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Analysts Weigh In On Cepheid Management Shakeup

NEW YORK (GenomeWeb News) – Two Wall Street analysts have weighed in on Cepheid's decision to fire its executive vice president of worldwide commercial operations and divvy up his responsibilities.

Cepheid said in a filing with the US Securities Exchange Commission yesterday after the close of the market that it had terminated the employment of Nicolaas Arnold, its EVP of worldwide commercial operations. The firm offered no explanation for the firing, but it said that Philippe Jacon, EVP of emerging markets, will be responsible for all of Cepheid's international commercial operations. In addition, it said that it has commenced a search to hire an executive to lead Cepheid's North American commercial operations.

The firing comes a week after Cepheid pre-announced fourth-quarter revenues of around $92 million — short of company guidance of $94 million and analysts' consensus estimates of $93.6 million. It also said that has made "significant progress" toward fixing manufacturing issues for its Xpert diagnostic test cartridges despite "higher-than-anticipated demand" for a number of its Xpert tests in the fourth quarter.

Cepheid had disclosed in September the manufacturing issues related to plastic parts used in its Xpert cartridges. The problem led to a $6.7 million cartridge backlog, accounts being placed on allocation, and a disruption to new revenue generation in the third and fourth quarters of 2012. But Cepheid CEO John Bishop said last week that the manufacturing challenges have been resolved.

In a research note published today, William Blair & Co. analyst Brian Weinstein said, "we do not believe the timing indicates any issue with 2013 expectations. While there will be a lot of speculation as to what this means for the company and its prospects, and it certainly adds to the recent drama, our best guess is that it has to do with how and likely who CEO John Bishop wants to run his North American commercial operations as opposed to any glaring issue at the company."

Goldman Sachs analyst Isaac Ro, however, said that he believes the termination was driven by operation performance under Arnold's leadership. He added that after speaking with Cepheid management he believes a replacement will be hired externally and that the decision to split the responsibility for North American and international commercial operations was made independently of Arnold's firing and was based on efforts to improve organizational efficiency.

In Thursday morning trade on the Nasdaq, shares of Cepheid were down 1 percent at $35.52.