OPKO HEALTH INC

Previous wording

We are a diversified healthcare company that seeks to establish industry leading positions in large and rapidly growing medical markets. Our pharmaceutical business featuresRayaldee, 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, and Somatrogon (hGH-CTP), a once-weekly human growth hormone injection. We have partnered with Pfizer Inc. (“Pfizer”) for the development and commercialization of Somatrogon (hGH-CTP). Regulatory approvals for Somatrogon (hGH-CTP) for the treatment of growth hormone deficiency in children and adolescents have been secured in over 50 markets, including the United States, European Union (“EU") Member States, Japan, Canada, and Australia, where it is marketed under the brand name NGENLA®. Our 2022 acquisition of ModeX Therapeutics, Inc. (“ModeX”) has expanded our pharmaceutical pipeline with early-stage immune therapies targeting cancer and infectious diseases.

Current wording

We are a diversified healthcare company that seeks to establish industry leading positions in large and rapidly growing medical markets. Our pharmaceutical business featuresRayaldee, 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, and Somatrogon (hGH-CTP), a once-weekly human growth hormone injection. We have partnered with Pfizer Inc. (“Pfizer”) for the development and commercialization of Somatrogon (hGH-CTP). Regulatory approvals for Somatrogon (hGH-CTP) for the treatment of growth hormone deficiency in children and adolescents have been secured in all major markets, including the United States, European Union (“EU") Member States, Japan, Canada, and Australia, where it is marketed under the brand name NGENLA®. Our 2022 acquisition of ModeX Therapeutics, Inc. (“ModeX”) has expanded our pharmaceutical pipeline with early-stage immune therapies targeting cancer and infectious diseases.

Previous wording

Our diagnostics business, BioReference Health, LLC (“BioReference”), is one of the nation’s largest full-service laboratories, with a sales and marketing team focused on growth and new product integration, including the4Kscore prostate cancer test. BioReference primarily serves customers in major metropolitan areas across the United States. We offer a comprehensive clinical diagnostics menu, including hematology, clinical chemistry, immunoassays, infectious disease testing, serology, hormone analyses, toxicology assays, Pap smears, anatomic pathology, and COVID-19 testing. Our laboratory services are marketed directly to physicians, geneticists, hospitals, clinics, correctional facilities, and other healthcare providers. On March 28, 2024 we entered into an agreement to sell select assets of BioReference to Laboratory Corporation of America Holdings ("Labcorp"), as described below.

Current wording

Our diagnostics business, BioReference Health, LLC (“BioReference”), is a highly specialized laboratory in the United States, with a sales and marketing team focused on growth and new product integration, including the 4Kscore® prostate cancer test. BioReference® offers a broad spectrum of diagnostic testing services for oncology, urology (4Kscore), and corrections nationwide, setting new standards with our industry-leading turnaround times. BioReference also provides comprehensive clinical and women’s health testing in New York and New Jersey. Our test offerings are backed by a team of board-certified medical professionals and driven by the latest healthcare guidelines and standards- marketed directly to physicians, geneticists, hospitals, clinics, correctional facilities, and other healthcare providers. On September 16, 2024 we completed an agreement to sell select assets of BioReference to Laboratory Corporation of America Holdings ("Labcorp"), as described below.

Previous wording

Proposed Sale of Select BioReference Assets

Current wording

Completion of Disposition of Select BioReference Assets

Previous wording

On July 18, 2024, our Board of Directors authorized the repurchase of up to $100 million of our Common Stock. Under this program, we may repurchase shares through various methods, including open market purchases, block trades, privately negotiated transactions and accelerated share repurchases, as well as pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Exchange Act, and otherwise in compliance with applicable laws. The timing and volume of repurchases will depend on market conditions, our capital management, investment opportunities, and other factors. The program does not obligate us to repurchase any specific number of shares, has no set expiration date, and may be modified, suspended, or discontinued at our discretion.

Current wording

On July 18, 2024, our Board of Directors authorized the repurchase of up to $100 million of our Common Stock. Under this program, we may repurchase shares through various methods, including open market purchases, block trades, privately negotiated transactions and accelerated share repurchases, as well as pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Exchange Act, and otherwise in compliance with applicable laws. The timing and volume of repurchases will depend on market conditions, our capital management, investment opportunities, and other factors. The program does not obligate us to repurchase any specific number of shares, has no set expiration date, and may be modified, suspended, or discontinued at our discretion. The Company repurchased 14,893,026 shares for approximately $23.8 million during the three months ended September 30, 2024.

