Nov 5, 2014
Executives
Douglas Michels – President and CEO Ronald Spair – COO and CFO
Analysts
Brandon Couillard – Jefferies Shaun Rodriguez – Cowen and Company Peter Lawson – Mizuho Securities Mark Massaro – Canaccord Genuity
Operator
Good afternoon everyone, and welcome to OraSure Technologies' 2014 Third 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 2014 third quarter financial results and certain other matters. The press release is available 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 November 12, 2014, by calling 855-859-2056 for domestic or 404-537-3406 for international. The access code is 17659442.
With us today are Doug Michels, President and Chief Executive Officer and Ron Spair, Chief Operating Officer and Chief Financial Officer. Doug and Ron will begin with opening remarks, 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, business plans and regulatory filings and approvals and other matters. 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, 2013, 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’d like to turn the call over to Doug Michels.
Douglas Michels
Okay. Thank you, Rena, and good afternoon everyone, and welcome to our call.
I am pleased to report that we had a very successful and extremely productive third quarter. Our financial performance succeeded our guidance on both the top and the bottom lines and we believe this continues the momentum that has been building for most of this year.
Consolidated net revenues for the quarter were $27.8 million, a 13% increase from the third quarter of 2013. Our molecular collection systems business turned in another record quarter with almost $7 million in revenues, 38% increase over the prior year period.
Our HCV business also delivered solid results with sales growth of about 12% over the third quarter of 2013. Domestic sales revenues doubled over third quarter last year.
In addition, we recorded $3.4 million in licensing and product development revenue related to this business line as a result of our HCV collaboration with AbbVie. We are also pleased to report a consolidated net profit for the quarter of $1.1 million.
As you might expect the main focus during the past few months has been the launch of our collaboration with AbbVie and the co-promotion of our OraQuick HCV rapid antibody test. Our initiatives in several markets are now well under way and good progress has been made to increase awareness and train potential customers on our product with the goal of stimulating additional testing.
Much has been accomplished and there is still much work to be completed as we finish the year and we move into 2015. Later in the call, I will provide more detail on our HCV collaboration activities as well as on development at DNA Genotek.
I will also touch briefly on our efforts to develop our rapid point of care test for Ebola on our OraQuick platform. So with that brief introduction let me turn the call over to Ron for his financial review.
Ronald Spair
Thanks Doug and good afternoon everyone. Our third quarter 2014 consolidated net revenues were $27.8 million an increase of 13% over the $24.7 million reported in 2013.
Our consolidated product revenues of $24.5 million were unchanged when compared to the comparable period of 2013. Higher sales from our molecular collection system business and domestic OraQuick HCV product were offset by lower sales of our OraQuick professional HIV and cryosurgical system products and reduction in OraQuick in home HIV test sales.
Licensing and product development revenues were $3.4 million in the current quarter compared to $147,000 in 2013. Sales of our OraQuick HCV professional product in the domestic market increased 99% in Q3 to $1.3 million from $653,000 in the prior year.
Higher demand among new and existing customers was the primary reason for this increase. International sales of our HCV test in the third quarter of 2014 decreased to 470,000 from 924,000 in the same period last year primarily due to the reduced sales in support of testing program within international NGO which made its first stocking purchase in the third quarter of 2013.
We expect sales to this NGO to continue at a reduced rate in the fourth quarter. Our overall infectious disease testing revenues decreased 13% to $11.2 million in the third quarter of 2014 compared to $12.9 million in the third quarter of 2013.
Domestic sales of our professional HIV product decreased to $7.2 million in the third quarter of 2014 from $8.1 million in the third quarter of 2013. This decrease was a result of the customer migration to automated fourth generation HIV amino assays as recommended under new testing guidelines issued by the CDC and continued pressure on government budgets.
We expect continued pressure on our professional HIV business for the foreseeable future. International sales of our professional HIV product decreased to $491,000 in the third quarter of 2014 from $1.2 million in the third quarter of 2013 primarily due to the timing of product shipments and support of the significant African testing program.
