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OSUR Approval Green-Light's CEMI's OTC Program?

Brian Marckx, CFA

OraSure's Rapid HIV FDA Approved For OTC Market
On Tuesday (7/3) the FDA approved OraSure's (OSUR - Snapshot Report) OraQuick over-the-counter rapid HIV test.  The test, which uses an oral swab (saliva) as the sample and is basically identical to the test sold to the clinical market, is the first HIV test to be approved for home use.  While the approval was not a total surprise given that in May an FDA advisory panel (Blood Products Advisory Committee) voted unanimously in favor of approving the test, there were some lingering doubts given concerns about the risk of false positives from the test.  OraSure's shares jumped on the news on Tuesday and are up over 15% from the closing price on Monday.   

Chembio (CEMI) has noted in the recent past that they might pursue FDA approval of their Sure Check (lateral flow, using blood sample) rapid HIV 1/2 test for the OTC market.  In September 2011 the FDA provided guidance that Chembio will need to perform additional studies in order to submit for an Investigational Device Exemption (IDE).  FDA clarified the regulatory pathway and Chembio has since completed the instructional manual for home-use testing.  But before spending any substantial time and financial resources on an OTC program, including running clinical trials, Chembio was waiting for the FDA's decision on OSUR's OTC test.  Tuesday's news now opens the door for Chembio to pursue OTC approval of its Sure Check rapid HIV test, which is already FDA approved for the clinical market.  As we've noted previously, as eventual FDA approval of a Sure Check OTC test is still uncertain (although chances are likely now more favorable with FDA approval of OraQuick) and not a near-term event, we do not yet include any contribution from it in our model.  

We cover Chembio with an Outperform rating and $10.40 price target.  

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