BETHLEHEM, Pa. - Sales declined steeply compared to the prior year in the third quarter and the first nine months of 2019 for OraSure Technologies.
However, in a sign of confidence in the future, the company announced that it has entered into a definitive agreement to acquire the outstanding equity of Diversigen in an all-cash transaction.
Diversigen is a privately held microbiome industry pioneer based in Houston, Texas.
Diversigen provides science-driven, customized solutions for metagenomics sequencing, bioinformatics, and statistical analysis for the study of the microbiome. The company was founded in 2013 by Dr. Joseph Petrosino, director of the Alkek Center for Metagenomics and Microbiome Research at the Baylor College of Medicine, where Diversigen is a Baylor portfolio company.
“Despite the headwinds during the third quarter, we remain optimistic about our future, as we continue to execute on our innovation-driven strategy, using our strong bottom line and healthy cash balances,” said OraSure President & CEO Stephen Tang, Ph.D. “We continue to realign our portfolio of businesses to focus on future growth, as outlined in our strategy. The acquisition of Diversigen will extend our leadership position as an end-to-end provider of microbiome products and services.
At the same time, the divestiture of our cryosurgical unit enables us to focus our resources on growing our core Molecular Solutions and Infectious Disease businesses.”
Net product revenues for the third quarter of 2019 decreased 19% from the comparable period of 2018, primarily as a result of lower genomics product sales, lower domestic sales of the company’s OraQuick® HIV test, and the divestiture of the cryosurgical systems business in mid-August to CryoConcepts LP. The decreased sales were partially offset by higher international HIV product sales and higher sales of the Company’s microbiome and risk assessment products.
For the first nine months of 2019 net revenues declined to $104.937 million from $131.497 million for the first nine months of 2018.
International sales of the OraQuick® HIV Self-Test for the third quarter of 2019 and 2018 included $520,000 and $840,000, respectively, of support payments under the Company’s charitable support agreement with the Bill & Melinda Gates Foundation (“Gates Foundation”).
Royalty income from a litigation settlement associated with a molecular collection device was $758,000 and $1.1 million for the third quarters of 2019 and 2018, respectively.
Other revenues, excluding royalty income, were a loss of $68,000 against a gain of $1.3 million for the third quarters of 2019 and 2018, respectively. Other revenues in the current period decreased as a result of a rate true-up under the Company’s contract with the U.S. Biomedical Advanced Research Development Authority (BARDA) and lower cost reimbursement from the Gates Foundation, which is separate from the support payments.
For the third quarter of 2019, operating expenses were $8.6 million, a decrease of $9.1 million from the $17.7 million reported for the third quarter of 2018. This decrease was due primarily to the pre-tax gain on the sale of the cryosurgical business of $10.2 million and a non-cash benefit of $2.4 million in the current quarter for the change in fair value of contingent consideration associated with the recent acquisitions of CoreBiome and Novosanis, offset by the incremental operating expenses of CoreBiome and Novosanis and $443,000 of acquisition-related transaction costs.
Orasure generated net income of $13.1 million, or $0.21 per share in the third quarter of 2019 compared to net income of $8.1 million in the third quarter of 2018. For the first nine months of 2019 net income reached $14.218 million, up from $10.098 million in 2018.
Updated Full-Year 2019 Guidance
The company expects full-year 2019 net revenues to range from $150 million to $153 million and is projecting net income of $0.28 to $0.31 per share. These projections do not account for the impact of changes in the fair value of acquisition-related contingent consideration or any potential transaction costs related to future business development activity.
Based in Bethlehem, OraSure Technologies (OSUR: NASDAQ) develops, manufactures and distributes oral fluid diagnostic and collection devices and other technologies designed to detect or diagnose critical medical conditions. These products include tests for the detection of antibodies to the HIV virus, a test for antibodies to the HCV virus, and oral fluid testing solutions for drugs of abuse testing.
OraSure also manufactures and sells several cryosurgical products. In addition, through its wholly-owned subsidiary, DNA Genotek Inc., the Company also is a provider of oral fluid sample collection, stabilization and preparation products for molecular diagnostic applications.