OraSure Technologies, Inc. (Nasdaq:OSUR), a market leader in oral
fluid diagnostics, today announced its consolidated financial
results for the third quarter of 2011.
Quarterly Highlights
- The Company completed the acquisition of DNA Genotek Inc.
("DNAG") on August 17, 2011.
- Consolidated revenues totaled $21.7 million for the quarter, a
14% increase from the comparable period of 2010. Revenues included
$19.7 million from OraSure operations and $2.0 million from DNAG
operations. The Company had previously forecasted $19.0 to $19.5
million in third quarter revenues for OraSure operations, exclusive
of DNAG performance.
- Non-GAAP adjusted net loss per share for the quarter totaled
$0.03, which excludes both DNAG financial results and certain costs
incurred by OraSure as a result of the acquisition. This compares
to a $.07 per share net loss previously forecasted for the Company,
exclusive of DNAG results and certain acquisition costs. The GAAP
consolidated net loss for the quarter was $0.08 per share.
- During the quarter, the Company completed the final clinical
study required in connection with FDA approval of an at-home HIV
test and submitted additional data requested by the FDA in support
of its pending CLIA (Clinical Laboratory Improvement Amendments of
1988) waiver submission for the Company's OraQuick® rapid HCV
test.
"We enjoyed a highly productive third quarter and we are very
pleased with the Company's performance," said Douglas A. Michels,
President and CEO of OraSure Technologies. "Our financial results
were strong with the OraSure base business exceeding our guidance
on both the top and bottom lines and we closed the DNA Genotek
acquisition. In addition, we made excellent progress against our
strategic initiatives by completing the final clinical study for
our OraQuick® HIV over-the-counter test and submitting additional
data in support of our CLIA submission for our OraQuick® HCV test.
We look forward to ending 2011 with a successful fourth
quarter."
Financial Results
The Company recorded consolidated revenues of $21.7 million for
the three months ended September 30, 2011, compared to $19.0
million for the three months ended September 30, 2010. Revenues for
the third quarter included $2.0 million contributed by DNAG for the
period following the closing of the acquisition.
Excluding the DNAG sales, product revenues for the current
quarter increased 6% primarily as a result of higher sales of the
Company's infectious disease testing and cryosurgical systems
products, partially offset by lower sales of its substance abuse
and insurance risk assessment products. The higher product revenues
were partially offset by a reduction in licensing and product
development revenues caused by a decrease in royalties received
pursuant to the Company's license and settlement agreement with
Merck.
The Company reported a consolidated net loss of $3.9 million, or
$0.08 per share, for the third quarter of 2011, compared to net
income of $274,000, or $0.01 per share, for the third quarter of
2010. The consolidated results included $0.02 of loss attributable
to a purchase accounting adjustment discussed below. DNAG's
operating results were impacted by the incurrence of $380,000 of
amortization of intangibles in connection with the acquisition. The
consolidated net loss also included $0.03 of loss resulting from
certain transaction costs incurred by OraSure as a result of the
acquisition.
The purchase accounting adjustment was required to write up
DNAG's inventory from production cost to fair market value as of
the acquisition date. For the third quarter, this adjustment
increased DNAG's cost of products sold by $763,000 based on the
amount of the adjusted inventory sold during that period. The
remainder of the inventory write up is expected to increase fourth
quarter cost of products sold by $115,000 calculated at September
30, 2011 exchange rates.
For the nine months ended September 30, 2011, the Company
recorded total revenues of $58.2 million, compared to $56.2 million
for the nine months ended September 30, 2010. Revenues for the
2011 period included the $2.0 million contributed by
DNAG.
Excluding the DNAG sales, product revenues for the current nine
month period increased 5% as a result of higher sales of the
Company's infectious disease and substance abuse testing products,
partially offset by lower cryosurgical systems and insurance risk
assessment revenues. This increase was partially offset by lower
licensing and product development revenues caused by the absence of
$2.0 million in milestone payments received from Merck during the
year ago period under the terms of the Company's collaboration with
Merck related to the development and promotion of the OraQuick®
rapid HCV test.
