OraSure Technologies, Inc. (NASDAQ: OSUR), a leader in
point-of-care diagnostic tests and specimen collection devices,
today announced its financial results for the three and nine months
ended September 30, 2019.
Financial and Business
Highlights
- In November 2019, the Company entered into an agreement to
acquire Diversigen Inc., a Texas-based microbiome industry pioneer,
for a cash purchase price of $12.0 million and the potential for an
additional earn-out payment tied to revenue performance.
- In October 2019, The Substance Abuse and Mental Health Services
Administration (SAMHSA) published new guidelines permitting oral
fluid drug testing in federal-regulated workplace settings and in
other markets that follow the federal guidelines. None of
these markets are currently being served by OraSure.
- During August 2019, the Company sold its cryosurgical systems
line of business to CryoConcepts LP. The Company recorded a pre-tax
gain on the sale of business of $10.2 million which is reflective
of the $12.0 million purchase price less the fair value of the
assets sold and related transaction costs.
- Net revenues for the third quarter of 2019 were $36.0 million,
a 22% decrease from the third quarter of 2018. Net product revenues
were $35.3 million, a 19% decrease from the third quarter of
2018.
- Total molecular collection systems revenues including royalty
income and other revenues were $18.3 million during the third
quarter of 2019, a decline of 31% from the third quarter of 2018.
Molecular collection systems product and service revenues were
$17.4 million during the third quarter of 2019 which represents a
32% decrease from the third quarter of 2018.
- International sales of the Company’s OraQuick® HIV products of
$5.9 million in the third quarter of 2019 increased 36% compared to
the third quarter of 2018. Domestic sales of the Company’s
OraQuick® HIV products of $4.3 million in the third quarter of 2019
decreased 4% compared to the third quarter of 2018.
- International sales of the Company’s OraQuick® HCV product of
$1.1 million decreased 3% from the third quarter of 2018. Domestic
sales of the Company’s OraQuick® HCV product of $2.0 million
decreased 4% from the third quarter of 2018.
- Net income for the third quarter of 2019 was $13.1 million, or
$0.21 per share on a fully-diluted basis, compared to net income of
$8.1 million, or $0.13 per share on a fully-diluted basis, for the
third quarter of 2018. This includes the pre-tax gain on the sale
of the cryosurgical business of $10.2 million and a non-cash
benefit of $2.4 million representing the change in fair value of
contingent consideration associated with two acquisitions that
closed at the beginning of the year. The third quarter of 2019 also
includes $443,000 of acquisition-related transaction costs. The net
impact of the reduction in the fair value of contingent
consideration and the additional transaction costs in the current
quarter approximated $0.03 per share on a fully-diluted basis.
- Cash and investments totaled $201.2 million at
September 30, 2019.
“Despite the headwinds during the third quarter,
we remain optimistic about our future, as we continue to execute on
our innovation-driven strategy, using our strong bottom line and
healthy cash balances,” said OraSure President & CEO Stephen
Tang, Ph.D. “We continue to realign our portfolio of businesses to
focus on future growth, as outlined in our strategy. The
acquisition of Diversigen will extend our leadership position as an
end-to-end provider of microbiome products and services. At the
same time, the divestiture of our cryosurgical unit enables us to
focus our resources on growing our core Molecular Solutions and
Infectious Disease businesses. During the quarter, we were pleased
to see continued strength in our international HIV Self-Test
business, strong growth in microbiome revenues, and some renewed
growth in risk assessment testing, even as recent trends continue
to affect our consumer genomics business.”
Financial Results
Net product revenues for the third quarter of
2019 decreased 19% from the comparable period of 2018, primarily as
a result of lower genomics product sales, lower domestic sales of
the Company’s OraQuick® HIV test, and the divestiture of the
cryosurgical systems business in mid-August. The decreased sales
were partially offset by higher international HIV product sales and
higher sales of the Company’s microbiome and risk assessment
products.
International sales of the OraQuick® HIV
Self-Test for the three months ended September 30, 2019 and 2018
included $520,000 and $840,000, respectively, of support payments
under the Company’s charitable support agreement with the
Bill & Melinda Gates Foundation (“Gates Foundation”).
Royalty income from a litigation settlement
associated with a molecular collection device was $758,000 and $1.1
million for the third quarters of 2019 and 2018, respectively.
Other revenues, excluding royalty income, were $(68,000) and $1.3
million for the third quarters of 2019 and 2018, respectively.
