˹

Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 3, 2023

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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q


(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023.

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 001-33528


˹.

(Exact Name of Registrant as Specified in Its Charter)


Delaware

75-2402409

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

4400 Biscayne Blvd.

Miami FL 33137

(Address of Principal Executive Offices) (Zip Code)

(305) 575-4100

(Registrants Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

OPK

NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90days.☒Yes☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).☒Yes☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act:

Large accelerated filer

x

Acceleratedfiler

Non-accelerated filer

Smallerreportingcompany

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act):Yes☒No

As of July 27, 2023, the registrant had 773,056,533 shares of Common Stock outstanding.



TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Page

Item1.

Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (unaudited)

7

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited)

8

Condensed Consolidated Statements of Comprehensive loss for the three and six months ended June 30, 2023 and 2022 (unaudited)

9

Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)

10

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)

12

Notes to Condensed Consolidated Financial Statements (unaudited)

13

Item2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

47

Item3.

Quantitative and Qualitative Disclosures About Market Risk

62

Item4.

Controls and Procedures

63

PART II. OTHER INFORMATION

Item1.

Legal Proceedings

64

Item1A.

Risk Factors

64

Item2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

Item3.

Defaults Upon Senior Securities

64

Item4.

Mine Safety Disclosures

65

Item5.

Other Information

65

Item6.

Exhibits

65

Signatures

66

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects, operating results, cash flows and/or financial condition. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described below and in “Item 1A-Risk Factors” of our Annual Report on Form 10-K for the year ended December31, 2022, and described from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). We do not undertake any obligation to update forward-looking statements, except to the extent required by applicable law. We intend that all forward-looking statements be subject to the safe-harbor provisions of the 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.

Risks and uncertainties, the occurrence of which could adversely affect our business, include the following:

we have had a history of losses and may not generate sustained positive cash flow sufficient to fund our operations and research and development programs;

our need for, and ability to obtain, additional financing when needed on favorable terms, or at all;

adverse results in material litigation matters or governmental inquiries;

the risks inherent in developing, obtaining regulatory approvals for and commercializing new, commercially viable and competitive products and treatments;

our research and development activities may not result in commercially viable products;

that earlier clinical results of effectiveness and safety may not be reproducible or indicative of future results;

that we may fail tosuccessfully commercialize Somatrogon (hGH-CTP);

that we may not generate or sustain profits or cash flow from our laboratory operations or substantial revenue fromSomatrogon (hGH-CTP),Rayaldee and our other pharmaceutical and diagnostic products;

our ability to manage our growth and our expanded operations;

that our acquisition of ModeX Therapeutics, Inc. will be successful and the products in the R&D pipeline will ultimately be commercialized;

that currently available over-the-counter and prescription products, as well as products under development by others, may prove to be as or more effective than our products for the indications being studied;

our ability and our distribution and marketing partners’ ability to comply with regulatory requirements regarding the sales, marketing and manufacturing of our products and product candidates and the operation of our laboratories;

the performance of our third-party distribution partners, licensees and manufacturers over which we have limited control;

changes in regulation and policies in the U.S. and other countries, including increasing downward pressure on healthcare reimbursement;

increased competition, including price competition;

our success is dependent on the involvement and continued efforts of our Chairman and Chief Executive Officer;

integration challenges for acquired business;

changing relationships with payors, including the various state and multi-state programs, suppliers and strategic partners;

efforts by third-party payors to reduce utilization and reimbursement for clinical testing services;

our ability to maintain reimbursement coverage for our products and services, including Rayaldee and the 4Kscore test;

failure to timely or accurately bill and collect for our services;

the information technology systems that we rely on may be subject to unauthorized tampering, cyberattack or other data security or privacy incidents that could impact our billing processes or disrupt our operations;

failure to obtain and retain new clients and business partners, or a reduction in tests ordered or specimens submitted by existing clients;

failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services;

failure to maintain the security of patient-related information;

our ability to obtain and maintain intellectual property protection for our products;

our ability to defend our intellectual property rights with respect to our products;

our ability to operate our business without infringing the intellectual property rights of others;

our ability to attract and retain key scientific and management personnel;

the risk that the carrying value of certain assets may exceed the fair value of the assets causing us to impair goodwill or other intangible assets;

our ability to comply with the terms of our 2022 Corporate Integrity Agreement with the U.S. Office of Inspector General of the Department of Health and Human Services;

failure to obtain and maintain regulatory approval outside the U.S.; and

legal, economic, political, regulatory, currency exchange, and other risks associated with international operations.

PART I. FINANCIAL INFORMATION

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the “Company”, “OPKO”, “we”, “our”, “ours”, and “us” refer to ˹., a Delaware corporation, including our consolidated subsidiaries.

