What changed in OPKO HEALTH, INC.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of OPKO HEALTH, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+215 added−198 removedSource: 10-K (2024-03-01) vs 10-K (2023-02-27)
Top changes in OPKO HEALTH, INC.'s 2023 10-K
215 paragraphs added · 198 removed · 145 edited across 2 sections
- Item 7. Management's Discussion & Analysis+199 / −179 · 131 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+16 / −19 · 14 edited
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
131 edited+68 added−48 removed110 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
131 edited+68 added−48 removed110 unchanged
2022 filing
2023 filing
Biggest changeThe following table summarizes the components of our research and development expenses: 68 Research and Development Expenses For the years ended December 31, 2021 2020 External expenses: Manufacturing expense for biological products $ 9,718 $ 5,326 Phase 3 studies 9,877 10,513 Post-marketing studies 70 1,270 Earlier-stage programs 17,268 14,811 Research and development employee-related expenses 19,497 21,931 Other internal research and development expenses 3,614 9,440 Third-party grants and funding from collaboration agreements (303) (2,142) Total research and development expenses $ 59,741 $ 61,149 Research and development expenses for the year ended December 31, 2021 was consistent with research and development expenses for the year ended December 31, 2020.
Biggest changeOther internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities. 59 Table of Contents The following table summarizes the components of our research and development expenses: Research and Development Expenses For the years ended December 31, 2023 2022 External expenses: Manufacturing expense for biological products $ 14,687 $ 10,038 Phase 3 studies 4,414 9,611 Post-marketing studies 591 35 Earlier-stage programs 45,476 14,347 Research and development employee-related expenses 33,719 25,440 Other internal research and development expenses 4,894 2,951 Third-party grants and funding from collaboration agreements (16,774 ) (1,147 ) Total research and development expenses $ 87,007 $ 61,275 The increase in research and development expenses for the year ended December 31, 2023 was primarily due to research expenses at ModeX driven by growth in our early-stage programs, including a $12.5 million payment to Sanofi under the Sanofi In-License Agreement and an increase in employee-related expenses, partially offset by lower expenses related to Somatrogon (hGH-CTP) due to the closure of the open-label extension studies in countries in which Somatrogon (hGH-CTP) received marketing authorization.
At December 31, 2022, we had 194 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through January 2023 with a notional value totaling approximately $11.9 million.
At December 31, 2022, we had 194 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various notional amounts maturing monthly through January 2023 with a notional value totaling approximately $11.9 million.
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.
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.
For The Years Ended December 31, 2022 and 2021 Our consolidated income (loss) from operations for the years ended December 31, 2022 and 2021 is as follows: 60 For the years ended December 31, (In thousands) 2022 2021 Change % Change Revenues: Revenue from services $ 755,630 $ 1,607,106 $ (851,476) (53) % Revenue from products 142,845 141,770 1,075 1 % Revenue from transfer of intellectual property and other 105,721 25,842 79,879 309 % Total revenues 1,004,196 1,774,718 (770,522) (43) % Costs and expenses: Cost of revenue 715,977 1,193,194 (477,217) (40) % Selling, general and administrative 372,672 468,857 (96,185) (21) % Research and development 73,887 76,850 (2,963) (4) % Contingent consideration (1,312) (1,703) 391 23 % Amortization of intangible assets 87,784 50,278 37,506 75 % Gain on sale of assets (18,559) (31,508) 12,949 41 % Total costs and expenses 1,230,449 1,755,968 (525,519) (30) % Income (loss) from operations (226,253) 18,750 (245,003) (1307) % Diagnostics For the years ended December 31, (In thousands) 2022 2021 Change % Change Revenues Revenue from services $ 755,630 $ 1,607,106 (851,476) (53) % Total revenues 755,630 1,607,106 (851,476) (53) % Costs and expenses: Cost of revenue 627,559 1,102,175 (474,616) (43) % Selling, general and administrative 284,388 357,633 (73,245) (20) % Research and development 12,024 18,652 (6,628) (36) % Amortization of intangible assets 23,870 30,579 (6,709) (22) % Gain on sale of assets (18,559) — (18,559) (100) % Total costs and expenses 929,282 1,509,039 (579,757) (38) % Income (loss) from operations (173,652) 98,067 (271,719) (277) % Revenue .
For The Years Ended December 31, 2022 and 2021 Our consolidated income (loss) from operations for the years ended December 31, 2022 and 2021 is as follows: For the years ended December 31, (In thousands) 2022 2021 Change % Change Revenues: Revenue from services $ 755,630 $ 1,607,106 $ (851,476 ) (53 )% Revenue from products 142,845 141,770 1,075 1 % Revenue from transfer of intellectual property and other 105,721 25,842 79,879 309 % Total revenues 1,004,196 1,774,718 (770,522 ) (43 )% Costs and expenses: Cost of revenue 715,977 1,193,194 (477,217 ) (40 )% Selling, general and administrative 372,672 468,857 (96,185 ) (21 )% Research and development 73,887 76,850 (2,963 ) (4 )% Contingent consideration (1,312 ) (1,703 ) 391 23 % Amortization of intangible assets 87,784 50,278 37,506 75 % Gain on sale of assets (18,559 ) (31,508 ) 12,949 41 % Total costs and expenses 1,230,449 1,755,968 (525,519 ) (30 )% Income (loss) from operations (226,253 ) 18,750 (245,003 ) (1307 )% Diagnostics For the years ended December 31, (In thousands) 2022 2021 Change % Change Revenues Revenue from services $ 755,630 $ 1,607,106 (851,476 ) (53 )% Total revenues 755,630 1,607,106 (851,476 ) (53 )% Costs and expenses: Cost of revenue 627,559 1,102,175 (474,616 ) (43 )% Selling, general and administrative 284,388 357,633 (73,245 ) (20 )% Research and development 12,024 18,652 (6,628 ) (36 )% Amortization of intangible assets 23,870 30,579 (6,709 ) (22 )% Gain on sale of assets (18,559 ) — (18,559 ) (100 )% Total costs and expenses 929,282 1,509,039 (579,757 ) (38 )% Income (loss) from operations (173,652 ) 98,067 (271,719 ) (277 )% Revenue .
Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities. 63 The following table summarizes the components of our research and development expenses: Research and Development Expenses For the years ended December 31, 2022 2021 External expenses: Manufacturing expense for biological products $ 10,038 $ 9,718 Phase 3 studies 9,611 9,877 Post-marketing studies 35 70 Earlier-stage programs 14,347 17,268 Research and development employee-related expenses 25,440 19,497 Other internal research and development expenses 2,951 3,614 Third-party grants and funding from collaboration agreements (1,147) (303) Total research and development expenses $ 61,275 $ 59,741 The increase in research and development expenses for the year ended December 31, 2022 was primarily due to research expenses at ModeX Therapeutics, partially offset by lower expenses related to Somatrogon (hGH-CTP) due to the closure of the open-label extension studies in countries with marketing authorization, lower expenditure on the Rayaldee COVID-19 study due to the study’s completion, and lower spending as a result of the sale of one of EirGen’s facilities in Waterford, Ireland to Horizon Therapeutics in 2021 discussed below.
Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities. 63 Table of Contents The following table summarizes the components of our research and development expenses: Research and Development Expenses For the years ended December 31, 2022 2021 External expenses: Manufacturing expense for biological products $ 10,038 $ 9,718 Phase 3 studies 9,611 9,877 Post-marketing studies 35 70 Earlier-stage programs 14,347 17,268 Research and development employee-related expenses 25,440 19,497 Other internal research and development expenses 2,951 3,614 Third-party grants and funding from collaboration agreements (1,147 ) (303 ) Total research and development expenses $ 61,275 $ 59,741 The increase in research and development expenses for the year ended December 31, 2022 was primarily due to research expenses at ModeX, partially offset by lower expenses related to Somatrogon (hGH-CTP) due to the closure of the open-label extension studies in countries with marketing authorization, lower expenditure on the Rayaldee COVID-19 study due to the study’s completion, and lower spending as a result of the sale of one of EirGen’s facilities in Waterford, Ireland to Horizon Therapeutics in 2021 discussed below.
When using the income approach, complex and judgmental matters applicable to the valuation process may include the following: 73 • Estimated useful life – The asset life expected to contribute meaningful cash flows is determined after considering expected regulatory approval dates (if unapproved), exclusivity periods and other legal, regulatory or contractual provisions. • Projections – Future revenues are estimated after considering many factors such as historical results, market opportunity, pricing, sales trajectories to peak sales levels, competitive environment and product evolution.
When using the income approach, complex and judgmental matters applicable to the valuation process may include the following: • Estimated useful life – The asset life expected to contribute meaningful cash flows is determined after considering expected regulatory approval dates (if unapproved), exclusivity periods and other legal, regulatory or contractual provisions. • Projections – Future revenues are estimated after considering many factors such as historical results, market opportunity, pricing, sales trajectories to peak sales levels, competitive environment and product evolution.
Corporate For the years ended December 31, (In thousands) 2022 2021 Change % Change Costs and expenses: Cost of revenue $ — $ (40) $ 40 100 % Selling, general and administrative 39,052 61,849 (22,797) (37) % Research and development 588 (1,543) 2,131 138 % Total costs and expenses 39,640 60,266 (20,626) (34) % Loss from operations $ (39,640) $ (60,266) $ 20,626 34 % 64 Operating loss for our unallocated corporate operations for the years ended December 31, 2022 and 2021 was $39.6 million and $60.3 million, respectively, and principally reflects general and administrative expenses incurred in connection with our corporate operations.
Corporate For the years ended December 31, (In thousands) 2022 2021 Change % Change Costs and expenses: Cost of revenue $ — $ (40 ) $ 40 100 % Selling, general and administrative 39,052 61,849 (22,797 ) (37 )% Research and development 588 (1,543 ) 2,131 138 % Total costs and expenses 39,640 60,266 (20,626 ) (34 )% Loss from operations $ (39,640 ) $ (60,266 ) $ 20,626 34 % Operating loss for our unallocated corporate operations for the years ended December 31, 2022 and 2021 was $39.6 million and $60.3 million, respectively, and principally reflects general and administrative expenses incurred in connection with our corporate operations.
As an integral part of our billing compliance program, we periodically assess our billing and coding practices, respond to payor audits on a routine basis, and investigate reported failures or suspected failures to comply with federal and state healthcare reimbursement requirements, as well as overpayment claims which may arise from time to time without fault on the 75 part of the Company.
As an integral part of our billing compliance program, we periodically assess our billing and coding practices, respond to payor audits on a routine basis, and investigate reported failures or suspected failures to comply with federal and state healthcare reimbursement requirements, as well as overpayment claims which may arise from time to time without fault on the part of the Company.
In April 2022, Pfizer notified OPKO that NGENLA (Somatrogon), a once-weekly injection to treat pediatric growth hormone deficiency, has received pricing approval in Germany and Japan. NGENLA was granted marketing authorization by the Ministry of Health, Labour and Welfare in Japan and by the European Commission in January and February of 2022, respectively.
In April 2022, Pfizer notified OPKO that NGENLA (Somatrogon), a once-weekly injection to treat pediatric growth hormone deficiency, received pricing approval in Germany and Japan. NGENLA was granted marketing authorization by the Ministry of Health, Labour and Welfare in Japan and by the European Commission in January and February of 2022, respectively.
