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Edited Transcript of OSUR.OQ earnings conference call or presentation 6-May-20 9:00pm GMT

Q1 2020 OraSure Technologies Inc Earnings Call

BETHLEHEM Jun 16, 2020 (Thomson StreetEvents) -- Edited Transcript of OraSure Technologies Inc earnings conference call or presentation Wednesday, May 6, 2020 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Roberto E. Cuca

OraSure Technologies, Inc. - CFO & Principal Accounting Officer

* Stephen S. Tang

OraSure Technologies, Inc. - President, CEO & Director

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Conference Call Participants

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* Andrew Cooper;Raymond James;Associate Analyst

* Brandon Couillard

Jefferies LLC, Research Division - Equity Analyst

* David Michael Westenberg

Guggenheim Securities, LLC, Research Division - Analyst

* Jacob K. Johnson

Stephens Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Good afternoon, everyone, and welcome to the OraSure Technologies 2020 First Quarter Financial Results Conference Call and Simultaneous Webcast. As a reminder, today's conference is being recorded. (Operator Instructions)

OraSure Technologies issued a press release at approximately 4:00 p.m. Eastern Time today regarding its 2020 first quarter financial results and certain other matters. The press release is available on our website at www.orasure.com, or by calling (610) 882-1820. If you go to our website, the press release can be found by opening the Investor Relations page and clicking on the link for Press Releases.

With us today are Dr. Stephen Tang, President and Chief Executive Officer; and Mr. Roberto Cuca, Chief Financial Officer. Dr. Tang and Mr. Cuca will begin with opening statements, which will be followed with a question-and-answer session.

Before I turn the call over to Dr. Tang, you should note that this call may contain certain forward-looking statements, including statements with respect to revenues, expenses, profitability, earnings or loss per share and other financial performance, product development, performance, shipments and markets, business plans, regulatory filings and approvals, expectations and strategies. Actual results could be significantly different. Factors that could affect results are discussed more fully in the company's SEC filings, including its registration statement, its annual report on Form 10-K for the year ended December 31, 2019, its quarterly reports on Form 10-Q and its other SEC filings.

Although forward-looking statements help to provide complete information about future prospects, listeners should keep in mind that forward-looking statements are based solely on information available to management as of today. The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call.

With that, I would like to turn the call over to Dr. Stephen Tang.

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [2]

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Thank you, Jane. Good evening, everyone, and welcome to our call. Before we begin, on behalf of all of us at OraSure, I would like to express our sincere gratitude to the health care providers on the front lines, fighting the COVID-19 pandemic, especially today, which is National Nurses Day. We would also like to acknowledge all those workers who are performing jobs that keep our country and society functioning. Your dedication, bravery and importance are vital to us. I also must thank all of our employees. Their outstanding efforts play an important role in helping people around the world. Our employers (sic) [employees] are being put to the test every day, and they are responding with tenacity and excellence. I have never been prouder to lead our exceptional company.

OraSure has a storied history of rising to the occasion of challenging health circumstances, having developed high-quality diagnostic tests for HIV, HCV and Ebola. As you can imagine, we are doing everything we can to bring our expertise with infectious disease diagnostics in sample collection to the battle against COVID-19.

On the testing front, we are developing a pan-SARS coronavirus rapid antigen in-home self-test that uses oral fluid samples and an ELISA-based test for the detection of human anti-SARS-CoV-2 antibodies in oral fluid specimens.

Our molecular solutions business unit is working with laboratories and researchers to demonstrate the effectiveness of our sample collection technologies for coronavirus testing. Later in the call, I will update you on our progress on these items.

Turning to the first quarter. I'm pleased to report that OraSure is off to a good start in 2020 with solid financial results. The coronavirus pandemic is certainly affecting our business and I'll discuss that in a minute. But it's important to note that any negative impact from COVID-19 in Q1 was largely offset by additional product uptake in response to the pandemic. As a result, the company's sales were in line with our own expectations from before the onset of the pandemic.

Because our company is considered an essential business, we are permitted to continue operating in the various states and countries where our employees are located. A large number of our employees can fulfill their job functions remotely and are working from home in accordance with local stay-at-home requirements. A key group of employees who must be on-site are primarily manufacturing, warehouse, laboratory and R&D personnel. We have implemented enhanced hygiene and social distancing protocols to ensure their safety. Fortunately, we've had only one instance of COVID-19 infection reported amongst the more than 470 employees company-wide. That employee, who is field-based, is now recovered. And for that, we are very grateful.

