SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

Opko Health, Inc. – ‘10-Q’ for 6/30/12

On:  Thursday, 8/9/12, at 2:05pm ET   ·   For:  6/30/12   ·   Accession #:  1193125-12-346925   ·   File #:  1-33528

Previous ‘10-Q’:  ‘10-Q’ on 5/10/12 for 3/31/12   ·   Next:  ‘10-Q’ on 11/9/12 for 9/30/12   ·   Latest:  ‘10-Q’ on 11/6/23 for 9/30/23

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/09/12  Opko Health, Inc.                 10-Q        6/30/12   59:5.8M                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    424K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     24K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     24K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     18K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     18K 
38: R1          Document and Entity Information                     HTML     38K 
28: R2          Condensed Consolidated Balance Sheets (Unaudited)   HTML    134K 
36: R3          Condensed Consolidated Balance Sheets               HTML     60K 
                (Parenthetical) (Unaudited)                                      
40: R4          Condensed Consolidated Statements of Operations     HTML    116K 
                (Unaudited)                                                      
54: R5          Condensed Consolidated Statements of Comprehensive  HTML     39K 
                Loss (Unaudited)                                                 
30: R6          Condensed Consolidated Statements of Cash Flows     HTML    162K 
                (Unaudited)                                                      
35: R7          Business and Organization                           HTML     29K 
25: R8          Summary of Significant Accounting Policies          HTML     40K 
17: R9          Loss Per Share                                      HTML     24K 
55: R10         Composition of Certain Financial Statement          HTML     44K 
                Captions                                                         
42: R11         Acquisitions Investments and Licenses               HTML     78K 
41: R12         Discontinued Operations                             HTML     42K 
47: R13         Fair Value Measurements                             HTML     81K 
48: R14         Derivative Contracts                                HTML     43K 
45: R15         Related Party Transactions                          HTML     39K 
49: R16         Commitments and Contingencies                       HTML     25K 
37: R17         Segments                                            HTML     59K 
39: R18         Subsequent Events                                   HTML     23K 
44: R19         Summary of Significant Accounting Policies          HTML     92K 
                (Policies)                                                       
59: R20         Composition of Certain Financial Statement Caption  HTML     43K 
                (Tables)                                                         
51: R21         Acquisitions Investments and Licenses (Tables)      HTML     56K 
32: R22         Discontinued Operations (Tables)                    HTML     38K 
43: R23         Fair Value Measurements (Tables)                    HTML     81K 
34: R24         Derivative Contracts (Tables)                       HTML     32K 
14: R25         Segments (Tables)                                   HTML     51K 
52: R26         Summary of Significant Accounting Policies          HTML     39K 
                (Details)                                                        
56: R27         Loss Per Share (Details)                            HTML     28K 
21: R28         Composition of Certain Financial Statement Caption  HTML     80K 
                (Details)                                                        
20: R29         Acquisitions, Investments, and Licenses (Details)   HTML     57K 
23: R30         Acquisitions, Investments, and Licenses (Details    HTML     48K 
                1)                                                               
24: R31         Acquisitions, Investments, and Licenses (Details    HTML     56K 
                2)                                                               
26: R32         Acquisitions, Investments, and Licenses (Details    HTML    202K 
                Textual)                                                         
13: R33         Discontinued Operations (Details)                   HTML     46K 
50: R34         Discontinued Operations (Details 1)                 HTML     34K 
31: R35         Discontinued Operations (Details Textual)           HTML     23K 
33: R36         Fair Value Measurements (Details)                   HTML     45K 
16: R37         Fair Value Measurements (Details 1)                 HTML     71K 
58: R38         Fair Value Measurements (Details 2)                 HTML     32K 
12: R39         Fair Value Measurements (Details Textual)           HTML     40K 
27: R40         Derivative Contracts (Details)                      HTML     33K 
53: R41         Related Party Transactions (Details)                HTML    233K 
15: R42         Commitments and Contingencies (Details)             HTML     37K 
19: R43         Segments (Details)                                  HTML     40K 
22: R44         Segments (Details Textual)                          HTML     27K 
29: R45         Subsequent Events (Details)                         HTML     44K 
57: XML         IDEA XML File -- Filing Summary                      XML     87K 
18: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS    870K 
 6: EX-101.INS  XBRL Instance -- opk-20120630                        XML   1.19M 
 8: EX-101.CAL  XBRL Calculations -- opk-20120630_cal                XML    205K 
 9: EX-101.DEF  XBRL Definitions -- opk-20120630_def                 XML    617K 
10: EX-101.LAB  XBRL Labels -- opk-20120630_lab                      XML   1.19M 
11: EX-101.PRE  XBRL Presentations -- opk-20120630_pre               XML    826K 
 7: EX-101.SCH  XBRL Schema -- opk-20120630                          XSD    181K 
46: ZIP         XBRL Zipped Folder -- 0001193125-12-346925-xbrl      Zip    139K 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2012.

