Exhibit 99.1
[LOGO OF CEPHEID]
Cepheid
904 Caribbean Drive
Sunnyvale, CA 94089
Telephone: 408.541.4191
Fax: 408.541.4192
CONTACTS:
AT THE COMPANY:
John L. Bishop John R. Sluis
CEO, Cepheid CFO, Cepheid
408-541-4191 408-541-4191
john.bishop@cepheid.com john.sluis@cepheid.com
AT FINANCIAL RELATIONS BOARD:
Tim Grace Tricia Ross
Media Contact Investor/Analyst Information
312-640-6667 617-520-7064
tgrace@financialrelationsboard.com tross@financialrelationsboard.com
CEPHEID REPORTS SECOND QUARTER 2005 RESULTS
TOTAL REVENUES INCREASE BY 89% DRIVEN BY 93% INCREASE IN PRODUCT SALES
GROSS MARGIN DOLLARS ON PRODUCT SALES INCREASE BY 94%
SUNNYVALE, Calif., August 4, 2005 -- Cepheid (NASDAQ: CPHD) today announced
financial results for the quarter and six months ended June 30, 2005.
Product sales for the quarter ended June 30, 2005 increased 93% to approximately
$20.2 million from approximately $10.5 million for the corresponding prior year
period while product sales for the six months ended June 30, 2005 increased 128%
to approximately $39.0 million from approximately $17.1 million for the
corresponding prior year period. The increase in product sales for the quarter
and six months ended June 30, 2005 as compared to the corresponding prior year
periods was primarily due to a 371% and 459% increase in reagent and disposable
sales, respectively.
Total revenues for the quarter ended June 30, 2005 increased 89% to
approximately $21.4 million compared to approximately $11.3 million for the
corresponding prior year period while total revenues for the six months ended
June 30, 2005 increased 121% to approximately $41.0 million from $18.5 million
for the corresponding prior year period. The increase in total revenue for both
the quarter and six months ended June 30, 2005 as compared to the corresponding
prior year period was due primarily to the increase in product sales. Contract
revenue of $0.7 million and $1.4 million for the quarter and six months ended
June 30, 2005 was primarily derived from the amortization of up-front license
fees in connection with the Company's collaboration with bioMerieux.
Gross Margin Dollars on product sales (total product sales less cost of product
sales) for the quarter and six months ended June 30, 2005 increased by 94% and
112%, respectively as compared to the corresponding prior year periods. The
gross margin percentage on product sales for the quarter ended June 30, 2005 was
consistent at 42% when compared to the corresponding prior year period and
decreased to 43% for the six months ended June 30, 2005 as compared to 47% for
the corresponding prior year period. The decline in gross margin on product
sales for the six months ended June 30, 2005 as compared to the corresponding
prior year period was due primarily to the amortization of up front license fees
and higher ongoing royalty costs associated with the Company's patent license
agreements entered into with Applera Corporation and F. Hoffman-La Roche Ltd in
the second and third quarter of 2004 as well as one time favorable pricing
achieved in the first quarter of 2004 which did not occur in the six months
ended June 30, 2005. Gross margin on product sales for the full year 2005 is
expected to be in the range of 43% to 45%. Previous guidance was for gross
margin on product sales to be in the range of 45% to 49%.
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Net loss for the quarter and six months ended June 30, 2005 was approximately
$3.6 million, or $0.09 per share and $7.1 million, or $0.17 per share,
respectively, compared to a net loss of approximately $3.7 million, or $0.09 per
share and $7.9 million, or $0.20 per share, respectively, for the corresponding
prior year periods.
"The Company is continuing to show progress in developing the individual
segments of our overall business plan. Three ASR's were released during the
second quarter covering gene expression and bacterial targets. Two additional
ASR's for bacterial targets were released subsequent to the close of the
quarter. These releases bring the total number of ASR's currently available from
the Company to 10. In addition, a new general use PCR master mix product was
released for use in both our ASR and Industrial markets."
"Collaborations and CSR programs were initiated with the FDA for Salmonella and
E. coli O157:H7/STEC, the University of North Carolina for recreational water
testing of E. coli, Enterococcus, Vibrio, Bacteroides and the Public Health
Research Institute (PHRI) for Methicillin Resistant Staph aureus (MRSA) and
VRE."
"The biothreat program with the United States Postal Service (USPS) continues to
move forward with installation of Biohazard Detection Systems (BDS). At this
time over 800 BDS units have been installed. In addition, a significant testing
milestone has been passed with over 1,000,000 tests now having been run with no
false positives while simultaneously maintaining a very high level of
sensitivity. This result is equivalent to a specificity of greater than
99.9999%. This was achieved using our patented testing system that includes our
closed cartridge, with integrated automated sample processing."