Gain on sale of assets for the year ended December 31, 2022, was $18.6 million due to the sale of GeneDx Transaction. 62 Pharmaceuticals For the years ended December 31, (In thousands) 2022 2021 Change % Change Revenues: Revenue from products $ 142,845 $ 141,770 $ 1,075 1 % Revenue from transfer of intellectual property and other 105,721 25,842 79,879 309 % Total revenues 248,566 167,612 80,954 48 % Costs and expenses: Cost of revenue 88,418 91,059 (2,641) (3) % Selling, general and administrative 49,232 49,375 (143) — % Research and development 61,275 59,741 1,534 3 % Contingent consideration (1,312) (1,703) 391 23 % Amortization of intangible assets 63,914 19,699 44,215 224 % Gain on sale of asset — (31,508) 31,508 100 % Total costs and expenses 261,527 186,663 74,864 40 % Loss from operations (12,961) (19,051) 6,090 32 % Revenue .
Gain on sale of assets for the year ended December 31, 2022, was $18.6 million due to the sale of GeneDx Transaction. 62 Table of Contents Pharmaceuticals For the years ended December 31, (In thousands) 2022 2021 Change % Change Revenues: Revenue from products $ 142,845 $ 141,770 $ 1,075 1 % Revenue from transfer of intellectual property and other 105,721 25,842 79,879 309 % Total revenues 248,566 167,612 80,954 48 % Costs and expenses: Cost of revenue 88,418 91,059 (2,641 ) (3 )% Selling, general and administrative 49,232 49,375 (143 ) (0 )% Research and development 61,275 59,741 1,534 3 % Contingent consideration (1,312 ) (1,703 ) 391 23 % Amortization of intangible assets 63,914 19,699 44,215 224 % Gain on sale of asset — (31,508 ) 31,508 100 % Total costs and expenses 261,527 186,663 74,864 40 % Loss from operations (12,961 ) (19,051 ) 6,090 32 % Revenue from products .
Revenue from services for the year ended December 31, 2022 decreased by approximately $851.5 million compared to the year ended December 31, 2021. The decrease in revenue for the year ended December 31, 2022 primarily reflected reflects lower demand for COVID-19 testing and lower COVID-19 reimbursement of $650.3 million and $55.1 million, respectively.
Revenue from services for the year ended December 31, 2022 decreased by approximately $851.5 million compared to the year ended December 31, 2021. The decrease in revenue for the year ended December 31, 2022 primarily reflected lower demand for COVID-19 testing and lower COVID-19 reimbursement of $650.3 million and $55.1 million, respectively.
The following table summarizes the components of our research and development expenses: Research and Development Expenses For the years ended December 31, 2022 2021 External expenses: Research and development employee-related expenses 8,691 13,266 Other internal research and development expenses 3,333 5,386 Total research and development expenses $ 12,024 $ 18,652 The decrease in research and development expenses for the year ended December 31, 2022 primarily related to the development of more efficient clinical testing services at BioReference and as a result of the GeneDx Transaction.
The following table summarizes the components of our research and development expenses: Research and Development Expenses For the years ended December 31, 2022 2021 External expenses: Research and development employee-related expenses $ 8,691 $ 13,266 Other internal research and development expenses 3,333 5,386 Total research and development expenses $ 12,024 $ 18,652 The decrease in research and development expenses for the year ended December 31, 2022 primarily related to the development of more efficient clinical testing services at BioReference and as a result of the sale of GeneDx.
Each period we revalue the contingent consideration obligations associated with certain prior acquisitions to their fair value and record increases in the fair value as contingent consideration expense and decreases in the 78 fair value as a reduction in contingent consideration expense.
Each period we revalue the contingent consideration obligations associated with certain prior acquisitions to their fair value and record increases in the fair value as contingent consideration expense and decreases in the fair value as a reduction in contingent consideration expense.
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.
Upon conversion of a note, 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 Consideration Shares were valued at $219.4 million, based on the closing price per share of our Common Stock of $2.44 as reported by NASDAQ on the closing date, which reflected the deduction from the purchase price of the value of certain equity awards issued by the Company to ModeX employees in an aggregate amount equal to $12.4 million on the closing date.
Such shares were valued at $219.4 million, based on the closing price per share of our Common Stock of $2.44 as reported by NASDAQ on the closing date, which reflected the deduction from the purchase price of the value of certain equity awards issued by the Company to ModeX employees in an aggregate amount equal to $12.4 million on the closing date.
The Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, subject to certain exceptions, 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 composed of eligible accounts receivables of BioReference and certain of its subsidiaries, as specified therein.
The Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, subject to certain exceptions, 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 composed of eligible accounts receivable of BioReference and certain of its subsidiaries, as specified therein.
Selling, general and administrative expenses in our diagnostics segment increased primarily due to higher variable billing and compensation costs which resulted from an increase in volume and collections during the year ended December 31, 2021, and in marketing costs and other administrative costs directly associated with COVID-19 testing volumes.
Selling, general and administrative expenses in our diagnostics segment increased primarily due to higher variable billing and compensation costs which resulted from an increase in volume and collections during the year ended December 31, 2022, and in marketing costs and other administrative costs directly associated with COVID-19 testing volumes.
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40).” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.
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 Equty (Subtopic 815-40).” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.
In addition, clinical test reimbursement decreased $54.0 million year over year as a result of the change in the mix of tests ordered. Furthermore, as a result of our sale of GeneDx (as defined below) in 2022, genomic test revenues decreased by $63.9 million for the year ended December 31, 2022, as compared to the prior year.
In addition, clinical test reimbursement decreased $54.0 million year over year as a result of the change in the mix of tests ordered. Furthermore, as a result of our sale of GeneDx in 2022, genomic test revenues decreased by $63.9 million for the year ended December 31, 2022, as compared to the prior year.
We have historically 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.
We have historically 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 2023 Convertible Notes, the 2025 Convertible Notes, and credit facilities available to us.
