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.