Full Press Release Details
OraSure Technologies, Inc.
Analyst/Investor Conference Call
Prepared Remarks of Douglas A. Michels and Ronald
Please see Important Information at the conclusion of the following prepared remarks.
Introduction Doug Michels
Thanks Judy, and good afternoon everyone.
2011 has gotten off to a solid start as our results
for the first quarter were better than expected. We exceeded our guidance for both revenues and the bottom line. We also continue to make good progress on our major clinical programs. Our manufacturing improvements are yielding results and our
balance sheet remains strong. As you will hear in the next 20 minutes, the OraSure team is executing effectively against our goals and objectives. Although the economy remains a challenge with funding and employment trends still under pressure, I am
pleased with the response by our management team during these challenging times.
For the call today, Ron will start with some financial
highlights, and then I will address some factors affecting our business and provide an update on our major clinical programs. We will then open the floor for your questions.
And with that, I will turn things over to Ron.
First Quarter 2011 Financial Results
Thanks Doug and good afternoon everyone.
First quarter 2011 revenues were $17.4 million compared to $17.9 million reported in 2010. Our product revenues increased 3% as increased sales of our infectious disease and substance abuse testing
products were partially offset by lower sales of our cryosurgical systems products and lower insurance risk assessment revenues. The increase in product revenues was offset by lower licensing and product development revenues caused by the absence of
a $1.0 million milestone payment received in the first quarter of 2010 under our HCV collaboration with Merck.
disease testing revenues were $10.0 million in the first quarter of 2011 compared to $9.5 million in the first quarter of 2010. The overall 5% increase was primarily a result of higher OraQuick HIV sales in international markets. Domestic OraQuick sales rose 2%. International
OraQuick revenues increased 115% largely because certain private and government customers were able to make
purchases for HIV testing.
In substance abuse testing, revenues increased from $2.7 million in the first
quarter of 2010 to $3.1 million in the first quarter of 2011 as a result of a 17% increase in sales of our
Intercept drug testing system. This increase was the result of an improvement in pre-employment testing rates
when compared to the first quarter of 2010 and the return by our primary drug testing laboratory customer to a more normal ordering pattern. In 2010, this customer changed its inventory management model and this change negatively impacted Intercept sales during the year ago period.
First quarter 2011 cryosurgical revenues decreased 9% compared to the first quarter of 2010.
sales decreased $485,000 when compared to 2010 largely as a result of the absence of sales to our Latin American OTC distributor, Genomma. One reason
for the reduction was the absence of an initial pipeline fill by Genomma required for the commercial launch of our product in Brazil during the first quarter of 2010. Genomma s purchases
during the first quarter of 2011 were also negatively impacted by regulatory issues in Mexico and Brazil. The decrease in sales to Genomma was partially offset by higher European OTC sales to our distributor, Reckitt Benckiser, during the first
On the professional side, combined domestic and international sales increased 14% as a result of improved distributor focus on our
products, the continued impact of our manufacturer s sales representative organizations, increased pricing, and some economic recovery.
Our insurance risk assessment sales decreased from $1.4 million in 2010 to $1.3 million in 2011 due to the issuance of fewer new insurance policies.
Gross Margin Ron Spair
Turning to Gross Margin, our overall margin for Q1 of 2011 was 65% compared to 64% reported for the first quarter of 2010. Margins in the first quarter of 2011 benefited from increased manufacturing
efficiencies and a more favorable product mix. Product gross margins increased 340 basis points when compared to last year primarily as a result of the manufacturing efficiencies. These benefits were partially offset by the decrease in licensing and
product development revenues that I mentioned previously. The $1.0 million HCV milestone we received during the first quarter of 2010 accounted for approximately 210 basis points of margin for that period.
Operating Expenses Ron Spair
Our total operating expenses for the first quarter increased $240,000 or 2%, compared to the first quarter of 2010. Research and development expenses increased by approximately $1.3 million due to higher
clinical trial costs associated with our OraQuick HIV OTC program, partially offset by an decrease in clinical
trial costs associated with our OraQuick HCV test. Sales and marketing expenses
decreased by approximately $762,000 as a result of lower staffing, recruiting and market research costs. General and administrative expenses decreased by approximately $311,000 as a result lower
consulting and staffing costs, partially offset by higher legal expenses.
From a bottom line perspective, we reported a net loss of $2.6 million, or $0.06 per share, which exceeded our guidance. This compares to a net loss of
$2.2 million, or $0.05 per share, for the same period of 2010.
Cash Flow from Operations and Liquidity Ron Spair
Turning briefly to our balance sheet and cash flow, our cash balance remained strong with cash and short-term investments of $72.4
million at March 31st.
Cash used in operating activities in the first quarter of 2011 was $2.0 million, a $3.0 million improvement when
compared to the $5.0 million used during the first quarter of 2010.
Second Quarter 2011 Financial Guidance Ron Spair
Turning to guidance for the second quarter of 2011, we are projecting revenues of approximately $17.75 to $18.25 million and a
loss per share of approximately $0.07 to $0.08.