We believe that the cash and cash equivalents on hand at December 31, 2022, 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 believe that the cash and cash equivalents on hand at December 31, 2023 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 limit foreign currency transaction risk through hedge transactions with foreign currency forward contracts. Under these forward contracts, for any rate above or below the fixed rate, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date.
We limit foreign currency transaction risk through hedge transactions with foreign currency forward contracts. Under these forward contracts, for any rate above or below the rate fixed by the contract, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date.
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.
Loss from investments in investees . We have made investments in certain early stage companies that we believe have valuable proprietary technology and significant potential to create value for us as a shareholder or member.
Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements except as required by applicable law.
Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in “ Item 1A — Risk Factors ” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements except as required by applicable law.
Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the consolidated financial results. During the years ended December 31, 2022 and 2021, the most significant currency exchange rate exposures were to the Euro and Chilean Peso.
Our financial statements are reported in USD; therefore, fluctuations in exchange rates affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting our consolidated financial results. During the years ended December 31, 2023, 2022 and 2021, the most significant currency exchange rate exposures were to the Euro and Chilean Peso.
The adoption of ASU 2020-06 at January 1, 2022 resulted in an increase of the 2025 Convertible notes of $21.6 million, a reduction of the Accumulated deficit of $17.5 million and a reduction of Additional paid-in capital of $39.1 million.
The adoption of ASU 2020-06 at January 1, 2022 resulted in an increase of the 2025 Convertible notes of $21.6 million, a reduction of the Accumulated deficit of $17.5 million and a reduction of Additional paid-in capital of $39.1 million. 74 Table of Contents
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.
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 at a conversion price of $5.00 per share.
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 August 30, 2024 and is guaranteed by all of BioReference’s domestic subsidiaries, subject to certain exceptions.
The Credit Agreement provides for a $50.0 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 August 30, 2025, and is guaranteed by all of BioReference’s domestic subsidiaries, subject to certain exceptions.
The decrease in operating loss for our unallocated corporate operations for the year ended December 31, 2022 was driven by decreases in legal and professional fees incurred partially offset by an increase in equity based compensation. Other Interest income .
The decrease in operating loss for our unallocated corporate operations for the year ended December 31, 2022 was driven by decreases in legal and professional fees incurred partially offset by an increase in equity based compensation. 64 Table of Contents Other Interest income .
Additionally, subject to GeneDx achieving certain revenue targets for the fiscal 70 years ending December 31, 2022 and 2023, we are eligible to receive an earnout payment in cash or stock (at GeneDx Holdings’ discretion) equal to a maximum of 30.9 million shares of GeneDx Holdings’ Class A common stock if paid in stock.
Additionally, subject to GeneDx achieving certain revenue targets for the fiscal years ended December 31, 2022 and 2023, we were eligible to receive an earnout payment in cash or stock (at GeneDx Holdings’ discretion) equal to a maximum of 30.9 million shares of GeneDx Holdings’ Class A common stock if paid in stock.
As of December 31, 2022 and 2021, we have liabilities of approximately $1.8 million and $5.0 million within Accrued expenses and Other long-term liabilities related to reimbursements for payor overpayments. Revenue from products. We recognize revenue from product sales when a customer obtains control of promised goods or services.
As of December 31, 2023 and 2022, we have liabilities of approximately $3.1 million and $1.8 million within Accrued expenses and Other long-term liabilities related to reimbursements for payor overpayments. Revenue from products. We recognize revenue from product sales when a customer obtains control of promised goods or services.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ( “ PSLRA ” ), Section 27A of the Securities Act of 1933, as amended, (the “ Securities Act ” ), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “ Exchange Act ” ), about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects.
Actual results could differ significantly from these estimates. Goodwill and intangible assets. Goodwill, IPR&D and other intangible assets acquired in business combinations, licensing and other transactions was $1.6 billion and $1.4 billion at December 31, 2022 and 2021, respectively.
Actual results could differ significantly from these estimates. Goodwill and intangible assets. Goodwill, IPR&D and other intangible assets acquired in business combinations, licensing and other transactions was $1.5 billion and $1.6 billion at December 31, 2023 and 2022, respectively.
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 $141.8 million.
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 $125.0 million. 68 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Use of estimates.
Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $39.9 million and $27.1 million at December 31, 2022 and 2021, respectively. We are subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions.
Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $34.6 million and $39.9 million at December 31, 2023 and 2022, respectively. We are subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions.
Net intangible assets other than goodwill were $1.0 billion and $1.1 billion at December 31, 2022 and 2021, respectively, including IPR&D of $195.0 million and $590.2 million at December 31, 2022 and 2021, respectively. Intangible assets are highly vulnerable to impairment charges, particularly newly acquired assets for recently launched products and IPR&D.
Net intangible assets other than goodwill were $0.9 billion and $1.0 billion at December 31, 2023 and 2022, respectively, including IPR&D of $195.0 million at December 31, 2023 and 2022. Intangible assets are highly vulnerable to impairment charges, particularly newly acquired assets for recently launched products and IPR&D.
With the achievement of these milestones, we received $85.0 million in milestone payments during the year ended December 31, 2022 under the Restated Pfizer Agreement. In February 2019, we issued $200.0 million aggregate principal amount of the 2025 Notes in an underwritten public offering.
With the achievement of these milestones, we received $85.0 million in milestone payments in 2022 under the Restated Pfizer Agreement. In February 2019, we issued $200.0 million aggregate principal amount of the 2025 Notes in an underwritten public offering.
Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which are used in our testing laboratories. Inventory obsolescence expense for the years ended December 31, 2022, 2021 and 2020 was $4.1 million, $6.5 million and $4.4 million, respectively. Contingent consideration.
Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which are used in our testing laboratories. Inventory obsolescence expense for the years ended December 31, 2023, 2022 and 2021 was $8.1 million, $4.1 million and $6.5 million, respectively. 73 Table of Contents Contingent consideration.