During the current quarter net sales of our OraQuick in home HIV test were $1.4 million compared to $1.8 million in the third quarter of 2013. Net revenues for these periods were not recorded using the same revenue recognition policy and are not readily comparable.
So a better way to evaluate the performance of this product is to look at the number of units purchased by consumers. Available point of sales data shows unit consumptions remained flat in the third quarter of 2014 compared to the third quarter of 2013.
As you may recall we previously announced that we would implement a new promotional strategy for the in home HIV test that is focused on more cost effective methods of building awareness and consumer adoption at retail. Under this strategy we have largely stopped the expensive broad-based consumer advertising and instead have adopted a lower cost and more economical promotional approach geared towards the retail or trade environment.
This new approach has substantially reduced our promotional spent for this product. Third quarter 2014 cryosurgical revenues decreased 11% to $3.2 million from $3.6 million in the third quarter of 2013 primarily as a result of lower sales of our professional product in both the U.S.
and international markets partially offset by higher over the counter sales in Europe. Our domestic professional sales decreased to $1.6 million in the third quarter of 2014 from $1.8 million in the third quarter of 2013 due to the impact of the merger of our two largest distributors who began selling the competing private level cry-product.
Professional sales in the international markets decreased to 43000 from 435,000 in the third quarter of 2014 and 2013 respectively. As we experienced delivery problems and inventory shortages as we transition to a new manufacturer of Histofreezer.
Over the counter cryo-sales increased to $1.6 million in the third quarter of 2014 from $1.4 million in the third quarter of 2013 largely due to customer ordering patterns. Our molecular collection systems revenues primarily representing sales of the Oragene product line increased to $6.9 million in the third quarter of 2014 compared to $5 million last year in 2013.
This 38% increase was the result of higher sales in both the academic and commercial markets. Licensing and product development revenues were $3.4 million in the third quarter of 2014 and represents the recognition of revenues from AbbVie onto our HCV collaboration agreement.
Third quarter 2013 licensing and product development revenues were $147,000 and represent royalties paid on domestic out sales of Merck's OTC cryosurgical wart removal product. Turning to gross margin, in the third quarter of 2014 it was 67% compared to 61% reported for the third quarter of 2013.
The current quarter margin benefited primarily from the $3.4 million of licensing and product development revenues recognized from our AbbVie relationship as well as more favorable product mix driven largely by increased DNA Genotek sales to higher margin customers. Our consolidated operating expense for the third quarter of 2014 increased to $17.8 million compared to $17 million in the third quarter of 2013.
This increase was primarily related to higher R&D cost associated with qualifying a new raw material vendor and higher staffing, legal and consulting expenses. From the bottom line perspective we reported net income of $1.1 million or $0.02 per share on fully diluted basis for the third quarter of 2014 compared to a net loss of $1.9 million or $0.03 per share for the same period last year.
Turning briefly to our balance sheet and cash flow, we continue to maintain a solid cash and liquidity position. Our cash and short-term time investment balance at September 30, 2014 was $98.9 million compared to $93.2 million at December 31, 2013.
Cash generated by operating activities in the third quarter of 2014 was $18.8 million compared to $6.1 million generated in the third quarter of last year. The primary reason for this improvement was the $50 million payment received from AbbVie in the third quarter.
So turning to guidance for the fourth quarter of 2014, we're projecting consolidated net revenues of approximately $28 million to $28.5 million, and a consolidated net loss per share of approximately $0.04 to $0.05 for the quarter. The projected net loss reflects higher operating expenses driven by two, we expect increased R&D spending during Q4 on our drug assay development program with Thermo for our next generation intercept oral fluid collector and also on our Ebola feasibility efforts.
Secondly, our Q4 sales and marketing expenses will also be up has a result of increased spending in support of the AbbVie collaboration. As we look a little bit further out, we expect to continue somewhat higher spending as a result of the AbbVie collaboration the next generation intercept device and the Ebola development work I just mentioned.
From a product revenue perspective, we anticipate that the entry year revenue distribution for 2015 will be much like 2014 with Q1 being down sequentially and then building strongly from there. And with that I will now turn the call back over to Doug.