Other revenues in the current period decreased as a result of a
rate true-up under the Company’s contract with the U.S. Biomedical
Advanced Research Development Authority (BARDA) and lower cost
reimbursement from the Gates Foundation, which is separate from the
support payments mentioned above.
Gross profit percentage was 60% and 62% for the
third quarters of 2019 and 2018 respectively. Gross profit
percentage in 2019 was negatively affected by the decline in other
revenues and by the lower margins generated by the Company’s newly
acquired subsidiaries, CoreBiome and Novosanis, partially offset by
lower royalty and freight costs.
For the three months ended September 30, 2019,
operating expenses were $8.6 million, a decrease of $9.1 million
from the $17.7 million reported for the three months ended
September 30, 2018. This decrease was due primarily to the pre-tax
gain on the sale of the cryosurgical business of $10.2 million and
a non-cash benefit of $2.4 million in the current quarter for the
change in fair value of contingent consideration associated with
the recent acquisitions of CoreBiome and Novosanis, offset by the
incremental operating expenses of CoreBiome and Novosanis and
$443,000 of acquisition-related transaction costs.
The Company generated operating income of $13.1
million in the third quarter of 2019 compared to operating income
of $10.9 million in the third quarter of 2018.
During the third quarter of 2019, the Company
recorded income tax expense of $1.2 million compared to $3.3
million recorded in the third quarter of 2018. This decrease
reflects the lower pre-tax income generated by the Company’s
Canadian subsidiary, DNA Genotek, and includes an income tax
benefit generated by Novosanis.
The Company’s cash and investment balance
totaled $201.2 million at September 30, 2019, compared to
$201.3 million at December 31, 2018. For the nine months ended
September 30 2019, the Company generated $10.8 million in cash from
operations compared with $24.8 million in the same period of
2018.
Updated Full-Year 2019
Guidance
The Company expects full-year 2019 net revenues
to range from $150 million to $153 million and is projecting net
income of $0.28 to $0.31 per share. These projections do not
account for the impact of changes in the fair value of
acquisition-related contingent consideration or any potential
transaction costs related to future business development activity
since those items cannot be fully determined at this time.
Financial Data
Condensed Consolidated Financial Data |
|
Three Months Ended |
|
|
Nine Months Ended |
|
September 30, |
|
|
September 30, |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
Results of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
35,989 |
|
|
$ |
45,885 |
|
|
$ |
104,937 |
|
|
$ |
131,497 |
Cost of products sold |
|
14,343 |
|
|
|
17,340 |
|
|
|
40,193 |
|
|
|
52,590 |
Gross profit |
|
21,646 |
|
|
|
28,545 |
|
|
|
64,744 |
|
|
|
78,907 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
4,619 |
|
|
|
3,855 |
|
|
|
13,525 |
|
|
|
12,191 |
Sales and marketing |
|
8,955 |
|
|
|
7,304 |
|
|
|
23,937 |
|
|
|
22,232 |
General and administrative |
|
7,556 |
|
|
|
6,529 |
|
|
|
23,748 |
|
|
|
28,567 |
Change in fair value of acquisition-related contingent
consideration |
|
(2,387 |
) |
|
|
— |
|
|
|
(843 |
) |
|
|
— |
Gain on sale of business |
|
(10,149 |
) |
|
|
— |
|
|
|
(10,149 |
) |
|
|
— |
Total operating expenses |
|
8,594 |
|