The Company recorded a consolidated net loss of $8.9 million, or
$0.19 per share, for the nine months ended September 30, 2011,
compared to a net loss of $2.5 million, or $0.05 per share, for the
nine months ended September 30, 2010. The consolidated net
loss for 2011 included the loss attributable to the purchase
accounting adjustment and the transaction costs incurred by OraSure
described above.
Consolidated gross margin for the three months ended September
30, 2011 was 63% compared to 62% for the three months ended
September 30, 2010. Consolidated gross margin for the nine
months ended September 30, 2011 was 64%, compared to 63% for the
comparable nine months of 2010. Gross margin in both periods of
2011 was negatively impacted by the purchase accounting adjustment
related to the write up of DNAG inventory. This adjustment
accounted for 350 and 130 basis points of margin for the three and
nine months ended September 30, 2011, respectively. Gross
margins in the 2011 periods benefitted from the inclusion of DNAG
results, lower direct labor costs and improved absorption of
overhead costs as a result of staffing optimization and a change to
automated manufacturing during 2011.
Consolidated operating expenses for the third quarter of 2011
increased to $17.8 million, from $11.5 million in the comparable
period of 2010, and to $46.2 million for the nine months ended
September 30, 2011, from $37.8 million for the first nine months of
2010. These increases resulted primarily from the inclusion of
DNAG operating expenses, higher research and development expenses
due to clinical trial spending related to the Company's OraQuick®
HIV over-the-counter product and higher legal, accounting,
consultant and other transaction costs incurred by OraSure in
connection with the DNAG acquisition.
Fourth Quarter 2011
Outlook
The Company expects total consolidated revenues of approximately
$22.0 to $23.0 million for the fourth quarter of 2011 and a fourth
quarter net loss of approximately $0.07 - $0.08 per share.
Financial Data
|
Condensed Consolidated
Financial Data |
|
(In thousands, except
per-share data) |
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
Three months
ended |
Nine months
ended |
|
September
30, |
September
30, |
|
2011 |
2010 |
2011 |
2010 |
Results of Operations |
|
|
|
|
Revenues |
$ 21,714 |
$ 19,034 |
$ 58,191 |
$ 56,197 |
Cost of products sold |
8,120 |
7,220 |
21,070 |
20,802 |
Gross profit |
13,594 |
11,814 |
37,121 |
35,395 |
Operating expenses: |
|
|
|
|
Research and development |
5,546 |
3,008 |
15,110 |
9,143 |
Sales and marketing |
5,742 |
4,593 |
16,026 |
15,898 |
General and administrative |
6,510 |
3,924 |
15,103 |
12,776 |
Total operating expenses |
17,798 |
11,525 |
46,239 |
37,817 |
Operating income (loss) |
(4,204) |
289 |
(9,118) |
(2,422) |
Other expense |
(30) |
(15) |
(153) |
(52) |
Income (loss) before income taxes |
(4,234) |
274 |
(9,271) |
(2,474) |
Income tax benefit |
(315) |
-- |
(315) |
-- |
Net income (loss) |
$ (3,919) |
$ 274 |
$ (8,956) |
$ (2,474) |
Earnings (loss) per share: |
|
|
|
|
Basic and Diluted |
$ (0.08) |
$ 0.01 |
$ (0.19) |
$ (0.05) |
|
|
|
|
|
Weighted average shares: |
|
|
|
|
Basic |
47,028 |
46,213 |
46,788 |
46,176 |
Diluted |
47,028 |
46,566 |
46,788 |
46,176 |
Non-GAAP Financial Measure
In this press release, the Company has provided adjusted net
loss as a non-GAAP financial measure. The Company believes
this non-GAAP measure provides investors with an additional
analytical tool for understanding the Company's financial
performance by excluding the impact of certain items that may
obscure trends in the core operating performance of the business.
In particular, this measure excludes certain non-operating and
non-cash expenses that management believes are not indicative of
the Company's core operating results. Non-GAAP adjusted net loss
represents the consolidated GAAP net loss exclusive of DNAG
operating results, certain transaction costs incurred by OraSure in
connection with the acquisition and the purchase accounting
adjustment described above.
