By Ben Butkus
Cepheid has stopped shipment of its PCR-based blood culture molecular diagnostic test for methicillin-resistant Staphylococcus aureus after a handful of customers reported getting inconclusive test results, several industry analysts reported last week.
This is the second time Cepheid's test, the Xpert MRSA/SA-BC for the GeneXpert system, has been recalled. In July 2010 the company voluntarily recalled all lots of the product due to reports of false negative results from customers (PCR Insider, 7/8/10).
Despite this, analysts agreed that the most recent recall would likely be immaterial to Cepheid's 2012 financial guidance, and noted that the company will likely re-submit the test to the US Food and Drug Administration with an eye toward re-releasing it by the end of the year, an outlook echoed this week by Cepheid CFO Andrew Miller.
Last week, analysts from Goldman Sachs, Raymond James, and RW Baird, among others, issued research notes detailing a letter that Cepheid sent to customers on Jan. 5. The letter stated that Cepheid would be voluntarily recalling Xpert MRSA/SA-BC due to what Goldman Sachs termed "performance issues."
More specifically, Goldman Sachs reported that a "minority" of customers in recent weeks had reported "inconclusive" test results, but that there were no adverse events reported and Cepheid has not been able to reproduce the results internally.
Today, at the JP Morgan Healthcare Conference in San Francisco, Cepheid's Miller noted in a breakout session following his company's presentation that Cepheid has indeed stopped shipment of the test, but did not recalle products already on the market.
Miller noted that this was a "class III" recall, which means that it is not likely to cause adverse health consequences. He also said that a small group of customers were getting a higher rate than normal of indeterminate results from the test; and that the issues were confined to two specific lots.
Miller added that Cepheid believes it will have to bring the test back to the US Food and Drug Administration for re-evaluation, and that it will likely be able to start marketing the test again by the end of this year.
Meantime, analysts from Raymond James provided additional detail, noting that there were "several reports" of "higher-than-normal" invalid rates (plus 5 percent) in two lots of the Xpert MRSA/SA-BC. However, this research note also stated that the product continues to meet performance claims as outlined in the current product labeling.
The MRSA/SA-BC assay specifically detects the presence of MRSA or S. aureus in gram positive blood culture bottles in less than one hour. In contrast, Cepheid's Xpert MRSA test — which is one of the company's best-selling products and detects bacteria directly from patient nasal swabs — is not affected by the recall.
However, the question of whether the performance issues of the Xpert MRSA/SA-BC are cause for concern regarding the performance of Cepheid's other molecular diagnostic products — particularly its nasal swab Xpert MRSA — remains open.
The majority of Cepheid's molecular diagnostic products use nested PCR in a closed-cartridge, automated system. However, when the company made its first recall of MRSA/SA-BC in 2010, it noted that the issues were not due to test performance, but instead likely due to the rapid genetic evolution of MRSA.
A US Food and Drug Administration spokesperson at the time noted that the agency does not believe the Cepheid recall suggested a possible common ongoing problem for nucleic acid tests for organisms such as MRSA.
This week, at the JP Morgan conference, Miller said that the MRSA/SA-BC recall has "no effect" on the nasal swab MRSA surveillance test.
Financially speaking, analysts generally agreed that the latest recall would not have a substantial impact on Cepheid in 2012 due to the fact that it comprises just a small piece of the company's overall revenues.
Isaac Ro of Goldman Sachs estimated that the test likely accounted for less than 2 percent, or about $4 million, of the company's total revenues in 2011. For comparison, the company's core MRSA, C. difficile, and tuberculosis tests together accounted for about $140 million of Cepheid's $179 million clinical IVD testing business in 2011.
Quintin Lai of Baird also noted that he expects no material impact from the recall and added that during the recall customers will still be able to use cartridges for the test they already have and report their results. He also noted the earlier recall of the test "had low impact" on Cepheid's financial results at that time.
The Raymond James report also noted that "while the product removal creates a minor headwind, we believe revenue contribution from the MRSA/SA-BC product is relatively modest at best, with strength in the core business and already liberal R&D expense guidance for 2012 likely enough to absorb this potential pressure without much disruption to current consensus views."
Additional reporting for this article provided by Tony Fong.
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