The COVID-19 pandemic is having a mixed impact on OraSure. We saw some downward pressure from COVID-19 on revenues in our domestic professional HIV and HCV businesses and in our molecular sales to the academic market in Q1 as HIV and HCV testing programs and molecular research programs have been delayed or terminated because of COVID-19.

In our services business, revenue were also impacted as customers who could not access samples housed at academic or medical facilities that were to be sent to our microbiome services lab for processing. We see these trends continuing with a likely bigger impact on future quarters. However, sales of our In-Home HIV tests are rising as public health HIV testing programs in the U.S. are increasingly using our over-the-counter product as they adjust sampling strategies in response to COVID-19.

We are also seeing increased sales of our existing molecular saliva collection kits and oral swabs, as some customers moved from blood to saliva collection due to difficulties collecting blood samples under current circumstances. Assuming we're successful in our development and regulatory efforts, we anticipate that the new coronavirus testing products we're working on and the expanded use of some existing molecular collection products could make significant contributions later this year, especially as the need for COVID-19 testing increases.

Our manufacturing operations have been unaffected by the pandemic. We have not had any significant disruptions from our suppliers. Importantly, we expect that to continue.

With respect to logistics, we have seen additional challenges for international shipments, particularly by our Thailand contract supplier, largely due to a reduction in the availability of airfreight, closing of customs offices in certain countries and transport congestion. We have generally been able to work around these issues by using more sea freight. Accordingly, our shipping costs are and will continue to be a bit higher for certain destinations. We are considering several options to expand current capacity to make sufficient quantities to support the growing demand for existing products as well as demand for COVID-19 products in development. We'll share more information about these options, once relevant and timely.

So despite the many moving parts and uncertainties surrounding the impact of COVID-19, we believe OraSure is well positioned to maintain its base business and to play an important role in fighting the pandemic.

Turning briefly to the highlights from Q1. Net revenues of $31.6 million represent a 5% increase from the year-ago period. We achieved this increase despite the absence of our cryosurgical product line, which we sold in 2019. Excluding revenues from our cryosurgical business, which we sold in August of 2019 and revenues from our newest subsidiary, Diversigen, which we acquired in November of 2019, net revenues grew 8%.

International HIV sales increased a robust 74% for the first quarter compared to 2019, largely due to the strength of our HIV Self-Test. This performance continues a trend we saw throughout 2019, and we expect that to continue in future periods.

Our molecular collection systems product and service revenues for Q1 grew 25%, largely due to renewed genomic sales growth and a strong financial performance by our laboratory services business.

Our genomic business grew 14% in the first quarter compared to last year. This was largely due to the shifts from blood to saliva testing by certain customers, as I mentioned earlier. We saw a 237% increase in laboratory service revenue for Q1, primarily due to the addition of Diversigen, which we acquired in late 2019.

Net loss from the first quarter was higher than the prior year as a result of greater cost of goods sold, increased R&D spend and charges and costs associated with our business development activity as we continue to prioritize the identification and pursuit of external acquisition opportunities, consistent with our long-term innovation growth strategy, all partially offset by higher foreign exchange gains.

Finally, our cash balances at the end of the quarter totaled $176 million. This significant cash balance, coupled with the absence of debt on our balance sheet, will enable us to weather the type of uncertainties presented by COVID-19 pandemic, while pursuing our innovation growth strategy.

So we are pleased with the way 2020 has started and look forward to delivering a successful rest of the year despite the challenges that may arise from COVID-19.

And with that, I'll now turn things over to Roberto for a financial review of the quarter. I will then share some additional thoughts on our business, and we'll take your questions. Roberto?

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Roberto E. Cuca, OraSure Technologies, Inc. - CFO & Principal Accounting Officer [3]

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Thanks, Steve, and good evening, everyone, again. Our first quarter net revenues increased 5% to $31.6 million from the $30.1 million reported in the first quarter of 2019. Our net product and services revenues increased to $30.9 million, growing 9% compared to the prior year period. Notably, the first quarter of 2019 included cryosurgical revenue of $2.6 million, which did not recur in 2020 since we sold this line of business in August of 2019. Excluding these sales dollars from Q1 2019 revenues, and the contribution to Diversigen, which we acquired in the fourth quarter of 2019, would result in an aggregate product and services revenue increase of 13% in the first quarter of 2020.

