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Strong First Half of 2007 for BCW Index as Cepheid, Invitrogen Shares Post Big Gains

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Shares of Cepheid and Invitrogen topped the list of BCW Index performers in the first half of 2007, while Caliper Life Sciences led the few stocks in the Index that declined (see table below).
 
Overall, shares of five of the 21 companies in the Index increased more than 20 percent during the first half of the year, while five companies saw their stocks decline. The Index gained 10 percent for the six-month period, outperforming the Dow Jones Industrial Average, the Nasdaq, and the Nasdaq Biotech Index.
 
Cepheid was, by far, the biggest gainer for the first half of 2007. Its shares are up 77.2 percent so far in what has been an eventful year for the company.
 
Cepheid received US Food and Drug Administration clearance 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 (see BioCommerce Week 5/9/2007).
 
The market for MRSA molecular diagnostics is estimated at $3 billion, and Cepheid has been wooing investors with the promise of significant revenues from the test.
 
The revenue potential of such tests led Becton Dickinson to acquire GeneOhm Sciences last year for $230 million plus up to $25 million in additional incentives. At the time of the acquisition, GeneOhm had annual revenues of approximately $5 million, but had received FDA clearance for its IDI-MRSA and IDI-Strep B molecular diagnostic tests.
 
While Cepheid and BD got an early jump in the market, they are likely to face increasing competition within the next few years from several firms that have expressed an interest in developing and selling an FDA-cleared MRSA test. 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.
 
During the first half of the year, Cepheid also 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.
 
The firm also inked an exclusive deal with Instrumentation Laboratory to develop molecular diagnostic tests for hemostasis based on the GeneXpert platform.
 
Amid Invitrogen’s rebound from a difficult 2006, the company’s shares had the second-biggest increase in the second half among BCW Index stocks. The firm’s stock rose 30.1 percent, and other than a dip in early March, Invitrogen’s shares have risen steadily throughout the first six months of 2007.
 
Early in the 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).
 
After acquiring 15 businesses over the course of 2004 and 2005, integration issues hit the firm. Invitrogen conducted a portfolio review last year, which resulted in the sale of BioReliance as well as an IT overhaul, some facilities consolidation, and adjustments to its sales strategy.
 
The firm surprised investors with better-than-expected fourth-quarter results, and followed that with a 10-percent increase in first-quarter revenues (see BioCommerce Week 5/2/2007). Invitrogen officials cited market factors and the initiatives undertaken by the firm in the second half of 2006 and early 2007 as the drivers of the rebound.
 
In addition to Cepheid and Invitrogen, shares of three other firms — Bruker BioSciences, Third Wave Technologies, and Waters — each rose more than 20 percent in the first half of the year.
 
Caliper Shares Slide
 
Caliper Life Sciences led the five stocks that lost value during the first half of 2007, dropping 20.4 percent.
 
In early May the firm reported a 28 percent increase in first-quarter revenues, which was in line with expectations (see BioCommerce Week 5/9/2007). However, its results were hampered by problems related to its OEM deals with Agilent and Affymetrix as well as lower spending by certain pharma clients.
 
“We had a soft Q1 due in part to Affymetrix not purchasing GCAS systems and Agilent’s reconfiguration of our OEM relationship with them,” said Caliper President and CEO Kevin Hrusovsky during the firm’s first-quarter conference call. But, he added, “We anticipate an uptick at both of these accounts in the second half of 2007, providing year-on-year growth momentum.”
 
The firm expects sales to pick up in the second half of the year with market uptake of the firm’s new products, such as the Zephyr automated liquid-handling system and Desktop Profiler for in-house kinase profiling.
 
Hrusovsky has been touting the firm’s so-called in vitro-in vivo bridge of research tools for drug discovery and development and the revenue potential of this combination, but so far this year that message has not resonated with Wall Street.
 
Shares of Applied Biosystems also had a double-digit drop in the first six months of the year, falling 14.8 percent. The other decliners in the Index were Bio-Rad Laboratories, Luminex, and Sequenom.
 
 

BioCommerce Week Index of Diversified
Molecular Biology Tool Companies
Company
Ticker
Closing Price
(June 29, 2007)
Starting Price
(Jan. 3, 2007
)
% change
Affymetrix
AFFX
24.89
22.29
11.66
Agilent
A
38.44
34.3
12.07
Applied Biosystems
ABI
30.54
35.84
-14.79
Beckman
BEC
64.68
60.1
7.62
Becton Dickinson
BDX
74.5
70.43
5.78
Bio-Rad
BIO
75.57
82.22
-8.09
Bruker
BRKR
9.01
7.24
24.45
Caliper
CALP
4.69
5.89
-20.37
Cepheid
CPHD
14.6
8.24
77.18
Illumina
ILMN
40.59
38.41
5.68
Invitrogen
IVGN
73.75
56.69
30.09
Luminex
LMNX
12.31
12.32
-0.08
MDS
MDZ
20.34
17.88
13.76
Millipore
MIL
75.09
65.81
14.10
PerkinElmer
PKI
26.06
21.89
19.05
Qiagen
QGEN
17.79
15.64
13.75
Sequenom
SQNM
4.5
4.7
-4.26
Sigma-Aldrich
SIAL
42.67
38.89
9.72
Thermo
TMO
51.72
45.17
14.50
Third Wave
TWTI
5.85
4.64
26.08
Waters
WAT
59.36
48.88
21.44
BCW Index Average
36.52
33.21
9.96
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