OPKO HEALTH : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

OVERVIEW

You should read this discussion together with the unaudited Condensed
Consolidated Financial Statements, related notes, and other financial
information included elsewhere in this Quarterly Report on Form 10-Q together
with our audited consolidated financial statements, related notes, and other
information contained in our Annual Report on Form 10-K for the year ended
December 31, 2019 (the "Form 10-K"). The following discussion contains
assumptions, estimates and other forward-looking statements that involve a
number of risks and uncertainties, including those discussed under "Risk
Factors," in Part I, Item 1A of the Form 10-K and in Part II, Item 1A of this
Quarterly Report on Form 10-Q and as described from time to time in our other
filings with the Securities and Exchange Commission. These risks could cause our
actual results to differ materially from those anticipated in these
forward-looking statements.
We are a diversified healthcare company that seeks to establish industry-leading
positions in large and rapidly growing medical markets. Our diagnostics business
includes BioReference Laboratories Inc. ("BioReference"), one of the nation's
largest full service laboratories with a core genetic testing business and an
almost 300-person sales and marketing team to drive growth and leverage new
products, including the 4Kscore test. Our pharmaceutical business features
Rayaldee, an FDA-approved treatment for secondary hyperparathyroidism ("SHPT")
in adults with stage 3 or 4 chronic kidney disease ("CKD") and vitamin D
insufficiency (launched in November 2016) and a pipeline of products in various
stages of development. Our leading product in development is hGH-CTP, a
once-weekly human growth hormone injection for which we have partnered with
Pfizer and successfully completed a phase 3 study in August 2019.
We operate established pharmaceutical platforms in Spain, Ireland, Chile and
Mexico, which are generating revenue and from which we expect to generate
positive cash flow and facilitate future market entry for our products currently
in development. We have a development and commercial supply pharmaceutical
company, as well as a global supply chain operation and holding company in
Ireland, which we expect will play an important role in the development,
manufacturing, distribution and approval of a wide variety of drugs with an
emphasis on high potency products. We also own a specialty active pharmaceutical
ingredients ("APIs") manufacturer in Israel, which we expect will facilitate the
development of our pipeline of molecules and compounds for our proprietary
molecular diagnostic and therapeutic products.

RECENT DEVELOPMENTS

In September 2020, we announced the initiation of a Phase 2 trial with Rayaldee
as a treatment for mild-to-moderate COVID-19. The trial is expected to enroll
approximately 160 subjects, some of whom may have stage 3 or 4 CKD which may put
them at higher risk for developing more severe illness.
In August 2020, GeneDx, Inc., a subsidiary of BioReference, announced that it
had entered into an agreement with Pediatrix Medical Group ("Pediatrix"), a
leading provider of maternal-fetal, and pediatric medical and surgical
subspecialty physician services, to offer state-of-the-art, next-generation
genomic sequencing to support clinical diagnosis in neonatal intensive care
units staffed by Pediatrix's affiliated neonatologists. The sequencing is
designed to enhance diagnostic capabilities in order to lessen the impact of
disease and facilitate the development of novel precision medicine solutions for
pediatric care. The initial offering is planned to include whole exome and whole
genome sequencing and genomic support services under the brand Detect Genomix
and the initial clinical diagnostic support services will be made available to
hospitals and patients across the country.



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RESULTS OF OPERATIONS
Impact of COVID-19

As the disease caused by SARS-CoV-2, a novel strain of coronavirus, COVID-19
continues to spread and severely impact the economy of the U.S. and other
countries around the world, we are committed to being a part of the coordinated
public and private sector response to this unprecedented challenge. In response
to the COVID-19 pandemic, BioReference is accepting specimens from U.S.
healthcare providers, clinics and health and hospital systems for two types of
COVID-19 testing, diagnostic molecular testing and serology antibody testing,
which is intended to promote earlier diagnosis of the coronavirus, assess a
patient's immune response to the virus and aid in limiting the spread of
infection. In addition to its robust nationwide COVID-19 testing offering,
BioReference has partnerships with the National Football League (NFL), National
Basketball Association (NBA), CVS, Rite-Aid, New York State Department of
Health, the New York City Health and Hospital Corporation (NYC Health +
Hospitals), the State of New Jersey, the State of Florida and the cities
of Detroit and Miami, among others, to provide COVID-19 testing. BioReference
performed approximately 0.3 million serology antibody tests and 3.5 million
diagnostic molecular tests for COVID-19 during the three months ended September
30, 2020, which represented 63% of BioReference's total test volume during the
third quarter of 2020. Additionally, BioReference has partnered with the State
of New York, New York City, the U.S. Center for Disease Control and Prevention
(CDC) and a number of employers and government agencies, to perform serologic
antibody testing, with the capacity to perform up to 400,000 tests per day and
BioReference has the additional capacity to perform more than 70,000 diagnostic
molecular tests per day.
We have put preparedness plans in place at our facilities to maintain continuity
of operations, while also taking steps to keep colleagues and customers healthy
and safe. In line with recommendations to reduce large gatherings and increase
social distancing, we have, where practical, transitioned many office-based
colleagues to a remote work environment.

Beginning in March 2020, BioReference experienced, and continues to experience,
a decline in routine clinical and genomics testing volumes due to the COVID-19
pandemic. Excluding COVID-19 test volumes, for the three months ended September
30, 2020, volumes in our diagnostics segment declined 9.1% as compared to
volumes in the third quarter of 2019. Additionally, sales of Rayaldee have not
increased in accordance with its expected growth trajectory as a result of
challenges in onboarding new patients due to the COVID-19 pandemic. Federal,
state and local governmental policies and initiatives designed to reduce the
transmission of COVID-19 have resulted in, among other things, a significant
reduction in physician office visits, the cancellation of elective medical
procedures, customers closing or severely curtailing their operations
(voluntarily or in response to government orders), and the adoption of
work-from-home or shelter-in-place policies, all of which have had, and may
continue to have, an adverse impact on our operating results, cash flows and
financial condition, including continued declines in testing volumes. As stay at
home orders and other restrictions have been lifted, we have seen our routine
clinical and genomic testing volumes trending towards normalization with prior
periods, however should stay at home orders or other restrictions be reenacted,
we could see our routine testing levels decline. We also continue to see a
substantial need for COVID-19 testing by our existing clients and expect new
clients as infection rates for the virus continue to increase across the
country.
In March 2020, in response to the COVID-19 pandemic, the CARES Act was signed
into law. The CARES Act provides numerous tax provisions and other stimulus
measures, including temporary changes regarding the prior and future utilization
of net operating losses, temporary changes to the prior and future limitations
on interest deductions, temporary suspension of certain payment requirements for
the employer portion of Social Security taxes, technical corrections from prior
tax legislation for tax depreciation of certain qualified improvement property,
and the creation of certain payroll tax credits associated with the retention of
employees.
We have received, or expect to receive a number of benefits under The CARES Act
including, but not limited to:
•During the second quarter of 2020, we received approximately $14 million under
The Centers for Medicare & Medicaid Services (CMS) Accelerated and Advance
Payment Program, which provides accelerated payments to Medicare
providers/suppliers working to provide treatment to patients and combat the
COVID-19 pandemic, and the amounts advanced are loans which will be offset
against future claims and must be repaid in 2021;
•We are eligible to defer depositing the employer's share of Social Security
taxes for payments due from March 27, 2020 through December 31, 2020,
interest-free and penalty-free;
•We received approximately $10.0 million and $16.2 million during the three and
nine months ended September 30, 2020 from the funds that were distributed to
healthcare providers for related expenses or lost revenues that are attributable
to the COVID-19 pandemic;