Previous wording

Approximately 21.7% of our revenue for the six months ended June 30, 2024, was denominated in currencies other than the U.S. Dollar (USD). This compares to 34.4% for the same period in 2023. Our financial statements are reported in USD; therefore, fluctuations in exchange rates affect the translation of foreign-denominated revenue and expenses. During the second quarter of 2024 and the year ended December 31, 2023, our most significant currency exchange rate exposures were to the Euro and the Chilean Peso. Gross accumulated currency translation adjustments, recorded as a separate component of shareholders’ equity, totaled $43.3 million and $34.6 million at June 30, 2024 and December 31, 2023, respectively.

Current wording

Approximately 22.3% of our revenue for the nine months ended September 30, 2024, was denominated in currencies other than the U.S. Dollar (USD). This compares to 30.7% for the same period in 2023. Our financial statements are reported in USD; therefore, fluctuations in exchange rates affect the translation of foreign-denominated revenue and expenses. During the second quarter of 2024 and the year ended December 31, 2023, our most significant currency exchange rate exposures were to the Euro and the Chilean Peso. Gross accumulated currency translation adjustments, recorded as a separate component of shareholders’ equity, totaled $36.2 million and $34.6 million at September 30, 2024 and December 31, 2023, respectively.

Previous wording

Revenue. Revenue from services for the three months ended June 30, 2024 increased by approximately $2.3 million, an increase of 1.8% compared to the same period in 2023. This increase was primarily driven by higher clinical test reimbursement of $3.6 million, offset by a decrease in clinical test volume of $1.3 million.

Current wording

Revenue. Revenue from services for the three months ended September 30, 2024 decreased by approximately $10.4 million, a decrease of 7.9% compared to the same period in 2023. This decrease was primarily due to a $2.0 million reduction in clinical test reimbursement rates and an $8.4 million decrease in clinical test volume, of which $3.3 million was attributable to the BioReference Transaction.

Previous wording

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 three months ended June 30, 2024 and 2023, we recorded $1.4 million and $13.9 million, respectively, of negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods mainly due to the composition of client pay mix.

Current wording

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 three months ended September 30, 2024 and 2023, we recorded $0.7 million and $1.5 million, respectively. These adjustments reflect changes in estimated implicit price concessions for services provided in prior periods, primarily due to shifts in the composition of our client mix

Previous wording

Amortization of intangible assets. Amortization of intangible assets was $4.0 million and $5.1 million, respectively, for the three months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.

Current wording

Amortization of intangible assets. Amortization of intangible assets was $3.9 million and $5.1 million, respectively, for the three months ended September 30, 2024 and 2023. The decrease is primarily attributable to the BioReference Transaction, which impacted the amount of amortizable intangible assets.

Previous wording

*Revenue from transfer of intellectual property and other.*For the three months ended June 30, 2024, revenue from the transfer of intellectual property and other was $12.3 million compared to $94.9 million for the prior year period. This decrease was primarily due to a one-time milestone payment of $90.0 million received in the 2023 period triggered by FDA approval of NGENLA (Somatrogon). For the three months ended June 30, 2024, revenue from the transfer of intellectual property and other reflects $6.3 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's Genotropin® (Somatropin), compared with $3.8 million of such payments received in the same period in 2023. Furthermore, revenue for the three months ended June 30, 2024 included $5.0 million from the BARDA Contract (as defined and described in Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q (our “Quarterly Financials”)).

Current wording

*Revenue from transfer of intellectual property and other.*For the three months ended September 30, 2024, revenue from the transfer of intellectual property and other was $13.2 million compared to $6.3 million for the prior year period. This increase was primarily attributable to $5.5 million from the BARDA Contract (as defined and described in Note 14 to our Quarterly Financials). Gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's Genotropin® (Somatropin) also increased to $7.0 million, compared with $4.9 million for the same period in 2023.