OR

For the transition period from              to             .

Commission file number 001-33528

OPKO Health, Inc.

(Exact Name of Registrant as Specified in Its Charter)

4400 Biscayne Blvd.

Miami, FL 33137

(Address of Principal Executive Offices) (Zip Code)

(305) 575-4100

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  YES    ¨  NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” (in Rule 12b-2 of the Exchange Act) (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    YES  ¨    NO  x

As of August 1, 2012, the registrant had 298,106,013 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS

2

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described below and in “Item 1A-Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2011, and described from time to time in our other reports filed with the Securities and Exchange Commission. Except as required by law, we do not undertake any obligation to update forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

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

3

Table of Contents

4

Table of Contents

5

Table of Contents

PART I. FINANCIAL INFORMATION

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

Item  1. Financial Statements

OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

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

6

Table of Contents

OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

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

7

Table of Contents

OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

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

8

Table of Contents

OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

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

9

Table of Contents

OPKO Health, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 BUSINESS AND ORGANIZATION

We are a multi-national pharmaceutical and diagnostics company that seeks to establish industry-leading positions in large and rapidly growing medical markets by leveraging our discovery, development and commercialization expertise and our novel and proprietary technologies. We are developing a range of solutions to diagnose, treat and prevent various conditions, including molecular diagnostics tests, point-of-care tests, and proprietary pharmaceuticals and vaccines. We plan to commercialize these solutions on a global basis in large and high growth markets, including emerging markets. We have already established emerging markets pharmaceutical platforms in Chile and Mexico, which are generating revenue and which we expect to generate positive cash flow and facilitate future market entry for our products currently in development. We also operate a specialty active pharmaceutical ingredients (“APIs”) manufacturer in Israel, which is currently generating revenue and positive cash flow, and which we expect to play a valuable role in the development of our pipeline of peptoids and other molecules for our proprietary molecular diagnostic and therapeutic products. We continue to actively explore opportunities to acquire complementary pharmaceuticals, compounds, technologies, and businesses.

We are incorporated in Delaware and our principal executive offices are located in leased offices in Miami, Florida. We lease office and lab space in Jupiter and Miramar, Florida, which is where our molecular diagnostics research and development and oligonucleotide research and development operations are based, respectively. We lease office, manufacturing, research and development and warehouse space in Woburn, Massachusetts for our point-of-care diagnostics business, and in Nesher, Israel for our API business. Our Chilean operations are located in leased offices and a leased warehouse facility in Santiago, Chile, and we own an office and manufacturing facility, and lease a warehouse facility in Guadalajara, Mexico.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the Company’s results of operations, financial position and cash flows have been made. The results of operations for the three and six months ended June 30, 2012 and cash flows for the six months ended June 30, 2012, are not necessarily indicative of the results of operations and cash flows that may be reported for the remainder of 2012 or for future periods. The unaudited condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2011.