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•U.S. Department of Health and Human Services (HHS), will provide claims
reimbursement to healthcare providers generally at Medicare rates for testing
uninsured patients; and
•Clinical laboratories are provided a one-year reprieve from the reporting
requirements under the Protecting Access to Medicare Act ("PAMA") as well as a
one-year delay of reimbursement rate reductions for clinical laboratory services
provided under Medicare that were scheduled to take place in 2021.
In April 2020, we took certain temporary actions to manage our workforce costs
including reduced hours for employees whose work was significantly impacted and
temporary furloughs for non-essential employees with diminished work
requirements. Substantially all of our furloughed employees have returned, and
we hired approximately 2,000 additional employees to support COVID-19 testing
and the continued increase to normalized levels of routine clinical and genomic
testing.
Since the pandemic began in the U.S., we have invested, and expect to continue
to invest, in testing capabilities and infrastructure to meet demand for our
molecular and antibody testing for COVID-19.

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 Our consolidated income (loss) from operations for the three months ended September 30, 2020 and 2019 is as follows:

                                       For the three months ended September
                                                        30,
(In thousands)                                   2020                2019           Change
Revenues:
Revenue from services                 $         382,498           $ 181,139       201,359
Revenue from products                            28,702              26,161         2,541
Revenue from transfer of intellectual
property and other                               16,864              21,472        (4,608)
Total revenues                                  428,064             228,772       199,292
Costs and expenses:
Cost of revenue                                 272,773             141,921       130,852
Selling, general and administrative              99,897              80,542        19,355
Research and development                         18,493              30,017       (11,524)
Contingent Consideration                          1,083              (1,109)        2,192
Amortization of intangible assets                13,879              16,412        (2,533)

Total costs and expenses                        406,125             267,783       138,342
Income (loss) from operations                    21,939             (39,011)       60,950


We manage our operations in two reportable segments, pharmaceuticals and
diagnostics. The pharmaceuticals 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 our clinical laboratory operations through BioReference
and our point-of-care operations. There are no significant inter-segment sales.
We evaluate the performance of each segment based on operating profit or loss.
The following presents the financial measures that management considers to be
the most significant indicators of the Company's performance.

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Diagnostics
                                                    For the three months ended
                                                           September 30,
(In thousands)                                          2020            2019                Change
Revenues
Revenue from services                             $     382,498    $   181,139          $   201,359
Revenue from transfer of intellectual property
and other                                                10,045              -               10,045
Total revenues                                          392,543        181,139              211,404
Costs and expenses:
Cost of revenue                                         255,339        126,293              129,046
Selling, general and administrative                      78,009         57,075               20,934
Research and development                                  4,170          3,481                  689
Contingent Consideration                                     36           (144)                 180
Amortization of intangible assets                         8,817         10,797               (1,980)

Total costs and expenses                                346,371        197,502              148,869
Income (loss) from operations                            46,172        (16,363)              62,535



Revenue. Revenue from services for the three months ended September 30, 2020
increased by approximately $201.4 million compared to the three months ended
September 30, 2019, primarily due to the positive impacts of increased COVID-19
testing volumes. In addition, Revenue from transfer of intellectual property and
other for the three months ended September 30, 2020 included a $10.0 million
grant received by BioReference from the CARES Act. BioReference performed
approximately 0.3 million serology antibody tests and 3.5 million diagnostic
molecular tests for COVID-19 during the three months ended September 30, 2020,
which represented 63% of its total testing volume for the third quarter of 2020.
This was partially offset by the negative impacts of:
•A reduction in clinical test volumes and genomics test volumes at BioReference
resulted in reduced revenue of $13.3 million and $1.5 million, respectively,
exclusive of COVID-19 test volumes as compared to the third quarter of 2019 .
Representing an approximate 9.1% decline in volume compared to prior year, this
decline in routine clinical and genomic testing volume reflects negative impacts
from the COVID-19 pandemic, principally from referring physician office closures
and stay-at-home guidance throughout states in which we predominately operate.
•A reduction in clinical test and genomic test reimbursement at BioReference of
$15.2 million and $14.8 million, respectively, as compared to the third quarter
of 2019. The lower reimbursement within our clinical business is primarily the
result of the negative impact of the PAMA price reduction that went into effect
January 1, 2020 combined with an overall shift in our test mix that was
partially offset by increased reimbursement of our 4KScore test. Within the
clinical business, BioReference has observed primary care and routine health
practices reopen more quickly from the COVID-19 pandemic than specialty
practices, resulting in an increase in the mix of lower value clinical tests
from patient encounters compared to higher value Oncology and Women's Health
tests. The lower reimbursement within our genomic business is from an increase
in denial rates and changes to payor pricing, policy and procedural requirements
that have resulted in reduced overall reimbursement rates.
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, 2020 and 2019, revenue
reductions due to changes in estimates of implicit price concessions for
performance obligations satisfied in prior periods of $1.7 million and $6.0
million, respectively, were recognized.
The composition of Revenue from services by payor for the three months ended
September 30, 2020 and 2019 was as follows:

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                              Three months ended September 30,
(In thousands)                      2020                      2019
Healthcare insurers   $         136,531                    $ 104,020
Government payers                21,537                       28,206
Client payers                   207,886                       43,750
Patients                         16,544                        5,163
Total                 $         382,498                    $ 181,139



Client payers include cities, states and companies for which BioReference
provides COVID-19 testing services.
Cost of revenue. Cost of revenue for the three months ended September 30, 2020
increased $129.0 million compared to the three months ended September 30, 2019.
Cost of revenue increased primarily due to labor and material costs to produce
COVID-19 testing volumes during the three months ended September 30, 2020,
partially offset by a decline in non-COVID clinical testing volumes and to cost
reduction initiatives leading to a 12% improvement in cost per patient
encounter, inclusive of all volumes.

Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended September 30, 2020 and 2019
were $78.0 million and $57.1 million, respectively. Selling, general and
administrative expenses in our diagnostics segment increased primarily due to
higher variable billing and compensation costs of $15 million in connection with
increased volume and collections during the third quarter 2020, $3 million in
one-time costs associated with the serology antibody test launch and related
activities, and other administrative and marketing costs directly associated
with the COVID-19 PCR testing volumes.
Research and development expenses. The following table summarizes the components
of our research and development expenses:
                                                               For the three months ended September
Research and Development Expenses                                               30,
                                                                    2020                   2019
External expenses:
PMA studies                                                   $           53          $         68
Research and development employee-related expenses                     2,522                 1,890
Other internal research and development expenses                       1,595                 1,523
Total research and development expenses                       $        

4,170 $ 3,481

Research and development for the diagnostic segment relates to the development
of testing services for our clinical and genomics testing at BioReference and
the development of the Claros Analyzer, a diagnostic instrument system to
provide rapid, high performance blood test results in the point-of-care setting.
The increase in research and development expenses for the three months ended
September 30, 2020 resulted primarily from increased research and development
expenses related to the development of clinical and genomics testing services.
Contingent consideration. Contingent consideration for the three months ended
September 30, 2020 and 2019 was $36 thousand of expense and $144 thousand
reversal of expense, respectively. Contingent consideration for the three months
ended September 30, 2020 and 2019 was attributable to changes in assumptions
regarding the timing of achievement of future milestones for OPKO Diagnostics in
both periods, and potential amounts payable to former stockholders of OPKO
Diagnostics in connection therewith, pursuant to our acquisition agreement in
October 2011.
Amortization of intangible assets. Amortization of intangible assets was $8.8
million and $10.8 million, respectively, for the three months ended September
30, 2020 and 2019. Amortization expense reflects the amortization of acquired
intangible assets with defined useful lives.
We believe that our estimates and assumptions in testing goodwill and other
intangible assets are consistent with assumptions that marketplace participants
would use in their estimates. However, if actual results are not consistent with
our estimates and assumptions, including as a result of the COVID-19 global
pandemic, we may be exposed to an impairment charge that could be material.

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Pharmaceuticals
                                        For the three months ended September
                                                         30,
 (In thousands)                                    2020                2019         Change
 Revenues:

 Revenue from products                 $          28,702            $ 26,161      $  2,541

Revenue from transfer of intellectual

 property and other                                6,819              20,676       (13,857)
 Total revenues                                   35,521              46,837       (11,316)
 Costs and expenses:
 Cost of revenue                                  17,464              15,680         1,784
 Selling, general and administrative              11,824              13,969        (2,145)
 Research and development                         14,548              26,770       (12,222)
 Contingent Consideration                          1,047                (965)        2,012
 Amortization of intangible assets                 5,063               5,615          (552)

 Total costs and expenses                         49,946              61,069       (11,123)
 Loss from operations                            (14,425)            (14,232)         (193)



Revenue. The increase in revenue from products for the three months ended
September 30, 2020 compared to the three months ended September 30, 2019 was
primarily attributable to an increase in sales at OPKO Chile and an increase in
sales of Rayaldee, which were $8.1 million for the three months ended September
30, 2020, as compared to $7.4 million for the same period in 2019. However,
sales growth of Rayaldee has been negatively impacted by challenges in
onboarding new patients due to the COVID-19 pandemic. Revenue from transfer of
intellectual property for the three months ended September 30, 2020 and 2019
principally reflected $3.1 million and $19.5 million, respectively, of revenue
related to the Pfizer Transaction.
Cost of revenue. Cost of revenue for the three months ended September 30, 2020
increased $1.8 million compared to the three months ended September 30, 2019.
Cost of product revenue increased primarily due to an increase in sales at OPKO
Chile, an increase in sales of Rayaldee and changes in product mix during the
period.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended September 30, 2020 and 2019
were $11.8 million and $14.0 million, respectively. The decrease in selling,
general and administrative expenses was primarily due to decreased expenses at
our pharmaceutical subsidiaries and a decrease in equity-based compensation
expense. Selling, general and administrative expenses for the pharmaceutical
segment for the three months ended September 30, 2020 and 2019 included
equity-based compensation expense of $0.6 million and $0.9 million,
respectively.
Research and development expenses. Research and development expenses for the
three months ended September 30, 2020 and 2019 were $14.5 million and $26.8
million, respectively. 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 ("PMA") 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.

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The following table summarizes the components of our research and development
expenses:
Research and Development Expenses                            For the three 

months ended September 30,

                                                                    2020                    2019
External expenses:
Manufacturing expense for biological products                $         2,526          $      12,708
Phase III studies                                                      2,646                  3,984
Post-marketing studies                                                    81                    575
Earlier-stage programs                                                 3,549                  6,340
Research and development employee-related expenses                     5,349                  5,581
Other internal research and development expenses                       2,410                  2,550

Third-party grants and funding from collaboration agreements (2,013)

                (4,968)
Total research and development expenses                      $        

14,548 $ 26,770

The decrease in research and development expenses for the three months ended
September 30, 2020 was primarily due to a decrease in research and development
expenses related to hGH-CTP, a once-weekly human growth hormone injection for
which we have partnered with Pfizer and successfully completed a phase 3 study
in August 2019. Ongoing expenses on the hGH-CTP program support open label
extension studies that will continue until market launch in most countries, as
well as the preparation of applications for marketing approvals. Research and
development expenses for the pharmaceutical segment for the three months ended
September 30, 2020 and 2019 included equity-based compensation expense of $0.7
million and $0.7 million, respectively.
Contingent consideration. Contingent consideration for the three months ended
September 30, 2020 and 2019 was $1.0 million of expense and $1.0 million
reversal of expense, respectively. Contingent consideration for the three months
ended September 30, 2020 and 2019 was primarily attributable to changes in
assumptions regarding the timing of achievement of future milestones for OPKO
Renal, and potential amounts payable to former stockholders of OPKO Renal in
connection therewith, pursuant to our acquisition agreement in March 2013.
Amortization of intangible assets. Amortization of intangible assets was $5.1
million and $5.6 million, respectively, for the three months ended September 30,
2020 and 2019. 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 U.S. FDA, the IPR&D assets will be
accounted for as a finite-lived intangible asset and amortized on a
straight-line basis over its estimated useful life.
We believe that our estimates and assumptions in testing goodwill and other
intangible assets, including IPR&D, for impairment are consistent with
assumptions that marketplace participants would use in their estimates. However,
if actual results are not consistent with our estimates and assumptions,
including as a result of the COVID-19 global pandemic, we may be exposed to an
impairment charge that could be material. If we are unable to successfully
develop hGH-CTP, or changes in projections and assumptions negatively impact our
forecast of net cash flows, we may be exposed to a material impairment charge
related to the IPR&D for hGH-CTP.

