OraSure Technologies (OSUR) Q3 2025: International Diagnostics Down 20% as Funding Shifts, Sickle Cell Acquisition Targets Growth
OraSure’s core diagnostics revenue fell sharply as international HIV orders and public health funding waned, but leadership doubled down on innovation and portfolio expansion to drive a 2026 recovery. The Biomedomics acquisition and new product launches signal a pivot toward diversified, higher-growth markets, though near-term headwinds persist. Investors should watch execution on pipeline launches and international channel leverage amid continued funding uncertainty and macro volatility.
Summary
- Diagnostics Portfolio Faces Funding Strain: International HIV test revenue fell as customers worked through inventory and adjusted to tighter funding.
- Strategic M&A and R&D Acceleration: Biomedomics acquisition and new product launches aim to offset legacy declines and capture new growth vectors.
- 2026 Growth Hinges on Execution: Pipeline milestones and channel expansion must deliver as market headwinds persist into next year.
Performance Analysis
OraSure’s Q3 results underscore the reality of a transition year, with total revenue at $27.1 million and core revenue at $27 million, reflecting a marked slowdown in international diagnostics. The diagnostics segment, which includes rapid HIV and hepatitis C tests, generated $14.5 million, while sample management solutions contributed $10.3 million. International diagnostics revenue is now expected to decline approximately 20% for the full year, a direct result of national health program funding changes and inventory drawdowns, particularly in Africa and other developing markets.
Sample management, which provides collection and stabilization products for genomics and clinical research, was flat year-over-year excluding a large consumer genetics client, but leadership sees early signs of recovery tied to precision medicine adoption and international research investments. Gross margins held at 44.2% non-GAAP, slightly above expectations due to operational efficiency and lower scrap rates, though Q4 is guided lower on mix and seasonality. Operating cash flow remained negative at $10 million, consistent with ongoing investment in the Sherlock molecular diagnostics platform and other innovation projects.
- International Diagnostics Pullback: Revenue drop driven by partner inventory digestion and reduced public health funding, with a 20% YoY decline expected for 2025.
- Sample Management Mixed: Flat performance excluding a major customer exit, with positive signals from new research initiatives and geographic expansion.
- Margin Resilience: Gross margins benefited from improved operational efficiency, but mix shift and seasonality will pressure Q4 profitability.
Management’s capital allocation remained disciplined, with $5 million deployed for share repurchases and a $4 million upfront for the Biomedomics tuck-in, targeting high-ROI growth in underserved markets. The core business is effectively breakeven, with incremental spend focused on innovation and next-generation diagnostic platforms.
Executive Commentary
"We continue to significantly advance our strategic transformation and execute with discipline as we position OraSure for a return to growth in 2026. We have delivered meaningful progress and continue strengthening our foundation. We're also elevating our core growth by expanding and diversifying our product portfolio and customer relationships."
Kerry Eglinton-Manner, President and Chief Executive Officer
"Our core business essentially is breakeven and where we do choose to spend our dollars beyond that are on innovation. In this case, innovation focused on delivering our Sherlock CTNG clinical trial submission, as well as internal innovation."
Ken McGrath, Chief Financial Officer
Strategic Positioning
1. Diagnostics Realignment Amid Public Health Volatility
International diagnostics, historically driven by large-scale HIV testing programs, is under pressure from changing funding dynamics and inventory cycles. Management expects a 20% full-year decline, emphasizing the need to diversify both end markets and geographies. The renewal of the Together Take Me Home HIV self-test program provides some stability, but broader market uncertainty remains.
2. Portfolio Diversification Through Targeted M&A
The acquisition of Biomedomics, and its SickleScan rapid sickle cell test, is a strategic move to address underserved markets in Africa and Latin America. This tuck-in leverages OraSure’s established international channels and aims for a rapid scale-up with minimal incremental cost, supporting both revenue growth and margin accretion as the product ramps.
