Recently, we upgraded Cepheid (CPHD) to Outperform with a target price of $44.00.
Cepheid reported an EPS of 3 cents during the second quarter of fiscal 2011 compared to the loss of 3 cents in the year-ago period and the Zacks Consensus Estimate of a 2 cent loss. Revenues during the reported quarter increased 31% to $63.6 million, beating the Zacks Consensus Estimate of $61 million. The upside was driven by a 42% growth in Clinical segment attributable to strong sales of reagents and systems. Based on robust performance in the first half of 2011, Cepheid raised its outlook for 2011.
Cepheid placed the maximum number of systems during the reported quarter tin its history bringing the total number of systems placed globally to 2,224.Excluding High Burden Developing Countries (HBDC), the company placed 148 GeneXpert systems during the quarter with 79 placements in North America and 69 in the international market.
Within the Clinical business, Cepheid recorded a 53% year-over-year growth in systems sales to $13.2 million and a 14% rise on a sequential basis. International system placements were driven by strong performance in Germany, before the new infection control law takes effect at the end of March 2012. Moreover, placements in Eastern Europe and Italy were strong driven by growing adoption of the Xpert MTB/RIF and Xpert C. diff. test. The company also placed 4 Infinity systems in North America during the quarter, the highest for any single quarter, since the product’s launch in the third quarter of 2009.
Although Cepheid is one of the leading players in the HAI segment, it is also looking at expanding in non-HAI markets – including critical infectious diseases, women’s health, and oncology and genetics. Additional tests under development in the areas of HIV, HCV and HPV are targeted to be released in Europe within the 2012-2013. 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 the hospital market. Successful commercialization of these tests should further improve Cepheid’s top line going ahead.
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