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Cepheid Stock Tops List of Performers As BCW Index Rises 28 Percent in 2007

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Despite the volatility in the general stock market and modest gains for the Nasdaq and Nasdaq Biotech Index in 2007, the BCW Index has had a very strong year, rising 28.2 percent for the tracking period of Jan. 3 to Dec. 18.
 
The Index has outgained by a wide margin the Dow Jones Industrial Average, which is up 6.1 percent for the same period; the Nasdaq, which is up 7.1 percent; and the Nasdaq Biotech Index, which gained 5 percent so far for the year.
 
Only two of the 21 firms that comprise the Index saw their stock prices decline during the year. While several firms’ shares rose more than 50 percent, Cepheid topped the list of gainers, rising an astonishing 194 percent so far this year.
 
Cepheid’s shares also had led the Index in the first half of the year, rising 77 percent, and its momentum gained steam as the year progressed.
 
The firm received US Food and Drug Administration clearance earlier this year for two molecular diagnostic tests that run on its GeneXpert system. In March, the FDA cleared its viral meningitis test, and a month later the agency cleared its Xpert MRSA test for detecting methicillin-resistant Streptococcus aureus, which has been a primary revenue driver since (see BioCommerce Week 4/25/2007).
 
MRSA infections are the leading cause of nosocomial infections and kill as many as 100,000 patients a year in the US. Industry analysts agree that the market potential for a rapid molecular test for MRSA is massive. Cepheid CEO John Bishop recently told BioCommerce Week via e-mail that the market for MRSA surveillance and diagnostics will grow to more than $1.3 billion by 2012.
 
Right now, Cepheid’s primary competition comes from Becton Dickinson, which is the only other firm to sell a FDA-cleared molecular-based MRSA assay. However, there are many molecular diagnostic and research-tools vendors who have said that they intend to develop products for what is a largely untapped market around the world. Among those firms are BCW Index participants Qiagen, Third Wave, and Beckman Coulter, as well as other molecular diagnostic players, such as Roche and Gen-Probe.
 
Cepheid’s revenues rose steadily throughout the year mostly due to sales of its MRSA assay and GeneXpert system to hospitals within the Veterans Administration, which has a comprehensive MRSA surveillance program in place. For the third quarter, the firm posted revenue gains of 53 percent to $36.3 million.
 
Also this year, Cepheid acquired Sangtec Molecular Diagnostics from Altana Pharma for approximately $27 million in cash (see BioCommerce Week 2/21/2007). The acquisition gave Cepheid a portfolio of real-time PCR-based assay kits for a variety of infectious diseases that affect immunocompromised patients.
 
In addition, the firm inked an exclusive deal with Instrumentation Laboratory to develop molecular diagnostic tests for hemostasis based on the GeneXpert platform.
 
Cepheid recently received the CE Mark for its combination SA/MRSA molecular diagnostic assay that runs on its GeneXpert platform and launched the test in Europe. Its pipeline includes a variety of molecular tests for hospital-acquired infections, including C. difficile and vancomycin-resistant Enterococcus.
 
Other Strong Performers
 
Cepheid was just one of several stocks to rise more than 50 percent for the year. Shares of Third Wave Technologies, Sequenom, Invitrogen, Waters, and Bruker BioSciences all eclipsed the 50 percent mark.
 
The primary catalyst for Third Wave, whose share price doubled in 2007, was a claims-construction opinion in July from the US District Court in Wisconsin that sided with Third Wave’s definitions in an HPV patent suit against Digene (see BioCommerce Week 7/25/2007). The firm’s shares rose 30 percent that week alone. But its stock has been a bit volatile over the past two months, bouncing between a low of $7.64 and a high of $9.89.
 
Third Wave officials recently said that the firm’s HPV assay would not be filed with the US Food and Drug Administration by the end of the year, as previously planned, but will be delayed one to three months (see BioCommerce Week 11/7/2007). However, just two weeks ago, it did receive the CE Mark, allowing Third Wave to sell the test in Europe.
 
Shares of Sequenom rose 68.3 percent this year, due almost entirely to its September agreement to license a next-generation sequencing technology from Harvard University (see BioCommerce Week 9/26/2007).
 
After rising 30 percent for the first half of 2007, Invitrogen’s shares continued their momentum through the second half of the year, and were up 65.1 percent for the year as of the close of the market on Tuesday. The firm has been rebounding from a difficult 2006, in which it struggled with integrating acquisitions and undertook an overhaul of its ERP systems.
 
Early this year, Invitrogen sold its long-struggling BioReliance unit to private equity firm Avista Capital Partners for approximately $210 million (see BioCommerce Week 2/14/2007).
 
Shares of Bruker rose 64.2 percent, while Waters is up nearly 60 percent this year. Waters recently posted 17 percent revenue growth for its third quarter, marking the fifth consecutive quarter of double-digit growth for the firm (see BioCommerce Week 10/24/2007).
 
Bruker’s shares have been hovering around a 52-week high of $12.60 since its announced two weeks ago that it would acquire its Bruker BioSpin affiliate for $914 million (see BioCommerce Week 12/5/2007). News of that acquisition caused a late-year spike in Bruker’s shares.
 
The deal will push Bruker to nearly $1 billion in annual revenue and is expected to enable the firm to more effectively compete in a greater number of markets already addressed by larger competitors, such as Thermo Fisher Scientific, PerkinElmer, Agilent Technologies, Waters, and Applied Biosystems.
 
Two Laggards
 
Two stocks in the BCW Index, Applied Biosystems and Caliper Life Sciences, declined in value this year. ABI has dropped 8.2 percent, while Caliper has fallen 5.6 percent for the year. However, both showed improvement from the first half of the year, during which Caliper’s shares had fallen 20 percent and ABI’s shares had dropped 15 percent.
 
Despite starting 2007 with a 28 percent gain in first-quarter revenues, Caliper officials deemed the quarter “soft.” The firm’s third-quarter revenues rose 38 percent, but its IVIS imaging sales declined year over year (see BioCommerce Week 11/14/2007). Company officials predicted, however, that the firm’s imaging sales would return to “strong double-digit” growth levels.
 
ABI had another busy year, as the firm worked on developing and launching its SOLiD next-generation DNA sequencing platform. Its parent firm, Applera, also hired investment bank Morgan Stanley to conduct a review and advise the company on its options for restructuring ABI and Celera (see BioCommerce Week 8/15/2007). A split of the two has long been desired by investors, who would like more transparency and independence in their operations.
 
The other three firms whose stocks had declined during the first half of the year but rebounded to post gains for the full year included Bio-Rad Laboratories, Luminex, and Sequenom.
 
 

BioCommerce Week Index of Diversified
Molecular Biology Tool Companies
Company
Ticker
Current Price
(December 18, 2007)
Beginning 
Price
(January 3, 2007)
% change
Affymetrix
AFFX
23.23 22.29 4.22
Agilent
A
35.11 34.30 2.36
Applied Biosystems
ABI
32.91 35.84 -8.18
Beckman
BEC
69.96 60.10 16.41
Becton Dickinson
BDX
82.37 70.43 16.95
Bio-Rad
BIO
100.15 82.22 21.81
Bruker
BRKR
11.89 7.24 64.23
Caliper
CALP
5.56 5.89 -5.60
Cepheid
CPHD
24.23 8.24 194.05
Illumina
ILMN
54.94 38.41 43.04
Invitrogen
IVGN
93.62 56.69 65.14
Luminex
LMNX
16.14 12.32 31.01
MDS
MDZ
18.67 17.88 4.42
Millipore
MIL
74.42 65.81 13.08
PerkinElmer
PKI
24.63 21.89 12.52
Qiagen
QGEN
20.70 15.64 32.35
Sequenom
SQNM
7.91 4.70 68.30
Sigma-Aldrich
SIAL
54.30 38.89 39.62
Thermo
TMO
56.70 45.17 25.53
Third Wave
TWTI
9.42 4.64 103.02
Waters
WAT
77.29 48.88 58.12
BCW Index Average 42.58 33.21
28.20
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