The use of different assumptions and judgments could result in a materially different estimate of fair value which may have a material impact on our results from operations and financial position. RECENT ACCOUNTING PRONOUNCEMENTS Recently adopted accounting pronouncements .
The use of different assumptions and judgments could result in a materially different estimate of fair value which may have a material impact on our results from operations and financial position. RECENT ACCOUNTING PRONOUNCEMENTS Accounting standards yet to be adopted .
Cost of revenue . Cost of revenue for the year ended December 31, 2022 decreased $474.6 million compared to the year ended December 31, 2021. Cost of revenue decreased primarily due to a decline in the volume of COVID-19 tests performed during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Cost of revenue decreased primarily due to a decline in the volume of COVID-19 tests performed during the year ended December 31, 2022 compared to the year ended December 31, 2021.
The Company paid the entirety of the $300.0 million purchase price in shares of Common Stock (the “Consideration Shares”) to the former stockholders of ModeX.
The Company paid the entirety of the $300.0 million purchase price in shares of Common Stock issued to the former stockholders of ModeX.
Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including the evolving impact of the COVID-19 pandemic on our business, the approval and success of our products in development, particularly our long acting Somatrogon (hGH-CTP) for which we have received approval in Europe, Japan, Australia and Canada, submitted for approval in the U.S. and received a Complete Response Letter in January 2022, the approval and success of Somatrogon (hGH-CTP) outside the United States, including in Europe, Japan, Australia and Canada, the commercial success of Rayaldee , BioReference’s financial performance, possible acquisitions and dispositions, 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.
Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including the approval and success of our products and products in development, particularly our long acting Somatrogon (hGH-CTP) for which we have received approval in over 50 markets, including the United States, Europe, Japan, Australia and Canada, the commercial success of Rayaldee , BioReference’s financial performance, possible acquisitions and dispositions, 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.
For the year ended December 31, 2022, negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $21.5 million million were recognized.
For the year ended December 31, 2023, and 2022, negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $19.2 million and $21.5 million, respectively, were recognized.
For the years ended December 31, 2022, 2021 and 2020, we recognized $27.3 million, $27.0 million and $36.8 million in net product revenue from sales of Rayaldee . Taxes collected from customers related to revenues from services and revenues from products are excluded from revenues. Revenue from intellectual property.
For the years ended December 31, 2023, 2022 and 2021, we recognized $31.0 million, $27.2 million and $27.0 million in net product revenue from sales of Rayaldee . Taxes collected from customers related to revenues from services and revenues from products are excluded from revenues. Revenue from intellectual property.
At December 31, 2022, the weighted average interest rate on these lines of credit was approximately 5.5%. 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 year ended December 31, 2022, was $66.5 million.
At December 31, 2023, the weighted average interest rate on these lines of credit was approximately 7.52%. 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 year ended December 31, 2023, was $29.7 million.
Due to the adoption of ASU 2020-06, interest expense decreased for the year ended December 31, 2022 compared to the prior year period due to the elimination of the discount created by recognizing a component of convertible debt in equity.
Due to the adoption of ASU 2020-06, interest expense decreased for the year ended December 31, 2022 compared to the prior year period due to the elimination of the discount created by recognizing a component of convertible debt in equity. Fair value changes of derivative instruments, net .
Based on the current financial performance of our diagnostic segment, if future results are not consistent with our estimates and assumptions, then we may be exposed to impairment charges, which could be material.
Based on the current financial performance of our diagnostic segment and our Ireland reporting unit, which includes Eirgen and Rayaldee , if future results are not consistent with our estimates and assumptions, then we may be exposed to impairment charges, which could be material.
Revenue from sales of Rayaldee for the years ended December 31, 2022 and 2021, was $27.3 million and $27.0 million, respectively.
Revenue from sales of Rayaldee for the years ended December 31, 2022 and 2021, was $27.3 million and $27.0 million, respectively. Revenue from transfer of intellectual property and other.
Changes in the contractual liabilities balance for the years ended December 31, 2022 are as follows: 77 (In thousands) Balance at December 31, 2021 $ 466 Balance at December 31, 2022 138 Revenue recognized in the period from: Amounts included in contracts liability at the beginning of the period $ 328 Concentration of credit risk and allowance for doubtful accounts .
Changes in the contractual liabilities balance for the years ended December 31, 2023 are as follows: (In thousands) Balance at December 31, 2022 $ 138 Balance at December 31, 2023 7 Revenue recognized in the period from: Amounts included in contracts liability at the beginning of the period $ 131 Concentration of credit risk and allowance for doubtful accounts .
For the years ended December 31, 2022, 2021 and 2020 we recorded $105.7 million, $25.8 million and $53.2 million of revenue from the transfer of intellectual property and other, respectively.
For the years ended December 31, 2023, 2022 and 2021, we recorded $180.7 million, $105.7 million and $25.8 million of revenue from the transfer of intellectual property and other, respectively.
Loss from investments in investees was $0.4 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively.
Loss from investments in investees was $0.1 million and $0.4 million for the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2021, 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 that do not result in a tax benefit.
For the year ended December 31, 2023, 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, and operating results in tax jurisdictions which do not result in a tax benefit.
In May 2021, we entered into exchange agreements with certain holders of the 2025 Notes pursuant to which the holders exchanged $55.4 million in aggregate principal amount of the outstanding 2025 Notes for 19,051,270 shares of our Common Stock (the “Exchange”). As of December 31, 2022, an aggregate principal amount of $142.1 million of the 2025 Notes was outstanding.
In May 2021, we entered into exchange agreements with certain holders of the 2025 Notes pursuant to which the holders exchanged $55.4 million in aggregate principal amount of the outstanding 2025 Notes for 19,051,270 shares of our Common Stock (the “Exchange”).
