OraSure Technologies :HIV Test =Target $ 14

Orasure oral HIV rapid testing.

Orasure oral HIV rapid testing. (Photo credit: Wikipedia)

OraSure Technologies

May 16

OSUR : NASDAQ : US$9.10  Buy , Target US$14.00

FDA panel supports HIV-OTC

Recommendation

Following a unanimous positive recommendation from the FDA BPAC (Blood Products Advisory Committee).

Highlights

Unanimous decision could pave way for first infectious disease test approval for home use. BPAC voted 17-0, implying that the benefits outweigh the risks for a home HIV test, while being safe/effective.

FDA projected a net public health benefit. Based on a risk assessment model, the OraQuick In-Home HIV test demonstrated a net increase in the number of HIV infections newly identified and net transmissions averted.

 

“We shouldn’t let perfect be the enemy of good,” seemed to be the response to the 93% sensitivity concern. In the end, the panel acknowledged the benefit of identifying incrementally thousands of individuals who previously do not test using conventional methods.

What’s next? Following a spring advisory panel that was also unanimous, we would now expect the FDA to approve the OraQuick In-Home HIV test by Q3/12, followed by some labelling finalization. Our model assumes the test will add an incremental $7.0M of revenue in its first year (2013).

2012 Catalysts

 We expect several additional catalysts to unfold this year:

1) Change to HCV testing guidelines around Q2;

 2) HIV-OTC FDA approval around Q3;

3) International partner for HIV-OTC announced by year-end.

Valuation

$14 price target is based on a three-year discount to our 2016 revenue

estimate of $198M and applying a 5.5x P/S multiple.

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