OraSure Technologies, Inc. (NASDAQ:OSUR), a market leader in
oral fluid diagnostics, today announced revenues of $71.1 million
and $17.2 million for the year and quarter ended December 31, 2008,
respectively. This compares to revenues of $82.7 million and $19.8
million for the year and quarter ended December 31, 2007,
respectively.
The Company recorded a net loss of $31.3 million or $0.67 per
share, and $29.3 million or $0.64 per share, on a GAAP1 basis, for
the year and quarter ended December 31, 2008, respectively. 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 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 U.S. 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
decreased 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 increased 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 $1.0 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 Outlook
The Company expects 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.
�
Condensed Financial Data (In thousands, except
per-share data and percentages) �
Unaudited
�
Three months ended
December 31,
Year ended
December 31,
2008
�
2007
2008
�
2007
Results of Operations Revenues $ 17,209 $ 19,809 $ 71,104 $
82,686 Cost of products sold � 7,583 � � 8,281 � � 29,976 � �
32,403 � Gross profit � 9,626 � � 11,528 � � 41,128 � � 50,283 �
Operating expenses: Research and development 5,392 4,240 20,255
14,136 Sales and marketing 5,411 5,063 20,917 20,062 General and
administrative � 4,994 � � 3,668 � � 16,287 � � 17,304 � Total
operating expenses � 15,797 � � 12,971 � � 57,459 � � 51,502 �
Operating loss (6,171 ) (1,443 ) (16,331 ) (1,219 ) Other income,
net � 506 � � 1,070 � � 7,583 � � 5,513 � Pre-tax income (loss)
(5,665 ) (373 ) (8,748 ) 4,294 Income tax provision (benefit) �
23,607 � � (400 ) � 22,527 � � 1,821 � Net income (loss) $ (29,272
) $ 27 � $ (31,275 ) $ 2,473 � Earnings (loss) per share Basic and
Diluted $ (0.64 ) $ � � $ (0.67 ) $ 0.05 � Weighted average shares:
Basic � 45,882 � � 46,625 � � 46,550 � � 46,325 � Diluted � 45,882
� � 47,336 � � 46,550 � � 46,878 � �
Non-GAAP Financial Measures
The Company�s management considers the use of non-GAAP financial
measures helpful in assessing the Company�s current periods�
financial performance, especially in comparison to the same periods
of the prior year. As such, the Company has presented non-GAAP net
income (loss) and non-GAAP basic and diluted earnings (loss) per
share in the table below. While the Company believes that
disclosing the following non-GAAP financial measures allows for
greater transparency in the review of its underlying financial
performance, it does not consider such measures to be substitutes
for, or superior to, net income (loss) or basic and diluted
earnings (loss) per share as determined in accordance with GAAP.
For purposes of calculating the non-GAAP net loss and non-GAAP
basic and diluted loss per share for the current periods, the
Company excluded the $26.0 million increase to the income tax
provision related to establishing a full valuation allowance
against the Company�s deferred tax asset, since such a significant
adjustment is not expected to recur on a quarterly or annual
basis.
The following table reconciles the GAAP net income (loss) and
GAAP basic and diluted earnings (loss) per share to the non-GAAP
net income (loss) and non-GAAP basic and diluted earnings (loss)
per share for the periods indicated.
� �
Three months ended
December 31,
Year ended
December 31,
2008
�
2007
2008
�
2007
Net income (loss), as reported under GAAP $ (29,272 ) $ 27 $
(31,275 ) $ 2,473 Tax adjustment � 25,978 � � ? � 25,978 � � ? Net
income (loss), non-GAAP $ (3,294 ) $ 27 $ (5,297 ) $ 2,473 �
Earnings (loss) per share: Basic and Diluted, as reported under
GAAP $ (0.64 ) $ ? $ (0.67 ) $ 0.05 Tax adjustment � 0.57 � � ? �
0.56 � � ? Basic and Diluted, non-GAAP $ (0.07 ) $ ? $ (0.11 ) $
0.05 � Weighted average shares: Basic � 45,882 � � 46,625 � 46,550
� � 46,325 Diluted � 45,882 � � 47,336 � 46,550 � � 46,878 � �
Three months ended December
31,
� �
Percentage of Dollars % Total
Revenues Market Revenues 2008 �
2007
Change 2008 �
2007 � Infectious disease
testing $ 8,837 $ 9,444 (6 )% 51 % 48 % Substance abuse testing
3,452 3,390 2 20 17 Cryosurgical systems 2,928 5,343 (45 ) 17 27
Insurance risk assessment � 1,690 � 1,605 5 10 � 8 � Product
revenues 16,907 19,782 (15 ) 98 100 Licensing and product
development � 302 � 27 1,019 2 � � � Total revenues $ 17,209 $
19,809 (13 )% 100 % 100 % � �
�
Year ended December 31, � �
Percentage of
Dollars % Total Revenues Market
Revenues 2008 �
2007 Change 2008 �
2007 � Infectious disease testing $ 38,096 $ 35,791 6 % 54 %
43 % Substance abuse testing 14,006 15,789 (11 ) 20 19 Cryosurgical
systems 10,655 23,533 (55 ) 15 28 Insurance risk assessment � 6,085
� 5,464 11 8 � 7 � Product revenues 68,842 80,577 (15 ) 97 97
Licensing and product development � 2,262 � 2,109 7 3 � 3 � Total
revenues $ 71,104 $ 82,686 (14 )% 100 % 100 % � � � � �
Three
months ended Year ended December 31, %
December 31, % OraQuick�
Revenues
2008 �
2007 Change 2008 �
2007
Change � Direct to U.S. Public Health $ 6,177 $
5,460 13 % $ 25,438 $ 19,799 28 % Abbott 1,137 2,018 (44 ) 6,625
8,102 (18 ) International 930 1,181 (21 ) 3,234 3,291 (2 ) SAMHSA/
CDC � � � � � � 12 � 1,464 (99 ) Total OraQuick� revenues $ 8,244 $
8,659 (5 )% $ 35,309 $ 32,656 8 % � � � � �
Three months
ended Year ended December 31, %
December 31, % Intercept�
Revenues
2008 �
2007 Change 2008 �
2007
Change � Workplace testing $ 1,270 $ 1,282 (1
)% $ 4,750 $ 6,650 (29 )% Criminal justice 698 622 12 2,663 2,570 4