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Corporate
                                        For the three months ended September
                                                         30,
 (In thousands)                                    2020                2019         Change
 Revenues:

Revenue from transfer of intellectual

 property and other                    $               -            $    796      $   (796)
 Total revenues                                        -                 796          (796)
 Costs and expenses:
 Cost of revenue                                     (32)                (52)           20
 Selling, general and administrative              10,065               9,498           567
 Research and development                           (225)               (234)            9
 Total costs and expenses                          9,808               9,212           596
 Loss from operations                  $          (9,808)           $ (8,416)     $ (1,392)



Operating loss for our unallocated corporate operations for the three months
ended September 30, 2020 and 2019 was $9.8 million and $8.4 million,
respectively, and principally reflects general and administrative expenses
incurred in connection with our corporate operations.
Other
Interest income. Interest income for the three months ended September 30, 2020
and 2019 was not significant as our cash investment strategy emphasizes the
security of the principal invested and fulfillment of liquidity needs.
Interest expense. Interest expense for the three months ended September 30, 2020
and 2019 was $5.5 million and $5.8 million, respectively. Interest expense was
principally related to interest incurred on the 2025 Notes, the 2023 Convertible
Notes, the 2033 Senior Notes, and BioReference's outstanding debt under its
credit facility.
Fair value changes of derivative instruments, net. Fair value changes of
derivative instruments, net for the three months ended September 30, 2020 and
2019, was $496 thousand and $21 thousand of expense, respectively. Derivative
expense for the three months ended September 30, 2020, was principally related
to the change in fair value on foreign currency forward exchange contracts at
OPKO Chile.
Other income (expense), net. Other income (expense), net for the three months
ended September 30, 2020 and 2019, was $4.7 million of income and $(15.5)
million of expense, respectively. Other income for the three months ended
September 30, 2020 primarily consisted of realized gains recognized during the
period on sales of our investment in VBI. Other expense for the three months
ended September 30, 2019 primarily consisted of net unrealized losses recognized
during the period on Eloxx and VBI.
Income tax provision. Our income tax benefit (provision) for the three months
ended September 30, 2020 and 2019 was $3.2 million and $(1.8) million,
respectively, and reflects quarterly results using our expected effective tax
rate.  For the three months ended September 30, 2020, the tax rate differed from
the U.S. federal statutory rate of 21% primarily due to the relative mix in
earnings and losses in the U.S. versus foreign tax jurisdictions, the impact of
certain discrete tax events and operating results in tax jurisdictions which do
not result in a tax benefit.
Loss from investments in investees. We have made investments in certain early
stage companies that we perceive to have valuable proprietary technology and
significant potential to create value for us as a shareholder or member. We
account for these investments under the equity method of accounting, resulting
in the recording of our proportionate share of their losses until our share of
their loss exceeds our investment. Until the investees' technologies are
commercialized, if ever, we anticipate they will report net losses. Loss from
investments in investees was $0.1 million and $0.3 million for the three months
ended September 30, 2020 and 2019, respectively.




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Table of Contents FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 Our consolidated income (loss) from operations for the nine months ended September 30, 2020 and 2019 is as follows:

                                      For the nine months ended September 30,
(In thousands)                                    2020                2019          Change
Revenues:
Revenue from services                 $          804,309           $ 538,488      $ 265,821
Revenue from products                             89,133              80,143          8,990
Revenue from transfer of intellectual
property and other                                47,297              58,961        (11,664)
Total revenues                                   940,739             677,592        263,147
Costs and expenses:
Cost of revenue                                  575,683             430,203        145,480
Selling, general and administrative              253,749             264,175        (10,426)
Research and development                          57,862              94,832        (36,970)
Contingent Consideration                           1,334                 (78)         1,412
Amortization of intangible assets                 43,753              49,393         (5,640)
Asset impairment charges                               -                 655           (655)
Total costs and expenses                         932,381             839,180         93,201
Income (loss) from operations                      8,358            (161,588)       169,946


Diagnostics
                                                     For the nine months ended
                                                           September 30,
(In thousands)                                          2020            2019                  Change
Revenues
Revenue from services                             $     804,309    $   538,488                 265,821
Revenue from transfer of intellectual property
and other                                                16,240              -                  16,240
Total revenues                                          820,549        538,488                 282,061
Costs and expenses:
Cost of revenue                                         523,029        386,008                 137,020
Selling, general and administrative                     188,445        186,862                   1,583
Research and development                                 11,348         10,732                     616
Contingent Consideration                                    104            439                    (335)
Amortization of intangible assets                        28,648         32,392                  (3,744)

Total costs and expenses                                751,574        616,433                 135,141
Income (loss) from operations                            68,975        (77,945)                146,920



Revenue. Revenue from services for the nine months ended September 30, 2020
increased by approximately $265.8 million compared to the nine months ended
September 30, 2019, primarily due to the positive impacts of increased COVID-19
testing volumes. The increase in Revenue from services also included $10.9
million due to the successful appeal of previously denied Medicare claims for
the 4Kscore test. In addition, revenue from the transfer of intellectual
property and other for the three months ended September 30, 2020 included $16.2
million of grants received by BioReference from the CARES Act. BioReference
performed 0.6 million serology antibody tests and 5.8 million diagnostic
molecular tests for COVID-19 during the nine months ended September 30, 2020,
which represented 48.9% of its total volume for that period. This was partially
offset by the negative impacts of:

•A reduction in clinical test volumes and genomics test volumes at BioReference
resulted in decreased revenues of $88.8 million and $15.5 million, respectively,
exclusive of COVID-19 test volumes, as compared to the nine months

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ended September 30, 2019. Representing an approximate 20.4% decline in volume
compared to prior year, this decline in routine clinical and genomic testing
volume reflects negative impacts from the COVID-19 pandemic, principally from
referring physician office closures and stay-at-home guidance throughout states
in which we predominately operate.
•A reduction in clinical test and genomic test reimbursement at BioReference of
$22.7 million and $11.8 million, respectively, as compared to the nine months
ended September 30, 2019 . The lower reimbursement within our clinical business
is primarily the result of the negative impact of the PAMA price reduction that
went into effect January 1, 2020 combined with an overall shift in our test mix
that was partially offset by improved operational procedures and an increased
reimbursement of our 4KScore test. The lower reimbursement within our genomic
business is from an increase in denial rates and changes to payor pricing,
policy and procedural requirements that have resulted in reduced overall
reimbursement rates.
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, 2020 and 2019, revenue
reductions due to changes in estimates of implicit price concessions for
performance obligations satisfied in prior periods of $1.6 million and $25.8
million, respectively, were recognized.
The composition of Revenue from services by payor for the nine months ended
September 30, 2020 and 2019 was as follows:
                             Nine months ended September 30,
(In thousands)                     2020                     2019
Healthcare insurers   $        319,763                   $ 315,227
Government payers               64,322                      87,243
Client payers                  388,078                     120,309
Patients                        32,146                      15,709
Total                 $        804,309                   $ 538,488



Client payers include cities, states and companies for which BioReference
provides COVID-19 testing services.
Cost of revenue. Cost of revenue for the nine months ended September 30, 2020
increased $137.0 million compared to the nine months ended September 30, 2019.
Cost of revenue increased primarily due to labor and material costs to produce
COVID-19 testing volumes during the nine months ended September 30, 2020,
partially offset by a decline in non-COVID clinical testing volumes and to cost
reduction initiatives leading to a 13% improvement in cost per patient
encounter, inclusive of all volumes.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the nine months ended September 30, 2020 and 2019
were $188.4 million and $186.9 million, respectively. Selling, general and
administrative expenses in our diagnostics segment increased primarily due to
higher variable billing and compensation costs of $19.1 million from an increase
in volume and collections during the nine months ended September 30, 2020, $3.0
million in one-time costs associated with the serology antibody test launch and
related activities, and other administrative and marketing costs directly
associated the COVID-19 PCR testing volumes, which was partially offset by $12.6
million of expense incurred during the nine months ended September 30, 2019 in
connection with certain legal matters.
Research and development expenses. The following table summarizes the components
of our research and development expenses:

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Research and Development Expenses                                  Nine months ended September 30,
                                                                     2020                    2019
External expenses:
PMA studies                                                   $            164          $        239
Research and development employee-related expenses                       6,895                 5,423
Other internal research and development expenses                         4,289                 5,070
Total research and development expenses                       $         

11,348 $ 10,732

Research and development for the diagnostic segment relates to the development
of testing services for our clinical and genomics testing at BioReference and
the development of the Claros Analyzer, a diagnostic instrument system to
provide rapid, high performance blood test results in the point-of-care setting.
The increase in research and development expenses for the nine months ended
September 30, 2020 resulted primarily from an increased research and development
expenses related to the development of clinical and genomics testing services.
Contingent consideration. Contingent consideration for the nine months ended
September 30, 2020 and 2019 was $0.1 million and $0.4 million of expense,
respectively. Contingent consideration for the nine months ended September 30,
2020 and 2019 was attributable to changes in assumptions regarding the timing of
achievement of future milestones for OPKO Diagnostics in both periods, and
potential amounts payable to former stockholders of OPKO Diagnostics in
connection therewith, pursuant to our acquisition agreement in October 2011.
Amortization of intangible assets. Amortization of intangible assets was $28.6
million and $32.4 million, respectively, for the nine months ended September 30,
2020 and 2019. Amortization expense reflects the amortization of acquired
intangible assets with defined useful lives.

Pharmaceuticals
                                       For the nine months ended September 30,
 (In thousands)                                    2020                2019         Change
 Revenues:

 Revenue from products                 $          89,133            $ 80,143      $  8,990

Revenue from transfer of intellectual

 property and other                               31,057              58,165       (27,108)
 Total revenues                                  120,190             138,308       (18,118)
 Costs and expenses:
 Cost of revenue                                  52,758              44,395         8,363
 Selling, general and administrative              38,493              44,201        (5,708)
 Research and development                         47,150              84,838       (37,688)
 Contingent Consideration                          1,230                (517)        1,747
 Amortization of intangible assets                15,105              17,001        (1,896)
 Asset impairment charges                              -                 655          (655)
 Total costs and expenses                        154,736             190,573       (35,837)
 Loss from operations                            (34,546)            (52,265)       17,719



Revenue. The increase in revenue from products for the nine months ended
September 30, 2020 compared to the nine months ended September 30, 2019 was
primarily attributable to an increase in sales at OPKO Chile and an increase in
sales of Rayaldee, which were $26.7 million for the nine months ended September
30, 2020, as compared to $18.8 million for the comparative period in 2019.
Revenue from transfer of intellectual property for the nine months ended
September 30, 2020 and 2019 principally reflected $25.8 million and
$55.1 million, respectively, of revenue related to the Pfizer Transaction.

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Cost of revenue. Cost of revenue for the three months ended September 30, 2020
increased $8.4 million compared to the nine months ended September 30, 2019.
Cost of product revenue increased primarily due to an increase in sales at OPKO
Chile and an increase in sales of Rayaldee in 2020 and changes in product mix
during the period.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the nine months ended September 30, 2020 and 2019
were $38.5 million and $44.2 million, respectively. The decrease in selling,
general and administrative expenses was primarily due to decreased expenses at
our pharmaceutical subsidiaries and a decrease in equity-based compensation
expense. Selling, general and administrative expenses for the pharmaceutical
segment for the nine months ended September 30, 2020 and 2019 included
equity-based compensation expense of $2.0 million and $3.7 million,
respectively.
Research and development expenses. Research and development expenses for the
nine months ended September 30, 2020 and 2019 were $47.1 million and
$84.8 million, respectively. 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.
The following table summarizes the components of our research and development
expenses:
Research and Development Expenses                             For the nine 

months ended September 30,

                                                                    2020                    2019
External expenses:
Manufacturing expense for biological products                $         5,254          $      32,819
Phase III studies                                                      7,985                 13,564
Post-marketing studies                                                 1,203                  1,178
Earlier-stage programs                                                11,117                 19,498
Research and development employee-related expenses                    16,617                 16,602
Other internal research and development expenses                       6,987                  6,522

Third-party grants and funding from collaboration agreements (2,013)

                (5,345)
Total research and development expenses                      $        

47,150 $ 84,838

The decrease in research and development expenses for the nine months ended
September 30, 2020 was primarily due to a decrease in research and development
expenses related to hGH-CTP, a once-weekly human growth hormone injection for
which we have partnered with Pfizer and successfully completed a phase 3 study
in August 2019. Ongoing expenses on the hGH-CTP program support open label
extension studies that will continue until market launch in most countries, as
well as the preparation of applications for marketing approvals. Research and
development expenses for the pharmaceutical segment for the nine months ended
September 30, 2020 and 2019 included equity-based compensation expense of $1.3
million and $1.6 million, respectively.
Contingent consideration. Contingent consideration for the nine months ended
September 30, 2020 and 2019 was $1.2 million of expense and $0.5 million
reversal of expense, respectively. Contingent consideration for the nine months
ended September 30, 2020 and 2019 was primarily attributable to changes in
assumptions regarding the timing of achievement of future milestones for OPKO
Renal, and potential amounts payable to former stockholders of OPKO Renal in
connection therewith, pursuant to our acquisition agreement in March 2013.
Amortization of intangible assets. Amortization of intangible assets was $15.1
million and $17.0 million, respectively, for the nine months ended September 30,
2020 and 2019. 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 U.S. FDA, the IPR&D assets will be
accounted for as a finite-lived intangible asset and amortized on a
straight-line basis over its estimated useful life.

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Asset impairment charges. Asset impairment charges were $0.7 million for the
nine months ended September 30, 2019 and is related to an impairment charge to
write down our intangible assets at FineTech down to their estimated fair value.
Corporate
                                       For the nine months ended September 30,
 (In thousands)                                    2020                2019         Change
 Revenues:

Revenue from transfer of intellectual

 property and other                    $          -                 $    796         (796)
 Total revenues                                   -                      796         (796)
 Costs and expenses:
 Cost of revenue                               (104)                    (200)          96
 Selling, general and administrative         26,811                   33,112       (6,301)
 Research and development                      (636)                    (738)         102
 Total costs and expenses                    26,071                   32,174       (6,103)
 Loss from operations                       (26,071)                 (31,378)       5,307