As of December 31, 2022, the total commitments under our amended and restated credit agreement, dated August 30, 2021 (as amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“CB”) and our lines of credit with financial institutions in Chile and Spain were $63.2 million, of which $31.8 million was drawn as of December 31, 2022.
As of December 31, 2023, the total commitments under our amended and restated credit agreement, dated August 30, 2021 (as amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“CB”) and our lines of credit with financial institutions in Chile and Spain were $37.9 million, of which $25.3 million was drawn as of December 31, 2023.
For the years ended December 31, 2022, and December 31, 2021, revenue from transfer of intellectual property and other principally reflects $9.3 million and $10.8 million, respectively, of revenue related to the Pfizer Transaction.
For the years ended December 31, 2023 and 2022, revenue from transfer of intellectual property and other principally reflects $4.1 million and $9.3 million, respectively, of revenue related to the Pfizer Transaction.
At December 31, 2021, we had 33 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through January 2022 with a notional value totaling approximately $2.6 million.
At December 31, 2023, we had 52 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various notional amounts maturing monthly through January 2024 with a notional value totaling approximately $2.9 million.
Selling, general and administrative expenses for the year ended December 31, 2021 also include $6.2 million of expense incurred in connection with certain legal matters and $40.0 million in administrative, IT, and marketing costs associated with our investment in the launch of Scarlet Health. Research and development expenses .
Selling, general and administrative expenses for the year ended December 31, 2022 also include expenses incurred in connection with certain legal matters and administrative, IT, and marketing costs associated with our investment in the launch of Scarlet Health. Research and development expenses .
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and for operating loss and tax credit carryforwards.
Income taxes. Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and for operating loss and tax credit carryforwards.
Loss from investments in investees was $0.6 million and $0.5 million for the years ended December 31, 2021 and 2020, respectively. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2022, we had cash and cash equivalents of approximately $153.2 million.
Loss from investments in investees was $0.4 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2023, we had cash and cash equivalents of approximately $95.9 million.
As of December 31, 2022, $16.8 million remained available for borrowing under the Credit Agreement. In connection with our agreements with Pfizer, VFMCRP, Nicoya and CAMP4, we are eligible to receive various milestone payments and royalty considerations.
As of December 31, 2023, $12.7 million remained available for borrowing under the Credit Agreement. 67 Table of Contents In connection with our agreements with Merck, Pfizer, VFMCRP, Nicoya and CAMP4, we are eligible to receive various milestone payments and royalty considerations.
Amortization expense declined during the year ended December 31, 2022 as a result of the GeneDx Transaction and due to acquired intangible assets becoming fully amortized. Gain on sale of assets .
Amortization expense declined during the year ended December 31, 2022 as a result of the GeneDx Transaction and the full amortization of certain acquired intangible assets. Gain on sale of assets.
Contingent consideration for the year ended December 31, 2020 was attributable to changes in assumptions regarding the timing of achievement of future milestones for OPKO Diagnostics, 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 .
Contingent consideration for the years ended December 31, 2023 and 2022, 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 .
Selling, general and administrative expenses for the years ended December 31, 2021 and 2020 were $357.6 million and $266.5 million, respectively.
Selling, general and administrative expenses . Selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were $284.4 million and $357.6 million, respectively.
Revenue from transfer of intellectual property and other for the year ended December 31, 2020 are the result of grants received under the CARES Act totaling $16.2 million. Cost of revenue . Cost of revenue for the year ended December 31, 2021 increased $278.2 million compared to the year ended December 31, 2020.
Revenue from transfer of intellectual property and other for the year ended December 31, 2021 represents grants received under the CARES Act totaling $16.2 million. Cost of revenue . Cost of revenue for the year ended December 31, 2022 decreased $474.6 million compared to the year ended December 31, 2021.
Furthermore, we are eligible to receive the additional $2.5 million upon the earlier of (i) Nicoya’s submission of the investigational new drug application to the Center for Drug Evaluation (“CDE”) of China, of which we received in February 2023.
Furthermore, we received the additional $2.5 million upon Nicoya’s submission of the investigational new drug application to the Center for Drug Evaluation of China in March 2023.
Through BioReference, we provide laboratory testing services, primarily to customers in the larger metropolitan areas in New York, New Jersey, Florida, Texas, Maryland, California, Pennsylvania, Delaware, Washington, DC, Illinois and Massachusetts, as well as to customers in a number of other states. We offer a comprehensive test menu of clinical diagnostics for blood, urine and tissue analysis.
Through BioReference, we offer our 4Kscore prostate cancer test and we provide laboratory testing services, primarily to customers in the larger metropolitan areas in New York, New Jersey, Florida, Texas, Maryland, Indiana, Virginia, California, Pennsylvania, Delaware, Washington, DC, Illinois and Massachusetts, as well as to customers in a number of other states.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress 76 for purposes of recognizing revenue from nonrefundable, upfront license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees.
Ultimately, potential changes in these assumptions may impact the estimated fair value of a reporting unit and result in an impairment if the fair value of such reporting unit is less than its carrying value.
We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. Ultimately, potential changes in these assumptions may impact the estimated fair value of a reporting unit and result in an impairment if the fair value of such reporting unit is less than its carrying value.
We may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault. We have periodically identified and reported overpayments, reimbursed payors for overpayments and taken appropriate corrective action.
We may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault.
Amortization of intangible assets was $30.6 million and $36.2 million, for the years ended December 31, 2021 and 2020, respectively. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.
Amortization of intangible assets . Amortization of intangible assets was $20.2 million and $23.9 million for the years ended December 31, 2023 and 2022, respectively. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.
If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment charges were recognized for the years ended December 31 2022, 2021, and 2020.
If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.
