•

we have had a history of losses and may not generate sustained positive cash flow sufficient to fund our operations and research and development programs;

•

our need for, and ability to obtain, additional financing when needed on favorable terms, or at all;

•

adverse results in material litigation matters or governmental inquiries;

•

the risks inherent in developing, obtaining regulatory approvals for and commercializing new, commercially viable and competitive products and treatments;

•

our research and development activities may not result in commercially viable products;

•

that earlier clinical results of effectiveness and safety may not be reproducible or indicative of future results;

•

that we may fail to successfully commercialize Somatrogon (hGH-CTP);

•

that we may not generate or sustain profits or cash flow from our laboratory operations or substantial revenue from Somatrogon (hGH-CTP), Rayaldee and our other pharmaceutical and diagnostic products;

•

our ability to manage our growth and our expanded operations;

•

that our acquisition of ModeX Therapeutics, Inc. will be successful and the products in the R&D pipeline will ultimately be commercialized;

•

that currently available over-the-counter and prescription products, as well as products under development by others, may prove to be as or more effective than our products for the indications being studied;

•

our ability and our distribution and marketing partners’ ability to comply with regulatory requirements regarding the sales, marketing and manufacturing of our products and product candidates and the operation of our laboratories;

•

the performance of our third-party distribution partners, licensees and manufacturers over which we have limited control;

•

changes in regulation and policies in the U.S. and other countries, including increasing downward pressure on healthcare reimbursement;

Table of ~~losses and may not generate sustained positive cash flow sufficient to fund our operations and research and development programs;~~Contents

•

increased competition, including price competition;

•

our success is dependent on the involvement and continued efforts of our Chairman and Chief Executive Officer;

•

integration challenges for acquired business;

•

changing relationships with payors, including the various state and multi-state programs, suppliers and strategic partners;

•

efforts by third-party payors to reduce utilization and reimbursement for clinical testing services;

•

our ability to maintain reimbursement coverage for our products and services, including Rayaldee and the 4Kscore test;

•

failure to timely or accurately bill and collect for our services;

•

the information technology systems that we rely on may be subject to unauthorized tampering, cyberattack or other data security or privacy incidents that could impact our billing processes or disrupt our operations;

•

failure to obtain and retain new clients and business partners, or a reduction in tests ordered or specimens submitted by existing clients;

•

failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services;

•

failure to maintain the security of patient-related information;

•

our ability to obtain and maintain intellectual property protection for our products;

•

our ability to defend our intellectual property rights with respect to our products;

•

our ability to operate our business without infringing the intellectual property rights of others;

•

our ability to attract and retain key scientific and management personnel;

•

the risk that the carrying value of certain assets may exceed the fair value of the assets causing us to impair goodwill or other intangible assets;

•

our ability to comply with the terms of our 2022 Corporate Integrity Agreement with the U.S. Office of Inspector General of the Department of Health and Human Services;

•

failure to obtain and maintain regulatory approval outside the U.S.; and

•

legal, economic, political, regulatory, currency exchange, and other risks associated with international operations.

~~the risks inherent in developing, obtaining regulatory approvals for and commercializing new, commercially viable and competitive products and treatments;~~

~~our research and development activities may not result in commercially viable products;~~

~~that earlier clinical results~~

Table of ~~effectiveness and safety may not be reproducible or indicative of future results;~~

~~that we may fail to obtain regulatory approval for hGH-CTP or successfully commercialize~~ ~~Rayaldee~~ ~~and hGH-CTP;~~Contents

~~that we may not generate profits or cash flow from our laboratory operations or substantial revenue from our pharmaceutical and diagnostic products;~~

~~our ability to build a successful pharmaceutical sales and marketing infrastructure;~~

~~the performance of our third-party distribution partners, licensees and manufacturers over which we have limited control;~~

~~our success is dependent on the involvement and continued efforts of our Chairman and Chief Executive Officer;~~

~~integration challenges for Transition Therapeutics, BioReference, EirGen and other acquired businesses;~~

~~changes in regulation and policies in the United States and other countries, including increasing downward pressure on healthcare reimbursement;~~

~~our ability to manage our growth and our expanded operations;~~

~~increased competition, including price competition;~~

~~changing relationships with payers, including the various state and multi-state Blues programs, suppliers and strategic partners;~~

~~efforts by third-party payors to reduce utilization and reimbursement for clinical testing services;~~

~~failure to timely or accurately bill for our services;~~

~~failure in our information technology systems, including cybersecurity attacks or other data security incidents;~~

~~failure to obtain and retain new clients and business partners, or a reduction in tests ordered or specimens submitted by existing clients;~~

~~failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services;~~

~~failure to maintain the security of patient-related information;~~

~~our ability to obtain and maintain intellectual property protection for our products;~~

~~our ability to defend our intellectual property rights with respect to our products;~~

~~our ability to operate our business without infringing the intellectual property rights of others;~~

~~our ability to attract and retain key scientific and management personnel;~~

~~our need for, and ability to obtain, additional financing;~~

~~adverse results in material litigation matters or governmental inquiries;~~

~~failure to obtain and maintain regulatory approval outside the U.S.;~~

~~legal, economic, political, regulatory, currency exchange, and other risks associated with international operations; and~~

~~our ability to finance and successfully complete construction of a research, development and manufacturing center in Waterford, Ireland.~~

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~~consolidated subsidiaries.

Item 1. Financial Statements

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

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OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

	June 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	108,108		$	153,191
Accounts receivable, net		210,982			127,312
Inventory, net		73,749			74,060
Other current assets and prepaid expenses		40,950			39,962
Total current assets		433,789			394,525
Property, plant and equipment, net		78,876			82,879
Intangible assets, net		782,195			823,520
In-process research and development		195,000			195,000
Goodwill		597,375			595,851
Investments		27,783			28,080
Operating lease right-of-use assets		34,938			38,725
Other assets		8,943			8,679
Total assets	$	2,158,899		$	2,167,259
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	87,877		$	66,993
Accrued expenses		98,604			98,269
Current maturities of operating leases		11,240			11,628
Current portion of convertible notes		—			3,050
Current portion of lines of credit and notes payable		28,729			33,540
Total current liabilities		226,450			213,480
Operating lease liabilities		24,912			27,963
Long term portion of convertible notes		212,299			210,371
Deferred tax liabilities		133,049			126,426
Other long-term liabilities, principally contract liabilities, contingent consideration and lines of credit		26,841			27,371
Total long-term liabilities		397,101			392,131
Total liabilities		623,551			605,611
Equity:
Common Stock - $0.01 par value, 1,000,000,000 shares authorized; 781,693,135 and 781,306,164 shares issued at June 30, 2023 and December 31, 2022, respectively		7,817			7,813
Treasury Stock - 8,655,082 shares at June 30, 2023 and December 31, 2022, respectively		(1,791	)		(1,791	)
Additional paid-in capital		3,427,094			3,421,872
Accumulated other comprehensive loss		(36,942	)		(43,323	)
Accumulated deficit		(1,860,830	)		(1,822,923	)
Total shareholders’ equity		1,535,348			1,561,648
Total liabilities and equity	$	2,158,899		$	2,167,259

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

September 30, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 100,362
$ 168,733
Accounts receivable, net 233,916
220,284
Inventory, net 46,954
47,228
Other current assets and prepaid expenses 49,324
47,356
Total current assets 430,556
483,601
Property, plant and equipment, net 142,437
122,831
Intangible assets, net 714,552
763,976
In-process research and development 648,377
644,713
Goodwill 715,573
704,603
Investments 32,196
41,139
Other assets 38,299
5,756
Total assets $ 2,721,990
$ 2,766,619
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 66,536
$ 53,360
Accrued expenses 176,300
197,955
Current portion of lines of credit and notes payable 16,112
11,981
Total current liabilities 258,948
263,296
2033 Senior Notes, net of discount 28,590
43,701
Deferred tax liabilities, net 118,799
165,331
Other long-term liabilities, principally deferred revenue, contingent consideration and line of credit 226,617
202,483
Total long-term liabilities 374,006
411,515
Total liabilities 632,954
674,811
Equity:
Common Stock - $0.01 par value, 750,000,000 shares authorized; 559,955,118 and 558,576,051
shares issued at September 30, 2017 and December 31, 2016, respectively 5,600
5,586
Treasury Stock - 549,907 and 586,760 shares at September 30, 2017 and December 31, 2016, respectively (1,791 ) (1,911 )
Additional paid-in capital 2,883,026
2,845,096
Accumulated other comprehensive loss (5,422 ) (27,009 )
Accumulated deficit (792,377 ) (729,954 )
Total shareholders’ equity 2,089,036
2,091,808
Total liabilities and equity $ 2,721,990
$ 2,766,619

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OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

	For the three months ended June 30,						For the six months ended June 30,
	2023			2022			2023			2022
Revenues:
Revenue from services	$	127,052		$	186,804		$	259,420		$	473,402
Revenue from products		43,500			35,892			83,883			72,550
Revenue from transfer of intellectual property and other		94,866			87,197			159,692			93,159
Total revenues		265,418			309,893			502,995			639,111
Costs and expenses:
Cost of service revenue		113,028			171,836			227,087			393,040
Cost of product revenue		25,911			22,475			50,166			45,147
Selling, general and administrative		79,794			101,464			155,436			219,000
Research and development		18,159			17,254			50,764			35,566
Contingent consideration		(34	)		175			102			69
Amortization of intangible assets		21,535			22,793			43,009			44,818
Gain on sale of assets		—			(15,365	)		—			(15,365	)
Total costs and expenses		258,393			320,632			526,564			722,275
Operating income (loss)		7,025			(10,739	)		(23,569	)		(83,164	)
Other income and (expense), net:
Interest income		1,077			161			2,107			171
Interest expense		(3,277	)		(3,075	)		(6,668	)		(5,737	)
Fair value changes of derivative instruments, net		142			338			(917	)		206
Other income (expense), net		(21,417	)		(72,997	)		(4,400	)		(74,439	)
Other income (expense), net		(23,475	)		(75,573	)		(9,878	)		(79,799	)
Loss before income taxes and investment losses		(16,450	)		(86,312	)		(33,447	)		(162,963	)
Income tax benefit (provision)		(3,148	)		(15,070	)		(4,381	)		6,196
Net loss before investment losses		(19,598	)		(101,382	)		(37,828	)		(156,767	)
Loss from investments in investees		(42	)		(268	)		(79	)		(316	)
Net loss	$	(19,640	)	$	(101,650	)	$	(37,907	)	$	(157,083	)
Loss per share, basic and diluted:
Loss per share	$	(0.03	)	$	(0.14	)	$	(0.05	)	$	(0.23	)
Weighted average common shares outstanding, basic and diluted		751,727,383			712,548,661			751,617,431			686,597,899

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

Table of Contents

For the three months ended September 30, For the nine months ended September 30,
2017 2016 2017 2016
Revenues:
Revenue from services $ 229,035
$ 259,025
$ 740,992
$ 777,559
Revenue from products 22,795
20,569
73,992
63,275
Revenue from transfer of intellectual property and other 11,665
18,441
58,819
105,338
Total revenues 263,495
298,035
873,803
946,172
Costs and expenses:
Cost of service revenue 135,203
138,554
419,070
417,121
Cost of product revenue 16,107
12,626
44,441
35,033
Selling, general and administrative 131,336
124,845
396,359
370,358
Research and development 32,329
24,424
90,944
83,594
Contingent consideration (11,213 ) 3,093
(4,475 ) 15,604
Amortization of intangible assets 18,023
18,116
53,904
47,337
Total costs and expenses 321,785
321,658
1,000,243
969,047
Operating loss (58,290 ) (23,623 ) (126,440 ) (22,875 )
Other income and (expense), net:
Interest income 249
163
634
341
Interest expense (1,840 ) (2,018 ) (4,771 ) (6,022 )
Fair value changes of derivative instruments, net (7,550 ) (5,701 ) 1,969
(5,889 )
Other income (expense), net 597
(2,972 ) 3,105
3,543
Other income and (expense), net (8,544 ) (10,528 ) 937
(8,027 )
Loss before income taxes and investment losses (66,834 ) (34,151 ) (125,503 ) (30,902 )
Income tax benefit 24,405
19,988
42,309
24,626
Net loss before investment losses (42,429 ) (14,163 ) (83,194 ) (6,276 )
Loss from investments in investees (4,013 ) (814 ) (11,771 ) (5,147 )
Net loss $ (46,442 ) $ (14,977 ) $ (94,965 ) $ (11,423 )
Loss per share, basic and diluted:
Loss per share $ (0.08 ) $ (0.03 ) $ (0.17 ) $ (0.02 )
Weighted average common shares outstanding, basic and diluted 559,405,309
552,229,266
559,065,232
548,550,641

OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

	For the three months ended June 30,						For the six months ended June 30,
	2023			2022			2023			2022
Net loss	$	(19,640	)	$	(101,650	)	$	(37,907	)	$	(157,083	)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation and other comprehensive income (loss)		670			(17,756	)		6,381			(18,676	)
Comprehensive loss	$	(18,970	)	$	(119,406	)	$	(31,526	)	$	(175,759	)

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

Table of Contents

For the three months ended September 30, For the nine months ended September 30,
2017 2016 2017 2016
Net loss $ (46,442 ) $ (14,977 ) $ (94,965 ) $ (11,423 )
Other comprehensive income (loss), net of tax:
Change in foreign currency translation and other comprehensive income (loss) 8,557
2,796
21,646
5,306
Available for sale investments:
Change in unrealized loss, net of tax (6 ) 449
(749 ) (2,955 )
Less: reclassification adjustments for losses included in net loss, net of tax 96
3,902
690
3,902
Comprehensive loss $ (37,795 ) $ (7,830 ) $ (73,378 ) $ (5,170 )

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)

For the three and six months ended June 30, 2023

														*Accumulated*
											*Additional*			*Other*
	*Common Stock*				*Treasury*						*Paid-In*			*Comprehensive*			*Accumulated*
	*Shares*		*Dollars*		*Shares*			*Dollars*			*Capital*			*Loss*			*Deficit*			*Total*
Balance at March 31, 2023		781,306,164	$	7,813		(8,655,082	)	$	(1,791	)	$	3,424,589		$	(37,611	)	$	(1,841,190	)	$	1,551,810
Equity-based compensation expense		—		—		—			—			2,810			—			—			2,810
Exercise of common stock options and warrants		386,971		4		—			—			(305	)		—			—			(301	)
Net loss		—		—		—			—			—			—			(19,640	)		(19,640	)
Other comprehensive income		—		—		—			—			—			669			—			669
Balance at June 30, 2023		781,693,135	$	7,817		(8,655,082	)	$	(1,791	)	$	3,427,094		$	(36,942	)	$	(1,860,830	)	$	1,535,348

														*Accumulated*
											*Additional*			*Other*
	*Common Stock*				*Treasury*						*Paid-In*			*Comprehensive*			*Accumulated*
	*Shares*		*Dollars*		*Shares*			*Dollars*			*Capital*			*Loss*			*Deficit*			*Total*
Balance at December 31, 2022		781,306,164	$	7,813		(8,655,082	)	$	(1,791	)	$	3,421,872		$	(43,323	)	$	(1,822,923	)	$	1,561,648
Equity-based compensation expense		—		—		—			—			5,527			—			—			5,527
Exercise of common stock options and warrants		386,971		4		—			—			(305	)		—			—			(301	)
Net loss		—		—		—			—			—			—			(37,907	)		(37,907	)
Other comprehensive income		—		—		—			—			—			6,381			—			6,381
Balance at June 30, 2023		781,693,135	$	7,817		(8,655,082	)	$	(1,791	)	$	3,427,094		$	(36,942	)	$	(1,860,830	)	$	1,535,348

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

Table of Contents

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)

For the three and six months ended June 30, 2022

														*Accumulated*
											*Additional*			*Other*
	*Common Stock*				*Treasury*						*Paid-In*			*Comprehensive*			*Accumulated*
	*Shares*		*Dollars*		*Shares*			*Dollars*			*Capital*			*Loss*			*Deficit*			*Total*
Balance at March 31, 2022		690,138,033	$	6,901		(8,655,082	)	$	(1,791	)	$	3,191,139		$	(31,415	)	$	(1,549,951	)	$	1,614,883
Equity-based compensation expense		—		—		—			—			4,308			—			—			4,308
Exercise of common stock options and warrants		546,337		6		—			—			(366	)		—			—			(360	)
ModeX Acquisition		89,907,311		899		—			—			218,475			—			—			219,374
Net loss		—		—		—			—			—			—			(101,650	)		(101,650	)
Other comprehensive loss		—		—		—			—			—			(17,756	)		—			(17,756	)
Balance at June 30, 2022		780,591,681	$	7,806		(8,655,082	)	$	(1,791	)	$	3,413,556		$	(49,171	)	$	(1,651,601	)	$	1,718,799

														*Accumulated*
											*Additional*			*Other*
	*Common Stock*				*Treasury*						*Paid-In*			*Comprehensive*			*Accumulated*
	*Shares*		*Dollars*		*Shares*			*Dollars*			*Capital*			*Loss*			*Deficit*			*Total*
Balance at December 31, 2021		690,082,283	$	6,901		(8,655,082	)	$	(1,791	)	$	3,222,487		$	(30,495	)	$	(1,511,976	)	$	1,685,126
Equity-based compensation expense		—		—		—			—			11,925			—			—			11,925
Exercise of common stock options and warrants		602,087		6		—			—			(231	)		—			—			(225	)
Adoption of ASU 2020-06		—		—		—			—			(39,100	)		—			17,458			(21,642	)
ModeX Acquisition		89,907,311		899		—			—			218,475			—			—			219,374
Net loss		—		—		—			—			—			—			(157,083	)		(157,083	)
Other comprehensive loss		—		—		—			—			—			(18,676	)		—			(18,676	)
Balance at June 30, 2022		780,591,681	$	7,806		(8,655,082	)	$	(1,791	)	$	3,413,556		$	(49,171	)	$	(1,651,601	)	$	1,718,799

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

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OPKO Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the six months ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(37,907	)	$	(157,083	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		52,993			55,809
Non-cash interest		1,364			1,364
Amortization of deferred financing costs		598			569
Losses from investments in investees		79			316
Equity-based compensation – employees and non-employees		5,527			11,925
Realized loss on disposal of fixed assets and sales of equity securities		2,075			(477	)
Change in fair value of equity securities and derivative instruments		6,146			73,724
Change in fair value of contingent consideration		102			69
Gain on sale of GeneDx		—			(15,365	)
Deferred income tax benefit		1,753			(8,942	)
Changes in assets and liabilities:
Accounts receivable, net		(81,822	)		95,864
Inventory, net		2,749			2,864
Other current assets and prepaid expenses		1,279			(6,502	)
Other assets		(1,915	)		(260	)
Accounts payable		20,210			(19,508	)
Foreign currency measurement		(1,318	)		4,295
Contract liabilities		2			(17	)
Accrued expenses and other liabilities		5,073			(69,978	)
Net cash used in operating activities		(23,012	)		(31,333	)
Cash flows from investing activities:
Investments in investees		(5,000	)		—
Proceeds from sale of GeneDx		—			115,423
Acquisition of businesses, net of cash		—			(2,071	)
Proceeds from the sale of property, plant and equipment		842			870
Capital expenditures		(9,050	)		(10,630	)
Net cash provided by (used in) investing activities		(13,208	)		103,592
Cash flows from financing activities:
Issuance of common stock		—			1
Proceeds from the exercise of common stock options		(301	)		(225	)
Borrowings on lines of credit		341,850			684,467
Repayments of lines of credit		(348,206	)		(679,860	)
Redemption of 2033 Senior Notes		(3,000	)		—
Net cash provided by (used in) financing activities		(9,657	)		4,383
Effect of exchange rate changes on cash and cash equivalents		794			(894	)
Net increase (decrease) in cash and cash equivalents		(45,083	)		75,748
Cash and cash equivalents at beginning of period		153,191			134,710
Cash and cash equivalents at end of period	$	108,108		$	210,458
SUPPLEMENTAL INFORMATION:
Interest paid	$	4,204		$	3,554
Income taxes paid, net of refunds	$	685		$	4,647
Assets acquired by finance leases	$	181		$	—
Non-cash financing:
Shares issued upon the conversion of:
Common stock options and warrants, surrendered in net exercise	$	301		$	655
Issuance of common stock for acquisition of ModeX	$	—		$	219,374
Fair value of shares included in consideration from GeneDx Holdings	$	6,689		$	172,000

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

Table of Contents

For the nine months ended September 30,
2017 2016
Cash flows from operating activities:
Net loss $ (94,965 ) $ (11,423 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 76,677
72,612
Non-cash interest 1,944
2,063
Amortization of deferred financing costs 168
175
Losses from investments in investees 11,771
5,147
Equity-based compensation – employees and non-employees 22,292
34,939
Realized loss (gain) on equity securities and disposal of fixed assets (2,683 ) 943
Change in fair value of derivative instruments (1,969 ) 5,889
Change in fair value of contingent consideration (4,475 ) 15,604
Deferred income tax benefit (46,366 ) (30,982 )
Changes in assets and liabilities, net of the effects of acquisitions:
Accounts receivable, net (13,594 ) (28,974 )
Inventory, net 1,729
(2,726 )
Other current assets and prepaid expenses (2,857 ) (24,310 )
Other assets (449 ) (402 )
Accounts payable 12,013
(16,141 )
Foreign currency measurement 608
(433 )
Deferred revenue (42,142 ) (56,256 )
Accrued expenses and other liabilities (11,892 ) 36,015
Net cash provided by (used in) operating activities (94,190 ) 1,740
Cash flows from investing activities:
Investments in investees (4,625 ) (9,171 )
Acquisition of businesses, net of cash —
15,878
Purchase of marketable securities (6 ) (15,631 )
Maturities of short-term marketable securities —
15,634
Proceeds from the sale of property, plant and equipment 3,979
1,082
Acquisition of intangible assets —
(5,000 )
Capital expenditures (32,061 ) (17,015 )
Net cash used in investing activities (32,713 ) (14,223 )
Cash flows from financing activities:
Proceeds from the exercise of Common Stock options and warrants 1,916
6,112
Borrowings on lines of credit 75,544
15,816
Repayments of lines of credit (20,643 ) (58,901 )
Net cash provided by (used in) financing activities 56,817
(36,973 )
Effect of exchange rate changes on cash and cash equivalents 1,715
504
Net decrease in cash and cash equivalents (68,371 ) (48,952 )
Cash and cash equivalents at beginning of period 168,733
193,598
Cash and cash equivalents at end of period $ 100,362
$ 144,646
SUPPLEMENTAL INFORMATION:
Interest paid $ 1,409
$ 2,519
Income taxes paid, net $ 5,899
$ 8,045
Non-cash financing:
Shares issued upon the conversion of:
Common Stock options and warrants, surrendered in net exercise $ 1,546
$ 350
Issuance of capital stock for contingent consideration settlement:
Transition Therapeutics, Inc. $ —
$ 58,530
OPKO Health Europe $ 303
$ 313
OPKO Renal $ —
$ 25,986
Issuance of stock for investment in Xenetic $ —
$ 4,856

OPKO Health, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 BUSINESS AND ORGANIZATION

We are a diversified healthcare company that seeks to establish industry-leading positions in large and rapidly growing medical markets. Our diagnostics business includes BioReference ~~Laboratories, Inc.~~Health, LLC (“BioReference”), one of the nation’s ~~third-largest clinical laboratory~~largest full service laboratories with a ~~core genetic testing business and a 400-person~~180-person sales and marketing team to drive growth and leverage new products, ~~including the~~ and we offer our 4Kscore prostate cancer test ~~and the~~ ~~Claros~~ ~~1 in-office immunoassay platform (in development).~~through BioReference. Our pharmaceutical business features Rayaldee, ~~an FDA-approved~~a U.S. Food and Drug Administration (“FDA”) approved treatment for secondary hyperparathyroidism (“SHPT”) in adults with stage 3 or 4 chronic kidney disease (“CKD”) and vitamin D insufficiency, and ~~VARUBI™ for chemotherapy-induced nausea and vomiting (oral formulation launched by partner TESARO in November 2015 and IV formulation approved October 2017)~~Somatrogon (hGH-CTP), OPK88003, a once or twice weekly oxyntomodulin for type 2 diabetes and obesity which is a clinically advanced drug candidate among the new class of GLP-1 glucagon receptor dual agonists (Phase 2b), and OPK88004, a selective androgen receptor modulator being developed for benign prostatic hyperplasia and other urologic and metabolic conditions. Our pharmaceutical business also features hGH-CTP, a once-weekly human growth hormone injection ~~(in Phase~~ for which we completed a successful phase 3 study in August 2019 and partnered with ~~Pfizer),~~Pfizer Inc. (“Pfizer”) with respect to Somatrogon (hGH-CTP)’s further development. Regulatory applications for Somatrogon (hGH-CTP) have been submitted to the applicable regulatory bodies for review in several countries around the world. In June 2023, the FDA approved NGENLA (Somatrogon) to treat children and ~~a once-daily Factor VIIa drug~~adolescents from as young as three years of age with growth disturbance due to insufficient secretion of growth hormone. In February 2022, the European Commission granted marketing authorization in the European Union for ~~hemophilia (Phase 2a). We are incorporated~~Somatrogon (hGH-CTP) under the brand name NGENLA® and has been granted pricing approval in ~~Delaware~~Germany. NGENLA® has been approved in more than 40 markets including the United States, EU Member States, Japan, Canada, and ~~our principal executive offices are located in leased offices in Miami, Florida.~~

Australia. In ~~August 2016,~~ May 2022, we ~~completed the acquisition of Transition~~acquired ModeX Therapeutics, Inc. (“~~Transition Therapeutics”~~ModeX”), a ~~clinical stage~~ biotechnology company focused on developing ~~OPK88003,~~innovative multi-specific immune therapies for cancer and infectious disease candidates. ModeX has a ~~once or twice weekly oxyntomodulin for type 2 diabetes~~robust early-stage pipeline with assets in key areas of immuno-oncology and ~~obesity,~~infectious diseases, and ~~OPK88004, a selective androgen receptor modulator for androgen deficiency indications. Holders~~we intend to further expand our pharmaceutical product pipeline through ModeX’s portfolio of Transition Therapeutics common stock received 6,431,899 shares of OPKO Common Stock. The transaction was valued at approximately $58.5 million, based on a closing price per share of our Common Stock of $9.10 as reported by NASDAQ on the closing date.

development candidates.

Through BioReference, we provide laboratory testing services, primarily to customers in the larger metropolitan areas ~~across~~in New York, New Jersey, Florida, Texas, Maryland, California, Pennsylvania, Delaware, Washington, DC, ~~Florida, California, Texas,~~ 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. This includes hematology, clinical chemistry, immunoassay, infectious ~~diseases,~~disease, serology, hormones, and toxicology assays, as well as Pap smear, anatomic pathology (biopsies) and other types of tissue ~~analysis.~~analysis, as well as testing for COVID-19. We market our laboratory testing services directly to physicians, geneticists, hospitals, clinics, correctional and other health facilities.

We operate established pharmaceutical platforms in Spain, Ireland, Chile, ~~Spain,~~ and Mexico, which are generating revenue and from which we expect to generate positive cash flow and facilitate future market entry for our products currently in development. ~~In addition, we~~We have a development and commercial supply pharmaceutical company ~~and~~as well as a global supply chain ~~operation and holding company in Ireland.~~operation. We also own a specialty active pharmaceutical ingredients (“APIs”) manufacturer in Israel, which we expect will facilitate the development of our pipeline of molecules and compounds for our proprietary molecular diagnostic and therapeutic products.

Our research and development activities are primarily performed at facilities in ~~Miramar, FL, Woburn, MA,~~Natick, Massachusetts, Waterford, Ireland, Kiryat Gat, Israel, and Barcelona, Spain.

On May 9, 2022 (the “Closing Date”), the Company entered into an Agreement and Plan of Merger (the “ModeX Merger Agreement”), in accordance with which we acquired ModeX pursuant to a merger (the "ModeX Merger") in which ModeX survived as a wholly owned subsidiary of the Company. The Company paid the entirety of the $300.0 million purchase price pursuant to the issuance of an aggregate of 89,907,310 shares (the “Consideration Shares”) of the Company’s common stock, par value $0.01 per share (“Common Stock”), to the former stockholders of ModeX (the “Selling Stockholders”), of which 10% of such shares were deposited in a twelve-month escrow for purposes of satisfying the potential indemnity obligations of the Selling Stockholders under the ModeX Merger Agreement. Additionally, the Company issued equity awards to ModeX employees in an amount equal to $12.4 million, which was deducted from the consideration payable on the Closing Date. If any of such awards are forfeited or otherwise remain unvested on the four-year anniversary of the Closing Date, Common Stock equal to $2.6 million (valued at the same price used for determining the number of Consideration Shares issuable upon consummation of the ModeX Merger) may be distributed pro rata to ModeX’s former stockholders in respect of such forfeited or unvested awards. Shares of Common Stock with respect to such potential distribution have been escrowed and will remain escrowed for such four-year period. For accounting purposes, the shares were valued at $221.7 million, based on the closing price per share of our Common Stock of $2.44 as reported by NASDAQ Global Select Market (“NASDAQ”) on the Closing Date. Included in the total fair value of consideration transferred of $221.7 million were $2.3 million of fully vested equity awards.

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On January 14, 2022, the Company entered into an Agreement and Plan of Merger and Reorganization (the “GeneDx Merger Agreement”) with GeneDx Holdings Corp. (f/k/a “Sema4 Holdings Corp.”), a Delaware corporation (“GeneDx Holdings”), pursuant to which GeneDx Holdings acquired the Company’s former subsidiary, GeneDx LLC, (f/k/a GeneDx, Inc. “GeneDx”), in a transaction (the “GeneDx Transaction”) that closed on April 29, 2022.

At closing, 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 80.0 million shares (the “Closing Shares”) of GeneDx Holdings’ Class A common stock, par value $0.0001 per share (“GeneDx Holdings Common Stock”). Based on the closing stock price of GeneDx Holdings as of April 29, 2022, the total upfront consideration represented approximately $322 million. Additionally, subject to GeneDx achieving certain revenue targets for the fiscal years ending December 31, 2022 and 2023, we are eligible to receive an earnout payment (“Milestone Consideration”) in cash or stock (at GeneDx Holdings’ discretion) equal to a maximum of 30.9 million shares of GeneDx Holdings’ Common Stock if paid in stock. We received 23.1 million shares of Class A Common Stock as a result of GeneDx satisfactorily achieving targets as of December 31, 2022.

In connection with the transactions contemplated by the GeneDx Merger Agreement, on January 14, 2022, the Company entered into a Shareholder Agreement (the “GeneDx Holdings Shareholder Agreement”) with GeneDx Holdings, pursuant to which the Company agreed to, among other things, be subject to a lock-up period with respect to its shares of GeneDx Holdings Common Stock, which expired on April 29, 2023 with respect to the Closing Shares, extends for one year with respect to the shares of Class A Common Stock received as Milestone Consideration for the year ended December 31, 2022, and, if earned and received, would extend for six-months from the date of issuance of the second potential Milestone Consideration payments.

Pursuant to the GeneDx Merger Agreement, the Company designated, and GeneDx Holdings nominated for election an individual to serve on the board of directors of GeneDx Holdings, and such nominee was elected by GeneDx Holdings’ stockholders to serve as a director at least until GeneDx Holdings’ 2024 annual meeting of stockholders. In addition, the Company has further agreed to certain standstill provisions whereby, subject to certain exceptions, it is obligated to refrain from taking certain actions with respect to the GeneDx Holdings Common Stock. The Company has also agreed to vote its shares of GeneDx Holdings Common Stock in accordance with the recommendations of GeneDx Holdings’s board of directors for so long as it continues to hold at least 5% of the outstanding shares of GeneDx Holdings Common Stock. Further, GeneDx Holdings has also granted the Company certain customary shelf, piggyback and demand registration rights that require GeneDx Holdings to register the shares of the Company’s shares of GeneDx Holdings Common Stock for resale under the Securities Act. OPKO intends to have a designee serving on GeneDx Holdings’s board of directors through the lock-up period applicable to the Company’s shares of GeneDx Holdings Common Stock. Such designee may continue to sit on the GeneDx Holdings board if elected by the GeneDx Holdings stockholders.

NOTE 2 FOREIGN EXCHANGE RATES

Foreign Currency Exchange Rates

Approximately 34.4% of revenue for the six months ended June 30, 2023, and approximately 23.6% of revenue for the six months ended June 30, 2022, were denominated in currencies other than the U.S. Dollar (USD). Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the consolidated financial results. For the first quarter of 2023 and the year ended December 31, 2022, the most significant currency exchange rate exposures were to the Euro and Chilean Peso. Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $33.5 million and $39.9 million at June 30, 2023 and December 2022, respectively.

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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. We seek to 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. At June 30, 2023, we had 67 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through July 2023 with a notional value totaling approximately $3.5 million. 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.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the ~~United States~~U.S. (“GAAP”) and with the instructions to Form ~~10-Q~~10-Q and Article 10 of Regulation ~~S-X.~~S-X. Accordingly, they do not include all information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments or adjustments otherwise disclosed herein) considered necessary to present fairly the Company’s results of operations, financial position and cash flows have been made. The results of operations and cash flows for the ~~three and~~ ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2023 are not necessarily indicative of the results of operations and cash flows that may be reported for the remainder of ~~2017~~2023 or any other future periods. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in our Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016.~~

2022.

Principles of consolidation. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of OPKO Health, Inc. and of our wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with GAAP 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 significantly from these estimates.

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.

Inventories. Inventories are valued at the lower of cost and net realizable value. Cost is determined by the ~~first-in, first-out~~first-in, first-out method. We consider such factors 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 and net realizable value. Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which isare used in our testing laboratories. Inventory obsolescence expense for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 and 2016~~2023, was ~~$5.0~~$0.8 million and ~~$0.2~~$2.2 million, respectively.

~~Pre-launch inventories. We may accumulate commercial quantities of certain product candidates prior to~~ Inventory obsolescence expense for the date we anticipate that such products will receive final U.S. FDA approval. The accumulation of such pre-launch inventories involves the risk that such products may not be approved for marketing by the FDA on a timely basis, or ever. This risk notwithstanding, we may accumulate pre-launch inventories of certain products when such action is appropriate in relation to the commercial value of the product launch opportunity. In accordance with our policy, this pre-launch inventory is expensed.

three and six months ended June 30, 2022, was $0.3 million and $1.0 million, respectively.

Goodwill and intangible assets. Goodwill represents the difference between the purchase price and the estimated fair value of the net assets acquired accounted for by the acquisition method of ~~accounting and arose from our acquisitions.~~accounting. Refer to Note 4.5. Goodwill, in-process research and development (“IPR&D”) and other intangible assets acquired in business combinations, licensing and other transactions was $1.6 billion at ~~both~~ ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016 was $2.1 billion.~~2022.

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~~Goodwill is~~

Subsequent to their acquisition, goodwill and indefinite lived intangible assets are tested at least annually as of October 1 for impairment, or when events or changes in circumstances indicate it is more likely than notthat the carrying amount of such assets may not be ~~recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its~~recoverable.

Estimating the fair value ~~exceeds~~of a reporting unit for goodwill impairment is highly sensitive to changes in projections and assumptions and changes in assumptions could potentially lead to impairment. 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.

Goodwill was $597.4 million and $595.9 million, respectively, at June 30, 2023 and December 31, 2022.

Net intangible assets other than goodwill was $1.0 billion on June 30, 2023, and December 31, 2022, respectively, including IPR&D of $195.0 million on June 30, 2023, and December 31, 2022. Intangible assets are ~~tested~~highly vulnerable to impairment charges, particularly newly acquired assets for recently launched products and IPR&D. Considering the high risk nature of research and development and the industry’s success rate of bringing developmental compounds to market, IPR&D impairment ~~whenever events or~~charges may occur in future periods. Estimating the fair value of IPR&D for potential impairment is highly sensitive to changes in ~~circumstances indicate that the carrying amount of such assets may not be recoverable, although IPR&D is required~~projections and assumptions and changes in assumptions could potentially lead to ~~be tested at least annually until the project is completed or abandoned.~~ impairment.

