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Ciphergen s Q4 Projections and Stock Drop; Rich Blames Core Facilities, Says Delay a Pause

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Amid the New Year’s lull, Ciphergen Biosystems announced last Friday that its revenues for the quarter would fall short of previous forecasts, due to delays in orders.

The company said its revenues for the quarter will be in the range of $15.0 to $15.5 million, as compared to prior expectations of about $19 million.

This week, CEO Bill Rich told ProteoMonitor that these delays were caused by competition from core proteomics facilities. Instead of buying a Ciphergen ProteinChip SELDI Biomarker system right away, he said, some potential customers were waiting to see if they could get their needs met at a core facility. As Ciphergen has targeted the small-scale researcher in academia and the clinical realm (see PM 09-26-03), the increasing capabilities of these core facilities may offer some stiff competition in the short term.

Rich dismissed this competition from core facilities however, as a temporary artifact of the emerging state of the market, comparing the facilities to central management information systems used for computing in the 1980s. Sooner or later, just as businesses replaced these centralized departments with desktop computers, researchers are going to want to replace such a core facility with a biomarker discovery system on their benchtops, he said.

“Computing [used to be] centralized. ... The descent of that started out with minicomputers and found its way into PCs. We believe you’ll find the same thing here with biomarker discovery,” Rich said.

But core facilities are not the only potential obstacles to Ciphergen’s continued growth. In the press release announcing the revision in revenues, Rich said the company’s fourth-quarter sales were also affected by delays from NIH and related funding sources, and acknowledged that “the entry of more direct competition resulted in a longer sales cycle at certain accounts.”

Rich did not name this “direct competition,” but he didn’t have to. Researchers now have a Pepsi to Ciphergen’s Coke in Bruker’s ClinProt biomarker discovery system, which the company launched in 2003 (see PM 9-5-03>, 7-18-03). Rather than just going with one or the other, some labs are even using both systems in head-to-head comparisons of performance. John Semmes, an associate professor at Eastern Virginia Medical Center, who is doing biomarker proteomics on sera from firefighters who have suffered long-term health effects from the World Trade Center disaster in New York, said in an interview with ProteoMonitor (see story p. 3) that his lab is beta-testing a Bruker system, alongside the Ciphergen system it already has.

The stock market reacted to Ciphergen’s sobering news last week: The company’s shares, which had been trading in the $11 to $12 range Dec. 31, dropped down to the $8 to $9 range.

Rich said the market did not necessarily overreact to the news, but added that what he sees as “a pause to evaluate various options” is just a natural blip in the inevitable upward growth of the protein biomarker market.

“The real phenomenon that we will be seeing is that the growth of interest in biomarkers is going to overwhelm” the various providers of technologies, he said.

Furthermore, he said, the sector was going to see an “inevitable transition” to doing biomarker assays. “Finding a biomarker candidate is not of any real value unless you can to a good test or assay, and that’s something we are focusing hard [on] at Ciphergen.”

Rich named several hot areas for assays, including Alzheimer’s disease, cancers, toxicology, and pharmacoproteomics.

“To the individual researcher who is in one of these areas, it is the hottest area,” he said.

— MMJ

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