OSUR OraSure Technologies Inc

OraSure Technologies, Inc. (NASDAQ:OSUR), a market leader in oral fluid diagnostics, today announced quarterly revenues of $16.9 million for the three months ended September 30, 2008, compared to $21.4 million in revenues for the three months ended September 30, 2007. Sales of the Company�s OraQuick ADVANCE� rapid HIV-1/2 antibody test increased 18% for the third quarter 2008. This increase was offset primarily by an expected decrease in sales of the Company�s over-the-counter (�OTC�) cryosurgical products. The Company�s net loss was $1.8 million, or $0.04 per share for the third quarter of 2008, compared to net income of $4,000 and break-even earnings per share for the third quarter of 2007. This decrease was primarily caused by reduced sales in the current quarter. �Sales of our OraQuick ADVANCE� rapid HIV test were strong during the current quarter, and we have taken steps to drive stronger sales performance in our other product lines,� said Douglas A. Michels, President and CEO of OraSure Technologies. �As previously announced, we are terminating our distribution agreement with Abbott Laboratories and will begin selling OraQuick ADVANCE� directly to U.S. hospitals in 2009. We expect our OraQuick� business will continue to grow with the transition to this direct sales model. We also continue to make great progress against our strategic objectives, the most significant of which was the recent submission of a pre-market approval application to the FDA for our OraQuick� HCV test.� For the nine months ended September 30, 2008, the Company recorded revenues of $53.9 million, a decrease of 14% when compared to revenues of $62.9 million for the nine months ended September 30, 2007. The Company recorded a net loss of $2.0 million or $0.04 per share, for the nine months ended September 30, 2008, compared to net income of $2.4 million, or $0.05 per share on a fully-diluted basis, for the nine months ended September 30, 2007. Gross margin in both the third quarter and the nine months ended September 30, 2008 was 58% compared with 60% in the third quarter of 2007 and 62% in the nine months ended September 30, 2007. Margins in the current periods were primarily impacted by an unfavorable product mix. Operating expenses for the third quarter of 2008 decreased $670,000 to $13.1 million, from $13.7 million in the comparable period in 2007 primarily due to lower legal costs in the current three-month period. Operating expenses for the nine months ended September 30, 2008 were $41.7 million, compared to $38.5 million for the comparable period in 2007. The increase in year-to-date operating expenses is attributable to higher research and development costs associated with the Company�s OraQuick� HIV OTC and OraQuick� HCV clinical development programs, partially offset by a decline in general and administrative expenses largely due to decreased legal costs. Cash, cash equivalents and short-term investments were $85.4 million and working capital was $99.5 million at September 30, 2008, compared to $95.6 million and $105.6 million, respectively, at December 31, 2007. Cash flow used in operating activities for the nine months ended September 30, 2008 was $3.7 million compared to $7.8 million provided by operations for the comparable period in 2007. During the third quarter of 2008, the Company purchased $3.1 million of stock under its previously announced stock repurchase plan. Fourth Quarter and Full Year 2008 Outlook The Company expects revenues of $16.0 to $16.5 million in the fourth quarter of 2008 with a loss per share of approximately $0.10. Included in the loss per share are charges associated with the transition of hospital and other business under the agreement with Abbott Laboratories and a $1.0 million charge associated with a milestone payment related to the filing of a pre-market approval application with the FDA for the Company�s OraQuick� HCV test. � � � � Financial Data � Condensed Financial Data (In thousands, except per-share data and percentages) � Unaudited � Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 Results of Operations Revenues $ 16,860 $ 21,415 $ 53,895 $ 62,877 Cost of products sold � 7,145 � � 8,647 � � 22,393 � � 24,122 Gross profit � 9,715 � � 12,768 � � 31,502 � � 38,755 Operating expenses: Research and development 4,167 3,672 14,864 9,896 Sales and marketing 5,327 4,979 15,505 14,999 General and administrative � 3,562 � � 5,074 � � 11,293 � � 