BTIG Reaffirms OraSure (OSUR) at 'Buy' Ahead of co-Promotion Agreement Decision with AbbVie (ABBV)

BTIG affirms OraSure Technologies (Nasdaq: OSUR) with a Buy rating and $9 price target amid possible termination of the HCV co-promotion agreement with AbbVie (NYSE: ABBV).

Analyst Karen Koski commented today:

• Beginning later this week (specifically on Thursday, 6/30), either OSUR or ABBV has the option of providing a six month notice of termination of the HCV Co-Promotion Agreement signed in June 2014 for convenience. See below for more info on the agreement.
• Termination (if it occurs) could come from either company. Since the agreement was signed, Gilead (Nasdaq: GILD) has emerged as a clear leader in the HCV treatment market, esp. in the US, and Merck (NYSE: MRK) and Bristol-Myers (NYSE: BMY) have also joined the battle. While the use of OSUR's HCV test is not dependent on whether ABBV's drugs will be used, we do view the co.'s co-promotion activities as important to increasing awareness around HCV testing. As such, we feel ABBV's struggles in the HCV space may have limited the adoption of OSUR's HCV test, at least slightly. Furthermore, given the minuscule size of the payments to OSUR (from an ABBV perspective) we wonder if termination by ABBV would signal defeat. With all of this in mind, we feel either co. could look to terminate the agreement.
• While OSUR has certainly benefitted from the agreement's high margin exclusivity payments, we think the company would remain profitable upon termination. We also note that even if one of the cos. gives notice later this week, the agreement remains in effect for another six months i.e. our 2016 rev forecasts would remain intact.

For an analyst ratings summary and ratings history on OraSure Technologies click here. For more ratings news on OraSure Technologies click here.

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