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Cepheid Expects to Report Q3 Revenues Below Target

NEW YORK (GenomeWeb News) – Cepheid said after the close of the market Wednesday that it expects to report third-quarter revenues of between $79 million and $81 million, below its own target range and Wall Street's average estimate of $83.8 million.

The Sunnyvale, Calif.-based firm said the shortfall is due to "intermittent interruptions in the supply of Xpert cartridge parts." The Xpert cartridges contain the tests that run on the firm's GeneXpert systems.

The firm said it is working to address the issue, but it expects to exit the third quarter on Sept. 30 with more than $5 million in backorders that are now expected to be fulfilled by the end of October.

"Demand for our Xpert family of molecular tests continues to grow at a fast pace while we simultaneously scale-up our next generation manufacturing operations intended to support our anticipated cartridge demand," Cepheid CEO John Bishop said in a statement. "During the third quarter, parts issues arose as we were developing higher capacity production tools and processes, limiting our ability to manufacture at the volumes necessary to meet growing demand."

He added that excluding the parts issue, Cepheid would have been on target to deliver revenues in the range of $84 million to $86 million.

"While there are still a few days left in the quarter, we expect total revenue will reflect a strong contribution from [the High Burden Developing Country program] following the completion of the first buy-down agreement in early August and continued growth in commercial test sales, although we expect this strong performance will be partially offset by weaker US commercial system sales associated with a more challenging capital environment," Bishop added.

The Q3 miss is the second quarter in a row that Cepheid will fall short of analysts' estimates. Its second-quarter revenues of $81 million were below Wall Street's consensus estimate of $82.7 million. At the time Cepheid said that revenues from the HBDC program were flat sequentially and were "several million" dollars less than had been expected.

Cepheid said today that it continues to expect total revenue to be in the range of $333 million to $347 million for fiscal-year 2012. The firm intends to update its bottom-line guidance during its Q3 conference call in a few weeks.

Shares of Cepheid fell 6 percent to 36.89 in early Thursday trading on the Nasdaq.

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