Item 1. Financial Statements

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

˹. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

June 30, 2023

December 31, 2022

ASSETS

Current assets:

Cash and cash equivalents

$ 108,108 $ 153,191

Accounts receivable, net

210,982 127,312

Inventory, net

73,749 74,060

Other current assets and prepaid expenses

40,950 39,962

Total current assets

433,789 394,525

Property, plant and equipment, net

78,876 82,879

Intangible assets, net

782,195 823,520

In-process research and development

195,000 195,000

Goodwill

597,375 595,851

Investments

27,783 28,080

Operating lease right-of-use assets

34,938 38,725

Other assets

8,943 8,679

Total assets

$ 2,158,899 $ 2,167,259

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$ 87,877 $ 66,993

Accrued expenses

98,604 98,269

Current maturities of operating leases

11,240 11,628

Current portion of convertible notes

3,050

Current portion of lines of credit and notes payable

28,729 33,540

Total current liabilities

226,450 213,480

Operating lease liabilities

24,912 27,963

Long term portion of convertible notes

212,299 210,371

Deferred tax liabilities

133,049 126,426

Other long-term liabilities, principally contract liabilities, contingent consideration and lines of credit

26,841 27,371

Total long-term liabilities

397,101 392,131

Total liabilities

623,551 605,611

Equity:

Common Stock - $0.01 par value, 1,000,000,000 shares authorized; 781,693,135 and 781,306,164 shares issued at June 30, 2023 and December 31, 2022, respectively

7,817 7,813

Treasury Stock - 8,655,082 shares at June 30, 2023 and December 31, 2022, respectively

(1,791 ) (1,791 )

Additional paid-in capital

3,427,094 3,421,872

Accumulated other comprehensive loss

(36,942 ) (43,323 )

Accumulated deficit

(1,860,830 ) (1,822,923 )

Total shareholders’ equity

1,535,348 1,561,648

Total liabilities and equity

$ 2,158,899 $ 2,167,259

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

˹. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

For the three months ended June 30,

For the six months ended June 30,

2023

2022

2023

2022

Revenues:

Revenue from services

$ 127,052 $ 186,804 $ 259,420 $ 473,402

Revenue from products

43,500 35,892 83,883 72,550

Revenue from transfer of intellectual property and other

94,866 87,197 159,692 93,159

Total revenues

265,418 309,893 502,995 639,111

Costs and expenses:

Cost of service revenue

113,028 171,836 227,087 393,040

Cost of product revenue

25,911 22,475 50,166 45,147

Selling, general and administrative

79,794 101,464 155,436 219,000

Research and development

18,159 17,254 50,764 35,566

Contingent consideration

(34 ) 175 102 69

Amortization of intangible assets

21,535 22,793 43,009 44,818

Gain on sale of assets

(15,365 ) (15,365 )

Total costs and expenses

258,393 320,632 526,564 722,275

Operating income (loss)

7,025 (10,739 ) (23,569 ) (83,164 )

Other income and (expense), net:

Interest income

1,077 161 2,107 171

Interest expense

(3,277 ) (3,075 ) (6,668 ) (5,737 )

Fair value changes of derivative instruments, net

142 338 (917 ) 206

Other income (expense), net

(21,417 ) (72,997 ) (4,400 ) (74,439 )

Other income (expense), net

(23,475 ) (75,573 ) (9,878 ) (79,799 )

Loss before income taxes and investment losses

(16,450 ) (86,312 ) (33,447 ) (162,963 )

Income tax benefit (provision)

(3,148 ) (15,070 ) (4,381 ) 6,196

Net loss before investment losses

(19,598 ) (101,382 ) (37,828 ) (156,767 )

Loss from investments in investees

(42 ) (268 ) (79 ) (316 )

Net loss

$ (19,640 ) $ (101,650 ) $ (37,907 ) $ (157,083 )

Loss per share, basic and diluted:

Loss per share

$ (0.03 ) $ (0.14 ) $ (0.05 ) $ (0.23 )

Weighted average common shares outstanding, basic and diluted

751,727,383 712,548,661 751,617,431 686,597,899

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

˹. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

For the three months ended June 30,

For the six months ended June 30,

2023

2022

2023

2022

Net loss

$ (19,640 ) $ (101,650 ) $ (37,907 ) $ (157,083 )

Other comprehensive income (loss), net of tax:

Change in foreign currency translation and other comprehensive income (loss)

670 (17,756 ) 6,381 (18,676 )

Comprehensive loss

$ (18,970 ) $ (119,406 ) $ (31,526 ) $ (175,759 )

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)

For the three and six months ended June 30, 2023

Accumulated

Additional

Other

Common Stock

Treasury

Paid-In

Comprehensive

Accumulated

Shares

Dollars

Shares

Dollars

Capital

Loss

Deficit

Total

Balance at March 31, 2023

781,306,164 $ 7,813 (8,655,082 ) $ (1,791 ) $ 3,424,589 $ (37,611 ) $ (1,841,190 ) $ 1,551,810

Equity-based compensation expense

2,810 2,810

Exercise of common stock options and warrants

386,971 4 (305 ) (301 )

Net loss

(19,640 ) (19,640 )

Other comprehensive income

669 669

Balance at June 30, 2023

781,693,135 $ 7,817 (8,655,082 ) $ (1,791 ) $ 3,427,094 $ (36,942 ) $ (1,860,830 ) $ 1,535,348

Accumulated

Additional

Other

Common Stock

Treasury

Paid-In

Comprehensive

Accumulated

Shares

Dollars

Shares

Dollars

Capital

Loss

Deficit

Total

Balance at December 31, 2022

781,306,164 $ 7,813 (8,655,082 ) $ (1,791 ) $ 3,421,872 $ (43,323 ) $ (1,822,923 ) $ 1,561,648

Equity-based compensation expense

5,527 5,527

Exercise of common stock options and warrants

386,971 4 (305 ) (301 )

Net loss

(37,907 ) (37,907 )

Other comprehensive income

6,381 6,381

Balance at June 30, 2023

781,693,135 $ 7,817 (8,655,082 ) $ (1,791 ) $ 3,427,094 $ (36,942 ) $ (1,860,830 ) $ 1,535,348

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)