Reclassifications. As further discussed in Note 6, the results of operations and the assets and the liabilities related to the instrumentation business have been accounted for as discontinued operations. Accordingly, the results of the operations related to the instrumentation business from prior periods have been reclassified to discontinued operations.

Principles of consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of OPKO Health, Inc. and our wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

10

Table of Contents

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

Marketable securities. Investments with original maturities of greater than 90 days and remaining maturities of less than one year are classified as marketable securities. Marketable securities include U.S. treasury securities and certificates of deposit. Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. Realized gains and losses, dividends, interest income, and declines in value judged to be other-than-temporary credit losses are included in Other income and expense, net. Amortization of any premium or discount arising at purchase is included in interest income.

Inventories and inventory reserves. Inventories are valued at the lower of cost or market (net realizable value). Cost is determined by the first-in, first-out method. We considers factors such as the amount of inventory on hand, estimated time required to sell such inventories, remaining shelf life, and current market conditions to determine whether inventories are stated at the lower of cost or market.

Revenue recognition. Generally, we recognize revenue from product sales when goods are shipped and title and risk of loss transfer to our customers. Our estimates for sales returns and allowances are based upon the historical patterns of products returned and allowances taken, matched against the sales from which they originated, and management’s evaluation of specific factors that may increase the risk of product returns.

Other revenue includes revenue related to upfront license payments, license fees and milestone payments received through our license, collaboration and commercialization agreements. We analyze our multiple-element arrangements to determine whether the elements can be separated and accounted for individually as separate units of accounting. In addition, Other revenue for the three and six months ended June 30, 2012, includes $0.2 million and $0.4 million, respectively, of revenue related to our consulting agreement with Neovasc Inc. and to revenue related to molecular diagnostics collaboration agreements. Refer to Note 5. We recognize this revenue on a straight-line basis over the contractual term of the agreements.

Non-refundable license fees for the out-license of our technology are recognized depending on the provisions of each agreement. We recognize non-refundable upfront license payments as revenue upon receipt if the license has standalone value and the fair value of our undelivered obligations, if any, can be determined. If the license is considered to have standalone value but the fair value of any of the undelivered items cannot be determined, the license payments are recognized as revenue over the period of our performance for such undelivered items or services. License fees with ongoing involvement or performance obligations are recorded as deferred revenue as an Accrued expense or Other long-term liability once received and generally are recognized ratably over the period of such performance obligation only after both the license period has commenced and we have delivered the technology. The assessment of our obligations and related performance periods requires significant management judgment. If an agreement contains research and development obligations, the relevant time period for the research and development phase is based on management estimates and could vary depending on the outcome of clinical trials and the regulatory approval process. Such changes could materially impact the revenue recognized, and as a result, management reviews the estimates related to the relevant time period of research and development on a quarterly basis.

Revenue from milestone payments related to arrangements under which we have continuing performance obligations are recognized as revenue upon achievement of the milestone only if all of the following conditions are met: the milestone payments are non-refundable; there was substantive uncertainty at the date of entering into the arrangement that the milestone would be achieved; the milestone is commensurate with either the vendor’s performance to achieve the milestone or the enhancement of the value of the delivered item by the vendor; the milestone relates solely to past performance; and the amount of the milestone is reasonable in relation to the effort expended or the risk associated with the achievement of the milestone. If any of these conditions are not met, the milestone payments are not considered to be substantive and are, therefore, deferred and recognized as revenue over the term of the arrangement as we complete our performance obligations.

Total deferred revenue recorded as Accrued expenses and Other long-term liabilities at June 30, 2012 and December 31, 2011 was $1.7 million and $0.9 million, respectively.

Derivative financial instruments. We record derivative financial instruments on our balance sheet at their fair value and the changes in the fair value are recognized in Other income and expense, net when they occur, the only exception being derivatives that qualify as hedges. To qualify the derivative instrument as a hedge, we are required to meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge. At June 30, 2012 and December 31, 2011, our forward contracts for inventory purchases did not meet the documentation requirements to be designated as hedges. Accordingly, we recognize all changes in fair values of the forward contracts in Other income and expense, net. Refer to Note 8. Changes in fair value of our common stock option and common stock warrant holdings of our available for sale investments are recognized in either Other income and expense, net, or Other comprehensive income, net. Refer to Note 7.

