Fighting Competition: Ciphergen

Ciphergen's (NASDAQ: CIPH) share price continues to slide after the company announced it would report lowered second quarter revenue due to increased competition. Ciphergen blamed the shortfall due to delays from longer sale cycle as potential customers evaluate its technology with competitors and (NIH - National Institute of Health) funding.

Management said it would provide a forecast for the remaining 2004 revenues and net losses at its next conference call by the end of the month. However, the company firmly believes new product launches in the third quarter will create momentum for the company combined with its work on developing diagnostics.

Back in early January of 2004, Ciphergen announced that fourth quarter revenues would fall to $15.0 to $15.5 million, versus Wall Street's estimate of $18.5 million. Ciphergen lost about 24% of its share price from $11.42 to $8.62 back then. Management also cited the same explanation for the shortfall, competition and funding.

Following the complete sequencing of the human genome, researchers are now faced with the challenge to assign function to the genetic code. Ciphergen's instruments for protein identification and analysis has become a focal point for these efforts, but with significant revenue miss investors will question the validity of the technology. According to scientists, Ciphergen's proprietary ProteinChip technology can satisfy the needs of researchers, but unfortunately the company is faced with some bumps in the roads.

With the current situation and the overall cautious mood in the market, Ciphergen needs to prove to Wall Street that it can beat the competition and remain the leader in developing proteomic-based tools. Right now, the market is telling us to sit on the sideline and wait until the air clears.

Nadine Wong


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