For the three and six months ended June 30, 2022

Accumulated

Additional

Other

Common Stock

Treasury

Paid-In

Comprehensive

Accumulated

Shares

Dollars

Shares

Dollars

Capital

Loss

Deficit

Total

Balance at March 31, 2022

690,138,033 $ 6,901 (8,655,082 ) $ (1,791 ) $ 3,191,139 $ (31,415 ) $ (1,549,951 ) $ 1,614,883

Equity-based compensation expense

4,308 4,308

Exercise of common stock options and warrants

546,337 6 (366 ) (360 )

ModeX Acquisition

89,907,311 899 218,475 219,374

Net loss

(101,650 ) (101,650 )

Other comprehensive loss

(17,756 ) (17,756 )

Balance at June 30, 2022

780,591,681 $ 7,806 (8,655,082 ) $ (1,791 ) $ 3,413,556 $ (49,171 ) $ (1,651,601 ) $ 1,718,799

Accumulated

Additional

Other

Common Stock

Treasury

Paid-In

Comprehensive

Accumulated

Shares

Dollars

Shares

Dollars

Capital

Loss

Deficit

Total

Balance at December 31, 2021

690,082,283 $ 6,901 (8,655,082 ) $ (1,791 ) $ 3,222,487 $ (30,495 ) $ (1,511,976 ) $ 1,685,126

Equity-based compensation expense

11,925 11,925

Exercise of common stock options and warrants

602,087 6 (231 ) (225 )

Adoption of ASU 2020-06

(39,100 ) 17,458 (21,642 )

ModeX Acquisition

89,907,311 899 218,475 219,374

Net loss

(157,083 ) (157,083 )

Other comprehensive loss

(18,676 ) (18,676 )

Balance at June 30, 2022

780,591,681 $ 7,806 (8,655,082 ) $ (1,791 ) $ 3,413,556 $ (49,171 ) $ (1,651,601 ) $ 1,718,799

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

˹. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

For the six months ended June 30,

2023

2022

Cash flows from operating activities:

Net loss

$ (37,907 ) $ (157,083 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

52,993 55,809

Non-cash interest

1,364 1,364

Amortization of deferred financing costs

598 569

Losses from investments in investees

79 316

Equity-based compensation – employees and non-employees

5,527 11,925

Realized loss on disposal of fixed assets and sales of equity securities

2,075 (477 )

Change in fair value of equity securities and derivative instruments

6,146 73,724

Change in fair value of contingent consideration

102 69

Gain on sale of GeneDx

(15,365 )

Deferred income tax benefit

1,753 (8,942 )

Changes in assets and liabilities:

Accounts receivable, net

(81,822 ) 95,864

Inventory, net

2,749 2,864

Other current assets and prepaid expenses

1,279 (6,502 )

Other assets

(1,915 ) (260 )

Accounts payable

20,210 (19,508 )

Foreign currency measurement

(1,318 ) 4,295

Contract liabilities

2 (17 )

Accrued expenses and other liabilities

5,073 (69,978 )

Net cash used in operating activities

(23,012 ) (31,333 )

Cash flows from investing activities:

Investments in investees

(5,000 )

Proceeds from sale of GeneDx

115,423

Acquisition of businesses, net of cash

(2,071 )

Proceeds from the sale of property, plant and equipment

842 870

Capital expenditures

(9,050 ) (10,630 )

Net cash provided by (used in) investing activities

(13,208 ) 103,592

Cash flows from financing activities:

Issuance of common stock

1

Proceeds from the exercise of common stock options

(301 ) (225 )

Borrowings on lines of credit

341,850 684,467

Repayments of lines of credit

(348,206 ) (679,860 )

Redemption of 2033 Senior Notes

(3,000 )

Net cash provided by (used in) financing activities

(9,657 ) 4,383

Effect of exchange rate changes on cash and cash equivalents

794 (894 )

Net increase (decrease) in cash and cash equivalents

(45,083 ) 75,748

Cash and cash equivalents at beginning of period

153,191 134,710

Cash and cash equivalents at end of period

$ 108,108 $ 210,458

SUPPLEMENTAL INFORMATION:

Interest paid

$ 4,204 $ 3,554

Income taxes paid, net of refunds

$ 685 $ 4,647

Assets acquired by finance leases

$ 181 $

Non-cash financing:

Shares issued upon the conversion of:

Common stock options and warrants, surrendered in net exercise

$ 301 $ 655

Issuance of common stock for acquisition of ModeX

$ $ 219,374

Fair value of shares included in consideration from GeneDx Holdings

$ 6,689 $ 172,000

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

˹. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 BUSINESS AND ORGANIZATION

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 Health, LLC (“BioReference”), one of the nation’s largest full service laboratories with a 180-person sales and marketing team to drive growth and leverage new products, and we offer our 4Kscore prostate cancer test through BioReference. 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, and Somatrogon (hGH-CTP), a once-weekly human growth hormone injection for which we completed a successful phase 3 study in August 2019 and partnered with Pfizer Inc. (“Pfizer”) with respect to Somatrogon (hGH-CTP)’s further development. Regulatory applications for Somatrogon (hGH-CTP) have been submitted to the applicable regulatory bodies for review in several countries around the world. In June 2023, the FDA approved NGENLA (Somatrogon) to treat children and adolescents from as young as three years of age with growth disturbance due to insufficient secretion of growth hormone. In February 2022, the European Commission granted marketing authorization in the European Union for Somatrogon (hGH-CTP)under the brand name NGENLA® and has been granted pricing approval in Germany. NGENLA® has been approved in more than 40 markets including the United States, EU Member States, Japan, Canada, and Australia. In May 2022, we acquired ModeX Therapeutics, Inc. (“ModeX”), a biotechnology company focused on developing innovative multi-specific immune therapies for cancer and infectious diseasecandidates. ModeX has a robust early-stage pipeline with assets in key areas of immuno-oncology and infectious diseases, and we intend to further expand our pharmaceutical product pipeline through ModeX’s portfolio of development candidates.