11

Table of Contents

Product warranties. Product warranty expense is recorded concurrently with the recording of revenue for product sales. The costs of warranties are accounted for as a component of cost of sales. We estimate warranty costs based on our estimated historical experience and adjust for any known product reliability issues.

Allowance for doubtful accounts. We analyze accounts receivable and historical bad debt levels, customer credit worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts using the specific identification method. Our reported net loss is directly affected by our estimate of the collectability of accounts receivable. The amount of allowance for doubtful accounts was $0.3 million and $0.4 million at June 30, 2012 and December 31, 2011, respectively.

Segment reporting. Our chief operating decision-maker (“CODM”) is comprised of our executive management team with the oversight of our Board of Directors. Our CODM reviews our operating results and operating plans and make resource allocation decisions on a Company-wide or aggregate basis. We currently manage our operations in one reportable segment, pharmaceuticals. The pharmaceutical segment consists of two operating segments, our (i) pharmaceutical research and development segment which is focused on the research and development of pharmaceutical products, diagnostic tests and vaccines, and (ii) the pharmaceutical operations we acquired in Chile, Mexico and Israel through the acquisition of OPKO Chile S.A. (“OPKO Chile”), Exakta-OPKO S.A. de C.V. (“Exakta-OPKO”) and FineTech Pharmaceuticals Ltd. (“FineTech”), respectively. We evaluate the performance of each operating segment based on operating profit or loss. There is no inter-segment allocation of interest expense and income taxes.

Equity-based compensation. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized in the statement of operations over the period during which an employee is required to provide service in exchange for the award. We record excess tax benefits, realized from the exercise of stock options as a financing cash inflow rather than as a reduction of taxes paid in cash flow from operations. Equity-based compensation arrangements to non-employees are recorded at their fair value on the measurement date. The measurement of equity-based compensation is subject to periodic adjustment as the underlying equity instruments vest. During the three months ended June 30, 2012 and 2011, we recorded $1.0 million and $1.9 million, respectively, of equity-based compensation expense. For the six months ended June 30, 2012 and 2011, we recorded $2.2 million and $3.6 million, respectively, of equity-based compensation expense.

Recent accounting pronouncements. On January 1, 2012, we adopted an amendment issued by the Financial Accounting Standards Board (“FASB”) to the accounting standards related to fair value measurements and disclosure requirements. This amendment revises the existing guidance on the use and application of fair value measurements and maintains a definition of fair value that is based on the notion of exit price. The adoption of this amendment did not have a material impact on our condensed consolidated financial statements.

On January 1, 2012, we adopted amendments issued by the FASB to the accounting standards related to the presentation of comprehensive income. These amendments revise the manner in which entities present comprehensive income in their financial statements and remove the option to present items of other comprehensive income in the statement of changes in stockholders’ equity. These amendments require an entity to report components of comprehensive income in either (1) a continuous statement of comprehensive income, or (2) two separate but consecutive statements of net income and other comprehensive income. We modified our condensed consolidated financial statements presentation using the latter alternative.

On January 1, 2012, we adopted revised guidance issued by the FASB related to the testing of goodwill for impairment. Under the revised guidance, an entity has the option to perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value prior to performing the two-step quantitative goodwill impairment test. If, based on the qualitative factors, an entity determines that the fair value of the reporting unit is greater than its carrying amount, then the entity would not be required to perform the two-step quantitative impairment test for that reporting unit. However, if the qualitative assessment indicates that it is not more-likely-than-not that the reporting unit’s fair value exceeds its carrying value, then the quantitative assessment must be performed. An entity is permitted to perform the qualitative assessment on none, some or all of its reporting units and may also elect to bypass the qualitative assessment and begin with the quantitative assessment of goodwill impairment. This amendment did not have a material impact on our condensed consolidated financial statements.