As Steve mentioned, international HIV sales increased 74% to $6.9 million from $4 million in the first quarter of 2019 due to higher sales of our HIV Self-Test into Africa. Domestic HIV sales decreased 2% to $4.2 million from $4.3 million in 2019 due to COVID-19 stay-at-home orders and the resulting deferral or shutdown of public health testing activities. This was offset by the launch of our In-Home HIV test into a new retail channel and the increased use of this OTC product in public health settings in reaction to COVID 19.

Domestic HCV sales decreased 18% in the first quarter of 2020 to $1.5 million from $1.8 million in the prior year period, also largely due to the cessation of testing programs as a result of COVID-19 as well as the redirection of funding away from the HCV testing to COVID testing. International HCV sales in the first quarter of 2020 decreased 25% to $1.1 million from $1.5 million in the same period of 2019, primarily due to lower sales into Asia.

Our total molecular revenues, including other revenues, increased 16% to $13.8 million in the first quarter compared to $11.9 million in 2019. Royalty income declined 59% to $446,000 in the first quarter of 2020 from $1.1 million in the same period of 2019. This reflects the continuing challenges faced in the consumer genomics and ancestry market. Genomics product revenues increased 14% to $9.1 million in 2020 compared to $8.1 million in 2019 due to organic growth of existing customers and a shift from blood to saliva collection by customers using both sample types due to the inability to collect blood samples as a result of restrictions related to COVID-19.

Microbiome product sales remained largely flat at $1.6 million in both the -- in the first quarters of 2020 and 2019. Lab service revenues generated by our subsidiaries, CoreBiome and Diversigen, increased 237% to $2.4 million in the first quarter of 2020 from $717,000 in the same period of 2019, largely due to the inclusion of revenues generated by Diversigen, which was acquired in the fourth quarter of 2019.

Gross profit percentage for the first quarter of 2020 was 51% compared to 60% reported for the first quarter of 2019. The decline is related to a revenue mix higher in sales of lower gross profit percentage products and services, including the addition of microbiome services acquisitions and the absence of higher-margin cryosurgical product sales as well as increased international freight costs, higher scrap and spoilage expense and a decline in other revenues, which contribute 100% to the gross profit percentage.

Our operating expenses for the first quarter of 2020 were $24.2 million compared to $21.9 million in the comparable period of 2019. The increase in the operating expense in the first quarter of 2020 was largely due to increasing staffing costs, higher lab supply and consulting costs in support of bioinformatics and new product initiatives, increased legal fees and the inclusion of operating expenses incurred by Diversigen.

We reported a net loss of $7.3 million or $0.12 per share on a fully diluted basis for the first quarter of 2020 compared to a net loss of $3.3 million or $0.05 per share for the first quarter of 2019. Results in these periods included acquisition-related charges of $1.1 million and $1.3 million, respectively. Results in Q1 2019 also included $597,000 of transaction expenses. These charges amounted to approximately $0.02 and $0.03 in the first quarters of 2020 and 2019, respectively.

As Steve mentioned, we continue to maintain a solid cash and liquidity position. Our cash and investments balance at March 31, 2020, was $176.2 million compared to $189.8 million at December 31, 2019. Cash generated by operating activities during the 3 months ended March 31, 2020, was $2.5 million compared to $528,000 in the same period of 2019.

As Steve will describe in a bit more detail shortly, the COVID-19 pandemic will likely not just exert downward pressure on certain existing lines of business but will also present new opportunities for both existing products and services and for development efforts we are undertaking to address COVID-19 testing needs specifically. The net effect of these future opportunities and challenges is difficult to predict reliably, and for this reason, we are withdrawing financial guidance for 2020. However, I do want to reiterate that this is because of the difficult to protect -- predict potential upside as well as downside presented by the pandemic.

With that, I will now turn the call back over to Steve for further business updates.

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [4]

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Thank you, Roberto.

Turning now to infectious disease. Our global HIV business continued to deliver strong performance with revenue increases -- increasing 34% in the first quarter compared to the first quarter of 2019. Major driver was a 74% increase in international HIV revenue. We shipped 2 million HIV Self-Tests to international markets in Q1. This business rose 98% compared to the year-ago quarter, as established countries continue to scale up testing and new countries begin to come online. Our domestic business was down 2% for the first quarter.