13,637 Total operating expenses � 13,056 � � 13,725 � � 41,662 � � 38,532 Operating income(loss) (3,341 ) (957 ) (10,160 ) 223 Other income, net 588 1,085 7,078 4,443 Income tax provision (benefit) � (991 ) � 124 � � (1,079 ) � 2,221 Net income (loss) $ (1,762 ) $ 4 � $ (2,003 ) $ 2,445 Earnings (loss) per share: Basic and Diluted $ (0.04 ) $ - � $ (0.04 ) $ 0.05 � Weighted average shares: Basic � 46,692 � � 46,341 � � 46,774 � � 46,393 Diluted � 46,692 � � 46,988 � � 46,774 � � 46,893 � � Three months ended September 30, Dollars � % Change � Percentage of Total Revenues Market Revenues 2008 � 2007 2008 � 2007 � Infectious disease testing $ 9,743 $ 8,233 18 % 58 % 38 % Substance abuse testing 3,581 4,070 (12 ) 21 19 Cryosurgical systems 1,671 6,738 (75 ) 10 31 Insurance risk assessment � 1,163 � � 1,620 � (28 ) 7 � 8 � Product revenues 16,158 20,661 (22 ) 96 96 Licensing and product development � 702 � � 754 � (7 ) 4 � 4 � Total revenues $ 16,860 � $ 21,415 � (21 )% 100 % 100 % � � � � Nine months ended September 30, Dollars % Change Percentage of Total Revenues Market Revenues 2008 2007 2008 2007 � Infectious disease testing $ 29,260 $ 26,350 11 % 54 % 42 % Substance abuse testing 10,554 12,396 (15 ) 20 20 Cryosurgical systems 7,726 18,190 (58 ) 14 29 Insurance risk assessment � 4,395 � � 3,859 � 14 8 � 6 � Product revenues 51,935 60,795 (15 ) 96 97 Licensing and product development � 1,960 � � 2,082 � (6 ) 4 � 3 � Total revenues $ 53,895 � $ 62,877 � (14 )% 100 % 100 % � � � � � � � Three months ended Nine months ended September 30, % Change September 30, % Change OraQuick� Revenues 2008 2007 2008 2007 � Direct to U.S. Public Health $ 6,147 $ 4,492 37 % $ 19,263 $ 14,339 34 % Abbott 1,799 2,159 (17 ) 5,489 6,087 (10 ) SAMHSA/CDC 10 30 (67 ) 10 1,464 (99 ) International � 957 � � 850 � 13 � 2,303 � � 2,110 � 9 Total OraQuick� revenues $ 8,913 � $ 7,531 � 18 % $ 27,065 � $ 24,000 � 13 % � � � Three months ended Nine months ended September 30, % Change September 30, % Change Intercept� Revenues 2008 2007 2008 2007 � Workplace testing $ 1,193 $ 1,845 (35 )% $ 3,480 $ 5,368 (35 )% Criminal Justice 637 641 (1 ) 1,965 1,948 1 International 481 525 (8 ) 1,570 1,757 (11 ) Direct � 303 � � 273 � 11 � 904 � � 739 � 22 Total Intercept� revenues $ 2,614 � $ 3,284 � (20 )% $ 7,919 � $ 9,812 � (19 )% � � � Three months ended Nine months ended � September 30, % Change September 30, % Change Cryosurgical Systems Revenues 2008 2007 2008 2007 � Professional domestic $ 903 $ 1,028 (12 )% $ 2,942 $ 3,441 (15 )% Professional international 401 574 (30 ) 1,802 1,551 16 OTC domestic ? 2,453 (100 ) ? 5,587 (100 ) OTC international � 367 � � 2,683 � (86 ) � 2,982 � � 7,611 � (61 ) Total cryosurgical systems revenues $ 1,671 � $ 6,738 � (75 )% $ 7,726 � $ 18,190 � (58 )% � � Unaudited Balance Sheets September 30, 2008 � December 31, 2007 Assets Cash, cash equivalents and short-term investments $ 85,382 $ 95,566 Accounts receivable, net 12,381 11,296 Inventories 10,238 9,410 Current portion of deferred income taxes 2,676 5,061 Other current assets 1,193 2,456 Property and equipment, net 21,373 20,911 Deferred income taxes 21,108 17,266 Other non-current assets � 4,668 � 5,387 Total assets $ 159,019 $ 167,353 � Liabilities and Stockholders� Equity Current portion of long-term debt $ 558 $ 557 Accounts payable 2,534 5,616 Accrued expenses 9,228 11,995 Long-term debt 8,441 8,818 Other liabilities 11 312 Stockholders� equity � 138,247 � 140,055 Total liabilities and stockholders� equity $ 159,019 $ 167,353 � � � As of September 30, Additional Financial Data 2008 2007 Capital expenditures $ 1,949 $ 4,281 Depreciation and amortization $ 2,122 $ 1,997 Purchase and retirement of common stock $ 3,052 ? Accounts receivable � days sales outstanding 63 days 52 days � Conference Call The Company will host a conference call and audio webcast today to discuss the Company's 2008 third quarter financial results, business developments and the Company�s 2008 fourth quarter outlook, beginning at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). On the call will be Douglas A. Michels, President and Chief Executive Officer, and Ronald H. Spair, Chief Operating Officer and Chief Financial Officer. The call will include remarks by management and a question and answer session. In order to listen to the conference call, please dial 888-742-2024 (Domestic) or 706-643-0033 (International) and reference 69750537 or go to OraSure Technologies� web