Operating loss for our unallocated corporate operations for the nine months
ended September 30, 2020 and 2019 was $26.1 million and $31.4 million,
respectively, and principally reflects general and administrative expenses
incurred in connection with our corporate operations. The decrease in operating
loss for the nine months ended September 30, 2020 was primarily attributable to
a decrease in legal fees incurred for the nine months ended September 30, 2020,
compared to the nine months ended September 30, 2019.
Other
Interest income. Interest income for the nine months ended September 30, 2020
and 2019 was not significant as our cash investment strategy emphasizes the
security of the principal invested and fulfillment of liquidity needs.
Interest expense. Interest expense for the nine months ended September 30, 2020
and 2019 was $16.5 million and $16.0 million, respectively. Interest expense was
principally related to interest incurred on the 2025 Notes, the 2023 Convertible
Notes, the 2033 Senior Notes, and BioReference's outstanding debt under its
credit facility.
Fair value changes of derivative instruments, net. Fair value changes of
derivative instruments, net for the nine months ended September 30, 2020 and
2019, was $112 thousand and $6 thousand of income, respectively. Derivative
income for the nine months ended September 30, 2020, was principally related to
the change in fair value on foreign currency forward exchange contracts at OPKO
Chile.
Other income (expense), net. Other income (expense), net for the nine months
ended September 30, 2020 and 2019, was $10.6 million of income and $(20.4)
million of expense, respectively. Other income for the nine months ended
September 30, 2020 primarily consisted of realized and unrealized gains
recognized during the period on our investment in VBI, offset by net unrealized
losses recognized during the period on our investment in Eloxx. Other expense
for the nine months ended September 30, 2019 primarily consisted of net
unrealized losses recognized during the period on Eloxx and VBI.
Income tax provision. Our income tax provision for the nine months ended
September 30, 2020 and 2019 was $4.0 million and $3.6 million, respectively, and
reflects quarterly results using our expected effective tax rate.  For the nine
months ended September 30, 2020, the tax rate differed from the U.S. federal
statutory rate of 21% primarily due to the relative mix in earnings and losses
in the U.S. versus foreign tax jurisdictions, the impact of certain discrete tax
events and operating results in tax jurisdictions which do not result in a tax
benefit.
Loss from investments in investees. We have made investments in certain early
stage companies that we perceive to have valuable proprietary technology and
significant potential to create value for us as a shareholder or member. We
account for these investments under the equity method of accounting, resulting
in the recording of our proportionate share of their losses until our share of
their loss exceeds our investment. Until the investees' technologies are
commercialized, if ever, we anticipate they will report net losses. Loss from
investments in investees was $0.4 million and $2.4 million for the nine months
ended September 30, 2020 and 2019, respectively.

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LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2020, we had cash and cash equivalents of approximately $36.3
million. Cash provided by operations of $5.2 million for the nine months ended
September 30, 2020 principally reflects cash generated by our diagnostics
segment due to the positive impact of increased COVID-19 testing volumes, which
was partially offset by general and administrative expenses related to our
corporate operations and research and development activities. Cash used in
investing activities for the nine months ended September 30, 2020 primarily
reflects capital expenditures of $26.9 million, which was partially offset by
proceeds from the sale of equity securities of $15.1 million. Cash used in
financing activities of $43.2 million primarily reflects net repayments on our
lines of credit. We have not generated sustained positive cash flow sufficient
to offset our operating and other expenses, and our primary sources of cash have
been from the public and private placement of equity, the issuance of the 2033
Senior Notes, 2023 Convertible Notes and 2025 Notes and credit facilities
available to us. However, as a result of the significant increase in testing
volumes resulting from the COVID-19 pandemic, and if our routine clinical and
genomic testing volumes continue to trend towards normalization with prior
periods, we anticipate generating cash from operations. We are unable to predict
how long the demand will continue for our COVID-19 related testing, whether
pricing and reimbursement policies for testing will sustain, or whether further
restrictions will be placed on elective procedures or if stay at home orders
will be reinstated and accordingly, the sustainability of the cash flow is
uncertain.
On February 25, 2020, we entered into a credit agreement with an affiliate of
Dr. Frost, pursuant to which the lender committed to provide us with an
unsecured line of credit in the amount of $100 million. Borrowings under this
line of credit bear interest at a rate of 11% per annum and may be repaid and
reborrowed at any time. The credit agreement includes various customary remedies
for the lender following an event of default, including the acceleration of
repayment of outstanding amounts under line of credit. The line of credit
matures on February 25, 2025. As of September 30, 2020, no funds were borrowed
under this line of credit.
On October 29, 2019, we issued 50 million shares of our Common Stock at a price
of $1.50 per share in an underwritten public offering, resulting in net proceeds
to the Company of approximately $70 million, after deducting underwriting
commissions and offering expenses. In November 2019, pursuant to an option the
Company granted the underwriters, we issued an additional 4,227,749 shares of
Common Stock at $1.50 per share, resulting in proceeds of approximately $6
million after deducting underwriting commissions.
In February 2019, we issued $200.0 million aggregate principal amount of the
2025 Notes in an underwritten public offering. The 2025 Notes bear interest at a
rate of 4.50% per year, payable semiannually in arrears on February 15 and
August 15 of each year. The notes mature on February 15, 2025, unless earlier
repurchased, redeemed or converted.
Holders may convert their 2025 Notes into shares of Common Stock at their option
at any time prior to the close of business on the business day immediately
preceding November 15, 2024 only under the following circumstances: (1) during
any calendar quarter commencing after the calendar quarter ended on March 31,
2019 (and only during such calendar quarter), if the last reported sale price of
our Common Stock for at least 20 trading days (whether or not consecutive)
during a period of 30 consecutive trading days ending on the last trading day of
the immediately preceding calendar quarter is greater than or equal to 130% of
the conversion price on each applicable trading day; (2) during the five
business day period after any five consecutive trading day period (the
"measurement period") in which the trading price per $1,000 principal amount of
2025 Notes for each trading day of the measurement period was less than 98% of
the product of the last reported sale price of our Common Stock and the
conversion rate on each such trading day; (3) if we call any or all of the 2025
Notes for redemption, at any time prior to the close of business on the
scheduled trading day immediately preceding the redemption date; or (4) upon the
occurrence of specified corporate events set forth in the indenture governing
the 2025 Notes. On or after November 15, 2024, until the close of business on
the business day immediately preceding the maturity date, holders of the 2025
Notes may convert their notes at any time, regardless of the foregoing
conditions. Upon conversion, we will pay or deliver, as the case may be, cash,
shares of our Common Stock, or a combination of cash and shares of our Common
Stock, at our election.
The current conversion rate for the 2025 Notes is 236.7424 shares of Common
Stock per $1,000 principal amount of 2025 Notes (equivalent to a conversion
price of approximately $4.22 per share of Common Stock). The conversion rate for
the 2025 Notes is subject to adjustment in certain events but will not be
adjusted for any accrued and unpaid interest.
On February 1, 2019, holders tendered to us approximately $28.8 million
aggregate principal amount of 2033 Senior Notes pursuant to such holders' option
to require us to repurchase the 2033 Senior Notes as set forth in the indenture,
following which repurchase only $3.0 million aggregate principal amount of the
2033 Senior Notes remained outstanding. Holders of the remaining $3.0 million
principal amount of the 2033 Senior Notes may require us to repurchase such
notes for 100% of their principal amount, plus accrued and unpaid interest, on
February 1, 2023, on February 1, 2028, or following the occurrence of a
fundamental change as defined in the indenture governing the 2033 Senior Notes.
As of September 30, 2020, the total commitments under our Credit Agreement (as
defined below) with CB and our lines of credit with financial institutions in
Chile and Spain were $90.7 million, of which $11.0 million was drawn as of

