect will facilitate the development of our pipeline of molecules and compounds for our proprietary molecular diagnostic and therapeutic products.

RECENT DEVELOPMENTS

On February 25, 2020, we entered into a credit agreement with an affiliate of Dr.

Frost, pursuant to which the lender committed to provide us with an unsecured line of credit in the amount of $100 million .

Borrowings under the line of credit will bear interest at a rate of 11% per annum and may be repaid and reborrowed at any time.

The credit agreement includes various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding amounts under line of credit.

The line of credit matures on February 25, 2025.

The line of credit also calls for a commitment fee equal to 0.25% per annum of the unused portion of the line.

On February 25, 2020, BioReference and certain of its subsidiaries entered into Amendment No.

11 to the Credit Agreement, which amended the Credit Agreement to provide that the fixed charge coverage ratio requirement set forth in the Credit Agreement would not be tested for the quarter ended December 31, 2019, with respect to availability calculated on January 29, 2020 and January 30, 2020, subject, in the case of testing for the quarter ended December 31, 2019, to (i) there having been no event of default occurring and (ii) availability under the revolving facility exceeding 10% of the total revolving commitment, for at least 30 consecutive days for the period ended on December 31, 2019, excluding December 18, 2019.

The other terms of the Credit Agreement remain unchanged.

On November 15, 2019, we announced that Novitas Solutions, Inc.

issued its final local coverage determination for Medicare payments for the 4Kscore prostate cancer test with defined coverage criteria, effective December 30, 2019.

On November 4, 2019, BioReference and certain of its subsidiaries entered into Amendment No.

10 to the Credit Agreement, which amended certain definitions in the Credit Agreement and further amended the Credit Agreement to extend

the maturity date to 2021 and reduce the commitment from $100 million to $75 million.

The other terms of the Credit Agreement remain unchanged.

On October 29, 2019, we issued 50 million shares of our Common Stock at a price of $1.50 per share in an underwritten public offering, resulting in net proceeds to the Company of approximately $70 million , after deducting underwriting commissions and offering expenses.

In November 2019, pursuant to an option the Company granted the underwriters, we issued an additional 4,227,749 shares of Common Stock at $1.50 per share, less underwriting discounts and commissions, resulting in net proceeds to the Company of approximately $6 million.

The Company intends to use the net proceeds received from the offering to fund research and development, to further develop and commercialize its portfolio of proprietary pharmaceutical and diagnostic products and for working capital, capital expenditures, acquisitions and other general corporate purposes.

Frost and Hsiao and Mr.

Steven Rubin, members of OPKO’s senior management purchased an aggregate of 2,415,000 shares of Common Stock in the offering.

On October 21, 2019, we and Pfizer announced that the global Phase 3 trial evaluating Somatrogon (hGH-CTP) dosed once-weekly in prepubertal children with growth hormone deficiency (GHD) met its primary endpoint of non-inferiority to daily Genotropin® (somatropin) for injection, as measured by annual height velocity at 12 months.

Top-line results from this trial demonstrated that treatment with Somatrogon dosed once-weekly in pre-pubertal children with GHD was non-inferior to somatropin dosed once-daily with respect to height velocity at 12 months of treatment (the primary endpoint);

the least square mean was higher in the Somatrogon group (10.12 cm/year) than in the somatropin group (9.78 cm/year);

the treatment difference (Somatrogon – somatropin) in height velocity (cm/year) was 0.33 with a two-sided 95% confidence interval of the difference of (-0.39, 1.05).

In addition, change in height standard deviation scores at six and twelve months, key secondary endpoints, were higher in the Somatrogon dosed once-weekly cohort in comparison to the somatropin dosed once-daily cohort.

Moreover, at six months, change in height velocity, another key secondary endpoint, was higher in the Somatrogon dosed once-weekly cohort in comparison to the somatropin dosed once-daily cohort.

These common measures of growth are employed in the clinical setting to measure the potential level of catch-up growth that subjects may experience relative to heights of age and gender matched peers.

Somatrogon was generally well tolerated in the study and comparable to that of somatropin dosed once-daily with respect to the types, numbers and severity of the adverse events observed between the treatment arms.

Immunogenicity testing and analysis of additional data are ongoing, and full results of the study will be submitted for presentation at a future scientific meeting.

In January 2021, we announced that the FDA had accepted for filing the initial BLA for Somatrogon, a long-acting human growth hormone that is intended to be administered once-weekly for the treatment of pediatric patients with growth hormone deficiency (“GHD”).

The target Prescription Drug User Fee Act (PDUFA) action date for decision by the FDA is in October 2021.

In December, 2020, we announced the appointment of Roger Medel, M.D.

as an independent member of our Board of Directors, effective December 18, 2020.

With this appointment, we have 11 Directors, including seven independent Directors.

RESULTS OF OPERATIONS

Impact of COVID-19

As the disease caused by SARS-CoV-2, a novel strain of coronavirus, COVID-19 continues to spread and severely impact the economy of the U.S.

and other countries around the world, we are committed to being a part of the coordinated public and private sector response to this unprecedented challenge.

In response to the COVID-19 pandemic, BioReference is accepting specimens from U.S.

healthcare providers, clinics and health and hospital systems for two types of COVID-19 testing, diagnostic molecular testing and serology antibody testing, which is intended to promote earlier diagnosis of the coronavirus, assess a patient’s immune response to the virus and aid in limiting the spread of infection.

We have put preparedness plans in place at our facilities to maintain continuity of operations, while also taking steps to keep our employees and customers healthy and safe.

In line with recommendations to reduce large gatherings and increase social distancing, we have, where practical, transitioned many office-based employees to a remote work environment.

Revenue from services for the year ended December 31, 2020 increased by $545.8 million as compared to 2019, due to COVID-19 testing volumes;

however we are unable to predict how long demand will continue for our COVID-19 related testing, or whether pricing and reimbursement policies for testing will sustain, and accordingly, the sustainability of our COVID-19 testing volumes is uncertain.

Additionally, beginning in March 2020, BioReference experienced, and continues to experience, a decline in routine clinical and genomics testing volumes due to the COVID-19 pandemic.

Excluding COVID-19 test volumes, for the year ended December 31, 2020, volumes in our diagnostics segment declined 17% as compared to volumes for the year ended December 31, 2019.

Additionally, sales of Rayaldee have not increased in accordance with its expected growth trajectory as a result of challenges in onboarding new patients due to the COVID-19 pandemic.

Federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 have resulted in, among other things, a significant reduction in physician office visits, the cancellation of elective medical procedures, customers closing or severely curtailing their operations (voluntarily or in response to government orders), and the adoption of work-from-home or shelter-in-place policies.

As stay at home orders and other restrictions have been lifted, we have seen our routine clinical and genomic testing volumes trending towards normalization with prior periods, however should stay at home orders or other restrictions be reenacted, we could see our routine testing levels decline.

We also continue to see a substantial need for COVID-19 testing by our existing clients and expect new clients as infection rates for the virus continue to increase across the country.

In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law.

The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain payroll tax credits associated with the retention of employees.

We have received, or expect to receive a number of benefits under The CARES Act including, but not limited to:

• During the year ended December 31, 2020, we received approximately $14 million under The Centers for Medicare & Medicaid Services (CMS) Accelerated and Advance Payment Program, which provides accelerated payments to Medicare providers/suppliers working to provide treatment to patients and combat the COVID-19 pandemic, and such amounts advanced to us are loans which will be offset against future claims and must be repaid in 2021;

• We are eligible to defer depositing the employer’s share of Social Security taxes for payments due from March 27, 2020 through December 31, 2020, interest-free and penalty-free;

• We received approximately $16.2 million during the year ended December 31, 2020 from the funds that were distributed to healthcare providers for related expenses or lost revenues that are attributable to the COVID-19 pandemic;

Department of Health and Human Services (HHS), will provide claims reimbursement to healthcare providers generally at Medicare rates for testing uninsured patients;

• Clinical laboratories are provided a one-year reprieve from the reporting requirements under the Protecting Access to Medicare Act (“PAMA”) as well as a one-year delay of reimbursement rate reductions for clinical laboratory services provided under Medicare that were scheduled to take place in 2021.

In October 2020, the U.S.

Department of Health & Human Services issued new reporting requirements for the CARES Act funding.

Due to these new reporting requirements and various interpretations, there is a reasonable possibility that amounts recorded under CARES Act funding will change in future periods.

For The Years Ended December 31, 2020 and December 31, 2019

Our consolidated income (loss) from operations for the years ended December 31, 2020 and 2019 is as follows:

For the years ended December 31,

(In thousands)

(In thousands) 2020 2019 Change % Change

Revenue from services $ 1,262,242 $ 716,434 $ 545,808 76 %

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Total revenues 1,435,413 901,935 533,478 59 %

Revenue from services for the year ended December 31, 2019 decreased approximately $96.8 million compared to the year ended December 31, 2018.

Revenue from services for the year ended December 31, 2019 was negatively affected by decreased reimbursement for our clinical testing of $49.2 million and from our genomics testing of $21.2 million, as a result of an increase in denial rates and changes to payor pricing, policy and procedural requirements, the impact of PAMA, and a decline in 4Kscore revenue due to the non-coverage decision issued by Novitas, which became effective on March 21, 2019.

Subsequent to the effective date of the non-coverage determination, in November 2019, Novitas issued its final LCD for Medicare payments for the 4Kscore test, effective December 30, 2019.

Under the final LCD, Medicare will reimburse the test for patients who meet defined criteria.

Revenue from services for the year ended December 31, 2019 was also negatively affected by $13.8 million as a result of a reduction in clinical test volumes, which was offset by higher volume in our genomics testing of $13.0 million.

Costs and expenses:

Cost of revenue 894,408 572,484 321,924 56 %

Selling, general and administrative 355,573 343,305 12,268 4 %

Research and development 75,316 117,870 (42,554) (36) %

Contingent consideration (3,989) (14,854) 10,865 (73) %

Amortization of intangible assets 56,391 64,783 (8,392) (13) %

Asset impairment charges — 92,399 (92,399) (100) %

Total costs and expenses 1,377,699 1,175,987 201,712 17 %

Income (loss) from operations 57,714 (274,052) 331,766 (121) %

We manage our operations in two reportable segments, pharmaceuticals and diagnostics.

The pharmaceuticals segment consists of our pharmaceutical operations in Latin America, Ireland, Israel and Spain, Rayaldee product sales and our pharmaceutical research and development.