site, www.orasure.com, and click on the Investor Info link. A replay of the call will be archived on OraSure Technologies' web site shortly after the call has ended and will be available for seven days. A replay of the call can also be accessed until November 11, 2008, by dialing 800-642-1687 (Domestic) or 706-645-9291 (International) and entering the Conference ID #69750537. About OraSure Technologies OraSure Technologies develops, manufactures and markets oral fluid specimen collection devices and tests and other diagnostic products using proprietary technologies, including immunoassays and other in vitro diagnostic tests and other medical devices. These products are sold in the United States and certain foreign countries to clinical laboratories, hospitals, clinics, community-based organizations and other public health organizations, distributors, government agencies, physicians� offices, and commercial and industrial entities. For more information on the Company, please visit www.orasure.com. Important Information This press release contains certain forward-looking statements, including with respect to revenues, expenses, net income, earnings/loss per share and products. Actual results could be significantly different. Factors that could affect results include the ability to market and sell products; changes in relationships, including disputes or disagreements, with strategic partners and reliance on strategic partners for the performance of critical activities under collaborative arrangements; failure of distributors or other customers to meet purchase forecasts or minimum purchase requirements for the Company�s products; impact of replacing distributors; inventory levels at distributors and other customers; impact of replacing distributors; inventory levels at distributors and other customers; impact of competitors, competing products and technology changes; ability to develop, commercialize and market new products; market acceptance of oral fluid testing or other products; changes in market acceptance of products based on product performance; continued bulk purchases by customers, including governmental agencies, and the ability to fully deploy those purchases in a timely manner; ability to fund research and development and other products and operations; ability to obtain and maintain new or existing product distribution channels; reliance on sole supply sources for critical product components; availability of related products produced by third parties or products required for use of our products; ability to obtain, and timing and cost of obtaining, necessary regulatory approvals for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements; history of losses and ability to achieve sustained profitability; volatility of the Company�s stock price; uncertainty relating to patent protection and potential patent infringement claims; uncertainty and costs of litigation relating to patents and other intellectual property; availability of licenses to patents or other technology; ability to enter into international manufacturing agreements; obstacles to international marketing and manufacturing of products; ability to sell products internationally, including changes in international funding sources; loss or impairment of sources of capital; ability to meet financial covenants in agreements with financial institutions; ability to retain qualified personnel; exposure to patent infringement, product liability, and other types of litigation; changes in international, federal or state laws and regulations; customer consolidations and inventory practices; equipment failures and ability to obtain needed raw materials and components; the impact of terrorist attacks and civil unrest; ability to identify, complete and realize the full benefits of potential acquisitions; and general political, business and economic conditions. These and other factors are discussed more fully in the Securities and Exchange Commission (�SEC�) filings of OraSure Technologies, including its registration statements, its Annual Report on Form 10-K for the year ended December 31, 2007, its Quarterly Reports on Form 10-Q, and its other filings with the SEC. Although forward-looking statements help to provide complete information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. The forward-looking statements are made as of the date of this press release and OraSure Technologies undertakes no duty to update these statements.