Previous wording

Research and development expenses. Research and development expenses for the three months ended June 30, 2024 and 2023 were $23.7 million and $17.5 million, respectively, an increase of 35.0% from the prior year period. 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 premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

Current wording

Research and development expenses. Research and development expenses for the three months ended September 30, 2024 and 2023 were $28.2 million and $18.9 million, respectively, an increase of 49.6% from the prior year period. 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 premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

Previous wording

Contingent consideration. Contingent consideration for the three months ended June 30, 2024 was zero, as compared to $34.0 thousand reversal of expense for the three months ended June 30, 2024. Contingent consideration for the three months ended June 30, 2023 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 2013.

Current wording

Contingent consideration. Contingent consideration for the three months ended September 30, 2024 was zero, as compared to $1.1 million reversal of expense for the three months ended September 30, 2023. Contingent consideration for the three months ended September 30, 2023 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 2013.

Previous wording

Amortization of intangible assets. Amortization of intangible assets was $16.4 million and $16.5 million, respectively, for the three months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. 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. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

Current wording

Amortization of intangible assets. Amortization of intangible assets was $16.5 million and $16.5 million, respectively, for the three months ended September 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. 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. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

Previous wording

Operating loss for our unallocated corporate operations for the three months ended June 30, 2024 and 2023 was $10.3 million and $12.4 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations. The decrease in operating loss for our unallocated corporate operations was primarily due to a decrease in employee-related expenses.

Current wording

Operating loss for our unallocated corporate operations for the three months ended September 30, 2024 and 2023 was $12.1 million and $10.0 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations. The increase in operating loss for our unallocated corporate operations was primarily due to an increase in employee-related expenses.

Previous wording

Interest expense. Interest expense increased to $15.9 million for the six months ended June 30, 2024, compared to $6.7 million in the same period of 2023. This increase was primarily driven by $9.0 million of interest incurred on the 2029 Convertible Notes including interest incurred, amortization of deferred financing costs, and embedded derivatives, partially offset by the extinguishment of our outstanding 2023 Convertible Notes in connection with their exchange for 2029 Convertible Notes and the repurchase of approximately $144.4 million aggregate principal amount of the 2025 Notes with certain of the net proceeds from the issuance of the 2029 Convertible Notes.

Current wording

Interest expense. Interest expense increased to $17.4 million for the three months ended September 30, 2024, compared to $3.4 million in the same period of 2023. The increase in interest expense was primarily driven by $14.6 million interest incurred on the 2029 Convertible Notes and the 2044 Notes, including amortization of deferred financing and debt issuance costs. This increase was partially offset by the extinguishment of our outstanding 2023 Convertible Notes and the repurchase of the 2025 Convertible Notes.

Previous wording

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the three months ended June 30, 2024 and 2023, was $1.0 thousand and $142.0 thousand of expense, respectively. Derivative expense was principally related to the change in fair value on the 2029 Convertible Notes and on foreign currency forward exchange contracts at OPKO Chile.

Current wording

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the three months ended September 30, 2024 and 2023, was $1.0 thousand and $88.0 thousand of expense, respectively. Derivative expense was principally related to foreign currency forward exchange contracts at OPKO Chile.

Previous wording

Other income (expense), net. Other income (expense), net for the three months ended June 30, 2024, resulted in $58.9 million of income compared to $21.4 million of expense for the 2023 period. Other income (expense), net for the three months ended June 30, 2024 and 2023 included $60.5 million of income and $19.9 million of expense, respectively, as a result of the change in the fair value of our investment in GeneDx Holdings (as defined in Note 6 to our Quarterly Financials). Furthermore, a foreign currency loss of $1.3 million was recorded for the 2024 period, compared with a $0.9 million of income in the 2023 period.

Current wording

Other income (expense), net. Other income (expense), net for the three months ended September 30, 2024, resulted in $48.6 million of income compared to $11.7 million of expense for the 2023 period. This was primarily driven by changes in the fair value of our investment in GeneDx Holdings (as defined in Note 6 to our Quarterly Financials). During the three months ended September 30, 2024, we recorded income of $35.4 million related to this investment, compared to an expense of $8.3 million in the prior-year period. Additionally, we realized a gain of $10.5 million from the sale of 1,386,929 shares of GeneDx during the three months ended September 30, 2024. Foreign currency income of $4.1 million was recorded for the 2024 period, compared with a $3.8 million expense in the 2023 period.

Previous wording

Income tax (benefit) provision. Our income tax (benefit) provision for the three months ended June 30, 2024 and 2023 was a $0.3 million benefit and a $3.2 million provision, respectively. For the three months ended June 30, 2024 and 2023, 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 and operating results in tax jurisdictions which do not result in a tax benefit.