The diagnostics segment primarily consists of our clinical and genetic laboratory operations through BioReference and GeneDx as well as our point-of-care operations.

There are no significant inter-segment sales.

We evaluate the performance of each segment based on operating profit or loss.

The following presents the financial measures that management considers to be the most significant indicators of the Company's performance.

For the years ended December 31,

(In thousands) 2020 2019 Change % Change

Revenue from services $ 1,262,242 $ 716,434 545,808 76 %

Revenue from transfer of intellectual property and other 16,240 — 16,240 100 %

Total revenues 1,278,482 716,434 562,048 78 %

Costs and expenses:

Cost of revenue 823,927 510,857 313,070 61 %

Selling, general and administrative 266,488 242,020 24,468 10 %

Research and development 15,003 14,219 784 6 %

Contingent consideration (2,066) (8,401) 6,335 (75) %

Amortization of intangible assets 36,208 42,401 (6,193) (15) %

Asset impairment charges — 38,697 (38,697) (100) %

Total costs and expenses 1,139,560 839,793 299,767 36 %

Income (loss) from operations 138,922 (123,359) 262,281 (213) %

Revenue from services for the year ended December 31, 2020 increased by approximately $545.8 million compared to the year ended December 31, 2019, due to COVID-19 testing volumes.

BioReference performed 0.8 million serology antibody tests and 10.1 million diagnostic molecular tests for COVID-19 during the year ended December 31, 2020, which represented 57% of total testing volume.

Revenue attributable to tests for COVID-19 was partially offset by the negative impacts of:

• A reduction in clinical test volumes and genomic test volumes at BioReference resulted in decreased revenues of $99.5 million and $15.6 million, respectively, as compared to the year ended December 31, 2019.

The decline in routine clinical and genomic testing volume reflects negative impacts from the COVID-19 pandemic, principally from referring physician office closures and stay-at-home guidance throughout states in which we predominately operate.

• A reduction in clinical test and genomic test reimbursement at BioReference of $10.2 million and $27.6 million, respectively, as compared to the year ended December 31, 2019.

The lower reimbursement within our clinical business was primarily the result of the negative impact of the PAMA price reduction that went into effect January 1, 2020 combined with an overall shift in our test mix that was partially offset by increased reimbursement of our 4KScore test.

The lower reimbursement within our genomic business resulted from an increase in denial rates and changes to payor policy and procedural requirements.

Estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered.

For the years ended December 31, 2019 and 2018, we recognized revenue reductions due to

changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $24.8 million and $22.8 million, respectively.

We may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault.

We have periodically identified and reported overpayments, reimbursed payors for overpayments and taken what we believe to be appropriate corrective action.

Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing services.

These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and our historical settlement activity, including an assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved.

Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations.

For the years ended December 31, 2019 and 2018, Revenue from services was reduced by approximately $2.6 million and $8.1 million, respectively, related to claims of overpayment.

The composition of Revenue from services by payor for the years ended December 31, 2019 and 2018 is as follows:

Revenue from services for the year ended December 31, 2020 included $12.1 million related to the successful appeal of previously denied claims for the 4Kscore test.

In addition, the year ended December 31, 2020 included positive revenue adjustments recognized due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $0.3 million, and for the year ended December 31, 2019, revenue reductions of $24.8 million were recognized due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods.

The composition of Revenue from services by payor for the years ended December 31, 2020 and 2019 was as follows:

For the years ended December 31,

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Healthcare insurers $ 483,643 $ 421,386

Government payors

Client payors

The increase in Revenue from products for 2019 as compared to 2018 was primarily attributable to an increase in sales of Rayaldee of $31.4 million for the year ended December 31, 2019, compared to $20.3 million for the year ended December 31, 2018, which was partially offset by a decrease in revenue at OPKO Chile.

The increase in Revenue from transfer of intellectual property was primarily attributable to an increase in revenue related to the Pfizer Transaction of $66.0 million for the year ended December 31, 2019 , as compared to $60.0 million for the year ended December 31, 2018, which was partially offset by $2.0 million of revenue from a milestone payment from our licensee VFMCRP in 2018.

Costs of revenue .

Costs of revenue for the year ended December 31, 2019 decreased $32.2 million compared to 2018.

Cost of service revenue decreased in 2019 primarily due to cost reduction initiatives resulting in per patient encounter efficiency gains at BioReference.

Cost of product revenue increased primarily due to an increase in sales of Rayaldee in 2019 and changes in the product mix of items sold during the period.

Cost of revenue for the years ended December 31, 2019 and 2018 were as follows:

Government payers 90,288 115,711

Client payers 637,645 158,527

Patients 50,666 20,810

Total $ 1,262,242 $ 716,434

Client payers include cities, states and companies for which BioReference provides COVID-19 testing services.

Revenue from the transfer of intellectual property and other for the year ended December 31, 2020 are the result of grants received under the CARES Act totaling $16.2 million.

Cost of revenue .

Cost of revenue for the year ended December 31, 2020 increased $313.1 million compared to the year ended December 31, 2019.

Cost of revenue increased primarily due to labor and material costs for COVID-19 testing and the significant volume of tests performed during the year ended December 31, 2020, partially offset by a decline in non-COVID testing volumes and to cost reduction initiatives leading to a 12.4% improvement in cost per patient encounter, inclusive of all volumes.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the years ended December 31, 2020 and 2019 were $266.5 million and $242.0 million, respectively.

Selling, general and administrative expenses in our diagnostics segment increased primarily due to higher variable billing and compensation costs of $23.2 million from an increase in volume and collections during the year ended December 31, 2020 and $3.0 million in marketing costs and other administrative and marketing costs directly associated the COVID-19 PCR testing volumes.

In comparison, the December 31, 2019 period included $12.6 million of expense related to the Department of Justice settlement.

As a percentage of net revenue SG&A for the diagnostic segment decreased to 21% from 34%, for the years ended December 31, 2020 and 2019, respectively as a result of per requisition efficiencies and expense management during this recent period of rapid volume growth.

Selling, general and administrative expenses for the diagnostics segment for the years ended December 31, 2020 and 2019 included equity-based compensation expense of $2.1 million and $2.2 million, respectively.

Research and development expenses .

The following table summarizes the components of our research and development expenses:

Research and Development Expenses For the years ended December 31,

External expenses:

PMA studies $ 218 $ 774

Research and development employee-related expenses 9,317 7,320

Other internal research and development expenses 5,468 6,125

Total research and development expenses $ 15,003 $ 14,219

Research and development for the diagnostic segment relates to the development of testing services for our clinical and genomics testing at BioReference and the development of the Claros Analyzer, a diagnostic instrument system to provide rapid, high performance blood test results in the point-of-care setting.

The increase in research and development expenses for the year ended December 31, 2020 resulted primarily from an increased research and development expenses related to the development of clinical and genomics testing services.

Contingent consideration .

Contingent consideration for the years ended December 31, 2020 and 2019 was $(2.1) million of expense and $8.4 million reversal of expense, respectively.

Contingent consideration for the years ended December 31, 2020 and 2019 was attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Diagnostics in both periods, and potential amounts payable to former stockholders of OPKO Diagnostics in connection therewith, pursuant to our acquisition agreement in October 2011.

Amortization of intangible assets .

Amortization of intangible assets was $36.2 million and $42.4 million, respectively, for the years ended December 31, 2020 and 2019.

Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.

Asset impairment charges .

Asset impairment charges were $38.7 million for the year ended December 31, 2019.

Asset impairment charges for the year ended December 31, 2019 is primarily related to a goodwill impairment charge of $18.0 million to write the carrying amount of the OPKO Diagnostics reporting unit down to its estimated fair value, and an impairment charge of $20.7 million to write our intangible asset for the Claros Analyzer down to its estimated fair value.

The asset impairment charges for the year ended December 31, 2019, resulted from liquidity constraints, longer than expected development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions of the expected future cash flows associated with the Claros Analyzer.

We believe that our estimates and assumptions in testing goodwill and other intangible assets are consistent with assumptions that marketplace participants would use in their estimates.

However, if actual results are not consistent with our estimates and assumptions, including as a result of the COVID-19 global pandemic, we may be exposed to an impairment charge that could be material.

Pharmaceuticals

For the years ended December 31,

(In thousands)

Cost of service revenue

Cost of product revenue

Total cost of revenue

(In thousands) 2020 2019 Change % Change

Revenue from products $ 119,952 $ 112,184 $ 7,768 7 %

Revenue from transfer of intellectual property and other 36,979 72,521 (35,542) (49) %

Total revenues 156,931 184,705 (27,774) (15) %

Costs and expenses:

Cost of revenue 70,565 61,888 8,677 14 %

Selling, general and administrative 50,476 57,589 (7,113) (12) %

Research and development 61,149 104,659 (43,510) (42) %

Contingent consideration (1,923) (6,453) 4,530 (70) %

Amortization of intangible assets 20,183 22,382 (2,199) (10) %

Asset impairment charges — 53,702 (53,702) (100) %

Total costs and expenses 200,450 293,767 (93,317) (32) %

Loss from operations (43,519) (109,062) 65,543 (60) %

The increase in revenue from products for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily attributable to an increase in sales at OPKO Chile and an increase in sales of Rayaldee .

Sales of Rayaldee were $36.8 million for the year ended December 31, 2020, as compared to $31.4 million for 2019.

Revenue from transfer of intellectual property for the years ended December 31, 2020 and 2019 principally reflected $28.7 million and $66.8 million, respectively, of revenue related to the Pfizer Transaction.

Revenue from transfer of intellectual property for the year ended December 31, 2020 also included a $3 million milestone payment triggered by the first marketing approval of Rayaldee in Europe.

Cost of revenue .

Cost of revenue for the year ended December 31, 2020 increased $8.7 million compared to the year ended December 31, 2019.

Cost of product revenue increased primarily due to an increase in sales at OPKO Chile and changes in product mix during the year ended December 31, 2020.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the years ended December 31, 2020 and 2019 were $50.5 million and $57.6 million, respectively.

The decrease in selling, general and administrative expenses was primarily due to decreased expenses at BioReference due to enacting cost reduction initiatives, which were partially offset by $12.6 million of expenses incurred in connection with certain legal matters.

Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 included equity-based compensation expense of $9.7 million and $14.7 million , respectively.

The decrease in selling, general and administrative expenses was primarily due to decreased expenses at our pharmaceutical subsidiaries and a decrease in equity-based compensation expense.