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 disease, serology, hormones, and toxicology assays, as well as Pap smear, anatomic pathology (biopsies) and other types of tissue analysis, as well as testing for COVID-19. We market our laboratory testing services directly to physicians, geneticists, hospitals, clinics, correctional and other health facilities.

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. 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 research and development activities are primarily performed at facilities in Natick, Massachusetts, Waterford, Ireland, Kiryat Gat, Israel, and Barcelona, Spain.

On May 9, 2022 (the “Closing Date”), the Company entered into an Agreement and Plan of Merger (the “ModeX Merger Agreement”), in accordance with which we acquired ModeX pursuant to a merger (the "ModeX Merger") in which ModeX survived as a wholly owned subsidiary of the Company. The Company paid the entirety of the $300.0million purchase price pursuant to the issuance of an aggregate of 89,907,310 shares (the “Consideration Shares”) of the Company’s common stock, par value $0.01 per share (“Common Stock”), to the former stockholders of ModeX (the “Selling Stockholders”), of which 10% of such shares were deposited in a twelve-month escrow for purposes of satisfying the potential indemnity obligations of the Selling Stockholders under the ModeX Merger Agreement. Additionally, the Company issued equity awards to ModeX employees in an amount equal to $12.4million, which was deducted from the consideration payable on the Closing Date. If any of such awards are forfeited or otherwise remain unvested on the four-year anniversary of the Closing Date, Common Stock equal to $2.6million (valued at the same price used for determining the number of Consideration Shares issuable upon consummation of the ModeX Merger) may be distributed pro rata to ModeX’s former stockholders in respect of such forfeited or unvested awards. Shares of Common Stock with respect to such potential distribution have been escrowed and will remain escrowed for such four-year period. For accounting purposes, the shares were valued at $221.7million, based on the closing price per share of our Common Stock of $2.44 as reported by NASDAQ Global Select Market (“NASDAQ”) on the Closing Date. Included in the total fair value of consideration transferred of $221.7million were $2.3million of fully vested equity awards.

13

On January 14, 2022, the Company entered into an Agreement and Plan of Merger and Reorganization (the “GeneDx Merger Agreement”) with GeneDx Holdings Corp. (f/k/a ٱ𳾲4 Holdings Corp.”), a Delaware corporation (“GeneDx Holdings”), pursuant to which GeneDx Holdings acquired the Company’s former subsidiary, GeneDx LLC, (f/k/a GeneDx, Inc. “GeneDx”), in a transaction (the “GeneDx Transaction”) that closed on April 29, 2022.

At closing, GeneDx Holdings paid to the Company aggregate consideration of $150million in cash (before deduction of transaction expenses and other customary purchase price adjustments), together with 80.0million shares (the “Closing Shares”) of GeneDx Holdings’ Class A common stock, par value $0.0001 per share (“GeneDx Holdings Common Stock”). Based on the closing stock price of GeneDx Holdings as of April 29, 2022, the total upfront consideration represented approximately $322million. Additionally, subject to GeneDx achieving certain revenue targets for the fiscal years ending December 31, 2022 and 2023, we are eligible to receive an earnout payment (“Milestone Consideration”) in cash or stock (at GeneDx Holdings’ discretion) equal to a maximum of 30.9million shares of GeneDx Holdings’ Common Stock if paid in stock. We received 23.1million shares of Class A Common Stock as a result of GeneDx satisfactorily achieving targets as of December 31, 2022.

In connection with the transactions contemplated by the GeneDx Merger Agreement, on January 14, 2022, the Company entered into a Shareholder Agreement (the “GeneDx Holdings Shareholder Agreement”) with GeneDx Holdings, pursuant to which the Companyagreed to, among other things, be subject to a lock-up period with respect to its shares of GeneDx Holdings Common Stock, which expired on April 29, 2023 with respect to the Closing Shares, extends for one year with respect to the shares of Class A Common Stock received as Milestone Consideration for the year ended December 31, 2022, and, if earned and received, would extend forsix-months from the date of issuance ofthe second potential Milestone Consideration payments.

Pursuant to the GeneDx Merger Agreement, the Company designated, and GeneDx Holdings nominated for election an individual to serve on the board of directors of GeneDx Holdings, and such nominee was elected by GeneDx Holdings’ stockholders to serve as a director at least until GeneDx Holdings’ 2024 annual meeting of stockholders. In addition, the Company has further agreed to certain standstill provisions whereby, subject to certain exceptions, it is obligated to refrain from taking certain actions with respect to the GeneDx Holdings Common Stock. The Company has also agreed to vote its shares of GeneDx Holdings Common Stock in accordance with the recommendations of GeneDx Holdings’s board of directors for so long as it continues to hold at least 5% of the outstanding shares of GeneDx Holdings Common Stock. Further, GeneDx Holdings has also granted the Company certain customary shelf, piggyback and demand registration rights that require GeneDx Holdings to register the shares of the Company’s shares of GeneDx Holdings Common Stock for resale under the Securities Act. OPKO intends to have a designee serving on GeneDx Holdings’s board of directors through the lock-up period applicable to the Company’s shares of GeneDx Holdings Common Stock. Such designee may continue to sit on the GeneDx Holdings board if elected by the GeneDx Holdings stockholders.

