OraSure Technologies, Inc. 2010 Fourth Quarter and Full Year Analyst/Investor Conference Call

OraSure Technologies, Inc.

2010 Fourth Quarter and Full Year

Analyst/Investor Conference Call

Prepared Remarks of Douglas A. Michels and

Please see Important Information at the conclusion of the following prepared remarks.

Introduction Doug Michels

Thanks Judy, and good afternoon everyone.

We ended 2010 on a strong note by exceeding our fourth

quarter guidance for both revenues and the bottom line. We are also generally pleased with our full year performance, especially given the difficult economic conditions and funding challenges encountered by our customers.

Ron Spair will begin today s discussion with some financial highlights. I will then discuss our major clinical programs and comment on other

developments in our business.

We will conclude by opening the floor for your questions.

And with that, I will turn things over to Ron.

Fourth Quarter 2010 Financial Results Ron Spair

Thanks Doug, and good afternoon everyone. As Doug mentioned, our fourth quarter performance exceeded our prior guidance, on both the top and bottom lines. In addition, I am pleased to say we generated

$3.6 million in cash flow from

operating activities for the quarter which brings us to a total of $3.9 million for the whole year.

Turning to revenues. Our total revenues for Q4

2010 were $18.8 million, compared to $20.9 million for Q4 2009.

Overall infectious disease revenues decreased 10% in the

fourth quarter of 2010 primarily as a result of our performance overseas. OraQuick HIV revenues in the international market declined during the fourth quarter as a result of price competition, changes in the use of our test within government

testing algorithms and lower funding for HIV testing initiatives. Domestic OraQuick HIV revenues increased

slightly as a result of higher volume partially offset by a lower average selling price which was forecasted.

In substance abuse testing,

revenues decreased 8% from $3.1 million in the fourth quarter of 2009 to $2.9 million in the fourth quarter of 2010, as a result of lower sales of our Intercept drug testing system in the criminal justice market, lower sales of our Q.E.D.

rapid saliva alcohol test and an absence of laboratory equipment sales.

Fourth quarter 2010 cryosurgical revenues decreased 10% compared to

the fourth quarter of 2009 primarily due to lower sales to our Latin American OTC distributor, Genomma. In the fourth quarter of 2009, Genomma increased its orders to prepare to launch our product in the Brazilian OTC market at the end of the year.

We did not have a similar pipeline fill in the fourth quarter of 2010. Offsetting this decrease were increases in professional sales in both the domestic and international markets. The higher U.S. professional sales were caused primarily by

elimination of the diversion issue and the impact of our manufacturer s sales representative organizations, which we added earlier in 2010.

International sales increased largely as a result of fluctuations in ordering patterns of our customers.

Gross Margin Ron Spair

Turning to Gross Margin, our overall margin

for Q4 of 2010 was 64% compared to 59% reported for the fourth quarter of 2009. Margins in the fourth quarter 2010 benefited from a reduction in royalty expense related to our OraQuick HIV product as a result of a royalty buy-out earlier in the

year. Year to date margins increased to 63% compared to 61% for the full year of 2009, largely due to milestone payments received from Merck related to our HCV test.

Operating Expenses Ron Spair

expenses for the quarter were $12.9 million compared to $15.8 million in the fourth quarter of 2009. 2009 operating expenses included a $1.5 million expense related to a litigation settlement. Research and development expenses decreased by

approximately $613,000 due a decrease in clinical trial costs associated with our OraQuick HCV test, partially

offset by an increase in clinical trial costs associated with our OraQuick HIV OTC program. Sales and marketing expenses decreased by approximately $854,000 as a result of lower market research and travel costs. General and administrative

expenses remained flat in Q4 of 2010 at approximately $4.0 million compared to $3.9 million in Q4 of 2009.

On the bottom line, we reported a net loss of $1.0 million, or $0.02 per share, for Q4 of 2010. This compares to a net loss of

$2.8 million, or $0.06 per share, in the fourth quarter of 2009. Our bottom line performance exceeded our previously issued Q4 guidance for a number of reasons. Revenues exceeded the high end of the range and our gross margin came in higher as well.

R&D costs were lower than projected largely as a result of slower than expected patient accrual into the

HIV-OTC trial over the holidays. Finally, severance payments related to our Q4 reduction in force were lower than originally projected.

Cash Flow from Operations and Liquidity Ron Spair

our balance sheet and cash flow, our cash balance remained strong with cash and short-term investments of $75.7 million at year end.

mentioned earlier, during the current quarter, we generated $3.6 million in cash flow from operations compared to $3.0 million used during the fourth quarter of 2009. Our full year cash flow from operations totaled $3.9 million as we improved

collections of our outstanding receivable balances, more effectively controlled our inventory levels and reduced the amount of our prepayments.