|
|
17,688 |
|
|
|
50,218 |
|
|
|
62,990 |
Operating income |
|
13,052 |
|
|
|
10,857 |
|
|
|
14,526 |
|
|
|
15,917 |
Other income |
|
1,195 |
|
|
|
510 |
|
|
|
2,243 |
|
|
|
1,658 |
Income before income taxes |
|
14,247 |
|
|
|
11,367 |
|
|
|
16,769 |
|
|
|
17,575 |
Income tax expense |
|
1,169 |
|
|
|
3,271 |
|
|
|
2,551 |
|
|
|
7,477 |
Net income |
$ |
13,078 |
|
|
$ |
8,096 |
|
|
$ |
14,218 |
|
|
$ |
10,098 |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.21 |
|
|
$ |
0.13 |
|
|
$ |
0.23 |
|
|
$ |
0.17 |
Diluted |
$ |
0.21 |
|
|
$ |
0.13 |
|
|
$ |
0.23 |
|
|
$ |
0.16 |
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
61,726 |
|
|
|
61,208 |
|
|
|
61,656 |
|
|
|
61,059 |
Diluted |
|
62,143 |
|
|
|
62,606 |
|
|
|
62,172 |
|
|
|
62,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
|
Dollars |
|
|
|
|
|
|
Percentage of Total Net Revenues |
|
|
2019 |
|
|
2018 |
|
|
%Change |
|
|
|
2019 |
|
|
2018 |
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infectious disease testing |
$ |
13,588 |
|
|
$ |
12,417 |
|
|
9 |
|
% |
|
38 |
% |
|
27 |
% |
Risk assessment testing |
|
3,312 |
|
|
|
2,842 |
|
|
17 |
|
|
|
9 |
|
|
6 |
|
Cryosurgical systems |
|
961 |
|
|
|
2,696 |
|
|
(64 |
) |
|
|
3 |
|
|
6 |
|
Molecular collection systems |
|
17,438 |
|
|
|
25,495 |
|
|
(32 |
) |
|
|
48 |
|
|
56 |
|
Net product and service revenues |
|
35,299 |
|
|
|
43,450 |
|
|
(19 |
) |
|
|
98 |
|
|
95 |
|
Royalty income |
|
758 |
|
|
|
1,132 |
|
|
(33 |
) |
|
|
2 |
|
|
2 |
|
Other |
|
(68 |
) |
|
|
1,303 |
|
|
(105 |
) |
|
|
- |
|
|
3 |
|
Net revenues |
$ |
35,989 |
|
|
$ |
45,885 |
|
|
(22 |
) |
% |
|
100 |
% |
|
100 |
% |
|
Nine Months Ended
September 30, |
|
|
Dollars |
|
|
|
|
|
|
Percentage of Total Net Revenues |
|
|
2019 |
|
|
2018 |
|
|
%Change |
|
|
|
2019 |
|
|
2018 |
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infectious disease testing |
$ |
39,273 |
|
|
$ |
42,506 |
|
|
(8 |
) |
% |
|
37 |
% |
|
32 |
% |
Risk assessment testing |
|
9,246 |
|
|
|
9,159 |
|
|
1 |
|
|
|
9 |
|
|
7 |
|
Cryosurgical systems |
|
7,054 |
|
|
|
7,874 |
|
|
(10 |
) |
|
|
7 |
|
|
6 |
|
Molecular collection systems |
|
45,325 |
|
|
|
61,047 |
|
|
(26 |
) |
|
|
43 |
|
|
46 |
|
Net product revenues |
|
100,898 |
|
|
|
120,586 |
|
|
(16 |
) |
|
|
96 |
|
|
91 |
|
Royalty income |
|
2,956 |
|
|
|
4,827 |
|
|
(39 |
) |
|
|
3 |
|
|
4 |
|
Other |
|
1,083 |
|
|
|
6,084 |
|
|
(82 |
) |
|
|
1 |
|
|
5 |
|
Net revenues |
$ |
104,937 |
|
|
$ |
131,497 |
|
|
(20 |
) |
% |
|
100 |
% |
|
100 |
% |
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
%Change |
|
|
|
2019 |
|
|
2018 |
|
|
%Change |
|
|
OraQuick®
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic HIV |
$ |
4,259 |
|
|
$ |
4,455 |
|
|
(4 |
) |
% |
|
$ |
13,024 |
|
|
$ |
14,689 |
|
|
(11 |
) |
% |
International HIV |
|
5,891 |
|
|
|
4,328 |
|
|
36 |
|
|
|
|
15,313 |
|
|
|
17,395 |
|
|
(12 |
) |
|
Net HIV revenues |
|
10,150 |
|
|
|
8,783 |
|
|
16 |
|
|
|
|
28,337 |
|
|
|
32,084 |
|
|
(12 |
) |
|
Domestic HCV |
|
1,977 |
|
|
|
2,066 |
|
|
(4 |
) |
|
|
|
5,907 |
|
|
|
5,424 |
|
|
9 |
|
|
International HCV |
|
1,129 |
|
|
|
1,168 |
|
|
(3 |
) |
|
|
|
3,569 |
|
|
|
3,306 |
|
|
8 |
|
|
Net HCV revenues |
|
3,106 |
|
|
|
3,234 |
|
|
(4 |
) |
|
|
|
9,476 |
|
|
|
8,730 |
|
|
9 |
|
|
Net product revenues |
$ |
13,256 |
|
|
$ |
12,017 |
|
|
10 |
|
% |
|
$ |
37,813 |
|
|
$ |
40,814 |
|
|
(7 |
) |
% |
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
%Change |
|
