By Ben Butkus
Cepheid plans to have a menu of nearly 50 molecular diagnostic assays for infectious diseases, hospital-acquired infections, women's health, and sexually transmitted diseases available globally for its GeneXpert instrument family by 2016, a company executive said at an investor conference this week.
In addition, the company is currently developing a number of cancer diagnostics that it expects to bring to market in the next few years using a "deliberate strategy" that will leverage well-known biomarkers and tackle easier diagnoses such as recurrence, he said. These plans include a test for bladder cancer recurrence and another for breast cancer recurrence that will use the same markers as Genomic Health's Oncotype DX.
Presenting at the UBS Global Life Sciences Conference this week in New York, Cepheid CFO Andrew Miller provided investors with an outline of the company's plans to garner a significant slice of the burgeoning molecular diagnostics market over the next five years.
These plans revolve almost exclusively around the company's GeneXpert platform, on which Cepheid has spent more than $300 million over the past several years to create a modular testing platform that, depending on the configuration, is able to process anywhere from one sample at a time to as many as 2,000 samples per day with the recently launched GeneXpert Infinity-80 system, Miller said.
Cepheid's ability to provide any of its amplification-based molecular tests on a single platform is what will set it apart from competitors, Miller said. For instance, he noted, clinical labs currently need to purchase myriad platforms from multiple vendors in order to provide molecular tests for areas such as women's health, infectious diseases, cancer, and STDs; whereas Cepheid's goal is to offer all of the major tests in these areas on the GeneXpert system.
Cepheid sells 11 molecular tests in the US, including several for hospital-acquired infections; and 12 tests outside of the US, including an assay for tuberculosis and rifampin resistance (PCR Insider, 4/21/11); and another for measuring BCR-ABL transcripts in Ph+ chronic myelogenous leukemia patients being treated with Novartis' Gleevec (PCR Insider 10/14/10).
Cepheid also has several tests in clinical studies including those for Chlamydia trachomatis/Neisseria gonorrhoeae, multi-drug-resistant tuberculosis, and a CLIA-waived test for Staphylococcus aureus.
Miller said that the company expects to receive both CE IVD Marking and US Food and Drug Administration 510(k) approval for its CT/NG test in 2012. Meantime, in the 2012 to 2013 window it expects to obtain the CE-IVD Mark for its HIV, human papillomavirus, and hepatitis C virus tests. Miller also noted that Cepheid hopes to have the HIV test on the US market in 2014.
Overall, Miller said that by 2016 Cepheid plans to have "the broadest test menu available on a single testing platform globally" with 47 tests available on GeneXpert, 39 of which would be on the market in both the US and Europe.
He estimated that Cepheid currently captures two-thirds of the $100 million market for molecular testing for methicillin-resistant Staphylococcus aureus, with C. difficile testing and tuberculosis as its two next-biggest revenue drivers.
When questioned by investors as to whether the unpredictable and recently chilly capital spending environment could put a crimp in Cepheid's near-term HAI-generated revenues, Miller noted that the company has been cautious about forecasting such revenues both in the US and Europe, but also said that there are some built-in protections that should ease investors' fears.
"We are cautious about the capital spending market in the US, but we tend to have longer sales cycles," Miller said. "Because there is a natural coalition of people running HAI [testing] in hospitals, it makes it easier to locate the appropriate customers."
In addition, Miller noted, "HAIs are pretty much an acute care situation," and as such "don’t fluctuate as much with the economic situation."
Miller also told investors that Cepheid aims to more firmly entrench itself in the oncology molecular diagnostics market, beyond the aforementioned BCR-ABL test that it is developing with Novartis. He said that Cepheid's strategy in this area involves "attracting an ecosystem of experts" by starting with biomarkers that are well known and can be used to develop tests that will demonstrate the efficacy of the GeneXpert platform.
Thus, Cepheid will focus first on cancer recurrence tests, since those would likely be easier to get through the FDA. These would be followed by tests to detect cancer in symptomatic patients and then asymptomatic patients, the latter being "the largest market, but you don't go after it first," Miller said.
He added that Cepheid is currently working on a test for bladder cancer recurrence and that the company expects to come to market with a breast cancer test that will rival Genomic Health's Oncotype DX by using the same markers.
Oncotype DX is a PCR-based test that measures the expression of 21 genes to assess the likelihood of breast cancer recurrence. Genomic Health offers it as a laboratory-developed test that it runs in its own CLIA lab and has not sought FDA approval for it.
Miller noted that Cepheid believes it has a competitive advantage over Genomic Health because its test would be available through any lab with the GeneXpert platform.
Lastly, when queried about Cepheid's priorities for some of the extra cash it has on hand, Miller told investors that the company doesn't have an itchy trigger finger in terms of M&A activity or technology acquisitions.
"The number one priority is to continue to invest in our business," Miller said. "Today we have a fully integrated and vertical testing platform, so we don't need to go after other technologies in order to, [for example,] go into cancer testing."
However, Miller also said that the company has stated that it intends to sell directly in the "big five" European countries, particularly Germany, and as such investors might see "some M&A to buy distributors" in those countries. He also said that the company may need to license biomarkers for oncology applications as it ramps up activity in that area.
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