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Cepheid Shares Downgraded by Bank

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Shares of Cepheid were down around 1 percent in late Thursday trade after investment bank Thomas Weisel Partners downgraded the firm's stock to "market weight" from "overweight."

However, Thomas Weisel analyst Peter Lawson raised his price target on the stock from $18 to $20.

"We continue to view Cepheid as a leader in molecular diagnostics with a best-in-class technology," Lawson wrote in a research note published last night. "However, in the current hospital spending environment and with the tone surrounding the hospital-acquired infection market, we are not proponents of significant multiple expansion nor significant revenue upside that would help drive the stock 10-15 percent above the current price to justify an Overweight rating."

He noted that Cepheid's stock is up 47 percent since the beginning of the year — significantly outperforming peers including Celera, Genomic Health, and Luminex.

Cepheid's revenues are derived from the sale of molecular diagnostic instruments and tests for healthcare-associated infections. The firm's CEO, John Bishop, told attendees of the JP Morgan Healthcare Conference in January that Cepheid expects to launch six more tests in 2010.

Lawson noted that Cepheid also has plans to introduce a Chlamydia/Gonorrhea test in Europe later this year and in the US in 2011, followed by other tests for vaginitis, trichomonas, and human papillomavirus.

"However, one concern is that the current weak hospital spending environment will delay instrument placements and provide competitors time to catch up on the technology front, compressing Cepheid's current technology and install base lead," Lawson wrote. "We do not believe that any near term catalysts from competitors will significantly pressure the stock, such as Gen-Probe's expected initiation of clinical trials for its Panther instrument and Qiagen's roll out of various configurations of its QIAsymphony and Ensemble platforms throughout 2010."

But, he noted, "mixed comments regarding hospital spending from larger firms like GE, Siemens, Phillips, and Becton Dickinson could reduce expectations and pressure hospital suppliers including Cepheid."

Cepheid's shares were trading down approximately 1 percent at $19.06 in late Thursday trade on the Nasdaq. They had fallen as low as $18.52 earlier in the day.