Opko has dropped approximately 25% since its recent quarterly report issued last Wednesday after it missed estimates on both revenue and earnings. In addition to the continued disappointing sales in the company’s FDA-approved product Rayaldee, the diagnostics division also saw a significant drop in revenue. We believe the recent quarter is merely the beginning of a series of continuing problems at the company.

The President of OPKO’s key BioReference division (82.8% of 2016 revenue) resigned, and no new successor was named. We believe this to be a strong negative omen. A recent lawsuit filed against BioReference alleges violations of law, including forgery, releasing unverified test results, and falsification of employee training and competency documents. A pattern of lawsuits emerges naming BioReference in four New York insurance fraud cases. OPKO’s recently FDA approved Varubi (licensed to TESARO) recently updated its risk factors to include major side effects, potentially inhibiting yet another cash flow stream. With tangible book value of only about $10.5 million (i.e.: 2 cents per share) and with very few bright spots to point to, we see significant further downside for OPKO.

Opko’s stock is now halted following SEC charges alleging fraud by both the company and its Chairman & CEO Phil Frost. The company put out a rather impotent statement Friday evening claiming the SEC complaint “contains serious factual inaccuracies” without identifying a single factual inaccuracy. We anticipate that criminal charges could follow given the reported FBI investigation that parallels the SEC charges. Frost is Opko’s key leader, key lender, and its largest holder with over 30% of the equity, leaving the company in a perilous position. Opko’s business was already in tatters. It is bleeding cash, has negative tangible equity, and a weak pipeline. We do not see a bottom for this stock. Price target zero.