And with that, I will turn things back over to Doug.
Business Outlook Doug Michels
Thanks Ron. In looking at our business, several points should be kept in mind.
Clinical Programs Update Doug Michels
Turning to our clinical programs Let me start with HCV.
OraQuick HCV Doug Michels
During the first quarter, there were two significant developments related to our OraQuick HCV product. First, in February we received FDA approval for use of the test on fingerstick whole blood samples.
This was the second application approved by the FDA the first being venous whole blood which was approved in June 2010.
The second development was our submission in March of an application for a CLIA waiver
for the OraQuick HCV product for use with both venous whole blood and fingerstick whole blood samples. Under
its current approvals, the OraQuick HCV test can be used by laboratories certified or accredited under CLIA as
being able to perform moderately complex tests. However, with a CLIA waiver, we will be able to sell our test to substantially more sites nationwide that currently hold a waiver, including outreach clinics, community-based organizations
and physician offices. As previously mentioned, the receipt of a CLIA waiver is critical to fully realizing the market potential for this product.
With respect to an oral fluid claim, we have initiated additional testing which we hope will provide further support for our oral fluid submission. We intend to meet with the FDA to discuss and finalize
the structure of our oral fluid submission in the coming months.
Assuming a timely CLIA waiver, we expect domestic revenues for this product
to increase later this year. We have been working with Merck under our collaboration agreement so that we are prepared to begin detailing the product in physician offices after the CLIA waiver is received.
HIV OTC Doug Michels
Turning to our OraQuick HIV OTC product, the final phase of
clinical testing was started at the end of 2010. You will recall that this phase involves the use of our test in an unobserved setting. One of the study objectives specified by the FDA is to identify at least 100 HIV infected, but undiagnosed
individuals. In order to meet this requirement, we expect that we will need to enroll and test approximately 4,000-5,000 participants in our study.
I am pleased to report that we have made substantial progress on the study, and it remains on time and on budget. All clinical sites have initiated testing and, in fact, we are now starting to close
several of our initial sites to ensure we achieve the appropriate geographic diversity required by our protocol. We have enrolled over
2,500 patients, and we have identified over half of the required number of newly diagnosed HIV individuals. Assuming enrollment continues as expected and we meet our anticipated prevalence rates
among those enrolled, we still expect to complete this study during the third quarter of this year.
OraQuick HIV Shelf Life Doug Michels
As discussed during our last call, we previously extended the shelf life for our OraQuick HIV test to 24 months. We have continued our real time stability studies and now have stability data for this
product that should support an extension to 30 months. We expect to file a formal request with the FDA in the next several weeks.
Drugs-of-Abuse High Throughput Oral Fluid Assays Doug Michels
In the area of substance abuse testing, during the first quarter we announced several 510(k) clearances for the use of high throughput
oral fluid assays with our Intercept device. Specifically, clearances were received for phencyclidine (PCP),
cocaine, opiates and methamphetamine. An application for amphetamines has also been filed, but remains pending with the FDA. We expect this assay to receive 510(k) clearance in the near future.
As discussed previously, the clinical work for the THC assay (marijuana) has followed a somewhat extended schedule. This work is continuing. Although the
goal is to resolve all open issues and make an FDA submission as soon as possible, this will likely not occur until near the end of the year at the earliest.
In the meantime, we expect to launch this product line with Roche with a panel consisting of PCP, cocaine, opiates, methamphetamine and amphetamine beginning October. We are working with Roche to
accelerate the availability of product in order to meet the competition expected in this market.
OraSure QuickFlu Doug Michels
Earlier this year we announced the addition of a new infectious disease testing product to our portfolio, the OraSure QuickFlu rapid flu A B
test. Our focus with this product is primarily on the U.S. hospital market. During the first quarter, we trained our sales team and prepared marketing materials for a formal launch. A number of our customers are currently evaluating this product in
anticipation of the 2011-2012 flu season. We expect sales of this test to begin to materialize during the second half of the year.
So as you ve just heard, we have been busy on
multiple fronts and measurable progress is being made. Our team has been effectively managing many demands and I thank them for all their hard work. We are executing on our goals and objectives - on time and on budget. The Company is well funded to
accomplish the tasks at hand and we have never been more optimistic about the future of the company. Although there is still much work that lies ahead, we believe 2011 is off to a good start, and we look forward to updating you as the year
New Director Doug Michels
Finally, before we open the Q&A session, I would like to mention one final item regarding the recent change in our Board of Directors.
In April, we announced the addition of Dr. Stephen Tang as a member of the Company s Board. Steve has enjoyed a successful career in both the medical diagnostic and pharmaceutical industries and
is currently the President and CEO of The University City Science Center, located in Philadelphia. We believe Steve will be a strong contributor, and we are very pleased that he has joined our Board.
Steve s appointment follows the retirement of Dr. Jack Goldstein as a Director. As you may recall,