Douglas Michels
Great, thank you, Ron. I would like to begin our business discussion with HCV implementing our HCV collaboration with AbbVie continues to be a top priority.
You may recall that our co-promotion efforts are focused on several key markets in the United States and we are pleased with the progress to-date. One of our largest initiatives is focused on primary care and specialty physicians and was launched approximately 10 weeks ago.
Over that time period, the AbbVie sales force has been detailing our OraQuick HCV test to physicians and we have launched a comprehensive training program for this customer segment. Our detailing efforts to-date has resulted in well over 1,000 physicians indicating a strong interest in the product.
We are seeing a high rate of purchase intent once the physicians or physician office completes our training program. Our representatives are tasked with making sure product pull through occurs following the completion of customer training.
It's been our experience that once a physician office expresses interest in our product, it takes somewhere between three to four weeks to schedule training. And then following the training, it then takes another three to four weeks for the first product order and the commencement of testing.
Consequently we were just beginning to see the impact from these efforts on our sales line. Our expectation is that sales will continue to grow but meaningful results will not materialize until 2015.
We want to emphasize that we are extremely encouraged by the results we are seeing in this initiative so far. We are also encouraged by the fact that product interest is being generated across the variety of practices ranging from multi-site physician offices, internal medicine practices, practices that serve HIV patients, correction facilities and community health centers.
In addition we are finding that the prevalence rate for HCV runs higher in some practices than the average for the baby boomer population of 3%. In a pilot conducted in one large U.S.
jail system we saw prevalence of 7%. Similarly offices that serve HIV patients have substantially higher HCV prevalence rates.
We are also seeing testing volumes at some of these customers range from 10,000 to 20,000 tests annually which approaches the volume of some of our larger public health accounts. We certainly believe we are up to a solid start with this initiative and our representatives will continue to coordinate with their AbbVie counterparts on all aspects of this physician co-promotion initiative.
The second primary initiative targets employers or employers groups with employees that are high risk for Hepatitis C. The initial focus here has been on commercial long haul truck drivers.
We have been working closely with the Healthy Trucking Association of America or HTAA along with the organization known as Rolling Strong. Both of these groups collaborate and focus on improving the health and wellness of professional truck drivers.
OraSure and AbbVie are specifically promoting the use of our test in physician offices, health clinics, and retail pharmacies where truckers receive their healthcare at driving schools where newly hired drivers are required to take and pass a physical exam and in health event sponsored by HTAA and Rolling Strong where truckers can take advantage of variety of health and wellness services. We are also engaging in discussions with large fleet owners.
We have assembled the fleet advisory board and we will hold our first meeting next week. And we have also assembled the clinical advisory board for this effort and that group will meet in early December.
Our co-promotion efforts geared towards truckers began in earnest with the major awareness and testing event at the great American truck show in Dallas Texas in late August. More recently we conducted other testing events at some of the larger truck stops in the United States including stops located in Carlisle, Pennsylvania and Bordentown, New Jersey.
Yesterday we had an event in our large truck stops in Tampa, Florida and another event was planned later this year in Ontario, California. Similar events are expected throughout 2015.
The primary objective of these truck shows is to educate and build awareness about HCV and to offer onsite rapid HCV testing along with the AbbVie patient support program. In conjunction with these events of OraSure and AbbVie are also in discussions with several physician groups and organizations who provide healthcare services to a significant number of truck drivers.
Our third major market segment consist of national and regional retail pharmacies and retail clinics. With the increased focus on expanding health and diagnostic services to consumers, we believe local retail pharmacy outlets are an important growth area for our Hepatitis C collaboration.
OraSure and AbbVie are continuing discussions with several major retailer, retail pharmacies, and health providers about increasing Hepatitis awareness and making our OraQuick HCV retest along with AbbVie patient care model available through retail outlets. Good discussions continue with a number of retailers and we hope to share more definitive progress updates in the months to come.
As previously discussed, the effort required to adequately address these market segments is substantial. A great deal of work is required to build awareness, promote our test and implement the various support services that are needed including product trainings, co-payment assistance and patient support.
