SUNNYVALE, Calif., Aug. 7 /PRNewswire-FirstCall/ -- Cepheid today announced financial results for the second quarter ended June 30, 2007. Key results for the second quarter 2007 include:
* Total revenues of $27.2 million, a 37 percent increase from $19.8 million in the second quarter of 2006. * Clinical product sales of $10.6 million, a 165 percent increase from $4.0 million in the second quarter of 2006. * Total product sales of $23.6 million, a 25 percent increase from $18.9 million in the second quarter of 2006. * Gross margins on product sales of 42 percent compared to 39 percent in the second quarter of 2006 (both excluding stock compensation expense and the amortization of acquired intangibles). * Net loss, excluding stock compensation expense and the amortization of acquired intangibles of $2.7 million, or $0.05 per share, compared to $5.1 million, or $0.09 per share, in the second quarter 2006.
Total revenues of $27.2 million for the second quarter of 2007 included $23.6 million of total product sales and $3.6 million from contracts, grants and research revenue. Other revenue is driven largely by reimbursement for R&D collaborations, including partnerships to develop assays for Tuberculosis with FIND, Avian Flu and flu A/B with the Centers for Disease Control and Prevention (CDC), and hemostasis with Instrumentation Laboratories.
Total product sales for the second quarter ended June 30, 2007 increased 25 percent to $23.6 million from $18.9 million for the second quarter 2006. The increase in product sales for the second quarter 2007 reflects a 165 percent increase in clinical product sales and a 43 percent increase in industrial sales, partially offset by a 26 percent decrease in biothreat sales, compared to the second quarter of 2006.
Sales by Market (millions) Q2 2007 Q2 2007 Q2 2006 Q2 2006 Total Percent of Total Percent of Sales Total Sales Sales Total Sales Clinical $10.6 45 $4.0 21 Industrial $4.0 17 $2.8 15 Biothreat $9.0 38 $12.1 64
The increase in clinical sales was driven by market adoption of both the GeneXpert(R) System and the Company's menu of available tests, specifically the Xpert(TM) MRSA product. Nationwide Hospital Acquired Infection (HAI) initiatives have contributed to the market traction the Company is experiencing, the most publicized of which is the Veterans Administration (VA) initiative. Cepheid continues to experience success within the VA hospital group. Currently, approximately 40 percent of the Company's Xpert MRSA business is with VA hospitals, with the remaining amounts coming from other hospitals.
The increase in industrial sales resulted from increased government research funding and the increased presence that the addition of a new distributor offered in the U.S. industrial market. The decrease in biothreat sales resulted from a planned decrease in the purchase price of Anthrax cartridges to the United States Postal Service (USPS), in conjunction with an anticipated five-year purchase agreement currently in negotiation, and a shift in the quarterly purchase volume.
Gross margin on product sales was 41 percent for the second quarter of 2007 compared to 38 percent for the second quarter of 2006. Gross margin on product sales, without stock compensation expense and the amortization of acquired intangibles, was 42 percent for the second quarter of 2007 compared to 39 percent for the second quarter of 2006. The increase in gross margin was largely due to a higher percentage of sales realized in the clinical market worldwide.
Net loss for the second quarter of 2007 was approximately $5.2 million, or $0.10 per share, as compared to a net loss of approximately $7.0 million, or $0.13 per share, for the second quarter 2006. Net loss for the second quarter of 2007, adjusted for stock compensation expense and the amortization of acquired intangibles, was $2.7 million, or $0.05 per share, for the second quarter of 2007 as compared to $5.1 million, or $0.09 per share, for the second quarter of 2006. See the attached table for a reconciliation of GAAP and Non-GAAP amounts.
"The increase in clinical product sales during the second quarter reflects growing market traction for on-demand molecular diagnostics, particularly with the adoption of the Xpert MRSA test," said John Bishop, Cepheid's Chief Executive Officer. "Our expanding menu of tests, combined with the modular GeneXpert System that is adaptable for high- and low-volume needs, is broadening the customer base that can benefit from molecular diagnostics."
Second Quarter 2007 and Recent Business Highlights
Following the launch of the Xpert MRSA test in the second quarter 2007, the Company moved to expand its U.S. sales and field service support organization, bringing the total to 28 sales and field service support personnel. Additionally, in order to increase its systems manufacturing capacity, the Company increased its facility square footage in Sunnyvale through the lease of a third building.