NOTE 2 FOREIGN EXCHANGE RATES

Foreign Currency Exchange Rates

Approximately 34.4% of revenue for the six months ended June 30, 2023, and approximately 23.6% of revenue for the six months ended June 30, 2022, were denominated in currencies other than the U.S. Dollar (USD). Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the consolidated financial results. For the first quarter of 2023 and the year ended December 31, 2022, the most significant currency exchange rate exposures were to the Euro and Chilean Peso. Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $33.5 million and $39.9million at June 30, 2023 and December 2022, respectively.

14

We are subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions. We seek to limit foreign currency transaction risk through hedge transactions with foreign currency forward contracts. Under these forward contracts, for any rate above or below the fixed rate, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date. At June 30, 2023, we had 67 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through July 2023 with a notional value totaling approximately $3.5 million. At December 31, 2022, we had 194 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through January 2023 with a notional value totaling approximately $11.9million.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments or adjustments otherwise disclosed herein) considered necessary to present fairly the Company’s results of operations, financial position and cash flows have been made. The results of operations and cash flows for the six months ended June 30, 2023 are not necessarily indicative of the results of operations and cash flows that may be reported for the remainder of 2023 or any other future periods. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Principles of consolidation. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of ˹. and our wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates.

Cash and cash equivalents. Cash and cash equivalents include short-term, interest-bearing instruments with original maturities of 90 days or less at the date of purchase. We also consider all highly liquid investments with original maturities at the date of purchase of 90 days or less as cash equivalents. These investments include money markets, bank deposits, certificates of deposit and U.S. treasury securities.

Inventories. Inventories are valued at the lower of cost and net realizable value. 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. Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which are used in our testing laboratories. Inventory obsolescence expense for the three and six months ended June 30, 2023, was$0.8 million and $2.2 million, respectively. Inventory obsolescence expense for the three and six months ended June 30, 2022, was $0.3 million and $1.0 million, respectively.

Goodwill and intangible assets. Goodwill represents the difference between the purchase price and the estimated fair value of the net assets acquired accounted for by the acquisition method of accounting. Refer to Note 5. Goodwill, in-process research and development (“IPR&D”) and other intangible assets acquired in business combinations, licensing and other transactions was $1.6 billion at June 30, 2023 and December 31, 2022.

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Assets acquired and liabilities assumed in business combinations, licensing and other transactions are generally recognized at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. At acquisition, we generally determine the fair value of intangible assets, including IPR&D, using the “income method.”

Subsequent to their 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.

Estimating the fair value of a reporting unit for goodwill impairment is highly sensitive to changes in projections and assumptions and changes in assumptions could potentially lead to impairment. We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. 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. Goodwill was $597.4 million and $595.9 million, respectively, at June 30, 2023 and December 31, 2022.

Net intangible assets other than goodwill was $1.0 billion on June 30, 2023, and December 31, 2022, respectively, including IPR&D of $195.0 million on June 30, 2023, and December 31, 2022. 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 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.

Upon obtaining regulatory approval, IPR&D assets are then accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. If the project is abandoned, the IPR&D asset is charged to expense. Finite lived intangible assets are tested for impairment when events or changes in circumstances indicate it is more likely than not that the carrying amount of such assets may not be recoverable. The testing includes a comparison of the carrying amount of the asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. We believe that our estimates and assumptions in testing goodwill and other intangible assets, including IPR&D, for impairment are reasonable and otherwise consistent with assumptions that marketplace participants would use in their estimates of fair value. Based on the current financial performance of our diagnostic segment, if future results are not consistent with our estimates and assumptions, then we may be exposed to impairment charges, which could be material.

During the first quarter of 2022, we reclassified $590.2million of IPR&D related to Somatrogon (hGH-CTP) from IPR&D in our Condensed Consolidated Balance Sheet upon the approval of NGENLA (Somatrogon) in Europe and Japan. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years. We use the straight-line method of amortization as there is no reliably determinable pattern in which the economic benefits of our intangible assets are consumed or otherwise used up. Amortization expense was$21.5 million and$43.0 million for the three and six months ended June 30, 2023, respectively. Amortization expense was$22.8 million and$44.8 million for the three and six months ended June 30, 2022, respectively.

Fair value measurements. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate their fair value due to the short-term maturities of these instruments. Investments that are considered equity securities as of June 30, 2023 and December 31, 2022 are predominately carried at fair value. Our debt under the Credit Agreement (as defined below) approximates fair value due to the variable rate of interest applicable to such debt.

In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. Refer to Note 9.

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Contingent consideration. Each period we revalue the contingent consideration obligations associated with applicable acquisitions to their respective fair values and record increases infair value as contingent consideration expense and decreases infair value as a reduction in contingent consideration expense. Changes in contingent consideration result from changes in the assumptions regarding probabilities of successful achievement of related milestones, the estimated timing in which the milestones are achieved and the discount rate used to estimate the fair value of the liability. Contingent consideration may change significantly as our development programs progress, revenue estimates evolve and additional data is obtained, impacting our assumptions. The assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could result in a materially different estimate of fair value which may have a material impact on our results from operations and financial position.