The composition of revenue from services by payor for the years ended December 31, 2022 and 2021 was as follows: For the years ended December 31, (In thousands) 2022 2021 Healthcare insurers $ 326,144 $ 520,244 Government payers 97,191 222,242 Client payers 316,309 843,405 Patients 15,986 21,215 Total $ 755,630 $ 1,607,106 Client payors include cities, states and companies for which BioReference provides COVID-19 testing services.
For the year ended December 31, 2021, positive revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $40.4 million were recognized, primarily due to an increase in COVID-19 test reimbursement estimates. 61 Table of Contents The composition of revenue from services by payor for the years ended December 31, 2022 and 2021 was as follows: For the years ended December 31, (In thousands) 2022 2021 Healthcare insurers $ 326,144 $ 520,244 Government payers 97,191 222,242 Client payers 316,309 843,405 Patients 15,986 21,215 Total $ 755,630 $ 1,607,106 Client payors include cities, states and companies for which BioReference provides COVID-19 testing services.
Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are also considered variable consideration and are included in the determination of the estimated transaction price for providing services.
We have periodically identified and reported overpayments, reimbursed payors for overpayments and taken appropriate corrective action. 70 Table of Contents Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are also considered variable consideration and are included in the determination of the estimated transaction price for providing services.
Fair value changes of derivative instruments, net for the years ended December 31, 2021 and 2020, was $846 thousand and $50 thousand of income, respectively. Derivative income for the year ended December 31, 2021, was principally related to the change in fair value on foreign currency forward exchange contracts at OPKO Chile. Other income (expense), net .
Fair value changes of derivative instruments, net for the years ended December 31, 2023 and 2022 were $0.8 million of expense and $0.7 million reversal of expense, respectively. Derivative expense for the years ended December 31, 2023 and 2022 was principally related to the change in fair value on foreign currency forward exchange contracts at OPKO Chile.
For the years ended December 31, 2021 and 2020, positive revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $40.4 million and $0.3 million were recognized, respectively.
For the years ended December 31, 2023, and 2022, negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $19.2 million and $21.5 million, respectively, were recognized.
Research and development expenses for the pharmaceutical segment for the years ended December 31, 2021 and 2020 included equity-based compensation expense of $1.3 million and $1.6 million, respectively. Contingent consideration . Contingent consideration for the years ended December 31, 2021 and 2020 was $1.7 million and $1.9 million reversal of expense, respectively.
Research and development expenses for the pharmaceutical segment for the years ended December 31, 2023 and 2022 included equity-based compensation expenses of $4.0 million and $2.6 million, respectively. Contingent consideration . Contingent consideration for the years ended December 31, 2023 and 2022 reflected reversals of expense of $1.0 million and $1.3 million, respectively.
ModeX has a robust early-stage pipeline with assets in key areas of immuno-oncology and infectious diseases, and we intend to further expand our pharmaceutical product pipeline through ModeX’s portfolio of development candidates.
Aditionally, in May 2022, we acquired ModeX, a biotechnology company focused on developing innovative multi-specific immune therapies for cancer and infectious disease candidates. ModeX has a robust early-stage pipeline with assets in key areas of immuno-oncology and infectious diseases, and we intend to further expand our pharmaceutical product pipeline through ModeX’s portfolio of development candidates.
Under the terms of the VFMCRP Agreement, we are entitled to receive up to an additional $17 million in regulatory milestones and $207 million in milestone payments tied to launch, pricing and sales of Rayaldee , including a $3.0 million milestone payment we recognized during the year ended December 31, 2022 following the first sale of Rayaldee in Europe.
Under the terms of the VFMCRP Agreement, we are entitled to receive up to an additional $15 million in regulatory milestones and $200 million in milestone payments tied to the launch, pricing and sales of Rayaldee , including a $7 million regulatory milestone payment we recorded in the first quarter of 2023 triggered by the German price approval for Rayaldee and $3 million regulatory milestone payment we recognized in 2022 following the first sale of Rayaldee in Europe.
GeneDx Holdings paid to the Company aggregate consideration of $150 million in cash (before deduction of transaction expenses and other customary purchase price adjustments), together with the Closing Shares.
GeneDx Holdings paid to the Company aggregate consideration of $150 million in cash (before deduction of transaction expenses and other customary purchase price adjustments), together with the Closing Shares (as defined in Note 1 to the audited consolidated financial statements contained in this Annual Report on Form 10-K).
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
14 edited+2 added−5 removed5 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
14 edited+2 added−5 removed5 unchanged
2022 filing
2023 filing
Biggest changeOur derivative activities, which consist of foreign exchange forward contracts, are initiated to economically hedge forecasted cash flows that are exposed to foreign currency risk. The foreign exchange forward contracts generally require us to exchange local currencies for foreign currencies based on pre-established exchange rates at the contracts’ maturity dates.
Biggest changeThe foreign exchange forward contracts generally require us to exchange local currencies for foreign currencies based on pre-established exchange rates at the contracts’ respective maturity dates.
As exchange rates change, gains and losses on these contracts are generated based on the change in the exchange rates that are recognized in the Consolidated Statements of Operations and offset the impact of the change in exchange rates on the foreign currency cash flows that are hedged.
As exchange rates change, gains and losses on these contracts are generated based on the changes in the exchange rates that are recognized in the Consolidated Statements of Operations and offset the impact of the change in exchange rates on the foreign currency cash flows that are hedged.
For information on such open foreign exchange forward contracts for the years ended December 31, 2022 and 2021 see “Management’s Discussion and Analysis—Results of Operations— Foreign Currency Exchange Rates.” We do not engage in trading market risk sensitive instruments or purchasing hedging instruments or “other than trading” instruments that are likely to expose us to significant market risk, whether interest rate, foreign currency exchange, commodity price, or equity price risk.