"Subsequent to the close of the quarter, we made a significant addition to the
management team with the appointment of David Persing M.D., Ph.D., currently a
member of the Company's Board of Directors, to the position of Executive Vice
President, Chief Medical and Technical Officer. Dr. Persing is a noted authority
in the field of infectious diseases and he brings a unique combination of
practical clinical experience along with a familiarity of industry research and
development models, which should immediately benefit the team and our programs
in the Clinical, Biothreat and Industrial markets," stated John Bishop,
Cepheid's CEO.
2005 OUTLOOK
Commenting on Cepheid's outlook for the remainder of 2005, Mr. Bishop stated:
"Work is continuing on our BCR/ABL ASR product for use on the GeneXpert(R)
system and we continue to expect to initiate product shipments in the second
half of this year. Development of our initial FDA product for detection of Group
B Strep (GBS) continues on the GeneXpert system along with a second generation
version of GBS on the SmartCycler(R) system. We expect to simultaneously
introduce both products in early 2006 in Europe with subsequent release in the
United States. The key issue has been to insure optimization of the test
sensitivity in the GeneXpert system and to simultaneously make available a
product with the same level of sensitivity for our existing SmartCycler
customers. Our product for the detection of Enterovirus is also expected to
enter clinical trials this year."
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"Research also continues on a GeneXpert version of MRSA and a second generation
MRSA test for the SmartCycler system. Both tests are expected to be
simultaneously released in 2006."
"We continue to expect deployment of BDS units to be completed in all 282 USPS
processing centers by the end of this year. As we have previously discussed, we
expect to continue to supply GeneXpert anthrax test cartridges to the USPS for
use in the installed base of BDS units. In this regard, we recently received an
Authorization Letter from Northrop Grumman for the purchase of 2.3 million
anthrax cartridges to be delivered over a 14 month period commencing in August
of 2005 and running through September of 2006. We have also announced our
development plans for an expanded biothreat product menu, which is expected to
include the following cartridge configurations in sequential order: 3 agent
cartridge including anthrax, Y. pestis and F. tularensis; 4 agent cartridge
including anthrax, Y. pestis, F. tularensis and Smallpox; 4 agent viral
cartridge including Ebola, Marburg, Crimean-Congo hemorrhagic fever (CCHF) and
Venezuelan equine encephalitis (VEE); 6 agent cartridge including anthrax, Y.
pestis, F. tularensis, Smallpox, Burkolderia, and Brucella; a 10 agent array
cartridge including anthrax, Y. pestis, F. tularensis, Smallpox, Burkolderia,
Brucella, Ebola, Marburg, CCHF and VEE."
"Our market focus will continue to be in the Clinical Genetic Assessment market,
along with the Biothreat and Industrial markets. In response to market demand,
we are expanding what was previously the Life Science market to a broader
Industrial market, which will encompass Food, Agricultural and Environmental
testing in addition to research use generally associated with the Life Science
market. As a part of this program, we recently participated in a head-to-head
third party evaluation of water tests for E. Coli and Enterococcus against other
competitors. Early indications are that the Cepheid tests, utilizing our
licensed Scorpions technology, will be found to be superior to the competitor
products. These water testing products are expected to be released for
environmental recreational water testing before the end of 2005."
"While we continue to make significant progress in product development, we are
also addressing issues associated with automated high volume production which
have negatively impacted our manufacturing gross profit margins. We expect to
make significant progress in resolving these issues by the end of this year.
However, we will be realizing less gross profit dollars on product sales than we
had previously expected in the near term."
"We also recently had our first Customer Corrective Action Notice involving a
software bug associated with our SmartCycler Diagnostic software. The Company
moved expeditiously to notify customers and has not received any indication of
adverse patient events. We do not expect this customer corrective action to have
any material financial impact to the Company."
"We reaffirm that we expect our 2005 product sales to be in the range of $80.0
million to $84.0 million, based on anticipated sales for the USPS program and
sales expected from other existing and new products. However, given the
near-term impact on our manufacturing gross margins, we are increasing our
expected 2005 net loss to be in the range of $12.0 million to $14.0 million or
$0.28 to $0.33 per share based on actual weighted average shares outstanding of
42.5 million as of June 30, 2005. Previous guidance was an expected 2005 net
loss of $9.0 million to $11.0 million or $0.21 to $0.26 per share. Our net loss
projections do not include any stock compensation expense associated with SFAS
123R for which mandatory implementation has been delayed until January 1, 2006
by the Securities and Exchange Commission."
