Opko Health's Philip Frost Is Trying to Catch Lightning an a Bottle (Again)

By Markets Fool.com

Serial deal-maker Philip Frost made billions selling Ivax to Teva Pharmaceutical, but his latest company may prove to be even a bigger moneymaker. After serving as chairman at Teva following Teva's $7.4 billion acquisition of Ivax, Frost stepped down in 2013 to take the top seat at Opko Health (NASDAQ: OPK). From his CEO perch, Frost has been feverishly doing deals to turn Opko Health into a major player in diagnostics, lab services, and biopharma. With two drugs already approved and a chance for his company to become profitable next year, is Frost's Opko Health about to take a leap forward?

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In this clip from The Motley Fool's Industry Focus: Healthcarepodcast, analyst Kristine Harjes and contributor Todd Campbell discuss how Frost is turning Opko Health into a healthcare giant.

A full transcript follows the video.

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This podcast was recorded on July 27, 2016.

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Kristine Harjes: The third one on our list today is Phillip Frost. This is the guy that is the CEO of Opko Health. He founded it in 2007. The ticker is OPK, and they've got a market cap of around $5.4 billion.

Todd Campbell: Phillip Frost is definitely a "sum is greater than the parts" kind of manager. He has made billions of dollars over a lifetime career, 40, 50 years, by cobbling together different companies and then turning some into a big enough piece where he could then sell it to another company. The company that made him probably most well known to investors was Ivax, which he sold to Teva Pharmaceutical for about $7 billion back in 2006. He does have a penchant for going out and being very highly acquisitive. He's shown that he knows how to navigate the marketplace and to make money for investors. Hopefully he'll be able to do that again with Opko Health, which is a very intriguing company on its own already.

Harjes: They have taken a bunch of really interesting acquisitions already. Even just no more than a month ago they announced that they bought a company called Transition Therapeutics for $60 million, which is also a pretty small acquisition, but it's bringing some really interesting candidates to Opko. They're getting a little bit more beefy of a diabetes pipeline, some obesity drugs. I think there's even a mid-stage Alzheimer candidate in there. This has been called a classic Phil Frost deal by somebody that works with them, because this is what he does. He buys up these companies and he makes them better than they were. He makes them profitable.

Campbell: Yeah. You look at probably the biggest deal he's made for Opko so far, is last year's purchase of BioReference Labs, which is a specialty lab company. Immediately gives Opko health $1 billion roughly in sales that it can leverage. It puts the company on a path to turn profitable for the first time next year, and that of course gives it a lot more financial flexibility to be able to go out and do a lot of the deals like you just mentioned. In the past he's also orchestrated deals that have landed a fairly nice pile of late-stage pipeline, and now turning commercial, drugs. He licensed Varubi to Tesaro, which we just mentioned. That's one drug that's in his pipeline. They just won approval for a vitamin D pro hormone, which is being sold under the name Rayaldee, which Frost seems to think has a lot of potential to be a big seller.

Harjes: $12 billion potential.

Campbell: It's also got a human growth hormone drug in development with late stage data coming soon. That drug is licensed to Pfizer.

Harjes: Yeah, as you mentioned, this is a company that is expected to be profitable next year. They really appear to be on the cusp. They're supposedly going to have 3 FDA-approved drugs on the market by the end of 2017. We'll see what their future holds.

Campbell: Yeah, it's really interesting, too. You can't really look at it this way, but Frost has been around a long time. I think he's about 80 years old. I look at him and I say, "What's his goal with Opko?" If he's got a history and track record of doing M&A, is it possible that he wants to turn Opko into something big relatively quickly, and then be able to turn around and sell that? I don't know. We'll have to keep an eye on it. See how these drugs roll out. See whether or not they hit the profitability targets that are being set for them next year. But this is a very intriguing company that investors ought to know about.

Harjes: And a very intriguing person, too, that investors ought to know about.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.