A trend towards legalizing so-called medical marijuana and even recreational use of the drug in general has sent investors scurrying to find a way to profit through marijuana stocks like Cannabis Science (PINK: CBIS) or Medical Marijuana Inc (PINK: MJNA), but other small cap stocks like drug testing stock OraSure Technologies, Inc (NASDAQ: OSUR) could (in theory) offer a less risky way for investors to get a high (See my previous article: Alternative Marijuana Stock Picks: Small Cap Drug Test Stock Psychemedics Corp (PMD)). After all and while the use of marijuana is becoming more widespread and acceptable, most employers still aren’t going to tolerate hiring and employing workers who are regular users of the stuff – meaning companies like OraSure Technologies that offer drug testing should see plenty of new and existing business come their way.
What is OraSure Technologies?
Small cap OraSure Technologies calls itself a leader in the development, manufacturing and distribution of oral fluid diagnostic and collection devices and other technologies designed to detect or diagnose critical medical conditions. These products include tests for the detection of antibodies to the HIV virus, a test for antibodies to the HCV virus and oral fluid testing solutions for abused drugs (Intercept® Oral Fluid Drug Test, Q.E.D.® Saliva Alcohol Test and OraSure® Oral Specimen Collection Devices). In addition, OraSure Technologies manufactures and sells several leading cryosurgical products for the removal od common and plantar warts and several other benign skin lesions while its wholly-owned subsidiary, DNA Genotek Inc., is a provider of oral fluid sample collection, stabilization and preparation products for molecular diagnostic applications.
In other words, OraSure Technologies is not a pure drug testing stock like Psychemedics Corp. (NASDAQ: PMD), which could mean less risk for investors.
What is There to Like and Not Like About Small Cap OraSure Technologies?
In early February, OraSure Technologies announced earnings along with a guidance that largely disappointed investors and sent shares from the $7 level to the $6 level. Specifically, OraSure Technologies reported a 7% fourth quarter revenue increase to $22.1 million and a 7% full year revenue revenue increase to $87.8 million along with a fourth quarter loss of $5.9 million verses net income of $115,000 a year earlier and a net loss of $15.1 million (including $9.9 million in costs associated with the commercialization of the company’s OraQuick(R) In-Home HIV test) verses a 2011 net loss of $8.8 million (Note: Substance abuse testing accounted for around 11% of revenues in 2012 and dropped 25% from $12,498k to $9,407k for the year). Cash stood at $87.9 million at the end of the year verses $23.9 million at the end of 2011 thanks to a secondary offering of 6.1 million shares back in July for $70.2 million in proceeds.
However, OraSure Technologies projected revenues for the first quarter to be sequentially down from the fourth quarter due to lower infectious disease testing sales to the professional market and the fact that for the past several years, the first quarter of each year has historically produced the lowest revenue. During the fourth quarter, OraSure Technologies launched a national public relations and advertising campaign for its rapid HIV test, but investors are apparently questioning whether the company will ever consistently be profitable. Shares also sank back in November after third quarter results - not so much on those results, but on weak guidance for the fourth quarter.
OraSure Technologies is next scheduled to report earnings on May 8th.
Stock Performance: OraSure Technologies, Cannabis Science and Medical Marijuana Inc
On Friday, small cap OraSure Technologies fell 0.79% to $5.03 for a market cap of $279.26 million and near the bottom of its 52 week trading range of $4.93 to $14.01 a share. In addition, OraSure Technologies is down 29.94% since the start of the year, down 55% over the past year and down 33.4% over the past five years. A quick comparison of OraSure Technologies’ share performance with that of Cannabis Science or Medical Marijuana Inc shows investors would have gotten their biggest high with the MJNA:
For technicians, here is a closer look at OraSure Technologies’ recent stock performance which has not been pretty:
The Bottom Line. Again, small cap OraSure Technologies is less of a bet on drug testing and more of a bet on the future of its home HIV test or rather the execution of a marketing campaign for it. Moreover and given that expectations for first quarter results are already pretty low (and could still be missed for that matter), traders and investors may want to keep an eye on OraSure Technologies until after earnings (don’t expect much in the way of news to suddenly generate excitement for traders and investors alike). Nevertheless, OraSure Technologies could still prove to be a better bet than marijuana stocks Cannabis Science or Medical Marijuana.