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UBS Warburg Upgrades Cepheid to a Buy; Stock Surges 22 Percent

NEW YORK, Feb. 7 - UBS Warburg has upgraded its investment rating on Cepheid to a "buy" from a "hold" and a gave the company 12-month price target of $5, according to a Reuters report.

 

The news agency said that UBS issued the upgrade "based on its belief that the company's shares are undervalued, and that it would benefit from increased government spending on health and bio-terrorism in coming years."

In a note to his clients, UBS analyst Howard Horn writes that "while not yet at the point of allocation, government monies set aside for health and bio-threat projects in the 2002 federal budget and proposed 2003 federal budget are substantially higher than funding in 2001. Our upgrade is a valuation call supported by strong initial market growth trends for a segment of [Cepheid's] targeted markets."

Shares of Cepheid jumped 22.31 percent, or $.54, to $2.96 in afternoon Nasdaq trade on Thursday. The stock has a 52-week trading range between $1.48 and $11.48.

 

As GenomeWeb reported, Cepheid on Tuesday posted increased revenues and a significantly widened loss for the fourth quarter 2001.

 

For the three months ended Dec. 31, the company reported revenues of $3.2 million, compared with $2.6 million in the same period one year ago. Cepheid said the increase was due to a jump in sales of its Smart Cycler DNA analysis systems: the company said it sold $2.9 million of the units in the fourth quarter of 2001 compared with $1.8 million in the year-ago period.

 

Cepheid also said that net losses widened to $4.2 million, or $.16 a share in the fourth quarter of 2001, compared with $3.2 million, or $.12 a share one year ago. R&D spending increased roughly $470,000 year-over-year to nearly $4 million.

 

The company said it has roughly $25.3 million in the bank and plans to burn an average of $1.5 million a month during the new year.

 

Cepheid's outlook for the first three months of 2002 calls for product sales to remain flat at between $2.5 million and $2.9 million, and for its per-share net loss to grow to between $.19 and $.20.

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