For information on such open foreign exchange forward contracts for the years ended December 31, 2023 and 2022 see “Management’s Discussion and Analysis—Results of Operations— Foreign Currency Exchange Rates.” We do not engage in trading market risk sensitive instruments or purchasing hedging instruments or “other than trading” instruments that are likely to expose us to significant market risk, whether interest rate, foreign currency exchange, commodity price, or equity price risk.
Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the consolidated financial results. During the years ended December 31, 2022 and 2021, the most significant currency exchange rate exposures were to the Euro and Chilean Peso.
Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting our consolidated financial results. During the years ended December 31, 2023 and 2022, the most significant currency exchange rate exposures were to the Euro and Chilean Peso.
The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we may invest our excess cash in debt instruments of the U.S.
The primary objective of our investment activities is to preserve principal while at the same time maximizing yield without significantly increasing risk. To achieve this objective, we may invest our excess cash in debt instruments of the U.S.
Foreign Currency Exchange Rate Risk – We operate globally and, as such, we are subject to foreign exchange risk in our commercial operations as portions of our revenues are exposed to changes in foreign currency exchange rates, primarily the Chilean Peso, the Mexican Peso, and the Euro.
Foreign Currency Exchange Rate Risk – We operate globally, and, we are subject to foreign exchange risk in our commercial operations as portions of our revenues are exposed to changes in foreign currency exchange rates, primarily those for the Chilean Peso, the Mexican Peso, and the Euro.
For the years ended December 31, 2022, 2021, and 2020, approximately 21.6%, 7.4%, and 5.7% of revenue was denominated in currencies other than the U.S. Dollar (USD).
For the years ended December 31, 2023, 2022, and 2021, approximately 29.6%, 21.6%, and 7.4% of revenue was denominated in currencies other than the U.S. Dollar (USD).
To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than three months. 80
To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than three months. 75 Table of Contents
Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $39.9 million and $27.1 million at December 31, 79 2022 and 2021, respectively.
Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $34.6 million and $39.9 million at December 31, 2023 and 2022, respectively.
If the counterparties to the exchange contracts do not fulfill their obligations to deliver the contracted currencies, we could be at risk for currency related fluctuations. Our foreign exchange forward contracts primarily hedge exchange rates on the Chilean Peso to the U.S. dollar.
If the counterparties to the exchange contracts do not fulfill their obligations to deliver the contracted currencies, our results could be negatively impacted due to effectively unhedged currency related fluctuations. Our foreign exchange forward contracts primarily hedge exchange rates on the Chilean Peso to the U.S. dollar.
For the year ended December 31, 2022, fluctuations in exchange rates exposed us to additional foreign currency transaction risk, and as a consequence we entered into significantly more open foreign exchange forward contracts than in the prior year.
For the years ended December 31, 2023 and 2022, fluctuations in exchange rates exposed us to additional foreign currency transaction risk, and we entered into a greater number of foreign exchange forward contracts than in the prior year.
We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that a change in market interest rates would have a significant negative impact on the value of our investment portfolio except for reduced income in a low interest rate environment.
We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that a change in market interest rates would have a significant negative impact on the value of our investment portfolio except for reduced interest income. At December 31, 2023, we had cash and cash equivalents of $95.9 million.
As of December 31, 2022, the principal outstanding balances under BioReference’s Credit Agreement with CB and our Chilean and Spanish lines of credit was $31.8 million in the aggregate at a weighted average interest rate of approximately 5.5%.
The weighted average interest rate related to our cash and cash equivalents for the year ended December 31, 2023 was approximately 3.5%. As of December 31, 2023, the principal outstanding balances under BioReference’s Credit Agreement with CB and our Chilean and Spanish lines of credit was $25.3 million in the aggregate at a weighted average interest rate of approximately 7.52%.
Although we do not speculate in the foreign exchange market, we may from time to time manage exposures that arise in the normal course of business related to fluctuations in foreign currency exchange rates by entering into offsetting positions through the use of foreign exchange forward contracts. Certain firmly committed transactions may be hedged with foreign exchange forward contracts.
From time to time, we manage our exposure to fluctuations in foreign currency exchange rates by entering into offsetting positions through the use of foreign exchange forward contracts. Certain firmly committed transactions may be hedged with foreign exchange forward contracts.
Removed
At December 31, 2022, we had cash and cash equivalents of $153.2 million. The weighted average interest rate related to our cash and cash equivalents for the year ended December 31, 2022 was less than 1%.
Added
We do not enter into foreign exchange or other derivative contracts for trading or speculative purposes. Our derivative activities, which consist of foreign exchange forward contracts, are intended to economically hedge forecasted cash flows that are exposed to foreign currency risk.
Removed
In 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. However, in March 2021, the Ice Benchmark Administration announced that it will continue to publish the U.S. overnight, one-month, three-month, six-month and 12-month LIBOR through at least June 30, 2023.
Added
Our outstanding convertible senior and senior notes have fixed rates of interest; therefore, we are not exposed to interest rate rish on those instruments. See Note 7 and Note 22 to the audited consolidated financial statements contained in this Annual Report on Form 10-K.
Removed
In July 2021, the Alternative Reference Rates Committee formally recommended the use of the CME's Group's forward-looking SOFR as a replacement to LIBOR. The agreements governing our variable rate indebtedness currently include mechanisms pursuant to which the underlying interest rates will be determined according to an alternative index that replaces LIBOR.
Removed
Because there is still great uncertainty in the market with respect to the elimination of LIBOR and the potential transition to a replacement rate, the impact of such changes on our future debt repayment obligations, results of operations and financial condition remains uncertain.
Removed
Our $3.0 million aggregate principal amount of our 2033 Senior Notes has a fixed interest rate of 3%, our $55.0 million aggregate principal amount of our 2023 Convertible Notes has a fixed interest rate of 5%, and our $200.0 million aggregate principal amount of the 2025 Notes has a fixed interest rate of 4.50%, and therefore are not subject to fluctuations in market interest rates.