The Company signed a non-exclusive agreement with VWR International during the quarter to further support the U.S. industrial market. Under the terms of the agreement, VWR International will distribute the SmartCycler(R) System, SmartMix(R) HM master mix, and associated accessories to industrial customers in the U.S.
In July, Cepheid introduced a number of new products at the American Association for Clinical Chemistry (AACC) Annual Meeting. These included the announcement of the GeneXpert Infinity Series, which includes 48 and 72 module systems with 24/7 robotic cartridge handling that will automatically load and unload test cartridges. The Infinity high-volume models are expected to be available in mid-2009.
Cepheid also announced that the entire GeneXpert family of systems will incorporate six color multiplex capabilities beginning in January 2008. Six color multiplexing will enable the ability to simultaneously test for up to 60 unrelated targets in a single test cartridge. Beginning in January 2008, all GeneXpert Systems will also include new Laboratory Information System (LIS) software for data output to central lab systems. The LIS software will also be available for purchase separately for application to existing GeneXpert four color systems.
The Company also announced the U.S. availability of a new line of research use only (RUO) products for Cytomegalovirus (CMV), Epstein-Barr Virus (EBV), and Varicella Zoster Virus (VZV).
2007 Outlook
Based upon its success in the clinical market, the Company is raising its forward-looking financial guidance for product sales in 2007.
* Product sales are expected to be in the range of $105 million to $108 million. * Other revenues are expected to remain in the range of $12 million to $15 million. * On a consolidated basis, the Company expects 2007 total revenues to be in the range of $117 million to $123 million. * The GAAP net loss for 2007, including the effect of stock compensation expense and the amortization of acquired intangibles, is expected to be in the range of $19 million to $22 million, or $0.34 to $0.40 per share based on expected weighted average shares outstanding of 55.6 million. * In view of incremental increases in Sales and Marketing expenditures, the net loss, not including the effect of stock compensation expense and the amortization of acquired intangibles for 2007, is expected to remain in the range of $8 million to $11 million or $0.14 to $0.20 per share based on the same number of weighted average shares outstanding. * The Company expects its quarterly operating results to continue to show a trend towards profitability in the second half of 2007 and currently expects to be profitable for the entire year of 2008, excluding stock compensation expense and the amortization of acquired intangibles.
Conference Call Information
Cepheid's CEO, John Bishop, and Senior V.P. and CFO, John Sluis will host the conference call today at 4:30 pm Eastern Time to discuss Cepheid's financial results and business highlights. Interested participants and investors may access the teleconference call by dialing 800-901-5218 (U.S./Canada) or 617-786-4511 (international), participant code 58587089. A telephonic replay will be available for seven days beginning at 6:30 p.m. Eastern Time today. Access numbers for this replay are 888-286-8010 (U.S./Canada) and 617-801-6888 (international); participant code 37880201.
The webcast of the call can be accessed on the Investor section of Cepheid's Web site at www.cepheid.com. Web participants are encouraged to go to the Web site at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software. After the live webcast, a replay will remain available in the Investors section of Cepheid's Web site for 90 days.
About Cepheid
Cepheid , based in Sunnyvale, Calif., is an on-demand molecular diagnostics company that develops, manufactures, and markets fully-integrated systems for genetic analysis in the clinical, industrial and biothreat markets. The Company's systems enable rapid, sophisticated genetic testing for organisms and genetic-based diseases by automating otherwise complex manual laboratory procedures. Cepheid's easy-to-use systems integrate a number of complicated and time-intensive steps, including sample preparation, DNA amplification and detection, which enable the analysis of complex biological samples in its proprietary test cartridges. Through its strong molecular biology capabilities, the Company is focusing on those applications where rapid molecular testing is particularly important, such as identifying infectious disease and cancer in the clinical market; food, agricultural, and environmental testing in the industrial market; and identifying bio-terrorism agents in the biothreat market. See www.cepheid.com for more information.
