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Cepheid's Shares Continue Daily Swings

NEW YORK (GenomeWeb News) – Cepheid's shares closed up around 8 percent at $8.14 in Friday trade on the Nasdaq, continuing a seesaw pattern in the firm's stock price this week.

Cepheid said last week that it expects to report revenue of around $38 million for the fourth quarter of 2008, a dip of around 6 percent from the $40.4 million it posted a year ago and roughly 10 percent below analysts' average estimate of $42.5 million. The firm expects full-year 2008 revenues to be $170 million, an increase of 31 percent from its 2007 revenues of $129.5 million. But, it also cautioned that its 2009 sales will be flat year over year.

Since making that announcement last Tuesday, Cepheid's stock has traded between a low of $6.59 — which is also the firm's 52-week low — and a high of $8.35.

In a research note published yesterday, Thomas Weisel Partners analyst Peter Lawson said that the fourth-quarter miss "was driven solely by the falloff in hospital capital expenditures." He noted that Cepheid is taking measures to counteract that particular market dynamic, such as shifting its sales focus to generating more consumables sales rather than selling instruments. In addition, the firm is now offering hospitals a financing program so they can lease its GeneXpert molecular diagnostics instrument rather than buy it.

Such a strategy was employed a little more than three years ago by Beckman Coulter, which switched to operating-type leases from sales-type leases as part of a restructuring program, and has since seen its revenues rise.

Lawson noted that Cepheid officials were "adamant" that they would not need to raise additional cash. The firm currently has around $24.4 million in cash and cash equivalents.

Last week at the JPMorgan Healthcare Conference in San Francisco, Cepheid CEO John Bishop said that the hospital-acquired infections testing market is still a significant revenue opportunity. In addition to the few molecular tests it already has on the market, the firm expects to receive FDA clearance for its Clostridium difficile and vancomycin-resistant Enterococci tests in the second half of this year.

Bishop also said that the firm is on track to launch a multi-drug-resistant tuberculosis test later this year and a combined chlamydia/gonorrhea test next year.

Thomas Weisel currently has an "overweight" rating on Cepheid's stock with a 12-month target price of $11.50.

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