COVID-19 pandemic is having its greatest impact on our domestic HIV business and global HCV business. During the first quarter, most domestic HIV testing programs were either reduced or put on hold, which lowered demand for our professional products. Because it started later in the quarter, our Q1 results were not significantly affected.

In contrast, international HIV testing remains strong, and we experienced only relatively minor issues resulting from COVID-19 related to shipping product overseas, which we were able to manage effectively. If the COVID-19 pandemic begins to subside by the middle of the year, we believe there's a good chance it will have a little impact on our HIV Self-Test sales in future periods. However, we expect the downward revenue pressure from COVID-19 to continue in the domestic HIV business. How long this will last and the exact impact on revenues will depend on when the COVID-19 pandemic is resolved, and the stay-at-home and social distancing restrictions are lifted.

Apart from COVID-19, we remain optimistic about HIV Self-Testing. Population Services International has indicated it will extend the Self-Testing Africa, or STAR, initiative to 7 new countries: India, Indonesia, Uganda, Nigeria, Tanzania, Cameroon and Mozambique, under Phase III of that initiative. We expect to receive orders under this phase to begin in the second quarter, with shipments occurring in the third and fourth quarters. Size of the program is expected to be similar to the 750,000 tests purchased under Phase I. Not only will Phase III drive additional volume, it will also provide assistance for additional countries to start HIV Self-Testing programs on a national scale.

In this regard, the President's Emergency Plan for AIDS Relief or PEPFAR, which is a U.S. governmental initiative to address the global HIV/AIDS epidemic, has communicated guidance to its funded countries to consider increasing HIV self-testing during the COVID-19 pandemic as a way of continuing testing while maintaining social distancing.

The value of HIV Self-Testing in the face of COVID-19 is also being recognized domestically. Although sales of our professional HIV tests are being negatively impacted, many public health departments are increasing purchases of our FDA-approved in-home HIV test in order to enable their clients to continue HIV testing without having to come to a clinic. In fact, the Centers for Disease Control and Prevention just last week issued a letter to all their funded sites, encouraging them to use in-home self-testing for HIV in order to continue testing while complying with COVID-19 safety restrictions.

Since we have the only FDA-approved in-home HIV Self-Test, we expect our revenues will be positively impacted, although it will likely not fully offset the downward pressure on our professional HIV franchise. Of course, the ultimate impact will depend on when the COVID-19 situation begins to mitigate.

Turning briefly to HCV. Revenues from this part of our business declined in Q1 compared to the prior year. Many testing programs in the U.S. have been put on hold as both money and personnel being shifted to COVID-related response activities. Depending on when the COVID-19 situation is resolved, we would anticipate this business to eventually return to more normal levels of revenue.

Our international business was not materially affected by COVID-19 in Q1, although it declined due to lower sales in Asia.

As previously mentioned, despite the challenges related to COVID-19, we see a number of upside opportunities which could be substantial. In April, we announced a contract with the Biomedical Advanced Research and Development Authority, or BARDA, to develop a pan-SARS coronavirus rapid antigen in-home self-test that uses oral fluid samples. This funding will help pay the cost for development and receipt of an emergency use authorization, EUA, from the FDA. If everything goes as planned, we hope to have this test on the market by early fall of 2020.

The value of an oral fluid antigen self-test is that it will allow detection of current infections by individuals at home by using an oral fluid sample that is easier and less painful to collect than a nasopharyngeal or an oropharyngeal sample. We believe, as BARDA has said publicly, a test like this could be a game changer that will reduce the pressure on overburdened health care systems and reference laboratories while protecting health care providers.

Testing millions of peoples in their home, identifying those who are infected with COVID-19 and isolating them will help safeguard our communities and restart our economy.

We are also developing an oral fluid microplate test for coronavirus antibodies to be run on high-volume laboratory equipment. Samples would be self-collected using our OraSure oral specimen collection device. We contemplate that this test will allow patients to more easily collect their sample at home and mail it to a laboratory for testing. Antibody tests will be used to show past infection, helping determine if people have acquired immunity to COVID-19 and can safely return to work and other normal activities. Completion of this test and receipt of EUA approval is targeted for early summer.

Finally, we are pursuing collaborations with multiple organizations, both domestic and international. Some of these are intended to help fund an expansion of production capacity as we model various assumptions and demand scenarios to meet potential high demand for our products. We are exploring third-party collaborations for development and commercialization of coronavirus testing products different than the ones we are currently developing internally. We will provide appropriate updates on these collaborations as they develop.

