We've all accidently cut ourselves and stuck a bandage on it
to stop the bleeding, then gone about our business. Usually the
wound heals after a couple of days, and all is good.
On occasion, though, a simple cut can turn complicated.
Say I've cut my finger and it begins to fester. I go to a
doctor's office and have a blood sample drawn and shipped to a
lab for analysis. The doctor makes an educated guess as to which
antibiotic might clear the infection and prescribes a 10-day
By the time your blood has gone through the routine tests to
identify the infection and determine the correct antibiotic, five
days have passed.
But after a few days -- and pills -- you feel better. This
time the doctor guessed right, averting a possible crisis.
However, more than 250,000 people die from sepsis -- the spread
of bacteria from a point of infection -- every year. A simple
infection from a cut, or pneumonia, or any number of sources can
quickly turn to sepsis -- which can be deadly without prompt and
Until recently, doctors had to rely on antiquated tests that
took days to deliver results and accurate treatment. Without a
quick way to differentiate between bacteria and viruses,
prescribing the right antibiotic is little more than a
Last year saw the emergence of a new breed of molecular
diagnostics -- known as in-vitro or IVD -- that involves tests
that identify a patient's nucleic acids or proteins (blood or
urine) or foreign objects outside the body.
These devices can diagnose sepsis and identify the proper
antibiotic -- right in the doctor's office. The process takes
just 2 1/2 hours after a positive blood culture and requires only
five minutes of a technician's time, with greater than 95%
This technology truly has life-saving potential -- and it's a
potential moneymaker for investors.
The global in-vitro diagnostic market was valued at $49.2
billion in 2012 and is expected to reach $69.1 billion by 2017.
It is forecast to be the highest-earning segment in the $455
billion medical technology industry throughout those five
Right now, two companies are battling it out in this arena:
One is a good investment for today,
, the other possibly for tomorrow,
In June, Cepheid gained FDA approval for its updated Xpert
MRSA/SA BC test (part of its popular GeneXpert system), which
detects infections in blood specific to causes of sepsis in
A $2.7 billion company, Cepheid recently reported
third-quarter revenue of just over $100 million, a 24% increase
over the same quarter a year ago. Its systems remain the most
popular molecular diagnostic platform on the market, and CPHD has
performed admirably, up 16% year to date and 33% over the past 12
On the other hand, Nanosphere, a $106 million company, has
struggled despite having more than 200 hospitals express interest
in its microwave-size units -- Gram-Positive Nucleic Acid Blood
Culture (BC-GP) -- which cost between $50,000 and $100,000
apiece. The test gained FDA approval in June 2012; however, NSPH
has performed dismally, off 33% this year. Today, Nanosphere
trades for $1.87, but some analysts have suggested an
intermediate-term target of $5.
Considering that about 4,500 microbiology labs or hospitals in
the U.S. exist that do not have molecular capabilities, there's
plenty of market left for both of these companies to tap
Risks to Consider:
Obviously, Nanosphere is a very risky stock with huge
potential. It is not for the faint of heart and should account
for no more than a slice of any investor's portfolio.
Action to Take -->
Cepheid is positioned to continue gobbling up market share with
its GeneExpert systems and has shown it knows how to turn a
profit. It is trading at 52-week highs near $40 and has climbed
steadily since its FDA approval.