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Oxford Immunotec Q4 Revenues Rise 5 Percent; Plans to Shut Down Babesia Assay Project

NEW YORK (360Dx) – Oxford Immunotec reported Tuesday that its fourth quarter revenues increased 5 percent year over year, driven by continued growth in both its tuberculosis and tick-borne disease testing businesses.

For the three months ended Dec. 31, 2017 Oxford Immunotec reported total revenues of $25.0 million, up from $23.7 million a year ago, but short of the analysts' average estimate of $25.7 million. In January, the firm announced that it expected to report fourth quarter revenue between $24.9 and $25.4 million.

Product revenues rose 4 percent year over year to $9.7 million from $9.3 million while service revenues increased 6 percent to $15.3 million from $14.4 million in the prior-year quarter. The firm said that the increase in product revenue was primarily driven by strong growth in tuberculosis kit sales in the Europe and the rest of the world. It noted that service revenues were primarily driven by strong growth in its clinical tick-borne disease business and tuberculosis volume increases in the US and the UK.

The company said that Q4 revenues related to its tuberculosis testing business grew 3 percent year over year to $21.0 million from $20.4 million, while tick-borne disease-related revenues rose 21 percent to $4.0 million from $3.3 million in Q4 2016.

Oxford Immunotec CEO Peter Wrighton-Smith said in a statement that 2017 "contained many ups and downs" for the firm. He noted that highlights during the year "included stronger-than-expected performance in Asia, a marked acceleration in Europe [and the rest of the world] revenue growth, outperformance of our clinical tick-borne disease business, and the successful culmination of several strategically important multiyear initiatives on intellectual property, royalties, and reimbursement.”

In Q4, overall US revenues rose 6 percent to $15.6 million from $14.7 million in the prior-year quarter while revenues in Europe and the rest of the world were up 29 percent to $2.2 million from $1.7 million, and Asia revenues dropped 1 percent to $7.2 million from $7.3 million. The firm said that in the US, the revenue increase was due to growth in its tuberculosis and tick-borne disease businesses, and in Europe and the rest of the world, the increase was primarily due to tuberculosis growth in the UK and continental European markets.

Wrighton-Smith noted on the conference call to discuss earnings that among the company's highlights in 2017 was its continued evolution "from a one product company to a multiproduct company and [the] completed … successful integration of two acquisitions." 

In June 2016, the firm acquired substantially all the assets of Lyme disease testing company Imugen in a transaction worth $22.2 million in cash, and in October 2106, it acquired Immunetics, a diagnostics company focused on developing specialized tests for infectious diseases, including Lyme disease, for $6 million in cash and up to an additional $6 million if certain conditions are met.

He noted that in the US, the firm's commercial success in 2017 was "overshadowed by lower test utilization and less demand for immigrant screening for tuberculosis.

Wrighton-Smith said that during the year the firm "saw the very successful conclusion of several strategic initiatives that had been underway in some cases for multiple years." They included strategies to drive higher reimbursement pricing than for competing tests for the firm's T-SPOT TB test in France and the US.

In 2018, the firm will invest in "multiple growth initiatives" for both its tick-borne and interferon gamma-release assay TB testing businesses, he said. Interferon gamma-release assays (IGRA) as a class of tests are only about 20 percent penetrated for TB testing, which leaves 80 percent of the market using tuberculin skin testing (TST), he said.

Wrighton-Smith noted that consequently, the firm's sales and marketing activities in 2018 will look to exploit increasingly positive updates to guidelines, including the combined US Centers for Disease Control and Prevention, American Thoracic Society, and Infectious Disease Society of America guidelines and the US Preventive Services Task Force recommendation to promote IGRA usage over the skin test in the US.

Earlier this month, the World Health Organization deemed IGRAs an appropriate alternative to the tuberculin skin test (TST) for determining which patients in regions with a high disease burden may progress to active tuberculosis. Also, the CDC mandated that all US civil surgeon screening immigrants for latent tuberculosis must use an interferon-gamma release assay (IGRA) instead of the decades-old TST.

JP Morgan analyst Tycho Peterson said in a research note today that Oxford's underlying core TB business "is set to benefit from a combination of guideline updates that should accelerate market penetration."

He noted that the CDC requirement for IGRA testing for immigration applications represents about 500,000 tests per year.

Oxford Immunotec reported net income in Q4 2017 of $8.8 million, or $.33 per share, compared to a loss of $4.9 million, or $.22 per share, in the year-ago period. The firm did not provide an adjusted EPS figure for the recently completed quarter. On average, analysts had expected a loss per share of $.18.

R&D expenses in Q4 2017 grew 13 percent to $4.5 million from $4.0 million in the year-ago period, while SG&A expenses rose 6 percent to $16.2 million from $15.3 million a year ago.

The company noted on a conference call to discuss its earnings that it expects to shut down a project to develop a babesia blood-donor screening assay because of a letter it had received from the US Food and Drug Administration that required additional clinical testing. The firm said that it recorded an impairment charge of $7.2 million in the recently completed quarter related to the project.

Due to product revalidation requirements by the FDA, the company is considering whether to continue development, because remediation would cause a 15-month delay and last beyond lease expiration of its current plant, Peterson said. Wrighton-Smith said during the conference call that this would undermine the firm's first-mover advantage, but that the firm would save about $3 million per year by stopping the program.

Also, in December, Oxford settled a lawsuit with Qiagen alleging patent infringement of Oxford's patents on tuberculosis diagnostic tools by Qiagen. Oxford noted that its net income for the fourth quarter included a lump sum payment of $27.5 million related to the lawsuit.

For the full-year 2017, Oxford Immunotec reported total revenues of $103.1 million, up 20 percent from $86.1 million a year ago, but short of the analysts' average estimate of $103.7 million.

In 2017, product revenues rose 11 percent year over year to $40.5 million from $36.4 million while service revenues increased 26 percent to $62.6 million from $49.6 million in the prior-year quarter. The company said that revenues for its tuberculosis testing business grew 9 percent year over year to $85.3 million from $78.6 million, while tick-borne disease-related revenues rose 141 percent to $17.8 million from $7.4 million in Q4 2016.

The firm reported that its net loss in 2017 widened to $32.9 million, or $1.38 per share, compared to a loss of $22.3 million, or $1.00 per share, in the year-ago period. The firm did not provide an adjusted EPS figure for the recently completed year. On average, the analysts had expected a 2017 loss per share of $1.97.

R&D expenses in 2017 grew 20 percent to $16.7 million from $13.9 million in 2016, while SG&A expenses rose 18 percent to $68.4 million from $58.1 million a year ago.

The company ended the quarter and year with $90.3 million in cash and cash equivalents.

Oxford said that for full-year 2018, it expects revenues of between $112 million and $118 million, which would represent 9 percent to 15 percent year-over-year growth.

In early morning trading on the Nasdaq, Oxford Immunotec's stock was down 3 percent at $11.64.