As of 3:42 p.m. EST Tuesday, OraSure Technologies (NASDAQ:$OSUR) is up 18.6%. This increase occurred after the company announced it had entered into a $143 million agreement for supplying its Oragene devices to an undisclosed consumer genomics customer.
This announcement wasn’t a press release, but rather an 8-K from the Securities Exchange Commission, which is unusual for such a big announcement. $143 million seems like a big announcement when you consider that OraSure has only had $111.8 million in product revenue from its first nine months this year. There are, however, some things to note when considering the meaning behind this announcement.
That first note comes in the form of the agreement’s wording, that this $143 million is “over several years.” It comes down, then, to what they mean by “several years”. Several years could be three, in which case that’s a huge boost in revenue, but if it’s over a longer period time, like eight years, it’s not that big a deal.
Another thing to note is that the average selling price of the Oragene devices is unknown. Also, OraSure may have given a volume discount due to the size of this order, meaning that actual revenue growth may not help earnings very much as they would have had the order been at a substantially lower gross margin.
While these unknowns do make it hard to put a value on the deal, it is unlikely that OraSure would be selling the Oragene devices at a loss, therefore the company is technically worth more today than it was before the deal. However, today’s double-digit move is most likely due to investors having more confidence thanks to this deal that the company can keep its revenue growth going, rather than a result of an accurate valuation of the deal.
Featured Image: twitter
