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Jefferies sees increased litigation risk for Orasure Technologies (OSUR
), and downgraded the stock to hold from buy.
Analyst Ryan Rauch says Orasure's litigation risk is raised with the likelihood of a lawsuit from Inverness' recent acquisition of Abbott's HIV business for about $56 million. He believes a lawsuit would create headline risk, limit operating leverage, and cap upside in the stock regardless of the outcome.
Rauch believes Abbott's non-compete agreement with Inverness precludes a distribution deal with Orasure in Europe, and lowers probability of a take-out. He lowers his price target to $10 from $14 on increased litigation risk.
He notes that his 16 cents 2005 and 26 cents 2006 earnings per share estimates are unchanged at this time.