Exhibit 99.01
Cepheid CONTACTS
904 Caribbean Drive
Sunnyvale, CA 94089 AT THE COMPANY:
Telephone: 408.541.4191 --------------
Fax: 408.541.4192 John L. Bishop John R. Sluis
CEO, Cepheid CFO, Cepheid
408-541-4191 408-541-4191
john.bishop@cepheid.com john.sluis@cepheid.com
FINANCIAL RELATIONS BOARD:
--------------------------
Lasse Glassen
Investor/Analyst Information
310-854-8313
lglassen@financialrelationsboard.com
CEPHEID REPORTS SECOND QUARTER 2006 RESULTS
Product sales decrease by 7% despite strong Clinical sales growth of 135%
Unexpected weakness in Industrial market combined with anticipated cessation of
USPS GeneXpert(R) Module Sales lead to decrease in total product sales
SUNNYVALE, Calif., August 8, 2006 -- Cepheid (NASDAQ: CPHD) today announced
financial results for the second quarter ended June 30, 2006.
Total product sales for the second quarter ended June 30, 2006 decreased 7% to
approximately $18.9 million from approximately $20.2 million for the
corresponding prior year period while total product sales for the six months
ended June 30, 2006 decreased 2% to approximately $38.2 million from
approximately $39.0 million for the corresponding prior year period. The
decrease in product sales for the quarter was the result of lower than expected
industrial market sales and the anticipated cessation of GeneXpert module sales
to the United States Postal Service (USPS) resulting from the completion of the
Biohazard Detection System (BDS) installation program in 2005. The sales
decrease was partially offset by a 135% increase in clinical market sales. For
the three and six months ended June 30, 2005, sales of GeneXpert modules to the
USPS were $3.0 million and $6.6 million respectively. As anticipated, there were
no sales of GeneXpert modules to the USPS for the first six months of 2006.
Accordingly, sales of all other products increased 10% and 18% for the three and
six month periods of 2006, respectively, when compared to the same periods of
2005.
Net loss for the quarter ended June 30, 2006 was approximately $7.0 million, or
$0.13 per share, compared to a net loss of approximately $3.6 million, or $0.09
per share, for the corresponding prior year period. Net loss for the six month
period ended June 30, 2006 was $13.7 million or $0.28 per share compared to a
net loss of $7.1 million or $0.17 per share for the same period of last year.
Beginning this year, the Company implemented the provisions of SFAS 123(R) which
resulted in stock compensation expense being reflected in operating results for
the first time. As a result, stock compensation expense included in the net loss
for the quarter ended June 30, 2006 was $1.9 million, or $0.04 per diluted
shared, and $3.6 million, or $0.08 per diluted share, for the six months ended
June 30, 2006.
Clinical product sales increased 135% to $4.0 million in the second quarter of
2006 from $1.7 million in the second quarter of 2005 and represented 21% of
total product sales for the second quarter of 2006 as compared to 9% of total
product sales for the second quarter of 2005. Clinical product sales increased
133% to $7.7 million for the six months ended June 30, 2006 from $3.3 million
for the six months ended June 30, 2005 and represented 20% of total product
sales as compared to 8% of total product sales for the six months ended June 30,
2005.
Industrial product sales decreased 29% to $2.8 million in the second quarter of
2006 from $3.9 million in the second quarter of 2005 and represented 15% of
total product sales in the second quarter of 2006 as compared to 19% of total
product sales in the second quarter of 2005 while industrial product sales
increased 2% to $6.2 million for the six months ended June 30, 2006 from $6.1
million for the six months ended June 30, 2005 and represented 16% of total
product sales in both periods.
Biothreat product sales decreased by 17% to $12.1 million in the second quarter
of 2006 from $14.6 million in the second quarter of 2005 and represented 64% of
total product sales in the second quarter of 2006 as compared to 72% in the
second quarter of 2005 while biothreat product sales decreased 18% to $24.3
million for the six months ended June 30, 2006 from $29.6 million for the six
months ended June 30, 2005 and represented 64% of total product sales as
compared to 76% of total product sales for the six months ended June 30, 2005.
The expected decrease in product sales in the biothreat market was a result of
the fourth quarter 2005 completion of the installation of the BDS in the USPS
processing centers and the resulting completion of additional GeneXpert modules
sales for the USPS BDS program.
Other revenues, including contract and grant and government sponsored research
revenue, decreased 18% to approximately $1.0 million for the second quarter of
2006 as compared to $1.2 million in the second quarter of 2005 while other
revenues decreased 7% to approximately $1.9 million for the six months ended
June 30, 2006 as compared to $2.0 million for the six months ended June 30,
2005. The decrease in other revenues for the quarter and for the first six
months as compared to the corresponding prior year periods was due primarily to
the decrease in grant and government sponsored research revenue.
