Good day ladies and gentlemen and welcome to the OraSure Technologies Incorporated Fourth Quarter 2013 Earning Conference Call. At this time, all participants are in a listen-only mode. Later we’ll have a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder this conference call is being recorded. I would now like to turn the conference over to your host for today, Judy Clarke. You may begin.

Thank you. Good afternoon everyone and welcome to OraSure Technologies 2013 fourth quarter financial results conference call and simultaneous webcast. As a reminder, today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions). OraSure Technologies issued a press release at approximately 4:00 PM Eastern Time today regarding its 2013 fourth quarter and full year financial results and certain other matters. The press release is available to you on our website at www.orasure.com or by calling 610-882-1820. If you go to our website, the press release can be found by opening the Investor Relations page and clicking on the link for press releases. This call is also available real time on our website and will be archived there for seven days. Alternatively, you can listen to an archive of this call until midnight February 12, 2014, by calling 855-859-2056 for domestic or 404-537-3406 for international. The access code is 37105448. With us today are Doug Michels, President and Chief Executive Officer; Ron Spair, Chief Operating Officer and Chief Financial Officer and Kathy Weber, Senior Vice President and General Manager Consumer Products. Doug and Ron will begin with opening statements, which will be followed with a question-and-answer session. Before I turn the call over to Doug, you should know that this call may contain certain forward-looking statements, including statements with respect to revenues, expenses, profitability, earnings or loss per share, and other financial performance, product development, performance, shipments and markets, and regulatory filings and approvals. Actual results could be significantly different. Factors that could affect results are discussed more fully in the company’s SEC filings including its registration statements, its annual report on Form 10-K for the year ended December 31, 2012, its quarterly reports on Form 10-Q, and its other SEC filings. Although forward-looking statements help to provide complete information about future prospects, listeners should keep in mind that forward-looking statements may not be reliable. The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call. With that, I would like to turn the call over to Doug Michels.

Thank you Judy and good afternoon everyone and welcome to our call. About an hour ago, we issued a press release in which we announced excellent fourth quarter results and a strong finish to a very good year in 2013. Consolidated net revenues for the fourth quarter were almost $29 million, and total revenues for the year were just under $100 million, both are records for OraSure. The major growth drivers were our infectious disease and molecular collection systems businesses. Infectious disease revenues were up 30% for the quarter and 19% for the year, primarily because of sales of our OraQuick In-Home HIV Test and growth in our HCV business. Our molecular collection systems business continues to deliver exceptional results. Net revenues for this segment grew 60% in the fourth quarter and 43% for the full year compared to 2012. During the fourth quarter, we continued to execute our new marketing campaign for the OraQuick In-Home HIV Test, and our OraQuick HCV business gained momentum. We also entered into a new strategic collaboration for our Intercept substance abuse testing business, which we expect will help us resume growing this business. I will provide additional insight into these and other items later in the call but first let me turn the call over to Ron to recap our financial performance, Ron.

Thanks Doug and good afternoon everyone. So starting with our top line. Our fourth quarter 2013 consolidated net revenues were $28.8 million compared to $22.1 million reported in 2012. Our consolidated product revenues increased 31% as a result of higher sales of our molecular collection systems, infectious disease testing, and cryosurgical systems products. These increases were partially offset by lower sales of our insurance risk assessment products. Our molecular collection systems revenues primarily representing sales of the Oragene product line increased to a record high of $6.8 million in the fourth quarter of 2013 compared to $4.3 million in 2012. This 60% increase was the result of higher sales in the commercial market. Our infectious disease testing revenues were $15.4 million in the fourth quarter of 2013 compared to $11.8 million in the fourth quarter of 2012. The overall 30% increase was primarily result of $3.9 million in net sales of our OraQuick In-Home HIV Test compared to $546,000 in the fourth quarter of 2012, the period in which we began selling this product. During the current quarter, gross sales of our OraQuick In-Home HIV Test were $4.3 million which included a $2.7 million adjustment made in December to account for a change in our revenue recognition policy related to this product. Total gross sales were offset by $349,000 in customer allowances including cooperative advertising, cash discounts, and other allowances. Net sales of this product included approximately $101,000 of direct sales of our OraQuick In-Home HIV Test to public health customers. Sales of our OraQuick HCV professional product in the domestic and international markets increased 65%. International sales of our professional HCV Test in the fourth quarter of 2013 increased to $860,000 from $326,000 in the same period last year, primarily due to sales and support of a significant testing…

