What happened

OraSure Technologies (NASDAQ:OSUR) is up 18.6% at 3:42 p.m. EST Tuesday after the company announced that it entered into a $143 million agreement to supply its Oragene devices to an undisclosed consumer genomics customer.

So what

The announcement came in the form of an 8-K with the Securities Exchange Commission, not a press release, as would be typical for a big announcement. Considering that OraSure had $111.8 million in product revenue through the first nine months of the year, $143 million would seem to be a big announcement.

Two men shaking hands in a conference room

Image source: Getty Images.

But there are a couple of wild cards here.

First the filing notes that the agreement is "over several years." If "several" is three years, that's a substantial boost to revenue. If it's eight years, it's not nearly as big of a deal.

The other big unknown is the average selling price of the Oragene devices, which are used to collect saliva DNA. OraSure presumably gave a volume discount for that large of an order, so the revenue growth may not help earnings nearly as much if the sales come at a substantially lower gross margin.

Now what

The unknowns make it hard to value the deal, but unless OraSure is selling the Oragene devices at a loss -- which seems highly unlikely -- OraSure is arguably worth more today than it was without the deal. Considering the substantial drop in share price after third-quarter earnings were released earlier this month, today's double-digit move is likely due to investors having more confidence that the company can keep its revenue growth going than an accurate valuation of the deal.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.