The gross margin percentage on product sales for the quarter ended and six
months ended June 30, 2006 decreased to 38% and 40% from 42% and 43% for the
prior year quarter and six months ended June 30, 2005. The cost of product sales
for the second quarter ended June 30, 2006 included $0.2 million of stock
compensation expense and $0.4 million for the six months ended June 30, 2006,
which had an impact of 1% on product gross margin percentage for the quarter and
for the six months ended June 30, 2006. The decrease in gross margin was due
primarily to unfavorable product mix as compared to the comparable periods of
2005. The Company did not experience a recurrence of any process manufacturing
inefficiencies on existing products.
"Based on the decrease in Industrial sales, our total sales for the quarter were
disappointing. It appears that the government redirected funding away from our
traditional educational and research laboratory customers in favor of various
other government initiatives," commented John Bishop, Cepheid's CEO. "We have
experienced temporary funding realignments in the past and the market has
recovered as normal funding levels are resumed."
Mr. Bishop added, "As previously noted, installation of Biohazard Detection
Systems (BDS) within United States Postal Service (USPS) processing centers was
completed during the fourth quarter of 2005. As expected, no sales of additional
GeneXpert modules for the USPS program are planned for 2006. The program
continues to run well with over 3.0 million tests run to-date. We are currently
working on the next follow-on anthrax test cartridge purchase order which, is
expected to be initiated in the fourth quarter this year."
"In the Clinical market, we continued to make good progress in both sales growth
and in stronger strategic positioning. Under the European CE mark initiative,
during the quarter we released products for GBS and EV on our GeneXpert system
and for EBV, CMV, VZV, and GBS on our SmartCycler system. In addition, the
marketing launch of our 16 module GeneXpert system was initiated during the
American Society of Microbiology meeting. We also entered into a collaboration
with the Foundation for Innovative Diagnostics (FIND), a Geneva-based non-profit
organization, to develop a new, rapid molecular diagnostic test for tuberculosis
(TB) on our GeneXpert system. Funded by the Bill and Melinda Gates Foundation,
FIND is dedicated to identifying and applying the latest biotechnology
innovations to develop affordable diagnostic tests for diseases affecting
underprivileged populations in developing countries. We also expect the
resultant test to be highly useful in developed countries around the world."
2006 OUTLOOK
Commenting on Cepheid's outlook for 2006, Mr. Bishop stated:
"Subsequent to the close of the quarter, our Group B Streptococcus (GBS) assay
on the GeneXpert System was cleared by the FDA. The 510k clearance constitutes
FDA clearance of the GBS assay and the GeneXpert instrument. The performance
characteristics of the Xpert GBS Assay were determined from the evaluation of
laboratory testing done on specimens from 791 maternity patients. All subjects
had culturing done and most also had a 2nd GBS Nucleic Acid Amplification Test
(NAAT) performed. The 2nd NAAT targets a sequence in the cfb gene and was
previously FDA-cleared. As compared to culture, the Xpert GBS test demonstrated
a sensitivity of 91.9% and specificity of 95.6% for intrapartum specimens and a
sensitivity of 85.3% and specificity of 98.1% for antepartum specimens. The 2nd
previously cleared GBS NAAT test demonstrated a sensitivity of 81.4% and
specificity of 95.6% for intrapartum specimens and a sensitivity of 74.5% and
specificity of 97.0% for antepartum specimens. As cleared, the package
instruction sheet provides for use by both laboratory and non-laboratory
personnel. We expect a formal 'moderate complexity' ruling in the immediate
future."
"We expect to receive word on our second 510k for Enterovirus meningitis on the
GeneXpert System, which was submitted to the FDA during the quarter, by the end
of the third quarter of this year."
"Development of our MRSA/MSSA assay on the GeneXpert System is continuing. Our
objective is to provide the clinician with the ability to simultaneously
identify methicillin sensitive and resistant strains of Staphylococcus aureus
(SA), and to confirm that a detected strain of MRSA is actually carrying the mec
A gene, which confers methicillin resistance. This may avoid potential false
positive clinical results, which might otherwise occur through detection of
staphylococcus strains that are carrying an empty cassette without the mec A
gene. We expect to submit the product to the FDA for 510k clearance during the
fourth quarter this year."
"Orders have already been received for six of our 16-module GeneXpert systems.
We expect to initiate delivery of these systems during the current quarter."
Because FDA clearances are taking longer than expected and due to the second
quarter weakness of the Industrial market, we are adjusting our financial
guidance for 2006."
"We currently expect our 2006 product sales to be in the range of $83.0 million
to $86.0 million, based on anticipated sales from existing and new products and
sales expected from the USPS program. We expect our 2006 net loss to be in the
range of $12.0 million to $14.0 million or $0.23 to $0.27 per share based on
expected weighted average shares outstanding of 52.3 million for the year ended
December 31, 2006. This is inclusive of additional interest income to be
generated from the proceeds of our follow-on offering, but does not include the
Actigenics acquisition as noted below. We expect the crossover to profitability
to occur during 2007. This does not include the effect of stock option expense
under the requirements of SFAS 123(R)."
"As of June 30, 2006, the Company had $111.9 million in unrestricted cash and
marketable securities."