Thanks Ron. Let me start out and say the fourth quarter was the first full quarter of implementation of our new marketing campaign for the OraQuick In Home HIV Test which was entitled Life As We Know It . This campaign, which launched in September in conjunction with National Gay Men's HIV Awareness Day has focused on the need to significantly increase brand awareness among MSM or men that have sex with men as well as among African-American consumers. As explained in prior calls, this new campaign has targeted urban high prevalence markets and has incorporated influential and trusted spokes people from within the target communities that we serve. We're beginning to see positive results from this new campaign. Retail sales have increased over the last several periods, with average weekly sales through major retail accounts up about 7% in December versus November of last year and up about 8% in January of 2014 versus December of 2013. Additionally, we believe that a greater portion of our sales are now coming from channels not tracked by the Nielsen Service, such as internet sites and independent drug stores. We estimate that these outlets represented at least 13% of our total retail sales and 24% of the total product shipped during 2013. In addition, social media mentions and website traffic increased significantly during the fourth quarter and continued to build in 2014. Daily visits to our OraQuick.com website since the launch of the new campaign are up about 10% compared to Q2 of 2013 and up about 82% compared to Q3 of 2013. Visitors to our website are showing strong purchase intent with about 40% indicating that they will purchase at retail or online after their site visit. Average daily social media impressions, a key measure of the impact of our campaign…

(Operator Instructions). And our first question comes from the line of Jeff Frelick of Canaccord. Your line is now open.

Yeah. Good afternoon folks.

Hey Jeff.

Hey guys, a question on HCV sales. So, 400 customers now, you mentioned Doug, can you give us a sense of the mix between the -- how many physician offices versus clinics? And just as a follow-up to that, can you give us a sense of the lead order rates? Thanks.

Right. So, a lot of metrics around that, right? If you look at full year revenue mix on a geographic basis, about 56% of revenues came out of the United States, about 44% international, and that 44% international had a pretty decent distribution. A significant contribution of that was this large NGO we talked about, but about 12% was out of the EU, about 6% out of Asia, and the rest coming out of rest of world. If you look at that 56% of revenues that came out of the domestic market, about two-thirds of that, maybe little more was in the public health market. Obviously, the public health jurisdictions have the infrastructure to adopt rapid hepatitis C testing, because they have adopted rapid HIV testing, and so we were able to penetrate that market more rapidly. Obviously, we expect continued growth in the public health market, but also in the physicians’ office market as both primary care as well as specialists begin to adopt some of these new testing recommendations, and we've also seen some growth in the hospital market where some of the pharmaceutical companies in the therapeutic space have funded some grants to expand testing in the hospital market.

And just on the reorder rates that you're seeing?

We've seen at least half of those customers reorder in 2013, and obviously we expect that we're going to see that reorder rate increase. I think one thing that's been very encouraging for us is that the average order size in Q4 was literally double what it was previously, and that held up in each one of the different segments whether it was public health hospitals, the physician office, or international. And additionally, we're seeing some new types of customers come online. A major retail pharmacy here in the United States now is offering rapid HCV testing on a fee-for-service basis in 35 different locations, and we expect that to grow substantially in 2014.

Okay. Thanks Doug.

Thank you. And our next question comes from the line of Shaun Rodriguez of Cowen and Company. Your line is now open.

Hi guys. Good afternoon. Thanks for taking my question. So, really strong Genotek quarter with early growth acceleration in Q4 amidst all of the 23andMe developments. I was hoping you can give some more detail on the strength based on the 80% commercial mix that’s clearly the area of strength, but was there any notable bulk purchasing in there and also any detail on how 23andMe behaved during the quarter, obviously the event there being the warning letter, any detail on sort of their buying behavior before and after, so that we can get a sense for the outlook for their purchasing moving forward?