|
|
2019 |
|
|
2018 |
|
|
%Change |
|
|
Molecular Collection Systems Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Genomics |
$ |
14,080 |
|
|
$ |
23,804 |
|
|
(41 |
) |
% |
|
$ |
36,359 |
|
|
$ |
56,260 |
|
|
(35 |
) |
% |
Microbiome |
|
3,063 |
|
|
|
1,691 |
|
|
81 |
|
|
|
|
8,362 |
|
|
|
4,787 |
|
|
75 |
|
|
Other |
|
295 |
|
|
|
— |
|
|
100 |
|
|
|
|
604 |
|
|
|
— |
|
|
100 |
|
|
Net product and service revenues |
|
17,438 |
|
|
$ |
25,495 |
|
|
(32 |
) |
|
|
|
45,325 |
|
|
$ |
61,047 |
|
|
(26 |
) |
|
Royalty income |
|
758 |
|
|
|
1,132 |
|
|
(33 |
) |
|
|
|
2,956 |
|
|
|
4,827 |
|
|
(39 |
) |
|
Other |
|
63 |
|
|
|
— |
|
|
100 |
|
|
|
|
321 |
|
|
|
— |
|
|
100 |
|
|
Total Molecular Collection Systems Revenues |
$ |
18,259 |
|
|
$ |
26,627 |
|
|
(31 |
) |
% |
|
$ |
48,602 |
|
|
$ |
65,874 |
|
|
(26 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
(Unaudited)
|
September 30,
2019 |
|
December 31,
2018 |
Assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
85,465 |
|
$ |
88,438 |
Short-term investments |
|
78,215 |
|
|
68,134 |
Accounts receivable, net |
|
27,764 |
|
|
34,842 |
Inventories |
|
25,040 |
|
|
22,888 |
Other current assets |
|
6,796 |
|
|
5,010 |
Property, plant and equipment,
net |
|
29,045 |
|
|
24,299 |
Right of use assets, net |
|
4,850 |
|
|
— |
Intangible assets, net |
|
11,577 |
|
|
5,137 |
Goodwill |
|
28,935 |
|
|
18,521 |
Long-term investments |
|
37,563 |
|
|
44,752 |
Other non-current assets |
|
3,971 |
|
|
3,550 |
Total assets |
$ |
339,221 |
|
$ |
315,571 |
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
Accounts payable |
$ |
9,783 |
|
$ |
10,598 |
Deferred revenue |
|
3,940 |
|
|
3,521 |
Contingent consideration
obligation |
|
3,039 |
|
|
— |
Other current liabilities |
|
12,174 |
|
|
13,861 |
Long-term lease liabilities |
|
3,882 |
|
|
— |
Long-term contingent
consideration obligation |
|
385 |
|
|
— |
Other non-current
liabilities |
|
4,653 |
|
|
4,213 |
Stockholders’ equity |
|
301,365 |
|
|
283,378 |
Total liabilities and stockholders’ equity |
$ |
339,221 |
|
$ |
315,571 |
|
Nine Months Ended |
|
September 30, |
Additional Financial
Data (Unaudited) |
2019 |
|
2018 |
Capital expenditures |
$ |
7,961 |
|
$ |
5,938 |
Depreciation and
amortization |
$ |
5,532 |
|
$ |
5,588 |
Stock-based compensation |
$ |
3,283 |
|
$ |
12,526 |
Cash provided by operating
activities |
$ |
10,838 |
|
$ |
24,807 |
|
|
|
|
|
|
Conference Call
The Company will host a conference call and
audio webcast for analysts and investors to discuss the Company’s
2019 third quarter results, certain business developments and
updated financial guidance, beginning today at 5:00 p.m. Eastern
Time (2:00 p.m. Pacific Time). On the call will be Dr. Stephen S.
Tang, President and Chief Executive Officer, and Roberto Cuca,
Chief Financial Officer. The call will include prepared remarks by
management and a question and answer session.
In order to listen to the conference call,
please dial 844-831-3030 (Domestic) or 315-625-6887 (International)
and reference Conference ID #8333048 or go to OraSure Technologies’
web site, www.orasure.com, and click on the Investor Relations
page. Please click on the webcast link and follow the prompts for
registration and access 10 minutes prior to the call. 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 midnight, November
16, 2019, by dialing 855-859-2056 (Domestic) or 404-537-3406
(International) and entering the Conference ID #8333048.