12

Table of Contents

NOTE 3 LOSS PER SHARE

Basic loss per share is computed by dividing our net loss by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing our net loss by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options. The dilutive impact of stock options and warrants is determined by applying the “treasury stock” method.

A total of 27,416,029 and 26,454,352 potential common shares have been excluded from the calculation of net loss per share for the three months ended June 30, 2012 and 2011, respectively, because their inclusion would be anti-dilutive. In addition, a total of 27,243,783 and 27,029,249 potential common shares have been excluded from the calculation of net loss per share for the six months ended June 30, 2012 and 2011, respectively, because their inclusion would be anti-dilutive. As of June 30, 2012, the holders of our Series D Preferred Stock could convert their Preferred Shares into approximately 11,884,944 shares of our Common Stock.

During the six months ended June 30, 2012, we issued 588,372 shares of our Common Stock as a result of Common Stock option and Common Stock warrant exercises.

NOTE 4 COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

The change in value of the intangible assets include the acquisition of ALS Distribuidora Limitada (Refer to Note 5) and the foreign currency fluctuation between the Chilean and Mexican pesos against the US dollar at June 30, 2012 and December 31, 2011.

13

Table of Contents

NOTE 5 ACQUISITIONS, INVESTMENTS, AND LICENSES

ALS acquisition

In April 2012, we completed the acquisition of ALS Distribuidora Limitada (“ALS”), a privately-held Chilean pharmaceutical company, pursuant to a stock purchase agreement entered into in January 2012. In connection with the transaction, we agreed to pay up to a total of $4.0 million in cash. Pursuant to the purchase agreement, we paid (i) $2.4 million in cash at closing, less certain liabilities, and (ii) $0.8 million in cash at closing into a separate escrow account to satisfy possible indemnity claims. We agreed to pay an additional $0.8 million, the remainder of the $4.0 million purchase price, upon the legal registration in the name of ALS of certain trademarks and product registrations previously held by Arama Laboratorios y Compañía Limitada.

FineTech acquisition

In December 2011, we purchased all of the issued and outstanding shares of FineTech Pharmaceuticals, Ltd., (“FineTech”) a privately held Israeli pharmaceutical company focused on the development and production of APIs. At closing, we delivered to the seller $27.7 million, of which $10.0 million was paid in cash and $17.7 million was paid in shares of our Common Stock. The shares delivered at closing were valued at $17.7 million based on the closing sales price per share of our Common Stock as reported by the New York Stock Exchange (“NYSE”) on the actual closing date of the acquisition, or $4.90 per share. The number of shares issued was based on the average closing sales price per share of our Common Stock as reported on the NYSE for the ten trading days immediately preceding the execution of the purchase agreement, or $4.84 per share. Upon finalization of the closing financial statements of FineTech, we recorded an additional $0.5 million purchase price adjustment related to a working capital surplus, as defined in the purchase agreement, which was paid to the seller in February 2012. In addition, the purchase agreement provides for the payment of additional cash consideration subject to the achievement of certain sales milestones.

The following table summarizes the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of FineTech at the date of acquisition, which are subject to change while contingencies that existed on the acquisition date are resolved:

Claros Diagnostics acquisition

In October 2011, we acquired Claros Diagnostics, Inc. (“OPKO Diagnostics”) pursuant to an agreement and plan of merger. We paid $10.0 million in cash, subject to certain set-offs and deductions, and $22.5 million in shares of our Common Stock, based on the closing sales price per share of our Common Stock as reported by the NYSE on the closing date of the merger, or $5.04 per share. The number of shares issued was based on the average closing sales price per share of our Common Stock as reported by the NYSE for the ten trading days immediately preceding the date of the merger, or $4.45 per share. Pursuant to the merger agreement, $5.0 million of the Common Stock consideration is held in a separate escrow account to secure the indemnification obligations of Claros Diagnostics Inc. under the merger agreement. In December 2011, we made a $0.2 million claim against the escrow for certain undisclosed liabilities. In addition, the merger agreement provides for the payment of up to an additional $19.1 million in shares of our Common Stock upon and subject to the achievement of certain milestones.

