Cepheid Reports Second Quarter and Six Months 2003 Results
Total Six Month Revenues Increase by 41% Driven by 26% Increase in Product
Sales, Gross Margin Dollars on Product Sales Increase by 111%
SUNNYVALE, Calif., July 31 /PRNewswire-FirstCall/ -- Cepheid
(Nasdaq: CPHD) today announced financial results for the quarter and six
months ended June 30, 2003.
Product sales for the quarter ended June 30, 2003 increased 18% to
approximately $3.2 million from approximately $2.7 million for the
corresponding prior year while product sales for the six months period ended
June 30, 2003 increased 26% to approximately $6.3 million from $5.0 million
for the corresponding prior year period. The increase in product sales for
both the three and six month periods ended June 30, 2003 as compared to the
corresponding prior year periods was primarily due to the 65% and 91%
increase, respectively, in reagent and disposable sales and to a lesser extent
to the 10% and 19% increase, respectively, in instrument sales. Total
revenues for the quarter ended June 30, 2003 increased 28% to approximately
$4.1 million compared to approximately $3.2 million for the corresponding
prior year period, while total revenues for the first six months ended
June 30, 2003 increased 41% to $7.9 million from $5.6 million for the
corresponding prior year period. The increase in total revenue for both the
three and six months ended June 30, 2003 as compared to the corresponding
prior year periods was due to the increase in product sales and grant and
government sponsored research revenue.
Gross Margin Dollars on product sales (total product sales less cost of
product sales) for the three and six months ended June 30, 2003 increased by
135% and 111%, respectively, as compared to the corresponding prior year
periods. The gross margin percentage on product sales for the quarter ended
June 30, 2003 increased to 42% compared to 21% for the corresponding prior
year period and increased to 42% for the six months ended June 30, 2003 as
compared to 25% for the corresponding prior year period. The increase in
gross margin on product sales for the quarter and six months ended June 30,
2003 as compared to the corresponding prior year periods is due primarily to
manufacturing economies of scale and improved product pricing. Net loss for
the quarter and six months ended June 30, 2003 was approximately $4.4 million,
or $0.14 per share and $9.1 million, or $0.29 per share, respectively,
compared to a net loss of approximately $5.5 million, or $0.21 per share and
$10.5 million, or $0.40 per share for the corresponding prior periods.
Commenting on second quarter and six months performance, Chief Executive
Officer John Bishop stated:
"As expected, sales of reagents and disposables continue to grow at a
faster rate than sales in instrument systems. Instrument penetration in the
U.S. Life Sciences market continues to expand as determined by the number of
unit purchase orders placed with institutional purchasing departments.
However, we continue to see delays in institutions completing unit purchases.
Our prior years' experience was to have approximately five units left in the
buyer's purchasing departments at the end of each quarter. In 2003 we have
seen that number increase to 35 units at the end of the first quarter ending
March 31, 2003 and to 61 units at the end of the second quarter ended June 30,
2003. We are penetrating the market but are clearly seeing an increase in the
amount of time required to complete the purchase process.
"In the Clinical market, the Group B Strep product was introduced at the
American College of Obstetrics and Gynecology meeting in New Orleans in May
and product evaluations have been initiated at a number of accounts.
"In the BioThreat market, the Northrop Grumman led consortium, of which
Cepheid is a part, was successful in obtaining the award of a $175 million
contract for placement of production units of the Biohazard Detection System
(BDS) for the United States Postal Service (USPS). We expect to realize
approximately 15 to 17% of the initial contract award with the majority of the
revenue to occur in 2004. The contract award includes an option for placement
of an additional number of BDS units, which may be exercised in 2004. We
further expect to realize continuing demand for GeneXpert(R) anthrax test
cartridges beyond the initial contract awards.
"The success in the USPS program has clearly demonstrated the ability of
the GeneXpert system to provide an accurate genetic determination on a broadly
disseminated and user-friendly basis. We expect the demonstrated capability
of the system to translate well to the Clinical market for infectious disease
and oncology use on a relatively near-term basis."
2003 Outlook
Commenting on Cepheid's outlook for 2003, Mr. Bishop stated:
"We expect to see a slightly stronger second half of 2003. Additional
programs will be initiated in support of the GBS product in the Clinical
market and we expect to ship GeneXpert module first article production units
for the BDS in the fourth quarter. This will set the stage for our potential
crossover to profitability in the last quarter of 2004 or early 2005,
depending on the actual deployment schedule of the USPS BDS units and
resulting test cartridge utilization. However, despite our unchanged longer-
term outlook, based on our experience in the first two quarters of this year,
particularly with regard to the extended sales cycle within buyers' purchasing
departments in the Life Sciences Research market, we are adjusting our
guidance for 2003 product sales to a range of $14 million to $16 million. We
expect our 2003 net loss to be in the range of $18.0 million to $19.0 million
or $0.56 to $0.59 per share based on quarter-end weighted average shares
outstanding."