Turning to the Molecular Solutions segment. Revenues from our molecular business were up 25% compared to Q1 2019. Our commercial genomics business delivered a strong performance with some organic growth and increased purchases from a number of customers who historically used a combination of saliva and blood collection but are now shifting to a greater reliance on saliva given the difficulties obtaining blood samples in the COVID-19 environment.

We added 31 new commercial customers in Q1 and reported a 44% increase in the number of customers that are using both our genomics and microbiome products, in some cases services as well.

During Q1, we received a general use 510(k) clearance for our Oragene Dx family of products. This clearance strengthens our regulatory and competitive position in the market and reduces the burden for test providers to adopt Oragene Dx as an approved collector for their molecular assays.

Despite the strong first quarter results, as mentioned previously, sales to our academic customers were negatively impacted by COVID-19 as many of these customers delayed research activities not associated with COVID-19 testing. This affected sales of our genomics, microbiome and urine collection kits to this market. We remain confident that both our genomics business and the disease risk management submarket and the microbiome market will return to double-digit annual growth after the pandemic.

As with the Infectious Disease segments, we're now seeing a number of opportunities for increased business related to COVID-19. These could be significant and may more than offset any negative revenue impact in our Molecular segment.

With the current issues with sample collection and overall testing capacity, the medical community is seeking alternatives to the accepted standard of collecting oropharyngeal and nasopharyngeal samples for COVID-19 testing.

Several publications have indicated that saliva, in addition to being quicker and more comfortable to collect for both patients and health care workers, is technically superior sample type for the detection of COVID-19. Our product lines, specifically Oragene Dx, ORAcollect RNA and OMNIgene Oral are well suited for this purpose. Our proprietary stabilization chemistries are proven to be effective in stabilizing viral DNA and RNA.

Our Oragene Dx line of products has been used by millions of customers in both home and professional settings and is the only device of this type granted 510(k) clearance. It is safe, nontoxic and easy to use, making it an ideal device for self-collection of samples for COVID-19 testing, either at home or under supervision in the clinic.

We are working with several laboratories and diagnostic companies to validate our sample collection products for use with COVID-19 assays and feel confident that our devices will be compatible with at least some of the leading extraction techniques and testing platforms. To date, we have engaged with over 150 customers from all over the world who share 1 common goal: to broaden the scope of COVID-19 tests offered and to provide easy-to-use collection solutions. These customers span all types of test providers, including manufacturers of genetic tests, commercial labs and teaching hospitals. To date, we shipped COVID -- we've shipped kits for COVID validations to over 60 customers and now have 10 purchase orders of significance in-house expected to result in approximately $3.6 million in Q2 revenue, with more expected shortly.

As we announced on Monday, the first COVID-19 related emergency use authorization, or EUA, incorporating one of our devices was issued last week by the FDA to Biocerna, LLC. This EUA authorizes the use of our ORAcollect RNA kit for the collection of anterior nasal samples for testing with Biocerna COVID-19 assay. We expect this to be the first of several EUAs incorporating our devices for COVID-19 testing using either nasal or saliva samples in professional and at-home settings.

In addition to the data we are generating with our customers, we have several ongoing studies of our own to confirm the safety and usability of our collection devices for COVID-19 testing. These include studies to support at-home sample collection. Preliminary data is encouraging, and we look forward to using the results from these studies to expand our regulatory clearances.

To meet the increased demand that we're seeing for our products, we have been increasing capacity at our multiple suppliers. We expect to be able to leverage multiple shifts to help increase our product -- our production capabilities.

Finally, in the lab service area, we've seen a consistent demand for lab services from our existing commercial customers with dedicated microbiome projects. However, we anticipate a short-term weakening in the overall microbiome services market as major pharmaceutical companies refocus efforts due to COVID-19. As I noted previously, there have been some delays in the academic market due to COVID-19 restrictions because of limited access to microbiome samples.

We are continuing to integrate our microbiome laboratory businesses. On May 8th, CoreBiome service operation will relocate to a new, state-of-the-art 17,000 square foot facility in St. Paul, Minnesota. This facility has been designed to absorb the integration of both the legacy CoreBiome and Diversigen laboratory operations as well as part of our bioinformatics and software teams. The lab is expected to be 100% operational for our CoreBiome customers on May 18. Relocation of the Diversigen laboratory operations will begin in mid-May with a target date for completion near the end of the third quarter 2020.