Selling, general and administrative expenses for the pharmaceutical segment for the years ended December 31, 2020 and 2019 included equity-based compensation expense of $1.0 million and $2.0 million, respectively.

Research and development expenses .

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External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs.

We track external research and development expenses by individual

program for phase 3 clinical trials for drug approval and PMAs for diagnostics tests, if any.

We track external research and development expenses by individual program for phase 3 clinical trials for drug approval and premarket approval for diagnostics tests, if any.

Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense.

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The following table summarizes the components of our research and development expenses:

For the years ended December 31,

Research and Development Expenses For the years ended December 31,

External expenses:

Manufacturing expense for biological products $ 5,326 $ 38,592

Phase III studies 10,513 16,869

Post-marketing studies 1,270 2,019

Earlier-stage programs 14,811 21,201

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Total research and development expenses $ 61,149 $ 104,659

The decrease in research and development expenses for the year ended December 31, 2019 was primarily due to a decrease in research and development expenses related to OPK88004, a selective androgen receptor modulator which we are exploring for various potential applications.

In addition, for the years ended December 31, 2019 and 2018, we recorded, as an offset to research and development expenses, $3.7 million and $5.2 million, respectively, related to research and development tax credits recognized in Ireland.

Research and development expenses for the years ended December 31, 2019 and 2018 included equity-based compensation expenses of $2.0 million and $4.2 million , respectively.

We expect our research and development expenses to increase as we continue to expand our research and development of potential future products.

The decrease in research and development expenses for the year ended December 31, 2020 was primarily due to a decrease in research and development expenses related to Somatrogon, a once-weekly human growth hormone injection for which we have partnered with Pfizer and successfully completed a phase 3 study in August 2019.

Ongoing expenses for the Somatrogon program support open label extension studies that will continue until the market launch of Somatrogon in certain countries, as well as the preparation of applications for marketing approvals.

Research and development expenses for the pharmaceutical segment for the years ended December 31, 2020 and 2019 included equity-based compensation expense of $1.6 million and $2.1 million, respectively.

Contingent consideration .

Contingent consideration for the years ended December 31, 2019 and 2018 , was $14.9 million and $16.8 million of gain, respectively.

Contingent consideration for the year ended December 31, 2019 was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Renal and OPKO Diagnostics.

Contingent consideration for the year ended December 31, 2018 was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Renal.

The contingent consideration liabilities of $9.7 million at December 31, 2019 related to potential amounts payable to former stockholders of CURNA, OPKO Diagnostics and OPKO Renal pursuant to our acquisition agreements in January 2011, October 2011 and March 2013, respectively.

Contingent consideration for the years ended December 31, 2020 and 2019 was $1.9 million and $6.5 million reversal of expense, respectively.

Contingent consideration for the years ended December 31, 2020 and 2019 was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Renal, and potential amounts payable to former stockholders of OPKO Renal in connection therewith, pursuant to our acquisition agreement in March 2013.

Amortization of intangible assets .

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Our indefinite lived IPR&D assets will not be amortized until the underlying development programs are completed.

Upon obtaining regulatory approval by the FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life.

Upon obtaining regulatory approval by the U.S.

FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life.

Asset impairment charges .

Asset impairment charges were $92.4 million and $21.8 million, respectively, for the years ended December 31, 2019 and 2018 .

Asset impairment charges for the year ended December 31, 2019 is primarily related to an impairment charge of $44.8 million to write our IPR&D assets for OPK88003 (oxyntomodulin) and CURNA’s platform technology for oligonucleotide therapeutics down to their estimated fair values, a goodwill impairment charge of $26.2 million to write the carrying amount of the OPKO Diagnostics, CURNA and Transition Therapeutics reporting units down to their estimated fair values, and an impairment charge of $20.7 million to write our intangible asset for the Claros Analyzer down to its estimated fair value.

The Asset impairment charges for the year ended December 31, 2019 , resulted from liquidity constraints, longer than expected development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions of the expected future cash flows associated with the Claros Analyzer, OPK88003 and CURNA’s platform technology.

Asset impairment charges for the year ended December 31, 2018 is related to an impairment charge of $10.1 million to write our IPR&D assets for Alpharen and OPK88004 down to their estimated fair values and a goodwill impairment charge of $11.7 million to write the carrying amount of the FineTech reporting unit down to its estimated fair value.

Asset impairment charges were $53.7 million for the year ended December 31, 2019.

Asset impairment charges for the year ended December 31, 2019 were primarily related to an impairment charge of $44.8 million to write our IPR&D assets for OPK88003 (oxyntomodulin) and CURNA’s platform technology for oligonucleotide therapeutics down to their estimated fair values, and a goodwill impairment charge of $8.2 million to write the carrying amount of the CURNA and Transition Therapeutics reporting units down to their estimated fair values.

The Asset impairment charges for the year ended December 31, 2019, resulted from liquidity constraints, longer than expected development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions of the expected future cash flows associated with OPK88003 and CURNA’s platform technology.

We believe that our estimates and assumptions in testing goodwill and other intangible assets, including IPR&D, for impairment are consistent with assumptions that marketplace participants would use in their estimates.

If we are unable to successfully develop Somatrogon, or changes in projections and assumptions negatively impact our forecast of net cash flows, we may be exposed to a material impairment charge related to the IPR&D for Somatrogon.

For the years ended December 31,

(In thousands) 2020 2019 Change % Change

Revenue from transfer of intellectual property and other $ — $ 796 (796) (100) %

Total revenues — 796 (796) (100) %

Costs and expenses:

Cost of revenue (84) (261) 177 (68) %

Selling, general and administrative 38,609 43,696 (5,087) (12) %

Research and development (836) (1,008) 172 (17) %

Total costs and expenses 37,689 42,427 (4,738) (11) %

Loss from operations (37,689) (41,631) 3,942 (9) %

Operating loss for our unallocated corporate operations for the years ended December 31, 2020 and 2019 was $37.7 million and $41.6 million, respectively, and principally reflects general and administrative expenses incurred in connection with our corporate operations.

The decrease in operating loss for the year ended December 31, 2020 was primarily attributable to a decrease in legal fees incurred for the year ended December 31, 2020, as compared to the year ended December 31, 2019.

Interest income .

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Interest expense for the years ended December 31, 2020 and 2019 was $21.9 million and $21.5 million, respectively.

Interest expense was principally related to interest incurred on the 2025 Notes, the 2023 Convertible Notes, our 3.0% Senior Notes due 2033 (the “2033 Senior Notes”), and BioReference’s outstanding debt under its credit facility.

The increase in interest expense for the year ended December 31, 2019 was primarily due to interest incurred on the 2025 Notes and 2023 Convertible Notes.

Interest expense was principally related to interest incurred on our Senior Convertible Notes due 2025 (the “2025 Notes”), our 5% Convertible Promissory Notes (the “2023 Convertible Notes”), our 3.0% Senior Notes due 2033 (the “2033 Senior Notes”), and BioReference’s outstanding debt under its credit facility.

Fair value changes of derivative instruments, net .

Fair value changes of derivative instruments, net for the years ended December 31, 2019 and 2018 , were $0.2 million and $3.0 million of income, respectively.

Derivative income for the year ended December 31, 2018 principally related to the change in fair value of warrants to purchase additional shares of Neovasc.

Other income and (expense), net.

Other income and (expense), net for the years ended December 31, 2019 and 2018 , was $11.3 million of expense and $1.5 million of income, respectively.

Other expense for the year ended December 31, 2019 primarily consisted of net unrealized losses recognized during the period on our investments in Eloxx Pharmaceuticals, Inc.

and VBI Vaccines Inc.

Other income for the year ended December 31, 2018 primarily consisted of net unrealized gains recognized during the period on equity securities.

Income tax benefit (provision) .

Our income tax benefit (provision) for the years ended December 31, 2019 and 2018 was $(7.1) million , and $38.7 million , respectively.

For the year ended December 31, 2019 , our effective tax rate differed from the U.S.

Fair value changes of derivative instruments, net for the years ended December 31, 2020 and 2019, was $50 thousand and $174 thousand of income, respectively.

Derivative income for the year ended December 31, 2020, was principally related to the change in fair value on foreign currency forward exchange contracts at OPKO Chile.

Other income (expense), net .

Other income (expense), net for the years ended December 31, 2020 and 2019, was $12.7 million of income and $11.3 million of expense, respectively.

Other income for the year ended December 31, 2020 primarily consisted of realized and unrealized gains recognized during the period on our investment in VBI Vaccines Inc.

(“VBI”), offset by net unrealized losses recognized during the period on our investment in Eloxx Pharmaceuticals, Inc.

Other expense for the year ended December 31, 2019 primarily consisted of net unrealized losses recognized during the period on Eloxx and VBI.

Income tax provision .

Our income tax provision for the years ended December 31, 2020 and 2019 was $17.6 million and $7.1 million, respectively, and reflects results using our expected effective tax rate.

For the year ended December 31, 2020, the tax rate differed from the U.S.

federal statutory rate of 21% primarily due to the relative mix in earnings and losses in the U.S.

versus foreign tax jurisdictions, the impact of certain discrete tax events and operating results in tax jurisdictions which do not result in a tax benefit.

The income tax benefit for the year ended December 31, 2018 included benefits related to discrete events which did not recur during 2019.

versus foreign tax jurisdictions, the impact of certain discrete tax events and operating results in tax jurisdictions that do not result in a tax benefit.

Loss from investments in investees .

We have made investments in other early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as a shareholder or member.

We have made investments in certain early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as a shareholder or member.

We account for these investments under the equity method of accounting, resulting in the recording of our proportionate share of their losses until our share of their loss exceeds our investment.

Until the investees’ technologies are commercialized, if ever, we anticipate they will report a net loss.

Until the investees’ technologies are commercialized, if ever, we anticipate they will report net losses.

Loss from investments in investees was $0.5 million and $2.9 million for the years ended December 31, 2020 and 2019, respectively.

For The Years Ended December 31, 2019 and December 31, 2018

Effective January 1, 2018, we adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers , using the full retrospective transition method.

Under this method, we have revised our Consolidated Financial Statements for the year ended December 31, 2017, as if Topic 606 had been effective for those periods.

Our consolidated loss from operations for the years ended December 31, 2019 and 2018 is as follows:

For the years ended December 31,

(In thousands)

(In thousands) 2019 2018 Change % Change

Revenue from services $ 716,434 $ 813,248 $ (96,814) (12) %

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Total revenues 901,935 990,266 (88,331) (9) %

Revenue from services for the year ended December 31, 2018 increased approximately $30.5 million compared to the year ended December 31, 2017.

