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Cepheid's Q2 Revenues Rise 55 Percent as Loss Widens; Lowers '08 Revenue Guidance

NEW YORK (GenomeWeb News) – Cepheid reported after the close of the market on Thursday a 55 percent increase in its second-quarter revenues and a 44.2 percent jump in its net loss for the three-month period ended June 30.
 
The Sunnyvale, Calif.-based molecular diagnostics firm brought in revenues of $42.1 million for the quarter compared to $27.2 million in the comparable quarter of 2007. System product sales increased 32 percent to $12.4 million from $9.4 million, while test and disposables sales rose 87 percent to $26.5 million from $14.2 million.
 
Clinical sales more than doubled to $25.9 million from $10.6 million, while industrial sales declined 7 percent to $3.7 million from $4 million and biothreat sales increased 4 percent to $9.4 million from $9 million.
 
"While our core clinical product laboratory sales grew to record levels in the second quarter, non-core clinical sales of products to other companies were below our expectations and we expect non-core clinical sales of products to other companies to continue to be below our expectations for the remainder of 2008," Cepheid CEO John Bishop said in a statement.
 
The non-core clinical sales declines were primarily attributable to partners Becton Dickinson, which purchases Cepheid’s SmartCycler platform for running molecular-based tests, and Roche, which buys OEM tests from the firm.
 
Bishop said during the firm’s conference call that non-core clinical sales declined 33 percent sequentially due to “an unexpected drop in purchases of the SmartCycler instrument by BD.” Cepheid’s purchase contract with BD ends in November, but the unexpected decline in purchases forced Cepheid to lower its revenue forecast for the year.
 
The firm lowered its revenue guidance for the year to a range of between $173 million and $177 million from its forecast three months ago of $183 million to $190 million. It also forecast a wider full-year loss of between $.35 and $.38, up from its prior forecast of a loss per share of $.18 to $.21.
 
Bishop said that Roche “delayed and cancelled contracted purchases of a specific first-generation OEM test product. This action impacted Q2 sales and will more significantly negatively impact sales in both Q3 and Q4.”
 
He said the negative impact of the sales to non-core clinical customers was more than offset by Cepheid’s sales of clinical products to laboratories. Sales to core clinical customers increased 239 percent year over year to $20.9 million.
 
Bishop also noted that the company’s Xpert MRSA test brought in revenues of around $11 million in the second quarter.
 
The firm said that it placed 108 of its flagship GeneXpert systems and 426 modules, primarily in North America and Europe, during the second quarter. As of the end of the quarter, the firm had placed a total of 717 GeneXpert systems and 3,560 modules worldwide.
 
Cepheid also noted that its gross margin on product sales, which was 41 percent for the quarter, was below expectations due to a problem in the production of a cartridge part. During the firm’s conference call, Bishop said the problem was a one-time event, and the firm predicted the gross margin would improve in the third quarter. Bishop said it was a low incidence problem and did not affect revenues.
 
Cepheid’s net loss increased to $7.5 million, or $.13 per share, from $5.2 million, or $.10 per share, in the second quarter of 2007.
 
Its R&D spending climbed 48.6 percent to $11 million from $7.4 million, while its SG&A costs increased 41.8 percent to $12.9 million from $9.1 million.
 
Cepheid finished the quarter with $24.9 million in cash and cash equivalents.
 
In early Friday trade on the Nasdaq, Cepheid’s shares tumbled 26.7 percent to $19.92.
 

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