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OraSure Technologies' Rapid Diagnostics Business Grows as Firm Touts Test Simplicity


NEW YORK – OraSure Technologies expects its rapid diagnostics business to make up an increasing proportion of its revenues as the at-home testing space expands. Although the firm is in the midst of evaluating strategic alternatives aimed at increasing shareholder value, OraSure continues to scale up manufacturing of its COVID-19 rapid antigen test which it claims is uniquely easy to use.

Bethlehem, Pennsylvania-based OraSure expects $230 million in revenues for 2021, as previously reported. The firm entered a strategic review period at the beginning of January and also announced that CEO Stephen Tang will be departing at the end of March.

More than half of the firm's $20 million in COVID-19 diagnostic sales for the year came in the fourth quarter, as it resolved manufacturing setbacks that had limited the initial scale-up of an at-home COVID test, called InteliSwab, which obtained Emergency Use Authorization in June 2021. These COVID revenues made up about one third of the firm's total Q4 sales.

Scott Gleason, OraSure's interim CFO and senior VP of corporate communications, said in an interview that the firm's diagnostics business — which includes tests for HIV, hepatitis C virus, and COVID-19 — makes up about two-fifths of total revenues. The larger portion of the business is molecular solutions, including sample collection devices and microbiome testing services.

But these proportions are now changing rapidly, Gleason said, with the InteliSwab test revenue ramping up.

"As we look to next year, we would expect our diagnostic division to be significantly larger than the molecular solutions business," he said.

On the diagnostics side, OraSure has been a pioneer in the public health diagnostics space since obtaining the first-ever at-home clearance for an infectious disease test. The firm launched its over-the-counter HIV test in 2012 and remained the only infectious disease test with an at-home clearance for many years.

"With the COVID pandemic it now seems normal to go to Walgreens and get a [diagnostic] test, but prior to 2012 that had never really happened before," said Gleason.

HIV self-tests like OraSure's have been shown to be important in preventing spread of that virus, particularly among certain vulnerable populations. The firm is also working with nongovernmental agencies in sub-Saharan Africa to supply HIV self-tests and has seen the amount of testing there grow at a double-digit rate of late, Gleason said.

OraSure has commercialized an HCV rapid test as well. While HIV rates overall are declining in the US, HCV is increasing, and is particularly dangerous because it can lead to liver damage and cancer.

OraSure's infectious disease revenues are divided between sales in the US and internationally, with both HIV and HCV testing historically somewhat dependent on public funding, particularly in cases where the testing is needed to serve disadvantaged communities or underfunded clinics.

In addition to these infectious disease tests, OraSure has unique assays for drugs of abuse that use oral fluid rather than urine as the sample type, which enables the person taking the test to be supervised, if needed.

For all these tests, Gleason says that being a pioneer in the OTC space has enabled the firm to work through some of the idiosyncrasies of at-home diagnostics.

"OraSure has a lot of experience in very simplistic testing," Gleason said. In contrast, he said some of the at-home COVID-19 rapid antigen tests are more like "mini science experiments." These can have particular disadvantages for people like busy parents testing small children before school, or nonnative speakers of English. Testing complexity could also potentially increase the likelihood of false negative results, Gleason said.

In the OraSure InteliSwab test, for example, the nasal swab is in the same small unit as the lateral flow strip, so the consumer only needs to place the tip in a developer solution and wait for results.

OraSure also recently obtained an additional claim for testing children. Along with the ease of use, for this market it is also important that the ingredients in the OraSure tests are nontoxic, Gleason said, noting that some other tests have "semi-toxic ingredients" from a chemistry standpoint.

Although one year ago it might have seemed remarkable to purchase an infectious disease test in a pharmacy, consumers seem to have quickly acclimated to the idea that at-home testing is less expensive, places less of a demand on the healthcare system, and can reduce the spread of disease.

"It has really opened the world's eyes," Gleason said. "When we think about where OraSure wants to go in the future, we think there are other tests in the over-the-counter setting that would really benefit people," he added. Given the COVID experience, there is also a chance for "a more positive regulatory environment" in the future for home testing that could be informed by increased consumer demand.

At this point, given its current capacity constraints, OraSure is focused on the OTC market for the InteliSwab COVID-19 test. It is also supporting a large tender award from the US government to supply testing.

In terms of the molecular business, the firm makes molecular kits that are used by consumer and clinical genomics companies to collect oral fluids. These products have also been adopted for COVID testing. And, it has a microbiome testing services business with its 2019 Diversigen and CoreBiome acquisitions. These businesses primarily provide contract research services to spaces like the pharmaceutical industry, Gleason said.

Past and present challenges

OraSure began developing its SARS-CoV-2 rapid antigen assay early in 2020 but faced numerous challenges, including a necessary change in sample type from oral fluid to a nasal swab. "That set us back some, from a timeframe standpoint," Gleason said.

The firm got three EUAs in early June of 2021, but then encountered a scale-up challenge related to tech transfer. Specifically, transitioning from a manual process in the R&D setting to an automated assembly process for the tests took a few months to resolve.

As a firm with a longstanding relationship with public health, however, OraSure knows that costs need to be kept low. "OraSure hasn't made any money on [COVID-19] rapid antigen testing — we've invested a lot and lost a lot of money because of the fact that we've been scaling up," Gleason said.

And unfortunately, like many other diagnostics makers, the firm is now facing similar challenges in finding enough skilled labor to assemble tests. OraSure has begun offering higher wages both in Bethlehem and Thailand to attract more applicants. "One of the keys to scaling up is hiring more people," Gleason said, noting however that the firm is currently making "good progress" on this front.

OraSure is also being hit by the increased shipping costs that are plaguing the industry. The firm makes the InteliSwab lateral test strip in Bethlehem, ships it for assembly into the test kit to its facility in Thailand, then ships it back to the US. It also has to ship to multiple sites in the US under its government contract.

The firm doesn't yet have stability testing data for a long voyage by sea, Gleason said, so OraSure ships by air, which involves buying excess cargo space in passenger flights. Since there are fewer of these flights lately, and many others are also shipping this way, the cost has gone up tenfold, he said.

It is not clear how the rates of COVID will ebb and flow over the coming years, "but for a company trying to recoup the investment it has made on equipment specific to testing for COVID-19, that's challenging," Gleason said. This is offset by government commitments to large purchases of rapid antigen tests, support for the scale-up, as well as new opportunities for reimbursement.

Going forward, Gleason could not comment on the specifics of the review of strategic alternatives but said the firm believes COVID-19 testing is apt to be a long-term challenge and rapid, accurate testing at the point-of-care needs to be part of the solution.

"We will likely continue to go through valleys and peaks of disease activity over time," he said, adding, "The virus probably still has a few tricks up its sleeve."