Upon obtaining regulatory approval, ~~the~~ IPR&D ~~asset is~~assets are then accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. If the project is abandoned, the IPR&D asset is charged to expense.

Finite lived intangible assets are tested for impairment when events or changes in circumstances indicate it is more likely than not that the carrying amount of such assets may not be recoverable. The testing includes a comparison of the carrying amount of the asset to its estimated undiscounted future cash flows expected to be generated by the asset. 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. We believe that our estimates and assumptions in testing goodwill and other intangible assets, including IPR&D, for impairment are reasonable and otherwise consistent with assumptions that marketplace participants would use in their estimates of fair value. 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.

During the first quarter of 2022, we reclassified ~~$187.6~~$590.2 million of IPR&D related to ~~Rayaldee~~ Somatrogon (hGH-CTP) from ~~In-process research and development to Intangible assets, net~~IPR&D in our Condensed Consolidated Balance ~~Sheets~~Sheet upon the ~~FDA’s~~ approval of ~~Rayaldee~~NGENLA (Somatrogon) in ~~June 2016.~~Europe and Japan. The assets ~~are being~~will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years. We use the straight-line method of amortization as there is no reliably determinable pattern in which the economic benefits of our intangible assets are consumed or otherwise used up. Amortization expense was ~~$53.9~~$21.5 million and ~~$47.3~~$43.0 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2023, respectively. Amortization expense was $22.8 million and ~~2016,~~$44.8 million for the three and six months ended June 30, 2022, respectively.

Fair value measurements. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate their fair value due to the short-term maturities of these instruments. Investments that are considered ~~available for sale~~equity securities as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 are predominately carried at fair value. Our debt under the ~~credit agreement with JPMorgan Chase Bank, N.A.~~Credit Agreement (as defined below) approximates fair value due to the variable rate of ~~interest.~~

interest applicable to such debt.

In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. Refer to Note 8.9.

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Contingent consideration. Each period we revalue the contingent consideration obligations associated with ~~certain prior~~applicable acquisitions to their respective fair ~~value~~values and record increases in ~~the~~ fair value as contingent consideration expense and decreases in ~~the~~ fair value as a reduction in contingent consideration expense. Changes in contingent consideration result from changes in the assumptions regarding probabilities of successful achievement of related milestones, the estimated timing in which the milestones are achieved and the discount rate used to estimate the fair value of the liability. Contingent consideration may change significantly as our development programs progress, revenue estimates evolve and additional data is obtained, impacting our assumptions. The assumptions used in estimating fair value require significant judgment. 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.

Derivative financial instruments. We record derivative financial instruments on our Condensed Consolidated Balance ~~Sheets~~Sheet at their fair value and recognize the changes in the fair value in our Condensed Consolidated ~~Statements~~Statement of Operations when they occur, the only exception being derivatives that qualify as hedges. For the derivative instrument to qualify 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 ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, our foreign currency forward contracts held to economically hedge inventory purchases did not meet the documentation requirements to be designated as hedges. Accordingly, we ~~recognize~~recognized all changes in the fair values of our derivatives instruments, net, in our Condensed Consolidated ~~Statements~~Statement of Operations. Refer to Note 9.

10.

Property, plant and equipment. Property, plant and equipment are recorded at ~~cost.~~cost or fair value if acquired in a business combination. Depreciation is provided using the straight-line method over the estimated useful lives of the assets and includes amortization expense for assets capitalized under ~~capital~~finance leases. The estimated useful lives by asset class are as follows: software - 3 years, machinery, medical and other equipment - 5-8 years, furniture and fixtures - 5-12 years, leasehold improvements - the lesser of their useful life or the lease term, buildings and improvements - 10-40 years, and automobiles ~~and aircraft~~ - ~~3-15~~3-5 years. Expenditures for repairs and maintenance are charged to expense as incurred. ~~Depreciation expense was $22.7 million and $25.3 million for the nine months ended September 30, 2017 and 2016, respectively.~~ Assets held under ~~capital~~finance leases are included within Property, plant and equipment, net in our Condensed Consolidated Balance Sheets and are amortized over the shorter of their useful lives or the expected term of their related leases.

Depreciation expense was $5.0 million and $10.0 million for the three and six months ended June 30, 2023, respectively. Depreciation expense was $5.2 million and $11.0 million for the three and six months ended June 30, 2022, respectively.

Impairment of long-lived assets. Long-lived assets, such as property and equipment and assets held for sale, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated 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.

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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

We operate in various countries and tax jurisdictions globally. For interim reporting purposes, we record income taxes based on the expected annual effective income tax rate taking into consideration global forecasted tax results. For the three and nine months ended September 30, 2017, the tax rate differed from the U.S. federal statutory rate of 35% primarily due to the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, the impact of certain discrete tax events and operating results in tax jurisdictions which do not result in a tax benefit.

We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment. ~~On December 29, 2016,~~Valuation allowances on certain U.S. deferred tax assets and non-U.S. deferred tax assets are established, because realization of these tax benefits through future taxable income does not meet the ~~Israeli Parliament reduced~~more-likely-than-not threshold.

We operate in various countries and tax jurisdictions globally. For interim reporting purposes, we record income taxes based on the ~~standard corporate~~expected effective income tax rate, taking into consideration year to date and global forecasted tax results. For the six months ended June 30, 2023, the tax rate differed from ~~25% to 24%, effective January 1, 2017 and 23% effective January 1, 2018. The new rates have been used in determining Income tax benefit in 2017.~~

~~Revenue recognition. Revenue for laboratory services is recognized at~~ the time test results are reported, which approximates when services are provided. Services are provided to patients covered by various third-party payer programs including various managed care organizations, as well as the Medicare and Medicaid programs. Billings for services under third-party payer programs are included in revenue netU.S. federal statutory rate of ~~allowances for contractual discounts and allowances for differences between the amounts billed and estimated program payment amounts. Adjustments~~21% primarily due to the ~~estimated payment amounts based on final settlement with~~valuation allowance against certain U.S. and non-U.S. deferred tax assets, the ~~programs are recorded upon settlement as an adjustment to revenue. For the nine months ended September 30, 2017, approximately 31% of our revenues were derived directly from the Medicare~~relative mix in earnings and ~~Medicaid programs.~~

We recognize revenue from product sales when persuasive evidence of an arrangement exists, delivery has occurred, collectability is reasonably assured, and the price to the buyer is fixed or determinable, which is generally 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 product returns and allowances taken, matched against the sales from which they originated, and our evaluation of specific factors that may increase or decrease the risk of product returns. Product revenues are recorded net of estimated rebates, chargebacks, discounts, co-pay assistance and other deductions (collectively, “Sales Deductions”) as well as estimated product returns. Allowances are recorded as a reduction of revenue at the time product revenues are recognized.

~~We launched~~ ~~Rayaldee~~losses in the U.S. ~~through our dedicated renal sales force~~versus foreign tax jurisdictions, and the impact of certain discrete tax events and operating results in ~~November 2016.~~ ~~Rayaldee~~tax jurisdictions which do not result in a tax benefit.

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Included in Other long-term liabilities is ~~distributed in the U.S. principally through the retail pharmacy channel, which initiates~~an accrual of $6.0 million related to uncertain tax positions involving income recognition. In connection with ~~the largest wholesalers in the U.S. (collectively, “Rayaldee~~ ~~Customers”). In addition to distribution agreements with~~ ~~Rayaldee~~ Customers, we have entered into arrangements with many healthcare providers and payers that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchasean examination of ~~Rayaldee~~.

~~We lack the experiential data which would allow us to estimate Sales Deductions and product returns. Therefore, as of September 30, 2017, we have determined that we do not yet meet the criteria~~foreign tax returns for the ~~recognition~~2014 through 2020 tax years, a foreign taxing authority has issued an income tax assessment of ~~revenue for shipments of~~ ~~Rayaldee~~ ~~at the time of shipment to~~ ~~Rayaldee~~ ~~Customers as allowances for Sales Deductions and product returns~~approximately $246 million (including interest). We are ~~not known or cannot be reasonably estimated. We will not recognize revenue upon shipment until such time~~appealing this assessment, as we ~~can reasonably estimate and record provisions~~believe, other than for ~~Sales Deductions and product returns utilizing historical information and market research projections.~~

~~During the nine months ended September 30, 2017, we did not recognize any product revenues related to~~ ~~Rayaldee~~ ~~sales. Payments received from~~ ~~Rayaldee~~ Customers in advance of recognition of revenue are recorded as deferred revenue included in Accrued expenses in our Condensed Consolidated Balance Sheets. The related deferred revenue balance as of September 30, 2017 was $6.5 million. The corresponding costs of product revenuesuncertain tax positions for which we have ~~not recognized product revenue have similarly not yet been reflected~~reserved, the issues are without merit. We intend to exhaust all judicial remedies necessary to resolve the matter, which could be a lengthy process. There can be no assurance that this matter will be resolved in our ~~Condensed Consolidated Statements~~favor, and an adverse outcome, or any future tax examinations involving similar assertions, could have a material adverse effect on our financial condition, results of ~~Operations.~~

operations and cash flows.

Revenue recognition. We recognize revenue when a customer obtains control of promised goods or services in accordance with Accounting Standards Codification Topic 606,Revenue from Contracts with Customers (“Topic 606”). The amount of revenue that is recorded reflects the consideration that we expect to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.

We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we review the contract to determine which performance obligations we must deliver and which of these performance obligations are distinct. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. For a complete discussion of accounting for Revenues from services, Revenues from products and Revenue from transfer of intellectual property ~~includes revenue related to the sale, license or transfer of intellectual property such as upfront license payments, license fees, milestone~~ and royalty payments received through our license, and 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.

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 qualifies for treatment as a separate unit of accounting under multiple-element arrangement guidance. License fees with ongoing involvement or performance obligations that do not have standalone value are recorded as deferred revenue, included in Accrued expenses or Other long-term liabilities, when received and generally are recognized ratably over the period of such performance obligations 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 periodic basis. For the three and nine months ended September 30, 2017, revenue from transfer of intellectual property includes $11.2 million and $46.5 million of revenue, respectively related to the Pfizer Transaction. For the three and nine months ended September 30, 2016, revenue from transfer of intellectual property includes $17.7 million and $53.0 million of revenue, respectively related to the Pfizer Transaction. Referother, refer to Note ~~12.~~

Revenue from milestone payments related to arrangements under which we have continuing performance obligations are recognized as Revenue from transfer of intellectual property 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 payment is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item by us; the milestone relates solely to past performance; and the amount of the milestone payment 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 from transfer of intellectual property over the term of the arrangement as we complete our performance obligations.

Total deferred revenue included in Accrued expenses and Other long-term liabilities was $120.4 million and $162.4 million at September 30, 2017 and December 31, 2016, respectively. The deferred revenue balance at September 30, 2017 relates primarily to the Pfizer Transaction. Refer to Note 12.

13.

Concentration of credit risk and allowance for ~~doubtful accounts~~credit losses. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. Substantially all of our accounts receivable are with either companies in the healthcare industry or patients. However, credit risk is limited due to the number of our clients as well as their dispersion across many different geographic regions.

While we have receivables due from federal and state governmental agencies, ~~we do not believe that~~ such receivables ~~represent~~are not a credit risk ~~since the related healthcare programs are funded by~~because federal and state governments ~~and payment~~fund the related healthcare programs. Payment is primarily dependent upon submitting appropriate documentation. ~~At September~~On June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, receivable balances (net of ~~contractual adjustments)~~explicit and implicit price concessions) from Medicare and Medicaid were ~~22.0%~~7% and ~~22.9%~~14%, respectively, of our consolidated Accounts receivable, net.

The portion of our accounts receivable due from individual patients comprises the largest portion of credit risk. At ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, receivables due from patients ~~represent~~represented approximately ~~2.4%~~1.8% and ~~4.1%~~2.9%, respectively, of our consolidated Accounts receivable, net.

We assess the collectability of accounts receivable balances by considering factors such as historical collection experience, customer credit worthiness, the age of accounts receivable balances, regulatory changes and current economic conditions and trends that may affect a customer’s ability to pay. Actual results could differ from those estimates. ~~Our reported net income (loss) is directly affected by our estimate of the collectability of accounts receivable.~~ The allowance for ~~doubtful accounts~~credit losses was ~~$57.6~~$2.0 million and ~~$36.3~~$4.2 million ~~at September~~on June 30, ~~2017~~2023, and December 31, ~~2016~~2022, respectively. The ~~provision for bad debts~~credit loss expense for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2023, was $2.8 thousand and ~~2016~~$88.0 thousand, respectively. The credit loss expense for the three and six months ended June 30, 2022, was ~~$78.3 million~~$96.0 thousand and ~~$62.5 million,~~$183.6 thousand, respectively.

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 Condensed Consolidated ~~Statements~~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 cash flows from operations. ~~Equity-based compensation arrangements to non-employees are recorded at their fair value on~~For the ~~measurement date. The measurement of equity-based compensation to non-employees is subject to periodic adjustment as the underlying equity instruments vest. During the nine~~three and six months ended ~~September~~June 30, ~~2017 and 2016,~~2023, we recorded ~~$22.3~~$2.8 million and ~~$34.9~~$5.5 million, respectively, of equity-based compensation expense.

For the three and six months ended June 30, 2022, we recorded $4.3 million and $11.9 million, respectively, of equity-based compensation expense.

Research and development expenses. Research and development expenses include external and internal ~~expenses, partially offset by third-party grants and fundings arising from collaboration agreements.~~expenses. External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. Research and development employee-related expenses include salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities. We expense these costs in the period in which they are incurred. We estimate our liabilities for research and development expenses in order to match the recognition of expenses to the period in which the actual services are received. As such, accrued liabilities related to third party research and development activities are recognized based upon our estimate of services received and degree of completion of the services in accordance with the specific third party contract.

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~~We record~~

Research and development expense includes costs for in-process research and development projects acquired in asset acquisitions which have not reached technological feasibility, and which have no alternative future use. For in-process research and development projects acquired in business combinations, the in-process research and development project is capitalized and evaluated for impairment until the development process has been completed. Once the development process has been completed the asset will be amortized over its remaining estimated useful life.

Segment reporting. Our chief operating decision-maker ~~(“CODM”)~~ is Phillip Frost, M.D., our Chairman and Chief Executive Officer. ~~Our CODM~~Dr. Frost reviews our operating results and operating plans and makes resource allocation decisions on a Company-wide or aggregate basis. We manage our operations in two reportable segments, pharmaceutical and diagnostics. The pharmaceutical segment consists of our pharmaceutical operations ~~we acquired~~ in Chile, Mexico, Ireland, Israel and Spain,Rayaldee product sales and our pharmaceutical research and development. The diagnostics segment primarily consists of clinical laboratory operations ~~we acquired~~ through ~~the acquisition of BioReference and our point-of-care operations.~~BioReference. There are no significant inter-segment sales. We evaluate the performance of each segment based on operating profit or loss. There is no inter-segment allocation of interest expense ~~and~~or income taxes.

Refer to Note 15.

Shipping and handling costs. We do not charge customers for shipping and handling costs. Shipping and handling costs are classified as Cost of revenues in the Condensed Consolidated Statement of Operations.

Foreign currency translation. The financial statements of certain of our foreign operations use the local currency as the functional currency. The local currency assets and liabilities are generally translated at the rate of exchange to the U.S. dollar on the balance sheet date. The local currency revenues and expenses are translated at average rates of exchange to the U.S. dollar during the reporting periods. Foreign currency transaction gains (losses) have been reflected as a component of Other income (expense), net within the Condensed Consolidated Statement of Operations and foreign currency translation gains (losses) have been included as a component of the Condensed Consolidated Statement of Comprehensive Income (Loss). During the three and six months ended June 30, 2023, we recorded $0.9 million and $2.0 million, respectively, of transaction gains. During the three and six months ended June 30, 2022, we recorded $0.8 million and $1.8 million, respectively, of transaction losses.

Variable interest entities. The consolidation of a variable interest entity (“VIE”) is required when an enterprise has a controlling financial interest. A controlling financial interest in a VIE will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE. Refer to Note 5.

Investments. We have made strategic investments in development stage and emerging companies. We record these investments as equity method investments or ~~investments available for sale~~as equity securities based on our percentage of ownership and whether we have significant influence over the operations of the investees. ~~Investments for which it is not practical to estimate fair value and which we do not have significant influence are accounted for as cost method investments.~~ For investments classified under the equity method of accounting, we record our proportionate share of their losses in Losses from investments in investees in our Condensed Consolidated ~~Statements~~Statement of Operations. Refer to Note 5.6. For investments classified as ~~available for sale,~~equity securities, we record changes in their fair value as ~~unrealized gain or loss~~Other income (expense) in ~~Other comprehensive income (loss)~~our Condensed Consolidated Statement of Operations based on their closing price per share at the end of each reporting ~~period.~~period, unless the equity security does not have a readily determinable fair value. Refer to Note 5.

~~Recent~~6.

Recently adopted accounting pronouncements.

In ~~May 2014,~~ August 2020, the FASB issued ~~Accounting Standards Update (“ASU”~~ASU No.2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) ~~No. 2014-09, “Revenue from~~ and Derivatives and Hedging—Contracts ~~with Customers.~~in Entity's Own Equity (Subtopic 815-40).” ASU 2014-09, as amended, clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and2020-06 simplifies the ~~preparation of financial statements~~accounting for convertible instruments by reducing the number of ~~requirements to which an entity must refer.~~accounting models for convertible debt instruments and convertible preferred stock. The ASU ~~2014-09~~ is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Companies can choose to apply the ASU using either the full retrospective approach or a modified retrospective approach.

We have commenced our implementation analysis, including identification of revenue streams and reviews of customer contracts under ASU 2014-09’s framework. Our analysis includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under this new standard. The Company has reviewed certain contracts with its customers that the Company believes are representative of its revenue streams and continues to review additional contracts across its global business units. ASU 2014-09 requires increased disclosure which in turn is expected to require certain new processes. The determination of the impact of adoption of ASU 2014-09 on our financial condition, results of operations, cash flows and disclosures, is ongoing, and, as such, we have not yet concluded on a transition method and are not able to reasonably estimate the effect that the adoption of the new standard will have on our financial statements. Based on our preliminary assessment of this ASU, however, the majority of the amounts that were historically classified as provision for bad debts, primarily related to patient responsibility, will be considered an implicit price concession in determining net revenues. Accordingly, we will report uncollectible balances associated with individual patients as a reduction of the transaction price and therefore as a reduction in net revenues when historically these amounts were classified as provision for bad debts within Selling, general and administrative expenses.

~~In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for~~public entities ~~that do not measure inventory using the last-in, first-out (“LIFO”) or retail inventory method from the lower of cost or market to lower of cost and net realizable value. ASU 2015-11 is effective~~ for fiscal years beginning after December 15, ~~2016, including interim periods within those fiscal years,~~2021, with early adoption permitted. As required, we adopted ASU 2020-06 on January 1, 2022 and used the modified retrospective approach for all convertible debt instruments at the beginning of the period of adoptions. Results for reporting periods beginning January 1, 2022 are presented under ASU 2020-06, while prior period amounts were not adjusted and continue to be reported in accordance with historic accounting guidance.

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Under the modified approach, entities will apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. ASU 2020-06 eliminates the cash conversion and beneficial conversion feature models in ASC 470-20 that require an issuer of certain convertible debt and preferred stock to separately account for embedded conversion features as a component of equity. The adoption of ASU ~~2015-11~~2020-06 at January 1, 2022 resulted in ~~the first quarter of 2017 did not have a significant impact on our Condensed Consolidated Financial Statements.~~

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which requires deferred tax liabilities and assets to be classified as noncurrent in a classified statement of financial position. The adoption of this ASU simplifies the presentation of deferred income taxes and reduces complexity without decreasing the usefulness of information provided to users of financial statements. We early adopted the provisions of this ASU prospectively in the fourth quarter of 2015, and did not retrospectively adjust the prior periods. The adoption of ASU 2015-17 did not have a significant impact on our Condensed Consolidated Financial Statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10),” which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidationan increase of the investee) to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impactConvertible notes of ~~this new guidance on our Condensed Consolidated Financial Statements.~~

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which will require organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

~~In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718),” which simplifies several aspects~~$21.6 million, a reduction of the ~~accounting for share-based payment award transactions, including the income tax consequences, classification~~Accumulated deficit of ~~awards as either equity or liabilities, classification on the statement~~$17.5 million and a reduction of cash flows and accounting for forfeitures. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard in the first quarterAdditional paid-in capital of 2017. As required by ASU 2016-09, excess tax benefits are classified as an operating activity in our Condensed Consolidated Statement of Cash Flows and we have applied this provision prospectively. In addition, we have elected to estimate forfeitures over the course of a vesting period, rather than account for forfeitures as they occur. We adjust our forfeiture estimates based on the number of share-based awards that ultimately vest on at least an annual basis. Upon the adoption of ASU 2016-09 in 2017, we recorded a cumulative-effect adjustment to increase our deferred tax assets and reduce our accumulated deficit by $32.5 million with respect to excess tax benefits recognized in our Condensed Consolidated Balance Sheets.$39.1 million.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230),” which addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350),” which simplifies how an entity is required to test for goodwill impairment. ASU 2017-04 will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted after January 1, 2017. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

NOTE 34 EARNINGS (LOSS) PER SHARE

Basic ~~earnings~~income (loss) per share is computed by dividing our net income (loss) by the weighted average number of shares of our Common Stock outstanding during the period. Shares of Common Stock outstanding under the share lending arrangement entered into in conjunction with the 2025 Notes (as defined in Note 7) are excluded from the calculation of basic and diluted earnings per share because the borrower of the shares is required under the share lending arrangement to refund any dividends paid on the shares lent. Refer to Note 7. For diluted earnings per share, the dilutive impact of stock options ~~warrants~~ and ~~for periods in 2016, conversion options of the 2033 Senior Notes~~warrants is determined by applying the “treasury stock” method. InThe dilutive impact of the2033 Senior Notes, the 2023 Convertible Notes and the 2025 Notes (each, as defined and discussed in Note 7) has been considered using the “if converted” method. For periods in which their effect would be antidilutive, no effect ~~has been~~is given to Common Stock issuable under outstanding options or warrants or the potentially dilutive shares issuable pursuant to the 2033 Senior Notes, ~~(defined in Note 6)~~the 2023 Convertible Notes and the 2025 Notes in the dilutive computation.

A total of ~~1,016,090~~82,817,175 and ~~1,636,706~~56,605,791 potential shares of Common Stock ~~have been~~were excluded from the calculation of diluted net loss per share for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017,~~2023 and 2022, respectively, because their inclusion would be antidilutive. A total of 82,438,648 and 57,016,847 potential shares of Common Stock were excluded from the calculation of diluted net loss per share for the six months ended June 30, 2023 and 2022, respectively, because their inclusion would be antidilutive. A full presentation of diluted earnings per share has not been provided because the required adjustments to the numerator and denominator resulted in diluted earnings per share equivalent to basic earnings per share.

During the three months ended ~~September~~June 30, ~~2017,~~2023, no ~~Common Stock~~ options were exercised and ~~Common Stock warrants to purchase~~549,680 restricted stock units vested, resulting in the issuance of 386,971 shares of ~~our~~ Common ~~Stock were exercised.~~

Stock.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017, 1,646,372~~2023, no options were exercised and 549,680 restricted stock units vested, resulting in the issuance of 386,971 shares of Common ~~Stock~~Stock.

During the three months ended June 30, 2022, an aggregate of 789,063 options and ~~Common Stock~~ warrants to purchase shares of our Common Stock were exercised, resulting in the issuance of ~~1,373,515~~546,337 shares of Common Stock. Of the ~~1,646,372 Common Stock~~789,063 options and ~~Common Stock~~ warrants exercised, ~~272,857~~242,726 shares of Common Stock were surrendered in lieu of a cash payment via the net exercise feature of ~~the agreements.~~

such instruments.

During the ~~three~~six months ended ~~September~~June 30, ~~2016, 660,921 Common Stock~~2022, an aggregate of 844,813 options and ~~Common Stock~~ warrants to purchase shares of our Common Stock were exercised, resulting in the issuance of ~~658,357~~602,087 shares of Common Stock. Of the ~~660,921 Common Stock~~844,813 options and ~~Common Stock~~ warrants exercised, ~~2,564~~242,726 shares of Common Stock were surrendered in lieu of a cash payment via the net exercise feature of ~~the agreements.~~such instruments.

~~During the nine months ended September 30, 2016, 2,899,458 Common Stock options and Common Stock warrants to purchase shares~~

Table of our Common Stock were exercised, resulting in the issuance of 2,771,514 shares of Common Stock. Of the 2,899,458 Common Stock options and Common Stock warrants exercised, 127,944 shares of Common Stock were surrendered in lieu of a cash payment via the net exercise feature of the agreements.Contents

NOTE 45 COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

	June 30,			December 31,
(In thousands)	2023			2022
Accounts receivable, net:
Accounts receivable	$	213,021		$	131,474
Less: allowance for credit losses		(2,039	)		(4,162	)
	$	210,982		$	127,312
Inventories, net:
Consumable supplies	$	29,326		$	31,275
Finished products		36,460			37,139
Work in-process		3,667			2,449
Raw materials		7,990			6,771
Less: inventory reserve		(3,694	)		(3,574	)
	$	73,749		$	74,060
Other current assets and prepaid expenses:
Taxes recoverable	$	8,138		$	8,191
Prepaid expenses		10,414			7,918
Prepaid insurance		6,214			4,496
Other receivables		8,973			13,105
Other		7,211			6,252
	$	40,950		$	39,962
Intangible assets, net:
Customer relationships	$	315,565		$	314,854
Technologies		829,131			826,282
Trade names		49,765			49,752
Covenants not to compete		12,913			12,911
Licenses		6,144			5,988
Product registrations		7,113			6,831
Other		5,937			5,861
Less: accumulated amortization		(444,373	)		(398,959	)
	$	782,195		$	823,520
Accrued expenses:
Inventory received but not invoiced	$	1,964		$	7,830
Commitments and contingencies		3,252			4,295
Employee benefits		36,734			33,765
Clinical trials		11,700			4,700
Contingent consideration		67			62
Finance leases short-term		2,809			2,809
Professional fees		1,943			1,820
Other		40,135			42,988
	$	98,604		$	98,269
Other long-term liabilities:
Contingent consideration	$	1,072		$	974
Mortgages and other debts payable		8,411			9,098
Finance leases long-term		7,270			7,089
Contract liabilities		140			138
Other		9,948			10,072
	$	26,841		$	27,371

(In thousands) September 30,
2017 December 31,
2016
Accounts receivable, net:
Accounts receivable $ 291,560
$ 256,552
Less: allowance for doubtful accounts (57,644 ) (36,268 )
$ 233,916
$ 220,284
Inventories, net:
Consumable supplies $ 19,446
$ 23,448
Finished products 22,882
16,143
Work in-process 4,087
3,896
Raw materials 6,984
4,686
Less: inventory reserve (6,445 ) (945 )
$ 46,954
$ 47,228
Other current assets and prepaid expenses:
Taxes recoverable 17,581
16,187
Other receivables 12,318
13,021
Prepaid supplies 12,269
6,952
Prepaid insurance 3,276
3,688
Other 3,880
7,508
$ 49,324
$ 47,356
Intangible assets, net:
Customer relationships $ 447,699
$ 443,560
Technologies 340,861
340,397
Trade names 50,520
50,442
Licenses 23,518
23,506
Covenants not to compete 16,373
16,348
Product registrations 10,857
7,641
Other 5,742
5,289
Less: accumulated amortization (181,018 ) (123,207 )
$ 714,552
$ 763,976
Accrued expenses:
Deferred revenue $ 52,403
$ 73,434
Employee benefits 46,237
43,792
Clinical trials 7,606
5,935
Taxes payable 4,590
4,430
Contingent consideration 2,011
259
Capital leases short-term 3,483
3,025
Milestone payment 9,819
4,865
Professional fees 2,584
4,035
Other 47,567
58,180
$ 176,300
$ 197,955

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(In thousands) September 30,
2017 December 31,
2016
Other long-term liabilities:
Deferred revenue $ 68,011
$ 89,016
Line of credit 93,311
38,809
Contingent consideration 38,290
44,817
Mortgages and other debts payable 1,162
717
Capital leases long-term 8,435
7,216
Other 17,408
21,908
$ 226,617
$ 202,483

~~All of the~~

Our intangible assets and goodwill ~~acquired~~ relate principally to our completed acquisitions of ~~principally~~ OPKO Renal, OPKO Biologics, EirGen, ~~Pharma Limited (“EirGen”)~~BioReference and ~~BioReference.~~ModeX. We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives. The estimated useful lives by asset class are as follows: technologies - 7-17 years, customer relationships - 5-20 years, product registrations - 7-10 years, covenants not to compete - 5 years, trade names - 5-10 years, other 9-13 years. We do not anticipate capitalizing the cost of product registration renewals, rather we expect to expense these costs, as incurred. Our goodwill is not tax deductible for income tax purposes in any jurisdiction in which we ~~operate in.~~

~~At September 30, 2017,~~operate.

In thefirst quarter of 2022, we reclassified $590.2 million of IPR&D related to Somatrogon (hGH-CTP) from IPR&D in our Condensed Consolidated Balance Sheet upon the approval of NGENLA (Somatrogon (hGH-CTP)) in Europe and Japan. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years. Other changes in value of the intangible assets and goodwill ~~are~~during the six months ended June 30, 2023 and 2022 were primarily due to foreign currency fluctuations between the ~~Chilean Peso, the~~ Euro, and the ~~Shekel~~Chilean Peso against the U.S. dollar.

The following table summarizes the changes in Goodwill by reporting unit during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023.

	2023
(In thousands)	Gross goodwill at January 1		Cumulative impairment at January 1			Acquisitions, dispositions and other			Foreign exchange and other		Balance at June 30
Pharmaceuticals
CURNA	$	4,827	$	(4,827	)	$	—		$	—	$	—
Rayaldee		81,786		—			—			1,355		83,141
FineTech		11,698		(11,698	)		—			—		—
ModeX		80,432		—			(172	)		—		80,260
OPKO Biologics		139,784		—			—			—		139,784
OPKO Chile		3,767		—			—			222		3,989
OPKO Health Europe		7,057		—			—			119		7,176
OPKO Mexico		100		(100	)		—			—		—
Transition Therapeutics		3,421		(3,421	)		—			—		—

Diagnostics
BioReference		283,025		—			—			—		283,025
OPKO Diagnostics		17,977		(17,977	)		—			—		—
	$	633,874	$	(38,023	)	$	(172	)	$	1,696	$	597,375

2017
(In thousands) Balance at January 1 Foreign exchange and other Balance at September 30th
Pharmaceuticals
CURNA $ 4,827
$ —
$ 4,827
EirGen 78,358
9,639
87,997
FineTech 11,698
—
11,698
OPKO Chile 4,785
217
5,002
OPKO Biologics 139,784
—
139,784
OPKO Health Europe 6,936
853
7,789
OPKO Renal 2,069
—
2,069
Transition Therapeutics 3,360
261
3,621

Diagnostics
BioReference 401,821
—
401,821
OPKO Diagnostics 17,977
—
17,977
OPKO Lab 32,988
—
32,988
$ 704,603
$ 10,970
$ 715,573

NOTE 56 ACQUISITIONS ~~INVESTMENTS~~ AND ~~LICENSES~~

~~Transition Therapeutics acquisition~~

~~In August 2016, we completed~~ INVESTMENTS

ModeX Acquisition

On May 9, 2022, the ~~acquisition~~Company entered into the ModeX Merger Agreement, pursuant to which ModeX became a wholly owned subsidiary of ~~Transition Therapeutics, a clinical stage biotechnology company. Holders~~the Company. The Company paid the entirety of ~~Transition Therapeutics common stock received 6,431,899 shares~~the $300.0 million purchase price pursuant to the issuance of ~~OPKO Common Stock.~~the Consideration Shares to the former stockholders of ModeX. The ~~transaction was~~Consideration Shares were valued at ~~approximately $58.5~~$219.4 million, based on athe closing price per share of our Common Stock of ~~$9.10~~$2.44 as reported by NASDAQ on the ~~closing date.~~Closing Date. Included in the total purchase price of $221.7 million were $2.3 million of fully vested equity awards.

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The following table summarizes the final purchase price allocation and the fair value of the net assets acquired and liabilities assumed at the date of acquisition of ModeX at the date of acquisition:

(In thousands) Transition Therapeutics
Cash and cash equivalents $ 15,878
IPR&D assets 41,000
Goodwill 3,453
Other assets 634
Accounts payable and other liabilities (1,035 )
Deferred tax liability (1,400 )
Total purchase price $ 58,530

(in thousands)	ModeX
Cash and cash equivalents	$	228
Other assets		727
Property, plant and equipment		1,046
IPR&D assets		195,000
Goodwill		80,260
Accounts payable		(287	)
Deferred tax liability		(55,312	)
Total purchase price	$	221,662

Goodwill from the acquisition of ~~Transition Therapeutics~~ModeX principally relates to intangible assets that do not qualify for separate recognition (for instance, ~~Transition Therapeutics’~~ModeX's assembled workforce) and the deferred tax liability generated as a result of the transaction. Goodwill is not tax deductible for income tax purposes and was assigned to the pharmaceutical reporting segment.

Our IPR&D assets will not be amortized until the underlying development programs are ~~completed. Upon obtaining~~completed and we obtain regulatory ~~approval, the~~approval. The IPR&D ~~assets are~~asset is then accounted for as a finite-lived intangible ~~assets~~asset and amortized depending on ~~a straight-line basis over its estimated useful life.~~

pattern of future use. Intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, although IPR&D is required to be tested at least annually until the project is completed or abandoned.

Since the date of acquisition, ModeX has recorded revenue of $50.0 million and accumulated net income of $12.7 million. Net loss in the Condensed Consolidated Statement of Operations for the six months ended June 30, 2023, includes $23.3 million of net income from ModeX.

Investments

The following table reflects the accounting method, carrying value and underlying equity in net assets of our unconsolidated investments as of ~~September~~June 30, ~~2017~~2023 and December 31, 2022:

(in thousands)	As of June 30, 2023				As of December 31, 2022
Investment type	Investment Carrying Value		Underlying Equity in Net Assets		Investment Carrying Value		Underlying Equity in Net Assets
Equity method investments	$	30	$	2,622	$	103	$	4,120
Variable interest entity, equity method		795		970		800		1,370
Equity method investments - FV option		21,209				21,120
Equity securities		330				648
Equity securities with no readily determinable fair value		5,381				5,381
Warrants and options		38				28
Total carrying value of investments	$	27,783			$	28,080

(in thousands)
Investment type Investment Carrying Value Underlying Equity in Net Assets
Equity method investments $ 24,101
$ 23,910
Variable interest entity, equity method 361
—
Available for sale investments 3,108

Cost method investment 2,606

Warrants and options 2,020

Total carrying value of investments $ 32,196

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Equity method investments

Our equity method investments, other than GeneDx Holdings, as described below, consist of investments in Pharmsynthez (ownership 9%), Cocrystal Pharma, Inc. (“COCP”) ~~(9%), Sevion Therapeutics, Inc. (“Sevion”) (31%~~(2%), Non-Invasive Monitoring Systems, Inc. (“NIMS”) (1%), Neovasc, ~~(4%), VBI Vaccines~~ Inc. (“~~VBI”~~Neovasc”) ~~(15%), InCellDx, Inc. (28%~~(0.5%), BioCardia, Inc. (“BioCardia”) ~~(5%~~(1%), ~~and~~ Xenetic Biosciences, Inc. (“Xenetic”) ~~(4%~~(3%), and LeaderMed Health Group Limited (“LeaderMed”) (47%). Neovasc was acquired by Shockwave Medical, Inc. in April 2023 and each shareholder is entitled to receive $27.25 per share up front with a potential deferred payment in the form of a non-tradeable contingent value right for up to an additional $12.00 per share in cash if certain regulatory milestones are timely achieved. As of June 30, 2023, we have not yet received the merger consideration for Neovasc and still hold the shares. The ~~total~~aggregate amount of assets, liabilities, and net losses of these equity method investees as of and for the six months ended June 30, 2023 were $95.2 million, $26.7 million, and $20.0 million, respectively. The aggregate amount of assets, liabilities, and net losses of our equity method investees as of and for the ~~nine months~~year ended ~~September 30, 2017~~December 31, 2022 were ~~$415.4~~$167.1 million, ~~$(203.2)~~$46.5 million, and ~~$(106.1)~~$101.5 million, respectively. We have determined that we ~~and/~~or our related parties ~~can significantly~~have the ability to exercise significant influence ~~the success of~~over our equity method investments through our board representation ~~and/~~or voting power. Accordingly, we account for our investment in these entities under the equity method and record our proportionate share of their losses in Loss from investments in investees in our ~~Condensed~~ Consolidated ~~Statements~~Statement of Operations. The aggregate

value of our equity method investments based on the quoted market ~~price~~prices of their respective shares of common stock and the number of shares held by us as of ~~September~~June 30, ~~2017~~2023 and December 31, 2022 was $1.7 million and $1.3 million, respectively.