We are implementing this collaboration as quickly as possible and substantial progress has been made since we signed the AbbVie agreement in June. As I mentioned previously, we expect to see increased revenues from the collaboration in the fourth quarter, but we are not projecting a significant financial impact from these efforts until 2015.
In addition to the AbbVie collaboration we continue to drive improvement in our existing HCV business. We achieved another record in Q3 with $1.3 million in domestic revenues.
We shipped product to over 460 customers during the quarter with 82% of our shipment being delivered to repeat customers. We also added over 80 new customers during this period.
So as we look forward, we anticipate continued progress in our HCV business. We expect product sales to continue to grow especially here in the U.S.
and we expect to achieve some of the performance goals under our HCV collaboration with AbbVie next year. Another area I would like to address this evening is our molecular collection system business.
As noted earlier in the call, DNA Genotek delivered another record quarter in Q3 with $6.9 million in revenues or 38% increase over the third quarter of last year. DNA Genotek revenues for the quarter were fairly evenly split between sales to the academic and commercial markets.
Academic revenue grew over 80% compared to the year ago period while commercial revenue grew approximately 16%. We are extremely pleased with the performance of our molecular collection system business.
During our last call we discussed two new product development initiatives underway at DNA Genotek. The first product OMNIgene.GUT will enable academic researchers to collect and stabilize sputum samples for gut microbiome analysis.
The second product line consisting of OMNIgene.GUT sputum and preparation reagent called prepIT•MAX are designed to improve collection, transport, stabilization and processing of sputum samples used for tuberculosis testing. Much of our activities for these products are centered around ensuring that early versions are being provided to key opinion leaders in the relevant markets which is exactly what is happening.
DNA Genotek employees have been connecting with many key opinion leaders around the world and the feedback to-date on these new products is very positive. We believe these products represent promising new opportunities and we expect both will make important contributions to the future of our molecular collected system business.
Our final area, I would to discuss our efforts to develop a rapid test for Ebola. As you may have heard, Dr.
Margaret Hamburg, Commissioner of the United States FDA visited our offices a couple of weeks ago to recognize the collaborative work that OraSure has done with the FDA over the years in bringing innovative HIV and HCV test to market. This meeting had been set up some time ago and was not related to the development of an Ebola test.
However, towards the end of our meeting, several members of the media interviewed Dr. Hamburg and me and a question was asked that if we have plans to develop an Ebola test.
In response, I explained that we had been recently contacted by certain public and private entities about developing such a test and that we were evaluating whether our technology platform could deliver the performance levels required for this product. As I am sure you can appreciate OraSure is interested in doing whatever it can to benefit the public health especially with something as urgent and critical as Ebola.
We have formed the cross functional team to manage this project and we are actively accessing the technical feasibility of an Ebola test on our OraQuick platform. Studies indicate that oral fluid is a good carrier of the Ebola antigen so we are optimistic about our ability to develop a product that will deliver the appropriate performance characteristics while bringing the benefits or rapid oral fluid based diagnostics to the situation.
We have been actively engaged with several governments and other organizations including the FDA, the CDC, NIH, the World Health Organization and certain non-profit foundations regarding all aspect of developing, validating, gaining emergency regulatory approvals and deploying a rapid diagnostic for Ebola. In cooperation with these organizations and others we are also assessing the commercial opportunity represented by such a test.
We expect to achieve several key milestones on this project during the fourth quarter of this year and we will provide an update on our progress at the appropriate time. So as you have just heard, there is absolutely no shortage of opportunities available to the company and you can be sure that we are keenly focused on the successful execution of the initiatives that I have outlined today.
We continue to be extremely enthusiastic about our molecular collection system business and its growth opportunities. Our HCV business posted a solid performance in the third quarter and is poised with substantial growth in 2015 and beyond.
We believe in our strategy to further advance each of these parts of our business. And I am pleased with our overall progress and encourage that we are on the right track towards maximizing the value of the opportunities before us.