This financial measure is not recognized under U.S. GAAP and may
not be comparable to similar measures used by other companies.
Accordingly, while the Company believes that disclosing non-GAAP
financial measures allows for greater transparency in the review of
its underlying financial performance, investors are cautioned not
to consider such measures to be substitutes for, or superior than,
consolidated net loss determined in accordance with GAAP.
The following reconciles the non-GAAP adjusted net loss to the
consolidated GAAP net loss for the three months ended September 30,
2011.
|
(In thousands, except
per share data) |
|
Unaudited |
|
|
|
|
|
|
|
OraSure
Technologies, Inc. Results (Non-GAAP Adjusted Net
Loss) |
Adjust for
Acquisition Related Costs Note 1 |
Adjust for DNA Genotek, Inc.
Results Note 2 |
Purchase
Accounting Adjustment Note 3 |
Consolidated
Results (GAAP Net Loss) |
Results of Operations |
|
|
|
|
|
Revenues |
$ 19,692 |
$ -- |
$ 2,022 |
$ -- |
$ 21,714 |
Gross profit |
12,936 |
-- |
1,421 |
(763) |
13,594 |
Gross margin |
66% |
|
70% |
|
63% |
Total operating expenses |
14,754 |
1,507 |
1,537 |
-- |
17,798 |
|
|
|
|
|
|
Operating loss |
(1,818) |
(1,507) |
(116) |
(763) |
(4,204) |
Net loss |
$ (1,611) |
$ (1,507) |
$ (38) |
$ (763) |
$ (3,919) |
|
|
|
|
|
|
Loss per share: |
$ (0.03) |
$ (0.03) |
$ -- |
$ (0.02) |
$ (0.08) |
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciles non-GAAP adjusted net loss to the
consolidated GAAP net loss for the nine months ended September 30,
2011.
|
(In thousands, except
per share data) |
|
Unaudited |
|
|
|
|
|
|
|
OraSure
Technologies, Inc. Results (Non-GAAP Adjusted Net
Loss) |
Adjust for
Acquisition Related Costs Note 1 |
Adjust for DNA Genotek, Inc.
Results Note 2 |
Purchase
Accounting Adjustment Note 3 |
Consolidated
Results (GAAP Net Loss) |
Results of Operations |
|
|
|
|
|
Revenues |
$ 56,169 |
$ -- |
$ 2,022 |
$ -- |
$ 58,191 |
Gross profit |
36,463 |
-- |
1,421 |
(763) |
37,121 |
Gross margin |
65% |
|
70% |
|
64% |
Total operating expenses |
43,195 |
1,507 |
1,537 |
-- |
46,239 |
|
|
|
|
|
|
Operating loss |
(6,732) |
(1,507) |
(116) |
(763) |
(9,118) |
Net loss |
$ (6,648) |
$ (1,507) |
$ (38) |
$ (763) |
$ (8,956) |
|
|
|
|
|
|
Loss per share: |
$ (0.14) |
$ (0.03) |
$ -- |
$ (0.02) |
$ (0.19) |
Note 1 – Represents success-based investment banking fees
incurred by OraSure at the time of the closing of the DNAG
acquisition. Additional legal, accounting, tax and consulting
costs of $629,000 and $1,028,000 were incurred by OraSure in
connection with the acquisition, and are included in the results
reported in the first column for the three and nine month periods
ended September 30, 2011, respectively.
Note 2 – The DNAG results include non-cash charges of $380,000
for the three and nine months ended September 30, 2011, related to
the amortization of intangibles recorded in connection with the
acquisition.