Yeah. So, first of all, Shaun, growth on the commercial front was pretty broad-based. Clearly, 23andMe was an important contributor to revenues in Q4, but we had strong growth from whole host of other commercial customers whether it was in the pharmacogenomic space, whether it was in different types of registries, and we expect that that’s going to continue. We really didn’t see any negative impact from the 23andMe warning letter in the fourth quarter. As I mentioned, they were a strong contributor to the commercial revenues, but we do anticipate that we will see a reduced contribution from 23andMe in 2014 until such time as they resolve some of these regulatory issues. Their business is not going to zero in 2014, that’s for sure. They continue to offer their full service offering outside the United States, and they’ve scaled back on their product offer here in the United States, but they’re still offering non-health related genetic information and testing services. We know that because we are in regular contact with them that they are in regular discussions with the FDA and collaborating fully with the FDA, and they do intend to file for FDA approval of their healthcare product service offering so that they can get back in the market with the full or near full service offering. Timing on that, I think, is best answered by 23andMe, but we know that they are working on it very diligently.

That’s helpful, I appreciate that color. And on potential partnerships with the HCV drug industry, obviously if you had something to announce, you would have, and we’ve heard for a while that interest on both sides is high and discussions are active, but I was really hoping to get a feel for whether this is a priority for senior management in terms of a view of what it could mean for the commercial potential of the test, but also in terms with any sense of urgency with regard to a window in which you would be really maximizing the opportunities here? I’m not saying that you will take a bad deal just to get one done, but just really trying to get some color around how much priority you put on this?

Well, I can tell you, it’s a high priority. And we are engaged at a significant level in different discussions. We believe that one of the key growth drivers for HCV testing in 2014 and beyond is going to be the introduction of the new therapies and the adoption of these new therapies. Gilead’s new drugs is obviously off to a great start. And I am quite certain they are working through the large warehouse of HCV positive patients that have not yet gone on therapy but given the success of their products so far, they are going to work through that warehouse pretty quickly. And as these new therapies come on line, there is going to be tremendous demand to identify more individuals that are chronically infected. We know that all of the pharmaceutical companies in the space have a keen interest in building awareness about HCV, but it’s not just the pharmacists that are focused on that, each of public health jurisdictions are very keen on building awareness, the different medical societies, whether it’s AASLD or the National Medical Association or the CDC, we’re seeing the introduction of laws now that are mandating testing and connection to care. And we’re actively involved in developing new screening programs, I mentioned specific program that's going on with one of the major retailers here. And we’re engaged with number of different public health jurisdictions on some major programs as well. So, it’s a priority, but obviously as we engage in those discussions, we want to be thoughtful in terms of the types of relationships we’re going to enter into. We want to make sure that they work for us, as well as the communities that we’re serving. And I remain hopeful that we’ll be able to get something done.

That's very helpful. Thank you for that. And lastly on HIV OTC spend, I think it was about a 1 million less than we had expected, some encouraging monthly trends the past few months and you do sound relatively encouraged by the data that you are seeing in terms of the traction from the new promotional campaign, but how should we think about spend over the next few quarters as I think you have recently talked about trying to maintain some flexibility in reacting to the data that you are seeing before really committing to any level of incremental spend there?

Yeah and I think that’s a good way to characterize that you should know that Kathy Weber is also here in the room with Ron and me and she can answer any specific questions on the different HIV OTC programs and where we are headed with that. Do you want to make any comment, Ron?

I was just going to -- the only thing I was going to say before you might want to elaborate is that for the first quarter we have approximately $5.6 million worth of spending included within our guidance numbers that we provided for HIV OTC advertising and promotional efforts.

And I would say that while that’s in the first quarter budget and we are committed to that because we still have elements of just retool the refine campaign that have yet to move out or overall out, I want to emphasize that we are keeping a very watchful eye on the returns that we are getting for our promotional spend. And frankly we need to see better returns to continue investing at this level. And I can say that we won’t continue at the current spending levels if sales remain on their current growth trajectory. So, I want to be clear on that. I also want to point out that it’s too early to tell if the retargeted campaign is going to be successful or not. One of the key aspects of the campaign is to increase awareness amongst our target consumers. And that's tough [slating] and it requires investment. And we're making that investment and we're starting to see positive results. But we have to see better results to continue spending at this level. And so we're going to monitor this as I said. And as we get out through the first quarter and evaluate the impact of all these programs as they are fully rolled out then we'll continue to make prudent decisions.

Thank you, Doug.

Thank you. And our next question comes from the line of Brandon Couillard of Jefferies. Your line is now open.

Hi, this is actually Kate in for Brandon. Talking about the DNA Genotek for a second and I was wondering if you could just go back to the growth and talk about is it coming from the existing customer base or are you selling off the goods to new customers as well?

