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Cepheid Prelim Q3 Revenues Miss Top, Bottom Lines; Firm Lowers Full-Year Guidance

NEW YORK (GenomeWeb) – Cepheid said after the close of the market on Tuesday that it expects to miss analysts' consensus estimates on both the top and bottom lines in the third quarter due primarily to lower-than-expected gross margin.

For the quarter ended Sept. 30, Cepheid reported preliminary revenue of approximately $126.5 million, shy of the Wall Street estimate of $127.8 million. Net loss per share, meantime, is expected to be $.32 in the quarter, falling short of analysts' estimate of a $.26 loss per share.

Excluding stock-based compensation expense of approximately $10 million, amortization of debt discount and transaction costs of $2.6 million, and amortization of purchased intangible assets of about $1.2 million, adjusted net loss per share is expected to be about $.13, Cepheid noted.

When it reported its second quarter earnings, Cepheid noted that it expected Q3 revenues of between $125 million and $128 million and full-year revenues of $544 million to $553 million.

On Tuesday the Sunnyvale, California-based firm lowered its full-year guidance to between $537 million and $541 million, which suggests $146 million to $150 million in Q4 revenue. Cepheid said it would provide updated net loss per share and adjusted net loss per share guidance in its Q3 earnings call next week.

"While the third quarter's overall business continued to perform broadly in line with our expectations, we were disappointed with gross margin that fell short of our targets," Cepheid Chairman and CEO John Bishop said in a statement. "The primary driver was mix, with a higher proportion of lower-margin [high-burden developing country] business and less commercial business than we projected. In addition, we incurred higher-than-expected manufacturing costs associated with the ramp-up to volume of our newest virology tests."

Bishop added that the initial virology manufacturing ramp-up is now behind the company, although Cepheid plans to implement additional controls to enhance visibility into ramp-up costs associated with future new product introductions.

Cepheid's shares fell nearly 9 percent to close at $39.61 in Tuesday trade on the Nasdaq. Its shares were down an additional 12 percent to $35.00 in after-hours trade.

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