Note 3 – In connection with the DNAG acquisition, a purchase
accounting adjustment totaling approximately $892,000 was recorded
to write up DNAG's inventory from actual production cost to fair
market value at the date of acquisition. Of this amount, $763,000
was included in cost of products sold during the three and nine
months ended September 30, 2011 to reflect the amount of adjusted
inventory sold during those periods.
|
|
Three Months
Ended September 30, |
|
|
Dollars |
|
Percentage of
Total Revenues |
Market |
|
2011 |
2010 |
% Change |
2011 |
2010 |
|
|
|
|
|
|
|
Infectious disease testing |
$ 11,854 |
$ 10,843 |
9% |
55% |
57% |
Substance abuse testing |
2,765 |
3,019 |
(8) |
13 |
16 |
Cryosurgical systems |
3,395 |
3,008 |
13 |
16 |
16 |
Molecular collection systems |
2,022 |
-- |
100 |
9 |
− |
Insurance risk assessment |
1,399 |
1,529 |
(9) |
6 |
8 |
|
Product revenues |
21,435 |
18,399 |
17 |
99 |
97 |
Licensing and product
development |
279 |
635 |
(56) |
1 |
3 |
|
Total revenues |
$ 21,714 |
$ 19,034 |
14% |
100% |
100% |
|
|
|
|
|
Nine Months Ended
September 30, |
|
|
Dollars |
|
Percentage of
Total Revenues |
Market |
|
2011 |
2010 |
% Change |
2011 |
2010 |
|
|
|
|
|
|
|
Infectious disease testing |
$ 33,100 |
$ 30,297 |
9% |
57% |
54% |
Substance abuse testing |
9,011 |
8,785 |
3 |
16 |
16 |
Cryosurgical systems |
8,907 |
9,122 |
(2) |
15 |
16 |
Molecular collection systems |
2,022 |
-- |
100 |
3 |
-- |
Insurance risk assessment |
4,145 |
4,471 |
(7) |
7 |
8 |
|
Product revenues |
57,185 |
52,675 |
9 |
98 |
94 |
Licensing and product
development |
1,006 |
3,522 |
(71) |
2 |
6 |
|
Total revenues |
$ 58,191 |
$ 56,197 |
4% |
100% |
100% |
|
|
|
|
|
|
Three Months
Ended September 30, |
Nine Months Ended
September 30, |
OraQuick®
Revenues |
2011 |
2010 |
% Change |
2011 |
2010 |
% Change |
|
|
|
|
|
|
|
|
Domestic |
|
$ 10,342 |
$ 10,102 |
2% |
$ 29,411 |
$ 28,083 |
5% |
International |
971 |
436 |
123 |
2,574 |
1,089 |
136 |
|
Total OraQuick® revenues |
$ 11,313 |
$ 10,538 |
7% |
$ 31,985 |
$ 29,172 |
10% |
|
|
|
|
|
|
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
Intercept®
Revenues |
2011 |
2010 |
% Change |
2011 |
2010 |
% Change |
|
|
|
|
|
|
|
|
Domestic |
|
$ 1,947 |
$ 1,913 |
2% |
$ 5,909 |
$ 5,391 |
10% |
International |
438 |
562 |
(22) |
1,472 |
1,522 |
(3) |
|
Total Intercept® revenues |
$ 2,385 |
$ 2,475 |
(4)% |
$ 7,381 |
$ 6,913 |
7% |
|
|
|
|
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
Cryosurgical
Systems Revenues |
2011 |
2010 |
% Change |
2011 |
2010 |
% Change |
|
|
|
|
|
|
|
|
Professional domestic |
$ 2,042 |
$ 1,690 |
21% |
$ 5,097 |
$ 4,476 |
14% |
Professional international |
402 |
326 |
23 |
989 |
865 |
14 |
Over-the-Counter |
951 |
992 |
(4) |
2,821 |
3,781 |
(25) |
|
Total cryosurgical systems revenues |
$ 3,395 |
$ 3,008 |
13% |
$ 8,907 |
$ 9,122 |
(2)% |
|
|
|
Consolidated Balance
Sheets (Unaudited) |
September 30,
2011 |
December 31,
2010 |
Assets |
|
|
Cash, cash equivalents and short-term |
$ 21,374 |
$ 75,738 |
investments |
Accounts receivable, net |
14,361 |
12,471 |
Inventories |
9,448 |
7,346 |
Other current assets |
2,239 |
1,930 |
Property and equipment, net |
20,000 |
19,611 |
Intangible assets, net |
29,246 |
-- |
Goodwill |
25,939 |
-- |
Other non-current assets |
200 |
5,424 |
Total assets |
$ 122,807 |
$ 122,520 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current portion of long-term debt |
$ 7,417 |
$ 7,791 |
Accounts payable |
3,485 |
2,899 |
Accrued expenses |
9,397 |
8,987 |
Deferred income taxes |
6,534 |
-- |
Stockholders' equity |
95,974 |
102,843 |
Total liabilities and stockholders'
equity |
$ 122,807 |
$ 122,520 |
|
|
|
Nine months
ended |
|
September
30, |
Additional Financial
Data (Unaudited) |
2011 |
2010 |
|
|
|
Capital expenditures |
$ 1,806 |
$ 1,643 |
Acquisition of DNA Genotek, Inc. |
$ 50,710 |
$ -- |
Depreciation and amortization |
$ 3,011 |
$ 2,101 |
Stock based compensation |
$ 3,016 |
$ 2,479 |
Cash provided by (used in) operating
activities |
$ (4,079) |
$ 241 |
Accounts receivable – days sales
outstanding |
67 days |
64 days |
|
Conference Call
The Company will host a conference call and audio webcast to
discuss the Company's 2011 third quarter financial results,
business developments and certain 2011 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