I look forward to a successful fourth quarter as well as moving to full year profitability in 2015. So with that I will now open the floor to your questions.
Operator?
Operator
[Operator Instructions] Our first question comes from Brandon with Jefferies. Your line is open.
Brandon Couillard – Jefferies
Thanks good afternoon.
Douglas Michels
Hi Brandon.
Brandon Couillard – Jefferies
Doug with respect to the DNA Genotek business in the period where there any discrete orders driving that growth maybe could you give us, remind us what the academic business grew in the first half of the year and whether I guess this run rate is sustainable over the coming period?
Douglas Michels
I will let Ron handle the academic growth rate. But, let me just make a couple of comments about the quarter’s revenues.
So, we did see nice growth in the quarter in the academic space. The mix of business was pretty much 50:50 academic versus commercial and that compares to previous quarters where we had a little higher revenue contribution coming from commercial customers.
We still expect that the full year mix of revenue contribution will skew slightly more towards commercial I would say probably more like we have seen historically over the last few quarters more like 60% commercial, 40% academic. We did see driving that growth in the academic front we did see nice contributions from academic study that contributed from the EU as well as another large study that came out of Australia.
But we also on the commercial front we saw a real solid contribution from some of our larger historical commercial customers continued growth if you will, same store growth so nice balance performance across the entire business and just couldn’t be more pleased.
Ronald Spair
Right. So, with respect to the growth in the academic marketplace specifically, as Doug pointed out in his prepared comments that space grew for us 80% compared to the year ago period.
And I think it did benefit from the contribution from a couple of orders that were received. We expect that to continue but I think realistically an expectation of that level of growth is probably higher than what we are going to be able to deliver going forward that said the academic business certainly has been a fine contributor to the revenue for the year and I think overall we will close out the 2014 year with an academic business contributing, approaching half of the total revenues for the business as a whole.
So very pleased with how that's going but I think overall Brent as you look out into 2015, 2016 and beyond the expectations would be that the commercial side of the business would be the one that would really move the needle for us going forward.
Brandon Couillard – Jefferies
That's helpful and then on the domestic HCV business, is it fair to see that the current revenue run rate is not really capture any meaningful contribution from the Abbey program thus far and can you give us some color around how we should be modeling the ramp in those revenues kind of over the next few periods?
Ronald Spair
I think that's a fair characterization at least for Q3 given the way I just described, we got out detailing for about ten weeks and despite the fact we've had very encouraging interest from the provider community, once we get that expression of interest, then there is a process that take some time to get them schedule for training. Once they are trained, some time passes by until they order the product make and they get up and running.
So, we really haven't seen a material impact from those efforts here in Q3 and will see some impact in Q4 but I think the real impact is going to be felt in 2015. We did see on that core HCV business as we mentioned it’s double from year ago period and it's up across the board, whether that's growth in the public health segment, in hospital and in the physician 's office on a year-to-date basis.
So we just continue to see more interest and adherence to the recommended guidelines. There is more money being allocated toward HCV prevention efforts in the public sector and we expect that will continue.
Brandon Couillard – Jefferies
Thank you.
Operator
Our next question comes from Shaun Rodriguez, Cowen and Company. Your line is open.
Shaun Rodriguez – Cowen and Company
Good afternoon, thanks for taking the question. So many be one or two on the guidance, so in terms of the revenue guidance if we have a non- product revenue about flat sequentially from Q3 to Q4 can you just talk or walk us through the sequential assumption that net out and that you're guiding to which is I think about half a million up sequentially virtually flat from Q3 to Q4?
Ronald Spair
I would, without getting to far into the detail, because there are a lot of moving parts and there are some assumptions around the different sensitivities on different line items but I would eventually say that the one that moves advance sequentially that could cause us a little bit of, with these revenues would be in the Cryo business and so the Cryo business is down in the fourth quarter versus the third quarter, which is not uncommon given the seasonality associated with the Cryo business and some of the difficult to predict ordering patterns that we have it in the international marketplace plus, as you may have noted my remarks, we are changed over a manufacturer for our Cryo product in the professional market place and we will expect to have affected that transition in the fourth quarter and get that business back rolling again later on this year and into 2015. So I would say that that would be an area that we would see some of the diminution of revenues where with the infectious disease business overall expectations are that that will be up sequentially.
