OraSure Technologies, Inc.

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OraSure Technologies, Inc.

220 East First Street
Bethlehem, Pennsylvania 18015
U.S.A.
Telephone: (610) 882-1820
Fax: (610) 882-1830
Web site: http://www.orasure.com

Public Company
Incorporated: 2000
Employees: 193
Sales: $54.0 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: OSUR
NAIC: 325413 In-Vitro Diagnostic Substance Manufacturing

OraSure Technologies, Inc. is the leading supplier to the life insurance industry and public health markets of oral fluid collection devices for the detection of antibodies to HIV. OraSure is a company that develops and manufactures medical devices and diagnostics. Using their four-platform technologies, OraSure provides an ever growing number of diagnostic capabilities, including tests for HIV and drugs-of-abuse. These medical diagnostics are built for and marketed to physician's offices, clinical laboratories, workplace sites, insurance companies, public health agencies, and criminal justice and drug rehabilitation agencies. OraSure's primary focus is the oral fluid, point-of-care market. The company is striving to improve the current methods of testing and provide ways for conducting tests by using oral fluid samples that return results in a matter of minutes.

Early Beginnings: 1979–93

Epitope, Inc. was an Oregon-based company that focused on oral fluid diagnostics specifically for the detection of HIV infection and for drugs of abuse. Epitope was formed as a private company in 1979, as Immunologic Associates, and became a public company in 1986, mainly in order to raise money for AIDS research. Prior to becoming a public company, Epitope's main funding came through private stock placement and research contracts. Through its initial offering, Epitope raised over $2.7 million in cash, which was used to finance development of a more reliable way to test for the AIDS virus.

In 1989, Epitope reported that it had developed technology for an oral fluid-based, rather than blood-based, diagnosis of infectious disease, allowing for rapid "on-the-street" testing. The Food and Drug Administration (FDA) approved a request by Epitope to begin human testing of an oral fluid-based HIV test in 1990. The system from Epitope included an oral fluid collection kit called "OraSure" that would collect an oral fluid called oral mucosal transudate (OMT) from the mouth. OMT contains large quantities of antibodies and is free of many of the contaminants that saliva contains. Specimens would be taken from between the gums and cheek; the sample was then placed in a tube and sent to Epitope's laboratory for results. The company cited the convenience of using oral fluid as opposed to blood-based tests. Although the actual product lacked full FDA approval and the company had yet to make a penny, its stock was valued at $160 million on the American Stock Exchange.

Approval Granted: 1994–97

In 1994, after a three-and-a-half year journey, Epitope finally received FDA approval for its oral fluid collection device, OraSure, specifically to be used for the detection of the AIDS virus. OraSure became the first medical diagnostic test of its type to be approved by the FDA for use in disease detection. The company projected that it would sell a million products monthly, with the cost being $2 to $4 per unit, a fraction of the cost of blood tests. However, because the oral fluid test was far less accurate than a blood test, the FDA outlined that the test would only be available through physician's offices and administered by trained personnel. Under the guidelines for approval, the FDA stated that the test could not be administered at home and could not be used to screen donors. Epitope acknowledged that the test was not as accurate as a blood test but stated that its hope was that the test would broaden HIV testing and help people to become aware of their AIDS status earlier. Now that FDA approval had been received, the question was whether Epitope could begin to make a profit.

Epitope concluded an exclusive licensing agreement with SmithKline Beecham Consumer Healthcare, one of the world's largest healthcare companies, in 1995, for distribution of OraSure. Unfortunately Epitope experienced a major loss and stocks hit a new low in the fall of 1995. This was due largely to SmithKline Beecham's reluctance to heavily market the oral fluid device. SmithKline cited the need for a confirmatory test prior to seriously distributing the test. An oral confirmatory test would allow for the use of the same sample when doing a second test for patients who tested positive for the HIV virus. Without an oral confirmatory test, patients would need to undergo a blood test in order to confirm a positive result.

In 1996, the first oral HIV antibody confirmatory test was approved by the FDA, making a single oral fluid sample adequate for the preliminary test and confirmatory tests in samples that tested positive for the HIV antibody. SmithKline Beecham announced plans to begin heavily marketing the OraSure test to health professionals and the insurance industry. By 1997, sales of the oral fluid diagnostic test had doubled, following an article in the Journal of the American Medical Association (JAMA) that declared OraSure's convenience and comparability (with regards to accuracy) to blood testing. In the fall of 1997, attempting to recover from damage incurred during problems with its Agritope subsidiary, Epitope reacquired the OraSure diagnostic from SmithKline Beecham. Epitope announced that it would market the diagnostic through the use of its own distribution channels.

Promising Agreements and New Developments: 1998–2000

The year 1998 brought several new agreements with marketing companies. First there was an agreement with LabOne, Inc., a company that marketed clinical, substance abuse, and insurance laboratory testing services. The agreement was for LabOne to provide oral testing for the HIV antibody to customers in the public health, corrections, military, and college health markets using the OraSure device. Second, Epitope made an agreement with Altrix Healthcare, plc, a U.K.-based medical diagnostic provider. The agreement was that Altrix would be responsible for the marketing and sales of OraSure in the United Kingdom and Ireland. Under the terms of the agreement, Altrix was required to meet minimum sales goals in order to maintain the relationship with Epitope. Having succeeded in increasing product sales, Epitope reported record product revenues and a small profit in late 1998.

