Investment Firm Demands Medical Device Company OraSure Explore Sale Options

Activist investor Altai Capital Management is pushing OraSure Technologies to consider selling the company, claiming it could be worth double its current stock value. The hedge fund wants board representation to oversee a strategic review and threatens a proxy battle if demands aren't met.

An investment firm is demanding that medical device manufacturer OraSure Technologies consider putting itself up for sale, claiming the company could be worth twice its current market value, according to correspondence obtained by Reuters on March 17.

Altai Capital Management, an activist hedge fund, also requested board representation to oversee any strategic review process and warned it would continue its proxy battle if no agreement is reached.

In a Tuesday letter to OraSure’s board of directors, Altai President and Chief Investment Officer Rishi Bajaj stated: “OraSure is worth significantly more in a sale than as a standalone company.”

Bajaj’s correspondence detailed the firm’s valuation estimates, writing: “After deducting transaction costs, we estimate OraSure is worth $4.54 to $6.60 per share if sold — a 42% to 109% premium to today’s price.”

The medical device company has experienced significant financial struggles, with its stock value plummeting 73% during the past five years as demand for COVID-19 rapid testing products declined.

OraSure has not provided a response to requests for comment regarding Altai’s demands.

Altai, which holds roughly 5% ownership in OraSure, is intensifying its campaign following unsuccessful negotiations with company leadership and board members, according to Bajaj’s letter. The firm is requesting that Bajaj and another executive be added to OraSure’s six-member board.

The Bethlehem, Pennsylvania-based company reported a 29% decline in fourth-quarter revenue compared to the prior year, announcing in February that it expects regulatory approval for new diagnostic products by 2026.

Since Altai formally nominated Bajaj and industry veteran John Bertrand for board positions in mid-January, OraSure’s stock has risen approximately 18%.

Healthcare industry entrepreneur Ron Zwanziger has also expressed renewed interest in acquiring OraSure this year, according to sources with knowledge of the situation who were not authorized to speak publicly. Last June, Zwanziger made an unsuccessful bid to purchase the company for $3.50 to $4 per share, which was rejected. OraSure shares closed at $3.07 on Monday.

Both Zwanziger and Altai have confirmed they are not collaborating on their respective efforts.

In his letter, Bajaj argued that new board leadership is necessary because the company has “dramatically underperformed.” He criticized the board for not holding management accountable for the stock price decline and pointed out that CEO Carrie Eglinton Manner’s compensation package is largely disconnected from share price performance.

Bajaj also questioned the company’s 2024 purchase of Sherlock Biosciences to enhance its molecular diagnostics capabilities and its investment in Sapphiros for exclusive distribution agreements on future products.

OraSure announced in 2024 that the Sherlock acquisition would broaden its rapid diagnostic offerings for sexually transmitted infections, targeting what it described as a market exceeding $1.5 billion for Chlamydia trachomatis and Neisseria gonorrhoeae testing. The company noted at the time that these tests still required regulatory clearance.

Given that OraSure is currently utilizing only about 30% of its manufacturing capacity, based on comments from CFO Kenneth McGrath during a recent earnings call, Bajaj suggested the company should have acquired an established business capable of utilizing that capacity rather than “early-stage ventures with no near-term production volumes,” referring to Sherlock.

The letter emphasized: “It is imperative for the Company to reduce its cash burn and safeguard itself against further misuses of cash, including additional value-destructive investments and acquisitions.”

Point-of-care diagnostic companies provide immediate, accurate testing results for various conditions including cholesterol levels, influenza, and pregnancy. However, the sector remains highly fragmented, with major corporations like Abbott Laboratories, Danaher, Siemens, Roche, and Thermo Fisher Scientific dominating market share.