Equity method investments - Fair value option

On April 29, 2022, the Company sold GeneDx to GeneDx Holdings in accordance with the terms of the GeneDx Merger Agreement, pursuant to which GeneDx Holdings paid to the Company aggregate consideration of $150.0 million in cash (before deduction of transaction expenses and other customary purchase price adjustments), together with the Closing Shares. In January 2023, we purchased 14,285,714 shares of GeneDx Holdings Common Stock for an aggregate of $5.0 million in GeneDx Holdings’ underwritten public offering. Additionally, subject to GeneDx achieving certain revenue targets for the fiscal years ending December 31, 2022 and 2023, we are eligible to receive the Milestone Consideration in cash or stock (at GeneDx Holdings’ discretion) equal to a maximum of 30.9 million shares of GeneDx Holdings’ Common Stock if paid in stock. We received 23.1 million shares of Class A Common Stock as a result of GeneDx satisfactorily achieving targets as of December 31, 2022. In April 2023, GeneDx Holdings announced a 1-for-33 reverse stock split of the GeneDx Holdings Common Stock. The 1-for-33 reverse stock split automatically converts 33 current shares of GeneDx Common Stock into one new share of GeneDx Common Stock. As of June 30, 2023, we held 3,558,602 shares of GeneDx Holdings Common Stock, representing an approximate 13.9% ownership interest in GeneDx Holdings.

Pursuant to the GeneDx Merger Agreement, the Company designated, and GeneDx Holdings nominated for election an individual to serve on the board of directors of GeneDx Holdings, and such nominee was elected by GeneDx Holdings stockholders to serve as a director until GeneDx Holdings 2024 annual meeting of stockholders. As a result, we have determined that the Company or our related parties can exercise significant influence over the investee through our board representation or voting power. However, our influence is ~~$67.4~~restricted by the GeneDx Holdings Shareholder Agreement, pursuant to which we have agreed to vote our shares of GeneDx Holdings Common Stock in accordance with the recommendation of GeneDx Holdings’s board of directors for so long as we continue to hold at least 5% of the outstanding shares of GeneDx Holdings Common Stock. Other than through our sole board seat, we are unable to influence GeneDx Holdings’s policy-making process. We hold one of seven seats on GeneDx Holdings board of directors, and our designee may continue to serve following the expiration of the lock-up period if the GeneDx Holdings stockholders elect him to continue serving on the board. We elected to account for our investment in GeneDx Holdings under the equity method fair value option and record gains and losses from changes in fair value in other income (expense), net in our Condensed Consolidated Statements of Operations. For the three and six months ended June 30, 2023, we recognized $19.9 million and $11.6 million of expense related to the change in fair value of our GeneDx Holdings investment. As of June 30, 2023, the aggregate value of our GeneDx Holdings investment based on the quoted market price of their respective shares of common stock and the number of shares held by us was $21.2 million.

~~Available for sale investments~~

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Investments in Equity Securities

Our ~~available for sale investments~~equity securities consist of investments in ~~RXi Pharmaceuticals Corporation (“RXi”) (ownership 2%~~VBI Vaccines Inc. (1%), ChromaDex Corporation (“ChromaDex”) (0.10%), Eloxx Pharmaceuticals, Inc. (“Eloxx”) (1%), ~~MabVax~~CAMP4 Therapeutics ~~Holdings,~~Corporation (“CAMP4”) (2%) and HealthSnap, Inc. ~~(“MabVax”) (4%), and ARNO Therapeutics, Inc. (“ARNO”) (5%~~(7%). We have determined that our ownership, along with that of our related parties, does not provide us with significant influence over the operations of ~~our available for sale~~these investments. Accordingly, we account for our investment in these entities as ~~available for sale,~~equity securities, and we record changes in ~~these investments as an unrealized gain or loss in Other comprehensive income (loss) each reporting period.~~

~~Based on our evaluation of~~ the ~~value of our investment in Xenetic, including Xenetic’s decreasing stock price during the~~ ~~nine months ended September 30, 2017, we determined that the decline in~~ fair value of ~~our Xenetic common shares was other-than-temporary and recorded an impairment charge of $0.6 million~~these investments in Other income (expense)~~, net in~~ each reporting period when they have readily determinable fair value. Equity securities without a readily determinable fair value are adjusted to fair value when there is an observable price change. Net gains and losses on our ~~Condensed Consolidated Statements of Operations~~equity securities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ ~~to write our investment in Xenetic down to its fair value~~2023 and 2022 were as ~~of September 30, 2017.~~

Based on our evaluation of the value of our investments in Xenetic and RXi, including their decreasing stock price during the nine months ended September 30, 2016, we determined that the decline in fair value of our common shares in Xenetic and RXi was other-than-temporary and recorded an impairment charge of $3.9 million in Other income (expense), net in our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2016 to write our investments in Xenetic and RXi down to their respective fair values as of September 30, 2016.

~~Cost method investments~~

Our cost method investments consist primarily of our investment in Eloxx Pharmaceuticals (“Eloxx”) (ownership 3%). Investments for which it is not practical to estimate fair value and with which we do not have significant influence, are accounted for as cost method investments.

follows:

	For the six months ended June 30,
(in thousands)	2023			2022
Equity Securities:
Net gains and losses recognized during the period on equity securities	$	(318	)	$	(2,718	)
Unrealized net losses recognized during the period on equity securities still held at the reporting date	$	(318	)	$	(2,718	)

Sales of investments

Gains (losses) included in earnings from sales of our investments are recorded in Other income (expense), net in our Condensed Consolidated ~~Statements~~Statement of Operations. ~~We did not have any such activity in the nine months ended September 30, 2017 and 2016.~~ The cost of securities sold is based on the specific identification method.

Warrants and options

In addition to our equity method investments and ~~available for sale investments,~~equity securities, we hold options to purchase ~~1.0 million additional shares of Neovasc, which are fully vested as of September 30, 2017, options to purchase 5.0 million~~47 thousand additional shares of BioCardia, ~~none~~all of which ~~are~~were vested as of ~~September~~June 30, ~~2017,~~2023 and ~~1.0 million, 0.3 million, 0.2 million,~~December 31, 2022, and 33 thousand and 0.7 million ~~0.5 million and 0.2 million of~~ warrants to purchase additional shares of COCP ~~Sevion, MabVax,~~and InCellDx Inc., ~~Xenetic and RXi,~~ respectively. We recorded the changes in the fair value of the options and warrants in Fair value changes of derivative instruments, net in our Condensed Consolidated ~~Statements~~Statement of Operations. We also recorded the fair value of the options and warrants in Investments, net in our Condensed Consolidated Balance ~~Sheets.~~Sheet. See further discussion of the Company’s options and warrants in Note 89 and Note 9.

10.

Investments in variable interest entities

We have determined that we hold variable interests in LeaderMed and Zebra Biologics, Inc. (“Zebra”). We made this determination as a result of our assessment that ~~Zebra does~~ they do not have sufficient resources to carry out ~~its~~their principal activities without additional financial support.

In September 2021, we and LeaderMed, a pharmaceutical development company with operations based in Asia, formed a joint venture to develop, manufacture and commercialize two of OPKO’s clinical stage, long-acting drug products in Greater China and eight other Asian territories. Under the terms of the agreements, we granted the joint venture exclusive rights to develop, manufacture and commercialize (a) OPK88003, an oxyntomodulin analog being developed for the treatment of obesity and diabetes, and (b) Factor VIIa-CTP, a novel long acting coagulation factor being developed to treat hemophilia, in exchange for 4,703 shares 47% ownership interest in the joint venture. In addition, we received an upfront payment of $1.0 million and will be reimbursed for clinical trial material and technical support we provide the joint venture.

In order to determine the primary beneficiary of the joint venture, we evaluated our investment and our related parties’ investment, as well as our investment combined with the related parties’ investment to identify if we had the power to direct the activities that most significantly impact the economic performance of the joint venture. Based on the capital structure, governing documents and overall business operations of the joint venture, we determined that, while a VIE, we do not have the power to direct the activities that most significantly impact the joint venture’s economic performance and do not have an obligation to fund expected losses. We did determine that we can significantly influence control of the joint venture through our board representation and voting power. Therefore, we have the ability to exercise significant influence over the joint venture’s operations and account for our investment in the joint venture under the equity method.

We own 1,260,000 shares of ~~Zebra~~Zebra’s Series ~~A-2~~A-2 Preferred Stock and 900,000 shares of Zebra restricted common stock (ownership 29% at ~~September~~June 30, ~~2017)~~2023 and December 31, 2022). Zebra is a privately held biotechnology company focused on the discovery and development of biosuperior antibody therapeutics and complex drugs. Dr. Richard Lerner, M.D., a former member of our Board of Directors, iswas a founder of ~~Zebra and, along with~~Zebra. Dr. Frost serves as a member of Zebra’s Board of Directors.

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In order to determine the primary beneficiary of Zebra, we evaluated our investment and our related parties’ investment, as well as our investment combined with the related ~~party group’s~~parties’ investment to identify if we had the power to direct the activities that most significantly impact the economic performance of Zebra. Based on the capital structure, governing documents and overall business operations of Zebra, we determined that, while a VIE, we do not have the power to direct the

activities that most significantly impact Zebra’s economic performance and have no obligation to fund expected losses. We ~~did determine,~~determined, however, that we can significantly influence ~~the success~~control of Zebra through our board representation and voting power. Therefore, we have the ability to exercise significant influence over Zebra’s operations and account for our investment in Zebra under the equity method.

~~Other~~

NOTE 7 DEBT

As of June 30, 2023 and December 31, 2022, our debt consisted of the following:

	June 30,		December 31,
(In thousands)	2023		2022
2025 Notes	$	142,660	$	142,096
2023 Convertible Notes		69,639		68,275
2033 Senior Notes		—		3,050
JP Morgan Chase		13,329		18,080
Chilean and Spanish lines of credit		12,743		13,740
Current portion of notes payable		2,657		1,720
Long term portion of notes payable		8,501		9,290
Total	$	249,529	$	256,251

Balance sheet captions
Current portion of convertible notes	$	—	$	3,050
Long term portion of convertible notes		212,299		210,371
Current portion of lines of credit and notes payable		28,729		33,540
Long Term notes payable included in long-term liabilities		8,501		9,290
Total	$	249,529	$	256,251

In ~~March 2016,~~ February 2019, we ~~entered into an agreement with Relative Core pursuant to which we delivered $5.0~~issued $200.0 million ~~cash to Relative Core in exchange for a $5.0 million promissory note (“Relative Note”) which bears interest at 10% and is~~aggregate principal amount of Convertible Senior Notes due in 2018. The Relative Note is secured by 122,446 shares of common stock of Xenetic and 494,462 shares of OPKO common stock. We recorded the Relative Note within Other current assets and prepaid expenses in our Condensed Consolidated Balance Sheets.

~~NOTE 6 DEBT~~

~~In January 2013, we entered into note purchase agreements~~2025 (the ~~“2033 Senior~~“2025 Notes”) ~~with qualified institutional buyers and accredited investors (collectively, the “Purchasers”)~~ in ~~a private placement in reliance on exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”).~~an underwritten public offering. The ~~2033 Senior~~2025 Notes ~~were issued on January 30, 2013. The 2033 Senior Notes, which totaled $175.0 million in original principal amount,~~ bear interest at ~~the~~a rate of ~~3.00%~~4.50% per year, payable semiannually in arrears on February 115 and August 115 of each year. The ~~2033 Senior~~2025 Notes ~~will~~ mature on February ~~1, 2033,~~15,2025, unless earlier repurchased, redeemed or converted. ~~Upon~~

Holders may convert their 2025 Notes into shares of Common Stock at their option at any time prior to the close of business on the business day immediately preceding November 15,2024 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ended March 31,2019 (and only during such calendar quarter), if the last reported sale price of our Common Stock for at least 20 trading days (whether or not consecutive) during a ~~fundamental change as defined in~~period of 30 consecutive trading days ending on the ~~Indenture, dated as~~last trading day of ~~January 30, 2013, by and between~~ the ~~Company and Wells Fargo Bank N.A., as trustee, governing the 2033 Senior Notes (the “Indenture”), subject to certain exceptions, the holders may require us to repurchase all~~immediately preceding calendar quarter is greater than or ~~any portion of their 2033 Senior Notes for cash at a repurchase price~~ equal to ~~100%~~130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the ~~2033 Senior~~measurement period was less than 98% of the product of the last reported sale price of our Common Stock and the conversion rate on each such trading day; (3) if we call any or all of the 2025 Notes ~~being repurchased, plus any accrued and unpaid interest to but not including the related fundamental change repurchase date.~~

~~The following table sets forth information related to the 2033 Senior Notes which is included our Condensed Consolidated Balance Sheets as of~~ ~~September 30, 2017~~:

(In thousands) Embedded conversion option 2033 Senior Notes Discount Debt Issuance Cost Total
Balance at December 31, 2016 $ 16,736
$ 31,850
$ (4,612 ) $ (273 ) $ 43,701
Amortization of debt discount and debt issuance costs —
—
1,514
111
1,625
Change in fair value of embedded derivative (3,185 ) —
—
—
(3,185 )
Reclassification of embedded derivatives to equity (13,551 ) —
—
—
(13,551 )
Balance at September 30, 2017 $ —
$ 31,850
$ (3,098 ) $ (162 ) $ 28,590

~~The 2033 Senior Notes will be convertible~~for redemption, at any time ~~on or after November 1, 2032, through the second scheduled trading day immediately preceding the maturity date, at the option of the holders. Additionally, holders may convert their 2033 Senior Notes~~ prior to the close of business on the scheduled trading day immediately preceding ~~November 1, 2032, under~~ the following circumstances: (1) conversion based upon satisfaction of the trading price condition relating to the 2033 Senior Notes; (2) conversion based on the Common Stock price; (3) conversion basedredemption date; or (4) upon the occurrence of specified corporate ~~events;~~events set forth in the indenture governing the 2025 Notes. On or ~~(4) if~~after November 15,2024, until the close of business on the business day immediately preceding the maturity date, holders of the 2025 Notes may convert their notes at any time, regardless of the foregoing conditions. Upon conversion, we ~~call~~will pay or deliver, as the ~~2033 Senior Notes for redemption. The 2033 Senior Notes will~~ case may be, ~~convertible into~~ cash, shares of our Common Stock, or a combination of cash and shares of our Common Stock, at our ~~election unless we have made an irrevocable election of net share settlement.~~ election.

The initial and current conversion rate for the ~~2033 Senior~~2025 Notes ~~will be 141.48~~is 236.7424 shares of Common Stock per ~~$1,000~~$1,000 principal amount of ~~2033 Senior~~2025 Notes (equivalent to ~~an initial~~a conversion price of approximately ~~$7.07~~$4.22 per share of Common Stock)~~, and will be~~. The conversion rate for the 2025 Notes is subject to adjustment ~~upon the occurrence of~~in certain ~~events.~~events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date of the 2025 Notes or if we ~~will,~~deliver a notice of redemption, in certain circumstances the indenture governing the 2025 Notes requires an increase in the conversion rate of the 2025 Notes for ~~holders~~a holder who elects to convert ~~their 2033 Senior Notes~~its notes in connection with such a ~~make-whole fundamental change (as defined in~~corporate event or notice of redemption, as the ~~Indenture) and holders who convert upon the occurrence~~case may be.

Table of ~~certain specific events prior to February 1, 2017 (other than in connection with a make-whole fundamental change). Holders~~Contents

We may redeem for cash any or all of the ~~2033 Senior~~2025 Notes, ~~may require us~~at our option, if the last reported sale price of our Common Stock has been at least 130% of the then current conversion price for the notes for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to ~~repurchase the 2033 Senior Notes for~~ 100% of ~~their~~the principal amount of the notes to be redeemed, plus accrued and unpaid interest ~~on February 1, 2019, February 1, 2023 and February 1, 2028, or following~~to, but excluding, the ~~occurrence of~~redemption date. No sinking fund is provided for the 2025 Notes.

If we undergo a fundamental change, as defined in the indenture governing the ~~2033 Senior Notes.~~

~~On or after February 1, 2017 and before February 1, 2019, we may redeem for cash any or all of the 2033 Senior~~2025 Notes, but only if the last reported sale price of our Common Stock exceeds 130% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the maturity date ~~on which we deliver~~of the ~~redemption notice. The redemption~~2025 Notes, holders may require us to repurchase for cash all or any portion of their notes at a repurchase price ~~will~~ equal to 100% of the principal amount of the ~~2033 Senior Notes~~notes to be ~~redeemed,~~repurchased, plus ~~any~~ accrued and unpaid interest to, but ~~not including~~excluding, the ~~redemption~~fundamental change repurchase date. ~~On or after February 1, 2019, we may redeem for cash~~The 2025 Notes are our senior unsecured obligations and rank senior in right of payment to any ~~or all~~of our indebtedness that is expressly subordinated in right of payment to the 2025 Notes; equal in right of payment to any of our existing and future liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the ~~2033 Senior~~value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries.

In May 2021, we entered into exchange agreements with certain holders of the 2025 Notes, ~~at a redemption price of 100% of~~pursuant to which the holders exchanged $55.4 million in aggregate principal amount of the ~~2033 Senior~~outstanding 2025 Notes for 19,051,270 shares of our Common Stock (the “Exchange”).

In conjunction with the issuance of the 2025 Notes, we agreed to loan up to 30,000,000 shares of our Common Stock to affiliates of the underwriter in order to assist investors in the 2025 Notes to hedge their position. Following consummation of the Exchange, the number of outstanding borrowed shares of Common Stock was reduced by approximately 8,105,175 shares. As of both June 30, 2023 and December 31, 2022, a total of 21,144,825 shares remained outstanding under the share lending arrangement. We will not receive any of the proceeds from the sale of the borrowed shares, but we received a one-time nominal fee of $0.3 million for the newly issued shares. Shares of our Common Stock outstanding under the share lending arrangement are excluded from the calculation of basic and diluted earnings per share. See Note 4.

The following table sets forth information related to the 2025 Notes which is included in our Condensed Consolidated Balance Sheet as of June 30, 2023:

(In thousands)	2025 Senior Notes		Debt Issuance Cost			Total
Balance at December 31, 2022	$	144,580	$	(2,484	)	$	142,096
Amortization of debt discount and debt issuance costs		—		564			564
Balance at June 30, 2023	$	144,580	$	(1,920	)	$	142,660

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. The ASU is effective for public entities for fiscal years beginning after December 15,2021, with early adoption permitted. As required, we adopted ASU 2020-06 on January 1, 2022 and used the modified retrospective approach for all convertible debt instruments at the beginning of the period of adoptions. Results for reporting periods beginning January 1, 2022 are presented under ASU 2020-06, while prior period amounts were not adjusted and continue to be ~~redeemed, plus~~reported in accordance with historic accounting guidance.

Under the modified approach, entities will apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. ASU 2020-06 eliminates the cash conversion and beneficial conversion feature models in ASC 470-20 that require an issuer of certain convertible debt and preferred stock to separately account for embedded conversion features as a component of equity. The adoption of ASU 2020-06 at January 1, 2022 resulted in an increase of the 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.

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In February 2018, we issued a series of 5% Convertible Promissory Notes (the “2023 Convertible Notes”) in the aggregate principal amount of $55.0 million. The original maturity of the 2023 Convertible Notes was five years following the date of issuance and each holder of a 2023 Convertible Note originally had 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 ~~up to but not including the redemption date.~~

~~The terms of the 2033 Senior Notes, include, among others: (i) rights to convert~~thereon, into shares of our Common Stock ~~including upon a fundamental change; and (ii) a coupon make-whole payment in the event of~~at a conversion byprice of $5.00 per share. On February 10, 2023, we amended the2023 Convertible Notes to extend the maturity to January 31, 2025 and reset the conversion price to the 10 day volume weighted average price immediately preceding the date of the amended note, plus a 25% conversion premium, or $1.66 per share. Interest under the 2023 Convertible Notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance, until the principal and accrued and unpaid interest, are paid in full.

We may redeem all or any part of the then issued and outstanding 2023 Convertible Notes, together with accrued and unpaid interest thereon, pro rata among the holders, upon no fewer than 30 days, and no more than 60 days, notice to the holders. The 2023 Convertible Notes contain customary events of default and representations and warranties of OPKO.

Purchasers of the 2023 Convertible Notes included an affiliate of Dr. Phillip Frost, M.D., our Chairman and Chief Executive Officer, and Dr. Jane H. Hsiao, Ph.D., MBA, our Vice-Chairman and Chief Technical Officer.

In January 2013, we issued an aggregate of $175.0 million of our 3.0% Senior Notes due 2033 (the “2033 Senior Notes”) in a private placement. The 2033 Senior Notes bore interest at the rate of 3.0% per year, payable semiannually on February 1 and August 1 of each year and matured on February 1,2033, unless earlier repurchased, redeemed or converted.

From 2013 to 2016, holders of the 2033 Senior Notes on or after February 1, 2017 but prior to February 1, 2019. We determined that these specific terms were considered to be embedded derivatives. Embedded derivatives are required to be separated from the host contract, the 2033 Senior Notes, and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. We concluded that the embedded derivatives within the 2033 Senior Notes

~~meet these criteria for periods prior to February 1, 2017 and, as such, were valued separate and apart from the 2033 Senior Notes and recorded at fair value each reporting period.~~

~~For accounting and financial reporting purposes, prior to 2017 we combined these embedded derivatives and valued them together as one unit of accounting.~~

On February 1, 2017, certain terms of the embedded derivatives expired pursuant to the original agreement and we determined that the embedded derivatives no longer met the criteria to be separated from the host contract and, as a result, the embedded derivatives are no longer required to be valued separate and apart from the 2033 Senior Notes and are not required to be measured at fair value subsequent to February 1, 2017.

The change in derivative income for the period from January 1, 2017 to February 1, 2017 related to the embedded derivatives was $3.2 million and the fair value at that date was $13.6 million. For financial reporting purposes, we had remeasured the embedded derivatives subsequent to February 1, 2017 and recorded derivative income of $4.9 million and $5.1 million for the three months ended March 31, 2017 and June 30, 2017, respectively. In the three and nine months ended September 30, 2017, we reversed aggregate derivative income of $6.8 million to correct the derivative to its value as of February 1, 2017. The adjustment of previously recorded derivative income for the three months ended March 31, 2017 and June 30, 2017 were not significant to those previous periods and increased our basic loss per share by $(0.01) for the three months ended September 30, 2017 in the consolidated statements of operations. In addition, because the embedded derivatives are no longer required to be accounted for separately each period, in September 2017 the embedded derivative fair value of $13.6 million as of February 1, 2017 was reclassified to additional paid in capital.

~~From 2013 to 2016, holders of the 2033~~ Senior Notes converted ~~143.2~~$143.2 million in aggregate principal amount into an aggregate of 21,539,873 shares of ~~the Company’s~~ Common ~~Stock.~~

~~On April~~Stock, and, on February 1, ~~2015, we initially announced that our~~ 2019, approximately $28.8 million aggregate principal amount of 2033 Senior Notes were ~~convertible through June 2015~~tendered by holders pursuant to such holders’ option to require us to repurchase the 2033 Senior Notes.

During the first quarter of ~~such notes. This conversion right was triggered because~~2023, we paid approximately $3.0 million to purchase the closing price per share of our Common Stock exceeded $9.19, or 130% of the initial conversion price of $7.07, for at least 20 of 30 consecutive trading days during the applicable measurement period. We have elected to satisfy our conversion obligation under the remaining 2033 Senior Notes in shares of our Common Stock. Our 2033 Senior Notes continued to be convertible by holders of such notes for the remainder of 2015, 2016 and the first quarter of 2017, and may be convertible thereafter, if one or more of the conversion conditions specified in the Indenture is satisfied during future measurement periods. Pursuant to the Indenture, a holder who elects to convert the 2033 Senior Notes will receive 141.4827 shares of our Common Stock plus such number of additional shares as is applicable on the conversion date per $1,000 principal amount of 2033 Senior Notes based on the early conversion provisions in the Indenture.

Through February 1, 2017, we used a binomial lattice model in order to estimate the fair value of the embedded derivative in the 2033 Senior Notes. A binomial lattice model generates two probable outcomes — one up and another down —arising at each point in time, starting from the date of valuation until the maturity date. A lattice model was initially used to determine if the 2033 Senior Notes would be converted, called or held at each decision point. Within the lattice model, the following assumptions are made: (i) the 2033 Senior Notes will be converted early if the conversion value is greater than the holding value; or (ii) the 2033 Senior Notes will be called if the holding value is greater than both (a) the redemption price (as defined in the Indenture) and (b) the conversion value plus the coupon make-whole payment at the time. If the 2033 Senior Notes are called, then the holders will maximize their value by finding the optimal decision between (1) redeeming at the redemption price and (2) converting the 2033 Senior Notes.

Using this lattice model, we had valued the embedded derivatives using the “with-and-without method,” where the value of the 2033 Senior Notes including the embedded derivatives is defined as the “with,” and the value of the 2033 Senior Notes excluding the embedded derivatives is defined as the “without.” This method estimated the value of the embedded derivatives by looking at the difference in the values between the 2033 Senior Notesaccordance with the ~~embedded derivatives and~~indenture governing the ~~value of the~~ 2033 Senior ~~Notes without the embedded derivatives.~~

The lattice model requires the following inputs: (i) price of our Common Stock; (ii) Conversion Rate (as defined in the Indenture); (iii) Conversion Price (as defined in the Indenture); (iv) maturity date; (v) risk-free interest rate; (vi) estimated stock volatility; and (vii) estimated credit spread for the Company.

~~The following table sets forth the inputs to the lattice model used to value the embedded derivative as of February 1, 2017:~~



	~~February 1, 2017~~
~~Stock price~~	~~$8.63~~
~~Conversion Rate~~	~~141.4827~~
~~Conversion Price~~	~~$7.07~~
~~Maturity date~~	~~February 1, 2033~~
~~Risk-free interest rate~~	~~1.22%~~
~~Estimated stock volatility~~	~~49%~~
~~Estimated credit spread~~	~~761 basis points~~

On Notes.

In November 5, 2015, BioReference and certain of its subsidiaries entered into a credit agreement with JPMorgan Chase Bank, N.A. (“CB”), as lender and administrative agent, as amended (the “Credit Agreement”)~~, which replaced BioReference’s prior credit facility. The~~. As amended, the Credit Agreement provides for a ~~$175.0~~$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. ~~BioReference may increase~~

On June 29, 2023, the ~~credit facility to up to $275.0 million on~~company entered into a ~~secured basis, subject~~Waiver and Amendment No.2 to the ~~satisfaction of specified conditions.~~Credit Agreement (the "Credit Agreement Amendment"). The Credit Agreement ~~matures~~Amendment, among other things, (i) waived specific defaults under the Credit Agreement resulting from the failure to pledge certain intellectual property, (ii) replaced the London interbank offered rate (LIBOR) with the forward-looking term rate based on ~~November 5, 2020~~the secured overnight financing rate (the "SOFR Rate") as the interest rate benchmark, (iii) reduced the aggregate revolving commitment from $75,000,000 to $50,000,000, (iv) provided a revised commitment fee rate, and (v) extended the maturity date from August 2024 to the earlier of August 2025, and 90 days prior to the maturity date of any indebtedness of the Company in an aggregate principal amount exceeding $7,500,000.

The Credit Agreement is guaranteed by all of BioReference’s domestic ~~subsidiaries. The Credit Agreement~~subsidiaries and is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well as a non-recourse pledge by us of our equity interest in BioReference. Availability under the Credit Agreement is based on a borrowing base ~~comprised~~composed of eligible accounts receivables of BioReference and certain of its subsidiaries, as specified therein. As of June 30, 2023, $13.3 million remained available for borrowing under the Credit Agreement. Principal under the Credit Agreement is due upon maturity on ~~November 5, 2020.~~

August 30, 2025.

At BioReference’s option, borrowings under the Credit Agreement (other than swingline loans) ~~will~~ bear interest at (i) the CB floating rate (defined as the higher of ~~(a)~~(x) the prime rate and ~~(b)~~(y) the ~~LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities)~~SOFR Rate for an interest period of one month plus 2.50% and a benchmark spread adjustment of 0.10%) plus an applicable margin of ~~0.35% for the first 12 months and 0.50% thereafter~~1.00%; or (ii) the ~~LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities)~~SOFR Rate plus a benchmark spread adjustment of 0.10% and an applicable margin of ~~1.35% for the first 12 months and 1.50% thereafter.~~2.00%. Swingline loans will bear interest at the CB floating rate plus the applicable margin. The Credit Agreement also calls for other customary fees and charges, including an unused commitment fee of ~~0.50%~~0.400% if the average quarterly availability is 50% or more of the ~~lending~~revolving commitment, or 0.275% if the average quarterly availability is less than or equal to 50% of the revolving commitments.

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~~On March 17, 2017, BioReference~~

As of June 30, 2023 and ~~certain of its subsidiaries entered into Amendment No. 3 to Credit Agreement, which amended~~December 31, 2022, $13.3 million and $18.1 million, respectively, was outstanding under the Credit Agreement to permit BioReference and its subsidiaries to dividend cash to the Company in the form of an intercompany loan, in an aggregate amount not to exceed $55,000,000. On August 7, 2017, BioReference and certain of its subsidiaries entered into Amendment No. 4 to Credit Agreement, which amended the Credit Agreement to permit BioReference and its subsidiaries to dividend cash to the Company in the form of an additional intercompany loan, in an aggregate amount not to exceed $35,000,000. The other terms of the Credit Agreement remain unchanged.

Agreement.

The Credit Agreement contains customary covenants and restrictions, including, without limitation, covenants that require BioReference and its subsidiaries to maintain a minimum fixed charge coverage ratio if availability under the new credit facility falls below a specified amount and to comply with laws and restrictions on the ability of BioReference and its subsidiaries to incur additional indebtedness or to pay dividends and make certain other distributions to the Company, subject to certain exceptions as specified therein. Failure to comply with these covenants would constitute an event of default under the Credit Agreement, notwithstanding the ability of BioReference to meet its debt service obligations. The Credit Agreement also includes various customary remedies for the lenders following an event of default, including the acceleration of repayment of outstanding amounts under the Credit Agreement and execution upon the collateral securing obligations under the Credit Agreement. Substantially all the assets of BioReference and its subsidiaries are restricted from sale, transfer, lease, disposal or distributions to the Company, subject to certain exceptions. As of June 30, 2023, BioReference and its subsidiaries had net assets as of ~~September 30, 2017 were~~ approximately ~~$1.0 billion,~~$525.7 million, which ~~includes~~included goodwill of ~~$401.8~~$283.0 million and intangible assets of ~~$457.0~~$177.9 million.

In addition to the Credit Agreement, ~~with CB,~~ we ~~have~~had line of credit agreements with ~~eleven~~thirteen other financial institutions as of ~~September~~June 30, ~~2017~~2023, and ~~ten other financial institutions as of~~ December 31, ~~2016~~2022, in ~~United States,~~the U.S., Chile and Spain. These lines of credit are used primarily as ~~a source~~sources of working capital for inventory purchases.

The following table summarizes the amounts outstanding under the ~~Bio Reference,~~BioReference, Chilean and Spanish lines of credit:

(Dollars in thousands) Balance Outstanding
Lender
Interest rate on
borrowings at September 30, 2017

Credit line
capacity
September 30,
2017
December 31,
2016
JPMorgan Chase 3.36% $ 175,000
$ 93,311
$ 38,809
Itau Bank 5.50% 1,810
374
419
Bank of Chile 6.60% 3,800
2,687
1,619
BICE Bank 5.50% 2,500
1,720
1,538
BBVA Bank 5.50% 3,250
2,164
1,063
Estado Bank 5.50% 3,500
2,559
1,870
Santander Bank 5.50% 4,500
2,133
1,196
Scotiabank 5.00% 1,800
986
789
Corpbanca 5.00% —
—
18
Banco Bilbao Vizcaya 2.90% 295
—
—
Santander Bank 2.67% 354
—
—
Total $ 196,809
$ 105,934
$ 47,321

(Dollars in thousands)						Balance Outstanding
	Interest rate on borrowings at			Credit line		June 30,		December 31,
Lender	June 30, 2023			capacity		2023		2022
JPMorgan Chase		11.85	%	$	50,000	$	13,329	$	18,080
Itau Bank		5.50	%		1,900		1,566		2,378
Bank of Chile		6.60	%		2,500		1,842		817
BICE Bank		5.50	%		2,640		2,640		1,661
Scotiabank		5.00	%		5,500		1,094		1,646
Santander Bank		5.50	%		5,000		1,682		1,238
Security Bank		5.50	%		1,400		571		755
Estado Bank		5.50	%		4,000		550		1,621
BCI Bank		5.00	%		2,500		839		2,100
Internacional Bank		5.50	%		1,500		1,292		599
Consoorcio Bank		5.00	%		2,000		667		925
Banco De Sabadell		1.75	%		544		—		—
Santander Bank		1.95	%		544		—		—
Total				$	80,028	$	26,072	$	31,820

At ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the weighted average interest rate on our lines of credit was approximately ~~4.5%~~8.8% and ~~4.7%~~5.4%, respectively.

At ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, we had notes payable and other debt (excluding the 2033 Senior Notes, the 2023 Convertible Notes, the 2025 Notes, the Credit Agreement and amounts outstanding under lines of ~~credit)~~credit described above) as follows:

(In thousands) September 30,
2017
December 31,
2016
Current portion of notes payable $ 3,726
$ 3,681
Other long-term liabilities 2,085
2,090
Total $ 5,811
$ 5,771

	June 30,		December 31,
(In thousands)	2023		2022
Current portion of notes payable	$	2,657	$	1,720
Other long-term liabilities		8,501		9,290
Total	$	11,158	$	11,010

The notes and other debt mature at various dates ranging from ~~2017~~2023 through ~~2024~~2032, bearing variable interest rates from ~~1.8%~~0.7% up to ~~6.3%~~5.1%. The weighted average interest rate on the notes and other debt at ~~September~~was 4.0% on June 30, ~~2017~~2023 and 3.5% on December 31, ~~2016~~~~, was~~ ~~2.9%~~ ~~and~~ ~~3.2%, respectively.~~2022. The notes ~~payable~~ are partially secured by our office space in Barcelona.

