We reiterate our Neutral recommendation on
Cepheid
(
CPHD
) following its fourth-quarter 2011 results. The company reported a
strong fourth quarter with both revenues ($80.1 million) and
earnings (6 cents per share) going past the Zacks Consensus
Estimate.
We are impressed with Cepheid making a record placement of 175
GeneXpert systems in the fourth quarter in its commercial business,
taking the total number of systems placed during the year to 565.
The company placed 88 systems in North America based on its
relationship with LABSCO and 14 Infinity systems, half of which
were sold to new high volume customers. The company's HBDC (High
Burden Developing Countries) Program continues to gain traction
with 181 system placements in the fourth quarter of 2011 (141 in
the third quarter and 38 in the second quarter) taking the total
number of systems placed under this program to 418 in 2011.
Apart from expansion of its menu, Cepheid is also looking toward
expanding its market reach in both the US and international market.
The company is in the process of expanding its direct sales force
in Germany and South Africa. Having witnessed strong potential in
the healthcare associated infection ("HAI") market in Germany,
Cepheid acquired the business from its distribution partner in
early January and is developing its own direct sales organization.
The company plans to acquire its distributor in South Africa
shortly. Germany presents the largest revenue opportunity in
Europe, given its upcoming infection control mandate. Although the
emphasis on international market is in its initial stages, these
markets hold tremendous opportunities.
The Sunnyvale, California based company currently offers 11
tests in the US and 12 outside the US. By the end of 2012, Cepheid
expects to launch 2 additional tests in US (CT/NG and BCR-ABL v1)
and Europe (CT/NG and BCR-ABL v2). Although the company is one of
the leading players in the HAI segment, it is also looking at
expanding in non-HAI markets, which includes critical infectious
diseases, women's health, virology and oncology and genetics.
Several tests are under development and the company is looking at
launching 10 new tests in each of these markets in the 2013-2014
timeframe. The company is also targeting up to 7 CLIA waived tests
by the end of 2016, which would significantly expand the market
potential of the GeneXpert system beyond hospitals and reference
laboratories. The company has accelerated the development of
CLIA-waived Xpert test (targeted toward flu) and expects the
product to be available in the US during the 2013-14 flu
season.
However, the current economic uncertainty continues to be a
major headwind for the company. Cepheid's peers such as
Myriad Genetics
(
MYGN
) and
Genomic Health
(
GHDX
) too are suffering from these market conditions. Despite high
system placements under the HBDC Program, the company prefers to
maintain a guarded stance. Our current recommendation on Cepheid is
backed by a Zacks #3 Rank (Hold) in the short term.
CEPHEID INC (
CPHD
): Free Stock Analysis Report
GENOMIC HEALTH (
GHDX
): Free Stock Analysis Report
MYRIAD GENETICS (
MYGN
): Free Stock Analysis Report
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