Derivative financial instruments. We record derivative financial instruments on our Condensed Consolidated Balance Sheet at their fair value and recognize the changes in the fair value in our Condensed Consolidated Statement of Operations when they occur, the only exception being derivatives that qualify as hedges. For the derivative instrument to qualify as a hedge, we are required to meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge. At June 30, 2023 and December 31, 2022, our foreign currency forward contracts held to economically hedge inventory purchases did not meet the documentation requirements to be designated as hedges. Accordingly, we recognized all changes in the fair values of our derivatives instruments, net, in our Condensed Consolidated Statement of Operations. Refer to Note 10.

Property, plant and equipment. Property, plant and equipment are recorded at cost or fair value if acquired in a business combination. Depreciation is provided using the straight-line method over the estimated useful lives of the assets and includes amortization expense for assets capitalized under finance leases. The estimated useful lives by asset class are as follows: software - 3 years, machinery, medical and other equipment - 5-8 years, furniture and fixtures - 5-12 years, leasehold improvements - the lesser of their useful life or the lease term, buildings and improvements - 10-40 years, and automobiles - 3-5 years. Expenditures for repairs and maintenance are charged to expense as incurred. Assets held under finance leases are included within Property, plant and equipment, net in our Condensed Consolidated Balance Sheets and are amortized over the shorter of their useful lives or the expected term of their related leases. Depreciation expense was $5.0 million and$10.0 million for the three and six months ended June 30, 2023, respectively. Depreciation expense was$5.2 million and $11.0 million for the three and six months ended June 30, 2022, respectively.

Impairment of long-lived assets. Long-lived assets, such as property and equipment and assets held for sale, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Income taxes. Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment. Valuation allowances on certain U.S. deferred tax assets and non-U.S. deferred tax assets are established, because realization of these tax benefits through future taxable income does not meet the more-likely-than-not threshold.

We operate in various countries and tax jurisdictions globally. For interim reporting purposes, we record income taxes based on the expected effective income tax rate, taking into consideration year to date and global forecasted tax results.For the six months ended June 30, 2023, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the valuation allowance against certain U.S. and non-U.S. deferred tax assets, the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, and the impact of certain discrete tax events and operating results in tax jurisdictions which do not result in a tax benefit.

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Included in Other long-term liabilities is an accrual of $6.0million related to uncertain tax positions involving income recognition. In connection with an examination of foreign tax returns for the 2014 through 2020 tax years, a foreign taxing authority has issued an income tax assessment of approximately $246million (including interest). We are appealing this assessment, as we believe, other than for uncertain tax positions for which we have reserved, the issues are without merit. We intend to exhaust all judicial remedies necessary to resolve the matter,which could be a lengthy process. There can be no assurance that this matter will be resolved in our favor, and an adverse outcome, or any future tax examinations involving similar assertions, could have a material adverse effect on our financial condition, results of operations and cash flows.

Revenue recognition. We recognize revenue when a customer obtains control of promised goods or services in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“TDZ辱 606”). The amount of revenue that is recorded reflects the consideration that we expect to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.

We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we review the contract to determine which performance obligations we must deliver and which of these performance obligations are distinct. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. For a complete discussion of accounting for Revenues from services, Revenues from products and Revenue from transfer of intellectual property and other, refer to Note 13.

Concentration of credit risk and allowance for credit losses. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. Substantially all of our accounts receivable are with either companies in the healthcare industry or patients. However, credit risk is limited due to the number of our clients as well as their dispersion across many different geographic regions.

While we have receivables due from federal and state governmental agencies, such receivables are not a credit risk because federal and state governments fund the related healthcare programs. Payment is primarily dependent upon submitting appropriate documentation. On June 30, 2023 and December 31, 2022, receivable balances (net of explicit and implicit price concessions) from Medicare and Medicaid were 7% and 14%, respectively, of our consolidated Accounts receivable, net.

The portion of our accounts receivable due from individual patients comprises the largest portion of credit risk. At June 30, 2023 and December 31, 2022, receivables due from patients represented approximately 1.8% and 2.9%, respectively, of our consolidated Accounts receivable, net.

We assess the collectability of accounts receivable balances by considering factors such as historical collection experience, customer credit worthiness, the age of accounts receivable balances, regulatory changes and current economic conditions and trends that may affect a customer’s ability to pay. Actual results could differ from those estimates. The allowance for credit losses was $2.0 million and $4.2 million on June 30, 2023, and December 31, 2022, respectively. The credit loss expense for the three and six months ended June 30, 2023, was $2.8 thousand and $88.0 thousand, respectively. The credit loss expense for the three and six months ended June 30, 2022, was$96.0 thousand and $183.6 thousand, respectively.

Equity-based compensation. 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 Condensed Consolidated Statement 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. For the three and six months ended June 30, 2023, we recorded $2.8 million and $5.5 million, respectively, of equity-based compensation expense. For the three and six months ended June 30, 2022, we recorded $4.3 million and $11.9 million, respectively, of equity-based compensation expense.

Research and development expenses. Research and development expenses include external and internal expenses. 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. Research and development employee-related expenses include 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. We expense these costs in the period in which they are incurred. We estimate our liabilities for research and development expenses in order to match the recognition of expenses to the period in which the actual services are received. As such, accrued liabilities related to third party research and development activities are recognized based upon our estimate of services received and degree of completion of the services in accordance with the specific third party contract.

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Research and development expense includes costs for in-process research and development projects acquired in asset acquisitions which have not reached technological feasibility, and which have no alternative future use. For in-process research and development projects acquired in business combinations, the in-process research and development project is capitalized and evaluated for impairment until the development process has been completed. Once the development process has been completed the asset will be amortized over its remaining estimated useful life.