It's primarily from new customers, but we continue to capture new customers both in the academic research space, as well as commercial. And actually as we look to 2014 pro forma [in-out] if you will 23andMe we expect somewhat reduced contribution until they resolve the regulatory issues. We expect both our commercial business, as well as our academic research business to grow and to grow handsomely.

Okay, thanks. That's helpful. And just one more on the HIV spend. Do you expect the campaign, the current campaign will continue past the first quarter or should we expect all those impacts to fall in the first quarter?

Yes, this is Kathy. We expect the campaign to continue beyond the first quarter. Really as Doug said, we rolled out some elements in the fourth quarter of last year and we’re continuing to add new elements throughout the first quarter and we’ll continue to add elements over the course of the year again against that focus of reaching the African-American consumer and the gay men in the most efficient way possible. But yes, we will continue.

Okay. Thanks.

Thanks Kate.

Thank you. (Operator Instructions). And our next question comes from the line of Eric Criscuolo of Mizuho. Your line is now open.

Good afternoon. Thanks for taking my question, just [one] in for Peter tonight. So, as more and more of these large genome studies are rolling out like the UK study looking at large populations, how involved are you in these studies? And is there -- if it’s a small amount, is there upside for you guys there?

I don’t believe that we’re involved in the UK study in a major way. But I think it represents the types of studies and the opportunities down the road that are certainly right for DNA Genotek to participate in. So I would say absolutely they represent great opportunities for the company.

Okay, thanks. And then just on the 2014 budget that was approved has that helped your public health customers kind of release funds for your products?

It actually should have some benefit. The (inaudible) Institute just recently put out a real nice analysis of the impact of sequestration on some of the federal programs. And I think based on their analysis the overall impact particularly into the CDC funded programs was in that 8% to 10% range. We estimate that within our publically funded customer base in 2013. We probably saw an impact somewhere between 6% and 8%. And now it looks like a number of those funding cuts are going to be largely restored, not completely. But the new budget for 2014 should provide some relief, not complete relief for those customers.

Great, thank you.

Thank you. And our next question comes from the line of Nicholas Jansen of Raymond James. Your line is open.

Hey, guys. Just a quick question on (inaudible) for you, Ron. In terms of your cash balance $93 million at the end of the year, 30% of your market cap. I guess that the question is with the stock being somewhat of a [laagered] as we’ve seen over the last six months or so, how do we think about maybe you guys using some of that cash flows to buy back stock or do something with it in terms of just --something to kind of maybe extract more value out of it rather than just sitting on the balance sheet? Thanks.

It’s a great question and we clearly Nick have a focused effort in the business development area led by Joe Thompson our Senior Vice President of Business Development. And we are always looking at opportunities whether that be in the form of potential M&A transactions, licensing deals, partnerships all to valuing and identify, complementary technologies and products that would drive revenue growth for us. So, we would welcome an opportunity to put that money to work in a way similar to how we did with DNA Genotek. And we’re always on a look out for that. Thank you.

And then in terms of cash flow guidance, I know you don’t give kind of cash flow guidance, but how should we think about cash flow in 2014 relative to ‘13, I know you actually generated cash even excluding the Roche settlement, so I actually think about cash burn or the maintenance of cash in 2014?

So although you’re right, we’re not giving guidance here. I think that as if you look closely at the kind of cash flow from ops performance that we generated in 2013 even pro forma in out the $8.3 million from Roche we were hovering in and around the breakeven position. And so, I think you can conclude from that that we’re going to run a fairly tight shift here looking to maintain and protect our cash position so that we can utilize that for the type of transactions that I just previously discussed. So from a financing risk perspective that ultimately is where you’re going with this. It’s not an issue for us in 2014.

Thanks guys.

Hey thank you Nick.

Thank you. And that brings an end to the Q&A session of today’s call. I would now like to turn the call over to Doug Michels for any closing remarks.

Okay. I want to thank you everybody again for being on the call with us this afternoon, this evening and certainly appreciate your continued interest in the company. And I hope you all have a great afternoon and evening. Thanks again. We’ll talk to you in a few months. Bye, bye.

Ladies and gentlemen, thank you for joining in today’s conference. This does conclude today’s program. You may now disconnect. Have a great day everyone.