The increase in revenue from services is attributable to reduced adjustments to estimated collection amounts from third-party payors as discussed in the paragraph below.

Revenue from services for the year ended December 31, 2017 was also negatively affected by claims of overpayment as a result of payor error of approximately $30.0 million.

In addition, Revenue from services for the year ended December 31, 2018 increased by $12.9 million from improved collections for our clinical testing resulting from improvements in our billing cycle and $4.7 million from higher volume in our genomics testing.

Partially offsetting these increases, Revenue from services for the year ended December 31, 2018 was negatively affected by $24.5 million as a result of changes in clinical test volumes as a result of increased competition, reduced clinical reimbursement of $15.6 million due to PAMA which came into effect in January 2018, and reduced genomics reimbursement of $11.6 million as a result of an increase in denial rates and changes to medical and procedural requirements.

Costs and expenses:

Cost of revenue 572,484 604,636 (32,152) (5) %

Selling, general and administrative 343,305 358,346 (15,041) (4) %

Research and development 117,870 125,586 (7,716) (6) %

Contingent consideration (14,854) (16,816) 1,962 (12) %

Amortization of intangible assets 64,783 67,933 (3,150) (5) %

Asset impairment charges 92,399 21,778 70,621 324 %

Total costs and expenses 1,175,987 1,161,463 14,524 1 %

Loss from operations (274,052) (171,197) (102,855) 60 %

For the years ended December 31,

(In thousands) 2019 2018 Change % Change

Revenue from services $ 716,434 $ 813,248 (96,814) (12) %

Total revenues 716,434 813,248 (96,814) (12) %

Costs and expenses:

Cost of revenue 510,857 546,305 (35,448) (6) %

Selling, general and administrative 242,020 254,330 (12,310) (5) %

Research and development 14,219 14,637 (418) (3) %

Contingent consideration (8,401) (1,907) (6,494) 341 %

Amortization of intangible assets 42,401 44,825 (2,424) (5) %

Asset impairment charges 38,697 — 38,697 100 %

Total costs and expenses 839,793 858,190 (18,397) (2) %

Loss from operations (123,359) (44,942) (78,417) 174 %

Revenue from services for the year ended December 31, 2019 decreased approximately $96.8 million compared to the year ended December 31, 2018.

Revenue from services for the year ended December 31, 2019 was negatively affected by $49.2 million of decreased reimbursement for our clinical testing and by $21.2 million from our genomics testing, as a result of an increase in denial rates and changes to payor pricing, policy and procedural requirements, the impact of PAMA, and a decline in 4Kscore revenue due to the non-coverage decision issued by Novitas, which became effective on March 21, 2019.

Subsequent to the effective date of the non-coverage determination, in November 2019, Novitas issued its final LCD for Medicare payments for the 4Kscore test, effective December 30, 2019.

Under the final LCD, Medicare will reimburse the test for patients who meet defined criteria.

For the year ended December 31, 2018, adjustments to estimated collection amounts from third-

party payors decreased revenue by $22.8 million compared to $66.0 million in 2017.

For the year ended December 31, 2017, approximately $35.1 million of adjustments related to our genomics testing and approximately $30.9 million related to our clinical testing.

The adjustments for our genomics testing in 2017 primarily relate to changes in payor medical and procedural requirements for our genomics testing and the adjustments for our clinical testing in 2017 and 2018 primarily relate to delays in the billing cycle resulting from our implementation of a new clinical testing billing system in late 2016 as well as reduced clinical reimbursement as discussed above.

For the years ended December 31, 2019 and 2018, we recognized revenue reductions due to

changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $24.8 million and $22.8 million, respectively.

We may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault.

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During the year ended December 31, 2017, a payor informed us it had overpaid BioReference due to an error on its part over a period of several years, including multiple years prior to the acquisition of BioReference by OPKO in August 2015.

For the years ended December 31, 2019 and 2018, Revenue from services was reduced by approximately $2.6 million and $8.1 million, respectively, related to claims of overpayment.

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Client payors 158,527 148,070

Overall, Revenue from products for the year ended December 31, 2018 was consistent with the comparative period in 2017 as an increase in sales of Rayaldee of $20.3 million in the year ended December 31, 2018 compared to $9.1 million in the year ended December 31, 2017, was partially offset by a decrease in revenue at FineTech and in Chile.

Revenue from transfer of intellectual property for the years ended December 31, 2018 and 2017 principally reflected $60.0 million and $61.2 million, respectively, of revenue related to the Pfizer Transaction.

Revenue from transfer of intellectual property for the years ended December 31, 2018 and 2017, also reflects $2.0 million and $10.0 million, respectively, of revenue from milestone payments from our licensees, VFMCRP and TESARO.

Patients 20,810 21,332

Total $ 716,434 $ 813,248

Costs of revenue .

Costs of revenue for the year ended December 31, 2019 decreased $35.4 million compared to 2018.

Cost of service revenue decreased in 2018 primarily due to a decrease in volume and employee related costs for clinical testing at BioReference.

The decrease in cost of product revenue is attributable to $5.4 million of inventory obsolescence expense recognized in 2017 related primarily to the launch of Rayaldee and to changes in the product mix of items sold during the period.

Cost of revenue for the years ended December 31, 2018 and 2017 were as follows:

Cost of Revenue

Cost of service revenue decreased in 2019 primarily due to cost reduction initiatives resulting in per patient encounter efficiency gains at BioReference.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 were $242.0 million and $254.3 million, respectively.

Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 included equity-based compensation expense of $2.2 million and $2.8 million, respectively.

Research and development expenses .

The following table summarizes the components of our research and development expenses:

Research and Development Expenses For the years ended December 31,

External expenses:

PMA studies $ 774 $ —

Research and development employee-related expenses 7,320 7,725

Other internal research and development expenses 6,125 6,912

Total research and development expenses $ 14,219 $ 14,637

Research and development expenses for the year ended December 31, 2019 were consistent with research and development expenses for the year ended December 31, 2018.

Contingent consideration .

Contingent consideration for the years ended December 31, 2019 and 2018 was $8.4 million and $1.9 million reversal of expense, respectively.

Contingent consideration for the years ended December 31, 2019 and 2018 was attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Diagnostics in

both periods, and potential amounts payable to former stockholders of OPKO Diagnostics in connection therewith, pursuant to our acquisition agreement in October 2011.

Amortization of intangible assets .

Amortization of intangible assets was $42.4 million and $44.8 million, respectively, for the years ended December 31, 2019 and 2018.

Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.

Asset impairment charges .

Asset impairment charges were $38.7 million for the year ended December 31, 2019.

The Asset impairment charges for the year ended December 31, 2019, resulted from liquidity constraints, longer than expected development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions of the expected future cash flows associated with the Claros Analyzer.

We believe that our estimates and assumptions in testing goodwill and other intangible assets are consistent with assumptions that marketplace participants would use in their estimates.

However, if actual results are not consistent with our estimates and assumptions, we may be exposed to an impairment charge that could be material.

Pharmaceuticals

For the years ended December 31,

(In thousands)

Cost of service revenue

Cost of product revenue

Total cost of revenue

(In thousands) 2019 2018 Change % Change

Revenue from products $ 112,184 $ 107,112 $ 5,072 5 %

Revenue from transfer of intellectual property and other 72,521 69,906 2,615 4 %

Total revenues 184,705 177,018 7,687 4 %

Costs and expenses:

Cost of revenue 61,888 58,794 3,094 5 %

Selling, general and administrative 57,589 58,789 (1,200) (2) %

Research and development 104,659 112,099 (7,440) (7) %

Contingent consideration (6,453) (14,909) 8,456 (57) %

Amortization of intangible assets 22,382 23,108 (726) (3) %

Asset impairment charges 53,702 21,778 31,924 147 %

Total costs and expenses 293,767 259,659 34,108 13 %

Loss from operations (109,062) (82,641) (26,421) 32 %

The increase in Revenue from transfer of intellectual property was primarily attributable to an increase in revenue related to the Pfizer Transaction of $66.8 million for the year ended December 31, 2019, as compared to $60.0 million for the year ended December 31, 2018, which was partially offset by $2.0 million of revenue from a milestone payment from our licensee VFMCRP in 2018.

Costs of revenue .

Cost of revenue increased primarily due to an increase in sales of Rayaldee in 2019 and changes in the product mix of items sold during the period.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 were $57.6 million and $58.8 million, respectively.

The decrease in selling, general and administrative expenses was primarily due to decreased expenses at BioReference due to enacting cost reduction initiatives and to a decrease in corporate expenses, which was partially offset by $9.6 million of expenses related to the defense and investigation of actions brought by the U.S.

Securities and Exchange Commission, which were settled in December 2018.

Selling, general and administrative expenses for the year ended December 31, 2017 also reflected higher professional fees related to the implementation of a new billing system at BioReference.

Selling, general and administrative expenses for the year ended December 31, 2017 included $8.8 million of expense to write-off certain other current assets.

Selling, general and administrative expenses during the years ended December 31, 2018 and 2017 included equity-based compensation expense of $14.7 million and $21.2 million, respectively.

The decrease in selling, general and administrative expenses was primarily due to a decrease in equity-based compensation expense.

Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 included equity-based compensation expense of $2.0 million and $4.4 million, respectively.

Research and development expenses .

Research and development expenses for the years ended December 31, 2019 and 2018 were $104.7 million and $112.1 million, respectively.

Research and development costs include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements.

Research and development expenses include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements.

External expenses include

clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs.

We track external research and development expenses by individual program for phase 3 clinical trials for drug approval and PMAs for diagnostics tests, if any.

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Manufacturing expense for biological products $ 38,592 $ 28,245

Phase III studies 16,869 23,759

Post-marketing studies 2,019 1,403

Earlier-stage programs 21,201 33,957

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Total research and development expenses $ 104,659 $ 112,099

Overall research and development expenses for the year ended December 31, 2018 were consistent with the comparative period in 2017 as an increase in research and development expenses related to a once or twice weekly oxyntomodulin for type 2 diabetes and to a selective androgen receptor modulator for benign prostatic hyperplasia were offset by research and development tax credits recognized in 2018.

Research and development expenses for the years ended December 31, 2018 and 2017 include equity-based compensation expenses of $4.2 million and $5.1 million, respectively.

Research and development expenses for the years ended December 31, 2019 and 2018 included equity-based compensation expenses of $2.1 million and $3.5 million, respectively.

