California-based molecular diagnostics provider Cepheid CPHD recently entered into a new strategic agreement with long-term partner, Foundation for Innovative New Diagnostics (FIND), a non-profit organization aimed at offering affordable diagnostic products and services in developing countries. Financial terms of the deal have been kept under wraps.
Based on the terms of the agreement, FIND and Cepheid intend to jointly offer advanced point-of-care tuberculosis (TB) diagnosis at all levels of the healthcare system in low and middle-income countries (LMICs).
Both the companies will evaluate the performance of Cepheid’s new GeneXpert Omni system and Xpert MTB/RIF Ultra test, in addition to analyzing the Omni system’s cloud-based connectivity service. Management at Cepheid expects this joint venture to eventually benefit its investors, once the resulting data from the evaluation is made public.
We believe this collaboration reflects Cepheid’s attempts to expand its foothold in the rapidly growing point-of-care market segment, by investing aggressively to expand its test menu and extend its geographical reach. This strategy is expected to expand Cepheid’s addressable market value to more than $8 billion by 2020, an almost 50% rise from today’s level.
Unveiled in July 2015, Cepheid’s GeneXpert Omni is a portable point-of-care molecular diagnostic tool that facilitates fast, accurate and potentially life-saving diagnosis for potential suspects of TB, HIV, HCV and Ebola in the most remote parts of the world. By virtue of this agreement, a complete solution for utilizing the GeneXpert Omni system will be made available to healthcare providers, including training, support and implementation of an end-to-end connectivity solution in jointly identified key developing countries.
On the other hand, the Xpert MTB/RIF Ultra test is an advanced version of Cepheid’s existing Xpert MTB/RIF test, which will enable earlier detection of Mycobacterium tuberculosis (MTB) DNA. This is expected to reduce morbidity, mortality, secondary transmission and incorrect treatment in children and HIV co-infected patients who are prone to be affected by MTB.
As patients’ access to diagnostic tests for TB and other diseases is essentially limited in the remote areas of LMICs, the availability of portable point-of-care molecular testing platforms like Cepheid’s GeneXpert Omni system and Xpert MTB/RIF Ultra should be a boon for healthcare enhancement in these nations.
Once the GeneXpert Omni system becomes available internationally in the emerging markets as expected in the first half of 2016, we believe Cepheid’s revenues from these tests will rise substantially.
Currently, the company carries a Zacks Rank #4 (Sell). Some better-ranked medical products stocks are Masimo Corporation MASI, Natus Medical Inc. BABY and Steris Plc STE. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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