Cepheid Expands European Portfolio

Last week, Cepheid (CPHD - Analyst Report) expanded its portfolio in Europe with CE Mark approvals of both Xpert CT/NG and Xpert CT tests. The company expects to begin shipments of the two tests shortly. The tests that will run on Cepheid’s flagship GeneXpert system are meant to detect and differentiate between Chlamydia trachomatis (“CT”) and Neisseria gonorrhoeae (“NG”). These tests are capable of detecting results within 90 minutes thus aiding the treatment process.

The company was expecting the approval of the CT/NG tests. Cepheid had been working hard to speed up the clinical trial process and as a result incurred higher costs in the most recent quarter. The company also plans to make the test available in the US in late 2012.

Gonorrhoeae and Chlamydia are sexually transmitted infections, which are easily treated when detected early. These tests would hugely benefit the patient population as the rate of reported chlamydial infections doubled during the last decade, as per estimates of the European Centers for Disease Control and Prevention. Besides, the traditional method of detecting the disease is time consuming, which makes the treatment challenging.

We are encouraged by Cepheid’s focus on portfolio expansion that should drive its top line in the forthcoming period. Although the company is one of the leading players in the healthcare associated infections (“HAI”) segment, it is also looking at expanding in non-HAI markets, which include critical infectious diseases, women’s health, virology and oncology and genetics. Several tests are under development and the company is looking at launching new tests in each of these markets in the 2013–2014 timeframe. This is significant as the competitive landscape is tough with the presence of players such as Myriad Genetics (MYGN - Analyst Report) and Genomic Health (GHDX - Analyst Report).

Recent CE Mark approvals in Europe were followed by the US approval of Cepheid’s high-throughput automated molecular system, GeneXpert Infinity-80. This is the latest addition to the GeneXpert family and works on the GeneXpert module technology. The system, initially cleared to be used with the Xpert Flu test, is scheduled to hit the market on July 1, 2012.

We have a Neutral recommendation for Cepheid. The stock retains a Zacks #3 Rank (Hold) in the short term.