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Cepheid, Bruker, and Response Genetics Wrap up UBS Conference

NEW YORK (GenomeWeb News) – The UBS Global Life Sciences Conference wrapped up today with a handful of 'omics-related life science firms presenting to investors. Below are summaries of their pitches.

Cepheid

CFO Andrew Miller reiterated previous company statements that the firm has 14 tests currently in development.

He said that the company has submitted its gonorrhea-chlamydia (CT/NG) test — one of three primary areas of focus, along with cancer and tuberculosis — to the US Food and Drug Administration and clearance could come by the end of the year.

Cepheid plans to market the test to hospitals, which make up about 30 percent of the total CT/NG market, with a particular emphasis on facilities that send their tests out. Of approximately 6,000 hospitals in the US, Miller said, two-thirds outsource all of their molecular testing.

He added that the remaining one-third of all hospitals that perform at least some of their own molecular testing use CT/NG assays from competitors such as Roche. However, "a majority" of those facilities are already Cepheid customers for other assays, representing a market opportunity for Cepheid for its CT/NG assay.

The company's MTB/RIF test for TB, meanwhile, is in clinical trials, which is expected to wrap up by the end of the year. When it does, Cepheid will submit the test to FDA, and Miller said, it should hit the market in the first half of 2013.

While the market for the test is modest — Miller estimated the market at about 400,000 tests annually — he said that a hidden opportunity may be to use the test to rule out patients who do not have the disease. Testing is normally done to rule in patients with TB, but because of false-positives, some patients end up being put on drug regimens unnecessarily, something that Cepheid's test would be able to reduce.

Among the firm's cancer tests, it is developing an assay for bladder cancer, targeted for a 2015 launch, and a breast cancer test and a colon cancer test, each with a 2016 launch date.

Also, Cepheid is developing with Novartis a BCR-ABL assay for chronic myelogenous leukemia. Novartis, which developed Gleevec (imatinib), is developing a new drug to prepare for the day when Gleevec goes off-patent, and Cepheid is working on a test for the new drug. The test is being developed to be more sensitive than the current Cepheid test that is available as a research-use only tool. The company, Miller said, is in discussions with FDA about the test and the steps necessary to bring it to the US.

Other assays in the pipeline include a vaginitis test slated for launch in the US in 2013 and a CLIA-waived flu test also expected to become available next year. Cepheid also is eyeing a 2013 launch of an HPV test in Europe, and further out, it anticipates additional tests for virology and oncology, as well as other CLIA-waived tests.

In August, Cepheid announced the first agreement to buy down the price of the Xpert MTB/RIF test in order to drive adoption of the technology in resource-poor areas of the world with multi-drug-resistant tuberculosis. Miller said today that the company expects to sign the two remaining agreements by year's end.

Bruker

The company is in the midst of a re-evaluation of its operations after disappointing second-quarter results, CFO Charles Wagner said at the conference.

In the second quarter, the firm reported a 5 percent increase in revenues year over year, but missed analyst estimates on both the top and bottom line. Bruker also trimmed its forecast for full-year 2012. During the Q2 earnings conference call, company officials hinted that organizational changes would be coming, and today, Wagner provided some details.

Overall, Bruker is moving to change an operation that has been largely decentralized, a setup that created headwinds because it made getting things done difficult as an organization, Wagner said.

As a step in changing that, the 10 separate divisions that made up Bruker and that had been reporting to Chairman, President and CEO Frank Laukien are now being reconfigured into three groups. Additionally, new hires are being brought in from the outside in order to shore up the business and drive up profitability, said Wagner, who became CFO of Bruker at the end of June. He had served on Bruker's board since 2010.

Effective Jan. 1, 2013, there will also be new presidents separately for Bruker Daltonics and Bruker Optics, he added.

Other steps include "implementing a robust corporate planning process" and adjusting compensation, Wagner said. Bruker also is initiating an overhaul of its ERP and financial IT systems, which he acknowledged will be a long and complicated process.

Asked about divestitures aimed at streamlining the company, Wagner said that that is always a possibility, but he added that there are currently no plans to sell off any part of Bruker.

Response Genetics

Since Thomas Bologna took the helm at the Los Angeles-based molecular diagnostics company in December, its pharmaceutical business has dropped from about $10 million in 2011 to an expected $5 million this year.

Bologna said today that that was by design. Rather than trying to recruit new pharma business, he said, Response Genetics chose to work only with its largest pharma customer, GlaxoSmithKline, so that it could focus on turning around a business that in 2011 lost $5.7 million, or $.30 per share.

That approach, Bologna told investors, has resulted in an improvement in the company's gross margin to 37 percent in Q2 2012 from 24 percent in Q4 2011. Although the firm's diagnostic revenues have remained flat and R&D costs went up, total operating expenses fell, he added.

Response Genetics' turnaround is under way now, Bologna said, and the firm will look to bring in another large pharma customer during the first quarter of 2013. Rather than having multiple pharma partners, though, the company's strategy is to maintain close relationships with GSK and one other partner. It also will allow the company to focus on its main priority, the diagnostic business.

The next key hire will be a vice president of sales and marketing, expected by the end of the year, and once that hire is in place, the company can increase its sales force. Response Genetics has 18 salespeople now and expects to grow the force to the low- to mid-20s by the middle of 2013, Bologna said.

He added that the company has begun evaluating next-generation sequencing technology for developing future tests, and in particular noted interest in the technology for analyzing solid tumors for genomic changes. Response Genetics is at the very beginning of the process, though, and has not yet decided on a platform to use.

Last week, the company announced it raised $8.8 million through a private placement of its stock. GSK led the round, and now owns 15 percent of Response Genetics, Bologna said.

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