877-348-9357 (Domestic) or 970-315-0488 (International) and
reference Conference ID #18091365, 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
November 9, 2011, by dialing 855-859-2056 (Domestic) or
404-537-3406 (International) and entering the Conference ID
#18091365.
About OraSure Technologies
OraSure Technologies is a leader in the development, manufacture
and distribution of oral fluid diagnostic and collection devices
and other technologies designed to detect or diagnose critical
medical conditions. Its innovative products include rapid tests for
the detection of antibodies to HIV and HCV at the point of care and
testing solutions for detecting various drugs of abuse. In
addition, through its wholly-owned subsidiary, DNA Genotek Inc.,
the Company also is a leading provider of oral fluid sample
collection, stabilization and preparation products for molecular
diagnostic applications. OraSure's portfolio of products is sold
globally to various clinical laboratories, hospitals, clinics,
community-based organizations and other public health
organizations, research and academic institutions, distributors,
government agencies, physicians' offices, and commercial and
industrial entities. The Company's products enable healthcare
providers to deliver critical information to patients, empowering
them to make decisions to improve and protect their
health. For more information on OraSure Technologies,
please visit www.orasure.com.
The OraSure Technologies, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=6440
Important Information
This press release contains certain forward-looking statements,
including with respect to expected revenues and earnings/loss per
share. Forward-looking statements are not guarantees of future
performance or results. Known and unknown factors that could cause
actual performance or results to be materially different from those
expressed or implied in these statements include, but are not
limited to: ability to market and sell products, whether through an
internal, direct sales force or third parties; ability to
manufacture products in accordance with applicable specifications,
performance standards and quality requirements; 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; changes in relationships, including disputes or
disagreements, with strategic partners or other parties 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; ability to
integrate and realize the full benefits of the Company's
acquisition of DNA Genotek; ability to identify, complete,
integrate and realize the full benefits of future acquisitions;
impact of competitors, competing products and technology changes;
impact of the economic downturn, high unemployment and poor credit
conditions; reduction or deferral of public funding available to
customers; competition from new or better technology or lower cost
products; 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, extended shelf life or other factors; 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; history of
losses and ability to achieve sustained profitability; ability to
utilize net operating loss carry forwards or other deferred tax
assets; volatility of our 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
the impact of changes in international funding sources and testing
algorithms; adverse movements in foreign currency exchange rates;
loss or impairment of sources of capital; ability to meet financial
covenants in agreements with financial institutions; ability to
refinance outstanding debt under expiring credit facilities on
acceptable terms or at all; ability to retain qualified personnel;
exposure to 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; and general
political, business and economic conditions. These and other
factors are discussed more fully in the Company's Securities
and Exchange Commission filings, including its registration
statements, Annual Report on Form 10-K for the year ended December
31, 2010, Quarterly Reports on Form 10-Q, and other filings with
the SEC. Although forward-looking statements help to provide
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.
CONTACT: Ronald H. Spair
Chief Financial Officer
610-882-1820
Investorinfo@orasure.com
www.orasure.com
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