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Cepheid Provides Update on MDx Pipeline with Focus on CT/NG, TB, Oncology

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A Cepheid executive today provided investors with an update on the company's molecular diagnostic pipeline, stating that the firm currently has 14 tests in development for its automated GeneXpert platform and that it expects to offer the broadest test menu of any molecular diagnostics vendor by 2017.

In particular, Cepheid CEO Andrew Miller, speaking at UBS' Global Life Sciences conference in New York, addressed investors' questions about some of the company's nearer-term opportunities, including tuberculosis testing in the US, chlamydia and gonorrhea testing, and oncology testing.

In a prepared presentation, Miller recapped the company's second-quarter topline financial results, noting that Cepheid saw 22 percent clinical diagnostic growth and placed 217 of its GeneXpert testing modules in the quarter.

Overall, the company has placed more than 3,300 GeneXpert systems — more than 1,000 of which are in US hospital labs — since it first introduced the platform several years ago. Cepheid's clinical revenue grew 36 percent in 2011 and the company has sustained a 61 percent growth rate over the past five years, Miller said.

Cepheid plans by the end of 2013 to bring to market in the US its chlamydia and gonorrhea, or CT/NG, test; as well as a CLIA-waived flu test. Outside the US, over the next three years, it expects to introduce tests for multidrug-resistant organisms, norovirus; human papillomavirus; vaginitis; BCR-ABL transcript assessment for chronic myelogenous leukemia treatment monitoring; HIV; and hepatitis B and C virus.

The company also expects to launch its HPV test in the US by 2015 or 2016, Miller said.

Cepheid views its pending Xpert CT/NG test launch as a large market opportunity, Miller said. Although he didn't provide a specific market size in dollar figures, he noted that the initial market opportunity lies with US-based hospital testing, which represents about 30 percent of overall CT/NG clinical testing volume in the US. In particular, Cepheid is going after the hospital laboratory and "non-molecular" hospital markets, Miller said, estimating those to represent about two-thirds of the approximately 6,000 US hospitals.

During a breakout Q&A session following Cepheid's presentation, Miller noted that in terms of penetrating the market against more established competitors such as Roche and Hologic's Gen-Probe, Cepheid expects CT/NG testing to "continue to disseminate" as Cepheid's and other CT/NG molecular tests become available.

"Hospital labs are competing with reference labs," Miller said. "They have outreach programs, and one of the biggest things they have going today is growing their outreach programs. So as they are able to offer a CT/NG test … they can build their CT/NG outreach programs."

He also disclosed that Cepheid hopes to have a CLIA-waived CT/NG test on the market in the 2016-2017 timeframe, "which frankly would open up the STD clinics," Miller said. "Today [clinics] send tests out, for the most part."

Miller also provided a recent example of how Cepheid expects to compete on price, citing an account that the company recently won — presumably in Europe, since the Xpert CT/NG received CE Marking in May — replacing the Roche Cobas Amplicor CT/NG assay and beating out Gen-Probe's Panther-based CT/NG test.

"Our test price for CT/NG is higher … so we won because of labor savings," Miller said. "The second reason we won was the ability to consolidate the menu on the GeneXpert. On the Panther, that's the only test they can run. On the GeneXpert … they were looking to run five tests on it. So that eliminates some platforms they have in their labs, and they're bringing in one or two tests in house that they currently send out. The overall economics of our solution were better than Gen-Probe or Roche, because of our ability to consolidate menus."

In Miller's prepared remarks he also reiterated that Cepheid's high-burden developing country program for its Xpert MTB/RIF test for tuberculosis and rifampin resistance is in the first phase of a planned "buy-down" by various non-profit and government agencies, which is intended to make the test more affordable for resource-poor countries and drive its widespread adoption.

Last month Cepheid said that it had inked an agreement with the Bill & Melinda Gates Foundation, the United States President's Emergency Plan for AIDS Relief, the United States Agency for International Development, and Unitaid to reduce the cost of Xpert MTB/RIF from $16.98 to $9.98 per cartridge (PCR Insider, 8/9/2012).

Miller said today that the company expects to sign similar agreements with two other organizations by the end of this year and noted that Cepheid's TB test revenue opportunity, despite the buy-down, is in "the millions of dollars."

Cepheid also plans to submit Xpert MTB/RIF to the US Food and Drug Administration by the end of this year in a bid to tackle a relatively small but important TB testing market in the US.

"Public health officials … and leaders in TB in the US are trying to make sure that we don't have the TB problem [of other countries]," Miller said during the Q&A session, noting that the FDA recently recommended down-classifying TB test approval to a 510(k) pre-market approval process.

"That is what is happening … and hopefully we'll have that on the market in the first half of next year," he said. "It's not a large US market, probably in the few hundred thousand tests per year, because it's used primarily as a 'rule-in' test: do you have TB? The real opportunity in the US is: can it become a rule-out test?" — in other words, used as a test to rule out patients who are currently unnecessarily put on potentially toxic TB treatment regimens while waiting for non-molecular testing results, but don't have the disease.

When asked by an investor whether Cepheid will target public health centers in the US with its TB test, once approved, Miller noted that many hospitals have also shown interest in the assay, and that Cepheid believes it will "drive capital equipment placements, because it is such a high-value test. If you only have a couple of patients come into your institution per year, then you'll have already paid for the cost of the test. We're seeing broad interest in the test in our customer base. It's not a high-volume test in the US market today, but we do believe it will drive capital equipment purchases."

Miller also noted that so far during Cepheid's clinical trials for the TB test, "there is a much higher rate of positivity or prevalence [in the US] than we expected or probably anyone would have expected. Clearly we chose sites that would have a higher level of prevalence … but it was a surprising level at US sites."

Lastly, during the company's breakout session, Miller provided an update on Cepheid's oncology testing pipeline in response to an investor's query.

The company's first oncology test, an Xpert assay for BCR-ABL transcript monitoring to determine therapeutic response in CML patients, is already on the market in Europe. Novartis, Cepheid's development partner for this test, sells the market-leading drug, Gleevec, for CML, "and they want our test brought to the US market, so they're funding both the development of a more sensitive test, and then the commercialization, so clinical trials, bringing it through the FDA," Miller said.

"The FDA has never cleared a BCR-ABL test … so we hope and expect to be the first to actually get FDA clearance on this," he added. "Novartis wants a test that is so sensitive … that it can potentially identify what is called a complete molecular response … for those patients that frankly have been cured, so they no longer require a therapeutic. They believe that their newer drug that will replace Gleevec … will drive a complete molecular response in a subset of patients … [who can then] potentially come off the treatment. They want an extremely sensitive test to do that."

Miller said the more sensitive version of its Xpert BCR-ABL test is scheduled to be on the market in Europe next year, and in the US in the 2014 to 2015 timeframe.

Cepheid is also developing a pair of bladder cancer tests — one for monitoring therapeutic response and one for diagnosing symptomatic patients.

He noted that the current market-leading test for bladder cancer is Abbott's Vysis fluorescence in situ hybridization assay. "We're quite optimistic that we'll have a test that is more reproducible than the Visys test … as not all labs read FISH equally well," Miller said. "We are looking to be at least equivalent on the specificity and sensitivity, at least on high-grade [cancer]. And we believe we will be potentially better on the low-grade, from a sensitivity and specificity perspective."

Lastly, Cepheid is working on two breast cancer tests — one for therapeutic monitoring, and the other "to enable labs to offer what Genomic Health offers today" with its Oncotype Dx test for breast cancer recurrence and chemotherapy benefit. "So there actually is a broad oncology menu" at Cepheid, he said.

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