Late 1998 also brought another agreement and a variation on the use of the OraSure fluid collection device. Epitope announced a five-year supply and distribution relationship with STC Technologies, a privately held company that developed and supplied medical devices and clinical lab products for use in workplace testing, clinical labs, and physician's offices. Under the terms of the agreement, Epitope's OraSure device would be packaged with STC's substance abuse tests. The kit would be called "Intercept" by STC. Epitope would be the exclusive supplier of its collection device for use with STC's drugs-of-abuse tests in the United States and Europe, excluding the United Kingdom and Ireland. In turn, STC would be the exclusive distributor of the substance abuse tests in the same area. The agreement stated that Epitope would sell the OraSure device at a per-unit price to STC. Epitope would then receive a percentage of STC's gross revenue from the resale of the Intercept substance abuse tests. It would also be entitled to a percentage of any of STC's revenues that occurred from any future related activities where the OraSure device was incorporated. This collaboration of Epitope's OraSure oral fluid collection device and STC's drugs-of-abuse tests was considered by both companies to be an ideal one, convenient and less invasive for employers and employees without sacrificing accuracy.

Early 1999 brought the formation of an alliance between Epitope and two of its partners: STC Technologies and LabOne. LabOne agreed to provide oral fluid analysis of STC's Intercept substance abuse tests (which were performed using Epitope's OraSure oral fluid collection device). STC voiced excitement over the alliance, saying that it was an important step necessary to truly market the Intercept device. LabOne also appreciated the relationship, stating that the market was continuously attempting to find ways to improve the collection of samples. In turn, sales of Epitope's OraSure collection device were sure to increase, thereby increasing revenue.

The year also brought an agreement with Organon Teknika, Ltd., of Dublin, Ireland, to work together on the final development of OraQuick, Epitope's one-step, rapid-result oral specimen testing kit. OraQuick would allow health providers to supply results to patients within ten minutes, forgoing the use of a laboratory. Organon Teknika touted expertise with tests similar to OraQuick and planned to manufacture OraQuick at its factories in Ireland. Both companies hoped to reach a future agreement for the manufacturing and distribution of the kit upon completion of development.

In the fall of 1999, Epitope reported that it was supplying the OraSure oral fluid collection device to seven of the top ten insurance companies in the United States. Those seven companies accounted for 21 percent of ordinary life insurance purchased in the United States in 1998. Epitope attributed that growth to the industry's increased comfort with oral fluid testing devices, cost efficiency as compared to blood testing, and the non-invasive aspect of the OraSure device.

Company Perspectives:

Create, combine and collaborate to be the world's best oral fluid diagnostics company. Deliver superior diagnostic solutions through the use of the most user-friendly and technologically advanced sample collection, detection and information technologies. Be entrepreneurial, build a culture based on our Core Values, and exceed Stakeholder Expectations.

Also in 1999, Epitope announced that it had received a two-phase $1.1 million grant from the National Institutes of Health (NIH) to develop a test for syphilis using either oral fluid samples or blood samples. Epitope hoped to modify the OraSure device so that it could collect samples for the syphilis test. The addition of a blood-based alternative would come as a response to Epitope's expression of a need to broaden its product base. Under terms of the grant, the first phase would include the company reaching certain, outlined goals. The second phase included clinical trials and submission to the FDA for approval. The test for syphilis would allow patients to find out a positive or negative result quickly, and, if necessary, get treatment sooner.

In early 2000, Epitope, along with LabOne and STC Technologies, announced the introduction of Intercept, the first laboratory-based substance abuse test that would look for and find illicit drugs in oral fluid samples. The Intercept test was expected to make a large impact in workplace drug testing, with negative results being available within 24 hours of receipt at the laboratory and positive results being confirmed within 72 hours of receipt. In addition, it would also be marketed to the criminal justice and public health markets. The Intercept drugs-of-abuse test was marketed as one of the most efficient, cost-effective drug testing alternatives available.

An Integration of Technologies; OraSure Is Born: 2000–02

In May 2000, STC Technologies and Epitope announced that they had signed a merger agreement. The newly formed company would be called OraSure Technologies, Inc. and would combine the developers of the foremost oral fluid collection device and the leaders in oral fluid analysis. STC Technologies was the owner of the Histofreezer Cryosurgical product line, a safe, effective means for removing skin lesions, and of the Uplink products, one of which was a point-of-care product used to detect the use of illicit drugs through oral fluid samples. Joining Epitope's OraQuick rapid fluid assay platform and the OraSure collection device along with STC's Histofreezer Cryosurgical and Uplink products created a four-platform technology that would allow for the companies to come together to become the world's utmost oral fluid diagnostic company. In September 2000, the merger was completed.