This press release contains forward-looking statements that are not purely historical regarding Cepheid's or its management's intentions, beliefs, expectations and strategies for the future, including those relating to potential growth in clinical products sales, the status of government funding, timing of future product releases, future revenues and demand for certain test products, future net losses and profitability, other future operating results, the status of the USPS BDS program and collaboration and product development efforts. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the Company's current expectations. Factors that could cause actual results to differ materially include risks and uncertainties such as those relating to: our success in increasing direct sales, and the effectiveness of new sales personnel; the performance and market acceptance of products; sufficient customer demand; our ability to complete clinical trials successfully in a timely manner for products to be marketed in clinical markets; uncertainties related to the FDA regulatory and European regulatory processes; the scope of actual USPS funding in the future; the rate of environmental testing using the BDS conducted by the USPS, which will affect the amount of consumable products sold; the fact that future levels of government funding are inherently uncertain; unforeseen development and manufacturing problems; the need for additional licenses for new tests and other products and the terms of such licenses; lengthy sales cycles in certain markets; the Company's reliance on distributors in some regions to market, sell and support our products; the occurrence of unforeseen expenditures, acquisitions or other transactions; the impact of acquisitions; unforeseen issues relating to acquisitions; the impact of competitive products and pricing; our ability to manage geographically-dispersed operations; and underlying market conditions worldwide. Readers should also refer to the section entitled "Risk Factors" in Cepheid's Annual Report on Form 10-K for 2006 and its other reports filed with the Securities and Exchange Commission.
All forward-looking statements and reasons why results might differ included in this release are made as of the date of this press release, based on information currently available to Cepheid, and Cepheid assumes no obligation to update any such forward-looking statement or reasons why results might differ.
(FINANCIAL STATEMENTS FOLLOW) CEPHEID CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Revenues: Instrument sales $9,394 $4,030 $16,231 $8,568 Reagent and disposable sales 14,190 14,852 29,420 29,586 Total product sales 23,584 18,882 45,651 38,154 Contract revenues 1,894 677 3,784 1,288 Grant and government sponsored research revenue 1,695 288 3,282 566 Total revenues 27,173 19,847 52,717 40,008 Costs and operating expenses: Cost of product sales 13,879 11,683 27,756 23,076 Collaboration profit sharing 2,731 3,843 6,228 7,654 Research and development 7,439 5,807 14,361 11,636 Selling, general and administrative 9,105 6,921 17,533 13,067 Total costs and operating expenses 33,154 28,254 65,878 55,433 Loss from operations (5,981) (8,407) (13,161) (15,425) Other income, net 740 1,365 1,767 1,711 Net loss $(5,241) $(7,042) $(11,394) $(13,714) Basic and diluted net loss per share $(0.10) $(0.13) $(0.21) $(0.28) Shares used in computing basic and diluted net loss per share 55,149 54,518 55,081 49,758 CEPHEID CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS (in thousands) June 30, 2007 December 31, 2006 ASSETS Current assets: Cash and cash equivalents $7,176 $17,186 Marketable securities 38,250 77,750 Accounts receivable, net 23,592 15,246 Inventory 17,602 10,240 Prepaid expenses and other current assets 2,473 1,390 Total current assets 89,093 121,812 Property and equipment, net 15,831 14,097 Restricted cash 661 661 Other non-current assets 331 666 Intangible assets and goodwill 57,264 30,425 Total assets $163,180 $167,661 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $11,096 $8,977 Accrued compensation 4,999 3,319 Accrued royalties 4,122 3,516 Accrued collaboration profit sharing 1,762 3,497 Accrued other liabilities 4,310 4,107 Accrued expense for patent-related matter -- 3,350 Current portion of