Conference Call Information
Cepheid's Chairman Tom Gutshall, CEO John Bishop, and CFO John R. Sluis,
will host a conference call today at 4:30pm (Eastern) to discuss Cepheid's
financial results, business highlights and outlook. The call will be
simultaneously broadcast over the Internet. Interested participants and
investors may access the teleconference call by dialing 800-215-6437
(domestic) or 706-679-7393 (international). There will also be a live webcast
of the call on the Investor Relations 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, the call will remain available on Cepheid's
website, www.cepheid.com, through July 31, 2004. A replay of the conference
call will be available at 800-642-1687 (domestic) or 706-645-9291
(international) through August 7, 2003; the conference ID is 1709757. The
replay will be available after 5:30 pm (Eastern).
About Cepheid
Cepheid (Nasdaq: CPHD), based in Sunnyvale, Calif., is a leading
developer, manufacturer and marketer of fully integrated systems that enable
genetic assessment when and where it is needed. Founded in 1996, the company
is commercializing its technology and products worldwide for research,
medical, and industrial applications requiring assessment of the human genome,
infectious disease and biothreat agents. 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
revenue growth, growth in identified markets, future net losses, the status of
the USPS BDS program, new product introductions, and business prospects.
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:
the scope and timing of actual USPS funding and deployment of the BDS system,
the rate of environmental testing using the BDS conducted by the USPS, which
will affect the amount of consumable products sold, and whether the system-as-
built performs to specifications; the potential need for FDA regulation in the
clinical diagnostic markets that Cepheid may target; the performance and
market acceptance of the Group B Strep product; Cepheid's ability to develop
additional products for the clinical genetic assessment market; the potential
need to obtain rights and licenses with respect to certain technologies,
targets and tests in other markets Cepheid may pursue; Cepheid's reliance on
distributors to market, sell and support its products; Cepheid's success in
increasing its direct sales; the impact of competitive products and pricing;
the ability of Cepheid to manage geographically-dispersed operations;
underlying market conditions in the U.S. and in international markets; and
development and manufacturing problems, including with respect to the
GeneXperta system and reagents. Readers should also refer to the section
entitled "Risk Factors" in Cepheid's Annual Report on Form 10-K for 2002 and
"Factors that Might Affect Future Results" in its most recent quarterly
reports on Form 10-Q, each 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.
For further information, please contact: John Bishop, CEO,
bishop@cepheid.com, or John Sluis, CFO, sluis@cepheid.com, of Cepheid,
+1-408-541-4191; or Media, Cynthia Martin, +1-312-640-6741,
clmartin@webershandwick.com, or Investor/Analyst Information, Tricia Ross,
+1-310-407-6540, tross@webershandwick.com, both of FRB Weber Shandwick, for
Cepheid.
(FINANCIAL STATEMENTS FOLLOW)
CEPHEID
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
Revenues:
Instrument sales $2,565 $2,324 $5,359 $4,500
Reagents and
disposables sales 615 373 955 499
Total Product Sales 3,180 2,697 6,314 4,999
License and royalty
revenue 4 63 36 129
Grant and government
sponsored research
revenue 682 361 1,249 361
Research and
development contract
revenue 238 84 284 84
Total revenues 4,104 3,205 7,883 5,573
Operating costs and
expenses:
Cost of product sales 1,857 2,135 3,665 3,744
Research and
development 4,035 4,563 7,862 8,565
Selling, general and
administrative 2,629 2,065 5,425 3,841
Total operating
costs and expenses 8,521 8,763 16,952 16,150
Loss from operations (4,417) (5,558) (9,069) (10,577)
Interest (loss) /
income, net (5) 23 (41) 72
Net loss $(4,422) $(5,535) $(9,110) $(10,505)
Net loss per share,
basic and diluted $(0.14) $(0.21) $(0.29) $(0.40)
Shares used in
computing net loss
per share, basic and
diluted 32,410 26,380 31,902 26,363
CEPHEID
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
ASSETS
June 30, December 31,
2003 2002 (1)
(unaudited)
Current assets:
Cash and cash equivalents $8,542 $14,505
Restricted cash 2,329 2,296
Accounts receivable 2,466 3,044
Inventory 4,371 3,850
Prepaid expenses and other current assets 1,096 352
Total current assets 18,804 24,047
Property and equipment, net 6,861 6,144
Total assets $25,665 $30,191
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,428 $2,367
Accrued compensation 1,228 1,171
Accrued other liabilities 2,093 2,092
Current portion of equipment financing 1,232 1,423
Current portion of bank loan payable 36 32
Total current liabilities 7,017 7,085
Equipment financing, less current portion 1,049 1,629
Bank loan payable, less current portion 379 364
Deferred rent 431 355
Shareholders' equity:
Common stock 80,961 75,928
Additional paid-in capital 7,488 7,505
Deferred stock-based compensation (11) (103)
Accumulated foreign exchange translation
adjustment 37 4
Accumulated deficit (71,686) (62,576)
Total shareholders' equity 16,789 20,758
Total liabilities and shareholders' equity $25,665 $30,191
(1) The balance sheet at December 31, 2002 has been derived from the
audited financial statements which are included in the Company's
Form 10-K filed with the Securities and Exchange Commission.