Along with the physical integration, we'll be consolidating the branding for microbiome service organizations under the Diversigen name. We are in the final stretches for this rebranding work. And within the next few weeks, all microbiome services will be operating under the Diversigen name with a new logo.

A final topic I want to cover is the recent organizational changes we have announced. Tony Zezzo, who is the business unit leader in charge of our infectious disease business unit, will be retiring this summer. Tony has been with the company for almost 10 years and has made significant contributions, including the global commercialization of our rapid HCV test and the substantial growth in our HIV franchise. His dedication and steady leadership will certainly be missed and we wish him well in his retirement.

Tony's successor will be Lisa Nibauer, will be joining Orasure after serving for the past 8 years with Becton Dickinson, most recently as Vice President and General Manager of BD's Medication Delivery Solutions business. Lisa has extensive general management, sales and marketing responsibility, both at BD and in other large companies and has exactly the skills we needed for this role. I'm confident that she will be a strong leader for this important segment of our business.

We've also recently announced several Board changes. Dr. David Shulkin, was formerly Secretary of the U.S. Department of Veterans Affairs, joined the Board last month and is now serving on the Audit Committee and Nominating and Corporate Governance Committee. David has a long history and distinguished career in the medical, public health -- and public health fields and has served at the highest level within our federal government. His track record of strong executive leadership will enable him to be a significant contributor to the Board.

We also announced the upcoming departure of 2 Board members. And Dr. Aradhana Sarin, who joined the Board in 2018 and currently serves as Chair of the Audit Committee and a member of the Nominating and Corporate Governance Committee, will be leaving the Board prior to our annual meeting so that she can devote more time to our duties as Chief Financial Officer of Alexion Pharmaceuticals. In addition, Chuck Patrick, who has been with the Board for almost 14 years and serves as a member of the Audit Committee and a member of the Nominating and Corporate Governance Committee will be retiring from the Board effective May 16th.

Both Aradhana and Chuck have been strong contributors to the Board and their advice and counsel will be missed. We wish them both much success in their future endeavors.

In closing, 2020 is off to a good start with a solid Q1 performance in spite of the pandemic. Our HIV Self-Testing business is expected to continue to grow strongly. We are proud to leverage our expertise to help fight COVID-19. We believe the opportunity is for a new rapid oral fluid in-home coronavirus antigen test and a laboratory-based oral fluid antibody test, along with the expanded use of our molecular saliva collection products, are promising and could generate revenues well in excess of any revenue loss as a result of the COVID-19 pandemic.

Despite the uncertain current environment, our future is bright. We are strong financially. We have the technical and management capabilities on Board to enable us to successfully capture the opportunities before us. At the same time, we continue to execute against our innovation growth strategy, the continued evaluation and pursuit of external acquisitions. We look forward to reporting back any significant new developments as they become available.

And with that, we will now take your questions. Operator, please proceed.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Jacob Johnson with Stephens.

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Jacob K. Johnson, Stephens Inc., Research Division - Analyst [2]

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First question. On the rapid test, I think there's -- just broadly around COVID testing, there's been a lot of questions about sensitivity and specificity of these tests in the market. Can you just give us any kind of color or insight into the sensitivity and specificity you are looking to achieve with this rapid test or would be adequate for a test like that?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [3]

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Yes. Thanks for the question, Jacob. So we have a long history of having sensitivity and specificity across our product portfolio in the high-90s, so above 95% for both specificity and sensitivity. We have not locked in a design yet, so I can't share with you yet what our current specifications are. But I can tell you that for our Ebola rapid antigen test, we had a positive correlation of 97.1% and a negative correlation of 100% for use of that product with oral cadaver fluids in the U.S.

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Jacob K. Johnson, Stephens Inc., Research Division - Analyst [4]

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Got it. I appreciate the color, Steve. I guess the follow-up here. On the rapid test, I think you referred to it as an at-home test. But is this a test that could be like the multiple-use opportunity? Is this something that could be used in a manufacturing facility to ensure that employees don't have COVID? Just kind of what's the opportunity in terms of volume?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [5]

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We think the opportunity is very large. The reason that we're targeting in-home self-tests for FDA clearance purposes is to make it as widely available as possible. But you're absolutely right, it could be equally purchased not just by individuals, but by anybody that needs to ensure the safety of, let's say, their workforce or a school, large gatherings of people, public health. And so buying segments can be viewed as extremely large, if you consider that it's likely that employers will need to test folks for whether they're infectious or not before returning to work. Certainly schools will want to know that as well and any large gathering sporting events and the like will have to test as well. So that's why we've looked for the broadest application possible, which would be clearance for a self-test.