3. Innovation Pipeline as Growth Engine
Investment in the Sherlock molecular diagnostics platform and new sample collection devices (ColiP, HEMA Collect) targets emerging markets in STIs, proteomics, and liquid biopsy. These products are positioned for regulatory milestones in late 2025 and early 2026, with early customer feedback shaping the roadmap. Success here is critical to offsetting legacy declines and unlocking higher-margin growth.
4. Operational Focus and Cost Discipline
OraSure’s operational model is now geared toward breakeven in the core, with incremental investment tightly focused on innovation and channel expansion. Automation and process improvements have supported gross margin stability, though the business remains exposed to mix and seasonal swings, particularly in international markets.
5. Channel Expansion and Customer Base Diversification
Growth beyond public health is a clear priority, with targeted expansion into urgent care, hospitals, correctional facilities, and consumer-initiated testing channels in the U.S. Internationally, new research partnerships and government initiatives (e.g., the Endo1000 project in the UK) offer additional growth vectors.
Key Considerations
This quarter marks a pivot from legacy public health reliance toward a more diversified, innovation-driven portfolio. Management’s strategy hinges on successful execution of new product launches, M&A integration, and channel leverage in both developed and emerging markets.
Key Considerations:
- Funding Headwinds in Core Diagnostics: Public health program volatility and inventory cycles are driving near-term declines, requiring a shift in go-to-market strategy.
- Pipeline Execution Risk: Timely regulatory approval and market adoption for Sherlock and new collection devices are essential to reignite growth.
- M&A Integration and ROI: Biomedomics must scale rapidly within OraSure’s infrastructure to deliver on targeted returns and strategic objectives.
- Margin Sensitivity to Mix: International revenue growth may dilute margins; operational discipline and automation remain critical levers.
Risks
OraSure faces ongoing risk from macro-driven funding reductions in public health, especially internationally, where government and NGO budgets remain uncertain. Regulatory and clinical trial timelines for new products could slip, delaying revenue inflection. Integration risk for Biomedomics, and execution on channel expansion, are additional watchpoints, while margin pressure from product and geographic mix could constrain profitability if not offset by operational gains.
Forward Outlook
For Q4 2025, OraSure guided to:
- Revenue of $25 million to $28 million, with COVID-19 testing now negligible.
- Gross margin in the low 40% range, down sequentially due to mix and seasonality.
For full-year 2025, management expects:
- International diagnostics revenue in the low to mid $30 million range, down ~20% YoY.
- U.S. diagnostics revenue in the low to mid $30 million range, down low single digits YoY.
- Sample management revenue flat YoY, excluding a major customer exit.
Management highlighted:
- Continued disruption from public health funding and consumer genetics customer exit.
- 2026 as a return-to-growth year, contingent on innovation pipeline execution and new channel ramp.
Takeaways
OraSure’s transition strategy is clear: stabilize the base, accelerate innovation, and diversify revenue streams.
- Diagnostics Contraction: International and U.S. public health funding remains a headwind, requiring aggressive portfolio and channel shifts.
- Innovation and M&A as Growth Catalysts: Sherlock platform and Biomedomics integration are central to 2026+ growth, but execution risk is high.
- Watch for Pipeline Milestones: Regulatory approvals, channel ramp, and margin trends will determine whether OraSure can deliver on its multi-year growth plan.
Conclusion
OraSure’s Q3 reveals the strain of public health market contraction, but also the urgency and focus behind its innovation and acquisition-led pivot. Success now depends on execution in new markets, integration of Biomedomics, and the ability to translate pipeline investments into sustainable growth by 2026.
Industry Read-Through
OraSure’s results reinforce the vulnerability of diagnostics suppliers to public health funding cycles and inventory swings, especially in global infectious disease testing. The pivot toward self-testing, point-of-care innovation, and diversified sample management solutions mirrors broader industry trends as traditional public health channels weaken. Emerging markets and clinical research are becoming more attractive as precision medicine and population health studies gain traction, but require tailored go-to-market strategies and product innovation. Peer companies should expect continued volatility in legacy channels and prioritize pipeline execution and channel diversification to drive future growth.