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Cepheid Posts 6 Percent Drop in Q4 Revenues, Details Cost-Cutting Moves

This article has been updated with comments from the firm's conference call.

NEW YORK (GenomeWeb News) – Cepheid reported after the close of the market on Thursday that its fourth-quarter revenues fell 6 percent due to a decrease in sales to clinical partners and biothreat customers.

The Sunnyvale, Calif.-based firm brought in total revenues of $37.8 million for the three-month period ended Dec. 31, compared to revenues of $40.4 million in the fourth quarter of 2007. System sales dropped 35 percent to $11.1 million from $15.6 million year over year, while reagent and disposable sales increased around 4 percent to $25.1 million from $21.3 million.

Sales to the firm's core clinical customers increased 53 percent to $24.7 million from $16.1 million year over year, while sales to its clinical partners dropped 62 percent to $2.3 million from $6.1 million, and sales to biothreat customers tumbled 54 percent to $5.2 million from $11.4 million. Sales to industrial customers rose 18 percent year over year to $3.9 million from $3.3 million.

Cepheid said that it placed a total of 99 of its GeneXpert molecular diagnostics systems and 598 modules during the quarter, and as of the end of the year had placed a cumulative total of 947 GeneXpert systems and 5,107 modules worldwide.

"The fourth quarter exhibited a tough operating environment as the economy deteriorated rapidly," said Cepheid CEO John Bishop during the firm's conference call last night. "In reaction to these conditions, hospitals encountered declining admissions and move to control expenses and capital investments."

Sales of the firm's Xpert MRSA tests were approximately $14 million, which was lower than anticipated relative to Cepheid's implied guidance of $16 million to $18 million, said Bishop. However, it represented growth of 211 percent from the same quarter a year ago.

The lower revenues were not unexpected, as Cepheid had cautioned last month that it would fall short of earlier expectations.

Cepheid's fourth-quarter net loss was $5.9 million, or $.10 per share, up 11 percent from a net loss of $5.3 million, or $.10 per share, for Q4 2007.

The firm's R&D expenses increased 24 percent to $10.8 million from $8.7 million, while its SG&A spending dipped slightly to $12.6 million from $12.7 million.

For full-year 2008, Cepheid had revenues of $169.6 million, up 31 percent from revenues of $129.5 million for 2007. Bishop said that the firm's Xpert MRSA test brought in revenues of $47 million for the year, a 420 percent increase over sales of $9 million for the test in 2007, when it was launched. Cepheid also launched four additional molecular tests for hospital acquired infections during the year, which boosted revenue growth.

The firm's net loss for the year was up roughly 1 percent at $21.7 million, or $.38 per share, versus $21.4 million, or $.39 per share, for 2007.

Cepheid's R&D spending for the year was $43.3 million compared to $31.4 million the year before, and its SG&A costs rose to $50.6 million from $41.1 million.

The company finished the year with $23.5 million in cash and cash equivalents.

Cepheid predicted full-year 2009 revenues in a range between $164 million and $174 million, with a net loss of $.42 to $.47 per share.

"With the potential for on-going economic uncertainty, we have executed a series of actions designed to optimize our opportunity for growth in our core clinical sales while reducing our 2009 spending levels and supporting our profitability improvement objectives," Bishop said in a statement. "These actions included: a reduction-in-force totaling 47 positions that impacted employees, contractors and replacement positions; the implementation of a hiring freeze with the exception of specified positions in sales, marketing, and manufacturing; and the suspension of annual salary increases for 2009."

In early December, Bishop told attendees of the Piper Jaffray Health Care Conference that the firm would "pare down" its force of sales representatives in 2009 and focus staff on managing existing accounts with an eye toward driving menu expansion on the GeneXpert system.

Cepheid expects to submit its Xpert tests for Clostridium difficile and vancomycin-resistant enterococcus to the FDA in the first half of 2009, with a US launch targeted for the second half of 2009. In addition, it expects to launch in the US in 2009 its HemosIL Factor I and V test and a MRSA nasal test for pre-surgical testing.

In early Friday trade on the Nasdaq, shares of Cepheid were up 2 percent at $8.01.

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