We expect our research and development expenses to increase as we continue to expand our research and development of potential future products.

Contingent consideration .

Contingent consideration for the years ended December 31, 2018 and 2017, were $16.8 million and $3.4 million of gain, respectively.

The change in contingent consideration was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Renal.

The contingent consideration liabilities of $24.6 million at December 31, 2018 related to potential amounts payable to former stockholders of CURNA, OPKO Diagnostics and OPKO Renal pursuant to our acquisition agreements in January 2011, October 2011 and March 2013, respectively.

Contingent consideration for the years ended December 31, 2019 and 2018 was $6.5 million and $14.9 million reversal of expense, respectively.

Contingent consideration for the years ended December 31, 2019 and 2018 was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Renal, and potential amounts payable to former stockholders of OPKO Renal in connection therewith, pursuant to our acquisition agreement in March 2013.

Amortization of intangible assets .

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Our indefinite lived IPR&D assets will not be amortized until the underlying development programs are completed.

Upon obtaining regulatory approval by the FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life.

Upon obtaining regulatory approval by the U.S.

FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life.

Asset impairment charges .

Asset impairment charges was $21.8 million and $13.2 million, respectively, for the years ended December 31, 2018 and 2017.

Asset impairment charges for the year ended December 31, 2018 is related to an impairment charge of $10.1 million to write our IPR&D assets for Alpharen and OPK88004 down to their estimated fair value and a goodwill impairment charge of $11.7 million to write the carrying amount of the FineTech reporting unit down to its estimated fair value due to the loss of a significant customer in 2018.

Asset impairment charges for the year ended December 31, 2017 is related to an impairment charge of $13.2 million to write our intangible asset for VARUBI™ down to its estimated fair value.

Asset impairment charges were $53.7 million and $21.8 million, respectively, for the years ended December 31, 2019 and 2018.

Asset impairment charges for the year ended December 31, 2019 is primarily related to an impairment charge of $44.8 million to write our IPR&D assets for OPK88003 (oxyntomodulin) and CURNA’s platform technology for oligonucleotide therapeutics down to their estimated fair values, and a goodwill impairment charge of $8.2 million to write the carrying amount of the CURNA and Transition Therapeutics reporting units down to their estimated fair values.

The Asset impairment charges for the year ended December 31, 2019, resulted from liquidity constraints, longer than expected development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions of the expected future cash flows associated with OPK88003 and CURNA’s platform technology.

However, if actual results are not consistent with our estimates and assumptions, including as a result of the COVID-19 global pandemic, we may

be exposed to an impairment charge that could be material.

For the years ended December 31,

(In thousands) 2019 2018 Change % Change

Revenue from transfer of intellectual property and other $ 796 $ — 796 100 %

Total revenues 796 — 796 100 %

Costs and expenses:

Cost of revenue (261) (463) 202 (44) %

Selling, general and administrative 43,696 45,227 (1,531) (3) %

Research and development (1,008) (1,150) 142 (12) %

Total costs and expenses 42,427 43,614 (1,187) (3) %

Loss from operations (41,631) (43,614) 1,983 (5) %

Operating loss for our unallocated corporate operations for the years ended December 31, 2019 and 2018 was $41.6 million and $43.6 million, respectively, and principally reflects general and administrative expenses incurred in connection with our corporate operations.

Interest income.

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Interest expense for the years ended December 31, 2019 and 2018, was $21.5 million and $11.9 million, respectively.

Interest expense is principally related to interest incurred on the 2033 Senior Notes, on BioReference’s outstanding debt under its credit facility and on the 2023 Convertible Notes issued in February 2018.

The increase in interest expense for the year ended December 31, 2018 is primarily due to interest incurred on the 2023 Convertible Notes and to higher outstanding debt and interest rates under BioReference’s credit facility in 2018 compared to 2017.

Interest expense was principally related to interest incurred on the 2025 Notes, the 2023 Convertible Notes, the 2033 Senior Notes, and BioReference’s outstanding debt under its credit facility.

The increase in interest expense for the year ended December 31, 2019 was primarily due to interest incurred on the 2025 Notes and 2023 Convertible Notes.

Fair value changes of derivative instruments, net.

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Derivative income for the year ended December 31, 2018 principally related to the change in fair value of warrants to purchase additional shares of Neovasc.

Fair value changes of derivative instruments, net for the year ended December 31, 2017 is primarily related $3.2 million of income due to the change in the fair value of the embedded derivatives in the 2033 Senior Notes, which was partially offset by $2.9 million of expense related to the change in the fair value of warrants and options to purchase additional shares of Neovasc, Inc.

(“Neovasc”) and Xenetic Biosciences, Inc.

Other income and (expense), net.

Other income and (expense), net for the years ended December 31, 2018 and 2017, were $1.5 million and $10.5 million of income, respectively.

Other income for the year ended December 31, 2018 primarily consists of net unrealized gains recognized during the period on equity securities.

Other income for the year ended December 31, 2017 primarily consists of a $3.0 million gain on the sale of non-strategic assets at a wholly-owned BioReference subsidiary, a $1.5 million gain on the sale of certain available for sale investments, a $2.5 million gain in connection with the acquisition transaction between Eloxx Pharmaceuticals, Inc.

and Sevion Therapeutics, Inc., and a $1.9 million gain in connection with the dilution of our equity method investment in VBI Vaccines Inc.

Other income and (expense), net for the years ended December 31, 2019 and 2018, was $11.3 million of expense and $1.5 million of income, respectively.

Other expense for the year ended December 31, 2019 primarily consisted of net unrealized losses recognized during the period on our investments in Eloxx Pharmaceuticals, Inc.

and VBI Vaccines Inc.

Other income for the year ended December 31, 2018 primarily consisted of net unrealized gains recognized during the period on equity securities.

Income tax benefit (provision) .

Our income tax benefit (provision) for the years ended December 31, 2019 and 2018 was $(7.1) million, and $38.7 million, respectively.

The change in income tax benefit is primarily a result of our analysis of the realization of deferred tax assets and corresponding release of the valuation allowance associated with U.S.

deferred tax assets.

As of December 31, 2017, the Company determined that it was more likely than not that certain U.S.

deferred tax assets would not be realized and recorded a valuation allowance of $28.7 million.

On December 22, 2017, the Tax Act was enacted into law and the new legislation reduced the corporate income tax rate from 35% to 21% which required us to remeasure our U.S.

deferred tax assets and liabilities and recognize the effect in the period of enactment, resulting in $31.8 million of expense, with an equal offset to valuation allowance.

For the year ended December 31, 2019, our effective tax rate differed from the U.S.

federal statutory rate of 21% primarily due to the relative mix in earnings and losses in the U.S.

versus foreign tax jurisdictions, the impact of certain discrete tax events and operating results in tax jurisdictions that do not result in a tax benefit.

The income tax benefit for the year ended December 31, 2018 included benefits related to discrete events which did not recur during 2019.

Loss from investments in investees .

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Loss from investments in investees was $2.9 million and $14.5 million for the years ended December 31, 2019 and 2018, respectively.

Included in Loss from investments in investees for the year ended December 31, 2018 is a charge of $2.9 million to write our investment in InCellDx, Inc.

down to its fair value as of December 31, 2018.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2020, we had cash and cash equivalents of approximately $72.2 million.

Cash used in operations of $172.5 million for year ended December 31, 2019 principally reflects general and administrative expenses in connection with our corporate operations, research and development activities and commercialization activities related to Rayaldee .

Cash used in investing activities for the year ended December 31, 2019 primarily reflects capital expenditures of $12.7 million .

Cash provided by financing activities primarily reflects the issuance of the 2025 Notes in February 2019 for net proceeds of $192.5 million and the issuance of 50 million shares of our Common Stock at a price of $1.50 per share in an underwritten public offering in October 2019, which was partially offset by the redemption of $28.8 million principal amount of 2033 Senior Notes and repayments on BioReference’s line of credit with JPMorgan Chase Bank, N.A.

We have not generated sustained positive cash flow sufficient to offset our operating and other expenses, and our primary source of cash has been from the public and private placement of equity, the issuance of the 2033 Senior Notes, 2023 Convertible Notes and 2025 Notes and credit facilities available to us.

Cash provided by operations of $39.5 million for year ended December 31, 2020 principally reflects cash generated by our diagnostics segment due to the positive impact of COVID-19 testing volumes, which was partially offset by general and administrative expenses related to our corporate operations and research and development activities.

Cash used in investing activities for the year ended December 31, 2020 primarily reflects capital expenditures of $33.7 million, which was partially offset by proceeds from sales of equity securities of $15.1 million.

Cash used in financing activities of $35.1 million primarily reflects net repayments on our lines of credit.

We have not generated sustained positive cash flow sufficient to offset our operating and other expenses, and our primary sources of cash have been from the public and private placement of equity, the issuance of the 2033 Senior Notes, 2023 Convertible Notes and 2025 Notes and credit facilities available to us.

However, as a result of the significant increase in testing volumes resulting from the COVID-19 pandemic, and if our routine clinical and genomic testing volumes continue to trend towards normalization with prior periods, we anticipate generating positive cash flow from operations.

We are unable to predict how long the demand will continue for our COVID-19 related testing, whether pricing and reimbursement policies for testing will sustain, or whether further restrictions will be placed on elective procedures or if stay at home orders will be reinstated and accordingly, the sustainability of the cash flow is uncertain.

On February 25, 2020, we entered into a credit agreement with an affiliate of Dr.

Frost, pursuant to which the lender committed to provide us with an unsecured line of credit in the amount of $100 million.

Borrowings under the line of credit will bear interest at a rate of 11% per annum and may be repaid and reborrowed at any time.

The credit agreement includes various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding

amounts under line of credit.

The line of credit matures on February 25, 2025.

The line of credit also calls for a commitment fee equal to 0.25% per annum of the unused portion of the line.

On October 29, 2019, we issued 50 million shares of our Common Stock at a price of $1.50 per share in an underwritten public offering (the “Offering”), resulting in net proceeds to the Company of approximately $70 million , after deducting underwriting commissions and offering expenses.

Borrowings under this line of credit bear interest at a rate of 11% per annum and may be repaid and reborrowed at any time.

The credit agreement includes various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding amounts under this line of credit.

This line of credit matures on February 25, 2025.

As of December 31, 2020, no funds were borrowed under this line of credit.