Current wording

Income tax provision. Our income tax provision for the three months ended September 30, 2024 and 2023 was $23.5 million and $6.1 million, respectively. This significant increase was primarily driven by a discrete expense related to the BioReference Transaction. While the U.S. federal statutory rate is 21%, our effective tax rate for the three months ended September 30, 2024 and 2023 differed from this rate primarily due to the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions and operating results in tax jurisdictions which do not result in a tax benefit.

Previous wording

Loss from investments in investees. We have invested in certain early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as an equityholder. 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 net losses. Loss from investments in investees was $3.0 thousand and $79.0 thousand for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Loss from investments in investees. We have invested in certain early-stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as an equity holder. 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 net losses Loss from investments in investees was $3.0 thousand and $20.0 thousand for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Our consolidated loss from operations for the six months ended June 30, 2024 and 2023 was as follows:

Current wording

Our consolidated loss from operations for the nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Revenue. Revenue from services for the six months ended June 30, 2024 decreased by approximately $3.1 million, a decrease of 1.2% compared to the six months ended June 30, 2023. This decrease reflects the combined impact of changes in clinical test reimbursement rates, volumes, and mix.

Current wording

Revenue. Revenue from services for the nine months ended September 30, 2024 decreased by approximately $13.5 million, a decrease of 3.5% compared to the nine months ended September 30, 2023. This decrease was primarily due to a $6.5 million reduction in clinical test reimbursement rates and an $7.0 million decrease in clinical test volume, of which $3.3 million was attributable to the BioReference Transaction.

Previous wording

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 six months ended June 30, 2024 and 2023, we recorded $0.9 million and $18.7 million, respectively, of negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods mainly due to the composition of patient pay mix.

Current wording

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 nine months ended September 30, 2024 and 2023, we recorded $2.2 million and $19.8 million, respectively, of negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods mainly due to the composition of patient pay mix.

Previous wording

The composition of revenue from services by payor for the six months ended June 30, 2024 and 2023 was as follows:

Current wording

The composition of revenue from services by payor for the nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Cost of revenue. Cost of revenue for the three months ended June 30, 2024 decreased $6.0 million, a decrease of 5.3% compared to the three months ended June 30, 2023. Cost of revenue decreased primarily due to a decrease in employee headcount, reflecting our continued cost-reduction initiatives implemented at BioReference, in addition to changes in the mix of testing ordered during the period.

Current wording

Cost of revenue. Cost of revenue for the nine months ended September 30, 2024 decreased $7.7 million, a decrease of 2.3% compared to the nine months ended September 30, 2023. Cost of revenue decreased primarily due to lower employee headcount, reflecting our continued cost-reduction initiatives implemented at BioReference, changes in the mix of testing ordered during the period, and by a decrease in consumption reflecting the timing of the BioReference Transaction.

Previous wording

The decrease in research and development expenses for the six months ended June 30, 2024 was primarily due to a decrease in employee-related expenses as a result of the continued cost-reduction initiatives implemented at BioReference.

Current wording

The decrease in research and development expenses for the nine months ended September 30, 2024 was primarily due to a decrease in employee-related expenses as a result of the continued cost-reduction initiatives implemented at BioReference.

Previous wording

Revenue from products. Revenue from products for six months ended June 30, 2024 decreased $5.4 million or 6.4%, compared to the six months ended June 30, 2023. This decline was primarily due to foreign exchange fluctuations of approximately $4.5 million and by decreasing sales from our international operations. Additionally, revenue from sales ofRayaldee for the six months ended June 30, 2024, was $14.1 million compared to the $14.4 million recorded in the same period in 2023.

Current wording

Revenue from products. Revenue from products for nine months ended September 30, 2024 decreased $6.9 million or 5.5%, compared to the nine months ended September 30, 2023. While we experienced higher sales volumes in 2024 compared to 2023, this increase was more than offset by unfavorable foreign exchange fluctuations of approximately $6.7 million from our international operations, resulting in an overall decrease in revenue. Additionally, revenue from sales ofRayaldee for the nine months ended September 30, 2024, was $19.9 million compared to $21.7 million recorded in the same period in 2023.