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September 30, 2020. At September 30, 2020, the weighted average interest rate on
these lines of credit was approximately 5.3%. These lines of credit are
short-term and are used primarily as a source of working capital. The highest
aggregate principal balance at any time outstanding during the nine months ended
September 30, 2020 was $66.5 million. We intend to continue to draw under these
lines of credit as needed. There is no assurance that these lines of credit or
other funding sources will be available to us on acceptable terms, or at all, in
the future.
On November 5, 2015, BioReference and certain of its subsidiaries entered into a
credit agreement with JPMorgan Chase Bank, N.A. ("CB"), as lender and
administrative agent, as amended (the "Credit Agreement"). The Credit Agreement
provides for a $75.0 million secured revolving credit facility and includes a
$20.0 million sub-facility for swingline loans and a $20.0 million sub-facility
for the issuance of letters of credit. The Credit Agreement matures on November
5, 2021 and is guaranteed by all of BioReference's domestic subsidiaries. The
Credit Agreement is also secured by substantially all assets of BioReference and
its domestic subsidiaries, as well as a non-recourse pledge by us of our equity
interest in BioReference. Availability under the Credit Agreement is based on a
borrowing base comprised of eligible accounts receivables of BioReference and
certain of its subsidiaries, as specified therein. As of September 30, 2020,
$64.7 million remained available for borrowing under the Credit Agreement.
In February 2018, in a transaction exempt from registration under the Securities
Act, we issued the 2023 Convertible Notes in the aggregate principal amount of
$55.0 million. The 2023 Convertible Notes mature five years from the date of
issuance. Each holder of a 2023 Convertible Note has the option, from time to
time, to convert all or any portion of the outstanding principal balance of such
2023 Convertible Note, together with accrued and unpaid interest thereon, into
shares of our Common Stock, par value $0.01 per share, at a conversion price of
$5.00 per share of Common Stock. We may redeem all or any part of the then
issued and outstanding 2023 Convertible Notes, together with accrued and unpaid
interest thereon, pro ratably among the holders, upon no fewer than 30 days, and
no more than 60 days, notice to the holders. The 2023 Convertible Notes contain
customary events of default and representations and warranties of OPKO.
On October 12, 2017, EirGen, our wholly-owned subsidiary, and JT entered into
the JT Agreement granting JT the exclusive rights for the development and
commercialization of Rayaldee in Japan. The license grant to JT covers the
therapeutic and preventative use of Rayaldee for (i) SHPT in non-dialysis and
dialysis patients with CKD, (ii) rickets, and (iii) osteomalacia, as well as
such additional indications as may be added to the scope of the license subject
to the terms of the JT Agreement. In connection with the transaction, OPKO
received an initial upfront payment of $6 million, and OPKO received another $6
million upon the initiation of OPKO's phase 2 study for Rayaldee in dialysis
patients in the U.S. in September 2018. OPKO is also eligible to receive up to
an additional aggregate amount of $31 million upon the achievement of certain
regulatory and development milestones by JT for Rayaldee in the JT Territory,
and $75 million upon the achievement of certain sales based milestones by JT in
the JT Territory. OPKO will also receive tiered, double digit royalty payments
at rates ranging from low double digits to mid-teens on sales of Rayaldee within
the JT Territory. JT will, at its sole cost and expense, be responsible for
performing all development activities necessary to obtain all regulatory
approvals for Rayaldee in Japan and for all commercial activities pertaining to
Rayaldee in Japan.
In May 2016, EirGen, our wholly-owned subsidiary, partnered with VFMCRP through
the VFMCRP Agreement for the development and commercialization of Rayaldee in
the VFMCRP Territory. The license to VFMCRP potentially covers all therapeutic
and prophylactic uses of the product in human patients, provided that initially
the license is for the use of the product for the treatment or prevention of
SHPT related to patients with CKD and vitamin D insufficiency/deficiency
("VFMCRP Initial Indication"). Effective May 5, 2020, we entered into an
amendment to the VFMCRP Agreement (the "VFMCRP Amendment"), pursuant to which
the parties agreed to exclude Mexico, South Korea, the Middle East and all of
the countries of Africa from the VFMCRP Territory. In addition, the parties
agreed to certain amendments to the milestone structure and to reduce minimum
royalties payable.
We have received non-refundable and non-creditable payments of $52 million to
date and are eligible to receive up to an additional $230 million pursuant to
the terms of the VFMCRP Amendment upon the achievement of certain regulatory and
sales-based milestones tied to sales and reimbursement levels. In addition, we
are eligible to receive tiered royalties on sales of the product at percentage
rates that range from the mid-teens to the mid-twenties or a minimum royalty,
whichever is greater, upon commencement of sales of the product.
As part of the arrangement, the companies will share responsibility for the
conduct of trials specified within an agreed-upon development plan, with each
company leading certain activities within the plan. For the initial development
plan, the companies have agreed to certain cost sharing arrangements. VFMCRP
will be responsible for all other development costs that VFMCRP considers
necessary to develop the product for the VFMCRP Initial Indication in the VFMCRP
Territory except as otherwise provided in the VFMCRP Agreement. EirGen also
granted to VFMCRP an option to acquire an exclusive license to use, import,
offer for sale, sell, distribute and commercialize the product in the U.S. for
treatment of SHPT in dialysis patients with stage 5 CKD and vitamin D
insufficiency (the "Dialysis Indication"). Upon exercise of the Option, VFMCRP
will