On October 29, 2019, we issued 50 million shares of our Common Stock at a price of $1.50 per share in an underwritten public offering, resulting in net proceeds to the Company of approximately $70 million, after deducting underwriting commissions and offering expenses.

In November 2019, pursuant to an option the Company granted the underwriters, we issued an additional 4,227,749 shares of Common Stock at $1.50 per share, resulting in proceeds of approximately $6 million after deducting underwriting commissions.

The Company intends to use the net proceeds received from the Offering to fund research and development, to further develop and commercialize its portfolio of proprietary pharmaceutical and diagnostic products and for working capital, capital expenditures, acquisitions and other general corporate purposes.

In February 2019, we issued $200.0 million aggregate principal amount of the 2025 Notes in an underwritten public offering.

The 2025 Notes bear interest at a rate of 4.50% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019.

The 2025 Notes bear interest at a rate of 4.50% per year, payable semiannually in arrears on February 15 and August 15 of each year.

The notes mature on February 15, 2025, unless earlier repurchased, redeemed or converted.

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The conversion rate for the 2025 Notes is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

On November 8, 2018, we entered into stock purchase agreements with certain investors pursuant to which we agreed to sell to such investors in private placements an aggregate of approximately 26.5 million shares of our Common Stock at a purchase price of $3.49 per share, which was the closing bid price of our Common Stock on the NASDAQ on such date, for an aggregate purchase price of $92.5 million.

The investors in the private placements include an affiliate of Dr.

Phillip Frost, our Chairman and Chief Executive Officer ($70 million), and Dr.

Jane Hsiao, our Vice Chairman and Chief Technical Officer ($2 million).

We intend to use the proceeds from the private placements for general corporate purposes.

On November 8, 2018, we entered into a credit agreement with an affiliate of Dr.

Frost, pursuant to which the lender committed to provide us with an unsecured line of credit in the amount of up to $60 million.

The credit agreement was terminated on or around February 20, 2019 and we repaid the $28.8 million outstanding from the proceeds of the 2025 Notes offering.

Borrowings under the line of credit bore interest at a rate of 10% per annum and could be repaid and reborrowed at any time.

The credit agreement included various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding amounts under line of credit.

The line of credit would have matured on November 8, 2023.

On February 1, 2019, holders tendered to us approximately $28.8 million aggregate principal amount of 2033 Senior Notes pursuant to such holders’ option to require us to repurchase the 2033 Senior Notes as set forth in the indenture, following which repurchase only $3.0 million aggregate principal amount of the 2033 Senior Notes remained outstanding.

On February 1, 2019, holders of our 2033 Senior Notes tendered to us approximately $28.8 million aggregate principal amount of such notes pursuant to such holders’ option to require us to repurchase the 2033 Senior Notes as set forth in the indenture, following which repurchase only $3.0 million aggregate principal amount of the 2033 Senior Notes remained outstanding.

Holders of the remaining $3.0 million principal amount of the 2033 Senior Notes may require us to repurchase such notes for 100% of their principal amount, plus accrued and unpaid interest, on February 1, 2023, on February 1, 2028, or following the occurrence of a fundamental change as defined in the indenture governing the 2033 Senior Notes.

As of December 31, 2019 , the total commitments under our Credit Agreement (as defined below) with CB and our lines of credit with financial institutions in Chile and Spain were $73.7 million , of which $52.1 million was drawn and outstanding as of December 31, 2019 .

The weighted average interest rate on these lines of credit was approximately 4.0% as of

December 31, 2019 .

As of December 31, 2020, the total commitments under our Credit Agreement (as defined below) with CB and our lines of credit with financial institutions in Chile and Spain were $87.7 million, of which $23.0 million was drawn as of December 31, 2020.

At December 31, 2020, the weighted average interest rate on these lines of credit was approximately 4.9%.

These lines of credit are short-term and are used primarily as a source of working capital.

The highest aggregate principal balance at any time outstanding during the year ended December 31, 2020, was $66.5 million.

We intend to continue to enter into these lines of credit as needed.

We intend to continue to draw on these lines of credit as needed.

There is no assurance that these lines of credit or other funding sources will be available to us on acceptable terms, or at all, in the future.

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The Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well as a non-recourse pledge by us of our equity interest in BioReference.

Availability under the Credit Agreement is based on a borrowing base comprised of eligible accounts receivables of BioReference and certain of its subsidiaries, as specified therein.

In 2019, we repaid $60.5 million under our Credit Agreement with CB based on changes in our borrowing base calculation which reduced credit available to us.

The repayment was made with cash on hand.

Availability under the Credit Agreement is based on a borrowing base composed of eligible accounts receivables of BioReference and certain of its subsidiaries, as specified therein.

As of December 31, 2020, $57.6 million remained available for borrowing under the Credit Agreement.

On August 6, 2019, BioReference and certain of its subsidiaries entered into Amendment No.

9 to the Credit Agreement, which amended certain definitions in the Credit Agreement and further amended the Credit Agreement to provide that the fixed charge coverage ratio requirement set forth in the Credit Agreement would not be tested for the second quarter and would not be tested for the quarter ending September 30, 2019, subject, in the case of testing for the quarter ending September 30, 2019, to (i) there having been no event of default occurring and (ii) availability under the revolving facility exceeding 10% of the total revolving commitment, subject to certain adjustments, for at least 30 consecutive days ending on September 30, 2019.

The other terms of the Credit Agreement remain unchanged.

On November 4, 2019, BioReference and certain of its subsidiaries entered into Amendment No.

10 to the Credit Agreement, which amended certain definitions in the Credit Agreement and further amended the Credit Agreement to extend the maturity date to 2021 and reduce the commitment from $100 million to $75 million.

The other terms of the Credit Agreement remain unchanged.

In February 2018, in a transaction exempt from registration under the Securities Act, we issued the 2023 Convertible Notes in the aggregate principal amount of $55.0 million .

The 2023 Convertible Notes mature five years from the date of issuance.

In February 2018, in a transaction exempt from registration under the Securities Act, we issued the 2023 Convertible Notes in the aggregate principal amount of $55.0 million maturing in February 2023.

Each holder of a 2023 Convertible Note has the option, from time to time, to convert all or any portion of the outstanding principal balance of such 2023 Convertible Note, together with accrued and unpaid interest thereon, into shares of our Common Stock, par value $0.01 per share, at a conversion price of $5.00 per share of Common Stock.

We may redeem all or any part of the then issued and outstanding 2023 Convertible Notes, together with accrued and unpaid interest thereon, pro ratably among the holders, upon no fewer than 30 days, and no more than 60 days, notice to the holders.

We may redeem all or any part of the then issued and outstanding 2023 Convertible Notes, together with accrued and unpaid interest thereon upon no fewer than 30 days, and no more than 60 days, notice to the holders.

The 2023 Convertible Notes contain customary events of default and representations and warranties of OPKO.

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JT will, at its sole cost and expense, be responsible for performing all development activities necessary to obtain all regulatory approvals for Rayaldee in Japan and for all commercial activities pertaining to Rayaldee in Japan.

In May 2016, EirGen, our wholly-owned subsidiary, partnered with VFMCRP through a Development and License Agreement for the development and commercialization of Rayaldee in Europe, Canada, Mexico, Australia, South Korea and certain other international markets.

In May 2016, EirGen, our wholly-owned subsidiary, partnered with VFMCRP through the VFMCRP Agreement for the development and commercialization of Rayaldee in the VFMCRP Territory.

The license to VFMCRP potentially covers all therapeutic and prophylactic uses of the product in human patients, provided that initially the license is for the use of the product for the treatment or prevention of SHPT related to patients with CKD and vitamin D insufficiency/deficiency (“VFMCRP Initial Indication”).

We have received non-refundable and non-creditable payments of $52 million and are eligible to receive up to an additional $230 million upon the achievement of certain regulatory and sales-based milestones.

In addition, we are eligible to receive tiered royalties on

sales of the product at percentage rates that range from the mid-teens to the mid-twenties or a minimum royalty, whichever is greater, upon commencement of sales of the product.

Effective May 5, 2020, we entered into the VFMCRP Amendment, pursuant to which the parties agreed to exclude Mexico, South Korea, the Middle East and all of the countries of Africa from the VFMCRP Territory.

In addition, the parties agreed to certain amendments to the milestone structure and to reduce minimum royalties payable.

We have received non-refundable and non-creditable payments of $55 million to date and are eligible to receive up to an additional $227 million pursuant to the terms of the VFMCRP Amendment upon the achievement of certain regulatory and sales-based milestones tied to sales and reimbursement levels.

In addition, we are eligible to receive tiered royalties on sales of the product at percentage rates that range from the mid-teens to the mid-twenties or a minimum royalty, whichever is greater, upon commencement of sales of the product.

As part of the arrangement, the companies will share responsibility for the conduct of trials specified within an agreed-upon development plan, with each company leading certain activities within the plan.

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EirGen also granted to VFMCRP an option to acquire an exclusive license to use, import, offer for sale, sell, distribute and commercialize the product in the U.S.

for treatment of SHPT in dialysis patients with stage 5 CKD and vitamin D insufficiency (the “Dialysis Indication”).

for treatment of SHPT in dialysis patients

with stage 5 CKD and vitamin D insufficiency (the “Dialysis Indication”).

Upon exercise of the Option, VFMCRP will reimburse EirGen for all of the development costs incurred by EirGen with respect to the product for the Dialysis Indication in the U.S.

VFMCRP would also pay EirGen up to an additional aggregate amount of $555 million upon the achievement of certain milestones and would be obligated to pay royalties on sales of the product at percentage rates that range from the mid-teens to the mid-twenties or a minimum royalty, whichever is greater, upon commencement of sales of the product.

On October 21, 2019, we and Pfizer announced that the global Phase 3 trial evaluating Somatrogon (hGH-CTP) dosed once-weekly in prepubertal children with GHD met its primary endpoint of non-inferiority to daily Genotropin® (somatropin) for injection, as measured by annual height velocity at 12 months.

In 2014, Pfizer and OPKO entered into a worldwide agreement for the development and commercialization of our long-acting hGH-CTP for the treatment of GHD in adults and children, as well as for the treatment of growth failure in children born small for gestational age.

In June 2020, we announced that the Japan phase 3 clinical trial met its primary and secondary objectives, and demonstrated that the efficacy and safety of Somatrogon administered weekly was comparable to GENOTROPIN® for injection administered once-daily as measured by annual height velocity after 12 months of treatment in treatment-naïve Japanese pre-pubertal children with GHD.