The new company was off to a running start when, in October 2000, it received the first international order for the OraQuick HIV Rapid test. The order was placed by a sub-Saharan African company and represented OraSure's push to provide the test to all of sub-Saharan Africa. The company cited the opportunities for OraQuick in that area as being enormous and stated that it felt the test was ideal for an area in which an estimated four million AIDS-affected individuals live.

Also in 2000, OraSure announced that it had finished phase one of the NIH grant received in 1999. The NIH approved almost $1 million in added funding for the oral fluid-based syphilis detection test. The syphilis project focused on developing a device that would both screen and confirm the result using the OraSure oral fluid collection device. In the future, the company hoped to extend to point-of-care syphilis testing using its OraQuick test. OraSure intended to use the OraQuick rapid fluid assay platform, the OraSure collection device, and its Uplink technology to maximize the market coverage achieved from projects including the research on syphilis. In this manner, the company hoped to broaden the range of users, extending from lab-based testing to street corner testing.

Early 2001 brought a new agreement with one of the largest drug testing laboratories, Bendiner & Schlesinger, Inc. of New York, New York. OraSure would be providing its Intercept drug testing system to the company, which would, in turn, offer the system to the drug rehabilitation market of the New York metropolitan area. The annual revenue from this agreement was expected to reach $500,000 annually. OraSure also announced that the FDA had given approval of the Intercept fluid assay for barbiturates and methadone. These new assays would join the test panel that already tested for opiates, cocaine, PCP, marijuana, amphetamines, and benzodiazepines. The new clearance would allow for OraSure to meet the demands of the rapidly growing market of drug rehabilitation customers.

In 2002, OraSure submitted for and received clearance from the FDA for the Uplink test system for detecting opiates in oral fluid. This became the first oral fluid point-of-care test cleared by the FDA. Uplink provided instrument-read results in ten minutes and was expected to increase accuracy and efficiency of drug testing. The company announced its intention to submit for the full five-drug panel of assays in an oral fluid specimen. The drugs in the panel would include cocaine, PCP, marijuana, methamphetamines/amphetamines, as well as opiates.

Advancements in HIV Testing: Late 2002–05

In the fall of 2002, OraSure received approval from the FDA for its OraQuick Rapid HIV-1 test. The test was to be done with whole blood samples acquired from a finger-stick, and was cited as being highly accurate. Clinical studies showed the test to have 99.6 percent accuracy in detecting positive samples and 100 percent accuracy in identifying negative samples. The results would be available in about 20 minutes, making it the fastest test of its kind.

Key Dates:

1986:: Epitope, Inc. becomes a public company.
1989:: Epitope announces new oral-fluid, point-of-care technology called "OraSure."
1994:: Food and Drug Administration (FDA) approves OraSure fluid collection device.
1998:: Epitope enters into supply and distribution relationship with STC Technologies, Inc.
2000:: Epitope merges with STC Technologies to form OraSure Technologies, Inc.
2004:: Company receives FDA approval to market OraQuick test for both HIV-1 and HIV-2.

Once FDA approval was received, an agreement made in 2002 allowed for Abbott Laboratories, a leader in HIV/AIDS research, and OraSure to begin co-exclusively distributing the OraQuick Rapid HIV-1 test. Both companies announced the availability of the test to physician's offices, hospitals, and other healthcare facilities in 2003. The Centers for Disease Control and Prevention (CDC) created further acceptance and interest in the product by announcing that it would incorporate the use of the OraQuick test into its new HIV testing initiative. OraQuick was cited as being a convenient test that could conform to nontraditional test settings as well as provide rapid results. Further validating the test, OraSure announced that the OraQuick Rapid HIV-1 test had received the Gold Medical Design Excellence Award in the "In Vitro Diagnostics" category in the sixth annual Medical Design Excellence Awards (MDEA) competition.

Furthering its testing capabilities, in 2004 the OraQuick test was approved by the FDA to test for HIV-2. The approval allowed for simultaneous detection of HIV-1 and HIV-2 antibodies by using one sample. Although the instances of infection with HIV-2 were believed to be relatively low in the United States, HIV-2 testing was part of the required drug testing regimen in many foreign countries. Allowing for simultaneous HIV-1 and HIV-2 testing created an added convenience and quicker detection and treatment of the viruses. Additionally, the OraQuick device was approved by the FDA for use in detecting HIV-2 in oral fluid samples. This made OraSure's OraQuick Rapid HIV-1/2 test the only test approved by the FDA to detect antibodies to the HIV-1 and HIV-2 in oral fluid, whole blood, and in plasma samples.

At the beginning of 2005, OraSure continued to be the market leader in oral fluid technology, signing an agreement with Abbott Laboratories to distribute the OraQuick Rapid HIV-1/2 test. The company announced its long-term goals, namely, moving into global markets, developing more products for point-of-care testing, and seeking government approval to sell products, specifically OraQuick, directly to customers without professional assistance. These goals reflected OraSure's commitment to broadening its product base and constantly looking to the future.

Principal Competitors

Bio-Rad Laboratories, Inc.; Johnson & Johnson; LabOne, Inc.; Laboratory Corporation of America Holdings; Nabi Biopharmaceuticals; Roche Diagnostics Corporation; Schering-Plough Holdings; Trinity Biotech plc; UBS AG.