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Cepheid Posts 21 Percent Increase in Q2 Revenues

This story has been updated with additional comments from Cepheid's conference call.

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Cepheid's revenues for the second quarter rose 21 percent, the company reported after the close of the market Thursday.

For the three months ended June 30, the molecular diagnostics firm posted receipts of $49.6 million, up from $41 million in Q2 2009. Its net loss for the period shrank 73 percent to $1.8 million, or $0.03 per share, during the quarter from almost $6.8 million, or $0.12 per share, a year ago.

Wall Street had estimated revenues of $49.4 million and a loss of $0.10 per share for the quarter.

In a statement, Cepheid CEO John Bishop said that revenue, which reached a record high, and gross margin performance was driven by the "continued rapid adoption of our industry-leading GeneXpert System in the clinical market. With our heavy royalty burden starting to ease in the third quarter, combined with our continued market growth, we have our eye firmly set on achieving sustainable profitability without compromising the research and development investment we are making to protect and grow our leadership position in molecular diagnostics."

Total product sales for the second quarter reached $48.6 million, compared to $39.6 million in the year-ago period. Within product sales, system sales rose to $9.8 million from $8.9 million in Q2 2009, while reagent and disposable sales increased to $38.8 million from $30.6 million a year ago.

Clinical systems and reagents sales totaled $37.7 million, up from $26.7 million a year ago.

Bishop said during a conference call following the release of Cepheid's earnings that while second quarter sales of the GeneXpert systems were up year-over year, they were down sequentially due to fewer international placements.

He added, "As anticipated, capital purchasers in the US continued to demonstrate caution resulting in 37 system placements in the second quarter versus 36 last quarter."

Similarly, module purchases were conservative. "It's clear that buyers are looking to leverage a smaller number of modules upfront with the intention of potentially adding modules as the test volume ramps," Bishop said.

The company reported the installation of 106 GeneXpert systems and 478 modules during the quarter, bringing the total number of systems placed worldwide to 1,605 as of June 30, and the total number of modules to 8,618.

Recently Cepheid initiated a recall of all lots of its Xpert MRSA/SA blood culture product because of false-negative methicillin-resistant Staphylococcus aureus results. On the conference call, Bishop reiterated that despite the recall, "the action did not require the return of any product."

The product remains on the market and customers can and do continue to use the product, he said, adding that only the blood-culture product was affected. The company's other products, including its MRSA surveillance test, were not affected.

One account has stopped using the product, however, Bishop said.

R&D spending dipped slightly to $10.2 million from $10.3 million in the second quarter of 2009, while its SG&A costs rose to $15.1 million from about $12.3 million.

In the third and fourth quarters, R&D spending is expected to increase by about $2 million each quarter as the company conducts clinical trials for upcoming products, said Cepheid CFO Andrew Miller. SG&A spending is also expected to increase "with targeted growth in support of commercial operations and higher commissions," he said.

Cepheid said it had cash, cash equivalents, and short-term investments of $48.4 million as of June 30.

The company forecast total revenue for full-year 2010 to fall between $200 million and $205 million with a net loss of $0.21 to $0.25 per share.

In early Friday trade on the Nasdaq, shares of Cepheid were up almost 5 percent at $15.44.

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