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NOTE 78 ACCUMULATED OTHER COMPREHENSIVE ~~INCOME (LOSS)~~

LOSS

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, changes in Accumulated other comprehensive ~~income (loss),~~loss, net of tax, were as follows:

	Foreign
	currency
(In thousands)	translation
Balance at December 31, 2022	$	(43,323	)
Other comprehensive income		6,381
Balance at June 30, 2023	$	(36,942	)

(In thousands)
Foreign
currency

Unrealized
gain (loss) in
Accumulated
OCI
Total
Balance at December 31, 2016 $ (28,128 ) $ 1,119
$ (27,009 )
Other comprehensive income (loss) before reclassifications 21,646
(749 ) 20,897
Reclassification adjustments for losses included in net loss, net of tax

690
690
Net other comprehensive income (loss) 21,646
(59 ) 21,587
Balance at September 30, 2017 $ (6,482 ) $ 1,060
$ (5,422 )

NOTE 89 FAIR VALUE MEASUREMENTS

We record fair values 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 determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a ~~three-tier~~three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers ~~include:~~are: 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.

~~A summary~~

As of ~~our investments classified as available for sale~~June 30, 2023, we had equity securities and ~~carried at~~an equity method fair value ~~is as follows:~~

As of September 30, 2017
(In thousands)
Amortized
Cost

Gross
unrealized
gains in
Accumulated
OCI

Gross
unrealized
losses in
Accumulated
OCI

Fair
value
Common stock investments, available for sale $ 2,048
$ 1,308
$ (248 ) $ 3,108
Total assets $ 2,048
$ 1,308
$ (248 ) $ 3,108

As of December 31, 2016
(In thousands)
Amortized
Cost

Gross
unrealized
gains in
Accumulated
OCI

Gross
unrealized
losses in
Accumulated
OCI

Fair
value
Common stock investments, available for sale $ 3,409
$ 1,313
$ (194 ) $ 4,528
Total assets $ 3,409
$ 1,313
$ (194 ) $ 4,528

~~Any future fluctuation in fair value related~~option (refer to our available for sale investments that is judged to be temporary, and any recoveries of previous temporary write-downs, will be recorded in Accumulated other comprehensive income (loss). If we determine that any future valuation adjustment was other-than-temporary, we will record a loss during the period such determination is made.

~~As of September 30, 2017, we have money market funds that qualify as cash equivalents,~~Note 6), forward foreign currency exchange contracts for inventory purchases (refer to Note 9)10) and contingent consideration related to the acquisitions of CURNA, OPKO Diagnostics and OPKO Renal that are required to be measured at fair value on a recurring basis. In addition, in connection with our investment and our consulting ~~agreements~~agreement with ~~Neovasc and~~ BioCardia, we record the related ~~Neovasc and~~ BioCardia options at fair value as well as the warrants from ~~COCP, Sevion, MabVax, InCellDx, Inc., Xenetic and RXi.~~

COCP.

Our financial assets and liabilities measured at fair value on a recurring basis are as follows:

	Fair value measurements as of June 30, 2023
	Quoted
	prices in
	active		Significant
	markets for		other		Significant
	identical		observable		unobservable
	assets		inputs		inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds	$	57,355	$	—	$	—	$	57,355
Equity securities		330		—		—		330
Equity Method - FV option		21,209		—		—		21,209
Common stock options/warrants		—		38		—		38
Total assets	$	78,894	$	38	$	—	$	78,932
Liabilities:
Forward contracts		—		134		—		134
Contingent consideration		—		—		1,139		1,139
Total liabilities	$	—	$	134	$	1,139	$	1,273

Fair value measurements as of September 30, 2017
(In thousands)
Quoted
prices in
active
markets for
identical
assets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Total
Assets:
Money market funds $ 12,621
$ —
$ —
$ 12,621
Common stock investments, available for sale 3,108
—
—
3,108
Common stock options/warrants —
2,020
—
2,020
Total assets $ 15,729
$ 2,020
$ —
$ 17,749
Liabilities:
Forward contracts —
264
—
264
Contingent consideration —
—
40,301
40,301
Total liabilities $ —
$ 264
$ 40,301
$ 40,565

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Fair value measurements as of December 31, 2016
(In thousands)
Quoted
prices in
active
markets for
identical
assets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Total
Assets:
Money market funds $ 5,314
$ —
$ —
$ 5,314
Common stock investments, available for sale 4,528
—
—
4,528
Common stock options/warrants —
4,017
—
4,017
Forward contracts —
39
—
39
Total assets $ 9,842
$ 4,056
$ —
$ 13,898
Liabilities:
Embedded conversion option $ —
$ —
$ 16,736
$ 16,736
Contingent consideration —
—
45,076
45,076
Total liabilities $ —
$ —
$ 61,812
$ 61,812

	Fair value measurements as of December 31, 2022
	Quoted
	prices in
	active		Significant
	markets for		other		Significant
	identical		observable		unobservable
	assets		inputs		inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds	$	102,773	$	—	$	—	$	102,773
Equity securities		648		—		—	$	648
Equity Method - fair value option		21,120		—		—		21,120
Common stock options/warrants		—		28		—		28
Total assets	$	124,541	$	28	$	—	$	124,569
Liabilities:
Forward contracts		—		1,123		—		1,123
Contingent consideration		—		—		1,036		1,036
Total liabilities	$	—	$	1,123	$	1,036	$	2,159

The carrying amount and estimated fair value of our ~~2033 Senior~~2025 Notes, ~~with the embedded conversion option,~~ as well as the applicable fair value hierarchy tiers, are contained in the table below. The fair value of the ~~2033 Senior~~2025 Notes is determined using ~~a binomial lattice approach~~inputs other than quoted prices in ~~order to estimate the fair value of the embedded derivative in the 2033 Senior Notes. Refer to Note 6.~~

September 30, 2017
(In thousands)
Carrying
Value

Total
Fair Value
Level 1 Level 2 Level 3
2033 Senior Notes $ 28,590
$ 37,011
$ —
$ —
$ 37,011

active markets that are directly observable.

	June 30, 2023
	Carrying		Total
(In thousands)	Value		Fair Value		Level 1		Level 2		Level 3
2025 Notes	$	142,660	$	138,797	$	—	$	138,797	$	—

There have been no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy.

As of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the carrying value of our other financial instrument assets ~~and liabilities~~ approximates their fair value due to their short-term nature or variable rate of interest.

The following table reconciles the beginning and ending balances of our Level 3 assets and liabilities as of ~~September~~June 30, ~~2017~~2023:

September 30, 2017
(In thousands)
Contingent
consideration

Embedded
conversion
option
Balance at December 31, 2016 $ 45,076
$ 16,736
Total losses for the period:
Included in results of operations (4,475 ) (3,185 )
Foreign currency impact 3
—
Payments (303 ) —
Reclassification of embedded derivatives to equity —
(13,551 )
Balance at September 30, 2017 $ 40,301
$ —

	June 30, 2023
	Contingent
(In thousands)	consideration
Balance at December 31, 2022	$	1,036
Change in fair value:
Included in results of operations		102
Foreign currency impact		1
Balance at June 30, 2023	$	1,139

The estimated fair values of our financial instruments have been determined by using available market information and what we believe to be appropriate valuation methodologies. We use the following methods and assumptions in estimating fair value:

Contingent consideration – We estimate the fair value of the contingent consideration utilizing a discounted cash flow model for the expected payments based on estimated timing and expected revenues. We use several discount rates depending on each type of contingent consideration related to, ~~OPKO Diagnostics,~~ CURNA and OPKO Renal transactions. ~~If estimated future sales were to decrease by~~ ~~10%, the contingent consideration related to OPKO Renal, which represents the majority of our contingent consideration liability, would decrease by~~ ~~$2.4 million~~. As of ~~September~~June 30, ~~2017~~2023, of the ~~$40.3~~$1.1 million of contingent consideration, ~~$2.0~~$0.1 million is was recorded in Accrued expenses and ~~$38.3~~$1.1 million is of contingent consideration was recorded in Other long-term liabilities. As of December 31, ~~2016~~2022, ~~of the~~ ~~$45.1~~$1.0 million of contingent consideration ~~$0.3 million~~ iswas recorded in ~~Accrued~~accrued expenses and ~~$44.8 million is recorded~~other long-term liabilities. As a result of our execution of the CAMP4 Agreement (as defined in ~~Other long-term liabilities.~~Note 14), we will have to pay a percentage of any payments received under the CAMP4 Agreement to the former CURNA stockholders.

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NOTE 910 DERIVATIVE CONTRACTS

The following table summarizes the fair values and the presentation of our derivative financial instruments in the Condensed Consolidated Balance Sheets:

(In thousands) Balance Sheet Component September 30,
2017 December 31,
2016
Derivative financial instruments:
Common Stock options/warrants Investments, net $ 2,020
$ 4,017
Embedded conversion option 2033 Senior Notes, net of discount and estimated fair value of embedded derivatives $ —
$ (16,736 )
Forward contracts Unrealized gains on forward contracts are recorded in Other current assets and prepaid expenses. Unrealized (losses) on forward contracts are recorded in Accrued expenses. $ (264 ) $ 39

	Balance Sheet	June 30,			December 31,
(In thousands)	Component	2023			2022
Derivative financial instruments:
Common Stock options/warrants	Investments, net	$	38		$	28
Forward contracts	Unrealized losses on forward contracts are recorded in Accrued expenses.	$	(134	)	$	(1,123	)

We enter into foreign currency forward exchange contracts with respect to ~~cover~~ the risk of exposure to exchange rate differences arising from inventory purchases on letters of credit. 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.

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 ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022, our derivative financial instruments do did not meet the documentation requirements to be designated as hedges. Accordingly, we recognize the changes in Fair value of derivative instruments, net in our Condensed Consolidated ~~Statements~~Statement of Operations. The following table summarizes the losses and gains recorded for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016:~~2022:

	Three months ended June 30,					Six months ended June 30,
(In thousands)	2023		2022			2023			2022
Derivative loss:
Common Stock options/warrants	$	12	$	(4	)	$	10		$	(5	)
Forward contracts		130		342			(927	)		211
Total	$	142	$	338		$	(917	)	$	206

Three months ended September 30, Nine months ended September 30,
(In thousands) 2017 2016 2017 2016
Derivative gain (loss):
Common Stock options/warrants $ (342 ) $ (12 ) $ (854 ) $ (4,728 )
2033 Senior Notes (6,829 ) (5,795 ) 3,185
(1,061 )
Forward contracts (379 ) 106
(362 ) (100 )
Total $ (7,550 ) $ (5,701 ) $ 1,969
$ (5,889 )

NOTE 1011 RELATED PARTY TRANSACTIONS

On May 4, 2023, the Company entered into an Assignment and Assumption Agreement (the "Assignment Agreement") with Ruen-Hui Biopharmaceuticals, Inc., a Taiwanese entity ("Ruen-Hui") in which Dr. Hsiao owns more than a 10% interest. Ruen-Hui assumed the Company's obligations under an exclusive license agreement with Academia Sinica in exchange for an upfront payment of $150,000, a number of potential milestone payments up to $1 million, commercial milestones ranging from low to double digit millions, and royalty payments. The Assignment Agreement will be effective upon Academia Sinica's consent to the assignment. Ruen Hui will also be responsible for any outstanding payment obligations under such license agreement, including patent maintenance costs, and any payments due to Academia Sinica.

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On April 29, 2022, upon consummation of the GeneDx Transaction, the Company entered into a Transition Services Agreement (the “Transition Services Agreement”) with GeneDx (now a wholly owned subsidiary of GeneDx Holdings), pursuant to which the Company agreed to provide, at cost, certain customary support services in respect of GeneDx’s business through August 31, 2023, including human resources, information technology support, and finance and accounting. As of June 30, 2023, the Company had incurred aggregate expenses of $2.1 million for services rendered under the Transition Services Agreement. For the six months ended June 30, 2023, the company incurred expenses of $0.8 million for services rendered under the Transaction Services Agreement. As of June 30, 2023, the company has a receivable of $0.5 million payable to the Company by GeneDx in accordance with the terms of the Transition Services Agreement.

The Company owns approximately 9% of Pharmsynthez and Pharmsynthez is Xenetic’s largest and controlling stockholder. Dr. Richard Lerner, a director of the Company until his death on December 2, 2021, was a co-inventor of Xenetic’s technology and received 31,240 shares of Xenetic upon the closing of the Xenetic transactions described above. Adam Logal, our Senior Vice President and Chief Financial Officer, is a director of Xenetic.

We hold investments in Zebra (ownership 29%), ~~Sevion (31%),~~ Neovasc ~~(4%~~(0.5%), ChromaDex ~~Corporation (1%), MabVax (4%~~(0.10%), COCP ~~(9%) ARNO (5%~~(2%), NIMS (1%), Eloxx (1%), BioCardia ~~(5%~~(1%) and ~~Eloxx (3%~~LeaderMed Health Group Limited (47%). Neovasc was recently acquired and we expect to receive merger consideration in exchange for our shares. These investments were considered related party transactions as a result of our executive management’s ownership interests and/or board representation in these entities. We also hold an investment in GeneDx Holdings (Nasdaq: WGS) representing an 13.9% ownership interest as a result of our sale of GeneDx, Inc. and subsequent participation in an underwritten offering by GeneDx Holdings. Richard Pfenniger who sits on our Board also sits on the GeneDx Board as a result of the acquisition. See further discussion of our investments in Note 5.

In June 2017, we invested $1.5 million in Eloxx for 99,915 Preferred C Shares and in July 2017, we invested an additional $1.5 million in Sevion for 10,000,000 shares of Sevion common stock. An entity controlled by Dr. Frost also made in investment in Eloxx and committed to investing additional funds in Sevion by December 31, 2017. Sevion and Eloxx entered into an acquisition agreement on May 31, 2017 under which Eloxx will become a wholly owned subsidiary of Sevion. Upon completion of the transaction, Sevion will change its name to Eloxx Pharmaceuticals, Inc. Previously, in November 2016, we made a $0.2 million loan to Sevion, and in February 2017, we entered into an agreement with Sevion pursuant to which we delivered $0.3 million cash to Sevion in exchange for a promissory note. The loan and promissory note were converted into 4.1 million shares of Sevion common stock in August 2017. In September 2017, we converted 66,667 shares of Series C Preferred Stock of Sevion into 1,250,006 shares of common stock. The agreements with Sevion were considered related party transactions as a result of our executive management’s ownership interests and board representation in Sevion.

In July 2017, we invested an additional $0.1 million in MabVax for 152,143 shares of common stock and in May 2017, we invested an additional $0.5 million in MabVax for 285,714 shares of Series G Preferred Stock and 322,820 shares of Series I Preferred Stock. We had also invested an additional $1.0 million in MabVax in August 2016 for 207,900 shares of its common stock and warrants to purchase 415,800 shares of its common stock.

In April 2017, we invested an additional $1.0 million in COCP for 4,166,667 shares of its common stock, and in August 2016, we had invested an additional $2.0 million in COCP for 4,878,050 shares of its common stock.

In January 2016, we invested an additional $0.3 million in ARNO for 714,285 shares of its common stock, and in August 2016, we had invested an additional $0.3 million in ARNO for 714,285 shares of its common stock and warrants to purchase 357,142 shares of its common stock.

In October 2016, we entered into a consulting agreement to provide strategic advisory services to BioCardia. In connection with the consulting agreement, BioCardia granted us 5,027,726 common stock options. In December 2016, we purchased 19,230,769 shares of BioCardia from Dr. Frost for $2.5 million. We have also purchased shares of BioCardia in the open market. BioCardia is a related party as a result of our executive management’s ownership interest and board representation in BioCardia and its predecessor, Tiger X Medical, Inc. In October 2016, BioCardia completed its merger with Tiger X Medical, Inc., to which Tiger X Medical, Inc. was the surviving entity and the name of the issuer was changed to BioCardia.

In November 2016, we entered into a Pledge Agreement with the Museum of Science, Inc. and the Museum of Science Endowment Fund, Inc. pursuant to which we will contribute an aggregate of $1.0 million over a four-year period for constructing, equipping and the general operation of the Frost Science Museum. Dr. Frost and Mr. Pfenniger serve on the Board of Trustees of the Frost Science Museum and Mr. Pfenniger is the Vice Chairman of the Board of Trustees.

We lease office space from Frost Real Estate Holdings, LLC (“Frost Holdings”) in Miami, Florida, where our principal executive offices are located. Effective ~~January~~August 1, ~~2017,~~ 2019, we entered into an amendment to our lease agreement with Frost Holdings. The lease, as amended, is for approximately 29,500 square feet of space. The lease provides for payments of approximately ~~$81~~$89 thousand per month in the first year increasing annually to ~~$86~~$101 thousand per month in the ~~third~~fifth year, plus applicable sales tax. The rent is inclusive of operating expenses, property taxes and parking.

Dr. Elias Zerhouni, our Vice Chairman and President, sits on the board of directors of Danaher Corporation (“Danaher”). Our ~~wholly-owned~~ subsidiary, BioReference, routinely procures products and services from several subsidiaries of Danaher, including Beckman Coulter, Integrated DNA Technologies Inc., and Leica Microsystems Inc., to which BioReference has paid $1.7 million, $0.8 million, and $0.2 million, respectively, during the six months ended June 30, 2023 .

BioReference purchases and uses certain products acquired from InCellDx, ~~Inc.,~~ a company in which we hold a ~~28%~~29% minority interest.

We reimburse Dr. Frost for Company-related use by Dr. Frost and our other executives of an airplane owned by a company that is beneficially owned by Dr. Frost. We reimburse Dr. Frost for out-of-pocket operating costs for the use of the airplane by Dr. Frost or Company executives for Company-related business. We do not reimburse Dr. Frost for personal use of the airplane by Dr. Frost or any other executive. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, we ~~recognized~~reimbursed approximately ~~$168~~$0.0 thousand and ~~$309~~$29.3 thousand, respectively, for Company-related travel by Dr. Frost and other OPKO executives. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2022, we ~~recognized~~reimbursed approximately ~~$154~~$0.0 thousand and ~~$274~~$30.0 thousand, respectively, for Company-related travel by Dr. Frost and other OPKO executives.

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NOTE 1112 COMMITMENTS AND CONTINGENCIES

In February 2023, the Office of the Attorney General for the State of Texas (“TX OAG”) informed BioReference that it believes that, from 2005 to the present, BioReference may have violated the Texas Medicaid Fraud Prevention Act with respect to claims it presented to Texas Medicaid for reimbursement. BioReference has not determined whether there is any merit to the TX OAG claims nor can it determine the extent of any potential liability. While management cannot predict the outcome of these matters at this time, the ultimate outcome could materially and adversely affect our business, financial condition, results of operations, and cash flows.

On December 29, 2022, the Israel Tax Authority (the “ITA”) issued an assessment against our subsidiary, OPKO Biologics in the amount of approximately $246 million (including interest) related to uncertain tax positions involving income recognition in connection with an examination of foreign tax returns for the 2014 through 2020 tax years. We recognize that local tax law is inherently complex and the local taxing authorities may not agree with certain tax positions taken. We are appealing this assessment, as we believe, other than for uncertain tax positions for which we have reserved, the issues are without technical merit. We intend to exhaust all judicial remedies necessary to resolve the matter, as necessary, which could be a lengthy process. There can be no assurance that this matter will be resolved in our favor, and an adverse outcome, or any future tax examinations involving similar assertions, could have a material adverse effect on our financial condition, results of operations and cash flows.

In connection with our acquisitions of CURNA, OPKO Diagnostics and OPKO Renal, we agreed to pay future consideration to the sellers upon the achievement of certain events. ~~As a result,~~Therefore, as of ~~September~~June 30, ~~2017,~~2023, we recorded ~~$40.3~~$1.1 million as contingent consideration, with ~~$2.0~~$0.1 million recorded ~~within~~in Accrued expenses and ~~$38.3~~$1.1 million recorded within Other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets. Refer to Note 4.

~~In August 2017, we entered into~~5.

GeneDx, Inc., the Company’s former subsidiary, received a ~~Commitment Letter (the “Commitment Letter”~~letter dated May 26, 2022 from the Texas Medicaid Office of the Inspector General stating that certain testing provided by GeneDx was not eligible for reimbursement by the Texas Medicaid program, because the testing was considered non-covered by the Texas Medicaid program at the time the tests were performed and/or GeneDx did not hold the requisite CLIA subspecialty classifications for the testing. The Company is working with GeneDx Holdings to investigate these issues. Following recent communication, it appears the CLIA subspecialty classification issue has been addressed to the satisfaction of the Texas Medicaid Office of the Inspector General. The potential non-covered testing issue, however, remains under investigation. The Texas Medicaid Office has expressed in writing a potential repayment liability of approximately $784 thousand. At this time, the Company can express no opinion as to the likelihood of an unfavorable outcome or the range of potential loss in this matter.

On March 1, 2019, the Company received a Civil Investigative Demand (“CID”) ~~with Veterans Accountable Care Group, LLC~~from the U.S. Department of Justice (“~~VACG”~~DOJ”), Washington, DC. The CID sets forth document requests and interrogatories in connection with ~~submission~~allegations that the Company and certain of ~~a bid~~its affiliates violated the False Claims Act and/or the Anti-Kickback Statute. On January 13, 2022, the Federal Government notified the U.S.D.C., Middle District Florida, Jacksonville Division, that it is declining to intervene in the matter but retains the right, via the Attorney General, to consent to any proposed dismissal of the action by ~~its affiliate,~~ the ~~Veterans Accountable Care Organization, LLC~~Court. On February 9, 2022, the States of Florida, Georgia, and Commonwealth of Massachusetts notified the U.S.D.C., Middle District Florida, Jacksonville Division, that they are declining to intervene in the matter. Notwithstanding the above declinations, on February 17, 2022, the Company was served with the Relator’s Summons and Complaint (“~~VACO”~~Complaint”), which had been previously sealed. The Complaint alleges violations of the False Claims Act, the California Fraud Preventions Act, the Florida False Claims Act, the Massachusetts False Claims Act, the Georgia False Medicaid Claims Act, and illegal kickbacks. A motion to dismiss the Complaint was filed on April 25, 2022 and the case was dismissed in ~~response~~March 2023. However, the Relator filed an amended complaint in April 2023. While management cannot predict the outcome of these matters at this time, the ultimate outcome could be material to ~~a request for proposal (“RFP”)~~our business, financial condition, results of operations, and cash flows.

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From time to time, we may receive inquiries, document requests, CIDs or subpoenas from the ~~Veterans Health Administration (“VA”)~~Department of Justice, OCR, CMS, various payors and fiscal intermediaries, and other state and federal regulators regarding ~~its Community Care Network. If VACO is successful in its bid, we will acquire a fifteen percent (15%) membership interest in VACO.~~investigations, audits and reviews. In addition ~~BioReference,~~to the matters discussed in this note, we are currently responding to CIDs, subpoenas, payor audits, and document requests for various matters relating to our ~~wholly-owned subsidiary, will provide~~ laboratory ~~services~~operations. Some pending or threatened proceedings against us may involve potentially substantial amounts as well as the possibility of civil, criminal, or administrative fines, penalties, or other sanctions, which could be material. Settlements of suits involving the types of issues that we routinely confront may require monetary payments as well as corporate integrity agreements. Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. Also, from time to time, we may detect issues of non-compliance with federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians, among other things. We may avail ourselves of various mechanisms to address these issues, including participation in voluntary disclosure protocols. Participating in voluntary disclosure protocols can have the ~~Community Care Network,~~potential for significant settlement obligations or even enforcement action. The Company generally has cooperated, and intends to continue to cooperate, with appropriate regulatory authorities as and when investigations, audits and inquiries arise.

We are a ~~region which currently includes approximately 2,133,000 veterans~~party to other litigation in the ~~states~~ordinary course of ~~Massachusetts, Maine, New Hampshire, Vermont, New York, Pennsylvania, New Jersey, Rhode Island, Connecticut, Maryland, Virginia, West Virginia, and North Carolina.~~

~~Pursuant to~~business. While we cannot predict the ~~Commitment Letter,~~ultimate outcome of legal matters, we committed to provide, or to arrange from a third party lender, a line of credit for VACG in the amount of $50.0 million (the “Facility”). Funds drawn under the Facility would be contributed by VACG to VACO in order to satisfy the financial stability requirement of VACO in connection with its submission of the RFP. VACG would not be permitted to draw down on the Facility unless and until the VHA awards a contract to VACO. The Facility would have a maturity of five (5) years. Interest on the Facility would be payable at a rate equal to six and one-half percent (6.5%) per annum, payable quarterly in arrears.

We currently anticipate that a decision by the VHA with respect to the RFP will occur during the fourth quarter of 2017, although there can be no assurance that a decision will be made by such time or that, if made, such decision will not be challenged by participants in the RFP process or otherwise.

~~The Facility is subject to the negotiation of definitive documentation conditions customary for transactions of such type and otherwise acceptable to VACG and the lender under the Facility.~~

We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. WeIt’s reasonably possible the ultimate liability could exceed amounts currently estimated and we review ~~these~~established accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For the matters referenced in the paragraph below, the amount of liability is not probable or the amount cannot be reasonably estimated; and, therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for matters which the likelihood of material loss is at least reasonably possible, we provide disclosureBecause of the ~~possible~~high degree of judgment involved in establishing loss ~~or range of loss; however, if a reasonable estimate cannot be made, we will provide disclosure to that effect.~~

From time to time, we may receive inquiries, document requests, or subpoenas from the Department of Justice, the Office of Inspector General and Office for Civil Rights (“OCR”) of the Department of Health and Human Services, the Centers for Medicare and Medicaid Services, various payors and fiscal intermediaries, and other state and federal regulators regarding investigations, audits and reviews. In addition to the matters discussed in this note, we are currently responding to subpoenas or document requests for various matters relating to our laboratory operations. Some pending or threatened proceedings against us may involve potentially substantial amounts as well as the possibility of civil, criminal, or administrative fines, penalties, or other sanctions, which could be material. Settlements of suits involving the types of issues that we routinely confront may require monetary payments as well as corporate integrity agreements. Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. Also, from time to time, we may detect issues of non-compliance with federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians, among other things. We may avail ourselves of various mechanisms to address these issues, including participation in voluntary disclosure protocols. Participating in voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement action. The Company generally has cooperated, and intends to continue to cooperate, with appropriate regulatory authorities as and when investigations, audits and inquiries arise.

We are a party to other litigation in the ordinary course of business. We do not believe that any such litigation will have a material adverse effect on our business, financial condition, results of operations or cash flows.

In April 2017, the Civil Division of the United States Attorney’s Office for the Southern District of New York (the “SDNY”) informed BioReference Laboratories (“BioReference”) that it believes that, from 2006 to the present, BioReference

had, in violation of the False Claims Act, improperly billed Medicare and Tricare (both are federal government healthcare programs) for clinical laboratory services provided to hospital inpatient beneficiaries at certain hospitals. BioReference is reviewing and assessing the allegations made by the SDNY, and, at this point, BioReference has not determined whether there is any merit to the SDNY’s claims nor can it determine the extent of any potential liability. While management cannot predict the outcome of these matters at this time,estimates, the ultimate outcome ~~could~~ of such matters will differ from our estimates and such differences may be material to our business, financial condition, results of operations, and cash flows.

We expect to continue to incur substantial research and development expenses, including expenses related to the hiring of personnel and additional clinical trials. We expect that selling, general and administrative expenses will also increase as we expand our sales, marketing and administrative staff and add infrastructure, particularly as it relates to the launch of ~~Rayaldee.~~ We do not anticipate that we will generate substantial revenue from the sale of proprietary pharmaceutical products or certain of our diagnostic products for some time and we have generated only limited revenue from our pharmaceutical operations in Chile, Mexico, Israel, Spain, and Ireland, and from sale of the ~~4Kscore~~ test. If we acquire additional assets or companies, accelerate our product development programs or initiate additional clinical trials, we will need additional funds. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs or possible acquisitions.

We have employment agreements with certain executives of BioReference which provide for compensation and certain other benefits and for severance payments under certain circumstances. During the nine months ended September

At June 30, ~~2017 and 2016, we recognized $3.7 million and $17.9 million, respectively, of severance costs pursuant to these employment agreements as a component of Selling, general and administrative expense.~~

~~At September 30, 2017,~~2023, we were committed to make future purchases for inventory and other items in ~~2017~~2023 that occur in the ordinary course of business under various purchase arrangements with fixed purchase provisions aggregating ~~$106.6~~approximately $46.4 million.

NOTE 13 REVENUE RECOGNITION

We generate revenues from services, products and intellectual property as follows:

Revenue from services

Revenue for laboratory services is recognized at the time test results are reported, which approximates when services are provided and the performance obligations are satisfied. Services are provided to patients covered by various third-party payor programs including various managed care organizations, as well as the Medicare and Medicaid programs. Billings for services are included in revenue net of allowances for contractual discounts, allowances for differences between the amounts billed and estimated program payment amounts, and implicit price concessions provided to uninsured patients which are all elements of variable consideration.

The following are descriptions of our payors for laboratory services:

Healthcare Insurers. Reimbursements from healthcare insurers are based on negotiated fee-for-service schedules. Revenues consist of amounts billed, net of contractual allowances for differences between amounts billed and the estimated consideration we expect to receive from such payors, which considers historical denial and collection experience and the terms of our contractual arrangements. Adjustments to the allowances, based on actual receipts from the third-party payors, are recorded upon settlement.

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Government Payors. Reimbursements from government payors are based on fee-for-service schedules set by governmental authorities, including traditional Medicare and Medicaid. Revenues consist of amounts billed, net of contractual allowances for differences between amounts billed and the estimated consideration we expect to receive from such payors, which considers historical denial and collection experience and the terms of our contractual arrangements. Adjustments to the allowances, based on actual receipts from the government payors, are recorded upon settlement.

Client Payors. Client payors include physicians, hospitals, employers, and other institutions for which services are performed on a wholesale basis, and are billed and recognized as revenue based on negotiated fee schedules. Client payors also include cities, states and companies for which BioReference provides COVID-19 testing services.

Patients. Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Insured patients (including amounts for coinsurance and deductible responsibilities) are billed based on fees negotiated with healthcare insurers. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients in accordance with our policies and implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration that we expect to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement.

The complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, require us to estimate the potential for retroactive adjustments as an element of variable consideration in the recognition of revenue in the period the related services are rendered. Actual amounts are adjusted in the period those adjustments become known. Negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods were recognized of $13.9 million and $21.2 million, respectively, for the six months ended June 30, 2023 and 2022. Revenue adjustments for the six months ended June 30, 2023 were mainly due to the composition of patient pay mix and, in 2022, mainly to lower reimbursement estimates for COVID-19 testing.

Third-party payors, including government programs, may decide to deny payment or recoup payments for testing they contend were improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received. Our revenues may be subject to retroactive adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance and changes by government agencies and payors in interpretations, requirements, and “conditions of participation” in various programs. We have processed requests for recoupment from third-party payors in the ordinary course of our business, and it is likely that we will continue to do so in the future. If a third-party payor denies payment for testing or recoups money from us in a later period, reimbursement for our testing could decline.

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. 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.

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. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and our historical settlement activity, including an assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations. As of June 30, 2023 and December 31, 2022, we had liabilities of approximately $2.9 million and $1.8 million, respectively, within Accrued expenses and Other long-term liabilities related to reimbursements for payor overpayments.

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The composition of revenue from services by payor for the three and six months ended June 30, 2023 and 2022 was as follows:

	Three months ended June 30,				Six months ended June 30,
(In thousands)	2023		2022		2023		2022
Healthcare insurers	$	76,954	$	76,442	$	157,365	$	172,269
Government payers		20,923		25,659		41,267		53,263
Client payers		24,899		80,931		52,443		240,021
Patients		4,276		3,772		8,345		7,849
Total	$	127,052	$	186,804	$	259,420	$	473,402

Revenue from products

We recognize revenue from product sales when a customer obtains control of promised goods or services. The amount of revenue recorded reflects the consideration that we expect to receive in exchange for those goods or services. Our estimates for sales returns and allowances are based upon the historical patterns of product returns and allowances taken, matched against the sales from which they originated, and our evaluation of specific factors that may increase or decrease the risk of product returns. Product revenues are recorded net of estimated rebates, chargebacks, discounts, co-pay assistance and other deductions (collectively, “Sales Deductions”) as well as estimated product returns which are all elements of variable consideration. Allowances are recorded as a reduction of revenue at the time product revenues are recognized. The actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect revenue from products in the period such variances become known.

Rayaldee is distributed in the U.S. principally through the retail pharmacy channel, which initiates with the largest wholesalers in the U.S. (collectively, “Rayaldee Customers”). In addition to distribution agreements with Rayaldee Customers, we have entered into arrangements with many healthcare providers and payors that provide for government-mandated or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of Rayaldee.

We recognize revenue for shipments of Rayaldee at the time of delivery to customers after estimating Sales Deductions and product returns as elements of variable consideration utilizing historical information and market research projections. For the three and six months ended June 30, 2023, we recognized $7.7 million and $14.4 million, respectively, in net product revenue from sales of Rayaldee. For the three and six months ended June 30, 2022, we recognized $6.2 million and $11.4 million, respectively, in net product revenue from sales of Rayaldee.

The following table presents an analysis of Rayaldee product sales allowances and accruals for the three and six months ended June 30, 2023 and 2022:

(In thousands)	Chargebacks, discounts, rebates and fees			Governmental			Returns			Total
Balance at March 31, 2023	$	1,574		$	5,140		$	1,676		$	8,390
Provision related to current period sales		3,950			5,561			351			9,862
Credits or payments made		(3,194	)		(4,747	)		(393	)		(8,334	)
Balance at June 30, 2023	$	2,330		$	5,954		$	1,634		$	9,918

Total gross Rayaldee sales										$	17,568
Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales											56	%

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(In thousands)	Chargebacks, discounts, rebates and fees			Governmental			Returns			Total
Balance at December 31, 2022	$	1,532		$	5,063		$	1,683		$	8,278
Provision related to current period sales		7,256			9,606			637			17,499
Credits or payments made		(6,458	)		(8,715	)		(686	)		(15,859	)
Balance at June 30, 2023	$	2,330		$	5,954		$	1,634		$	9,918

Total gross Rayaldee sales										$	31,850
Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales											55	%

(In thousands)	Chargebacks, discounts, rebates and fees			Governmental			Returns			Total
Balance at March 31, 2022	$	1,588		$	5,282		$	2,333		$	9,203
Provision related to current period sales		3,411			5,442			308			9,161
Credits or payments made		(3,330	)		(4,235	)		(1,023	)		(8,588	)
Balance at June 30, 2022	$	1,669		$	6,489		$	1,618		$	9,776

Total gross Rayaldee sales										$	15,382
Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales											60	%

(In thousands)	Chargebacks, discounts, rebates and fees			Governmental			Returns			Total
Balance at December 31, 2021	$	2,014		$	5,499		$	2,639		$	10,152
Provision related to current period sales		6,626			10,311			577			17,514
Credits or payments made		(6,971	)		(9,321	)		(1,598	)		(17,890	)
Balance at June 30, 2022	$	1,669		$	6,489		$	1,618		$	9,776

Total gross Rayaldee sales										$	28,861
Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales											61	%

Taxes collected from customers related to revenues from services and revenues from products are excluded from revenues.

Revenue from intellectual property and other

We recognize revenues from the transfer of intellectual property generated through license, development, collaboration and/or commercialization agreements. The terms of these agreements typically include payment to us for one or more of the following: non-refundable, up-front license fees; development and commercialization milestone payments; funding of research and/or development activities; and royalties on sales of licensed products. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer.

For research, development and/or commercialization agreements that result in revenues, we identify all material performance obligations, which may include a license to intellectual property and know-how, and research and development activities. In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. We constrain (reduce) our estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, we consider whether there are factors outside of our control that could result in a significant reversal of revenue. In making these assessments, we consider the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.

