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Cepheid Q4 Revenues Increase 15 Percent

NEW YORK (GenomeWeb News) – Cepheid said after the close of the market on Thursday that its fourth-quarter revenues increased 15 percent year over year as the firm missed consensus Wall Street estimates on the top line but easily beat it on the bottom line.

For the three months ended Dec. 31, 2012, total revenues came in at $92.4 million, up from $80.1 million in the year-ago period, but short of the $92.9 million expected by analysts. Earlier in the month Cepheid pre-announced Q4 revenues of around $92 million.

The Sunnyvale, Calif.-based company racked up $14.1 million in system sales during the fourth quarter, down 31 percent from $20.4 million a year ago. Reagent sales shot up 34 percent, however, to $75.6 million from $56.6 million.

Cepheid said that it placed 153 GeneXpert systems in its commercial clinical business, as well as 68 GeneXpert systems as part of its High Burden Developing Country program during the quarter.

Cepheid increased its R&D spending to $17.3 million, up 4 percent from $16.7 million a year ago, while SG&A costs rose 5 percent to $25.8 million from $24.6 million.

The company posted a profit of $5.6 million, or $.08 per share, compared to a loss of $1.6 million, or $.03 per share, in the year-ago period. On an adjusted basis, its EPS was $.20. Wall Street analysts had expected a GAAP loss per share of $.01.

In September, the company announced manufacturing issues that resulted in intermittent interruptions in Xpert cartridge supplies. Earlier this month, Cepheid said it had made "significant progress" resolving those issues and that many of the company's Xpert tests came off allocation, meaning they are no longer being rationed, in the fourth quarter as expected.

On a conference call following the release of the earnings results, Cepheid CEO John Bishop said that all commercial products are off allocation except Xpert Flu "which is seeing even higher demand than we anticipated" from just a few weeks ago.

Due to the strong flu season, that test is anticipated to remain on allocation during the first quarter of 2013. A couple of the firm's lowest volume tests could also see intermittent allocation as Cepheid prioritizes production of the flu test, he added.

The firm's highest volume tests, including Xpert MRSA and C. difficile "will be freely available for customers to order," however, he said.

In its HBDC program, Xpert MTBC remains on allocation, but the company expects that to end by the end of the first quarter, Bishop said. He added that Cepheid closed on its acquisition of a plastics molding firm in December and is in the process of expanding its capacity as part of its efforts to resolve the manufacturing problems.

Asked whether any accounts had been lost as Cepheid worked through those issues, Bishop said that it lost "an account or two, but nothing overt, no major trends. ... The customers are staying with us."

In December, the US Food and Drug Administration cleared the firm's Xpert CT/NG test and last week, the agency categorized it as moderate complexity under the Clinical Laboratory Improvement Amendments. The company will begin shipping the test in the US next week, Bishop said.

Meanwhile, 14 tests remain under active development. The Xpert MTB test remains on target to be launched in the US in the middle of the year, while a submission of Cepheid's blood culture test to FDA is anticipated later in the first quarter, Bishop said.

Xpert HPV is on track for release as a CE-IVD marked test late this year, he continued, and the Xpert virology portfolio is anticipated to be launched in the 2014/2015 time frame. Xpert Norovirus is on target for a launch outside the US at the end of 2013.

Cepheid has, however, made some changes to its menu including a decision to focus on a dedicated test for trichomonas, rather than a combined trichomonas/Candida panel, reflecting a growing market interest in molecular tests for trichomonas. The test is anticipated to be launched outside the US at the end of this year, with a US launch mid-2014, Bishop said.

The company also is delaying clinical trials for its CLIA-waived flu test until the next flu season as part of its continuing efforts to resolve its manufacturing problems, and it will "ship cartridges to customers rather than use them for clinical trials this quarter.

"This does remain a strategic priority for the company but in the immediate term we felt it more appropriate to give priority to current customer demand," Bishop said on the conference call.

For full-year 2012, revenues increased 19 percent to $331.2 million from $277.6 million in 2011, matching analyst expectations. System sales retreated 11 percent to $55.4 million from $61.9 million a year ago. Reagent sales offset the decrease, though, rising 31 percent to $266.1 million from $203.6 million.

The company placed 523 GeneXpert systems in its commercial clinical business in 2011, and 506 GeneXpert systems as part of the HBDC program, it said. As of the end of 2012, a cumulative 3,835 GeneXpert systems have been placed globally.

The HBDC program had total revenues of $35 million in 2012, Bishop said on the conference call, representing a greater than 80 percent increase from 2011.

The firm's R&D costs for the year climbed to $71.7 million, a 21 percent increase from $59.4 million a year ago. Its SG&A costs also rose 21 percent to $105.2 million $86.7 million.

Cepheid reported a net loss of $20.0 million, or $.30 per share, for 2012, compared to a profit of $2.6 million, or $.04 per share, in 2011. Its adjusted EPS for the year was $.31. Wall Street analysts estimated net loss per share of $.39 on a GAAP basis.

The firm's full-year 2012 net loss includes a charge of $15.1 million, or $.23 per share, associated with a litigation settlement. In September Cepheid agreed to pay Abaxis $17.3 million to put to rest lawsuits the two firms had filed against each other.

The company ended the year with $95.8 million in cash and cash equivalents.

For 2013, it said that total revenues are anticipated to be in the $375 million to $385 million range. It also expects a range of $.05 net loss per share to EPS of $.01. On an adjusted basis EPS is expected in the range of $.41 to $.46.

On the conference call, Cepheid CFO Andrew Miller said the HBDC program is expected to bring in about $45 million in revenues for the year.

For the first quarter of 2013, Cepheid anticipates revenues to be "modestly down" sequentially from Q4 2012. Non-GAAP and GAAP EPS is projected to be down between $.09 and $.11 from Q4 2012, Miller added.

In late morning trade on the Nasdaq shares of Cepheid were up 5 percent at $37.28.