Previous wording

Revenue from transfer of intellectual property and other.For the six months ended June 30, 2024, revenue from the transfer of intellectual property and other was $21.1 million compared to $159.7 million for the prior period. This decrease was primarily due to one-time milestone payments received in 2023, including a $90.0 million payment triggered by the FDA approval of NGENLA (Somatrogon), a $50.0 million payment from Merck for rights granted under the Merck Agreement (as defined and described in Note 14 to our Quarterly Financials), a $7.0 million payment from VFMCRP triggered by the German price approval forRayaldee (as described in Note 14 to our Quarterly Financials) and a $2.5 million payment from Nicoya due to Nicoya’s submission of the investigational new drug application to China's Center for Drug Evaluation pursuant to the Nicoya Agreement (as described in Note 14 to our Quarterly Financials). For the six months ended June 30, 2024, revenue from the transfer of intellectual property and other reflects $11.9 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's Genotropin® (Somatropin), compared with $6.9 million received in the same period in 2023. Furthermore, revenue for the six months ended June 30, 2024 included $7.2 million from the BARDA Contract (as defined and described in Note 14 to our Quarterly Financials).

Current wording

Revenue from transfer of intellectual property and other.For the nine months ended September 30, 2024, revenue from the transfer of intellectual property and other was $34.3 million compared to $165.9 million for the prior period. This decrease was primarily due to one-time milestone payments received in 2023, including a $90.0 million payment triggered by the FDA approval of NGENLA (Somatrogon), a $50.0 million payment from Merck for rights granted under the Merck Agreement (as defined and described in Note 14 to our Quarterly Financials), a $7.0 million payment from VFMCRP triggered by the German price approval forRayaldee (as described in Note 14 to our Quarterly Financials) and a $2.5 million payment from Nicoya due to Nicoya’s submission of the investigational new drug application to China's Center for Drug Evaluation pursuant to the Nicoya Agreement (as described in Note 14 to our Quarterly Financials). For the nine months ended September 30, 2024, revenue from the transfer of intellectual property and other reflects $18.9 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's Genotropin® (Somatropin), compared with $11.8 million received in the same period in 2023. Furthermore, revenue for the nine months ended September 30, 2024 included $12.8 million from the BARDA Contract (as defined and described in Note 14 to our Quarterly Financials).

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023 were $29.1 million and $28.4 million, respectively, an increase of 2.5% from the prior year period. The increase in selling, general and administrative expenses was due to higher employee-related and professional expenses related to our international operations.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months ended September 30, 2024 and 2023 were $44.3 million and $41.9 million, respectively, an increase of 5.7% from the prior year period. The increase in selling, general and administrative expenses was due to higher employee-related and professional expenses related to our international operations.

Previous wording

Research and development expenses. Research and development expenses for the six months ended June 30, 2024 and 2023 were $44.9 million and $49.4 million, respectively, a decrease of 9.1% from the prior year period. 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 premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

Current wording

Research and development expenses. Research and development expenses for the nine months ended September 30, 2024 and 2023 were $73.2 million and $68.3 million, respectively, an increase of 7.1% from the prior year period. 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 premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

Previous wording

Research and development expenses for the six months ended June 30, 2024, decreased primarily due to a one-time payment to Sanofi of $12.5 million pursuant to the Sanofi In-License Agreement, which was made in 2023 as a result of the Merck Agreement. Costs related to Somatrogon (hGH-CTP) decreased following the closure of open-label extension studies in countries where it has received marketing authorization. This decrease was partially offset by increased BARDA spending of $7.2 million of increased BARDA spending and higher employee related expenses during the 2024 period.

Current wording

Research and development expenses for the nine months ended September 30, 2024, increased primarily to growth in our BARDA collaboration and higher employee-related expenses. These increases were partially offset by a one-time payment to Sanofi of $12.5 million made in 2023 pursuant to the Sanofi In-License Agreement, which was triggered as a result of the Merck Agreement, and lower costs related to Somatrogon (hGH-CTP) following the closure of open-label extension studies in countries where it has received marketing authorization.

Previous wording

Contingent consideration. Contingent consideration for the six months ended June 30, 2024 was zero, as compared to a $0.1 million reversal of expense for the six months ended June 30, 2024. Contingent consideration for the six months ended June 30, 2023 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 2013.

Current wording

Contingent consideration. Contingent consideration for the nine months ended September 30, 2024 was zero, as compared to a $1.0 million reversal of expense for the nine months ended September 30, 2023. Contingent consideration for the nine months ended September 30, 2023 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 2013.