In October 2019, we and Pfizer announced that the global phase 3 trial evaluating Somatrogon (hGH-CTP) dosed once-weekly in prepubertal children with GHD met its primary endpoint of non-inferiority to daily Genotropin® (somatropin) for injection, as measured by annual height velocity at 12 months.

In 2014, Pfizer and OPKO entered into a worldwide agreement for the development and commercialization of our long-acting Somatrogon for the treatment of GHD in adults and children, as well as for the treatment of growth failure in children born small for gestational age.

In May 2020, we entered into a Restated Agreement with Pfizer which was effective as of January 1, 2020, pursuant to which the parties agreed to share all costs for Manufacturing Activities, as defined in the Restated Agreement, for developing a licensed product for the three indications included in the Agreement.

Under the terms of the agreements with Pfizer, we received non-refundable and non-creditable upfront payments of $295 million in 2015 and are eligible to receive up to an additional $275 million upon the achievement of certain regulatory milestones.

Pfizer received the exclusive license to commercialize hGH-CTP worldwide.

In addition, we are eligible to receive initial tiered royalty payments associated with the commercialization of hGH-CTP for Adult GHD with percentage rates ranging from the high teens to mid-twenties.

Upon the launch of hGH-CTP for Pediatric GHD in certain major markets, the royalties will transition to regional, tiered gross profit sharing for both hGH-CTP and Pfizer’s Genotropin®.

Under the agreement, we agreed to lead the clinical activities and to be responsible for funding the development programs for the key indications, which includes Adult and Pediatric GHD and Pediatric SGA.

Pfizer agreed to be responsible for all development costs for additional indications as well as all post-marketing studies.

In addition, Pfizer agreed to fund the commercialization activities for all indications and lead the manufacturing activities covered by the global development plan.

The agreement obligated us to fund development up to an agreed cap.

The development project for hGH-CTP has exceeded our original estimates and the agreed development cap.

If we are unable to reach an agreement with Pfizer regarding cost sharing for overruns, as well as other obligations, including development obligations, it could have a material adverse impact on the expected benefits of the Pfizer Transaction and our overall financial condition.

If we do not successfully develop hGH- CTP and/or Pfizer Inc.

were to terminate the agreement or not successfully commercialize hGH-CTP for any reason, our business would be adversely affected.

Pfizer received the exclusive license to commercialize Somatrogon worldwide.

In addition, we are eligible to receive initial tiered royalty payments associated with the commercialization of Somatrogon for Adult GHD with percentage rates ranging from the high teens to mid-twenties.

Upon the launch of Somatrogon for Pediatric GHD in certain major markets, the royalties will transition to regional, tiered gross profit sharing for both Somatrogon and Pfizer’s Genotropin®.

In January 2021, we announced that the FDA has accepted for filing the initial BLA for Somatrogon for the treatment of pediatric patients with GHD.

The target PDUFA action date for decision by the FDA is in October 2021.

In January 2021 we also announced the submission of a New Drug Application to the Ministry of Health, Labour, and Welfare in Japan for Somatrogon for the treatment of pediatric patients with GHD.

In connection with our acquisitions of CURNA, OPKO Diagnostics and OPKO Renal, we agreed to pay future consideration to the sellers upon the achievement of certain events, including up to an additional $19.1 million in shares of our Common Stock to the former stockholders of OPKO Diagnostics upon and subject to the achievement of certain milestones;

and up to an additional $125.0 million in either shares of our Common Stock or cash, at our option subject to the achievement of certain milestones, to the former shareholders of OPKO Renal.

We expect to continue to incur substantial research and development expenses, including expenses related to the hiring of personnel and additional clinical trials.

We also expect to incur substantial selling, general and administrative expenses as we expand our sales, marketing and administrative staff and add infrastructure.

We believe that the cash and cash equivalents on hand at December 31, 2019 , and the amounts available to be borrowed under our lines of credit are sufficient to meet our anticipated cash requirements for operations and debt service beyond the next 12 months.

We believe that the cash and cash equivalents on hand at December 31, 2020, cash from operations and the amounts available to be borrowed under our lines of credit are sufficient to meet our anticipated cash requirements for operations and debt service beyond the next 12 months.

We based this estimate on assumptions that may prove to be wrong or are subject to change, and we may be required to use our available cash resources sooner than we currently expect.

If we acquire additional assets or companies, accelerate our product development programs or initiate additional clinical trials, we will need additional funds.

Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including our relationship with Pfizer and our other commercial partners, the commercial success of Rayaldee , BioReference’s financial performance, possible acquisitions, the continued progress of research and development of our product candidates, the timing and outcome of clinical trials and regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing, our success in developing markets for our product candidates and results of government investigations, payor claims, and legal proceedings

that may arise, including, without limitation class action and derivative litigation to which we are subject, and our ability to obtain insurance coverage for such claims.

Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including the impact of the COVID-19 pandemic on our business, the approval and success of our products in development, particularly our long acting Somatrogon for which we have submitted for approval in the U.S.

and Japan and expect to submit for approval in the Europe shortly, the commercial success of Rayaldee , including the launch of Rayaldee by Vifor expected later in 2021, BioReference’s financial performance, possible acquisitions, the continued progress of research and development of our product candidates, the timing and outcome of clinical trials and regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing, our success in developing markets for our product candidates and results of government investigations, payor claims, and legal proceedings that may arise, including, without limitation class action and derivative litigation to which we are subject, and our ability to obtain insurance coverage for such claims.

We have not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs or possible acquisitions or reduce our marketing or sales efforts or cease operations.

Additionally, the rapid development and fluidity of the COVID-19 pandemic makes it very difficult to predict its ultimate impact on our business, results of operations and liquidity.

The pandemic presents a significant uncertainty that could materially and adversely affect our results of operations, financial condition and cash flows, including due to a continued negative impact on non-COVID-related diagnostics testing services provided by BioReference in our diagnostics segment, notwithstanding that our results of operations have been positively impacted by our provision of COVID-19 testing services.

Further, deteriorating economic conditions globally have resulted in a challenging capital raising environment, which could materially limit our access to capital, whether through the issuance and sale of our common stock, debt securities or otherwise, as well as through bank facilities and lines of credit.

Events resulting from the effects of COVID-19 could negatively impact our ability to comply with certain covenants in the Credit Agreement or require that we pursue alternative financing.

We can provide no assurance that any such alternative financing, if required, could be obtained on acceptable terms or at all.

The combination of potential disruptions to our business resulting from COVID-19 together with and volatile credit and capital markets could adversely impact our future liquidity, which could have an adverse effect on our business and results of operations.

We will continue to monitor and assess the impact COVID-19 may have on our business and financial results.

The following table provides information as of December 31, 2020, with respect to the amounts and timing of our known contractual obligation payments due by period.

Contractual obligations

(In thousands)

(In thousands) 2021 2022 2023 2024 2025 Thereafter Total

Open purchase orders $ 342,103 $ 49 $ — $ — $ — $ — $ 342,152

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Capital leases 2,428 1,422 835 503 70 — 5,258

2033 Senior Notes

Deferred payments

Convertible Notes — — 58,050 — 156,163 — 214,213

Mortgages and other debts payable 1,031 807 597 500 94 — 3,029

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Interest commitments 296 286 13,972 260 36,852 — 51,666

Total $ 377,840 $ 10,251 $ 79,647 $ 5,458 $ 195,624 $ 9,240 $ 678,060

The preceding table does not include information where the amounts of the obligations are not currently determinable, including the following:

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Accounting estimates.

Use of estimates.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

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Subsequent to acquisition, goodwill and indefinite lived intangible assets are tested at least annually as of October 1 for impairment, or when events or changes in circumstances indicate it is more likely than not that the carrying amount of such assets may not be recoverable.

Our annual assessment may consist of a qualitative or quantitative analysis to determine whether it is more likely than not that its fair value exceeds the carrying value.

When performing qualitative analysis, the factors we consider include our share price, our financial performance compared to budgets, long-term financial plans, the

timing and cost of development plans, macroeconomic, industry and market conditions as well as the excess of fair value over the carrying value of net assets from the annual impairment test previously performed.

Our annual assessment may consist of a qualitative or quantitative analysis to determine

whether it is more likely than not that its fair value exceeds the carrying value.

When performing qualitative analysis, the factors we consider include our share price, our financial performance compared to budgets, long-term financial plans, the timing and cost of development plans, macroeconomic, industry and market conditions as well as the excess of fair value over the carrying value of net assets from the annual impairment test previously performed.

When performing quantitative analysis, we use a combination of income and market valuation methods and may weigh the outcomes of valuation approaches when estimating fair value.

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Ultimately, potential changes in these assumptions may impact the estimated fair value of a reporting unit and result in an impairment if the fair value of such reporting unit is less than its carrying value.

Net intangible assets other than goodwill were $1.1 billion and $1.3 billion , including IPR&D of $590.2 million and $635.6 million , respectively, at December 31, 2019 and 2018 .

Net intangible assets other than goodwill were $1.1 billion, including IPR&D of $590.2 million, at both December 31, 2020 and 2019.

Intangible assets are highly vulnerable to impairment charges, particularly newly acquired assets for recently launched products and IPR&D.

Considering the high risk nature of research and development and the industry’s success rate of bringing developmental compounds to market, IPR&D impairment charges are likely to occur in future periods.

Considering the high risk nature of research and development and the industry’s success rate of bringing developmental compounds to market, IPR&D impairment charges may occur in future periods.

Estimating the fair value of IPR&D for potential impairment is highly sensitive to changes in projections and assumptions and changes in assumptions could potentially lead to impairment.

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Impairment charges for the year ended December 31, 2019 were $92.4 million and consist of a goodwill impairment charge of $26.2 million to write the carrying amount of the OPKO Diagnostics, CURNA and Transition Therapeutics reporting units down to their estimated fair value, an impairment charge of $44.8 million to write our IPR&D assets for OPK88003 and CURNA’s platform technology for oligonucleotide therapeutics down to their estimated fair value, and an impairment charge of $20.7 million to write our intangible asset for the Claros Analyzer down to its estimated fair value as a result of our testing.

These impairment charges for the year ended December 31, 2019 , resulted from liquidity constraints, longer than expected development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions

of the expected future cash flows of the reporting units focused on the development of the Claros Analyzer, OPK88003 and CURNA’s platform technology.

We believe that our estimates and assumptions are reasonable and otherwise consistent with assumptions that marketplace participants would use in their estimates of fair value.

However, if future results are not consistent with our estimates and assumptions, then we may be exposed to an impairment charge, which could be material.