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Upfront License Fees: If a license to our intellectual property is determined to be functional intellectual property distinct from the other performance obligations identified in the arrangement, we recognize revenue from nonrefundable, upfront license fees based on the relative value prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. 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. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Development and Regulatory Milestone Payments: Depending on facts and circumstances, we may conclude that it is appropriate to include the milestone in the estimated transaction price or that it is appropriate to fully constrain the milestone. A milestone payment is included in the transaction price in the reporting period that we conclude that it is probable that recording revenue in the period will not result in a significant reversal in amounts recognized in future periods. We may record revenues from certain milestones in a reporting period before the milestone is achieved if we conclude that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. We record a corresponding contract asset when this conclusion is reached. Milestone payments that have been fully constrained are not included in the transaction price to date. These milestones remain fully constrained until we conclude that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. We re-evaluate the probability of achievement of such development milestones and any related constraint each reporting period. We adjust our estimate of the overall transaction price, including the amount of revenue recorded, if necessary.

Research and Development Activities: If we are entitled to reimbursement from our customers for specified research and development expenses, we account for them as separate performance obligations if distinct. We also determine whether the research and development funding would result in revenues or an offset to research and development expenses in accordance with provisions of gross or net revenue presentation. The corresponding revenues or offset to research and development expenses are recognized as the related performance obligations are satisfied.

Sales-based Milestone and Royalty Payments: Our customers may be required to pay us sales-based milestone payments or royalties on future sales of commercial products. We recognize revenues related to sales-based milestone and royalty payments upon the later to occur of (i) achievement of the customer’s underlying sales or (ii) satisfaction of any performance obligation(s) related to these sales, in each case assuming the license to our intellectual property is deemed to be the predominant item to which the sales-based milestones and/or royalties relate.

Other Potential Products and Services: Arrangements may include an option for license rights, future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s election. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations at the inception of the contract and revenue is recognized only if the option is exercised and products or services are subsequently delivered or when the rights expire. If the promise is based on market terms and not considered a material right, the option is accounted for if and when exercised. If we are entitled to additional payments when the licensee exercises these options, any additional payments are generally recorded in license or other revenues when the licensee obtains control of the goods, which is upon delivery.

For the three and six months ended June 30, 2023, we recorded $94.9 million and $159.7 million of revenue from the transfer of intellectual property and other, respectively. For the six months ended June 30, 2023, revenue from transfer of intellectual property and other principally reflects $90.0 million triggered by the FDA approval of NGENLA (Somatrogon) and during the three months ended June 30, 2022, includes $85.0 million of regulatory milestone payments from Pfizer due from the commencement of sales from NGENLA (Somatrogon) in Europe and Japan. For the six months ended June 30, 2023, revenue from transfer of intellectual property and other reflects a $50.0 million payment from Merck in consideration for the rights granted to Merck under the Merck Agreement (as defined below), a $7.0 million payment from Vifor (as defined below) triggered by the German price approval for Rayaldee and a $2.5 million payment from Nicoya due to Nicoya’s submission of the investigational new drug application to China's Center for Drug Evaluation. For the six months ended June 30, 2022, revenue from transfer of intellectual property and other included $3.0 million related to a sales milestone from Vifor.

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Contract liabilities relate to cash consideration that OPKO receives in advance of satisfying the related performance obligations. Changes in the contractual liabilities balance during the six months ended June 30, 2023 were as follows:

(In thousands)
Balance at December 31, 2022	$	138
Balance at June 30, 2023		140
Revenue recognized in the period from:
Amounts included in contracts liability at the beginning of the period		(2	)

NOTE 1214 STRATEGIC ALLIANCES

~~Vifor Fresenius Medical Care Renal Pharma Ltd~~

Merck

On March 8, 2023, ModeX, the Company (with respect to certain sections), and Merck Sharp & Dohme LLC (“Merck”) entered into a License and Research Collaboration Agreement (the “Merck Agreement”) pursuant to which ModeX granted to Merck a license to certain patent rights and know-how in connection with the development of ModeX’s preclinical nanoparticle vaccine candidate targeting the Epstein-Barr Virus.

Under the terms of the Merck Agreement, ModeX granted to Merck an exclusive, sublicensable, royalty-bearing license to certain intellectual property to develop, manufacture, use and commercialize (i) a multivalent or monovalent vaccine assembled using our platform for Epstein-Barr Virus (“Vaccine”), and (ii) any pharmaceutical or biological preparation in final form containing a Vaccine for sale or for administration to human patients in a clinical trial for all uses (“Product”). We received an initial payment of $50.0 million and are eligible to receive up to an additional $872.5 million upon the achievement of certain commercial and development milestones under several indications. We are also eligible to receive tiered royalty payments ranging from high single digits to low double digits upon achievement of certain sales targets of the Product. Certain of the rights subject to the license provided by us under the Merck Agreement were obtained by us from Sanofi pursuant to that certain License Agreement entered into as of July 1, 2021 (“Sanofi In-License Agreement”) between us and Sanofi, a French corporation (“Sanofi”), and a portion of the upfront payment, milestones and royalties received by us under the Merck Agreement may be payable to Sanofi under the terms of the Sanofi In-License Agreement. As a result of such obligations under the Sanofi In-License Agreement, we paid $12.5 million to Sanofi during the second quarter of 2023.

As part of their strategic collaboration, ModeX and Merck have put in place a research plan to ~~develop~~manage research and other development activities related to the development of a ~~portfolio~~Vaccine or Product including a joint steering committee to facilitate the research program. As part of ~~product candidates through~~the research plan, they will use a ~~combination of internal~~third-party contract development and ~~external partnerships.~~manufacturing organization (“CDMO”) to carry out such activities unless otherwise agreed. Development costs incurred by ModeX in furtherance of these development activities will be reimbursed by Merck. To date, we have spent $8.2 million of development costs related to the Epstein -Barr Virus, for which Merck will provide reimbursement.

The Merck Agreement will remain in effect until one or more Products receive marketing authorization, and, thereafter, until the expiration of all royalty obligations unless earlier terminated as permitted under the Merck Agreement. In ~~May 2016,~~ addition to termination rights for material breach and bankruptcy, Merck is permitted to terminate the Agreement in its entirety without cause after a specified notice period. If Merck terminates the Merck Agreement for convenience or by us for Merck’s uncured material breach, we may elect to receive a reversion license such that we can continue its work with Vaccines and Products which have not been terminated due to a material safety issue.

LeaderMed

On September 14, 2021, we and LeaderMed announced the formation of a joint venture to develop, manufacture and commercialize two of OPKO’s clinical stage, long-acting drug products in Greater China and eight other Asian territories.

Under the terms of the agreements, we have granted the joint venture exclusive rights to develop, manufacture and commercialize (a) OPK88003, an oxyntomodulin analog being developed for the treatment of obesity and diabetes, and (b) Factor VIIa-CTP, a novel long-acting coagulation factor being developed to treat hemophilia, in exchange for a 47% ownership interest in the joint venture. In addition, during 2021 we received an upfront payment of $1 million and will be reimbursed for clinical trial material and technical support we provide the joint venture.

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LeaderMed is responsible for funding the joint venture’s operations, development and commercialization efforts and, together with its syndicate partners, initially invested $11 million in exchange for a 53% ownership interest. We retain full rights to oxyntomodulin and Factor VIIa-CTP in all other geographies.

CAMP4 Therapeutics

On July 6, 2021, we entered into an exclusive license agreement (the “CAMP4 Agreement”) with CAMP4, pursuant to which we granted to CAMP4 an exclusive license to develop, manufacture, commercialize or improve therapeutics utilizing the AntagoNAT technology, an oligonucleotide platform developed under OPKO CURNA, which includes the molecule for the treatment of Dravet syndrome, together with any derivative or modification thereof (the “Licensed Compound”) and any pharmaceutical product that comprises or contains the Licensed Compound, alone or in combination with one or more other active ingredients (“Licensed Product”), worldwide. The CAMP4 Agreement grant covers human pharmaceutical, prophylactic, and therapeutic and certain diagnostic uses.

We received an initial upfront payment of $1.5 million and 3,373,008 shares of CAMP4’s Series A Prime Preferred Stock (“Preferred Stock”), which equates to approximately 9% of the outstanding shares of CAMP4, and we are eligible to receive up to $3.5 million in development milestone payments for Dravet syndrome products, and $4 million for non-Dravet syndrome products, as well as sales milestones of up to $90 million for Dravet syndrome products and up to $90 million for non-Dravet syndrome products. We may also receive double digit royalty payments on the net sales of royalty bearing products, subject to adjustment. In addition, upon achievement of certain development milestones, we will be eligible to receive equity consideration of up to 5,782,299 shares of Preferred Stock in connection with Dravet syndrome products and up to 1,082,248 shares of Preferred Stock in connection with non-Dravet syndrome products. In connection with our acquisition of CURNA, we agreed to pay future consideration to the sellers upon the achievement of certain events. As a result of our execution of the CAMP4 Agreement, we will have to pay a percentage of any payments received under the CAMP4 Agreement to the former CURNA stockholders.

Unless earlier terminated, the CAMP4 Agreement will remain in effect on a Licensed Product-by-Licensed Product and country by-country basis until such time as the royalty term expires for a Licensed Product in a country, and expires in its entirety upon the expiration of the royalty term for the last Licensed Product in the last country. CAMP4’s royalty obligations expire on the later of (i) the expiration, invalidation or abandonment date of the last patent right in connection with the royalty bearing product, or (ii) ten (10) years after a royalty bearing product’s first commercial sale in a country. In addition to termination rights for material breach and bankruptcy, CAMP4 is permitted to terminate the CAMP4 Agreement after a specified notice period.

NICOYA Macau Limited

On June 18, 2021, EirGen, our ~~wholly-owned~~wholly owned subsidiary, and ~~Vifor Fresenius Medical Care Renal Pharma Ltd~~NICOYA Macau Limited (“~~VFMCRP”~~Nicoya”), a Macau corporation and an affiliate of NICOYA Therapeutics, entered into a Development and License Agreement (the ~~“VFMCRP~~“Nicoya Agreement”) granting Nicoya the exclusive rights for the development and commercialization of extended release calcifediol (the “Nicoya Product”) in Greater China, which includes mainland China, Hong Kong, Macau, and Taiwan (collectively, the “Nicoya Territory”). Extended release calcifediol is marketed in the U.S. by OPKO under the tradename Rayaldee. The license grant to Nicoya covers the therapeutic and preventative use of the Nicoya Product for SHPT in non-dialysis and hemodialysis chronic kidney disease patients (the “Nicoya Field”).

EirGen received an initial upfront payment of $5 million and was eligible to receive an additional $5 million tied to the first anniversary of the effective date of the Nicoya Agreement, as amended, of which EirGen has received $2.5 million plus accrued interest for the delayed payment. Furthermore, EirGen received the additional $2.5 million upon Nicoya’s submission of an investigational new drug (IND) application to the Center for Drug Evaluation of China in March 2023. EirGen is also eligible to receive up to an additional aggregate amount of $115 million upon the achievement of certain development, regulatory and sales-based milestones by Nicoya for the Nicoya Product in the Nicoya Territory. EirGen is eligible to receive tiered, double digit royalty payments at rates in the low double digits on net product sales within the Nicoya Territory and in the Nicoya Field.

Nicoya will, at its sole cost and expense, be responsible for performing all development activities necessary to obtain all regulatory approvals for the Nicoya Product in the Nicoya Territory and for all commercial activities pertaining to the Nicoya Product in the Nicoya Territory.

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Unless earlier terminated, the Nicoya Agreement will remain in effect until such time as all royalty payment terms and extended payment terms have expired, and Nicoya shall have no further payment obligations to EirGen under the terms of the Nicoya Agreement. Nicoya’s royalty obligations expire on the later of (i) expiration of the last to expire valid patent claim covering the Nicoya Product sold in the Nicoya Territory, (ii) expiration of all regulatory and data exclusivity applicable to the Nicoya Product in the Nicoya Territory, and (iii) on a product-by-product basis, ten (10) years after such Nicoya Product’s first commercial sale in the Nicoya Territory. In addition to termination rights for material breach and bankruptcy, Nicoya is permitted to terminate the Nicoya Agreement after a specified notice period.

CSL Vifor

In May 2016, EirGen and Vifor Fresenius Medical Care Renal Pharma Ltd. (“Vifor”) entered into a Development and License Agreement (the “Vifor Agreement”) for the development and commercialization of Rayaldee ~~(the “Product”)~~ worldwide, except for (i) the United States and Canada, (ii) any country in Central America or South America ~~(excluding~~(including Mexico), (iii) Russia, (iv) China, (v) ~~Japan,~~South Korea, (vi) Ukraine, (vii) Belorussia, (viii) Azerbaijan, (ix) Kazakhstan, (x) Taiwan (xi) the Middle East, and ~~(x) Taiwan~~(xii) all countries of Africa (the ~~“VFMCRP~~“Vifor Territory”)., as amended. The license to ~~VFMCRP~~Vifor potentially covers all therapeutic and prophylactic uses of the Product in human patients (the ~~“VFMCRP~~“Vifor Field”), provided that initially the license is for the use of the Product for the treatment or prevention of SHPT related to patients with ~~stage 3 or 4 chronic kidney disease~~CKD and vitamin D insufficiency/deficiency (the ~~“VFMCRP~~“Vifor Initial Indication”).

~~Under~~

In January 2023, the ~~terms~~price approval for Rayaldee was granted by the German Association of Statutory Health Insurance funds (GKV-SV), which triggered a milestone payment of $7.0 million for the six months ended June 30, 2023. For the six months ended June 30, 2022 we recognized a milestone payment of $3.0 million in revenue from transfer of intellectual property and other for the first sale of Rayaldee in Europe.

Effective May 23, 2021, we entered into an amendment to the Vifor Agreement pursuant to which the parties thereto agreed to include Japan as part of the ~~VFMCRP~~Vifor Territory.

Effective May 5, 2020, we entered into an amendment to the Vifor Agreement ~~EirGen granted~~pursuant to ~~VFMCRP an exclusive license in~~which the ~~VFMCRP Territory in~~parties agreed to exclude Mexico, South Korea, the ~~VFMCRP Field~~Middle East and all of the countries of Africa from the Vifor Territory. In addition, the parties agreed to ~~use~~ certain ~~EirGen patents and technology~~amendments to ~~make, have made, use, sell, offer for sale, and import Products~~the milestone structure and to ~~develop, commercialize, have commercialized, and otherwise exploit~~reduce minimum royalties payable. As revised, the ~~Product. EirGen~~Company has received a ~~non-refundable~~$3 million payment triggered by the first marketing approval of Rayaldee in Europe, $7.0 million payment triggered by the Germany price approval by the local sick fund association, and ~~non-creditable initial payment of $50 million. EirGen~~ is ~~also~~ eligible to receive up to an additional ~~$37~~$10 million in regulatory milestones ~~(“Regulatory Milestones”)~~ and ~~$195~~$207 million in milestone payments tied to launch, pricing and ~~sales-based milestones (“Sales Milestones”)~~sales of Rayaldee, and ~~will receive~~ tiered, ~~royalties on sales of the product at percentage rates that range from the mid-teens~~double-digit royalties.

We plan to ~~the mid-twenties or a minimum royalty, whichever is greater, upon the commencement of sales of the Product within the VFMCRP Territory and in the VFMCRP Field.~~

~~As part of the arrangement, the companies will~~ share responsibility with Vifor for the conduct of trials specified within an agreed-upon development plan, with each company leading certain activities within the plan. EirGen will lead the manufacturing activities within and outside the ~~VFMCRP~~Vifor Territory and the commercialization activities outside the ~~VFMCRP~~Vifor Territory and outside the ~~VFMCRP~~Vifor Field in the ~~VFMCRP~~Vifor Territory and ~~VFMCRP~~Vifor will lead the commercialization activities in the ~~VFMCRP~~Vifor Territory and the ~~VFMCRP~~Vifor Field. For the initial development plan, the companies have agreed to certain cost sharing arrangements. ~~VFMCRP~~Vifor will be responsible for all other development costs that ~~VFMCRP~~Vifor considers necessary to develop the Product for the use of the Product for the ~~VFMCRP~~Vifor Initial Indication in the ~~VFMCRP~~Vifor Territory in the ~~VFMCRP~~Vifor Field except as otherwise provided in the ~~VFMCRP~~Vifor Agreement.

The ~~VFMCRP Agreement will remain in effect with respect to the Product in each country~~first of the VFMCRP Territory, on a country by country basis, until the date on which VFMCRP shall have no further payment obligations to EirGen under the terms of the VFMCRP Agreement, unless earlier terminated pursuant to the VFMCRP Agreement. VFMCRP’s royalty

obligations expire on a country-by-country and product-by-product basis on the later of (i) expiration of the last to expire valid claim covering the Product sold in such country, (ii) expiration of all regulatory and data exclusivity applicable to the Productclinical studies provided for in the ~~country of sale, and (iii) ten (10) years after the Product first commercial sale~~development activities commenced in such country. In addition to termination rights for material breach and bankruptcy, VFMCRP is permitted to terminate the VFMCRP Agreement in its entirety, or with respect to one or more countries in the VFMCRP Territory, after a specified notice period, provided that VFMCRP shall not have the right to terminate the VFMCRP Agreement with respect to certain major countries without terminating the entire VFMCRP Agreement. If the VFMCRP Agreement is terminated by EirGen or VFMCRP, provision has been made for transition of product and product responsibilities to EirGen.

September 2018.

In connection with the ~~VFMCRP~~Vifor Agreement, the parties entered into a letter agreement ~~(the “Letter Agreement”)~~ pursuant to which EirGen granted to ~~VFMCRP~~Vifor an exclusive option (the “Option”) to acquire an exclusive license under certain EirGen patents and technology to use, import, offer for sale, sell, distribute and commercialize the Product in the ~~United States~~U.S. solely for the treatment of ~~secondary hyperparathyroidism~~SHPT in dialysis patients with ~~chronic kidney disease~~CKD and vitamin D insufficiency (the “Dialysis Indication”). Upon exercise of the Option, ~~VFMCRP will~~Vifor has agreed to reimburse EirGen for all of the development costs incurred by EirGen with respect to the Product for the Dialysis Indication in the ~~United States. VFMCRP~~U.S. Vifor would also pay EirGen up to an additional aggregate amount of $555 million of sales-based milestones upon the achievement of certain milestones and would be obligated to pay royalties at percentage rates that range from the mid-teens to the mid-twenties on sales of the Product in the ~~United States~~U.S. for the Dialysis Indication.

~~The Option is exercisable until~~ To date, Vifor has not exercised the earlier of (i) the date that EirGen submits a new drug application or supplemental new drug application or their then equivalents to the U.S. Food and Drug Administration for the Product for the Dialysis Indication in the United States, (ii) the parties mutually agree to discontinue development of Product for the Dialysis Indication, or (iii) VFMCRP provides notice to OPKO that it has elected not to exercise the Option.

~~OPKO has guaranteed the performance of certain of EirGen’s obligations under the VFMCRP Agreement and the Letter Agreement.~~

For revenue recognition purposes, we evaluated the various agreements with VFMCRP to determine whether there were multiple deliverables in the arrangement. The VFMCRP Agreement provides for the following: (1) an exclusive license in the VFMCRP Territory in the VFMCRP Field to use certain patents and technology to make, have made, use, sell, offer for sale, and import Products and to develop, commercialize, have commercialized, and otherwise exploit the Product; (2) EirGen will supply Products to support the development, sale and commercialization of the Products to VFMCRP in the VFMCRP Territory (the “Manufacturing Services”); and (3) the Option to acquire an exclusive license under certain EirGen patents and technology to use, import, offer for sale, sell, distribute and commercialize the Product in the United States solely for the Dialysis Indication. Based on our evaluation, the exclusive license is the only deliverable at the outset of the arrangement. We concluded the Manufacturing Services were a contingent deliverable dependent on the future regulatory and commercial action by VFMCRP and the Option was substantive and not considered a deliverable under the license arrangement.

We recognized the $50.0 million upfront license payment in Revenue from transfer of intellectual property in our Condensed Consolidated Statements of Operations in the second quarter of 2016. Revenues related to the Manufacturing Services will be recognized as Product is sold to VFMCRP. No revenue related to the Option will be recognized unless and until VFMCRP exercises its Option under the Letter Agreement.

We determined that the cost sharing arrangement for development of the Dialysis Indication is not a deliverable in the VFMCRP Agreement. Payments for the Dialysis Indication will be recorded as Research and development expense as incurred.

~~EirGen is also eligible to receive up to an additional $37 million in Regulatory Milestones and $195 million in Sales Milestones.~~

Payments received for ~~Regulatory Milestones~~regulatory milestones and ~~Sales Milestones~~sales milestones are non-refundable. The ~~Regulatory Milestones~~regulatory milestones are payable if and when ~~VFMCRP~~Vifor obtains approval from certain regulatory authorities and will be recognized as revenue in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met. We account for the ~~Sales Milestones~~sales milestones as royalties and ~~Sales Milestones~~sales milestones payments will be recognized as revenue ~~in full~~ in the period in which the associated milestone is achieved or sales occur, assuming all other revenue recognition criteria are met. ~~To date, no revenue has been recognized related to the achievement~~

Table of ~~the milestones.~~Contents

Pfizer Inc.

In December 2014, we entered into an exclusive worldwide agreement (the “Pfizer Agreement”) with Pfizer ~~Inc. (“Pfizer”)~~ for the development and commercialization of our long-acting ~~hGH-CTP~~Somatrogon (hGH-CTP) for the treatment of growth hormone deficiency (“GHD”) in adults and children, as well as for the treatment of growth failure in children born small for gestational age ~~(“SGA”)~~ (the “Pfizer Transaction”).

In June 2023, The FDA approved NGENLA (Somatrogon) a once-weekly injection to treat pediatric growth hormone deficiency in the United States. In early 2022, the European Commission and Ministry of Health, Labour and Welfare in Japan approved NGENLA (Somatrogon) in those territories. We have also received pricing approvals in Germany and Japan. NGENLA (Somatrogon) is approved for the treatment of pediatric GHD in more than 40 markets, including Canada, Australia, Japan, and EU Member States. With the achievement of these milestones, during the second quarter of 2023, we recorded revenue of $90 million and $85.0 million in 2022.

In May 2020, we entered into an Amended and Restated Development and Commercialization License Agreement (the “Restated Pfizer ~~Transaction closed~~Agreement”) with Pfizer, effective January 1, 2020, pursuant to which the parties agreed, among other things, to share all costs for Manufacturing Activities, as defined in ~~January 2015 following~~ the ~~termination~~Restated Pfizer Agreement, for developing a licensed product for the three indications included in the Restated Pfizer Agreement.

On October 21, 2019, we and Pfizer announced that the global phase 3 trial evaluating Somatrogon dosed once-weekly in prepubertal children with GHD met its primary endpoint of ~~the waiting period under the Hart-Scott-Rodino Act.~~ non-inferiority to daily Genotropin® (somatropin) for injection, as measured by annual height velocity at 12 months.

Under the terms of the Pfizer Transaction, as restated, we received non-refundable and non-creditable upfront payments of $295.0 million and are eligible to receive up to an additional $275.0 million upon the achievement of certain regulatory milestones. Pfizer received the exclusive license to commercialize ~~hGH-CTP~~Somatrogon worldwide. In addition, we are eligible to receive initial tiered royalty payments associated with the commercialization of hGH-CTP for Adult GHD with percentage rates ranging from the high teens to mid-twenties. Upon the launch of hGH-CTP for Pediatric GHD in certain major markets, the royalties will transition to regional, tiered gross profit sharing for both ~~hGH-CTP~~Somatrogon and Pfizer’s Genotropin®.

(somatropin) in all global markets, with the U.S. region commencing gross profit sharing in August 2023.

The agreement with Pfizer will remain in effect until the last sale of the licensed product, unless earlier terminated as permitted under the ~~agreement.~~Pfizer Agreement. In addition to termination rights for material breach and bankruptcy, Pfizer is permitted to terminate the Pfizer Agreement in its entirety, or with respect to one or more world regions, without cause after a specified notice period. If the Pfizer Agreement is terminated by us for Pfizer’s uncured material breach, or by Pfizer without cause, provision has been made for transition of product and product responsibilities to us for the terminated regions, as well as continued supply of product by Pfizer or transfer of supply to us in order to support the terminated regions.

For revenue recognition purposes, we viewed the Pfizer Transaction as a multiple-element arrangement. Multiple-element arrangements are analyzed to determine whether the various performance obligations, or elements, can be separated or whether they must be accounted for as a single unit of accounting. We evaluated whether a delivered element under an arrangement has standalone value and qualifies for treatment as a separate unit of accounting. Deliverables that do not meet these criteria are not evaluated separately for the purpose of revenue recognition. For a single unit of accounting, payments received are recognized in a manner consistent with the final deliverable. We determined that the deliverables under the Pfizer Transaction, including the licenses granted to Pfizer, as well as our obligations to provide various research and development services, will be accounted for as a single unit of account. This determination was made because the ongoing research and development services to be provided by us are essential to the overall arrangement as we have significant knowledge and technical know-how that is important to realizing the value of the licenses granted. The performance period over which the revenue will be recognized is expected to continue from the first quarter of 2015 through 2020, when we anticipate completing the various research and development services that are specified in the Pfizer Transaction and our performance obligations are completed. We will continue to review the timing of when our research and development services will be completed in order to assess that the estimated performance period over which the revenue is to be recognized is appropriate. Any significant changes in the timing of the performance period will result in a change in the revenue recognition period. We increased the expected performance period over which the revenue will be recognized in the third quarter of 2017 by approximately one year.

~~We are recognizing~~ the non-refundable $295.0 million upfront payments ~~on a straight-line basis over~~as revenue as the ~~performance period. We recognized $46.5 million~~research and development services were completed. As of ~~revenue~~June 30, 2023 and December 31, 2022, we had no contract liabilities related to the Pfizer Transaction in Revenue from transfer of intellectual property in our Condensed Consolidated Statements of Operations during the nine months ended September 30, 2017, and had deferred revenue related to the Pfizer Transaction of $112.3 million at September 30, 2017. As of September 30, 2017, $44.9 million of deferred revenue related to the Pfizer Transaction was classified in Accrued expenses and $67.4 million was classified in Other long-term liabilities in our Condensed Consolidated Balance Sheets.

Transaction.

The Pfizer Transaction includes milestone payments ~~totaling~~of $275.0 million upon the achievement of certain milestones. The milestones range from $20.0 million to $90.0 million each and are based on achievement of regulatory approval in the U.S. and regulatory approval and price approval in other major markets. We evaluated each of these milestone payments and believe that all of the milestones are substantive as (i) there is substantive uncertainty at the close of the Pfizer Transaction that the milestones would be achieved as approval from a regulatory authority must be received to achieve the milestones which would be commensurate with the enhancement of value of the underlying intellectual property, (ii) the milestones relate solely to past performance and (iii) the amount of the milestone is reasonable in relation to the effort expended and the risk associated with the achievement of the milestone. The milestone payments will be recognized as revenue ~~in full~~ in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met. To date, no$175.0 million of revenue has been recognized related to the achievement of the milestones.

~~TESARO~~

In November 2009, we entered into an asset purchase agreement (the “NK-1 Agreement”) under which we acquired VARUBI™ (rolapitant) and other neurokinin-1 (“NK-1”) assets from Merck. In December 2010, we entered into an exclusive license agreement with TESARO, in which we out-licensed the development, manufacture, commercialization and distribution

of our lead NK-1 candidate, VARUBI™ (the “TESARO License”). Under the terms of the license, we received a $6.0 million upfront payment from TESARO and we received $30 million of milestone payments from TESARO upon achievement of certain regulatory and commercial sale milestones and we are eligible to receive additional commercial milestone payments of up to $85 million if specified levels of annual net sales are achieved. During the nine months ended September 30, 2017, $10.0 million of revenue was recognized related to the achievement of the milestones under the TESARO License. During the nine months ended September 30, 2016, no revenue was recognized related to the achievement of the milestones under the TESARO License. TESARO is also obligated to pay us tiered royalties on annual net sales achieved in the United States and Europe at percentage rates that range from the low double digits to the low twenties, and outside of the United States and Europe at low double-digit percentage rates. TESARO assumed responsibility for clinical development and commercialization of licensed products at its expense. Under the NK-1 Agreement, we will continue to receive royalties on a country-by-country and product-by-product basis until the later of the date that all of the patent rights licensed from us and covering VARUBI™ expire, are invalidated or are not enforceable and 12 years from the first commercial sale of the product.

If TESARO elects to develop and commercialize VARUBI™ in Japan through a third-party licensee, TESARO will share equally with us all amounts it receives in connection with such activities, subject to certain exceptions and deductions.

The term of the license will remain in force until the expiration of the royalty term in each country, unless we terminate the license earlier for TESARO’s material breach of the license or bankruptcy. TESARO has a right to terminate the license at any time during the term for any reason on three months’ written notice.

~~Pharmsynthez~~

In April 2013, we entered into a series of concurrent transactions with Pharmsynthez, a Russian pharmaceutical company traded on the Moscow Stock Exchange pursuant to which we acquired an equity method investment in Pharmsynthez (ownership 9%). We also granted rights to certain technologies in the Russian Federation, Ukraine, Belarus, Azerbaijan and Kazakhstan (the “Pharmsynthez Territories”) to Pharmsynthez and agreed to perform certain development activities. We will receive from Pharmsynthez royalties on net sales of products incorporating the technologies in the Pharmsynthez Territories, as well as a percentage of any sublicense income from third parties for the technologies in the Pharmsynthez Territories.

In July 2015, we entered into a Note Purchase Agreement with Pharmsynthez pursuant to which we delivered $3.0 million to Pharmsynthez in exchange for a $3.0 million note (the “Pharmsynthez Note Receivable”). The Pharmsynthez Note Receivable will be settled in 2017 and Pharmsynthez may satisfy the note either in cash or shares of its capital stock. We recorded the Pharmsynthez Note Receivable within

Other ~~current assets and prepaid expenses in our Condensed Consolidated Balance Sheets.~~

~~RXi Pharmaceuticals Corporation~~

In March 2013, we completed the sale to RXi of substantially all of our assets in the field of RNA interference (the “RNAi Assets”) (collectively, the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, RXi will be required to pay us up to $50.0 million in milestone payments upon the successful development and commercialization of each drug developed by RXi, certain of its affiliates or any of its or their licensees or sublicensees utilizing patents included within the RNAi Assets (each, a “Qualified Drug”). In addition, RXi will also be required to pay us royalties equal to: (a) a mid single-digit percentage of “Net Sales” (as defined in the Asset Purchase Agreement) with respect to each Qualified Drug sold for an ophthalmologic use during the applicable “Royalty Period” (as defined in the Asset Purchase Agreement); and (b) a low single-digit percentage of net sales with respect to each Qualified Drug sold for a non-ophthalmologic use during the applicable Royalty Period.

~~Other~~

We have completed strategic deals with numerous institutions and commercial partners. In connection with these agreements, upon the achievement of certain milestones we are obligated to make certain payments and have royalty obligations upon sales of products developed under the license agreements. At this time, we are unable to estimate the timing and amounts of payments as the obligations are based on future development of the licensed products.

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NOTE 1315 SEGMENTS

We manage our operations in two reportable segments, pharmaceutical and diagnostics. The pharmaceutical segment consists of our pharmaceutical operations ~~we acquired~~ in Chile, Mexico, Ireland, Israel and Spain,Rayaldee product sales and our pharmaceutical research and development. The diagnostics segment primarily consists of our clinical and genomics laboratory operations ~~we acquired~~ through ~~the acquisitions of~~ BioReference ~~and OPKO Lab~~ and our point-of-care operations. There are no significant ~~inter-~~

~~segment~~inter-segment sales. We evaluate the performance of each segment based on operating profit or loss. There is no inter-segment allocation of interest expense and income taxes.

Information regarding our operations and assets for our operating segments and the unallocated corporate operations as well as geographic information are as follows:

	For the three months ended June 30,						For the six months ended June 30,
(In thousands)	2023			2022			2023			2022
Revenue from services:
Pharmaceutical	$	—		$	—		$	—		$	—
Diagnostics		127,052			186,804			259,420			473,402
Corporate		—			—			—			—
	$	127,052		$	186,804		$	259,420		$	473,402
Revenue from products:
Pharmaceutical	$	43,500		$	35,892		$	83,883		$	72,550
Diagnostics		—			—			—			—
Corporate		—			—			—			—
	$	43,500		$	35,892		$	83,883		$	72,550
Revenue from transfer of intellectual property and other:
Pharmaceutical	$	94,866		$	87,197		$	159,692		$	93,159
Diagnostics		—			—			—			—
Corporate		—			—			—			—
	$	94,866		$	87,197		$	159,692		$	93,159
Operating income (loss):
Pharmaceutical	$	63,631		$	55,435		$	82,585		$	37,327
Diagnostics		(44,258	)		(57,543	)		(84,264	)		(101,092	)
Corporate		(12,348	)		(8,631	)		(21,890	)		(19,399	)
	$	7,025		$	(10,739	)	$	(23,569	)	$	(83,164	)
Depreciation and amortization:
Pharmaceutical	$	17,788		$	17,840		$	35,703		$	33,242
Diagnostics		8,603			10,155			17,290			22,567
Corporate		—			—			—			—
	$	26,391		$	27,995		$	52,993		$	55,809
Loss from investment in investees:
Pharmaceutical	$	(42	)	$	(268	)	$	(79	)	$	(316	)
Diagnostics		—			—			—			—
Corporate		—			—			—			—
	$	(42	)	$	(268	)	$	(79	)	$	(316	)
Revenues:
United States	$	134,859		$	193,105		$	323,943		$	484,913
Ireland		96,749			89,177			112,595			97,638
Chile		19,954			15,804			35,494			32,143
Spain		5,968			5,696			12,078			12,805
Israel		1,639			1,854			6,233			3,412
Mexico		5,724			4,055			11,551			7,805
Other		525			202			1,101			395
	$	265,418		$	309,893		$	502,995		$	639,111

For the three months ended September 30, For the nine months ended September 30,
(In thousands) 2017 2016 2017 2016
Revenue from services:
Pharmaceutical $ —
$ —
$ —
$ —
Diagnostics 229,035
259,025
740,992
777,559
Corporate —
—
—
—
$ 229,035
$ 259,025
$ 740,992
$ 777,559
Revenue from products:
Pharmaceutical $ 22,795
$ 20,569
$ 73,992
$ 63,275
Diagnostics —
—
—
—
Corporate —
—
—
—
$ 22,795
$ 20,569
$ 73,992
$ 63,275
Revenue from transfer of intellectual property:
Pharmaceutical $ 11,665
$ 18,441
$ 58,819
$ 105,338
Diagnostics —
—
—
—
Corporate —
—
—
—
$ 11,665
$ 18,441
$ 58,819
$ 105,338
Operating loss:
Pharmaceutical $ (18,452 ) $ (18,593 ) $ (49,709 ) $ 15,422
Diagnostics (27,619 ) 3,098
(35,664 ) 11,117
Corporate (12,219 ) (8,128 ) (41,067 ) (49,414 )
$ (58,290 ) $ (23,623 ) $ (126,440 ) $ (22,875 )
Depreciation and amortization:
Pharmaceutical $ 6,935
$ 6,994
$ 20,404
$ 12,841
Diagnostics 18,430
18,818
56,183
59,711
Corporate 29
20
90
60
$ 25,394
$ 25,832
$ 76,677
$ 72,612
Income (loss) from investment in investees:
Pharmaceutical $ (3,661 ) $ 399
$ (10,784 ) $ (5,643 )
Diagnostics (352 ) (1,213 ) (987 ) 496
Corporate —
—
—
—
$ (4,013 ) $ (814 ) $ (11,771 ) $ (5,147 )
Revenues:
United States $ 229,218
$ 259,221
$ 751,732
$ 777,703
Ireland 15,182
20,594
57,812
114,526
Chile 11,514
9,936
33,534
26,516
Spain 4,123
3,910
13,746
12,257
Israel 1,935
3,699
13,807
12,862
Mexico 1,483
675
3,072
2,308
Other 40
—
100

—
$ 263,495
$ 298,035
$ 873,803
$ 946,172

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(In thousands) September 30,
2017 December 31,
2016
Assets:
Pharmaceutical $ 1,309,650
$ 1,294,916
Diagnostics 1,339,401
1,408,522
Corporate 72,939
63,181
$ 2,721,990
$ 2,766,619
Goodwill:

Pharmaceutical $ 262,786
$ 251,817
Diagnostics 452,787
452,786
Corporate —
—
$ 715,573
$ 704,603

~~Two customers~~

	June 30,		December 31,
(In thousands)	2023		2022
Assets:
Pharmaceutical	$	1,411,170	$	1,322,531
Diagnostics		655,878		690,504
Corporate		91,851		154,224
	$	2,158,899	$	2,167,259
Goodwill:
Pharmaceutical	$	314,350	$	312,826
Diagnostics		283,025		283,025
	$	597,375	$	595,851

No customer represented more than 10% of our total consolidated revenue ~~during~~for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017.~~2023 and 2022. As of ~~September~~June 30, ~~2017, one~~2023 and December 31, 2022, no customer represented more than 10% of our accounts receivable balance. As

NOTE 16 LEASES

We have operating leases for office space, laboratory operations, research and development facilities, manufacturing locations, warehouses and certain equipment. We determine if a contract contains a lease at inception or modification of ~~December 31, 2016, one customer represented more than 10%~~a contract. Our leases generally do not provide an implicit interest rate, and we therefore use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. We used the incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. Many of our ~~accounts receivable balance.~~

~~NOTE 14 SUBSEQUENT EVENTS~~

~~On October 12, 2017, EirGen,~~leases contain rental escalation, renewal options and/or termination options that are factored into our ~~wholly-owned subsidiary, and Japan Tobacco Inc. (“JT”) entered into a Development and License Agreement granting JT~~determination of lease payments as appropriate. Variable lease payment amounts that cannot be determined at the ~~exclusive rights for~~commencement of the ~~development and commercialization of~~ ~~Rayaldee~~lease are not included in ~~Japan (the “JT Territory”). The license grant to JT covers~~ the ~~therapeutic and preventative~~right-to-use assets or liabilities.