deferred revenue 5,486 3,913 Current portion of license fees payable -- 447 Current portion of equipment financing 59 313 Current portion of note payable 4 11 Total current liabilities 31,838 31,450 Long-term portion of deferred revenue 3,244 2,663 Long-term portion of equipment financing -- 3 Long-term portion of note payable 2 41 Deferred rent 806 798 Total liabilities 35,890 34,955 Shareholders' equity: Common stock 252,655 251,132 Additional paid-in capital 19,583 15,065 Accumulated other comprehensive loss (68) (5) Accumulated deficit (144,880) (133,486) Total shareholders' equity 127,290 132,706 Total liabilities and shareholders' equity $163,180 $167,661 Table A - GAAP vs. Non GAAP Measures Three months ended Six months ended June 30, June 30, 2007 2006 2007 2006 Total Product Sales $23,584 $18,882 $45,651 $38,154 Total Revenues $27,173 $19,847 $52,717 $40,008 Cost of product sales $13,879 $11,683 $27,756 $23,076 Stock compensation expense (36) (204) (302) (378) Amortization of acquired inventory step-up in basis (106) -- (170) -- Amortization of purchased intangible assets (164) -- (367) -- Non-GAAP measure of cost of goods sold $13,573 $11,479 $26,917 $22,698 Gross Margin on Product Sales per GAAP 41% 38% 39% 40% Gross Margin on Product Sales per Non-GAAP 42% 39% 41% 41% Gross Margin on Total Revenues per GAAP 49% 41% 47% 42% Gross Margin on Total Revenues per Non-GAAP 50% 42% 49% 43% Research and development $7,439 $5,807 $14,361 $11,636 Stock compensation expense (1,047) (725) (1,791) (1,318) Non-GAAP measure of cost of research and development $6,392 $5,082 $12,570 $10,318 Non-GAAP R&D measure as percent of Total Revenues 24% 26% 24% 26% Selling, general and administrative $9,105 $6,921 $17,533 $13,067 Stock compensation expense (1,215) (985) (2,206) (1,941) Non-GAAP measure of cost of selling, general and administrative $7,890 $5,936 $15,327 $11,126 Non-GAAP SG&A measure as percent of Total Revenues 29% 30% 29% 28% Net Loss $(5,241) $(7,042) $(11,394) $(13,714) Stock compensation expense 2,298 1,914 4,299 3,637 Amortization of acquired inventory step-up in basis 106 -- 170 -- Amortization of purchased intangible assets 164 -- 367 -- Non-GAAP measure of Net Loss $(2,673) $(5,128) $(6,558) $(10,077) Basic and diluted net loss per share $(0.095) $(0.129) $(0.207) $(0.276) Stock compensation expense $0.042 $0.035 $0.078 $0.073 Amortization of acquired inventory step-up in basis $0.002 $-- $0.003 $-- Amortization of purchased intangible assets $0.003 $-- $0.007 $-- Non-GAAP measure of Net Loss $(0.048) $(0.094) $(0.119) $(0.203) Shares used in computing basic and diluted net loss per share 55,149 54,518 55,081 49,758 Table B - Instrument and Reagent Sales Mix Three months ended Six months ended June 30, June 30, Product Sales 2007 2006 2007 2006 Instrument sales $9,394 $4,030 $16,231 $8,568 Reagent and disposable sales 14,190 14,852 29,420 29,586 Total product sales $23,584 $18,882 $45,651 $38,154 Percent of Product Sales Instruments 40% 21% 36% 22% Reagents and disposables 60% 79% 64% 78% Total product sales 100% 100% 100% 100% Table C - Geographic Sales Mix Three months ended Six months ended June 30, June 30, 2007 2006 2007 2006 Percent of Instrument and service sales US & ROW 73% 72% 67% 73% Europe 27% 28% 33% 27% Total Instrument and Service Sales 100% 100% 100% 100% Percent of reagent and disposable sales (including USPS) US & ROW 82% 98% 87% 98% Europe 18% 2% 13% 2% Total Reagent and Disposable Sales 100% 100% 100% 100% Percent of Reagent and Disposable Sales (without USPS) US & ROW 51% 89% 59% 90% Europe 49% 11% 41% 10% Total Reagent and Disposable Sales 100% 100% 100% 100% Percent of Total Product Sales (including USPS) US & ROW 78% 92% 80% 93% Europe 22% 8% 20% 7% Total Product Sales (including USPS) 100% 100% 100% 100% Percent of Total Product Sales (without USPS) US & ROW 64% 79% 63% 80% Europe 36% 21% 37% 20% Total Reagent and Disposable Sales 100% 100% 100% 100%
CepheidCONTACT: John L. Bishop, CEO, john.bishop@cepheid.com, or John R. Sluis,CFO, john.sluis@cepheid.com, both of Cepheid, +1-408-541-4191; or Media,Chris Stamm of Schwartz Communications, +1-781-684-0770,cepheid@schwartz-pr.com, for Cepheid; or Investors, Jason Spark of PorterNovelli, +1-619-849-6005, jspark@pnlifesciences.com, for Cepheid
