For a medical diagnostic company, nothing does more to jump-start sales of a product than a recommendation by a major health organization that its product be used for disease testing.
HIV and drug-testing product maker OraSure Technologies (NASDAQ:OSUR) didn't quite get an endorsement for one of its products yesterday, but the shares of the company were up 22% on something close to an endorsement.
During the day, the Centers for Disease Control and Prevention (CDC) issued a statement recommending that HIV testing become routine for all people aged 13 to 64, whereas before, the federal agency had only recommended routine HIV testing for people who were at high risk because of their lifestyle or because they worked in a hands-on capacity in the health-care system.
Once this report by the CDC hit the news wires, shares of OraSure soared, since infectious-disease testing supplies accounted for nearly 40% of the company's total product revenue in 2005 and the first six months of 2006. For the year ended 2005, sales of infectious disease tests increased by 40% as well, to represent $26 million of OraSure's $69 million revenues.
To be fair, there are many other HIV diagnostic test suppliers besides OraSure. What separates OraSure from the other diagnostic suppliers is that it's only one of four companies that make a test for the infection which gives the results in minutes. Also, OraSure has an HIV testing product on the market that can detect the presence of HIV with just an oral fluid sample rather than blood.
OraSure's other big product line is substance-abuse testing equipment for employers, which also had a 34% surge in sales for 2005. That and infectious-disease testing accounted for the vast majority of the company's sales growth for the year and almost half of revenues.
Thus far, 2006 has not brought on the type of sales growth for infectious-disease supplies that OraSure investors need to make their investment worthwhile. Sales of infectious-disease testing supplies for OraSure have only grown 8% in the first six months of the year. With the CDC's new and broader screening guidelines for HIV, investors in shares of OraSure should expect faster sales growth in this area and a better revenue outlook for the company.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