We elected the use of the Product for (i) SHPT in non-dialysis and dialysis patients with CKD, (ii) rickets, and (iii) osteomalacia (the “JT Initial Indications”), as well as such additional indications as may be added to the scopepermitted practical expedients of ~~the license subject to the terms of the Agreement (the “JT Additional Indications”, and together with the JT Initial Indications, the “JT Field”).~~

~~OPKO will receive an initial upfront payment of $6 million. OPKO will receive another $6 million upon the initiation of OPKO’s planned phase 2 study for~~ ~~Rayaldee~~ in dialysis patients in the U.S. OPKO is also eligible to receive up to an additional aggregate amount of $31 million upon the achievement of certain regulatory and development milestones by JT for the Product in the JT Territory, and $75 million upon the achievement of certain sales based milestones by JT in the JT Territory. OPKO will also receive tiered, double digit royalty payments at rates ranging from low double digits to mid-teensnot recording leases on net Product sales within the JT Territory and in the JT Field. JT will, at its sole cost and expense, be responsible for performing all development activities necessary to obtain all regulatory approvals for ~~Rayaldee~~ ~~in Japan and for all commercial activities pertaining to~~ ~~Rayaldee~~ ~~in Japan, except for certain preclinical expenses which OPKO has agreed to reimburse JT up to a capped amount.~~

~~We have reviewed all subsequent events and transactions that occurred after the date of~~ our ~~September 30, 2017~~ Condensed Consolidated Balance Sheet ~~date, through~~when the ~~time~~leases have terms of ~~filing this Quarterly Report~~12 months or less, and we elected not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

The following table presents the lease balances within the Condensed Consolidated Balance Sheet as of June 30, 2023 and December 31, 2022:

(in thousands)	*Classification on the Balance Sheet*	*June 30, 2023*			*December 31, 2022*
Assets
Operating lease assets	Operating lease right-of-use assets	$	34,938		$	38,725
Finance lease assets	Property, plant and equipment, net		10,079			9,898

Liabilities
Current
Operating lease liabilities	Current maturities of operating leases		11,240			11,628
Accrued expenses	Current maturities of finance leases		2,809			2,809
Long-term
Operating lease liabilities	Operating lease liabilities		24,912			27,963
Other long-term liabilities	Finance lease liabilities	$	7,270		$	7,089

Weighted average remaining lease term
Operating leases (in years)			6.0			6.0
Finance leases (in years)			6.8			6.5
Weighted average discount rate
Operating leases			4.6	%		4.4	%
Finance leases			4.6	%		3.8	%

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The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on ~~Form 10-Q.~~our Condensed Consolidated Balance Sheet as of June 30, 2023:

(in thousands)	*Operating*		*Finance*
July 1, 2023 through December 31, 2023	$	6,442	$	1,804
2024		8,844		2,737
2025		5,567		2,061
2026		4,114		1,394
2027		3,858		588
Thereafter		11,910		1,959
Total undiscounted future minimum lease payments		40,735		10,543
Less: Difference between lease payments and discounted lease liabilities		4,583		464
Total lease liabilities	$	36,152	$	10,079

Expense under operating leases and finance leases was $8.3 million and $1.4 million, respectively, for the six months ended June 30, 2023, which includes $0.6 million of variable lease costs. Expense under operating leases and finance leases was $8.4 million and $1.9 million, respectively, for the six months ended June 30, 2022, which includes $1.3 million of variable lease costs. Operating lease costs and finance lease costs are included within Operating loss in the Condensed Consolidated Statement of Operations. Short-term lease costs were not material.

Supplemental cash flow information is as follows:

	For the six months ended June 30,
(in thousands)	2023		2022
Operating cash out flows from operating leases	$	7,955	$	8,327
Operating cash out flows from finance leases		206		52
Financing cash out flows from finance leases		1,268		724
Total	$	9,429	$	9,103

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ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

You should read this discussion together with the unaudited Condensed Consolidated Financial Statements, related ~~Notes,~~notes, and other financial information included elsewhere in this ~~report~~Quarterly Report on Form 10-Q together with our audited consolidated financial statements, related notes, and other information contained in our Annual Report on Form 10-K for the year ended December31, ~~2016~~2022 (the ~~“Form 10-K”~~“Form 10-K”). The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under ~~“Risk~~“Risk Factors,” in Part ~~II,~~I, Item1A of ~~our~~the Form 10-K ~~for the year ended December 31, 2016,~~ and as described from time to time in our other ~~reports filed~~filings with the Securities and Exchange Commission. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.

We are a diversified healthcare company that seeks to establish industry-leading positions in large and rapidly growing medical markets. Our diagnostics business includes BioReference ~~Laboratories~~Health, LLC (“BioReference”), one of the nation’s ~~third-largest clinical laboratory~~largest full service laboratories with a ~~core genetic testing business and a 400-person~~180-person sales and marketing team to drive growth and leverage new products, ~~including the~~ and we offer our 4Kscore prostate cancer test ~~and the~~ ~~Claros 1~~ ~~in-office immunoassay platform (in development).~~through BioReference. Our pharmaceutical business features Rayaldee,~~, an FDA-approved~~ a U.S. Food and Drug Administration (“FDA”) approved treatment for secondary hyperparathyroidism (“SHPT”) in adults with stage 3 or 4 chronic kidney disease (“CKD”) and vitamin D insufficiency, ~~(launched in November 2016),~~ and ~~VARUBI™ for chemotherapy-induced nausea and vomiting (oral formulation launched by partner TESARO in November 2015 and IV formulation approved October 2017)~~Somatrogon (hGH-CTP), OPK88003, a once or twice weekly oxyntomodulin for type 2 diabetes and obesity which is a clinically advanced drug candidate among the new class of GLP-1 glucagon receptor dual agonists (Phase 2b), and OPK88004, a selective androgen receptor modulator being developed for benign prostatic hyperplasia and other urologic and metabolic conditions. Our pharmaceutical business also features hGH-CTP, a once-weekly human growth hormone injection ~~(in Phase~~for which we completed a successful phase 3 study in August 2019 and partnered with ~~Pfizer)~~Pfizer Inc. (“Pfizer”) with respect to Somatrogon (hGH-CTP)’s further development. Regulatory applications for Somatrogon (hGH-CTP) have been submitted to the applicable regulatory bodies for review in several countries around the world. In June 2023, The FDA approved NGENLA (Somatrogon) to treat children and adolescents from as young as three years of age with growth disturbance due to insufficient secretion of growth hormone. In February 2022, the European Commission granted marketing authorization in the European Union for Somatrogon (hGH-CTP) under the brand name NGENLA®. NGENLA® has been approved in more than 40 markets including the United States, EU Member States, Japan, Canada, and Australia. In May 2022, we acquired ModeX Therapeutics, Inc. (“ModeX”), a biotechnology company focused on developing innovative multi-specific immune therapies for cancer and infectious diseases candidates. ModeX has a ~~once-daily Factor VIIa drug~~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.

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 ~~hemophilia (Phase 2a).~~

blood, urine and tissue analysis. This includes hematology, clinical chemistry, immunoassay, infectious disease, serology, hormones, and toxicology assays, as well as Pap smear, anatomic pathology (biopsies) and other types of tissue analysis, as well as testing for COVID-19. We market our laboratory testing services directly to physicians, geneticists, hospitals, clinics, correctional and other health facilities.

We operate established pharmaceutical platforms in ~~Spain,~~ Ireland, Chile, Spain, Mexico, and ~~Mexico,~~the U.S., which are generating revenue and from which we expect to generate positive cash flow and facilitate future market entry for our products currently in development. ~~EirGen, our specialty pharmaceutical manufacturing and development site in Ireland, is focused on the~~In addition, we have a development and commercial supply ~~of high potency, high barrier to entry~~ pharmaceutical ~~products. In addition, we operate~~company and a ~~specialty active pharmaceutical ingredients (“APIs”)~~global supply chain operation and holding company in Ireland. We own an APIs manufacturer in Israel, which we expect will facilitate the development of our pipeline of molecules and compounds for our proprietary ~~products.~~

~~RECENT DEVELOPMENTS~~

~~On October 12, 2017, EirGen, our wholly-owned subsidiary,~~molecular diagnostic and ~~Japan Tobacco Inc. (“JT”) entered into a Development and License Agreement granting JT the exclusive rights~~therapeutic products.

RESULTS OF OPERATIONS

Foreign Currency Exchange Rates

Approximately 34.4% of revenue for the ~~development~~six months ended June 30, 2023, and ~~commercialization~~approximately 23.6% of ~~Rayaldee~~revenue for the six months ended June 30, 2022, were denominated in ~~Japan (the “JT Territory”)~~currencies other than the U.S. Dollar (USD). ~~The license grant to JT covers~~Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates affect the ~~therapeutic~~translation of revenues and ~~preventative use~~expenses denominated in foreign currencies into USD for purposes of reporting our consolidated financial results. In the ~~Product for (i) SHPT in non-dialysis~~first quarter of 2023 and ~~dialysis patients with CKD, (ii) rickets, and (iii) osteomalacia (the “JT Initial Indications”), as well as such additional indications as may be added~~the year ended December 31, 2022, the most significant currency exchange rate exposures were to the ~~scope~~Euro and Chilean Peso. Gross accumulated currency translation adjustments recorded as a separate component of ~~the license~~shareholders’ equity were $33.5 million and $39.9 million at June 30, 2023, and December 2022, respectively.

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We are subject to foreign currency transaction risk for fluctuations in exchange rates during the ~~terms~~period of time between the ~~Agreement (the “JT Additional Indications”,~~consummation and ~~together~~cash settlement of transactions. We seek to limit foreign currency transaction risk through hedge transactions with foreign currency forward contracts. Under these forward contracts, for any rate above or below the ~~JT Initial Indications,~~fixed rate, we receive or pay the ~~“JT Field”).~~

~~OPKO will receive an initial upfront payment of $6 million. OPKO will receive another $6 million upon~~difference between the ~~initiation of OPKO’s planned phase 2 study for~~ ~~Rayaldee~~ ~~in dialysis patients in~~spot rate and the ~~U.S. OPKO is also eligible to receive up to an additional aggregate amount of $31 million upon the achievement of certain regulatory and development milestones by JT~~fixed rate for the ~~Product in~~given amount at the ~~JT Territory, and $75 million upon the achievement~~settlement date. At June 30, 2023, we had 67 open foreign exchange forward contracts relating to inventory purchases on letters of ~~certain sales based milestones by JT in the JT Territory. OPKO will also receive tiered, double digit royalty payments at rates ranging from low double digits~~credit with various amounts maturing monthly through July 2023 with a notional value totaling approximately $3.5 million. At December 31, 2022, we had 194 open foreign exchange forward contracts relating to ~~mid-teens~~inventory purchases on net Product sales within the JT Territory and in the JT Field. JT will, at its sole cost and expense, be responsible for performing all development activities necessary to obtain all regulatory approvals for ~~Rayaldee~~ ~~in Japan and for all commercial activities pertaining to~~ ~~Rayaldee~~ ~~in Japan, except for certain preclinical expenses which OPKO has agreed to reimburse JT up to~~letters of credit with various amounts maturing monthly through January 2023 with a ~~capped amount.~~

~~RESULTS OF OPERATIONS~~

notional value totaling approximately $11.9 million.

FOR THE THREE MONTHS ENDED ~~SEPTEMBER~~June 30, ~~2017 AND 2016~~

Revenues For the three months ended September 30,
(In thousands) 2017 2016 Change
Revenue from services $ 229,035
$ 259,025
$ (29,990 )
Revenue from products 22,795
20,569
2,226
Revenue from transfer of intellectual property and other 11,665
18,441
(6,776 )
Total revenues $ 263,495
$ 298,035
$ (34,540 )

~~The decrease in Revenue~~2023 and 2022

Our consolidated income (loss) from services is attributable to decreased pricing at BioReference’s GeneDx division. The increase in Revenue from products principally reflects an increase in revenue from OPKO Chile and EirGen. Revenue from transfer of intellectual propertyoperations for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 principally~~2022 was as follows:

	For the three months ended June 30,
(In thousands)	2023			2022			Change			% Change
Revenues:
Revenue from services	$	127,052		$	186,804		$	(59,752	)		(32	)%
Revenue from products		43,500			35,892			7,608			21	%
Revenue from transfer of intellectual property and other		94,866			87,197			7,669			9	%
Total revenues		265,418			309,893			(44,475	)		(14	)%
Costs and expenses:
Cost of revenue		138,939			194,311			(55,372	)		(28	)%
Selling, general and administrative		79,794			101,464			(21,670	)		(21	)%
Research and development		18,159			17,254			905			5	%
Contingent Consideration		(34	)		175			(209	)		(119	)%
Amortization of intangible assets		21,535			22,793			(1,258	)		(6	)%
Gain on sale		—			(15,365	)		15,365			100	%
Total costs and expenses		258,393			320,632			(62,239	)		(19	)%
Income (loss) from operations		7,025			(10,739	)		17,764			165	%

Diagnostics

	For the three months ended June 30,
(In thousands)	2023			2022			Change			% Change
Revenues
Revenue from services	$	127,052		$	186,804		$	(59,752	)		(32	)%
Total revenues		127,052			186,804			(59,752	)		(32	)%
Costs and expenses:
Cost of revenue		113,027			171,841			(58,814	)		(34	)%
Selling, general and administrative		52,617			78,980			(26,363	)		(33	)%
Research and development		617			2,780			(2,163	)		(78	)%
Amortization of intangible assets		5,049			6,111			(1,062	)		(17	)%
Gain of sale of assets		—			(15,365	)		15,365			100	%
Total costs and expenses		171,310			244,347			(73,037	)		(30	)%
Loss from operations		(44,258	)		(57,543	)		13,285			23	%

Revenue. Revenue from services for the three months ended June 30, 2023, decreased by approximately $59.8 million compared to the three months ended June 30, 2022. The decrease in revenue for the three months ended June 30, 2023, reflects ~~$11.2~~lower demand for COVID-19 testing and lower COVID-19 reimbursement of $48.7 million and ~~$17.7~~$0.8 million, respectively. BioReference performed 33 thousand molecular tests for COVID-19 during the three months ended June 30, 2023, representing 1.45% of total testing volume for that period. In comparison, the three months ended June 30, 2022, included 874 thousand molecular tests for COVID-19 and 81 thousand serology antibody tests, representing 30.7% of total testing volume for the 2022 period. The reduction in reimbursement reflected an increase in utilization of antigen point of care diagnostic tests and a change in the mix of customers, which have varying contract prices depending on the level of services we provide.

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Furthermore, clinical test reimbursement decreased by $5.8 million due to the mix of testing ordered offset by an increase in clinical test volume of $7.7 million. Moreover, revenues decreased by $12.1 million as a result of our sale in April 2022 of GeneDx in the GeneDx Transaction (as defined below).

Estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. Negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods were recognized of $13.9 million and $23.2 million, respectively, for the three months ended June 30, 2023 and 2022. Revenue adjustments for the three months ended June 30, 2023 were mainly due to the composition of patient pay mix and, in 2022, mainly to lower reimbursement estimates for COVID-19 testing.

The composition of revenue ~~related to~~from services by payor for the ~~Pfizer Transaction.~~

three months ended June 30, 2023 and 2022 was as follows:

	Three months ended June 30,
(In thousands)	2023		2022
Healthcare insurers	$	76,954	$	76,442
Government payers		20,923		25,659
Client payers		24,899		80,931
Patients		4,276		3,772
Total	$	127,052	$	186,804

Client payors include cities, states and companies for which BioReference provides COVID-19 testing services.

Cost of revenue. Cost of revenue for the three months ended ~~September~~June 30, ~~2017 increased $0.1~~2023 decreased $58.8 million compared to the ~~prior year period. The decrease~~three months ended June 30, 2022. Cost of revenue decreased primarily due to a decline in ~~cost~~the volume of ~~service revenue is attributable~~COVID-19 tests performed during the three months ended June 30, 2023, compared to ~~cost savings initiatives at BioReference. The increase in cost of product revenue is attributable to an increase in revenue at OPKO Chile and EirGen.~~2022. Cost of revenue for the three months ended ~~September~~June 30, ~~2017~~2023, also decreased due to changes in the mix of testing ordered during the period, continued cost-reduction initiatives implemented at Bio Reference and ~~2016 were~~$8.2 million as ~~follows:~~

Cost of Revenue For the three months ended September 30,
(In thousands) 2017 2016 Change
Cost of service revenue $ 135,203
$ 138,554
$ (3,351 )
Cost of product revenue 16,107
12,626
3,481
Total cost of revenue $ 151,310
$ 151,180
$ 130

a result of the disposition of GeneDx in April 2022.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022 were ~~$131.3~~$52.6 million and ~~$124.8~~$79.0 million, respectively. Selling, general and administrative expenses in our diagnostics segment decreased primarily due to the continued cost-reduction initiatives implemented at Bio Reference as we strive to return to profitability following the buildup and then decline of COVID related testing.

Research and development expenses. The following table summarizes the components of our research and development expenses:

Research and Development Expenses	Three months ended June 30,
	2023		2022
Research and development employee-related expenses	$	464	$	2,233
Other internal research and development expenses		153		547
Total research and development expenses	$	617	$	2,780

The decrease in research and development expenses for the three months ended June 30, 2023, was primarily related to the development of more efficient clinical testing services at BioReference and partly as a result of the GeneDx disposition.

Amortization of intangible assets. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Amortization of intangible assets was $5.0 million and $6.1 million, respectively, for the three months ended June 30, 2023 and 2022. Amortization expense declined for the three months ending June 30, 2023 due to the disposition of GeneDx.

Gain on sale of assets. Gain on sale of assets for the three months ended June 30, 2022, was $15.4 million due to the disposition of GeneDx in April 2022.

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Pharmaceuticals

	For the three months ended June 30,
(In thousands)	2023			2022		Change			% Change
Revenues:
Revenue from products	$	43,500		$	35,892	$	7,608			21	%
Revenue from transfer of intellectual property and other		94,866			87,197		7,669			9	%
Total revenues		138,366			123,089		15,277			12	%
Costs and expenses:
Cost of revenue		25,912			22,470		3,442			15	%
Selling, general and administrative		14,831			13,518		1,313			10	%
Research and development		17,540			14,809		2,731			18	%
Contingent Consideration		(34	)		175		(209	)		(119	)%
Amortization of intangible assets		16,486			16,682		(196	)		(1	)%
Total costs and expenses		74,735			67,654		7,081			10	%
Income from operations		63,631			55,435		8,196			15	%

Revenue. Revenue from products for the three months ended June 30, 2023 and 2022 was $43.5 million and $35.9 million, respectively. The increase in revenue from products for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was attributable to an increase in sales from OPKO Chile and OPKO Mexico which were positively impacted by foreign exchange fluctuations of approximately $1.9 million , as well as increased sales of Rayaldee. Revenue from sales of Rayaldee for the three months ended June 30, 2023 and 2022 was $7.7 million and $6.2 million, respectively. For the three months ended June 30, 2023, revenue from transfer of intellectual property and other principally reflects revenue of $90.0 million triggered by the FDA approval of NGENLA (Somatrogon), the 2022 period includes an $85.0 million regulatory milestone payments from Pfizer due from the commencement of sales from NGENLA (Somatrogon) in Europe and Japan (as defined in Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q). For the three months ended June 30, 2023 and 2022, revenue from transfer of intellectual property and other also includes $0.5 million and $2.3 million, respectively, related to the Pfizer Transaction (as defined in Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q).

Cost of revenue. Cost of revenue for the three months ended June 30, 2023 increased $3.4 million compared to the three months ended June 30, 2022, which was attributable to an increase in sales as well as changes in product mix during the period at our international operating companies as well as higher inventory costs partially impacted by unfavorable foreign exchange fluctuations of approximately $1.3 million.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended June 30, 2023 and 2022 were $14.8 million and $13.5 million, respectively. The increase in selling, general and administrative expenses was ~~primarily~~ due to ~~costs related to the launch of~~ ~~Rayaldee~~an increase in employee-related expenses from from our international operations and increased selling, general and administrative expenses at BioReference. Selling, general and administrative expenses during the three months ended September 30, 2017 and 2016, include equity-based compensation expense of $4.6 million and $6.4 million, respectively.

Rayaldee.

Research and development expenses. Research and development expenses for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022 were ~~$32.3~~$17.5 million and ~~$24.4~~$14.8 million, respectively. Research and development expenses include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements. External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. We track external research and development expenses by the individual program for phase 3 clinical trials for drug approval and premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expenses. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

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The following table summarizes the components of our research and development expenses:

Research and Development Expenses	Three months ended June 30,
	2023			2022
External expenses:
Manufacturing expense for biological products	$	3,006		$	2,070
Phase 3 studies		1,186			2,200
Post-marketing studies		29			—
Earlier-stage programs		11,925			3,113
Research and development employee-related expenses		8,955			6,774
Other internal research and development expenses		1,052			652
Third-party grants and funding from collaboration agreements		(8,613	)		—
Total research and development expenses	$	17,540		$	14,809

The increase in research and development expenses for the three months ended June 30, 2023, 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 in which Somatrogon (hGH-CTP) received marketing authorization. Research and development expenses for the pharmaceutical segment for the three months ended June 30, 2023 and 2022 included equity-based compensation expenses of $914.6 thousand and $637.9 thousand, respectively.

Contingent consideration. Contingent consideration for the three months ended June 30, 2023 and 2022 was a $34 thousand reversal of expense and $175 thousand of expense, respectively. Contingent consideration for the three months ended June 30, 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. Amortization of intangible assets was $16.5 million and $16.7 million for the three months ended June 30, 2023 and 2022. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Our indefinite lived IPR&D assets will not be amortized until the underlying development programs are completed. Upon obtaining regulatory approval by the FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life.

Corporate

	For the three months ended June 30,
(In thousands)	2023			2022			Change			% Change
Costs and expenses:
Selling, general and administrative	$	12,346		$	8,966		$	3,380			38	%
Research and development		2			(335	)		337			101	%
Total costs and expenses		12,348			8,631			3,717			43	%
Loss from operations		(12,348	)		(8,631	)		(3,717	)		(43	)%

Operating loss for our unallocated corporate operations for the three months ended June 30, 2023 and 2022 was $12.3 million and $8.6 million, respectively, and principally reflects general and administrative expenses incurred in connection with our corporate operations. The increase in operating loss for our unallocated corporate operations for the three months ended June 30, 2023, was primarily due to increases in employee expenses and professional fees, partially offset by a decrease in legal fees.

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Other

Interest income. Interest income for the three months ended June 30, 2023 and 2022 was $1.1 million and $0.2 million, respectively. The increase is driven by having higher average cash and investment balances as a result of the cash received related to the GeneDx disposition, as well as increased interest rates between the two periods.

Interest expense. Interest expense for the three months ended June 30, 2023 and 2022 was $3.3 million and $3.1 million, respectively. Interest expense was principally related to interest incurred on the 2025 Notes, the 2023 Convertible Notes, and BioReference’s outstanding debt under the Credit Agreement (each as defined in Note 7 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q ) with JPMorgan Chase Bank, N.A. (“CB”).

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the three months ended June 30, 2023 and 2022, was $0.1 million and a $0.3 million reversal of expense, respectively. Derivative expense for the three months ended June 30, 2023 and 2022 was principally related to the change in fair value on foreign currency forward exchange contracts at OPKO Chile.

Other income (expense), net. Other income (expense), net for the three months ended June 30, 2023 and 2022 was $21.4 million and $73.0 million of expense, respectively. Other income (expense), net for the three months ended June 30, 2023, and 2022, included $19.9 million and $71.2 million of expense as a result of a decrease in the fair value of our investment in GeneDx Holdings (as defined below). Foreign currency gains of $0.9 million and $0.8 million of losses were the majority of other expenses for the three months ended June 30, 2023, and 2022, respectively.

Income tax provision. Our income tax provision for the three months ended June 30, 2023 and 2022 was $3.1 million and $15.1 million, respectively, and reflects quarterly results using our expected effective tax rate. For the three months ended June 30, 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.

Loss from investments in investees. We have invested in certain early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as a shareholder or member. We account for these investments under the equity method of accounting, recording of our proportionate share of their losses until our share of their loss exceeds our investment. Until the investees’ technologies are commercialized, if ever, we anticipate they will report net losses. Loss from investments in investees was $42 thousand and $268 thousand for the three months ended June 30, 2023 and 2022, respectively.

FOR THE six months ended June 30, 2023 and 2022

Our consolidated income (loss) from operations for the six months ended June 30, 2023 and 2022 was as follows:

	For the six months ended June 30,
(In thousands)	2023			2022			Change			% Change
Revenues:
Revenue from services	$	259,420		$	473,402		$	(213,982	)		(45	)%
Revenue from products		83,883			72,550			11,333			16	%
Revenue from transfer of intellectual property and other		159,692			93,159			66,533			71	%
Total revenues		502,995			639,111			(136,116	)		(21	)%
Costs and expenses:
Cost of revenue		277,253			438,187			(160,934	)		(37	)%
Selling, general and administrative		155,436			219,000			(63,564	)		(29	)%
Research and development		50,764			35,566			15,198			43	%
Contingent Consideration		102			69			33			48	%
Amortization of intangible assets		43,009			44,818			(1,809	)		(4	)%
Gain of sale of assets		—			(15,365	)		15,365			100	%
Total costs and expenses		526,564			722,275			(195,711	)		(27	)%
Loss from operations		(23,569	)		(83,164	)		59,595			72	%

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Diagnostics

	For the six months ended June 30,
(In thousands)	2023			2022			Change			% Change
Revenues
Revenue from services	$	259,420		$	473,402		$	(213,982	)		(45	)%
Total revenues		259,420			473,402			(213,982	)		(45	)%
Costs and expenses:
Cost of revenue		227,088			393,048			(165,960	)		(42	)%
Selling, general and administrative		105,193			173,936			(68,743	)		(40	)%
Research and development		1,306			9,002			(7,696	)		(85	)%
Amortization of intangible assets		10,097			13,873			(3,776	)		(27	)%
Gain of sale of assets		—			(15,365	)		15,365			100	%
Total costs and expenses		343,684			574,494			(230,810	)		(40	)%
loss from operations		(84,264	)		(101,092	)		16,828			17	%

Revenue. Revenue from services for the six months ended June 30, 2023 decreased by approximately $214.0 million compared to the six months ended June 30, 2022. The decrease in revenue for the six months ended June 30, 2023 reflects lower demand for COVID-19 testing and lower COVID-19 reimbursement of $175.5 million and $2.2 million, respectively. BioReference performed 102 thousand molecular tests for COVID-19 and 73 thousand serology antibody tests during the six months ended June 30, 2023, which represented 3.8% of total testing volume for that period. In comparison, the six months ended June 30, 2022 included 2.9 million molecular tests for COVID-19 and 0.2 million serology antibody tests, which represented 41.7% of total testing volume for the period. The reduction in reimbursement reflects an increase in utilization of antigen point of care diagnostic tests as well as a change in the mix of customers, which have varying contract prices depending on the level of services we provide.

For the six months ended June 30, 2023, clinical test volume increased $24.7 million, while clinical test reimbursement decreased $12.7 million, respectively, as a result of the mix of testing ordered. Furthermore, as a result of our April 2022 sale of GeneDx in the GeneDx Transaction (as defined below), genomic test revenues decreased by $48.3 million.

Estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. For the six months ended June 30, 2023, negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $18.7 million were recognized. Revenue adjustments for the six months ended June 30, 2023 were primarily due to lower COVID-19 test reimbursement estimates. For the six months ended June 30, 2022, negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $21.2 million were recognized. Revenue adjustments for the six months ended June 30, 2022 were primarily due to lower COVID-19 test reimbursement estimates.

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The composition of revenue from services by payor for the six months ended June 30, 2023 and 2022 was as follows:

	Six months ended June 30,
(In thousands)	2023		2022
Healthcare insurers	$	157,365	$	172,269
Government payers		41,267		53,263
Client payers		52,443		240,021
Patients		8,345		7,849
Total	$	259,420	$	473,402

Client payors include cities, states and companies for which BioReference provides COVID-19 testing services.

Cost of revenue. Cost of revenue for the six months ended June 30, 2023 decreased $166.0 million compared to the six months ended June 30, 2022. Cost of revenue decreased primarily due to a decline in the volume of COVID-19 tests performed during the six months ended June 30, 2023 compared to 2022. Cost of revenue for the six months ended June 30, 2023 also decreased due to changes in the mix of testing ordered during the period. Cost of revenue also decreased by $34.9 million as a result of the GeneDx Transaction in April 2022.

Selling, general and administrative expenses. Selling, general and administrative expenses for the six months ended June 30, 2023 and 2022 were $105.2 million and $173.9 million, respectively. Selling, general and administrative expenses in our diagnostics segment decreased primarily due to the continued cost-reduction initiatives implemented at Bio Reference as we strive to return to profitability following the buildup and then decline of COVID related testing, as well as decreased expenses due to the GeneDx Transaction.

Research and development expenses. The following table summarizes the components of our research and development expenses:

Research and Development Expenses	Six months ended June 30,
	2023		2022
Research and development employee-related expenses	$	826	$	7,159
Other internal research and development expenses		480		1,843
Total research and development expenses	$	1,306	$	9,002

The decrease in research and development expenses for the six months ended June 30, 2023 was primarily related to the development of more efficient clinical testing services at BioReference and partly as a result of the disposition of GeneDx during the second quarter of 2022.

Amortization of intangible assets. Amortization of intangible assets was $10.1 million and $13.9 million, respectively, for the six months ended June 30, 2023 and 2022. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Amortization expense declined during the six months ended June 30, 2023 due to the disposition of GeneDx in April 2022 and to acquired intangible assets becoming fully amortized.

Gain on sale of assets. Gain on sale of assets for the six months ended June 30, 2022, was $15.4 million due to the disposition of GeneDx in April 2022.

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Pharmaceuticals

	For the six months ended June 30,
(In thousands)	2023		2022		Change		% Change
Revenues:
Revenue from products	$	83,883	$	72,550	$	11,333		16	%
Revenue from transfer of intellectual property and other		159,692		93,159		66,533		71	%
Total revenues		243,575		165,709		77,866		47	%
Costs and expenses:
Cost of revenue		50,165		45,139		5,026		11	%
Selling, general and administrative		28,392		25,129		3,263		13	%
Research and development		49,419		27,100		22,319		82	%
Contingent Consideration		102		69		33		48	%
Amortization of intangible assets		32,912		30,945		1,967		6	%
Total costs and expenses		160,990		128,382		32,608		25	%
Income from operations		82,585		37,327		45,258		121	%

Revenue. The increase in revenue from products for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was driven by an increase in sales from OPKO Chile and OPKO Mexico, which were positively impacted by foreign exchange fluctuations of approximately $2.1 million, as well as increased sales of Rayaldee. Revenue from sales of Rayaldee for the six months ended June 30, 2023 and 2022 was $14.4 million and $11.3 million, respectively. Revenue from transfer of intellectual property and other for the six months ended June 30, 2023 reflects revenue of $90.0 million triggered by the FDA approval of NGENLA (Somatrogon) and a $50.0 million payment from Merck in consideration for the rights granted to Merck under the Merck Agreement (as defined in Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q), a $7.0 million payment from Vifor (as defined in Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q) triggered by the German price approval for Rayaldee and a $2.5 million payment from Nicoya due to Nicoya’s submission of the investigational new drug application to China's Center for Drug Evaluation. For the six months ended June 30, 2022, revenue from transfer of intellectual property and other reflects a $85.0 million regulatory milestone payments from Pfizer due from the commencement of sales from NGENLA (Somatrogon) in Europe and Japan and $3.0 million related to a sales milestone from Vifor.

Cost of revenue. Cost of revenue for the six months ended June 30, 2023 increased $5.0 million compared to the six months ended June 30, 2022 driven by an increase in sales as well as changes in product mix during the period at our international operating companies, as well as by higher inventory costs compared to the prior period and partially impacted by unfavorable foreign exchange fluctuations of $1.3 million.

Selling, general and administrative expenses. Selling, general and administrative expenses for the six months ended June 30, 2023 and 2022 were $28.4 million and $25.1 million, respectively. The increase in selling, general and administrative expenses was due to an increase in employee-related expenses from our international operations and Rayaldee.

Research and development expenses. Research and development expenses for the six months ended June 30, 2023 and 2022 were $49.4 million and $27.1 million, respectively. Research and development expenses include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements. External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. We track external research and development expenses by individual program for phase 3 clinical trials for drug approval and ~~pre-market approvals (“PMAs”)~~premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses ~~including~~such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

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The following table summarizes the components of our research and development expenses:

Research and Development Expenses For the three months ended September 30,
2017 2016
External expenses:
Phase 3 clinical trials $ 3,275
$ 2,647
Manufacturing expense for biological products 10,827
6,951
PMA studies 249
—
Earlier-stage programs 1,479
1,910
Research and development employee-related expenses 6,177
6,718
Other internal research and development expenses 10,500
6,797
Third-party grants and funding from collaboration agreements (178 ) (599 )
Total research and development expenses $ 32,329
$ 24,424

Research and Development Expenses	Six months ended June 30,
	2023			2022
External expenses:
Manufacturing expense for biological products	$	5,979		$	3,319
Phase III studies		3,127			4,832
Post-marketing studies		159			12
Earlier-stage programs		30,075			5,714
Research and development employee-related expenses		16,762			11,953
Other internal research and development expenses		2,003			1,270
Third-party grants and funding from collaboration agreements		(8,686	)		—
Total research and development expenses	$	49,419		$	27,100

The increase in research and development expenses isfor the six months ended June 30, 2023 was primarily due to ~~an increase~~research expenses at ModeX, including a $12.5 million payment to Sanofi under the Sanofi In-License Agreement (each as defined in ~~research and development~~Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10- Q), partially offset by lower expenses related to ~~hGH-CTP, a long acting human growth hormone which was outlicensed to Pfizer in 2015, and~~Somatrogon (hGH-CTP) due to the ~~acquisition~~closure of ~~Transition Therapeutics~~the open-label extension studies in August 2016. In addition, during the three months ended September 30, 2017 and 2016, we recorded, as an offset to research and development expenses, $0.2 million and $0.6 million, respectively, related to research and development grantscountries in which Somatrogon (hGH-CTP) received ~~from our collaboration and funding agreements.~~marketing authorization. Research and development expenses for the ~~three~~pharmaceutical segment for the six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 include~~2022 included equity-based compensation expense of ~~$1.3~~$1.8 million and ~~$2.0~~$0.8 million, respectively. ~~We expect our research and development expenses to increase as we continue to expand our research and development of potential future products.~~

Contingent consideration. Contingent consideration ~~income (expense)~~ for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, were $11.2~~2022 was $0.1 million ~~of income~~ and ~~$3.1~~$0.1 million of expense, respectively. ~~The change in contingent~~Contingent consideration ~~income (expense) was attributable to contingent consideration income~~ for ~~OPKO Renal during~~ the ~~three~~six months ended ~~September~~June 30, ~~2017 due~~2023 and 2022 was primarily attributable to changes in assumptions regarding the timing of ~~successful~~ achievement of future milestones of ~~Rayaldee. The contingent consideration liabilities at September 30, 2017 relate to~~for OPKO Renal, and potential amounts payable to former stockholders of ~~CURNA, OPKO Diagnostics and~~ OPKO Renal in connection therewith, pursuant to our acquisition ~~agreements~~agreement in ~~January 2011, October 2011 and~~ March ~~2013, respectively.~~

2013.