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As of June 30, 2005, the Company had $52.4 million in unrestricted cash and
marketable securities.
CONFERENCE CALL INFORMATION
Cepheid's CEO, John Bishop, and Senior V.P. and CFO, John Sluis will host a
conference call today at 4:30 pm (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 800-366-7417 (domestic) or 303-262-2141
(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 August 4, 2006. A replay of the conference call will be
available at 800-405-2236 (domestic) or 303-590-3000 (international) through
August 11, 2005; the conference ID is 11034949. The replay will be available
after 6:30 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 future
product releases, product performance, future revenues, future margins, future
net losses and the status of the USPS BDS program. 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; the occurrence of delays with respect to the
BDS, the rate of environmental testing using the BDS conducted by the USPS,
which will affect the amount of consumable products sold, and whether the BDS
performs to specifications; development and manufacturing problems, including
with respect to the GeneXpert system and reagents; the need for additional
licenses for new tests and other products and the terms of such licenses; our
ability to complete clinical trials successfully in a timely manner for products
to be marketed in clinical markets; our ability to successfully commercialize
our stand-alone GeneXpert system; lengthy sales cycles in certain markets; the
performance and market acceptance of new products; sufficient customer demand in
the Industrial markets; our reliance on distributors to market, sell and support
our products; the occurrence of unforeseen expenditures, acquisitions or other
transactions; our success in increasing direct sales; 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 2004
and in its most recent quarterly report on Form 10-Q, each filed with the
Securities and Exchange Commission.
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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)
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CEPHEID
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenues:
Instrument sales $ 7,262 $ 7,720 $ 13,621 $ 12,584
Reagent and disposable sales 12,942 2,749 25,334 4,533
------------ ------------ ------------ ------------
Total Product Sales 20,204 10,469 38,955 17,117
Contract revenues 743 807 1,390 1,420
Grant and government sponsored
research revenues 437 9 605 9
------------ ------------ ------------ ------------
Total revenues 21,384 11,285 40,950 18,546
------------ ------------ ------------ ------------
Operating costs and expenses:
Cost of product sales 11,743 6,113 22,017 9,131
Collaboration profit sharing 3,602 607 7,208 1,032
Research and development 4,538 3,864 9,044 7,494
Selling, general and administrative 5,036 4,434 9,591 7,501
Expense for patent related matter - - - 1,264
------------ ------------ ------------ ------------
Total costs and operating
expenses 24,919 15,018 47,860 26,422
------------ ------------ ------------ ------------
Loss from operations (3,535) (3,733) (6,910) (7,876)
Other income (expenses), net (100) 22 (183) 18
------------ ------------ ------------ ------------
Net loss $ (3,635) $ (3,711) $ (7,093) $ (7,858)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.09) $ (0.09) $ (0.17) $ (0.20)
============ ============ ============ ============
Shares used in computing basic and
diluted net loss per share 42,465 41,713 42,355 40,211
============ ============ ============ ============
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CEPHEID
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2005 2004
------------ ------------
(unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 18,448 $ 23,189
Marketable securities 34,000 34,250
Accounts receivable 12,570 14,584
Inventory 8,298 6,544
Prepaid expenses and other current assets 1,314 402
------------ ------------
Total current assets 74,630 78,969
Property and equipment, net 12,042 9,756
Restricted cash 688 688
Intangible assets, net 29,708 30,902
------------ ------------
Total assets $ 117,068 $ 120,315
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,930 $ 8,074
Accrued compensation 2,594 2,836
Accrued royalties 2,414 2,113
Accrued other liabilities 4,103 4,517
Current portion of deferred revenue 2,853 3,847
Current portion of license fee payable 10,683 10,476
Current portion of equipment financing 2,061 1,889
------------ ------------
Total current liabilities 37,638 33,752
Long term portion of deferred revenue 5,238 6,190
Long term portion of licensing fees payable 6,700 8,561
Equipment financing, less current portion 2,358 1,604
Line of credit 4,000 4,000
Deferred rent 654 599
Commitments
Shareholders' equity:
Preferred stock - -
Common stock 153,935 152,136
Additional paid-in capital 7,519 7,517
Accumulated other comprehensive loss 26 (137)
Accumulated deficit (101,000) (93,907)
------------ ------------
Total shareholders' equity 60,480 65,609
------------ ------------
Total liabilities and shareholders' equity $ 117,068 $ 120,315
============ ============
(1) The balance sheet at December 31, 2004 has been derived from the Company's
audited financial Statements, which are included in the Company's 2004 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
See accompanying notes.