"As a final note, we are also today announcing our first acquisition involving
marker rights with the completion of the purchase of Actigenics, a small company
in Toulouse, France. With a strong bioinformatics capability, Actigenics is one
of the leaders in the discovery of microRNAs, a newly identified class of RNAs
that are closely involved in gene expression and regulation. Of about 1500
predicted microRNAs in the human genome, only a few hundred have been found to
be expressed. Actigenics has one of the largest portfolios of validated
microRNAs in the world having discovered 88 novel microRNAs to date. By using
their proprietary search algorithms, several hundred more novel micro RNA
candidates have been identified and are being validated in their discovery
pipeline. We believe these microRNAs may potentially provide the basis for a
broad range of Cepheid proprietary markers for Cancer-specific markers,
Infection-specific markers, Inflammation-specific markers, and surrogate markers
of complex regulatory mechanisms."
"Actigenics possesses both therapeutic and diagnostic rights to their validated
microRNAs. We currently plan to out-license therapeutic applications of these
microRNAs as appropriate. However, we plan on maintaining the opportunity to
develop diagnostic tests associated with those therapeutic applications."
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 800-218-9073 (domestic) or 303-262-2190
(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 8, 2007. A replay of the conference call will be
available at 800-405-2236 (domestic) or 303-590-3000 (international) through
August 15, 2006; the conference ID is 11065928. The replay will be available
after 6:30 pm (Eastern).
ABOUT CEPHEID
Cepheid (Nasdaq: CPHD), based in Sunnyvale, Calif., is a 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. The company'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 clinical
trials and FDA approvals, future product developments, the status of government
funding, timing of future product releases, product performance, future
revenues, future net losses and the status of the USPS BDS program and other
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: 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, including with respect to the GeneXpert(R) system,
cartridges, 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; uncertainties related to the FDA regulatory and European regulatory
processes; our ability to successfully commercialize our stand-alone
GeneXpert(R) system; lengthy sales cycles in certain markets; the performance
and market acceptance of new products; sufficient customer demand in the other
markets; our reliance on distributors to market, sell and support our products;
the occurrence of unforeseen expenditures, acquisitions or other transactions;
unforeseen issues relating to integration of acquisitions; 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 2005 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 STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues:
Instrument sales $ 4,030 $ 7,262 $ 8,568 $ 13,621
Reagent and disposable sales 14,852 12,942 29,586 25,334
---------- ---------- ---------- ----------
Total Product Sales 18,882 20,204 38,154 38,955
Contract revenues 677 743 1,288 1,390
Grant and government sponsored
research revenues 288 437 566 605
---------- ---------- ---------- ----------
Total revenues 19,847 21,384 40,008 40,950
---------- ---------- ---------- ----------
Costs and operating expenses:
Cost of product sales 11,683 11,743 23,076 22,017
Collaboration profit sharing 3,843 3,602 7,654 7,208
Research and development 5,807 4,538 11,636 9,044
Selling, general and administrative 6,921 5,036 13,067 9,591
---------- ---------- ---------- ----------
Total costs and operating expenses 28,254 24,919 55,433 47,860
---------- ---------- ---------- ----------
Loss from operations
(8,407) (3,535) (15,425) (6,910)
Other income (expenses), net 1,365 (100) 1,711 (183)
---------- ---------- ---------- ----------
Net loss $ (7,042) $ (3,635) $ (13,714) $ (7,093)
========== ========== ========== ==========
Basic and diluted net loss per share $ (0.13) $ (0.09) $ (0.28) $ (0.17)
========== ========== ========== ==========
Shares used in computing basic and
diluted net loss per share 54,518 42,465 49,758 42,355
========== ========== ========== ==========
CEPHEID
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2006 2005
------------ ------------
(unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 31,444 $ 16,072
Marketable securities 80,450 21,150
Accounts receivable 10,747 13,976
Inventory 9,156 7,989
Prepaid expenses and other current assets 1,558 583
------------ ------------
Total current assets
133,355 59,770
Property and equipment, net 14,291 13,000
Restricted cash 661 661
Intangible assets, net 28,540 29,757
------------ ------------
Total assets $ 176,847 $ 103,188
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,588 $ 9,293
Accrued compensation 3,258 3,191
Accrued royalties 2,317 3,115
Accrued collaboration profit sharing 3,843 4,371
Accrued other liabilities 3,038 2,441
Current portion of deferred revenue 3,026 2,963
Current portion of license fee payable 7,104 8,538
Line of credit - 4,000
Current portion of equipment financing 822 2,297
------------ ------------
Total current liabilities 32,996 40,209
Long term portion of deferred revenue 3,471 4,402
Long term portion of license fees payable - 387
Long term portion of equipment financing, 59 2,052
Deferred rent 789 735
Commitments
Shareholders' equity:
Preferred stock - -
Common stock 249,741 155,347
Additional paid-in capital 10,905 7,518
Accumulated other comprehensive income 101 39
Accumulated deficit (121,215) (107,501)
------------ ------------
Total shareholders' equity 139,532 55,403
------------ ------------
Total liabilities and shareholders' equity $ 176,847 $ 103,188
============ ============
(1) The balance sheet at December 31, 2005 has been derived from the Company's
audited financial Statements, which are included in the Company's 2005 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.