OraSure Technologies Announces 2008 First Quarter Results

Business Wire,  May 6, 2008  

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BETHLEHEM, Pa. -- OraSure Technologies, Inc. (NASDAQ:OSUR), a market leader in oral fluid diagnostics, today announced quarterly revenues of $18.1 million for the three months ended March 31, 2008, compared to $20.1 million in revenues recorded for the three months ended March 31, 2007. Increased sales of the Company's OraQuick ADVANCE([R]) rapid HIV-1/2 antibody test, professional cryosurgical products and insurance risk assessment products during the first quarter 2008, were offset by decreased sales of the Company's over-the-counter ("OTC") cryosurgical wart removal products and substance abuse testing products and lower licensing and product development revenue.

The Company's net income increased 35% to $2.0 million, or $0.04 per share on a fully-diluted basis, for the first quarter of 2008, compared to net income of $1.5 million, or $0.03 per share on a fully-diluted basis, for the first quarter of 2007. The 2008 results include a previously announced $4.9 million pre-tax gain related to a settlement and licensing agreement entered into during the quarter with Schering-Plough Healthcare Products, Inc. The 2007 results include a $1.4 million pre-tax gain from the sale of the Company's equity interest in a foreign distributor.

Gross margin in the first quarter of 2008 was 59% compared with 62% in the first quarter of 2007. Gross margin was affected by a less favorable product mix, increased scrap and spoilage expense, and higher unabsorbed overhead.

Operating expenses for the first quarter of 2008 increased $1.7 million to $13.6 million, from $11.9 million in the comparable period in 2007. This increase was primarily attributable to higher research and development costs associated with the Company's OraQuick([R]) HIV OTC and OraQuick([R]) HCV clinical development programs.

"Our first quarter financial performance was in line with our most recent guidance, and we continue to make very good progress against our strategic initiatives," said Douglas A. Michels, President and Chief Executive Officer of OraSure Technologies. "Our clinical trials for FDA and European approval of an OraQuick([R]) HCV test are on schedule and progressing well, and we have initiated the observed use study for our OraQuick([R]) OTC test. We have also continued to advance the development of fully automated homogeneous oral fluid drug assays for use with our Intercept([R]) collector under our collaboration with Roche Diagnostics. Despite these positive developments, however, we are also facing a number of challenges to our business, against which we will intensify our efforts during the remainder of the year."

Cash, cash equivalents and short-term investments were $90.4 million and working capital was $106.0 million at March 31, 2008, compared to $95.6 million and $105.6 million, respectively, at December 31, 2007. Cash flow used in operating activities was $3.7 million in the first quarter of 2008 compared to $1.0 million in the first quarter of 2007. First quarter 2008 net operating cash out-flows included a $5.6 million decrease in accounts payable and accrued expenses reflecting reductions in year-end royalty and legal accruals and an increase in accounts receivable balances.

Full Year and Second Quarter 2008 Outlook

As previously announced, a patent infringement lawsuit against the Company was recently filed by Inverness Medical and Church & Dwight, which will result in an unexpected increase in legal costs during 2008. In addition, there was an unanticipated inventory buildup at the Company's OTC cryosurgical distributor in Mexico and a recent change in funding sources for the purchase of OraQuick([R]) HIV tests in Africa, both of which are impacting the Company's business. In the U.S., the Company is experiencing lower than expected growth of OraQuick ADVANCE([R]) sales in the U.S. hospital market, and the slowing economy continues to impact hiring and workplace drug testing. In view of these developments, the Company has decided to lower its financial guidance for 2008.

The Company expects total revenues for second quarter 2008 to range from approximately $18.5 to $19.0 million and a second quarter loss per share to be between $0.06 and $0.07. Full year 2008 revenues are projected to be approximately $83.0 million with a loss per share ranging from approximately $0.10 to $0.11.

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Conference Call

The Company will host a conference call and audio webcast today to discuss the Company's 2008 first quarter financial results, business developments and the Company's 2008 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 43942293 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 May 13, 2008, by dialing 800-642-1687 (Domestic) or 706-645-9291 (International) and entering the Conference ID #43942293.