14

Table of Contents

The following table summarizes the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of OPKO Diagnostics at the date of acquisition, which are subject to change while contingencies that existed on the acquisition date are resolved:

Investments

In February 2012, we made a $1.0 million investment in ChromaDex Corporation (“ChromaDex”), a publicly-traded company and leading provider of proprietary ingredients and products for the dietary supplement, nutraceutical, food and beverage, functional food, pharmaceutical and cosmetic markets, in exchange for 1,333,333 shares of ChromaDex common stock, at $0.75 per share. In connection with our investment, we also entered into a license, supply and distribution agreement with ChromaDex pursuant to which we obtained exclusive distribution rights to certain of its products in Latin America. Our investment was part of a $3.7 million private placement by ChromaDex. Other investors participating in the private financing included certain related parties. Refer to Note 9.

We have determined that our ownership, along with that of our related parties do not provide us with significant influence over the operations of ChromaDex and as a result, we account for ChromaDex as an investment, available for sale, and we will record future changes in the fair value of ChromaDex as an unrealized gain or loss as a component of other comprehensive loss. During the six months ended June 30, 2012, we recorded an unrealized loss of $0.1 million in other comprehensive loss, reflecting a closing share price of ChromaDex of $0.69 per share on June 30, 2012.

In February 2012, we purchased from Biozone Pharmaceuticals, Inc., a publicly traded company that specializes in drug development, manufacturing, and marketing (“BZNE”), $1.7 million of 10% secured convertible promissory notes (the “BZNE Notes”), convertible into BZNE common stock at a price equal to $0.20 per common share, which BZNE Notes are due and payable on February 24, 2014 and ten year warrants (the “BZNE Warrants”) to purchase 8.5 million shares of BZNE common stock at an exercise price of $0.40 per share. The BZNE Notes are secured pursuant to a security agreement by a first priority lien in the assets of BZNE, including the stock of its subsidiaries. As further consideration for the purchase of the BZNE Notes by us, BZNE granted us exclusive, worldwide distribution rights to its enhanced formulation of propofol. The parties also entered into a license agreement pursuant to which we acquired a world-wide license for the development and commercialization of products utilizing BZNE’s proprietary drug delivery technology, including QuSomes, exclusively for OPKO in the field of ophthalmology and non-exclusive for all other therapeutic fields, subject in each case to certain excluded products. Refer to Note 9.

We have accounted for the BZNE Notes as an investment, available for sale. We recorded the BZNE Notes and BZNE Warrants at fair value on the date of acquisition. Refer to Note 7. Changes in fair value for the BNZE Notes will be recorded through other comprehensive loss each reporting period and changes in fair value for the beneficial conversion feature of the BZNE Notes and the BNZE Warrants will be recorded in Other income and expense, net in our Condensed Consolidated Statement of Operations. In July 2012, we exercised the BZNE Warrants and received 7,650,000 shares of BZNE common stock. The stock market trading activity in BZNE does not represent an active market and as such, we will determine the fair market value utilizing a business enterprise valuation approach in order to determine the fair value of our investment in BZNE.

We have determined that BZNE has an insufficient amount of equity to carry out its principal activities without additional financial support and, as such as, meets the definition of a variable interest entity (“VIE”). We determined that we do not have the power to direct the activities of BZNE which most significantly impact its economic performance and as such, have determined that we are not the primary beneficiary of BZNE. We will continue to evaluate our relationship with BZNE including if we convert the BZNE Notes or BZNE Warrants into BZNE common stock.