Shaun Rodriguez – Cowen and Company
Okay that's helpful. And actually related to that on the P&L assumptions within the Q4 guidance.
I understand that R&D and SG&A will pick up in and understand the basis for that but does your guidance also reflect a gross margin moderates relative to Q3, and if so is that just reflective of the mix assumptions, some of which you just touched on.
Ronald Spair
I think that's a good point Shaun and yes we will see a slight moderation because sequentially our revenues from DNA Genotek are expected be down and that is a higher gross margin profile for the business and we will likely see some step up in contribution from 23 and the business within the fourth quarter, which also is a lower gross margin profile.
Shaun Rodriguez – Cowen and Company
Okay, thank you for that and on HIV professional, so I understand the pressures you called out there. Clearly, the CDC change in the algorithm is not new but I guess I am trying to understand what you're saying about the outlook, so it looks like US professional HIV is down about 10% year-to-date.
So is what you're suggesting when you say you expect to remain when you say you expect to remain under pressure for the foreseeable future, are you signaling an acceleration of the rate of declines, the stable declines at around these levels are a moderation. How should we think about a given that there is still is obviously an important franchise for us to think about when we model.
Ronald Spair
I think that you can look at most of the pressure being applied in the public health space and I think if you model those declines in that segment consistent with our most recent experience, I think, at least for the near term, that's a reasonable expectation. I think you should also highlight that the hospital business has been quite stable, actually in our physician office business is up for the year and will likely finish up in the mid to high double digits, 15% to 20% range.
For the full year, physician office business could be up in the thirty plus percent per year-on-year, so you kind of have to look at it by segment. Our HIV international businesses is going to be down year on year slightly and that is due largely to some of the large African orders that are a little bit lumpy and an hard to predict market timing issue than any kind of major business degradation.
And then Shaun just to point out in the fourth quarter we are going to be up against the pretty tough comp for the overall infectious disease business, because if you recall in last year's fourth quarter, we had the revenue recognition change which generated about $2.5 million worth of revenue on the OTC HIV line which we will not have the benefit of the fourth quarter of 2014.
Shaun Rodriguez - Cowen and Company
Right, that's helpful. Thanks Ron.
Okay, thanks guys that's it from me.
Operator
Our next question comes from Peter Lawson with Mizuho Securities. Your line is open.
Peter Lawson – Mizuho Securities
Just on the DNA Genotek business, how many commercial partners do you have now that are meaningful and one of you can give us some details about how of broader growth was in the commercial business, is that coming from many partners or just a few.
Ronald Spair
I would say it’s coming from many and the number of the large commercial customers continues to grow significantly year on year and when we kind of evaluating our definition of a large commercial customer for this business, it would be a customer and 250,000 plus revenue range and we have many of those right now versus what we have had in ’13 and certainly in ’12.
Peter Lawson – Mizuho Securities
And when you look out with that business, how sustainable do you think that kind of 20% to 30% and 40% growth rate is?
Douglas Michels
I think we want to get out and to speculating on the sustainable levels of growth other than to say that it certainly our expectations that after this next quarter here that we will continue to see growth for the years ahead in the collection business that we currently enjoy but also as we bring on the new product Peter, like Doug spoke up beyond the gene sputum, Preplt Max product and our HEMAgene product that was developed there. So that can benefit from not only the domestic successes but in the geographic expansion and more customers coming on board and just generally more DNA testing being conducted around the world.
So I think it's a business that has a significant potential over the long-term,
Peter Lawson – Mizuho Securities
Thank you and just on the Ebola test, do you have the right components, capabilities and regents internal to develop a test for Ebola over there has to be a commercial partners we to help you.
Douglas Michels
As you can imagine, there are many aspects to the development of a test like this. We certainly believe our testing platform is robust and obviously we have demonstrated that through the development of our original HIV or quick assay and enhancements to that and the hepatitis C product and the like.