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Operator [6]

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Your next question comes from the line of Andrew Cooper with Raymond James.

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Andrew Cooper;Raymond James;Associate Analyst, [7]

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I guess, first one, I know it's very early for this, but when we think about the -- some of these tests that you're working on, do you have a sense for relative to -- I guess, for pricing relative to -- a home test, obviously, bringing a little bit different value proposition than what most of the other folks are out there talking about developing on the market. How do you think about that relative to what you'll be bringing to the table from a pricing perspective? And then I have a follow-up after that.

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [8]

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Thanks, Andrew. We have probably a unique set of experiences in pricing because we're one of the few companies, the only one that has both professional and over-the-counter products sold in the U.S. as well as product design for global public health. So we have not yet [come up with] pricing for particular segments of the market or match it with volume. And that's something we will consider as we get closer to the product launch. But I think our experience with HIV across the world, in the U.S. and abroad will be very instructive.

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Andrew Cooper;Raymond James;Associate Analyst, [9]

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Okay. That's helpful. And then I guess kind of secondly, when we think about manufacturing capacity, obviously, it's easy to get really carried away with where demand could go. But can you give us just maybe a reminder of kind of where you are on OraQuick capacity and how do you think about potentially ramping that should there be demand when tests launch?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [10]

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Sure. Well, I shared that in the first quarter of 2020, we shipped 2 million HIV Self-Tests. In the fourth quarter of 2019, we shared that we shipped 2.9 million HIV Self-Tests. So you can tell, if you do the math there, that we are in the range just on the HIV Self-Tests of tens of millions of tests per year. Depending on the estimates that you're looking at for the amount of widespread testing that may be done to get back to normal, that number is significantly higher than tens of millions. By some reports, that's somewhere between 3 million and 30 million tests per day. And so that's why we're looking at scale up possibilities and massive scale up possibilities for that antigen test today. And by the way, the same goes for our molecular sample collection kits, which could be in high demand also as an alternative to the nasopharyngeal and the oropharyngeal swabs that are currently used. So we are looking at capacity increases across the corporation, in some cases massive increases in capacity.

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Operator [11]

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Your next question comes from the line of David Westenberg with Guggenheim Securities.

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David Michael Westenberg, Guggenheim Securities, LLC, Research Division - Analyst [12]

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Excuse my ignorance in sub-Saharan Africa, but what is it like on the ground there in terms of COVID and potential socially distancing measures? I'm just trying to think about maybe the next 6 months, year, what it could look like on the ground for self-testing? I mean or...

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [13]

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David, are you asking about HIV Self-Testing or COVID-19 self-testing?

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David Michael Westenberg, Guggenheim Securities, LLC, Research Division - Analyst [14]

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No, I'm actually asking about COVID -- what the -- like what the public policy looks like there? I mean I'm guessing there's going to be country differences. But is there a general way that COVID-19 is being treated in sub-Saharan African countries, particularly ones where you have higher penetration of your HIV tests? I'm just trying to think about what kind of measures that would be in place that might stall HIV testing?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [15]

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I see. So first of all, I think we shared that, certainly, in the first quarter, we -- our sales of HIV Self-Test into Africa and the rest of the world was as expected, and that led to a 74% increase year-over-year for the first quarter. We expect that to continue, provided that shipping isn't an issue. And so far, that seems to be working out.

The interlink between HIV and COVID is rather interesting. So first of all, as a reminder, Africa is in the southern hemisphere, so they are now just entering the winter months. And so a traditional flu and cold season is just upon them right now. And that's, of course, where we started with COVID-19 in the northern hemisphere around the winter months. So we're watching that situation very carefully.