Previous wording

Amortization of intangible assets. Amortization of intangible assets was $32.9 million for both for the six months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. 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. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

Current wording

Amortization of intangible assets. Amortization of intangible assets was $49.4 million for both for the nine months ended September 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. 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. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

Previous wording

Operating loss for our unallocated corporate operations for the six months ended June 30, 2024 and 2023 was $19.7 million and $21.9 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations. The decrease in operating loss for our unallocated corporate operations was primarily due to a decrease in employee-related expenses.

Current wording

Operating loss for our unallocated corporate operations for the nine months ended September 30, 2024 and 2023 was $31.8 million and $31.8 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations.

Previous wording

Interest expense. Interest expense increased to $8.2 million for the three months ended June 30, 2024, compared to $3.3 million in the same period of 2023. This increase was primarily driven by $4.7 million of interest incurred on the 2029 Convertible Notes (as defined below), including interest incurred and amortization of deferred financing costs, partially offset by the extinguishment of our outstanding 2023 Convertible Notes in connection with their exchange for 2029 Convertible Notes and the repurchase of approximately $144.4 million aggregate principal amount of the 2025 Notes a portion of the net proceeds from the issuance of the 2029 Convertible Notes.

Current wording

Interest expense. Interest expense increased to $33.2 million for the nine months ended September 30, 2024, compared to $10.1 million in the same period of 2023. The increase was primarily driven by interest incurred on the 2029 Convertible Notes and the 2044 Senior Secured Notes, including amortization of deferred financing and debt issuance costs. This increase was partially offset by the extinguishment of our outstanding 2023 Convertible Notes in connection with their exchange for 2029 Convertible Notes and the repurchase of a portion of the 2025 Convertible Notes.

Previous wording

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the six months ended June 30, 2024 and 2023, was $26.2 million and $0.9 million of expense, respectively. Derivative expense was principally related to the change in fair value on the 2029 Convertible Notes and on foreign currency forward exchange contracts at OPKO Chile.

Current wording

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the nine months ended September 30, 2024 and 2023, was $26.2 million and $0.8 million of expense, respectively. Derivative expense was principally related to the change in fair value on the 2029 Convertible Notes and on foreign currency forward exchange contracts at OPKO Chile.

Previous wording

Other income (expense), net. Other income (expense), net for the six months ended June 30, 2024, resulted in $80.2 million of income, compared to $4.4 million of expense for the 2023 period. Other income (expense), net for the six months ended June 30, 2024 and 2023, included $83.2 million of income and $11.6 million of expense, respectively, as a result of the change in the fair value of our investment in GeneDx Holdings (as defined in Note 6 to our Quarterly Financials). Furthermore, the six months ended June 30, 2023, reflected an $8.5 million of income due to GeneDx Holdings reaching specific revenue targets for the fiscal year ending December 31, 2022. Finally, a foreign currency loss of $4.0 million was recorded for the 2024 period, compared with a $2.0 million gain in the 2023 period.

Current wording

Other income (expense), net. Other income (expense), net for the nine months ended September 30, 2024, was $128.8 million of income, compared to $16.1 million of expense for the 2023 period. Other income (expense), net for the nine months ended September 30, 2024 and 2023, included $118.6 million of income and $19.9 million of expense, respectively, as a result of the change in the fair value of our investment in GeneDx Holdings (as defined in Note 6 to our Quarterly Financials). Furthermore, the nine months ended September 30, 2023, reflected $8.5 million of income due to GeneDx Holdings reaching specific revenue targets for the fiscal year ending December 31, 2022. Finally, a foreign currency gain of $0.1 million was recorded for the 2024 period, compared with a $1.8 million loss in the 2023 period.

Previous wording

Income tax (benefit) provision. Our income tax (benefit) provision for the six months ended June 30, 2024 and 2023 was a $1.6 million benefit and $4.4 million provision, respectively. For the six months ended June 30, 2024 and 2023, 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 the payments under Merck Agreement, and operating results in tax jurisdictions which do not result in a tax benefit.

Current wording

Income tax provision. Our income tax provision for the nine months ended September 30, 2024 and 2023 was a $21.9 million and $10.5 million, respectively. For the nine months ended September 30, 2024 and 2023, 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, a discrete expense impact related to the BioReference Transaction, the impact of the payments under Merck Agreement, and operating results in tax jurisdictions which do not result in a tax benefit.