International 598 431 39 2,168 2,188 (1 ) Direct � 299 � 264 13 �
1,204 � 1,003 20 Total Intercept� revenues $ 2,865 $ 2,599 10 % $
10,785 $ 12,411 (13 )% � � � � �
Three months ended Year
ended December 31, % December 31, %
Cryosurgery Revenues 2008 �
2007 Change
2008 �
2007 Change � Professional
domestic $ 970 $ 1,806 (46 )% $ 3,911 $ 5,247 (25 )% Professional
international 725 798 (9 ) 2,529 2,349 8 OTC domestic � 650 (100 )
� 6,237 (100 ) OTC international � 1,233 � 2,089 (41 ) � 4,215 �
9,700 (57 ) Total cryosurgery revenues $ 2,928 $ 5,343 (45 )% $
10,655 $ 23,533 (55 )% � � � �
Balance Sheets December
31, 2008 December 31, 2007
Assets
Cash, cash equivalents and short-term
investments
$ 82,523 $ 95,566 Accounts receivable, net 11,571 11,296
Inventories 10,704 9,410 Current deferred income taxes ? 5,061
Other current assets 1,418 2,455 Property and equipment, net 21,235
20,911 Deferred income taxes ? 17,266 Other non-current assets �
4,467 � 5,387 Total assets $ 131,918 $ 167,352 �
Liabilities and Stockholders� Equity
Current portion of long-term debt $ 558 $ 557 Accounts payable
3,926 5,616 Accrued expenses 10,796 11,996 Long-term debt 8,301
8,818 Other liabilities 12 311 Stockholders� equity � 108,325 �
140,054 Total liabilities and stockholders� equity $ 131,918 $
167,352 � �
Year ended December 31, Additional Financial
Data 2008 �
2007 � Capital expenditures $ 2,643 $
5,504 Depreciation and amortization $ 3,177 $ 2,736 Purchase and
retirement of common stock $ 5,121 ? Cash flows from operating
activities $ (2,670 ) $ 11,584
Accounts receivable � days sales
outstanding
60 days 50 days �
Conference Call
The Company will host a conference call and audio webcast to
discuss the Company�s 2008 fourth quarter and full-year financial
results, business developments and first quarter 2009 financial
guidance, beginning today 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 Financial
Officer and Chief Operating Officer. The call will include prepared
remarks by management and a question and answer session.
In order to listen to the conference call, please either dial
888-742-2024 (Domestic) or 706-643-0033 (International) and
reference Conference ID #83800004, 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 February 16, 2009, by dialing
800-642-1687 (Domestic) or 706-645-9291 (International) and
entering the Conference ID #83800004.
About OraSure Technologies
OraSure Technologies develops, manufactures and markets oral
fluid specimen collection devices and tests and other diagnostic
products using proprietary technologies, including immunoassays and
other in vitro diagnostic tests and other medical devices. These
products are sold in the United States and certain foreign
countries to clinical laboratories, hospitals, clinics,
community-based organizations and other public health
organizations, distributors, government agencies, physicians'
offices, and commercial and industrial entities. For more
information on the Company, please visit www.orasure.com.
Important Information
This press release contains certain forward-looking statements,
including with respect to revenues, expenses, net income,
earnings/loss per share and products. Actual results could be
significantly different. Factors that could affect results include
the ability to market and sell products, whether through an
internal, direct sales force or third parties; changes in
relationships, including disputes or disagreements, with strategic
partners and reliance on strategic partners for the performance of
critical activities under collaborative arrangements; failure of
distributors or other customers to meet purchase forecasts or
minimum purchase requirements for the Company�s products; impact of
replacing distributors and success of direct sales efforts;
inventory levels at distributors and other customers; impact of
competitors, competing products and technology changes; ability to
develop, commercialize and market new products; market acceptance
of oral fluid testing or other products; changes in market
acceptance of products based on product performance and extended
shelf life; continued bulk purchases by customers, including
governmental agencies, and the ability to fully deploy those
purchases in a timely manner; 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 product components;
availability of related products produced by third parties or
products required for use of our products; 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; history of losses and ability to achieve sustained
profitability and ability to utilize net operating loss
carryforwards 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 changes in international
funding sources; loss or impairment of sources of capital; ability
to meet financial covenants in agreements with financial
institutions; ability to retain qualified personnel; exposure to
patent infringement, 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;
ability to identify, complete and realize the full benefits of
potential acquisitions; and general political, business and
economic conditions. These and other factors are discussed more
fully in the Securities and Exchange Commission (�SEC�) filings of
OraSure Technologies, including its registration statements, its
Annual Report on Form 10-K for the year ended December 31, 2007,
its Quarterly Reports on Form 10-Q, and its other filings with the
SEC. Although forward-looking statements help to provide complete
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.
1 GAAP is defined as U.S. Generally Accepted Accounting
Principles
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