Also important to remember is that immunocompromised patients are the most susceptible to COVID-19 and the most susceptible to morbidity from COVID-19. So it's absolutely imperative we continue HIV testing in Africa as COVID-19 begins to enter the seasonal cycle there. We also believe that ultimately, the sales channels that we have developed for HIV Self-Test in sub-Saharan Africa and elsewhere, that is primarily selling to ministries of health and individual countries, will be the same for selling COVID-19 self-tests should we get approved and launch in the fall and winter. So I think it ultimately ends up being a tailwind for us overall for both the HIV and the COVID -- potential COVID business.

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David Michael Westenberg, Guggenheim Securities, LLC, Research Division - Analyst [16]

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Got it. And so when we think of OraSure, we think of this as HIV -- in the infectious disease business, you think of it as an HCV, HIV kind of business, and then you have these infectious diseases that come along the way like Ebola and Zika and now COVID. Now you've developed these tests fairly on track, these new tests. Thinking about this in like a 3- to 5-year time frame, I mean, do you see OraSure as a little bit more of a wide menu infectious disease company? Just I'm just kind of picking up on the key learnings that you're getting from this COVID testing and how you might apply this to maybe future activities in R&D? And that's all I have.

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [17]

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Thanks, David. I think we view ourselves as quick learners. And so I think having served the needs of the HIV pandemic globally, the Ebola pandemic, which thankfully was mainly isolated to certain parts of the world, it didn't spread the way the COVID-19 is spread today. Has been instructive. And obviously, we're learning a lot about serving the needs of COVID-19 today. And hopefully, as a global society, we'll be better prepared God forbid in the next pandemic.

So I think the way to view us is a learning organization that is focused on meeting unmet needs for global public health. And the reason I think we've been able to respond so quickly for COVID-19 everywhere, from sample collection to development of this antigen test and development of this antibody test is that these are skills and capabilities we've developed over time, not just technically, but in terms of scale up, for sales and marketing and channel development to get product to customer effectively. So I think we've just been fortunate to be extremely well positioned based on all those experiences. And I think that as we look ahead, there'll be, I think, more opportunities to serve global public health and the needs of public health and other areas in the U.S. in particular.

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David Michael Westenberg, Guggenheim Securities, LLC, Research Division - Analyst [18]

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I'm going to go ahead and root against another public health crisis, sorry?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [19]

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We are with you 100%, but we're there if needed, certainly.

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Operator [20]

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Your next question comes from the line of Brandon Couillard with Jefferies.

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Brandon Couillard, Jefferies LLC, Research Division - Equity Analyst [21]

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Roberto or Stephen, just (technical difficulty) outlook. I understand there are some parts of the business that you may be negatively impacted. But should we think about the headwinds from COVID-19 actually outweigh the potential tailwinds? Or is it actually a net positive theoretically in 2Q?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [22]

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I think as we shared in our message today, Brandon, I think that we see a lot of strength there, tailwinds are more apparent than the headwinds. But I don't think you can count the headwinds, and that's why we were so explicit in the areas where we saw them in terms of HCV testing in the U.S., in terms of serving the academic market for molecular. But I think of that we're seeing a book of business that's related to COVID growing every week of this crisis. And so while we are withdrawing guidance for the full year, I think that we see -- we're very optimistic about our overall prospects.

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Brandon Couillard, Jefferies LLC, Research Division - Equity Analyst [23]

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And on the molecular business, was there any benefit in the first quarter from order timing that might have been favorable? And then secondly, the $3.6 million of revenue you -- booking in the second quarter from labs using the oral fluid collection to study COVID-19, is that just based on orders that you've received to date? Or could that number actually be much higher as the quarter continues to play out?

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [24]

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Yes. So (technical difficulty) But remember, most people were in stay-at-home or social distancing towards the middle end of March, which would put it towards the end of the quarter. So I don't think there was much that was forward (inaudible) in the first quarter. And then related to the $3.6 million second quarter COVID-related sample collection, that's a current number. That's not a projection for the full quarter. That's what we have currently in play is what we know today. But as I said, that situation is changing nearly weekly. And it's triggered by things like the Biocerna EUA announcement earlier this week. And I think we're expecting to see couple of announcements like that coming up in the coming weeks.

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Operator [25]

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That brings to the end of the Q&A session of today's call. I will now turn the call over to Dr. Tang for closing remarks.

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Stephen S. Tang, OraSure Technologies, Inc. - President, CEO & Director [26]

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Thank you, everyone, for participating on today's call and for your continued interest in OraSure. Have a good afternoon and evening, and please stay safe and be well.

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Operator [27]

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This concludes today's conference. You may now disconnect.