For the year ended December 31, 2019, the results of operations of our BioReference reporting unit were below management’s long-term forecast of expected cash flows for the year ending December 31, 2019 due to a change in reimbursement coverage for our 4Kscore test and other market factors.

Our 2019 impairment test of the BioReference reporting unit indicated an excess of estimated fair value over the carrying amount of approximately 11%.

If we are unable to obtain appropriate reimbursement for our services and experience future declines in operating results versus forecast, then our estimates of the fair value of the BioReference reporting unit may decrease, and the resulting impairment could be significant.

These impairment charges for the year ended December 31, 2019, resulted from liquidity constraints, longer than expected

development timelines and changes in the competitive landscape, which resulted in changes to our estimates and assumptions of the expected future cash flows of the reporting units focused on the development of the Claros Analyzer, OPK88003 and CURNA’s platform technology.

No impairment charges were recognized for the year ended December 31, 2020.

We recorded a goodwill impairment charge of $11.7 million in Asset impairment charges in our Consolidated Statement of Operations for the year ended December 31, 2018 to write the carrying amount of the FineTech reporting unit down to its estimated fair value.

No goodwill impairment was recorded for the year ended December 31, 2017.

We recorded an impairment charge of $10.1 million in Asset impairment charges in our Consolidated Statement of Operations for the year ended December 31, 2018 to write our IPR&D assets for Alpharen and OPK88004 down to their estimated fair value as a result of our testing and we recorded an impairment charge of $13.2 million for the year ended December 31, 2017 to write our intangible asset for VARUBI™ down to its estimated fair value as a result of our testing.

We also recorded an impairment charge of $10.1 million in Asset impairment charges in our Consolidated Statement of Operations for the year ended December 31, 2018 to write our IPR&D assets for Alpharen and OPK88004 down to their estimated fair value as a result of our testing.

We believe that our estimates and assumptions are reasonable and otherwise consistent with assumptions that marketplace participants would use in their estimates of fair value.

However, if future results are not consistent with our estimates and assumptions, including as a result of the COVID-19 global pandemic, then we may be exposed to an impairment charge, which could be material.

We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years.

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Actual amounts are adjusted in the period those adjustments become known.

For the years ended December 31, 2019 , 2018 and 2017, revenue reductions due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $24.8 million , $22.8 million and $66.0 million , respectively, were recognized.

For the year ended December 31, 2020, positive revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $0.3 million were recognized.

For the years ended December 31, 2019 and 2018, revenue reductions due to changes in estimates of implicit price

concessions for performance obligations satisfied in prior periods of $24.8 million and $22.8 million, respectively, were recognized

Third-party payors, including government programs, may decide to deny payment or recoup payments for testing they contend were improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received.

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We recognize revenue for shipments of Rayaldee at the time of delivery to customers after estimating Sales Deductions and product returns as elements of variable consideration utilizing historical information and market research projections.

For the years ended December 31, 2019 , and 2018 , we recognized $31.4 million and $20.3 million in net product revenue from sales of Rayaldee .

For the years ended December 31, 2020, 2019 and 2018, we recognized $36.8 million, $31.4 million and 20.3 million in net product revenue from sales of Rayaldee .

Taxes collected from customers related to revenues from services and revenues from products are excluded from revenues.

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For research, development and/or commercialization agreements that result in revenues, we identify all material performance obligations, which may include a license to intellectual property and know-how, and research and development activities.

In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract.

In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable

consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract.

We constrain (reduce) our estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract.

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If we are entitled to additional payments when the licensee exercises these options, any additional payments are generally recorded in license or other revenues when the licensee obtains control of the goods, which is upon delivery.

For the years ended December 31, 2019 , 2018 and 2017 we recorded $73.3 million , $69.9 million and $75.5 million of revenue from the transfer of intellectual property, respectively.

For the year ended December 31, 2019, revenue from the transfer of intellectual property included $66.8 million related to the Pfizer Transaction.

For the year ended December 31, 2018, revenue from the transfer of intellectual property included $60.0 million related to the Pfizer Transaction and $2.0 million related to a milestone payment from our licensee, VFMCRP.

For the year ended December 31, 2017, revenue from the transfer of intellectual property included $61.2 million related to the Pfizer Transaction and $10.0 million related to a milestone

payment from our licensee, TESARO.

For the years ended December 31, 2020, 2019 and 2018 we recorded $53.2 million, $73.3 million and $69.9 million of revenue from the transfer of intellectual property and other, respectively.

For the year ended December 31, 2020 and 2019, revenue from the transfer of intellectual property and other included $28.7 million and $66.8 million related to the Pfizer Transaction.

In addition, revenue from the transfer of intellectual property and other for the year ended December 31, 2020 included $16.2 million of grants received by BioReference under the CARES Act and a $3 million milestone payment triggered by the first marketing approval of Rayaldee in Europe.

Refer to Note 16.

Total contract liabilities included in Accrued expenses and Other long-term liabilities was $21.8 million and $91.1 million at December 31, 2019 and December 31, 2018 , respectively.

The contract liability balance at December 31, 2019 and 2018 relates primarily to the Pfizer Transaction.

Contract liabilities relate to cash consideration that OPKO receives in advance of satisfying the related performance obligations.

Changes in the contractual liabilities balance for the years ended December 31, 2020 are as follows:

(In thousands)

Balance at December 31, 2019 $ 21,767

Balance at December 31, 2020 16,378

Revenue recognized in the period from:

Amounts included in contracts liability at the beginning of the period 19,048

The contract liability balance at December 31, 2020 related primarily to accelerated payments received as part of the CARES Act.

Concentration of credit risk and allowance for doubtful accounts .

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While we have receivables due from federal and state governmental agencies, we do not believe that such receivables represent a credit risk since the related healthcare programs are funded by federal and state governments, and payment is primarily dependent upon submitting appropriate documentation.

At December 31, 2019 and 2018 , receivable balances (net of contractual adjustments) from Medicare and Medicaid in total were 6% and 7% , respectively, of our consolidated Accounts receivable, net.

At December 31, 2020 and 2019, receivable balances (net of explicit and implicit price concessions) from Medicare and Medicaid were 6% and 6%, respectively, of our consolidated Accounts receivable, net.

At December 31, 2020, receivable balances (net of explicit and implicit price concessions) due directly from states, cities and other municipalities, specifically related to our real-time reverse-transcription polymerase chain reaction (real-time RT-PCR) assay to detect COVID-19, were 6.3% of our consolidated accounts receivable, net.

The portion of our accounts receivable due from individual patients comprises the largest portion of credit risk.

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Actual results could differ from those estimates.

The allowance for doubtful accounts was $1.9 million and $1.8 million at December 31, 2019 and 2018 , respectively.

The provision for bad debts for the years ended December 31, 2019 and 2018 was $0.5 million and $0.7 million , respectively.

The allowance for credit losses was $2.1 million and $1.9 million at December 31, 2020 and 2019, respectively.

The credit loss expense for the years ended December 31, 2020 and 2019 was $0.2 million and $0.5 million, respectively.

Income taxes.

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We measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

That cost is recognized in the Consolidated Statement of Operations over the period during which an employee is required to provide service in exchange for the award.

That cost is recognized in the Consolidated Statements of Operations over the

period during which an employee is required to provide service in exchange for the award.

We record excess tax benefits, realized from the exercise of stock options, as cash flows from operations.

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Cost is determined by the first-in, first-out method.

We consider such factors as the amount of inventory on hand, estimated time required to sell such inventories,

remaining shelf-life, and current market conditions to determine whether inventories are stated at the lower of cost and net realizable value.

We consider such factors as the amount of inventory on hand, estimated time required to sell such inventories, remaining shelf-life, and current market conditions to determine whether inventories are stated at the lower of cost and net realizable value.

Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which is used in our testing laboratories.

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Recently adopted accounting pronouncements .

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-02, “Leases (Topic 842),” which requires organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets.

ASU 2016-02, as amended and codified under Topic 842, requires new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.

As required, we adopted Topic 842 on January 1, 2019 and used the modified retrospective approach for all lease arrangements at the beginning or the period of adoption.

Results for reporting periods beginning January 1, 2019 are presented under Topic 842, while prior period amounts were not adjusted and continue to be reported in accordance our historic accounting under ASC 840.

For leases that commenced before the effective date of Topic 842, we elected the use of permitted practical expedients and did not reassess the following:

(i) whether any expired or existing contracts contain leases;

(ii) the lease classification for any expired or existing leases;

and (iii) initial direct costs for any existing leases.

We also elected the policy of not recording leases on our Consolidated Balance Sheet when the leases have terms of 12 months or less, and we elected not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

The adoption of Topic 842 resulted in the recognition of operating lease liabilities of approximately $33.7 million and operating lease right-to-use assets of approximately $33.3 million as of March 31, 2019, primarily related to operating leases for our diagnostic facilities, based on the present value of lease payments over the lease term.

There was no cumulative-effect adjustment to beginning Accumulated deficit on the Consolidated Balance Sheet.

The accounting for our finance leases remains substantially unchanged, as finance lease liabilities and their corresponding right-to-use assets were already recorded on the Consolidated Balance Sheet under the previous guidance.

The adoption of Topic 842 did not have a significant effect on our results of operations or cash flows.

Refer to Note 16 for additional disclosures required by Topic 842.

In February 2018, the FASB issued ASU No.

2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive loss to retained earnings due to the U.S.

federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017.

This standard is effective for interim and annual reporting periods beginning after December 15, 2018.

We adopted this standard effective January 1, 2019 with the election not to reclassify immaterial amounts of stranded tax effects from accumulated other comprehensive loss to retained earnings.

In June 2016, the FASB issued ASU No.

2018-07, “Compensation - Stock Compensation (Topic 718),” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees.

The adoption of ASU 2018-07 on January 1, 2019, did not have a significant impact on our Consolidated Financial Statements.

Pending accounting pronouncements .

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

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This may result in the earlier recognition of allowances for losses.

The ASU is effective for public

entities for fiscal years beginning after December 15, 2019, with early adoption permitted.

The ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted.

The adoption of ASU 2016-13 on January 1, 2020, did not have a significant impact on our Consolidated Financial Statements.

Pending accounting pronouncements .

In August 2020, the FASB issued ASU No.

2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40).” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

The ASU is effective for public entities for fiscal years beginning after December 15, 2021, with early adoption permitted.

We are currently evaluating the impact of this new guidance on our Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis