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Cepheid Sees 'Significant Opportunity' in Menu Expansion, CLIA Market

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NEW YORK (GenomeWeb) – With a growing portfolio of tests either CE marked for sale in Europe or going through the US Food and Drug Administration process, Cepheid Chairman and CEO John Bishop said the firm sees a "significant opportunity" ahead in both the US and international markets.

The firm also has plans to expand its sales force and is targeting growth in the CLIA test market.

Speaking on a conference call following the release of the firm's first quarter financial results, Bishop said that Cepheid "continued to deliver" on it's test menu expansion initiatives in Q1. He said that the firm received 11 regulatory approvals in the US and Europe over the last 12 months. "Most of these tests remain in the earlier stages of adoption and … six of the new tests still have yet to complete US regulatory requirement, so [a] significant opportunity still lies ahead of us."

He also noted that Cepheid recently received an Emergency Use Authorization for its Ebola test from the US Food and Drug Administration, and obtained the CE mark for its Xpert HIV qualitative and Xpert HCV viral load tests, bringing the number of commercially available Xpert test to 17 in the US, and 22 outside the US.

The Ebola test is also in clinical trials in Sierra Leone, and the firm has been monitoring those studies with its remote Xpert cloud-based software, Bishop said, pointing out that remote monitoring has also demonstrated its value to some of the firm's TB test customers and "could be a very valuable asset in monitoring the West African situation."

Cepheid's HIV viral load and HCV viral load tests are now in clinical trials with targeted release dates in the 2016/17 timeframe, Bishop said, adding that the firm will narrow that window when it gets closer to submission to the FDA. In addition, its Xpert Trichomonas will be submitted to the FDA in Q2, and the firm is targeting commercial release of its Xpert BCR-ABL Ultra test outside the US in late 2015, with a submission to the FDA in the first half of 2016.

The firm placed 163 new GeneXpert systems in North America in the first quarter, including the three Infinity systems. To support this expansion and further drive uptake in the US, Cepheid plans to hire 53 news sales reps, said Bishop.

He said six of these new hires will be in management positions, and the remainder will be "customer-facing" and focus in part on the below-150 bed hospital distributorship Cepheid bought back from LABSCO for $21 million last October.

These new sales reps will act as "franchisees" in newly carved out geographical territories, Bishop said. The salespeople will develop total business of all the accounts within that geographical business area, continuing to develop both high-volume accounts as well as smaller hospitals. Bishop also expects to see growth when hospitals with Xpert systems in central clinical labs purchase the systems to be used in emergency rooms and intensive care units.

"We already have a very large footprint of test systems out in the market … but what we really want to do now is ramp menu utilization within that footprint while at the same time, of course, we continue to expand our footprint," Bishop said.

Cepheid also anticipates adding a sales force specifically for the CLIA market in early May. This force will consist of representatives hired directly out of college, Bishop said, and will be used "for organizational development," providing growth and career development incentives, but also remaining cost-effective.

"Basically the least level [of] sophistication will be in the CLIA-waived market, and then you move into the hospital market, [which is] very sophisticated, and then yet an additional step as you look at the independent lab market. "

The firm is currently pursuing CLIA waivers for its Xpert Flu and recently cleared Flu/RSV tests, the former having been validated for use in ER settings.  

"The CLIA-waived market is actually going to step up overall test volumes as you move more broadly-disseminated," Bishop noted. "I think the molecular tests are going to grab market share very rapidly … and that's going to get even more emphasized with all of the programs now on antibiotic stewardship and more diagnostically directed use of therapeutics," he said, adding that this will benefit everyone participating in that market, particularly because reimbursement is "very good."

HBDC lumpiness

Though Cepheid's high-burden developing countries program continues to develop, with 133 GeneXpert systems placed in Q1, Bishop emphasized that HBDC continued to show "the variability that is typical of this business." A number of funded implementations are taking longer than expected due to administrative or infrastructure readiness delays, he said. As a result, revenues from its HBDC business declined 15 percent year over year to $15.6 million.

"We are taking an even more cautious view on the timing of HBDC revenue, but are confident in the growth trajectory of the overall business," Bishop said.

Notably, the firm expects to deliver "a sizable order" of 300 GX4 systems to India starting in the second quarter. This order contributed to the company's inventory build in Q1, but India then "moved more slowly to enact that program than what we anticipated," Bishop said.

The firm saw a similar situation with distribution in China, to which the firm shipped 774 platforms last year.

"Those are not nearly as aggressively being utilized," Bishop said, and that accounts in that country "continue to go very slow relative to follow-on orders for TB testing," in part because the country has not worked out the kinks at rural and provincial levels.

"It's a real lesson," Bishop said, that even though systems are placed and funded, unless the infrastructure is in place, "You are not going to see those follow-on orders come on a timely basis."

"While [the HBDC business is] continuing to grow and the outlook on the business is going to be even more sizable, it's going to be very lumpy," Bishop said.

Infectious disease, flu tests drive Q1

Cepheid reported 24 percent first quarter revenue growth, driven by its commercial clinical business, and its infectious disease and flu tests, in particular. A recap of Cepheid's Q1 financial results can be found here.

The firm's sexual health business — including tests for chlamydia and gonorrhea, Group B strep, human papilloma virus, and Trichomonas vaginalis — more than doubled from the first quarter of 2014, with dollar growth driven by the Xpert CT/NG and Xpert GBS tests, Bishop said.

A strong flu season also boosted revenues, and Bishop further claimed that Cepheid has "taken significant market share relative to the molecular flu market," and that Xpert Flu and Xpert Flu RSV contributed revenue "in the double-digit millions of dollars in the first quarter."

A "strong uptick" in the firm's Xpert Flu and Xpert Flu RSV tests also drove 50 percent growth in critical infectious disease test sales from the first quarter of 2014. Bishop noted, however, that non-flu products also grew over 20 percent. "Even excluding flu, commercial clinical reagent growth was in the mid-20 [percent], reflecting strong growth across our portfolio."

HAI test sales were also strong, he said. The firm's Clostridium difficile and methicillin-resistant Staphylococcus aureus tests had double-digit growth, Bishop said, and the firm saw "modest but growing" contributions outside the US from its CE-marked norovirus and carbapem-resistant bacteria tests.

Bishop pointed to the recent CRE outbreak in Los Angeles in discussing the market opportunity for the Xpert Carba-R assay. He described the outbreak as " likely to be an early indicator of a future trend," adding, "accurate and fast molecular diagnostics are well positioned to support any broader initiatives to manage these threats, and our Carba-R product, now available outside the US and targeted for US release later this year, looks to be particularly timely."

The Carba-R test is also being used by a consortium including AstraZeneca and GlaxoSmithKline, Bishop mentioned, for an antimicrobial resistance initiative called COMBACTE. Cepheid has partnered with those firms to develop Carba-R for the US market, as previously reported by GenomeWeb. 

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