OPKO's Frost: BioReference Was a Tremendous Acquisition (Audio)

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Palett and that's a Bloomberg Business Flash. You're listening to Taking Stock with Kathleen and pin Box on Bloomberg Radio. Dr Philip Frost is a physician a dermatologist who has become a billionaire investor as the chairman and CEO of UPco Health, one of the most respected entrepreneurs in healthcare. He sat down with taking Stock to discuss his company's product pipeline, his views on drug pricing, and what his

current outlook is for the pharmaceutical industry. I think we're living in a very special time in the history of the pharmaceutical industry and then the history of man for that matter. For the less one years, we've been accumulating the technological infrastructure that has permitted the stepwise the helpment of more and more specific, more and more effective drugs.

And we're at the point now where there's enough critical mass of technology with enough people working in the field so that they can bring together these new resources to create all kinds of therapy. So within the next ten twenty years, I imagine that a lot of the conditions that were not approachable will all of a sudden be treatable and curable. We see little by little that happening.

So from our point of view, we are very excited to be able to participate that in whatever way we can, even if it's a small part, but there is a lot to be done and we're excited. Well, give us an update on some of the drugs that you have developed, and I'd like to start with four key score because is potentially a game changer for anyone who is unfortunate to come down with aggressive prostate cancer. You're absolutely right.

The four case square was developed in large measure right here in New York at Memorial Slumpcuttering Hospital by Peter Scardino and his team. Peter was at the time the

head of the urology section. Now he's the head of surgery, but he, working with a team in Finland who had been added for at least a dozen years, perfected the test, which involves using four different enzymes that a man produces in his g US system, one of which is the p s A, a test that has been maligned recently, but the other three are in the same category called calicrons as the p s A. Two of them are proprietary to OpCo and occur in the blood primarily when

there is a serious prostate cancer present, unlike the p s A, which is more associated with a benign conditions. So the bottom line is that the four case score, a simple blood test that we can perform in our laboratories, will permit you to identify a man who has a serious cancer in the making, a serious press cancer, and so that that's the man that you want to watch

carefully and possibly treat. And the problem, of course is that the p s A results in over seventy false positives in the sense that they either have no disease on biopsy or a benign indolent form that doesn't need to be treated. So this net effective. This is that we can avoid more than fifty of the biopsies that

are now done. And I'm told that this is one of the most unpleasant experiences a man will ever go through, and at the same time pick up the important cancers if they're present, and at the same time save the health system a lot of money from the needless biopsies and the consequences of bleeding and infection and so forth. So there's the physician talking, the scientists talking. What about

the businessman. Because you can have the best drug, the best test in the world, and if you can't get something like a local coverage determination, if you can't get Medicare to say we'll pay for this so that other physicians and hospitals will pay for it, it's tough to get it to the people who need it, and it's tough to make money. So that's very, very true. But we're extremely confident because the data is so compelling. There are over a dozen UH publications in peer review journals

from all over the world. It's been given the stamp of approval by the A m A, by the NCC and the National Cancer Board that determines these matyrs and other prestigious groups. The data is so overwhelming that we've think that the re that the payers will up for reapprosement, and we are already getting payment for many of the important payers. Just recently, there were a few missteps one of the so called max of which there is more.

There are perhapsimately a dozen around the country. These are the agents that are contracted by Medicare to evaluate new tests. One of them came up with a positive opinion A AN L C D, and the next day another one came with a negative, after which the first positive one was withdrawn. This is what I consider a misstep or not necessarily in our part, because we never really submitted the data for them to consider. So everyone is aware

of this and we're in the process of dealing with that. Eventually, it has the opportunity, I think, to become, from an economic point of view, one of the more important tests in the history of the diagnostics business. So what does it do for your bottom line? Eventually? I think it will be a very important contributor, a very important acquisition for you. Last year, bio Reference the third largest full

service reference laboratory in the United States. How it's doing since you acquired it, and how it fits into the overall strategy and growth plan for OpCo Health. Well, this is a perfect example of the type of acquisition that we're interested in doing any day of the week. It added over a billion dollars of annual sales and it's

going to add a lot of profit. But even more important, from a strategic point of view, it's going to permit the more rapid marketing and sales and uptake of the four case score, which, as I had mentioned, has the opportunity for being one of the most important tests in the history of the industry. And it will become an outlet for many of the new diagnostic products that we have.

While on its own, it's growing with their normal business, one part of which is particularly exciting, and that's genomic testing. They are probably doing more gene sequencing than any company in the industry right now, and that part of the business is growing more quickly, and it's a more profitable part of the business than the rest of it. In retrospect, was a tremendous acquisition, both from a straight economic point of view as well as a long term strategic point

of view. Revenue of two fifty million dollars in the first quarter of this year, you say, if you get much bigger, well we're going hours. We anticipate that it will be well over a billion dollars for the calendar year. Just switching gears a bit, but certainly pricing, selling, marketing. Valiant Pharmaceuticals a poster child now for a predatory pricing model using that to boost growth. Has that hurt the industry? Has it? How does it affect what you do or

don't do? You know, I've been giving that a lot of thought lately because there's so much discussion about pricing in the industry, and you know that there are always opportunities to exploit a given a situation to the disadvantage of the patient and and payers. My experience and observation is that in general the industry is highly ethical and very very much sensitive to the needs of patients and

the players and the health system in general. But my thought was that looking at our product, for example, it costs a hell of a lot to develop a drug, both in human terms the time and energy of a large number of people and a lot of money, and there's a lot of risk associated with it. We all know that of the drugs that are started in development,

a tiny percentage point up coming to market. So taking all that into account, if the companies are to be profitable so that they can continue to do the research and turn out these good products that are going to be breakthroughs in medicine and future, they need to make a profit. So the prices that I'll admit seemed very high for many products most often have a tremendous justification behind him. That was Dr Philip Frosty is the chairman

and the chief executive of up Go Health. Up Go Health that shares down a little bit more than seven and a half percent so far this year. And Kathleen, I know in speaking with the Dr Frost, he's got, of course, of major interest in the success of the company because he owns nearly thirty percent of the stock

of UPco Health. You know him. He is such an impressive man, uh well along in life and so focused and so innovative and and looking for the next successful, profitable and very helpful to mankind treatment and drug whatever it is. He's well, very interesting conversation about the new test for prostate cancer and his thoughts on drug some issues. You're listening to taking Stock. I'm Pim Fox my co host Kathleen Hayes, and you're listening to Bloomberg Radio.