15

Table of Contents

In August 2011, we made an investment in Neovasc Inc. (“Neovasc”), a Canadian publicly traded medical technology company based in Vancouver, Canada. Neovasc is developing devices to treat cardiovascular diseases and is also a leading supplier of tissue components for the manufacturers of replacement heart valves. We invested $2.0 million and received two million Neovasc common shares, and two-year warrants to purchase an additional one million shares for $1.25 a share. We recorded the warrants on the date of grant at their estimated fair value of $0.7 million using the Black-Scholes-Merton Model. Prior to the warrants being readily convertible into cash, we recorded an unrealized gain of $0.2 million in other comprehensive loss. During the three and six months ended June 30, 2012 we recorded an unrealized loss of $0.2 million and $0.4 million, respectively related to these warrants to reflect the decrease in the closing price of Neovasc common stock as well as the remaining time to exercise, in Other income and expense, net. We also entered into an agreement with Neovasc to provide strategic advisory services to Neovasc as it continues to develop and commercialize its novel cardiac devices. In connection with the consulting agreement, Neovasc granted us 913,750 common stock options. The options were granted at (Canadian) $1.00 per share and vest annually over three years. We valued the options using the Black-Scholes-Merton Model at $0.8 million on the date of grant and will recognize the revenue over four years as Other revenue. Through June 30, 2012, we recorded unrealized gains relative to Neovasc’s closing share price of $0.2 million, including an unrealized loss $0.1 million during the three months ended June 30, 2012 and $32 thousand for the six months ended June 30, 2012. The unrealized gain reflects the increase in share price of Neovasc to (Canadian) $1.20 per share. Refer to Note 9.

In December 2010, we entered into a license agreement (the “TESARO License”) with TESARO, Inc. (“TESARO”) granting TESARO exclusive rights to the development, manufacture, commercialization and distribution of rolapitant and a related compound. In connection with the TESARO License, we also received an equity position in TESARO. We recorded the equity position at $0.7 million, the estimated fair value of the TESARO equity received based on a discounted cash flow model. Neither we nor our related parties have the ability to significantly influence TESARO and as such, we accounted for our investment in TESARO under the cost method until June 2012 on which date, TESARO had an initial public offering. As a result of the initial public offering, we determined TESARO had a readily determinable fair value and we changed the accounting for our investment in TESARO from a cost method investment to an investment, available for sale, and we recorded an unrealized gain in other comprehensive loss of $5.3 million. We will record future changes in the fair value of TESARO as an unrealized gain or loss as a component of other comprehensive loss. The closing share price of TESARO common stock was $13.99 on June 30, 2012.

In November 2010, we made a $0.7 million investment in Fabrus, Inc. (“Fabrus”), a privately-held early stage biotechnology company with next generation therapeutic antibody drug discovery and development capabilities. Fabrus is using its proprietary antibody screening and engineering approach to discover promising lead compounds against several important oncology targets. Our investment was part of a $2.1 million financing for Fabrus and included other related parties. Refer to Note 9.

In September 2009, we entered into an agreement pursuant to which we invested $2.5 million in cash in Cocrystal Discovery, Inc., a privately held biopharmaceutical company (“Cocrystal”), in exchange for 1,701,723 shares of Cocrystal’s Convertible Series A preferred stock. Cocrystal is focused on the discovery and development of novel antiviral drugs using a combination of protein structure-based approaches. Refer to Note 9.

In October 2011, Cocrystal received an investment of $7.5 million from Teva Pharmaceutical Industries Ltd. Dr. Phillip Frost, our Chief Executive Officer and Chairman of our Board of Directors, is Chairman of the Board of Directors of Teva Pharmaceutical Industries Limited. In connection with that investment, we determined Cocrystal no longer meets the definition of a variable interest entity as it has sufficient capital to carry out its principal activities without additional financial support. As a result of the Company’s and its related parties’ ownership interest, the Company and its related parties have the ability to significantly influence Cocrystal, and we account for our investment under the equity method.