Amortization of intangible assets. Amortization of intangible assets was ~~$18.0~~$32.9 million and ~~$18.1~~$30.9 million, respectively, for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016.~~2022. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Our indefinite lived IPR&D assets will not be amortized until the underlying development programs are completed. Upon obtaining regulatory approval by the ~~U.S.~~ FDA, the IPR&D assets will ~~then~~ be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. In the first half of 2022, we reclassified $590.2 million of IPR&D related to Somatrogon (hGH-CTP) from IPR&D in our Condensed Consolidated Balance Sheet upon the approval of NGENLA (Somatrogon) in Europe and Japan. The assets will be amortized on a straight-line basis over their estimated useful life.

of approximately 12 years.

Corporate

	For the six months ended June 30,
(In thousands)	2023			2022			Change			% Change
Costs and expenses:
Selling, general and administrative	$	21,851		$	19,935		$	1,916			10	%
Research and development		39			(536	)		575			107	%
Total costs and expenses		21,890			19,399			2,491			13	%
Loss from operations		(21,890	)		(19,399	)		(2,491	)		(13	)%

Operating loss for our unallocated corporate operations for the six months ended June 30, 2023 and 2022 was $21.9 million and $19.4 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations. The increase in operating loss for our unallocated corporate operations for the six months ended June 30, 2023 was primarily due to increase in employee expenses and professional fees, partially offset by a decrease in legal fees.

Other

Interest income. Interest income for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 was ~~not significant~~$2.1 million and $0.2 million, respectively. The increase is driven by having higher average cash and investment balances as ~~our cash investment strategy emphasizes the security~~a result of the ~~principal invested and fulfillment~~cash received related to the disposition of ~~liquidity needs.~~GeneDx, as well as increased interest rates between the two periods.

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Interest expense. Interest expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 was ~~$1.8~~$6.6 million and ~~$2.0~~$5.7 million, respectively. Interest expense iswas principally related to interest incurred on the 2025 Notes, the 2023 Convertible Notes, the 2033 Senior Notes, ~~including amortization of related deferred financing costs~~ and ~~to interest incurred on~~ BioReference’s outstanding debt under ~~its credit facility.~~

the Credit Agreement.

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, was $7.6 million and $5.7~~2022, were $0.9 million of expense and $0.2 million reversal of expense, respectively. ~~The change in derivative instruments~~Derivative expense for the six months ended June 30, 2023 and 2022, was principally related to ~~non-cash expense related to~~ the ~~changes~~change in ~~the~~ fair value ~~of the embedded derivatives in the 2033 Senior Notes of $6.8 million and $5.8 million of expense for the three months ended September 30, 2017 and 2016, respectively.~~

on foreign currency forward exchange contracts at OPKO Chile.

Other income (expense), net. Other income (expense), net for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, were $0.6~~2022, was $4.4 million ~~of income~~ and ~~$3.0~~$74.4 million of expense, respectively. Other ~~expense~~income (expense), net for the ~~three~~six months ended ~~September~~June 30, ~~2016 primarily consists~~2023, and 2022, includes $8.3 million and $71.2 million, respectively, of expense as a result of a ~~$3.9~~decrease in the fair value of our investment in GeneDx Holdings (as defined below). Foreign currency gains of $2.0 million ~~other-than-temporary impairment charge to write our investments in Xenetic~~ and ~~RXi down to their respective fair values.~~

$1.8 million of losses were the majority of other expenses for the six months ended June 30, 2023, and 2022, respectively.

Income tax benefit (provision). Our income tax benefit (provision) for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 was ~~$24.4~~$(4.4) million and ~~$20.0~~$6.2 million, respectively, and reflects quarterly results using our expected effective tax rate. For the six months ended June 30, 2023, the tax rate ~~for~~differed from the ~~full year. The change in income taxes is~~U.S. federal statutory rate of 21% primarily due to ~~changes~~a $22.0 million discrete benefit resulting from reduced tax rates that will be applicable to existing foreign deferred tax liabilities, as well as the relative mix in earnings and losses in the ~~geographic mix of revenues~~U.S. versus foreign tax jurisdictions, and ~~expenses.~~

operating results in tax jurisdictions which do not result in a tax benefit.

Loss from investments in investees. We have made investments in ~~other~~certain early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as a shareholder or member. We account for these investments under the equity method of accounting, resulting in the recording of our proportionate share of their losses until our share of their loss exceeds our investment. Until the investees’ technologies are commercialized, if ever, we anticipate they will report a net ~~loss.~~losses. Loss from investments in investees was ~~$4.0~~$0.1 million and ~~$0.8~~$0.3 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. ~~The increase in Loss from investments in investees is attributable to losses recognized on our investment in Pharmsynthez.~~

~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016~~

Revenues Nine months ended September 30,
(In thousands) 2017 2016 Change
Revenue from services $ 740,992
$ 777,559
$ (36,567 )
Revenue from products 73,992
63,275
10,717
Revenue from transfer of intellectual property and other 58,819
105,338
(46,519 )
Total revenues $ 873,803
$ 946,172
$ (72,369 )

The decrease in Revenue from services is attributable to decreased pricing at BioReference’s GeneDx division. The increase in Revenue from products principally reflects an increase in revenue from OPKO Chile and EirGen. Revenue from transfer of intellectual property decreased as a result of the $50.0 million of revenue from the initial payment under the VFMCRP agreement included in the nine months ended September 30, 2016, partially offset by $10.0 million of revenue from a milestone payment from our licensee, TESARO, for the nine months ended September 30, 2017. Revenue from transfer of intellectual property for the nine months ended September 30, 2017 and 2016 also reflects $46.5 million and $53.0 million, respectively, of revenue related to the Pfizer Transaction.

~~Cost of revenue~~. Cost of revenue for the nine months ended September 30, 2017 increased $11.4 million compared to the prior year period. The increase in cost of service revenue is attributable to BioReference. The increase in cost of product revenue is attributable to an increase in revenue at OPKO Chile and EirGen. Included in cost of product revenue for the nine months ended September 30, 2017 is $5.0 million of inventory obsolescence expense related primarily to the launch of ~~Rayaldee. Cost of revenue for the nine months ended September 30, 2017 and 2016 were as follows:~~

Cost of Revenue Nine months ended September 30,
(In thousands) 2017 2016 Change
Cost of service revenue $ 419,070
$ 417,121
$ 1,949
Cost of product revenue 44,441
35,033
9,408
Total cost of revenue $ 463,511
$ 452,154
$ 11,357

~~Selling, general and administrative expenses~~. Selling, general and administrative expenses for the nine months ended September 30, 2017 and 2016, were $396.4 million and $370.4 million, respectively. The increase in selling, general and administrative expenses was primarily due to costs related to the launch of ~~Rayaldee~~ and increased selling, general and administrative expenses at BioReference, which was partially offset by a decrease in severance costs. Included in selling, general and administrative expenses for the nine months ended September 30, 2017 and 2016 are $3.7 million and $17.9 million, respectively, of net severance costs for certain BioReference executives. These severance costs include $2.8 million and $8.9 million of expense related to the acceleration of stock option vesting for certain BioReference executives in 2017 and 2016, respectively.

Selling, general and administrative expenses during the nine months ended September 30, 2017 and 2016, include equity-based compensation expense of $16.7 million and $27.7 million, respectively, including the expense related to the acceleration of stock option vesting for certain BioReference executives.

~~Research and development expenses~~. Research and development expenses for the nine months ended September 30, 2017 and 2016, were $90.9 million and $83.6 million, respectively. Research and development costs include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements. External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. We track external research and development expenses by individual program for phase 3 clinical trials for drug approval and PMAs for diagnostics tests, if any. Internal expenses include employee-related expenses including salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

~~The following table summarizes the components of our research and development expenses:~~

Research and Development Expenses Nine months ended September 30,
2017 2016
External expenses:
Phase 3 clinical trials $ 11,354
$ 8,436
Manufacturing expense for biological products 31,102
30,484
PMA studies 694
—
Earlier-stage programs 4,734
4,949
Research and development employee-related expenses 18,915
21,266
Other internal research and development expenses 25,394
20,525
Third-party grants and funding from collaboration agreements (1,249 ) (2,066 )
Total research and development expenses $ 90,944
$ 83,594

The increase in research and development expenses is primarily due to a increase in research and development expenses related to hGH-CTP, a long acting human growth hormone which was outlicensed to Pfizer in 2015, and to the acquisition of Transition Therapeutics in August 2016.. In addition, during the nine months ended September 30, 2017 and 2016, we recorded, as an offset to research and development expenses, $1.2 million and $2.1 million, respectively, related to research and development grants received from our collaboration and funding agreements. Research and development expenses for the nine months ended September 30, 2017 and 2016 include equity-based compensation expense of $4.0 million and $6.0 million, respectively. We expect our research and development expense to increase as we continue to expand our research and development of potential future products.

~~Contingent consideration~~. Contingent consideration income (expense) for the nine months ended September 30, 2017 and 2016, were $4.5 million of income and $15.6 million of expense, respectively. The change in contingent consideration income (expense) was attributable to contingent consideration income for OPKO Renal during the nine months ended September 30, 2017 due to changes in assumptions regarding the timing of successful achievement of future milestones of ~~Rayaldee~~. The contingent consideration liabilities at September 30, 2017 relate to potential amounts payable to former stockholders of CURNA, OPKO Diagnostics and OPKO Renal pursuant to our acquisition agreements in January 2011, October 2011 and March 2013, respectively.

~~Amortization of intangible assets~~. Amortization of intangible assets was $53.9 million and $47.3 million, respectively, for the nine months ended September 30, 2017 and 2016. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Amortization of intangible assets for the nine months ended September 30, 2017 includes $12.0 million of amortization expense related to intangible assets for ~~Rayaldee.~~ ~~Upon the FDA’s approval of~~ ~~Rayaldee~~ ~~in June 2016, we reclassified $187.6 million of IPR&D related to~~ ~~Rayaldee~~ from In-process research and development to Intangible assets, net in our Condensed Consolidated Balance Sheets and began to amortize that asset. Our IPR&D assets will not be amortized until the underlying development programs are completed. Upon obtaining regulatory approval by the U.S. FDA, the IPR&D assets will then be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life.

~~Interest income~~. Interest income for the nine months ended September 30, 2017 and 2016, was not significant as our cash investment strategy emphasizes the security of the principal invested and fulfillment of liquidity needs.

~~Interest expense~~. Interest expense for the nine months ended September 30, 2017 and 2016, was $4.8 million and $6.0 million, respectively. Interest expense is principally related to interest incurred on the 2033 Senior Notes including amortization of related deferred financing costs and to interest incurred on BioReference’s outstanding debt under its credit

~~facility. The decrease in interest expense for the nine months ended September 30, 2017 is attributable to lower interest rates on borrowings in 2017 compared to 2016.~~

~~Fair value changes of derivative instruments, net~~. Fair value changes of derivative instruments, net for the nine months ended September 30, 2017 and 2016, was $2.0 million of income and $5.9 million of expense, respectively. Fair value changes of derivative instruments, net nine months ended September 30, 2017 principally related to non-cash income of $3.2 million related to the changes in the fair value of the embedded derivatives in the 2033 Senior Notes. For the nine months ended September 30, 2017, we observed a decrease in the market price of our Common Stock which resulted in the decrease in the estimated fair value of our embedded derivatives in the 2033 Senior Notes through the last valuation on February 1, 2017. Fair value changes of derivative instruments, net for the nine months ended September 30, 2016 principally reflects $4.0 million of expense related to the change in fair value of options to purchase additional shares of NeoVasc.

~~Other income (expense), net~~. Other income (expense), net for the nine months ended September 30, 2017 and 2016, were $3.1 million and $3.5 million of income, respectively. Other income for the nine months ended September 30, 2017 primarily consists of a $3.0 million gain on the sale of non-strategic assets at a wholly-owned BioReference subsidiary. Other income for the nine months ended September 30, 2016 primarily consisted of a $2.5 million gain recognized in connection with the merger of STI and VBI Vaccines Inc. and a $2.9 million gain recognized in connection with the settlement of a legal matter, which was partially offset by a $3.9 million other-than-temporary impairment charge to write our investments in Xenetic and RXi down to their respective fair values.

~~Income tax benefit~~. Our income tax benefit for the nine months ended September 30, 2017 and 2016 was $42.3 million and $24.6 million, respectively, and reflects quarterly results using our expected effective tax rate for the full year. The change in income taxes is primarily due to changes in the geographic mix of revenues and expenses.

~~Loss from investments in investees~~. We have made investments in other early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as a shareholder or member. We account for these investments under the equity method of accounting, resulting in the recording of our proportionate share of their losses until our share of their loss exceeds our investment. Until the investees’ technologies are commercialized, if ever, we anticipate they will report a net loss. Loss from investments in investees was $11.8 million and $5.1 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in Loss from investments in investees is attributable to losses recognized on our investment in Pharmsynthez.

LIQUIDITY AND CAPITAL RESOURCES

At ~~September~~June 30, ~~2017,~~2023, we had cash and cash equivalents of approximately ~~$100.4 million.~~$108.1 million, which does not include the $90 million milestone payment from Pfizer that is expected to be received in August 2023. Cash used in operations ~~during 2017~~of $23.0 million for the six months ended June 30, 2023 principally reflects milestone payments of $90.0 million, $7.0 million and $2.5 million from Pfizer, Vifor and Nicoya, respectively, and general and administrative expenses related to ~~general and administrative activities of~~ our corporate operations and research and development ~~activities and our launch activities related to~~ ~~Rayaldee~~.activities. Cash used in investing activities for the six months ended June 30, 2023 primarily reflects an investment of $5.0 million in GeneDx Holdings Class A common stock and capital expenditures of ~~$32.1~~$7.6 million. Cash ~~provided by~~used in financing activities of $9.7 million primarily reflects net borrowings on our lines of credit and $3.0 million redemption of ~~$54.9 million.~~the 2033 Senior Notes. We have historically not generated sustained positive cash flow sufficient to offset our operating and other expenses, and our primary ~~source~~sources of cash ~~has~~have been from the public and private placement of ~~stock,~~equity, the issuance of the ~~2033 Senior~~2023 Convertible Notes, 2025 Notes and credit facilities available to us.

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In June 2023, the Company and Pfizer announced that the FDA approved NGENLA (Somatrogon), a once-weekly injection to treat pediatric growth hormone deficiency in the United States. With the achievement of the FDA approval milestone, during the second quarter of 2023 we recorded $90.0 million of revenue under the Restated Pfizer Agreement.

On ~~October 12, 2017, EirGen, our wholly-owned subsidiary,~~March 8, 2023, ModeX, the Company (with respect to certain sections), and ~~Japan Tobacco Inc. (“JT”)~~Merck entered into a ~~Development~~License and ~~License~~Research Collaboration Agreement ~~granting JT~~(the “Merck Agreement under”) pursuant to which Merck obtained a license to certain patent rights and know-how in connection with the ~~exclusive rights~~development of ModeX’s preclinical nanoparticle vaccine candidate targeting the Epstein -Barr Virus. In consideration for the ~~development and commercialization~~rights granted to Merck under the Merck Agreement, we received an initial one-time, non-refundable upfront payment of ~~Rayaldee~~$50.0 million in ~~Japan (the “JT Territory”). The license grant to JT covers the therapeutic and preventative use~~April 2023. Certain of the ~~Product for (i) SHPT in non-dialysis~~rights subject to the license provided by us under the Merck Agreement were obtained by us from Sanofi pursuant to the Sanofi In-License Agreement stipulates, and ~~dialysis patients with CKD, (ii) rickets,~~because a portion of the upfront payment, milestones and ~~(iii) osteomalacia (the “JT Initial Indications”), as well as such additional indications as~~royalties received by us under the Merck Agreement may be ~~added~~payable to ~~the scope of the license subject to~~Sanofi under the terms of the Sanofi In-License Agreement, ~~(the “JT Additional Indications”,~~of which $12.5 million was paid to Sanofi during the second quarter of 2023.

As part of their strategic collaboration, ModeX and ~~together with the JT Initial Indications, the “JT Field”).~~

~~OPKO will receive an initial upfront payment of $6 million. OPKO will receive another $6 million upon the initiation of OPKO’s planned phase 2 study for~~ ~~Rayaldee~~Merck have put in ~~dialysis patients in the U.S. OPKO is also eligible~~place a research plan to ~~receive up to an additional aggregate amount of $31 million upon the achievement of certain regulatory~~manage research and development milestones by JT for the Product in the JT Territory, and $75 million upon the achievement of certain sales based milestones by JT in the JT Territory. OPKO will also receive tiered, double digit royalty payments at rates ranging from low double digits to mid-teens on net Product sales within the JT Territory and in the JT Field. JT will, at its sole cost and expense, be responsible for performing allother development activities ~~necessary~~related to ~~obtain all regulatory approvals~~the development of a Vaccine or Product including a joint steering committee to facilitate the research program. As part of the research plan, they will use a third-party contract development and manufacturing organization (“CDMO”) to carry out such activities unless otherwise agreed. Development costs incurred by ModeX in furtherance of these development activities will be reimbursed by Merck. To date, we have spent $8.2 million of development costs related to the Epstein -Barr Virus, for ~~Rayaldee~~ ~~in Japan and for all commercial activities pertaining to~~ ~~Rayaldee~~ ~~in Japan, except for certain preclinical expenses~~ which ~~OPKO has agreed to reimburse JT up to a capped amount.~~

~~In August 2017, we~~Merck will provide reimbursement.

On May 9, 2022, the Company entered into ~~a Commitment Letter~~an Agreement and Plan of Merger (the ~~“Commitment Letter”~~“ModeX Merger Agreement”) ~~with Veterans Accountable Care Group, LLC (“VACG”)~~, pursuant to which we acquired ModeX. The Company paid the entirety of the $300.0 million purchase price in ~~connection with submission~~shares of ~~a bid by its affiliate, the Veterans Accountable Care Organization, LLC (“VACO”~~Common Stock (the “Consideration Shares”) in response to a request for proposal (“RFP”) from the Veterans Health Administration (“VA”) regarding its Community Care Network. If VACO is successful in its bid, we will acquire a fifteen percent (15%) membership interest in VACO. In addition, BioReference, our wholly-owned subsidiary, will provide laboratory services for the Community Care Network, a region which currently includes approximately 2,133,000 veterans in the states of Massachusetts, Maine, New Hampshire, Vermont, New York, Pennsylvania, New Jersey, Rhode Island, Connecticut, Maryland, Virginia, West Virginia, and North Carolina.

~~Pursuant~~ to the ~~Commitment Letter, we committed to provide, or to arrange from a third party lender, a line~~former stockholders of credit for VACG in the amount of $50.0 million (the “Facility”). Funds drawn under the Facility would be contributed by VACG to VACO in order to satisfy the financial stability requirement of VACO in connection with its submission of the RFP. VACG would not be permitted to draw down on the Facility unless and until the VHA awards a contract to VACO.ModeX. The ~~Facility would have a maturity of five (5) years. Interest on the Facility would be payable at a rate equal to six and one-half percent (6.5%) per annum, payable quarterly in arrears.~~

~~The Facility is subject to the negotiation of definitive documentation conditions customary for transactions of such type and otherwise acceptable to VACG and the lender under the Facility.~~

~~In November 2016, we launched commercial sales for~~ ~~Rayaldee~~ ~~in the U.S. market. The FDA approved~~ ~~Rayaldee~~ extended release capsules in June 2016 for the treatment of SHPT in adults with stage 3 or 4 CKD and serum total 25-hydroxyvitamin D levels less than 30 ng/mL. We have a highly specialized sales and marketing team dedicated to the launch and commercialization of ~~Rayaldee, and we have increased the sales and marketing team in the second half of 2017 as market access improves and prescription trends increase.~~

In August 2016, we completed the acquisition of Transition Therapeutics, a clinical stage biotechnology company. Holders of Transition Therapeutics common stock received 6,431,899 shares of OPKO Common Stock. The transaction wasConsideration Shares were valued at ~~approximately $58.5~~$219.4 million, based on athe closing price per share of our Common Stock of ~~$9.10~~$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.

~~In May 2016, EirGen,~~ Included in the total fair value of consideration transferred of $221.7 million were $2.3 million of fully vested equity awards. The Company deposited 10% of the Consideration Shares in a twelve-month escrow for purposes of satisfying the potential indemnity obligations of the sellers under the ModeX Merger Agreement.

On April 29, 2022, the Company completed the disposition (the “GeneDx Transaction.”) of its former subsidiary, GeneDx LLC (f/k/a GeneDx, Inc. “GeneDx”), to GeneDx Holdings Corp. (f/k/a “Sema4 Holdings Corp.”), a Delaware corporation (“GeneDx Holdings”). 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 our ~~wholly-owned subsidiary, partnered with VFMCRP through a Development and License Agreement~~condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q). Based on the closing stock price of GeneDx Holdings as of April 29, 2022, the total upfront consideration represented approximately $322 million. Additionally, subject to GeneDx achieving certain revenue targets for the ~~development~~fiscal years ending December 31, 2022 and ~~commercialization of~~ ~~Rayaldee~~ in Europe, Canada, Mexico, Australia, South Korea and certain other international markets. The license to VFMCRP potentially covers all therapeutic and prophylactic uses of the product in human patients, provided that initially the license is for the use of the product for the treatment or prevention of SHPT related to patients with stage 3 or 4 chronic kidney disease and vitamin D insufficiency/deficiency (“VFMCRP Initial Indication”). We received a non-refundable and non-creditable upfront payment of $50 million and are eligible to receive up to an additional $232 million upon the achievement of certain regulatory and sales-based milestones. In addition,2023, we are eligible to receive ~~tiered royalties on sales~~an earnout payment in cash or stock (at GeneDx Holdings’ discretion) equal to a maximum of ~~the product at percentage rates that range from the mid-teens to the mid-twenties or a minimum royalty, whichever is greater, upon commencement~~30.9 million shares of ~~sales~~GeneDx Holdings’ Class A common stock if paid in stock (the “Milestone Consideration”). We received 23.1 million shares of ~~the product.~~

As part of the arrangement, the companies will share responsibility for the conduct of trials specified within an agreed-upon development plan, with each company leading certain activities within the plan. For the initial development plan, the companies have agreed to certain cost sharing arrangements. VFMCRP will be responsible for all other development costs that VFMCRP considers necessary to develop the product for the VFMCRP Initial Indication in the VFMCRP Territory except as otherwise provided in the VFMCRP Agreement. EirGen also granted to VFMCRP an option to acquire an exclusive license to use, import, offer for sale, sell, distribute and commercialize the product in the United States for treatment of SHPT in dialysis patients with stage 5 CKD and vitamin D insufficiency (the “Dialysis Indication”). Upon exercise of the Option, VFMCRP will reimburse EirGen for all of the development costs incurred by EirGenClass A Common Stock with respect to ~~the product~~Milestone Consideration for the ~~Dialysis Indication~~year ended December 31, 2022. As of June 30, 2023, the aggregate value of our GeneDx Holdings investment based on the quoted market price of their respective shares of common stock and the number of shares held by us was $21.2 million.

In April 2022, Pfizer notified OPKO that NGENLA received pricing approval in Germany and Japan. NGENLA was granted marketing authorization by the ~~United States. VFMCRP would also pay EirGen up to an additional aggregate amount~~Ministry of ~~$555 million upon~~Health, Labour and Welfare in Japan and by the European Commission in January and February of 2022, respectively. With the achievement of ~~certain~~these milestones, ~~and would be obligated to pay royalties on sales of the product at percentage rates that range from the mid-teens to the mid-twenties.~~

In January 2015, we partnered with Pfizer through a worldwide agreement for the development and commercialization of our long-acting hGH-CTP for the treatment of GHD in adults and children, as well as for the treatment of growth failure in children born SGA. Under the terms of the agreements with Pfizer, we received ~~non-refundable and non-creditable upfront payments of $295.0~~$85.0 million in 2015 and are eligible to receive up to an additional $275 million upon the achievement of certain regulatory milestones. Pfizer received the exclusive license to commercialize hGH-CTP worldwide. In addition, we are eligible to receive initial tiered royalty payments associated with the commercialization of hGH-CTP for Adult GHD with percentage rates ranging from the high teens to mid-twenties. Upon the launch of hGH-CTP for Pediatric GHD in certain major markets, the royalties will transition to regional, tiered gross profit sharing for both hGH-CTP and Pfizer’s Genotropin®.

We will lead the clinical activities and will be responsible for funding the development programs for the key indications, which includes Adult and Pediatric GHD and Pediatric SGA. Pfizer will be responsible for all development costs for additional indications as well as all post-marketing studies. In addition, Pfizer will fund the commercialization activities for all indications and lead the manufacturing activities covered by the global development plan. In December 2016, we announced preliminary topline data from our Phase 3, double blind, placebo controlled study of hGH-CTP in adults with GHD. Although there was no statistically significant difference between hGH-CTP and placebo on the primary endpoint of change in trunk fat mass from baseline to 26 weeks, after unblinding the study, we identified an exceptional value of trunk fat mass reduction in the placebo group that may have affected the primary outcome.

We have now completed post-hoc sensitivity analyses to evaluate the influence of outliers on the primary endpoint results using multiple statistical approaches. Analyses that excluded outliers showed a statistically significant difference between hGH-CTP and placebo on the change in trunk fat mass. Additional analyses that did not exclude outliers showed mixed results. Following completion of the analyses, OPKO and Pfizer have agreed that OPKO may proceed with a pre-BLA meeting with the FDA to discuss a submission plan. OPKO intends to carry out an additional study in adults using a pen device.

~~We are constructing a research, development and manufacturing center in Waterford, Ireland, for which we expect to~~

incur between $40 million and $45 million for the construction and validation of the facility. Construction of the facility began in the fourth quarter of 2016 with expected completion in 2019. Currently, we plan to fund the project from cash on hand or from third party funding sources that may be available to us.

Our licensee, TESARO, received approval by the U.S. FDA in September 2015 for oral VARUBI™, a neurokinin-1 receptor antagonist for the prevention of chemotherapy-induced nausea and vomiting. In November 2015, TESARO announced the commercial launch of VARUBI™ in the United States. We received $30.0 million of milestone payments ~~from TESARO upon achievement of certain regulatory and commercial sale milestones, which includes a $10.0 million milestone payment we received for~~in 2022 under the nine months ended September 30, 2017, and we are eligible to receive additional commercial milestone payments of up to $85.0 million if specified levels of annual net sales are achieved. TESARO is also obligated to pay us tiered royalties on annual net sales achieved in the United States and Europe at percentage rates that range from the low double digits to the low twenties, and outside of the United States and Europe at low double-digit percentage rates.

Restated Pfizer Agreement.

In ~~January 2013,~~February 2019, we issued ~~$175.0~~$200.0 million ~~of the 2033 Senior Notes. The 2033 Senior Notes were sold in a private placement in reliance on exemptions from registration under the Securities Act. At September 30, 2017, $31.9 million~~aggregate principal amount of ~~2033 Senior~~the 2025 Notes ~~was outstanding.~~

~~In connection with our acquisitions~~in an underwritten public offering. The 2025 Notes bear interest at a rate of ~~CURNA, OPKO Diagnostics~~4.50% per year, payable semiannually in arrears on February 15 and ~~OPKO Renal, we agreed to pay future consideration~~August 15 of each year. The 2025 Notes mature on February 15, 2025, unless earlier repurchased, redeemed or converted.

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Holders may convert their 2025 Notes into shares of Common Stock at their option at any time prior to the ~~sellers upon~~close of business on the ~~achievement of certain events, including up to an additional $19.1 million in shares of our Common Stock to the former stockholders of OPKO Diagnostics upon and~~business day immediately preceding November 15, 2024, subject to the ~~achievement~~satisfaction of certain ~~milestones; and up to an additional $125.0 million in either~~conditions. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our Common Stock, or a combination of cash and shares of our Common Stock, at our ~~option~~election.

The current conversion rate for the 2025 Notes is 236.7424 shares of Common Stock per $1,000 principal amount of 2025 Notes (equivalent to a conversion price of approximately $4.22 per share of Common Stock). The conversion rate for the 2025 Notes is subject to adjustment in certain events but will not be adjusted for any accrued and unpaid interest.

In May 2021, we entered into exchange agreements with certain holders of the ~~achievement~~2025 Notes pursuant to which the holders exchanged $55.4 million in aggregate principal amount of ~~certain milestones,~~the outstanding 2025 Notes for 19,051,270 shares of our Common Stock (the “Exchange”).

In February 2018, we issued the 2023 Convertible Notes in the aggregate principal amount of $55.0 million, with an original maturity date in February 2023. 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. We may redeem all or any part of the then issued and outstanding 2023 Convertible Notes, together with accrued and unpaid interest thereon upon no fewer than 30 days, and no more than 60 days, notice to the ~~former shareholders~~holders. The 2023 Convertible Notes contain customary events of ~~OPKO Renal.~~

default and representations and warranties of OPKO. On ~~November 5, 2015, BioReference~~February 10, 2023, the Company amended the 2023 Convertible Notes to extend the maturity to January 31, 2025, and certain of its subsidiaries entered into a credit agreement with JPMorgan Chase Bank, N.A. (“CB”), as lender and administrative agent, as amended (the “Credit Agreement”). The Credit Agreement provides for a $175.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility forto reset the ~~issuance of letters of credit. BioReference may increase the credit facility to up to $275.0 million on a secured basis, subject~~conversion price to the ~~satisfaction~~10 day volume weighted average price immediately preceding the date of specified conditions. The Credit Agreement matures on November 5, 2020 and is guaranteed by all of BioReference’s domestic subsidiaries. The Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well asthe amended note, plus a ~~non-recourse pledge by us of our equity interest in BioReference. Availability~~25% conversion premium, or $1.66 per share. Interest under the ~~Credit Agreement is based on a borrowing base comprised~~2023 Convertible Notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from the date of ~~eligible accounts receivables of BioReference~~issuance, until the principal and ~~certain of its subsidiaries, as specified therein.~~

~~On March 17, 2017, BioReference~~accrued and ~~certain of its subsidiaries entered into Amendment No. 3 to Credit Agreement, which amended the Credit Agreement to permit BioReference and its subsidiaries to dividend cash to the Company~~unpaid interest are paid in the form of an intercompany loan, in an aggregate amount not to exceed $55,000,000. On August 7, 2017, BioReference and certain of its subsidiaries entered into Amendment No. 4 to Credit Agreement, which amended the Credit Agreement to permit BioReference and its subsidiaries to dividend cash to the Company in the form of an additional intercompany loan, in an aggregate amount not to exceed $35,000,000. The other terms of the Credit Agreement remain unchanged.

full.

As of ~~September~~June 30, ~~2017,~~2023, the total ~~availability~~commitments under our Credit Agreement with CB and our lines of credit with financial institutions in Chile and Spain ~~was $130.6~~were $43.4 million, of which ~~$105.9~~$26.1 million was ~~used and outstanding~~drawn as of ~~September~~June 30, ~~2017. The~~2023. At June 30, 2023, the weighted average interest rate on these lines of credit iswas approximately ~~4.5%~~8.8%. These lines of credit are short-term and are used primarily as a source of working capital. The highest aggregate principal balance at any time outstanding during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2023 was ~~$105.9~~$26.4 million. We intend to continue to ~~enter into~~draw under these lines of credit as needed. There is no assurance that these lines of credit or other funding sources will be available to us on acceptable terms, or at all, in the future.

~~We expect~~

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 ~~continue~~certain exceptions. The Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, subject to ~~incur substantial research~~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. As of June 30, 2023, $13.3 million remained available for borrowing under the Credit Agreement.

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In connection with our agreements with Merck, Pfizer, Vifor, Nicoya and CAMP4, we are eligible to receive various milestone payments and royalty considerations. Under the terms of the Merck Agreement, we received an initial payment of $50 million and are also eligible to receive up to an additional $872.5 million upon the achievement of certain commercial and development ~~expenses,~~milestones under several indications. We are also eligible to receive tiered royalty payments ranging from high single digits to low double digits upon achievement of certain sales targets of the Product (as defined in the Merck Agreement). Under the terms of the Restated Pfizer Agreement, we have received or are eligible to receive up to an additional $275.0 million upon the achievement of certain regulatory milestones, including ~~expenses related~~$90 million triggered by the FDA approval in the US and $85 million due to the ~~hiring~~commencement of ~~personnel~~sales from NGENLA (Somatrogon) in Europe and Japan, which we received in 2022. In addition, we are eligible to receive regional, tiered gross profit sharing for both Somatrogon (hGH-CTP) and Pfizer’s Genotropin®. Under the terms of the Vifor Agreement, we are entitled to receive up to an additional ~~clinical trials.~~$10 million in regulatory milestones and $207 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. In addition, we are eligible to receive tiered, double-digit royalty payments. Under the terms of the Nicoya Agreement, we received an initial upfront payment of $5 million and are eligible to receive an aggregate of $5 million tied to the first anniversary of the effective date of the Nicoya Agreement, of which we have received $2.5 million. 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. We ~~expect that selling, general~~are also eligible to receive up to an additional aggregate amount of $115 million upon the achievement of certain development, regulatory and ~~administrative expenses~~sales-based milestones by Nicoya for the Nicoya Product in the Nicoya Territory. We are also eligible to receive tiered, double digit royalty payments at rates in the low double digits on net product sales within the Nicoya Territory and in the Nicoya Field. Under the terms of the CAMP4 Agreement, we received an initial upfront payment of $1.5 million and we are eligible to receive up to $3.5 million in development milestone payments for Dravet syndrome products and $4.0 million for non-Dravet syndrome products, as well as sales milestones of up to $90 million for Dravet syndrome products and up to $90 million for non-Dravet syndrome products.

In connection with our acquisitions of CURNA and OPKO Renal, we agreed to pay future consideration to the sellers upon the achievement of certain events up to an additional $125.0 million in either shares of our Common Stock or cash, at our option subject to the achievement of certain milestones, to the former shareholders of OPKO Renal. As a result of our execution of the CAMP4 Agreement, we will ~~also increase as we expand our sales, marketing and administrative staff and add infrastructure.~~

have to pay a percentage of any payments received under the CAMP4 Agreement to the former CURNA stockholders.

