OraSure Technologies, Inc. (OraSure Technologies) has reported revenues of $71.1 million for the full year of 2008, compared with the revenues of $82.6 million in the previous year-end. It has also reported net loss of $31.2 million, or $0.67 per share, for the full year of 2008, compared with the net income of $2,473 or $0.05 per share, in the previous year-end.
The company announced revenues of $17.2 million for the quarter ended December 31, 2008. This compares to revenues of $19.8 million for the quarter ended December 31, 2007.
The company recorded a net loss of $29.3 million or $0.64 per share, on a GAAP1 basis, quarter ended December 31, 2008. The net loss for these periods includes a non-cash charge of $26.0 million reflected in the income tax provision, which resulted from establishing a full valuation allowance against the company’s net deferred tax asset. Excluding the impact of this non-cash charge, the company’s net loss on a non-GAAP basis would have been $5.3 million, or $0.11 per share, and $3.3 million, or $0.07 per share, for the year and quarter ended December 31, 2008, respectively. These results compare to net income of $2.5 million, or $0.05 per fully-diluted share for the year ended December 31, 2007, and net income of $27,000, or break-even earnings per share for the fourth quarter of 2007.
“We have recorded a full valuation allowance against our net deferred tax asset, in accordance with GAAP, as a result of the continued unprecedented volatility in the global economy and our expectation of a loss for 2009,” said Ronald H. Spair, OraSure Technologies Inc.’s chief financial officer. “Establishing this valuation allowance, however, does not change our view of the company’s long-term financial outlook or the expected utilization of our net operating loss carryforwards or other deferred tax assets in the future upon returning to profitability. In addition, we finished 2008 with strong liquidity as we had $82.5 million of cash, cash equivalents and short-term investments and $91.0 million of working capital at year end.”
For the year ended December 31, 2008, increased sales of the company’s OraQuick ADVANCE rapid HIV-1/2 antibody test, coupled with increased sales in the insurance risk assessment market and higher licensing and product development revenues, were offset by an expected decline in sales of the company’s cryosurgical wart removal and substance abuse testing products.
For the fourth quarter ended December 31, 2008, increased sales of the company’s Intercept oral fluid drug testing products and higher licensing and product development revenues, were offset by lower sales of the OraQuick ADVANCE HIV-1/2 test to Abbott Laboratories, in anticipation of the transition of the US hospital business to a direct sales model in 2009, coupled with the expected decline in sales of the company’s cryosurgical wart removal products.
“Despite the challenges we faced during 2008 and the current uncertain economic climate, we are starting the new year on a positive note,” said Douglas A. Michels, president and chief executive officer of OraSure Technologies. “Our newly expanded sales force is now selling OraQuick ADVANCE® directly into the U.S. hospital market, our sales and marketing group has been realigned and strengthened, and we recently received FDA approval of a twelve-month shelf life for OraQuick ADVANCE®. We have also made significant progress on our strategic initiatives by filing for FDA approval of our OraQuick® HCV test and advancing the clinical development of our OraQuick® HIV OTC test and the fully automated oral fluid substance abuse assays.”
The company’s gross margins were 58% and 56% for the year and quarter ended December 31, 2008, respectively. Gross margins down from 61% for the full year 2007 and from 58% for the quarter ended December 31, 2007. The decrease in gross margin for both the year and fourth quarter was largely due to a less favorable product mix, driven primarily by significant declines in cryosurgical product revenues, and increases in manufacturing scrap and spoilage expense. Although scrap and spoilage for the full year exceeded 2007 levels, OraQuick scrap and spoilage was down sequentially in each quarter of 2008. The majority of scrap and spoilage charges in the fourth quarter were related to products other than OraQuick and are not expected to recur. Scrap and spoilage charges for 2009 are expected to be significantly lower than 2008 levels.
For the full year 2008, operating expenses up to $57.5 million from $51.5 million in 2007. Operating expenses for the quarter ended December 31, 2008 were $15.8 million, compared to $13.0 million for the fourth quarter of 2007. These increases were primarily attributable to higher research and development costs and higher sales and marketing expenses.
Research and development costs increased in both the year and the quarter ended December 31, 2008 as a result of planned incremental costs incurred for the company’s OraQuick HIV-OTC and OraQuick HCV clinical development programs. In addition, during the fourth quarter of 2008, the company recorded a $1 million charge related to a patent license milestone payment required upon filing of the company’s OraQuick HCV pre-market approval application with the U.S. Food and Drug Administration.
Sales and marketing expenses also increased for both the year and the quarter ended December 31, 2008. The net increases experienced in these periods were primarily due to higher staffing related costs, driven by an increase in the company’s direct sales force for the hospital market, as well as by recent organizational changes, partially offset by a decline in reimbursable cryosurgical distributor advertising and promotional costs.
General and administrative expenses for the full year 2008 decreased as a result of lower compensation costs, bank charges, consulting fees and legal expenses. Fourth quarter 2008 general and administrative expenses increased as a result of an accrual for costs associated with the termination of the company’s OraQuick distribution agreement with Abbott Laboratories, coupled with an increase in legal fees associated with the patent infringement lawsuit filed against the company by Inverness Medical and Church & Dwight. By contrast, fourth quarter 2007 legal expenses reflected the award of certain legal fees to the company in connection with the company’s arbitration with Prestige Brands.
Cash, cash equivalents and short-term investments totaled $82.5 million and working capital was $91.0 million at December 31, 2008, compared to $95.6 million and $105.6 million, respectively, at December 31, 2007.
First Quarter 2009 Guidance
The company projects total revenues for the first quarter of 2009 to range from approximately $16.5 to $17.0 million. The company is currently projecting a loss per share for the first quarter of 2009 of approximately $0.07.