Segment reporting. Our chief operating decision-makeris Phillip Frost, M.D., our Chairman and Chief Executive Officer. Dr. Frost reviews our operating results and operating plans and makes resource allocation decisions on a Company-wide or aggregate basis. We manage our operations in two reportable segments, pharmaceutical and diagnostics. The pharmaceutical segment consists of our pharmaceutical operations in Chile, Mexico, Ireland, Israel and Spain, Rayaldee product sales and our pharmaceutical research and development. The diagnostics segment primarily consists of clinical laboratory operations through BioReference. There are no significant inter-segment sales. We evaluate the performance of each segment based on operating profit or loss. There is no inter-segment allocation of interest expense or income taxes. Refer to Note 15.

Shipping and handling costs. We do not charge customers for shipping and handling costs. Shipping and handling costs are classified as Cost of revenues in the Condensed Consolidated Statement of Operations.

Foreign currency translation. The financial statements of certain of our foreign operations usethe local currency as the functional currency. The local currency assets and liabilities are generally translated at the rate of exchange to the U.S. dollar on the balance sheet date. The local currency revenues and expenses are translated at average rates of exchange to the U.S. dollar during the reporting periods. Foreign currency transaction gains (losses) have been reflected as a component of Other income (expense), net within the Condensed Consolidated Statement of Operations and foreign currency translation gains (losses) have been included as a component of the Condensed Consolidated Statement of Comprehensive Income (Loss). During the three and six months ended June 30, 2023, we recorded $0.9 million and $2.0 million, respectively, of transaction gains. During the three and six months ended June 30, 2022, we recorded $0.8 million and $1.8 million, respectively, of transaction losses.

Variable interest entities. The consolidation of a variable interest entity (“VIE”) is required when an enterprise has a controlling financial interest. A controlling financial interest in a VIE will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE. Refer to Note 6.

Investments. We have made strategic investments in development stage and emerging companies. We record these investments as equity method investments or as equity securities based on our percentage of ownership and whether we have significant influence over the operations of the investees. For investments classified under the equity method of accounting, we record our proportionate share of their losses in Losses from investments in investees in our Condensed Consolidated Statement of Operations. Refer to Note 6. For investments classified as equity securities, we record changes in their fair value as Other income (expense) in our Condensed Consolidated Statement of Operations based on their closing price per share at the end of each reporting period, unless the equity security does not have a readily determinable fair value. Refer to Note 6.

Recently adopted 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 simplifies 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 December15, 2021, with early adoption permitted. As required, we adopted ASU 2020-06 on January 1, 2022 and used the modified retrospective approach for all convertible debt instruments at the beginning of the period of adoptions. Results for reporting periods beginning January 1, 2022 are presented under ASU 2020-06, while prior period amounts were not adjusted and continue to be reported in accordance with historic accounting guidance.

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Under the modified approach, entities will apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. ASU 2020-06 eliminates the cash conversion and beneficial conversion feature models in ASC 470-20 that require an issuer of certain convertible debt and preferred stock to separately account for embedded conversion features as a component of equity. The adoption of ASU 2020-06 at January 1, 2022 resulted in an increase of the Convertible notes of $21.6million, a reduction of the Accumulated deficit of $17.5million and a reduction of Additional paid-in capital of $39.1million.

NOTE 4 EARNINGS (LOSS) PER SHARE

Basic income (loss) per share is computed by dividing our net income (loss) by the weighted average number of shares of our Common Stock outstanding during the period. Shares of Common Stock outstanding under theshare lendingarrangement entered into in conjunction with the 2025 Notes (as defined in Note 7) are excluded from the calculation of basic and diluted earnings per share because the borrower of the shares is required under the share lending arrangement to refund any dividends paid on the shares lent. Refer to Note 7. For diluted earnings per share, the dilutive impact of stock options and warrants is determined by applying the “treasury stock” method. The dilutive impact of the 2033 Senior Notes, the 2023 Convertible Notes and the 2025 Notes (each, as defined and discussed in Note 7) has been considered using the “if converted” method. For periods in which their effect would be antidilutive, no effect is given to Common Stock issuable under outstanding options or warrants or the potentially dilutive shares issuable pursuant to the 2033 Senior Notes, the 2023 Convertible Notes and the 2025 Notes in the dilutive computation.

A total of 82,817,175 and 56,605,791 potential shares of Common Stock were excluded from the calculation of diluted net loss per share for the three months ended June 30, 2023 and 2022, respectively, because their inclusion would be antidilutive. A total of 82,438,648 and 57,016,847 potential shares of Common Stock were excluded from the calculation of diluted net loss per share for the six months ended June 30, 2023 and 2022, respectively, because their inclusion would be antidilutive. A full presentation of diluted earnings per share has not been provided because the required adjustments to the numerator and denominator resulted in diluted earnings per share equivalent to basic earnings per share.

During the three months ended June 30, 2023, no options were exercised and 549,680 restricted stock units vested, resulting in the issuance of 386,971 shares of Common Stock.

During the six months ended June 30, 2023, no options were exercised and 549,680 restricted stock units vested, resulting in the issuance of 386,971 shares of Common Stock.

During the three months ended June 30, 2022, an aggregate of 789,063 options and warrants to purchase shares of our Common Stock were exercised, resulting in the issuance of 546,337 shares of Common Stock. Of the 789,063 options and warrants exercised, 242,726 shares of Common Stock were surrendered in lieu of a cash payment via the net exercise feature of such instruments.