We believe that the cash and cash equivalents on hand at ~~September~~June 30, ~~2017~~,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 based this estimate on assumptions that may prove to be wrong or are subject to change, and we may be required to use our available cash resources sooner than we currently expect. If we acquire additional assets or companies, accelerate our product development programs or initiate additional clinical trials, we will need additional funds. Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including ~~our relationship with Pfizer,~~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 40 markets, including the United States, Europe, Japan, Australia and Canada, the commercial ~~launch~~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, ~~and~~ our success in developing markets for our product ~~candidates. If~~candidates and results of government investigations, payor claims, and legal proceedings that may arise, including, without limitation class action and derivative litigation to which we are

subject, and our ability to obtain insurance coverage for such claims. We have historically not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs or possible ~~acquisitions.~~acquisitions or reduce our marketing or sales efforts or cease operations.

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The following table provides information as of ~~September~~June 30, ~~2017~~,2023, with respect to the amounts and timing of our known contractual obligation payments due by period.

Contractual obligations
(In thousands)
Remaining three months ending December 31,
2017 2018 2019 2020 2021 Thereafter Total
Open purchase orders $ 97,863
$ 8,446
$ 274
$ 34
$ —
$ —
$ 106,617
Operating leases 5,271
18,231
15,027
9,388
6,164
6,853
60,934
Capital leases 887
3,404
3,026
2,367
1,438
800
11,922
2033 Senior Notes —
—
31,850
—
—
—
31,850
Deferred payments 5,000
5,000
5,000
—
—
—
15,000
Mortgages and other debts payable 3,412
416
410
409
409
755
5,811
Lines of credit 12,623
—
—
93,311
—
—
105,934
Severance payments 5,101
—
—
—
—
—
5,101
Interest commitments 257
1,019
291
39
37
23
1,666
Total $ 130,414
$ 36,516
$ 55,878
$ 105,548
$ 8,048
$ 8,431
$ 344,835

Contractual obligations	Remaining six months ending
(In thousands)	December 31, 2023		2024		2025		2026		2027		Thereafter		Total
Open purchase orders	$	46,137	$	236	$	5	$	—	$	—	$	—	$	46,378
Operating leases		6,309		8,367		5,072		3,596		3,266		9,542		36,152
Finance leases		1,547		2,592		2,003		1,390		588		1,959		10,079
2025 and 2023 Convertible Notes		—		—		212,299		—		—		—		212,299
Mortgages and other debts payable		2,061		1,914		1,568		1,347		1,090		4,728		12,708
Lines of credit		26,072		—		—		—		—		—		26,072
Interest commitments		3,535		6,789		5,181		207		205		615		16,532
Total	$	85,661	$	19,898	$	226,128	$	6,540	$	5,149	$	16,844	$	360,220

The preceding table does not include information where the amounts of the obligations are not currently determinable, including the following:

- Contractual obligations in connection with clinical trials, which span over two years, and that depend on patient enrollment. The total amount of expenditures is dependent on the actual number of patients enrolled and as such, the contracts do not specify the maximum amount we may owe.

~~- Product license agreements effective during the lesser of 15 years or patent expiration whereby payments and amounts are determined by applying a royalty rate on uncapped future sales.~~

- Contingent consideration that includes payments upon achievement of certain milestones including meeting development milestones such as the completion of successful clinical trials, NDA approvals by the FDA and revenue milestones upon the achievement of certain revenue targets all of which are anticipated to be paid within the next seven years and are payable in either shares of our Common Stock or cash, at our option, and that may aggregate up to $159.1 million.

•

Contractual obligations in connection with clinical trials, which span over two years, and that depend on patient enrollment. The total amount of expenditures is dependent on the actual number of patients enrolled and as such, the contracts do not specify the maximum amount we may owe.

•

Product license agreements effective during the lesser of 15 years or patent expiration whereby payments and amounts are determined by applying a royalty rate on uncapped future sales.

•

Contingent consideration that includes payments upon achievement of certain milestones including meeting development milestones such as the completion of successful clinical trials, NDA approvals by the FDA and revenue milestones upon the achievement of certain revenue targets all of which are anticipated to be paid within the next seven years and are payable in either shares of our Common Stock or cash, at our option, and that may aggregate up to $125.0 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~Accounting estimates~~. The preparation of financial statements in conformity with GAAP 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 significantly from these estimates.

~~Goodwill and intangible assets. Goodwill and other intangible assets, including IPR&D, acquired in business combinations, licensing and other transactions at both~~ ~~September 30, 2017~~ ~~and December 31, 2016 was $2.1 billion, representing approximately 76% of total assets.~~

Assets acquired and liabilities assumed in business combinations, licensing and other transactions are generally recognized at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. We determined the fair value of intangible assets, including IPR&D, using the “income method.” This method starts with a forecast of net cash flows, risk adjusted for estimated probabilities of technical and regulatory success (for IPR&D) and adjusted to present value using an appropriate discount rate that reflects the risk associated with the cash flow streams. All assets are valued from a market participant view which might be different than our specific views. The valuation process is very complex and requires significant input and judgment using internal and external sources. Although a valuation is required to be finalized within a one-year period, it must consider all and only those facts and evidence which existed at the acquisition date. The most complex and judgmental matters applicable to the valuation process are summarized below:

Unit of account – Most intangible assets are valued as single global assets rather than multiple assets for each jurisdiction or indication after considering the development stage, expected levels of incremental costs to obtain additional approvals, risks associated with further development, amount and timing of benefits expected to be derived in the future, expected patent lives in various jurisdictions and the intention to promote the asset as a global brand.

Estimated useful life – The asset life expected to contribute meaningful cash flows is determined after considering all pertinent matters associated with the asset, including expected regulatory approval dates (if unapproved), exclusivity periods and other legal, regulatory or contractual provisions as well as the effects of any obsolescence, demand, competition, and other economic factors, including barriers to entry.

Probability of Technical and Regulatory Success (“PTRS”) Rate – PTRS rates are determined based upon industry averages considering the respective program’s development stage and disease indication and adjusted for specific information or data known at the acquisition date. Subsequent clinical results or other internal or external data obtained could alter the PTRS rate and materially impact the estimated fair value of the intangible asset in subsequent periods leading to impairment charges.

Projections – Future revenues are estimated after considering many factors such as initial market opportunity, pricing, sales trajectories to peak sales levels, competitive environment and product evolution. Future costs and expenses are estimated after considering historical market trends, market participant synergies and the timing and level of additional development costs to obtain the initial or additional regulatory approvals, maintain or further enhance the product. We generally assume initial positive cash flows to commence shortly after the receipt of expected regulatory approvals which typically may not occur for a number of years. Actual cash flows attributed to the project are likely to be different than those assumed since projections are subjected to multiple factors including trial results and regulatory matters which could materially change the ultimate commercial success of the asset as well as significantly alter the costs to develop the respective asset into commercially viable products.

Tax rates – The expected future income is tax effected using a market participant tax rate. In determining the tax rate, we consider the jurisdiction in which the intellectual property is held and location of research and manufacturing infrastructure. We also consider that any repatriation of earnings would likely have U.S. tax consequences.

Discount rate – Discount rates are selected after considering the risks inherent in the future cash flows; the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory, or economic barriers to entry, as well as expected changes in standards of practice for indications addressed by the asset.

Goodwill was $715.6 million and $704.6 million, respectively, at September 30, 2017 and December 31, 2016. Goodwill is tested at least annually for impairment or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. Examples of qualitative factors include our share price, our

financial performance compared to budgets, long-term financial plans, macroeconomic, industry and market conditions as well as the substantial excess of fair value over the carrying value of net assets from the annual impairment test previously performed.

The estimated fair value of a reporting unit is highly sensitive to changes in projections and assumptions; therefore, in some instances changes in these assumptions could potentially lead to impairment. We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. Ultimately, future potential changes in these assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below its carrying value. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to an impairment charge that could be material.

~~Intangible assets, net~~

There were $1.4 billion, including IPR&D of $648.4 million and $644.7 million, respectively, at September 30, 2017 and December 31, 2016. Intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, although IPR&D is required to be tested at least annually until the project is completed or abandoned. Upon obtaining regulatory approval, the IPR&D asset is then accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. If the project is abandoned, the IPR&D asset is charged to expense.

Intangible assets are highly vulnerable to impairment charges, particularly newly acquired assets for recently launched products and IPR&D. These assets are initially measured at fair value and therefore any reduction in expectations used in the valuations could potentially lead to impairment. Some of the more common potential risks leading to impairment include competition, earlier than expected loss of exclusivity, pricing pressures, adverse regulatory changes or clinical trial results, delay or failure to obtain regulatory approval and additional development costs, inability to achieve expected synergies, higher operating costs, changes in tax laws and other macro-economic changes. The complexity in estimating the fair value of intangible assets in connection with an impairment test is similar to the initial valuation.

Considering the high risk nature of research and development and the industry’s success rate of bringing developmental compounds to market, IPR&D impairment charges are likely to occur in future periods. IPR&D is closely monitored and assessed each period for impairment.

~~We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years. We use the straight-line method of amortization as there is~~ no reliably determinable pattern in which the economic benefits of our intangible assets are consumed or otherwise used up. Amortization expense was $53.9 million and $47.3 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Revenue recognition~~. Revenue for laboratory services is recognized at the time test results are reported, which approximates when services are provided. Services are provided to patients covered by various third-party payer programs including various managed care organizations, as well as the Medicare and Medicaid programs. Billings for services under third-party payer programs are included in revenue net of allowances for contractual discounts and allowances for differences between the amounts billed and estimated program payment amounts. Adjustments to the estimated payment amounts based on final settlement with the programs are recorded upon settlement as an adjustment to revenue. For the nine months ended September 30, 2017, approximately 31% of our revenues were derived directly from the Medicare and Medicaid programs.

~~We launched~~ ~~Rayaldee~~ ~~in the U.S. through our dedicated renal sales force in November 2016.~~ ~~Rayaldee~~ ~~is distributed in the U.S. principally through the retail pharmacy channel, which initiates with the largest wholesalers in the U.S. (collectively,~~ “~~Rayaldee~~ ~~Customers”). In addition to distribution agreements with~~ ~~Rayaldee~~ Customers, we have entered into arrangements with many healthcare providers and payers that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of ~~Rayaldee~~.

We lack the experiential data which would allow us to estimate Sales Deductions and product returns. Therefore, as of September 30, 2017, we have determined that we do not yet meet the criteria for the recognition of revenue for shipments of ~~Rayaldee~~ ~~at the time of shipment to~~ ~~Rayaldee~~ ~~Customers as allowances for Sales Deductions and product returns are not known~~

or cannot be reasonably estimated. We will not recognize revenue upon shipment until such time as we can reasonably estimate and record provisions for Sales Deductions and product returns utilizing historical information and market research projections.

Revenue from transfer of intellectual property includes revenue related to the sale, license or transfer of intellectual property such as upfront license payments, license fees, milestone and royalty payments received through our license, and 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.

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 periodic basis.

~~Concentration of credit risk and allowance for doubtful accounts~~. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. Substantially all of our accounts receivable are with either companies in the healthcare industry or patients. However, credit risk is limited due to the number of our clients as well as their dispersion across many different geographic regions.

While we have receivables due from federal and state governmental agencies, we do not believe that such receivables represent a credit risk since the related healthcare programs are funded by federal and state governments, and payment is primarily dependent upon submitting appropriate documentation. At September 30, 2017 and December 31, 2016, receivable balances (net of contractual adjustments) from Medicare and Medicaid were 22.0% and 22.9%, respectively, of our consolidated Accounts receivable, net.

The portion of our accounts receivable due from individual patients comprises the largest portion of credit risk. At September 30, 2017 and December 31, 2016, receivables due from patients represent approximately 2.4% and 4.1%, respectively, of our consolidated Accounts receivable, net.

~~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. Deferred tax

assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment.

~~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 Condensed Consolidated Statements 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 cash flows 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 to non-employees is subject to periodic adjustment as the underlying equity instruments vest. We estimate the grant-date fair value of our stock option grants using a valuation model known as the Black-Scholes-Merton formula or the “Black-Scholes Model.” The Black-Scholes Model requires the use of several variables to estimate the grant-date fair value of stock options including expected term, expected volatility, expected dividends and risk-free interest rate. We perform analyses to calculate and select the appropriate variable assumptions used in the Black-Scholes Model and to estimate forfeitures of equity-based awards. We adjust our forfeiture estimates on at least an annual basis based on the number of share-based awards that ultimately vest. The selection of assumptions and estimated forfeiture rates is subject to significant judgment and futurematerial changes to our ~~assumptions~~critical accounting policies and estimates ~~which may~~described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 that have had a material impact on our Condensed Consolidated Financial ~~Statements.~~

~~Inventories.~~ ~~Inventories are valued at the lower of cost~~Statements and net realizable value. Cost is determined by the first-in, first-out method. We consider such factors 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 and net realizable value. Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which is used in our testing laboratories.

~~Pre-launch inventories.~~ We may accumulate commercial quantities of certain product candidates prior to the date we anticipate that such products will receive final U.S. FDA approval. The accumulation of such pre-launch inventories involves the risk that such products may not be approved for marketing by the FDA on a timely basis, or ever. This risk notwithstanding, we may accumulate pre-launch inventories of certain products when such action is appropriate in relation to the commercial value of the product launch opportunity. In accordance with our policy, this pre-launch inventory is expensed.

~~Contingent consideration.~~ 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. Changes in contingent consideration result from changes in the assumptions regarding probabilities of successful achievement of related milestones, the estimated timing in which the milestones are achieved and the discount rate used to estimate the fair value of the liability. Contingent consideration may change significantly as our development programs progress, revenue estimates evolve and additional data is obtained, impacting our assumptions. The assumptions used in estimating fair value require significant judgment. 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.

notes.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting pronouncements.

In ~~May 2014,~~August 2020, the FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. ~~2014-09, “Revenue from~~ 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts ~~with Customers.~~in Entity's Own Equity (Subtopic 815-40).” ASU 2014-09, as amended, clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and2020-06 simplifies the ~~preparation of financial statements~~accounting for convertible instruments by reducing the number of ~~requirements to which an entity must refer.~~accounting models for convertible debt instruments and convertible preferred stock. The ASU ~~2014-09~~ is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Companies can choose to apply the ASU using either the full retrospective approach or a modified retrospective approach.

expected to require certain new processes. The determination of the impact of adoption of ASU 2014-09 on our financial condition, results of operations, cash flows and disclosures, is ongoing, and, as such, we have not yet concluded on a transition method and are not able to reasonably estimate the effect that the adoption of the new standard will have on our financial statements. Based on our preliminary assessment of this ASU, however, the majority of the amounts that were historically classified as provision for bad debts, primarily related to patient responsibility, will be considered an implicit price concession in determining net revenues. Accordingly, we will report uncollectible balances associated with individual patients as a reduction of the transaction price and therefore as a reduction in net revenues when historically these amounts were classified as provision for bad debts within Selling, general and administrative expenses.

~~In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for~~public entities ~~that do not measure inventory using the last-in, first-out (“LIFO”) or retail inventory method from the lower of cost or market to lower of cost and net realizable value. ASU 2015-11 is effective~~ for fiscal years beginning after December 15, ~~2016, including interim periods within those fiscal years,~~2021, with early adoption permitted. As required, we adopted ASU 2020-06 on January 1, 2022 and used the modified retrospective approach for all convertible debt instruments at the beginning of the period of adoptions. Results for reporting periods beginning January 1, 2022 are presented under ASU 2020-06, while prior period amounts were not adjusted and continue to be reported in accordance historic accounting guidance.

Under the modified approach, entities will apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. ASU 2020-06 eliminates the cash conversion and beneficial conversion feature models in ASC 470-20 that require an issuer of certain convertible debt and preferred stock to separately account for embedded conversion features as a component of equity. The adoption of ASU ~~2015-11~~2020-06 at January 1, 2022 resulted in ~~the first quarter of 2017 did not have a significant impact on our Condensed Consolidated Financial Statements.~~

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10),” which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidationan increase of the investee) to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impactConvertible notes of ~~this new guidance on our Condensed Consolidated Financial Statements.~~

~~In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718),” which simplifies several aspects~~$25.6 million, a reduction of the ~~accounting for share-based payment award transactions, including the income tax consequences, classification~~Accumulated deficit of ~~awards as either equity or liabilities, classification on the statement~~$17.5 million and a reduction of cash flows and accounting for forfeitures. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard in the first quarterAdditional paid-in capital of ~~2017. As required by ASU 2016-09, excess tax benefits are classified as an operating activity in our Condensed Consolidated Statement~~$39.1 million.

Table of Cash Flows and we have applied this provision prospectively. In addition, we have elected to estimate forfeitures over the course of a vesting period, rather than account for forfeitures as they occur. We adjust our forfeiture estimates based on the number of share-based awards that ultimately vest on at least an annual basis. Upon the adoption of ASU 2016-09 in 2017, we recorded a cumulative-effect adjustment to increase our deferred tax assets and reduce our accumulated deficit by $32.5 million with respect to excess tax benefits recognized in our Condensed Consolidated Balance Sheets.Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates.

Foreign Currency Exchange Rate Risk – We operate globally and, as such, we are subject to foreign exchange risk in our commercial operations as ~~a significant portion~~portions of our revenues are exposed to changes in foreign currency exchange rates, primarily the Chilean Peso, the Mexican Peso, ~~the Euro~~ and the ~~New Israeli Shekel.~~

Euro.

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. As exchange rates change, gains and losses on the exposed transactions are partially offset by gains and losses related to the hedging contracts. Both the exposed transactions and the hedging contracts are translated and fair valued, respectively, at current spot rates, with gains and losses included in earnings.

Our 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. 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 Condensed Consolidated Statements of Operations and offset the impact of the change in exchange rates on the foreign currency cash flows that are hedged. 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~~Peso to the U.S. dollar. If Chilean ~~pesos~~Pesos were to strengthen or weaken in relation to the U.S. dollar, our loss or gain on hedged foreign currency cash-flows would be offset by the derivative contracts, with a net effect of zero.

Approximately 34.4% of revenue for the six months ended June 30, 2023, and approximately 23.6% of revenue for the six months ended June 30, 2022, were denominated in currencies other than the U.S. Dollar (USD). 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. In the first six months of 2023 and during the year ended December 31, 2022, the most significant currency exchange rate exposures were the Euro and Chilean Peso. Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $33.5 million and $39.9 million at June 30, 2023 and December 2022, respectively. For information on such open foreign exchange forward contracts for the three and six months ended June 30, 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.

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Interest Rate Risk – Our exposure to interest rate risk relates to our cash and investments and to our borrowings. We generally maintain an investment portfolio of money market funds and marketable securities. The securities in our investment portfolio are not leveraged, and are, due to their very short-term nature, subject to minimal interest rate risk. 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.

At ~~September~~June 30, ~~2017,~~2023, we had cash and cash equivalents of ~~$100.4~~$108.1 million. The weighted average interest rate related to our cash and cash equivalents for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2023 was less than 1%. As of ~~September~~June 30, ~~2017,~~2023, the principal outstanding ~~balance~~balances under ~~our~~BioReference’s Credit Agreement with ~~JPMorgan Chase Bank, N.A.~~CB and our Chilean and Spanish lines of credit was ~~$105.9~~$26.1 million in the aggregate at a weighted average interest rate of approximately ~~4.5%~~8.8%.

Our ~~$31.9~~$55.0 million aggregate principal amount of our ~~2033 Senior~~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 isare not subject to fluctuations in market interest rates.

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. Government and its agencies, bank obligations, repurchase agreements and high-quality corporate issuers, and money market funds that invest in such debt instruments, and, by policy, restrict our exposure to any single corporate issuer by imposing concentration limits. To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than three months.

Item4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”))~~Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~

2023.

Changes to the ~~Company’s~~Company’s Internal Control Over Financial Reporting

In connection with the acquisition of Transition Therapeutics in August 2016, we began implementing standards and procedures at Transition Therapeutics, including establishing controls over accounting systems and establishing controls over the preparation of financial statements in accordance with generally accepted accounting principles to ensure that we

There have in place appropriate internal control over financial reporting at Transition Therapeutics. We are continuing to integrate the acquired operations of Transition Therapeutics into our overall internal control over financial reporting process.

We are in the process of implementing a new comprehensive enterprise resource planning (“ERP”) system on a company-wide basis, which is one of the systems used for financial reporting. The implementation of the ERP system involves changes to our financial systems and other systems and accordingly, necessitated changes to our internal controls over financial reporting.

~~These~~been no changes to the Company’s internal control over financial reporting that occurred during the ~~most recent~~ quarter ended ~~September~~June 30, ~~2017~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item1. Legal Proceedings

We are, from time to time, party to various legal proceedings arising out of our business. During the reporting period covered by this Quarterly Report on Form 10-Q, there have been no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2016 and~~2022.

Item1A. Risk Factors

There have been no material changes to our ~~Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.~~

~~Item 1A.~~ ~~Risk Factors~~

~~Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors”~~risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31 2016, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2016.

2022.

Item2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item3. Defaults Upon Senior Securities

None.

~~None.~~

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Item4. Mine Safety Disclosures

Not Applicable.

Item5. Other Information

~~On November 8, 2017, BioReference and certain~~

During the quarter ended June 30, 2023, none of ~~its subsidiaries entered into Amendment No. 5~~our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of securities that was intended to ~~Credit Agreement, which amended~~satisfy the ~~Credit Agreement to, among other things, ease certain thresholds that require increased reporting by BioReference and reduce~~affirmative defense conditions of Rule 10b5-1(c) under the ~~pro forma availability condition for BioReference to make certain cash dividends~~Exchange Act or any "non-Rule 10b5-1 trading arrangement", as defined in It5em 408 of Regulation S-K.

Item6. Exhibits

Exhibit 10.1

Waiver and Amendment No. 2 to the ~~Company. The other terms of the Credit Agreement remain unchanged.~~

~~Item 6.~~ ~~Exhibits~~



~~Exhibit 3.1(1)~~	Amended and Restated ~~Certificate of Incorporation.~~
~~Exhibit 3.2(2)~~	~~Amended and Restated By-Laws.~~
~~Exhibit 3.3(3)~~	~~Certificate of Designation of Series D Preferred Stock.~~
~~Exhibit 4.3(4)~~	~~Indenture, dated as of January 30, 2013, between OPKO Health, Inc. and Wells Fargo Bank, National Association.~~
Exhibit 10.1*	~~Amendment No. 4 to~~ Credit Agreement, dated June 29, 2023, by and ~~between Bio-Reference Laboratories, Inc. and~~among BioReference Health, LLC, certain of its subsidiaries, and JPMorgan Chase Bank, N.A. ~~dated August 7, 2017~~
Exhibit 10.2*		~~Commitment Letter by and between OPKO Health, Inc. and Veterans Accountable Care Group, LLC, dated August 15, 2017~~
Exhibit 31.1	Certification by Phillip Frost, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended ~~September~~June 30, ~~2017.~~2023.
Exhibit 31.2		Certification by Adam Logal, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended ~~September~~June 30, ~~2017.~~2023.
Exhibit 32.1		Certification by Phillip Frost, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended ~~September~~June 30, ~~2017.~~2023.
Exhibit 32.2		Certification by Adam Logal, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended ~~September~~June 30, ~~2017.~~2023.
Exhibit 101.INS		Inline XBRL Instance Document
Exhibit 101.SCH		Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB		inline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document


* Exhibit 104			~~Filed herewith.~~

	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
⁽¹⁾	Filed with the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 12, 2013 for the Company’s three month period ended September 30, 2013, and incorporated herein by reference.


⁽²⁾	~~Filed with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2008, and incorporated herein by reference.~~


⁽³⁾	~~Filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 24, 2009, and incorporated herein by reference.~~


⁽⁴⁾	~~Filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2013, and incorporated herein by reference.~~

+ Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: ~~November 8, 2017~~August 3, 2023	OPKO Health, Inc.

		/s/ Adam Logal
		Adam Logal
		Senior Vice President and Chief Financial ~~Officer,~~
		~~Chief Accounting~~ Officer ~~and Treasurer~~



~~Delaware~~		~~75-2402409~~
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock, par value $0.01 per share			OPK			NASDAQ Global Select Market



Large accelerated filer	x		Accelerated filer		¨ ☐
Non-accelerated filer		¨ ~~(Do not check if a smaller reporting company)~~ ☐		Smaller reporting company		¨ ☐
				Emerging growth company		¨



PART I. FINANCIAL INFORMATION			Page
Item 1.	Financial Statements
Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 (unaudited)		67
Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		78
Condensed Consolidated Statements of Comprehensive ~~Loss~~loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		89
Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)		10
Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		912
Notes to Condensed Consolidated Financial Statements (unaudited)		1013
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3847
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5362
Item 4.	Controls and Procedures	5463
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5564
Item 1A.	Risk Factors	5564
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5564
Item 3.	Defaults Upon Senior Securities	5564
Item 4.	Mine Safety Disclosures	5565
Item 5.	Other Information	5565
Item 6.	Exhibits	5665
Signatures		5766


☒
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	100,362		$	168,733
Accounts receivable, net	233,916			220,284
Inventory, net	46,954			47,228
Other current assets and prepaid expenses	49,324			47,356
Total current assets	430,556			483,601
Property, plant and equipment, net	142,437			122,831
Intangible assets, net	714,552			763,976
In-process research and development	648,377			644,713
Goodwill	715,573			704,603
Investments	32,196			41,139
Other assets	38,299			5,756
Total assets	$	2,721,990		$	2,766,619
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	66,536		$	53,360
Accrued expenses	176,300			197,955
Current portion of lines of credit and notes payable	16,112			11,981
Total current liabilities	258,948			263,296
2033 Senior Notes, net of discount	28,590			43,701
Deferred tax liabilities, net	118,799			165,331
Other long-term liabilities, principally deferred revenue, contingent consideration and line of credit	226,617			202,483
Total long-term liabilities	374,006			411,515
Total liabilities	632,954			674,811
Equity:
Common Stock - $0.01 par value, 750,000,000 shares authorized; 559,955,118 and 558,576,051 shares issued at September 30, 2017 and December 31, 2016, respectively	5,600			5,586
Treasury Stock - 549,907 and 586,760 shares at September 30, 2017 and December 31, 2016, respectively	(1,791		)	(1,911		)
Additional paid-in capital	2,883,026			2,845,096
Accumulated other comprehensive loss	(5,422		)	(27,009		)
Accumulated deficit	(792,377		)	(729,954		)
Total shareholders’ equity	2,089,036			2,091,808
Total liabilities and equity	$	2,721,990		$	2,766,619



	For the three months ended September 30,						For the nine months ended September 30,
	2017			2016			2017			2016
Revenues:
Revenue from services	$	229,035		$	259,025		$	740,992		$	777,559
Revenue from products	22,795			20,569			73,992			63,275
Revenue from transfer of intellectual property and other	11,665			18,441			58,819			105,338
Total revenues	263,495			298,035			873,803			946,172
Costs and expenses:
Cost of service revenue	135,203			138,554			419,070			417,121
Cost of product revenue	16,107			12,626			44,441			35,033
Selling, general and administrative	131,336			124,845			396,359			370,358
Research and development	32,329			24,424			90,944			83,594
Contingent consideration	(11,213		)	3,093			(4,475		)	15,604
Amortization of intangible assets	18,023			18,116			53,904			47,337
Total costs and expenses	321,785			321,658			1,000,243			969,047
Operating loss	(58,290		)	(23,623		)	(126,440		)	(22,875		)
Other income and (expense), net:
Interest income	249			163			634			341
Interest expense	(1,840		)	(2,018		)	(4,771		)	(6,022		)
Fair value changes of derivative instruments, net	(7,550		)	(5,701		)	1,969			(5,889		)
Other income (expense), net	597			(2,972		)	3,105			3,543
Other income and (expense), net	(8,544		)	(10,528		)	937			(8,027		)
Loss before income taxes and investment losses	(66,834		)	(34,151		)	(125,503		)	(30,902		)
Income tax benefit	24,405			19,988			42,309			24,626
Net loss before investment losses	(42,429		)	(14,163		)	(83,194		)	(6,276		)
Loss from investments in investees	(4,013		)	(814		)	(11,771		)	(5,147		)
Net loss	$	(46,442	)	$	(14,977	)	$	(94,965	)	$	(11,423	)
Loss per share, basic and diluted:
Loss per share	$	(0.08	)	$	(0.03	)	$	(0.17	)	$	(0.02	)
Weighted average common shares outstanding, basic and diluted	559,405,309			552,229,266			559,065,232			548,550,641



(In thousands)	September 30, 2017			December 31, 2016
Accounts receivable, net:
Accounts receivable	$	291,560		$	256,552
Less: allowance for doubtful accounts	(57,644		)	(36,268		)
	$	233,916		$	220,284
Inventories, net:
Consumable supplies	$	19,446		$	23,448
Finished products	22,882			16,143
Work in-process	4,087			3,896
Raw materials	6,984			4,686
Less: inventory reserve	(6,445		)	(945		)
	$	46,954		$	47,228
Other current assets and prepaid expenses:
Taxes recoverable	17,581			16,187
Other receivables	12,318			13,021
Prepaid supplies	12,269			6,952
Prepaid insurance	3,276			3,688
Other	3,880			7,508
	$	49,324		$	47,356
Intangible assets, net:
Customer relationships	$	447,699		$	443,560
Technologies	340,861			340,397
Trade names	50,520			50,442
Licenses	23,518			23,506
Covenants not to compete	16,373			16,348
Product registrations	10,857			7,641
Other	5,742			5,289
Less: accumulated amortization	(181,018		)	(123,207		)
	$	714,552		$	763,976
Accrued expenses:
Deferred revenue	$	52,403		$	73,434
Employee benefits	46,237			43,792
Clinical trials	7,606			5,935
Taxes payable	4,590			4,430
Contingent consideration	2,011			259
Capital leases short-term	3,483			3,025
Milestone payment	9,819			4,865
Professional fees	2,584			4,035
Other	47,567			58,180
	$	176,300		$	197,955



	2017
(In thousands)	Balance at January 1		Foreign exchange and other		Balance at September 30th
Pharmaceuticals
CURNA	$	4,827	$	—	$	4,827
EirGen	78,358		9,639		87,997
FineTech	11,698		—		11,698
OPKO Chile	4,785		217		5,002
OPKO Biologics	139,784		—		139,784
OPKO Health Europe	6,936		853		7,789
OPKO Renal	2,069		—		2,069
Transition Therapeutics	3,360		261		3,621

Diagnostics
BioReference	401,821		—		401,821
OPKO Diagnostics	17,977		—		17,977
OPKO Lab	32,988		—		32,988
	$	704,603	$	10,970	$	715,573



(in thousands)
Investment type	Investment Carrying Value		Underlying Equity in Net Assets
Equity method investments	$	24,101	$	23,910
Variable interest entity, equity method	361		—
Available for sale investments	3,108
Cost method investment	2,606
Warrants and options	2,020
Total carrying value of investments	$	32,196



(In thousands)	Embedded conversion option			2033 Senior Notes		Discount			Debt Issuance Cost			Total
Balance at December 31, 2016	$	16,736		$	31,850	$	(4,612	)	$	(273	)	$	43,701
Amortization of debt discount and debt issuance costs	—			—		1,514			111			1,625
Change in fair value of embedded derivative	(3,185		)	—		—			—			(3,185		)
Reclassification of embedded derivatives to equity	(13,551		)	—		—			—			(13,551		)
Balance at September 30, 2017	$	—		$	31,850	$	(3,098	)	$	(162	)	$	28,590



(Dollars in thousands)				Balance Outstanding
Lender	Interest rate on borrowings at September 30, 2017	Credit line capacity		September 30, 2017		December 31, 2016
JPMorgan Chase	3.36%	$	175,000	$	93,311	$	38,809
Itau Bank	5.50%	1,810		374		419
Bank of Chile	6.60%	3,800		2,687		1,619
BICE Bank	5.50%	2,500		1,720		1,538
BBVA Bank	5.50%	3,250		2,164		1,063
Estado Bank	5.50%	3,500		2,559		1,870
Santander Bank	5.50%	4,500		2,133		1,196
Scotiabank	5.00%	1,800		986		789
Corpbanca	5.00%	—		—		18
Banco Bilbao Vizcaya	2.90%	295		—		—
Santander Bank	2.67%	354		—		—
Total		$	196,809	$	105,934	$	47,321



(In thousands)	Foreign currency			Unrealized gain (loss) in Accumulated OCI			Total
Balance at December 31, 2016	$	(28,128	)	$	1,119		$	(27,009	)
Other comprehensive income (loss) before reclassifications	21,646			(749		)	20,897
Reclassification adjustments for losses included in net loss, net of tax				690			690
Net other comprehensive income (loss)	21,646			(59		)	21,587
Balance at September 30, 2017	$	(6,482	)	$	1,060		$	(5,422	)

Delaware	75-2402409



	As of September 30, 2017
(In thousands)	Amortized Cost		Gross unrealized gains in Accumulated OCI		Gross unrealized losses in Accumulated OCI			Fair value
Common stock investments, available for sale	$	2,048	$	1,308	$	(248	)	$	3,108
Total assets	$	2,048	$	1,308	$	(248	)	$	3,108



	As of December 31, 2016
(In thousands)	Amortized Cost		Gross unrealized gains in Accumulated OCI		Gross unrealized losses in Accumulated OCI			Fair value
Common stock investments, available for sale	$	3,409	$	1,313	$	(194	)	$	4,528
Total assets	$	3,409	$	1,313	$	(194	)	$	4,528



	Fair value measurements as of September 30, 2017
(In thousands)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Money market funds	$	12,621	$	—	$	—	$	12,621
Common stock investments, available for sale	3,108		—		—		3,108
Common stock options/warrants	—		2,020		—		2,020
Total assets	$	15,729	$	2,020	$	—	$	17,749
Liabilities:
Forward contracts	—		264		—		264
Contingent consideration	—		—		40,301		40,301
Total liabilities	$	—	$	264	$	40,301	$	40,565



	September 30, 2017
(In thousands)	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3
2033 Senior Notes	$	28,590	$	37,011	$	—	$	—	$	37,011



	September 30, 2017
(In thousands)	Contingent consideration			Embedded conversion option
Balance at December 31, 2016	$	45,076		$	16,736
Total losses for the period:
Included in results of operations	(4,475		)	(3,185		)
Foreign currency impact	3			—
Payments	(303		)	—
Reclassification of embedded derivatives to equity	—			(13,551		)
Balance at September 30, 2017	$	40,301		$	—



(In thousands)	Balance Sheet Component	September 30, 2017			December 31, 2016
Derivative financial instruments:
Common Stock options/warrants	Investments, net	$	2,020		$	4,017
Embedded conversion option	2033 Senior Notes, net of discount and estimated fair value of embedded derivatives	$	—		$	(16,736	)
Forward contracts	Unrealized gains on forward contracts are recorded in Other current assets and prepaid expenses. Unrealized (losses) on forward contracts are recorded in Accrued expenses.	$	(264	)	$	39



	Three months ended September 30,						Nine months ended September 30,
(In thousands)	2017			2016			2017			2016
Derivative gain (loss):
Common Stock options/warrants	$	(342	)	$	(12	)	$	(854	)	$	(4,728	)
2033 Senior Notes	(6,829		)	(5,795		)	3,185			(1,061		)
Forward contracts	(379		)	106			(362		)	(100		)
Total	$	(7,550	)	$	(5,701	)	$	1,969		$	(5,889	)



Contractual obligations (In thousands)	Remaining three months ending December 31, 2017		2018		2019		2020		2021		Thereafter		Total
Open purchase orders	$	97,863	$	8,446	$	274	$	34	$	—	$	—	$	106,617
Operating leases	5,271		18,231		15,027		9,388		6,164		6,853		60,934
Capital leases	887		3,404		3,026		2,367		1,438		800		11,922
2033 Senior Notes	—		—		31,850		—		—		—		31,850
Deferred payments	5,000		5,000		5,000		—		—		—		15,000
Mortgages and other debts payable	3,412		416		410		409		409		755		5,811
Lines of credit	12,623		—		—		93,311		—		—		105,934
Severance payments	5,101		—		—		—		—		—		5,101
Interest commitments	257		1,019		291		39		37		23		1,666
Total	$	130,414	$	36,516	$	55,878	$	105,548	$	8,048	$	8,431	$	344,835