So those components and materials are well characterized and we have them in-house, we have different forms of those in-house and they'll all go into the development of the prototype test. The actual biologic material, the monoclonal antibodies, the engines and the like are being sourced externally and we have multiple sources for those reagents from both the private as well as the public sector and I mentioned a number of that organizations and agencies that we've been in discussions with the spirit of collaboration and cooperation is off the charts and we have been receiving raw materials for the last couple of weeks and those are being evaluated and put into the development effort which our expectations will lead to functional prototypes at which time will validate those both analytically as well as clinically, all that work will also be done together with potential partners and as we make progress on that that warrants communication will certainly share that.
Peter Lawson – Mizuho Securities
When did you have a test for Ebola?
Douglas Michels
I wouldn't speculate on that because this development but there is a tremendous, ample of urgency, both here in the company and that urgency is shared by these partners that we've been in discussions with. I think, if any company can develop highly effective, accurate diagnostic in the space or sure is extremely well-positioned to do it both with our platform capabilities, our organization technical capability and the resources that we have available to do it.
But again it’s science, so we are on it and we'll share our success or lack thereof with you at the appropriate time.
Peter Lawson – Mizuho Securities
Right. Thank you so much.
Ronald Spair
Thanks Peter.
Operator
[Operator Instructions] our next question comes from Mark Massaro with Canaccord Genuity, your line open.
Mark Massaro – Canaccord Genuity
Thanks for taking the question.
Ronald Spair
Hi Mark.
Douglas Michels
Hi Mark.
Mark Massaro – Canaccord Genuity
Maybe could you comment on whether or not you think you can obtain some of the benefit on the milestone payments in the first half of ’15 versus the second half of ’15 and what I'm referring to is 3.5 million to 55.5 million of additional opportunity on the empty opportunity?
Ronald Spair
We have indicated and I want to be clear both from things we've communicated previously as what we try to reinforce here, we do expect profitability from the entire business in 2015 and that expectation for profitability is exclusive of us earnings some of those performance payments as part of the AbbVie agreement. We have also indicated that we do expect to achieve some of those performance payments in 2015.
I don't think at this point in time we are prepared to forecast or predict when in the year will begin to achieve those payments.
Mark Massaro – Canaccord Genuity
Okay. And I think I heard you guys say that you thought the 2013 you may could pick up a bit in Q4, can you give us an update on some of the conversations you have had with them, and maybe an update on their regulatory update?
Ronald Spair
Yes, so I’ll handle the regulatory component to the extent that I am able to share. They have responded to the FDA's concerns and we believe that the FDA has given them feedback on their submission.
I do not have an update beyond that as to whether they responded to the FDA's feedback. We did announce or they announced in the quarter that they launched the full-service offering in Canada and we are aware that they expect to launch in additional countries both in the fourth quarter as well as their plans for launching in additional geographies in 2015.
So we're excited about that and look forward to continuing to work with them both in terms of global expansion as well as to support them in whatever way we can so that they can get back on the U.S. market with the broader product service offering.
Mark Massaro – Canaccord Genuity
Thanks and I know the AbbVie U.S. agreement to clearly large and significant for you.
Doug, can you comment if you are continuing conversations with a partnership outside the U.S.?
Douglas Michels
We are and those discussions are ongoing but I don't have anything substantive to report on that at this time.
Mark Massaro – Canaccord Genuity
And may be the last one from me with 100 million in cash, do you have any thoughts on potentially deploying that and in any ways that deviate from the last year or two?
Douglas Michels
No. I think we are still going down the path of exploring business development opportunities that would identify products technologies company that would be attractive to bring under the OraSure umbrella.
Mark Massaro – Canaccord Genuity
Great, thanks guys.
Douglas Michels
Thank you, Mark.
Operator
That brings to an end the Q&A session of today's call. I will now turn the call over to Doug Michels for closing remarks,
Douglas Michels
I just want to thank everyone for joining us on the call this afternoon and this evening. Look forward to speaking with you on the next call and talk about Q4.
Thanks everybody and have a great evening.