Previous wording

Loss from investments in investees. We have invested in certain early-stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as an equityholder. 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 net losses Loss from investments in investees was $1.0 thousand and $42.0 thousand for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Loss from investments in investees. We have invested in certain early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as an equityholder. 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 net losses. Loss from investments in investees was $7.0 thousand and $99.0 thousand for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

On June 30, 2024, we had cash and cash equivalents of approximately $40.6 million. Cash used in operations of $62.0 million for the six months ended June 30, 2024 principally reflected general and administrative expenses related to our corporate operations, research and development activities, partially offset by the change in fair value of our equity securities. Cash used in investing activities of $11.6 million for the six months ended June 30, 2024 primarily reflected capital expenditures. Cash provided by financing activities for the six months ended June 30, 2024 of $18.5 million primarily reflected net borrowings on our lines of credit, the issuance of our 2029 Convertible Notes, the redemption of the 2025 Notes, and repurchase of shares of our Common Stock. We have historically 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 and debt, as well as credit facilities available to us.

Current wording

On September 30, 2024, we had cash, cash equivalents and restricted cash of approximately $420.1 million. Cash used in operations of $139.1 million for the nine months ended September 30, 2024 was primarily driven by a $121.5 million gain on the sale of assets related to the BioReference Transaction and $94.6 million change in fair value from equity securities. We also incurred general and administrative expenses related to our corporate operations and research and development activities. Cash from investing activities was $236.2 million for the nine months ended September 30, 2024 primarily reflected both the proceeds from the BioReference Transaction and the sale of equity securities, offset by capital expenditures. Cash provided by financing activities for the nine months ended September 30, 2024 of $224.6 million primarily reflected net borrowings on our lines of credit, the issuance of our 2029 Convertible Notes, the issuance of the 2044 Notes, the redemption of the 2025 Notes, and repurchase of shares of our Common Stock. We have historically 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 and debt, as well as credit facilities available to us.

Previous wording

On March 27, 2024, Labcorp entered into a definitive agreement with us (the “Labcorp Asset Purchase Agreement”) to acquire select assets of BioReference (the “BioReference Transaction”). The assets contemplated by the BioReference Transaction include BioReference's laboratory testing businesses focused on clinical diagnostics, reproductive health, and women's health across the United States, excluding New York and New Jersey operations. These assets include patient service centers, specific customer contracts, and operating assets. The purchase price for the BioReference Transaction is $237.5 million. The BioReference Transaction remains subject to customary closing conditions, including applicable regulatory approvals. The Company anticipates closing the BioReference Transaction in the third quarter of 2024.

Current wording

On September 16, 2024, the Company consummated the BioReference Transaction, pursuant to which Labcorp acquired select assets of the Company's subsidiary, BioReference. Labcorp paid to the Company aggregate consideration of $237.5 million in cash, subject to certain adjustments as set forth in the Labcorp Asset Purchase Agreement. The assets acquired by Labcorp include BioReference's laboratory testing businesses focused on clinical diagnostics, reproductive health, and women's health across the United States, excluding New York and New Jersey operations.

Previous wording

On July 18, 2024, our Board of Directors authorized the repurchase of up to $100 million of our Common Stock. Under this program, we may repurchase shares through various methods, including open market purchases, block trades, privately negotiated transactions and accelerated share repurchases, as well as pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Exchange Act, and otherwise in compliance with applicable laws. The timing and volume of repurchases will depend on market conditions, our capital management, investment opportunities, and other factors. The program does not obligate us to repurchase any specific number of shares, has no set expiration date, and may be modified, suspended, or discontinued at our discretion.

Current wording

On July 18, 2024, our Board of Directors authorized the repurchase of up to $100 million of our Common Stock. Under this program, we may repurchase shares through various methods, including open market purchases, block trades, privately negotiated transactions and accelerated share repurchases, as well as pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Exchange Act, and otherwise in compliance with applicable laws. The timing and volume of repurchases will depend on market conditions, our capital management, investment opportunities, and other factors. The program does not obligate us to repurchase any specific number of shares, has no set expiration date, and may be modified, suspended, or discontinued at our discretion. In connection with this new authorization, the Company repurchased 14,893,026 shares for $23.8 million during the three months ended September 30, 2024.