About OraSure Technologies
OraSure Technologies is empowering the global
community to improve health and wellness by providing access to
accurate essential information. OraSure is a leader in the
development, manufacture and distribution of point-of-care
diagnostic tests, molecular collection devices and other
technologies designed to detect or diagnose critical medical
conditions. Its first-to-market, innovative products include rapid
tests for the detection of antibodies to HIV and Hepatitis C (HCV)
on the OraQuick® platform, sample self-collection and stabilization
products for molecular applications, and oral fluid laboratory
tests for detecting various drugs of abuse. Together with its
wholly-owned subsidiaries (DNA Genotek, CoreBiome and Novosanis),
OraSure provides its customers with value-added, end-to-end
solutions that encompass tools, diagnostics and services.
OraSure’s portfolio of products is sold globally to various
clinical laboratories, hospitals, clinics, community-based
organizations and other public health organizations, research
institutions, distributors, government agencies, physicians’
offices, commercial and industrial entities and consumers.
For more information on OraSure Technologies,
please visit www.orasure.com.
Important Information
This press release contains certain
forward-looking statements, including with respect to expected
revenues and earnings/loss per share. Forward-looking statements
are not guarantees of future performance or results. Known and
unknown factors that could cause actual performance or results to
be materially different from those expressed or implied in these
statements include, but are not limited to: ability to successfully
manage and integrate acquisitions of other companies in a manner
that complements or leverages our existing business, or otherwise
expands or enhances our portfolio of products and our end-to-end
service offerings, and the diversion of management’s attention from
our ongoing business and regular business responsibilities to
effect such integration; the expected economic benefits of
acquisitions (and increased returns for our stockholders),
including that the anticipated synergies, revenue enhancement
strategies and other benefits from the acquisitions may not be
fully realized or may take longer to realize than expected and our
actual integration costs may exceed our estimates; ability to
market and sell products, whether through our internal, direct
sales force or third parties; impact of significant customer
concentration in the genomics business; failure of distributors or
other customers to meet purchase forecasts, historic purchase
levels or minimum purchase requirements for our products; ability
to manufacture products in accordance with applicable
specifications, performance standards and quality requirements;
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; ability to effectively resolve
warning letters, audit observations and other findings or comments
from the U.S. Food and Drug Administration (“FDA”) or other
regulators; changes in relationships, including disputes or
disagreements, with strategic partners or other parties and
reliance on strategic partners for the performance of critical
activities under collaborative arrangements; ability to meet
increased demand for the Company’s products; impact of replacing
distributors; inventory levels at distributors and other customers;
ability of the Company to achieve its financial and strategic
objectives and continue to increase its revenues, including the
ability to expand international sales; ability to identify,
complete, integrate and realize the full benefits of future
acquisitions; impact of competitors, competing products and
technology changes; reduction or deferral of public funding
available to customers; competition from new or better technology
or lower cost products; ability to develop, commercialize and
market new products; market acceptance of oral fluid or urine
testing, collection or other products; market acceptance and uptake
of microbiome informatics, microbial genetics technology and
related analytics services; changes in market acceptance of
products based on product performance or other factors, including
changes in testing guidelines, algorithms or other recommendations
by the Centers for Disease Control and Prevention (“CDC”) or other
agencies; 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 products and components; availability of
related products produced by third parties or products required for
use of our products; impact of increased reliance on U.S.
government contracts; impact of negative economic conditions;
ability to maintain sustained profitability; ability to utilize net
operating loss carry forwards or other deferred tax assets;
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
the impact of changes in international funding sources and testing
algorithms; adverse movements in foreign currency exchange rates;
loss or impairment of sources of capital; ability to attract and
retain qualified personnel; exposure to 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; and general political, business and economic conditions.
These and other factors that could affect our results are discussed
more fully in our Securities and Exchange Commission (“SEC”)
filings, including our registration statements, Annual Report on
Form 10-K for the year ended December 31, 2018, Quarterly
Reports on Form 10-Q, and other filings with the SEC. Although
forward-looking statements help to provide 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.
Company Contact:
Roberto Cuca |
Jeanne Mell |
Chief Financial
Officer610-882-1820 |
VP Corporate
Communications484-353-1575 |
Investorinfo@orasure.com |
media@orasure.com |
www.orasure.com |
www.orasure.com |
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