In June 2009, we entered into a stock purchase agreement with Sorrento Therapeutics, Inc. (“Sorrento”), a publicly held company with a technology for generating fully human monoclonal antibodies, pursuant to which we invested $2.3 million in Sorrento. The closing stock price for Sorrento’s common stock, a thinly-traded stock, as quoted on the over-the-counter markets was $0.27 per share on June 30, 2012. Refer to Note 9.

Variable interest entities

We have determined that we hold variable interests in two entities Fabrus and BZNE. We made this determination as a result of our assessment that they do not have sufficient resources to carry out their principal activities without additional financial support.

16

Table of Contents

In order to determine the primary beneficiary of Fabrus, we evaluated our investment and our related parties’ investment, as well as our investment combined with the related party group’s investments to identify if we had the power to direct the activities that most significantly impact the economic performance of Fabrus. The related party group when considering our investment in Fabrus includes the Company, Frost Gamma Investments Trust, of which Dr. Frost is the sole trustee (the “Gamma Trust”), Hsu Gamma Investment, L.P., of which Dr. Jane Hsiao is the general partner (“Hsu Gamma”), and the Richard Lerner Family Trust of which Dr. Richard Lerner is the general partner. Drs. Frost, Hsiao and Lerner are all members of our Board of Directors. As of June 30, 2012 we own approximately 13% of Fabrus and Drs. Frost, Hsiao and Lerner own a total of 24% of Fabrus’ voting stock on an “as converted” basis, including 16% held by the Gamma Trust. Drs. Frost and Hsiao currently serve on the board of directors of Fabrus and represent 40% of its board. Based on this analysis, we determined that neither we nor our related parties have the power to direct the activities of Fabrus. However, we did determine that our related parties can significantly influence the success of Fabrus through our board representation and voting power. Accordingly, as we and our related parties have the ability to exercise significant influence over Fabrus’ operations, we account for our investment in Fabrus under the equity method.

In order to determine the primary beneficiary of BZNE, we evaluated our investment and our related parties’ investments, as well as our investment combined with the related party group’s investments to identify if we had the power to direct the activities that most significantly impact the economic performance of BZNE. We determined that power to direct the activities that most significantly impact BZNE’s economic performance is conveyed through the board of directors of BZNE and no entity is able to appoint the BZNE governing body that oversees its executive management team. Based on the capital structure, governing documents and overall business operations of BZNE, we determined that, while a VIE, no single entity has the power to direct the activities that most significantly impact BZNE’s economic performance. As such, we account for our investment in BZNE as an investment available for sale.

The total assets, liabilities, and net losses of our equity method investees as of and for the six months ended June 30, 2012 were $22.7 million, $2.0 million, and $7.8 million, respectively. The following table reflects our maximum exposure, accounting method, ownership interest and underlying equity in net assets of each of our investments:

NOTE 6 DISCONTINUED OPERATIONS

In September 2011, we entered into an agreement with Optos, Inc., a subsidiary of Optos plc (collectively “Optos”) to sell our ophthalmic instrumentation business. Upon closing in October 2011, we received $17.5 million of cash and will receive royalties up to $22.5 million on future sales.

The assets and liabilities related to our instrumentation business have identifiable cash flows that are independent of the cash flows of other groups of assets and liabilities and we will not have a significant continuing involvement with the related products beyond one year after the closing of the transaction. Therefore, the accompanying Condensed Consolidated Balance Sheets report the

17

Table of Contents

assets and liabilities related to our instrumentation business as discontinued operations in all periods presented, and the results of operations related to our instrumentation business have been classified as discontinued operations in the accompanying Condensed Consolidated Statements of Operations for all periods presented.

The following table presents the major classes of assets and liabilities that have been presented as assets of discontinued operations and liabilities of discontinued operations in the accompanying Condensed Consolidated Balance Sheets:

The following table presents summarized financial information for the discontinued operations included in the Condensed Consolidated Statements of Operations:

NOTE 7 FAIR VALUE MEASUREMENTS

We record fair value at an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

18

Table of Contents

A summary of our investments classified as available for sale, and carried at fair value is as follows (in thousands):