CPHD Cepheid (MM)

Cepheid (CPHD) has received clearance from the US Food and Drug Administration (FDA) for its Xpert C. difficile/Epi assay. The automated test, which will run on Cepheid’s GeneXpert system, is meant to detect the toxin B gene associated with Clostridium difficile infection (CDI) that causes diarrhea. According to the FDA, the test should be used as an aid in the diagnosis of CDI and not for determining or monitoring the treatment procedure.

The C. difficile test continues to be an extremely attractive market for Cepheid and has become the second biggest test in the company’s portfolio (behind MRSA surveillance) with multimillion-dollar revenue contribution in each quarter. The company has captured more than 60% of the C. difficile market at present.

Meanwhile, revenue from Cepheid’s MRSA test has been steadily growing and has maintained sequential growth over the past quarters since 2007. With these two tests Cepheid enjoys a strong position in the Healthcare Associated Infections (HAI) market. We believe that the company is well positioned to improve its top line based on an attractive test menu.

Cepheid placed 130 GeneXpert systems during the fourth quarter consisting of 57 systems in the US and 73 in the international market. Placements of the GeneXpert system in the international market is also gaining traction despite typical seasonality issues and continued weakness associated with austerity measures, particularly in southern Europe.

Recommendation

Based on a strong growth of Clinical reagents, Cepheid recorded a 19% growth in revenues during the last reported quarter and improved its bottom line. Moreover, we are encouraged to note that the company is focusing on non-HAI areas as well.

While MRSA surveillance continues to be the largest test, its C. difficile test is also gaining acceptance gradually. Cepheid, being a player in the Molecular Diagnostics segment, has a huge potential as this is the fastest growing segment in the in vitro diagnostics market.

We are currently Neutral on the stock.

 
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