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reimburse EirGen for all of the development costs incurred by EirGen with
respect to the product for the Dialysis Indication in the U.S. VFMCRP would also
pay EirGen up to an additional aggregate amount of $555 million upon the
achievement of certain milestones and would be obligated to pay royalties on
sales of the product at percentage rates that range from the mid-teens to the
mid-twenties or a minimum royalty, whichever is greater, upon commencement of
sales of the product.
In June 2020, we announced that the Japan phase 3 clinical trial met its primary
and secondary objectives, and demonstrated that the efficacy and safety of
Somatrogon administered weekly was comparable to GENOTROPIN® for injection
administered once-daily as measured by annual height velocity after 12 months of
treatment in treatment-naïve Japanese pre-pubertal children with GHD. In October
2019, we and Pfizer announced that the global phase 3 trial evaluating
Somatrogon (hGH-CTP) dosed once-weekly in prepubertal children with GHD met its
primary endpoint of non-inferiority to daily Genotropin® (somatropin) for
injection, as measured by annual height velocity at 12 months.
In 2014, Pfizer and OPKO entered into a worldwide agreement for the development
and commercialization of our long-acting hGH-CTP for the treatment of GHD in
adults and children, as well as for the treatment of growth failure in children
born small for gestational age. Under the terms of the agreements with Pfizer,
we received non-refundable and non-creditable upfront payments of $295 million
in 2015 and are eligible to receive up to an additional $275 million upon the
achievement of certain regulatory milestones. Pfizer received the exclusive
license to commercialize hGH-CTP worldwide. In addition, we are eligible to
receive initial tiered royalty payments associated with the commercialization of
hGH-CTP for Adult GHD with percentage rates ranging from the high teens to
mid-twenties. Upon the launch of hGH-CTP for Pediatric GHD in certain major
markets, the royalties will transition to regional, tiered gross profit sharing
for both hGH-CTP and Pfizer's Genotropin®.
In May 2020, we entered into a Restated Agreement with Pfizer which was
effective as of January 1, 2020, pursuant to which the parties agreed to share
all costs for Manufacturing Activities, as defined in the Restated Agreement,
for developing a licensed product for the three indications included in the
Agreement.
In connection with our acquisitions of CURNA, OPKO Diagnostics and OPKO Renal,
we agreed to pay future consideration to the sellers upon the achievement of
certain events, including up to an additional $19.1 million in shares of our
Common Stock to the former stockholders of OPKO Diagnostics upon and subject to
the achievement of certain milestones; and up to an additional $125.0 million in
either shares of our Common Stock or cash, at our option subject to the
achievement of certain milestones, to the former shareholders of OPKO Renal.
We believe that the cash and cash equivalents on hand at September 30, 2020,
cash from operations and the amounts available to be borrowed under our lines of
credit are sufficient to meet our anticipated cash requirements for operations
and debt service beyond the next 12 months. We based this estimate on
assumptions that may prove to be wrong or are subject to change, and we may be
required to use our available cash resources sooner than we currently expect. If
we acquire additional assets or companies, accelerate our product development
programs or initiate additional clinical trials, we will need additional funds.
Our future cash requirements, and the timing of those requirements, will depend
on a number of factors, including the impact of the COVID-19 pandemic on our
business, the approval and success of our products in development, particularly
our long acting hGH-CTP for which we expect to submit for approval in the U.S.
this year and in Europe and Japan thereafter, the commercial success of
Rayaldee, including the launch of Rayaldee by Vifor expected later this year,
BioReference's financial performance, possible acquisitions, the continued
progress of research and development of our product candidates, the timing and
outcome of clinical trials and regulatory approvals, the costs involved in
preparing, filing, prosecuting, maintaining, defending, and enforcing patent
claims and other intellectual property rights, the status of competitive
products, the availability of financing, our success in developing markets for
our product candidates and results of government investigations, payor claims,
and legal proceedings that may arise, including, without limitation class action
and derivative litigation to which we are subject, and our ability to obtain
insurance coverage for such claims. We have not generated sustained positive
cash flow and if we are not able to secure additional funding when needed, we
may have to delay, reduce the scope of, or eliminate one or more of our clinical
trials or research and development programs or possible acquisitions or reduce
our marketing or sales efforts or cease operations.
Additionally, the rapid development and fluidity of the COVID-19 pandemic makes
it very difficult to predict its ultimate impact on our business, results of
operations and liquidity. The pandemic presents a significant uncertainty that
could materially and adversely affect our results of operations, financial
condition and cash flows, including due to a continued negative impact on
non-COVID-related diagnostics testing services provided by BioReference in our
diagnostics segment, notwithstanding that our results of operations have been
positively impacted by our provision of COVID-19 testing services. Further,
deteriorating economic conditions globally have resulted in a challenging
capital raising environment, which could materially limit our access to capital,
whether through the issuance and sale of our common stock, debt securities or
otherwise, as well as through bank facilities and lines of credit. Events
resulting from the effects of COVID-19 could negatively impact our ability to
comply with certain covenants in the Credit Agreement or require that we pursue
alternative financing. We can provide no assurance that any such alternative
financing, if required, could be obtained on acceptable terms or at all. The

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combination of potential disruptions to our business resulting from COVID-19
together with and volatile credit and capital markets could adversely impact our
future liquidity, which could have an adverse effect on our business and results
of operations. We will continue to monitor and assess the impact COVID-19 may
have on our business and financial results.
The following table provides information as of September 30, 2020, with respect
to the amounts and timing of our known contractual obligation payments due by
period.
                                       Remaining
Contractual obligations           three months ending
(In thousands)                     December 31, 2020            2021              2022              2023              2024           Thereafter            Total
Open purchase orders              $         195,241          $    883          $     22          $      -          $     -          $        -          $ 196,146
Operating leases                              3,182             7,565             6,352             5,231            3,905              11,070             37,305
Finance leases                                  631             2,174             1,188               610              275                   2              4,880
2033 Senior Notes, 2025 and
2023 Convertible Notes                            -                 -                 -                 -            3,050             209,061            212,111
Deferred payments                             3,750             7,500             3,575                 -                -                   -             14,825
Mortgages and other debts
payable                                         317               986               772               571              478                  90              3,214
Lines of credit                              10,993                 -                 -                 -                -                   -             10,993

Interest commitments                            291               302               284            13,994              260              39,121             54,252
Total                             $         214,405          $ 19,410          $ 12,193          $ 20,406          $ 7,968          $  259,344          $ 533,726


The preceding table does not include information where the amounts of the
obligations are not currently determinable, including the following:
- Contractual obligations in connection with clinical trials, which span over
two years, and that depend on patient enrollment. The total amount of
expenditures is dependent on the actual number of patients enrolled and as such,
the contracts do not specify the maximum amount we may owe.
- Product license agreements effective during the lesser of 15 years or patent
expiration whereby payments and amounts are determined by applying a royalty
rate on uncapped future sales.
- Contingent consideration that includes payments upon achievement of certain
milestones including meeting development milestones such as the completion of
successful clinical trials, NDA approvals by the FDA and revenue milestones upon
the achievement of certain revenue targets all of which are anticipated to be
paid within the next seven years and are payable in either shares of our Common
Stock or cash, at our option, and that may aggregate up to $149.1 million.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes to our critical accounting policies and estimates
described in our Annual Report on Form 10-K for the fiscal year ended December
31, 2019, that have a material impact on our Condensed Consolidated Financial
Statements and related notes.
RECENT ACCOUNTING PRONOUNCEMENTS
Recently adopted accounting pronouncements.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,"
which amends the impairment model by requiring entities to use a forward-looking
approach based on expected losses rather than incurred losses to estimate credit
losses on certain types of financial instruments, including trade receivables.
This may result in the earlier recognition of allowances for losses. The ASU is
effective for public entities for fiscal years beginning after December 15,
2019, with early adoption permitted. The adoption of ASU 2016-13 on January 1,
2020, did not have a significant impact on our Condensed Consolidated Financial
Statements.
Pending accounting pronouncements.
In August 2020, the FASB issued ASU No. 2020-06, "Debt-Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40)." ASU 2020-06 will simplify the accounting
for convertible instruments by reducing the number of accounting models for
convertible debt instruments and convertible preferred stock. The ASU is
effective for public entities for fiscal years beginning after December 15,
2021, with early adoption permitted. We are currently evaluating the impact of
this new guidance on our Condensed Consolidated Financial Statements.

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