First Quarter 2011 Financial Guidance Ron Spair

Turning to guidance for the first quarter of 2011, we are projecting revenues of approximately $16.75 to $17.25 million and a net loss per share of approximately $0.08.

And with that, I will turn things back over to Doug.

Clinical Programs Update Doug Michels

Thanks, Ron. During the fourth

quarter and the first few weeks of the new year, we have continued to make good progress on our major clinical programs.

OraQuick HCV Doug Michels

Last year as you may recall, we filed for FDA approval of our OraQuick HCV test for use with fingerstick whole blood specimens. Based on our discussions with the FDA, we expect to see something on this approval very soon. Assuming things

proceed as expected, fingerstick whole blood would be the second approved application for our test. This approval would also be another significant milestone which, along with a CLIA waiver, will be critical to fully realizing the market potential

for this product here in the U.S.

Now that a fingerstick approval appears to be imminent, we are finalizing our strategy for obtaining FDA

approval of an oral fluid claim. Our plan is to conduct some additional testing on oral fluid specimens, which we believe will provide further support for an oral fluid approval. We intend to meet with the FDA to discuss our oral fluid submission

during the second quarter.

In December of last year, we completed the studies required for a CLIA waiver for both fingerstick and venous

whole blood, and we are pleased with the study results. Analysis of the resulting data and preparation of a final report for the FDA is nearing completion. Assuming the fingerstick approval is received shortly, we would expect to file our formal

request for CLIA waiver in the near future. We also plan to request a CLIA waiver for oral fluid once a PMA supplement for that claim is filed and FDA approval is received.

HIV OTC Doug Michels

Since our last earnings call, we received an

investigational device exemption ( IDE ) for the final phase of clinical testing for our rapid HIV over-the-counter test. As a result, this final study was commenced at the end of 2010. Our call center is up and running, and we are in the

process of adding the additional clinical sites required to complete the study.

This final phase of testing will likely require 4,000-5,000

participants, and we will need to identify at least 100 newly-infected HIV individuals in order to meet the parameters specified by the FDA. This study is on track and, as previously disclosed, we expect study enrollment to close in the third

quarter of this year. After the study is completed, we will analyze the data and complete our submission for filing with the FDA, which we will pursue as aggressively as possible. As discussed on prior calls, the results of our final clinical phase

will need to be reviewed by an FDA advisory board, the Blood Products Advisory Committee. We will continue to provide you with appropriate updates as this

exciting and important program progresses.

Drugs-of-Abuse High Throughput Oral

Fluid Assays Doug Michels

In the area of substance abuse testing, I am pleased to report that the FDA recently issued a

510(k) clearance for use of a high throughput oral fluid PCP assay with our Intercept device. This is the first such clearance resulting from our joint collaboration with Roche Diagnostics. We believe the FDA clearance process is in the final stages

for several of the other NIDA-5 assays that have been developed, and we would expect the FDA to issue additional 510(k) clearances in the near future.

As you know, the submission for the THC assay is progressing on a somewhat later schedule. Since the last call, Roche completed a pre-IDE review of the study protocol for THC. As a result, the THC

clinical studies have now been started, and we expect that a submission for this assay will be filed with the FDA later this year.

approval is an exciting development for many of our laboratory customers who have expressed interest in utilizing integrated instrument platforms that can consolidate urine and oral fluid testing. By integrating oral fluid and urine samples on a

single, random access workstation, labs can streamline workflow, decrease turnaround times, increase capacity and reduce costs.

OraQuick HIV Shelf Life Doug Michels

During our last call, I mentioned that we had requested FDA approval of a shelf life extension for our

OraQuick HIV test from 18 months to 24 months. I am pleased to report that our request was granted in November

of last year. We will likely seek further extensions in the future when the required stability data is available.

Organizational Change Doug Michels

I am very pleased that we now have new leadership in the sales and marketing areas, with the addition of Tony Zezzo. As the Company s new Executive

Vice President, Marketing and Sales, Tony will have overall responsibility for our global marketing and sales operations, including both the domestic and international sales teams for our infectious disease, substance abuse testing and insurance

testing businesses. Our cryosurgical business will continue under the direction of Mike Formica.

Tony brings an extensive and very successful

resume in sales and marketing, with almost 30 years of diagnostic sales and marketing experience with Johnson & Johnson, Dade International and Abbott Diagnostics. Tony has already hit the ground running, and we believe he will make a

significant contribution to our Company.

Other Comments Doug Michels

Finally, before we take your questions, I would like to comment on several other issues affecting our business.

So overall, we are very encouraged by these positive developments and their potential impact on our business in the future. And with that, I will now open the floor to your questions.

Conclusion Doug Michels

Thank you for participating on today s call and for your continued interest in OraSure. Have a good afternoon and evening.

Important Information

This document contains certain forward-looking statements,