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Cepheid Q3 Revenues Grow 10 Percent as Firm Misses Estimates on Top, Bottom Lines

NEW YORK (GenomeWeb) – Cepheid reported after the close of the market Tuesday a 10 percent spike in third quarter revenues as the firm missed analysts' consensus estimates on both the top and bottom lines due primarily to lower-than-expected gross margin.

The firm also announced that the US Food and Drug Administration has approved its assay for Trichomonas vaginalis.

The quarterly results were in line with preliminary results reported by the firm last week, which led to a downgrade from one investment bank and double digit percentage losses in stock price, as previously reported.

For the three months ended Sept. 30, revenue was $126.5 million compared to $115.2 million in the year-ago quarter and below the Wall Street estimate of $127.8 million. Cepheid tallied $102.3 million in clinical reagents sales, up 14 percent from the year-ago period, and $17.9 million in clinical systems sales, up 5 percent from Q3 2014.

"Even as a half a billion-dollar company, Cepheid continues to grow at industry-leading rates; stumbles along the way are of course regrettable, and the best we can do is learn from the experience to further strengthen our execution going forward," CEO John Bishop said in a call to discuss the earnings.

"The items impacting our third quarter results and fourth quarter guidance are transitory. There is no change to the magnitude of the opportunity we are facing and there is no change to the strategic direction of the company, which I believe puts us firmly on the path to becoming the largest company in molecular diagnostics," he added.

Commercial clinical sales were $97.8 million and sales to high-burden developing countries were $22.4 million. In its commercial clinical business this quarter, the firm installed 204 GeneXpert systems and placed 172 GeneXpert systems as part of the HBDC program, for a cumulative total of 9,279 systems placed worldwide to date, up from 7,553 a year ago.

"We have the largest installed base of molecular systems globally ... and we believe we will exceed 10,000 in the first half of 2016," Bishop said.

To the menu of tests for the Xpert system the firm now adds the Xpert TV test, an on-demand test for same-day consultation and treatment of Trich infection in symptomatic and asymptomatic female patients, using urine, endocervical swab or vaginal swabs collected by the patient in a clinical setting. In the call, Bishop also highlighted new CDC guidelines recommending nucleic acid amplification testing for this sexually-transmitted parasitic infection, suggesting these are spurring further development of the US market.

Cepheid took a net loss of $22.9 million, or $.32 per share in the quarter, compared to $7.2 million, or $.10 per share, in the year-ago period, and below analysts' estimate of a loss per share of $.26.

The firm also affirmed the preliminary report of an adjusted net loss per share of $.13 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.

Cepheid's R&D expenses in the quarter totaled $32.9 million, up 40 percent from $23.5 million in Q3 2014. The firm reported $44.1 million in SG&A expenses, up 19 percent from $37 million in the year-ago period.

"We believe that our strategic growth position is on the verge of full realization; we have been investing aggressively to expand our test menu, extend our geographic reach, and enter new rapidly growing market segments like point of care," Bishop said, adding, "As we execute this strategy, our addressable market grows from $4 billion dollars today to more than $8 billion dollars by 2020."

Cepheid ended the quarter with cash, cash equivalents, and investments of $386.4 million.

In its Q2 earnings report, Cepheid said it had expected Q3 revenues of between $125 million and $128 million and full-year revenues of $544 million to $553 million.

Today the firm officially lowered its full-year guidance to between $537 million and $541 million. It provided an outlook of a net loss in the range of $.73 to $.71 per share, and non-GAAP earnings in the range of a loss of $.01 to an income of $.01.