OraSure Beats Expectations in 3Q23; Investors Focus on Core Growth and Post InteliSwab Growth Drivers
11-8-23 (by: Scott Gleason) OraSure Technologies has announced its financial results for the third quarter of 2023 with the company reporting revenue of $89.2 million compared to $116.5 million in the same period of 2022, a 23% year-over-year decline. However, the core business grew 7% year-over-year predominantly on higher HIV test sales and the decline was attributable to lower COVID-19 test sales under the company’s government contracts. Street forecasts called for total revenue of $75.0 million.
Diagnostic products (excluding COVID-19) grew 59% year-over-year in the quarter. Some of the strength was driven by the Together Take Me Home Program. Orasure also announced a new partnership agreement to launch three new diagnostic tests including syphilis and Hepatitis B. The company also announced an expanded agreement for its point-of-care drug of abuse tests. Molecular products revenue exhibited a 17% sequential increase but saw a 4% year-over-year decrease. The company’s molecular business, which is the most highly valued segment by investors, has declined by 20% year to date which the company has attributed to muted ordering by a few large customers and customer inventory destocking activity. COVID-19 revenue amounted to $50.2 million in the third quarter, reflecting a 37% decrease from the previous year. The company received an additional $5.7 million purchase contract from the government for InteliSwab tests and anticipates completing its contracts in the first half of 2024. The company has around $80 million remaining on its contracts and expects $40 million in COVID-19 revenue in Q423 leaving $40 million remaining for 2024.
OraSure reported non-GAAP operating income stood of $20.6 million compared to $11.7 million recorded in the third quarter of 2022. The increase is attributable to production efficiencies and cost-cutting. During the third quarter, the company generated significant operating cash flow under its InteliSwab government contracts with cash balances ending at $225 million. Management stated that it remains confident in achieving their goal of breaking even in cash flow from operations for the core business by the end of 2024. The company noted that it is on track to exceed the $15 million in annualized cost savings announced in Q1 2023. Management noted that it has collected the final milestone payments under its government funded testing capacity expansion.
The company guided to Q423 revenue of $71 to $76 million, which includes core revenue of $33 to $35 million and InteliSwab revenue of $38 to $41 million. The guidance implies a sequential decline in core revenue. OraSure’s CEO stated on the call they expect the core business as it stands today to grow in the low single digits in 2024 but that they are working on improving that through growth initiatives.