NEW YORK (360Dx) – OraSure Technologies reported after the close of the market on Wednesday that its third quarter revenues rose 8 percent year over year as overall product revenues rose 6 percent.
For the three months ended Sept. 30, the point-of-care diagnostics company reported total revenues of $45.9 million, up from $42.3 million in the prior-year quarter and beating the average Wall Street estimate of $44.5 million.
"Our solid third quarter performance was driven by strong growth in our molecular collections and international HIV self-test businesses," OraSure President and CEO Stephen Tang said in a statement. "An abundance of opportunity remains in the growth drivers for our business, and capitalizing on these opportunities will remain a priority for our management team."
The firm's product revenues for the quarter rose to $43.5 million from $41.2 million in Q3 2017. Within products, only molecular collections systems revenues increased, rising 37 percent to $25.5 million from $18.6 million, which included a 48 percent increase in revenues from commercial genomics products to $21.5 million from $14.5 million, and a 118 percent increase in microbiome product revenues to $1.7 million from $776,000. This category also saw a 29 percent decrease in revenues from academic genomics products to $2.3 million from $3.2 million.
The firm's Q3 revenues from infectious disease testing fell 25 percent to $12.4 million from $16.6 million a year earlier. Risk assessment testing revenues fell 10 percent to $2.8 million from $3.1 million, and cryosurgical systems revenues fell 6 percent to $2.7 million from $2.9 million.
Within the firm's infectious disease testing revenues, sales of its OraQuick tests for HIV and hepatitis C fell 26 percent to $12.0 million from $16.2 million in Q3 2017. Total HIV sales rose 7 percent to $8.8 million from $8.2 million — domestic HIV testing sales fell 24 percent to $2.7 million from $3.6 million, but this was offset by a 41 percent increase in international HIV testing sales to $4.3 million from $3.1 million and a 13 percent increase in domestic OTC HIV testing revenues to $1.7 million from $1.5 million.
Total HCV testing sales fell 60 percent to $3.2 million from $8.0 million in the year-ago quarter — a 9 percent increase in domestic HCV testing sales to $2.1 million from $1.9 million was unable to offset an 81 percent decrease in international HCV testing revenues to $1.2 million from $6.2 million.
On a call with analysts following the release of the earnings, OraSure CFO Roberto Cuca said that the 48 percent increase in commercial genomics products revenues were largely due to higher customer demand from a large unnamed consumer genomics customer. Tang also noted that strong sales in the consumers genomics market reflected the seasonal variability of the company's molecular revenues as customers purchased OraSure products in preparation for annual retail promotional events in the winter holiday shopping season.
"As a reminder, this large component of our revenue tracks like a consumer product rather than a typical health care diagnostic test, and this should be factored in when developing quarterly expectations," Tang said.
He added that OraSure won 29 new commercial accounts during Q3 compared to 43 for all of 2017. Many of these new accounts were pharmacokinetic testing providers or customers in the health and wellness space.
"We are seeing a trend of new commercial purchasers coming primarily from diagnostic pharmacogenomics and nutritional fields. Sales for the Asia-Pacific market have also continued to grow with large accounts from the direct-to-consumer pharmacogenomics and health and wellness test markets," Tang said. "The fact that we continue to secure large contracts in Asia indicates the preference of these customers for using our [US Food and Drug Administration]-cleared, high-quality DNA sample collection kits with their tests."
Turning to the company's infectious disease testing business, Cuca said that international HIV sales increased due to higher sales of the OraQuick HIV self-test in Africa. "A majority of our volume this quarter came from countries outside of the UNITAID Population Services International Self-Testing Africa, or STAR, initiative, demonstrating continued growth of countrywide pilots and initiatives," he noted.
Tang also announced that the company had completed registrations for its HIV self-test in 10 countries, that submissions are pending for an additional 10 countries, and that new submissions are being prepared for 24 countries.
With respect to the firm's global HCV business, revenues declined in the third quarter primarily as a result of funding challenges and the difficult comparison caused by the non-renewal of a large foreign supply contract last year, Tang said, adding, "Nevertheless, we remain confident that our overall HCV business and believe it will continue to be a source of future growth largely because interest in eradicating HCV and testing remains high, both here in the US and in international markets."
OraSure's overall revenue increase also benefitted from a 110 percent increase in other revenues to $2.4 million from $1.2 million, including royalty income of $1.1 million compared to none a year ago, and a 15 percent year-over-year increase in BARDA funding to $1.1 million from $939,000. On the call, Cuca noted that royalty income came from a litigation settlement agreement.
The firm's Q3 net income grew to $8.1 million, or $.13 per share, from $5.8 million, or $.09 per share, in the year-ago period.
OraSure's R&D expenses for the quarter rose 22 percent to $3.9 million from $3.2 million in Q3 2017, and its SG&A costs fell 2 percent to $13.8 million from $14.1 million.
The company ended the quarter with $78.1 million in cash and cash equivalents and $72.2 million in short-term investments.
For the fourth quarter, the company expects net revenues of $46.5 million to $48.0 million and net income of $.09 to $.11 per share. Analysts have projected revenues of $54.6 million for Q4.
On the call, Cuca noted that the revenue expectation implies full-year 2018 year-over-year revenue growth of 7 percent. "As we've described previously, last year, some of our consumer genomics customers experienced unexpectedly positive responsiveness to their winter holiday promotional activities and discounting, with the result of this purchased inventory for the holidays deeper into the fourth quarter than they otherwise might have," he said. "Based on recent discussions, we understand that they are better prepared for this year's holiday season and that their purchases will be more evenly distributed between the third and fourth quarters. As a result, we do not anticipate experiencing as substantial a revenue progression from the third to fourth quarters of this year as we saw last year."
OraSure's shares fell 13 percent to $12.80 in Thursday morning trading on the Nasdaq.