During the six months ended June 30, 2022, an aggregate of 844,813 options and warrants to purchase shares of our Common Stock were exercised, resulting in the issuance of 602,087 shares of Common Stock. Of the 844,813 options and warrants exercised, 242,726 shares of Common Stock were surrendered in lieu of a cash payment via the net exercise feature of such instruments.

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NOTE 5 COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

June 30,

December 31,

(In thousands)

2023

2022

Accounts receivable, net:

Accounts receivable

$ 213,021 $ 131,474

Less: allowance for credit losses

(2,039 ) (4,162 )
$ 210,982 $ 127,312

Inventories, net:

Consumable supplies

$ 29,326 $ 31,275

Finished products

36,460 37,139

Work in-process

3,667 2,449

Raw materials

7,990 6,771

Less: inventory reserve

(3,694 ) (3,574 )
$ 73,749 $ 74,060

Other current assets and prepaid expenses:

Taxes recoverable

$ 8,138 $ 8,191

Prepaid expenses

10,414 7,918

Prepaid insurance

6,214 4,496

Other receivables

8,973 13,105

Other

7,211 6,252
$ 40,950 $ 39,962

Intangible assets, net:

Customer relationships

$ 315,565 $ 314,854

Technologies

829,131 826,282

Trade names

49,765 49,752

Covenants not to compete

12,913 12,911

Licenses

6,144 5,988

Product registrations

7,113 6,831

Other

5,937 5,861

Less: accumulated amortization

(444,373 ) (398,959 )
$ 782,195 $ 823,520

Accrued expenses:

Inventory received but not invoiced

$ 1,964 $ 7,830

Commitments and contingencies

3,252 4,295

Employee benefits

36,734 33,765

Clinical trials

11,700 4,700

Contingent consideration

67 62

Finance leases short-term

2,809 2,809

Professional fees

1,943 1,820

Other

40,135 42,988
$ 98,604 $ 98,269

Other long-term liabilities:

Contingent consideration

$ 1,072 $ 974

Mortgages and other debts payable

8,411 9,098

Finance leases long-term

7,270 7,089

Contract liabilities

140 138

Other

9,948 10,072
$ 26,841 $ 27,371

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Our intangible assets and goodwill relate principally to our completed acquisitions of OPKO Renal, OPKO Biologics, EirGen, BioReference and ModeX. We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives. The estimated useful lives by asset class are as follows: technologies - 7-17 years, customer relationships - 5-20 years, product registrations - 7-10 years, covenants not to compete - 5 years, trade names - 5-10 years, other 9-13 years. We do not anticipate capitalizing the cost of product registration renewals, rather we expect to expense these costs, as incurred. Our goodwill is not tax deductible for income tax purposes in any jurisdiction in which we operate.

In the first quarter of 2022, we reclassified $590.2million of IPR&D related to Somatrogon (hGH-CTP) from IPR&D in our Condensed Consolidated Balance Sheet upon the approval of NGENLA (Somatrogon (hGH-CTP)) in Europe and Japan. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years. Other changes in value of the intangible assets and goodwill during thesix months ended June 30, 2023 and 2022 were primarily due to foreign currency fluctuations between the Euro, and the Chilean Peso against the U.S. dollar.

The following table summarizes the changes in Goodwill by reporting unit during the six months ended June 30, 2023.

2023

(In thousands)

Gross goodwill at January 1

Cumulative impairment at January 1

Acquisitions, dispositions and other

Foreign exchange and other

Balance at June 30

Pharmaceuticals

CURNA

$ 4,827 $ (4,827 ) $ $ $

Rayaldee

81,786 1,355 83,141

FineTech

11,698 (11,698 )

ModeX

80,432 (172 ) 80,260

OPKO Biologics

139,784 139,784

OPKO Chile

3,767 222 3,989

˹ Europe

7,057 119 7,176

OPKO Mexico

100 (100 )

Transition Therapeutics

3,421 (3,421 )

Diagnostics

BioReference

283,025 283,025

OPKO Diagnostics

17,977 (17,977 )
$ 633,874 $ (38,023 ) $ (172 ) $ 1,696 $ 597,375

NOTE 6 ACQUISITIONS AND INVESTMENTS

ModeX Acquisition

On May 9, 2022, the Company entered into the ModeX Merger Agreement, pursuant to which ModeX became a wholly owned subsidiary of the Company. The Company paid the entirety of the $300.0million purchase price pursuant to the issuance of the Consideration Shares to the former stockholders of ModeX. The Consideration Shares were valued at $219.4million, based on the closing price per share of our Common Stock of $2.44 as reported by NASDAQ on the Closing Date. Included in the total purchase price of $221.7million were $2.3million of fully vested equity awards.

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The following table summarizes the final purchase price allocation and the fair value of the net assets acquired and liabilities assumed at the date of acquisition of ModeX at the date of acquisition:

(in thousands)

ModeX

Cash and cash equivalents

$ 228

Other assets

727

Property, plant and equipment

1,046

IPR&D assets

195,000

Goodwill

80,260

Accounts payable

(287 )

Deferred tax liability

(55,312 )

Total purchase price

$ 221,662

Goodwill from the acquisition of ModeX principally relates to intangible assets that do not qualify for separate recognition (for instance, ModeX's assembled workforce) and the deferred tax liability generated as a result of the transaction. Goodwill is not tax deductible for income tax purposes and was assigned to the pharmaceutical reporting segment.