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Cepheid Plans Assay Expansion Beyond HAI Market, Additional Sales Hires Later This Year

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Cepheid officials said last week that the firm has devised a five-year plan for assay development that will take it beyond its current focus on hospital-acquired infections and into other infectious diseases and oncology.
 
In addition to beginning work in these other areas, Cepheid is contemplating selling its own products directly in Western Europe. The firm’s CEO, John Bishop, told investors and analysts at the Thomas Weisel Partners Healthcare Conference that Cepheid is eyeing multibillion-dollar clinical markets as it expands its portfolio and gets ready to roll out a new version of its GeneXpert platform.
 
“We have a very aggressive five-year program with our platforms to give a very broad testing menu,” said Bishop during his presentation, which was webcast from Boston. “The major breakout opportunity for the company is clearly the clinical marketplace, where we’re looking at multibillion-dollar developing markets at this point and time.
 
“Within the [five-year] strategic plan we’ve been talking about entering the human papillomavirus market, [and] HIV,” as well as hepatitis B and C viruses, he said. Though there are intellectual property issues around some of those targets in both the US and Europe, “many of these patents vis-a-vis the European market are in fact expiring over the next couple of years,” said Bishop.
 
He said the firm’s facilities in Stockholm will be its virology R&D center, where researchers are currently working on the firm’s C. difficile and vancomycin-resistant Enterococcus tests for the hospital-acquired infections, or HAI, marketplace.
 
Cepheid also is working on microRNA products for oncology markers. Bishop said the firm is starting with a focus on lung cancer, but, depending on progress in that program, may expand into cervical cancer.
 
Bishop also said that with the firm’s improved profitability this year it is considering “going direct” with its sales overseas, particularly in Western Europe. The firm already has a sales and marketing staff based in Tolouse, France, but uses distributors throughout Europe.
 
Last month, Cepheid posted a 37 percent increase in second-quarter revenues to $27.2 million driven by a 165 percent increase in revenues from clinical products, particularly its molecular diagnostic assay for methicillin-resistant Staphylococcus aureus (MRSA). Even though Cepheid did not have the benefit of a full quarter of sales for the Xpert MRSA test, which was cleared by the US Food and Drug Administration in April, the test and the firm’s GeneXpert instruments were the primary drivers of revenue growth.
 
The company is developing a variety of molecular diagnostic assays for the HAI market and expects its clinical products to continue to provide the majority of revenues going forward.
 
“We are disproportionately ramping our sales and marketing investment [in the HAI market],” Bishop said at the conference last week. “Our [sales and marketing] investment there is up by 60 percent this year.”
 
He also said the firm will be adding an undisclosed number of sales personnel in the fourth quarter.
 
Pitching MDx
 
With an increasing emphasis on clinical products, as opposed to industrial assays, Bishop pitched investors on the rapidly evolving market for molecular diagnostics.
 
“We see the market … at an inflection point,” said Bishop. “What’s driving the inflection point overall in clinical molecular diagnostics is, one, the general acceptance today within the clinical medical community that molecular is an extremely accurate technology, so therefore they are highly desirous in getting access to that technology.”
 
He said a second driver is the need by the clinical community for rapid “access to clinically actionable results … [and] as a result of all of this, there is a significantly increasing interest in clinical molecular diagnostics,” said Bishop.
 

“The single largest factor that has withheld the development of alternate site testing, historically, has been the inability to correlate the result obtained in an alternate site setting with that obtained in the central laboratory.”

He said there is also increasing interest in moving molecular testing beyond core central labs and closer to the patient. “As a result, there’s going to be a movement toward disseminating test capability outside of the central lab facility even within an institution.
 
“The single largest factor that has withheld the development of alternate site testing, historically, has been the inability to correlate the result obtained in an alternate site setting with that obtained in the central laboratory,” he added, while noting that Cepheid is looking to eliminate this problem.
 
Cepheid’s GeneXpert system is the base on which it has built its molecular diagnostics business, and Bishop believes it is a unique system that offers advantages over other molecular diagnostic instruments.
 
“The GeneXpert system is a fully contained molecular lab, not an instrument that has to sit in a molecular lab,” said Bishop. “That has major implications, because one of the reasons why you have 7,000 CLIA high-complexity registered laboratories in the US and only about 2,300 are doing molecular today is the significant investment not only for the equipment and the expensive dedicated personnel, but the costs of bricks and mortar of high-cost specialized laboratories,” he said.
 
Bishop said that because the GeneXpert system is fully contained, it cuts the overall cost and makes it easier for labs to do molecular testing.
 
Starting in January, Cepheid will introduce the next generation of GeneXpert systems, called Infinity. The new six-color system will be able to directly interface with a laboratory information system. Compay officials told BioCommerce Week that six-color modules also will be available for the GX1, GX IV, and GX XVI systems and can be added to current GeneXpert systems with four-color modules.
 
“The days of batch testing are gone,” said Bishop. “The fact of the matter is it’s better medicine and it’s better overall efficiency to do on-demand testing, and that’s what the laboratory also gets with the GeneXpert.”
 
He said this is one of the reasons why the Veterans Administration has readily adopted Cepheid’s system and cartridges for HAI testing.
 
Bishop noted, however, that 60 percent of the firm’s MRSA test revenues are from non-VA customers. He said the firm is gaining the most traction in sales of the GeneXpert from high-volume labs both inside and outside the VA system.

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