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 FOURTH QUARTER AND FULL YEAR 2006 RESULTS
SUNNYVALE, Calif., February 22, 2007 -- Cepheid (NASDAQ: CPHD) today announced
financial results for the fourth quarter and full year ended December 31, 2006.
Total product sales for the fourth quarter ended December 31, 2006 were $21.6
million. Sales results were mixed for the three markets in which the Company
participates. Clinical product sales for the fourth quarter increased by 81% to
$6.2 million. Industrial product sales increased by 5% to $3.8 million. The
increases in the Clinical and Industrial product sales were offset by a 24%
decrease in Biothreat product sales to $11.6 million. This resulted in an
overall decrease in total product sales of 3% from the $22.2 million for the
fourth quarter ended December 31, 2005. Total product sales for the full year of
2006 increased 2% to approximately $82.4 million from approximately $80.4
million for the full year of 2005.
Net loss for the quarter ended December 31, 2006 was approximately $8.3 million,
or $0.15 per share. The fourth quarter 2006 net loss included a one time expense
of $3.4 million for settlement of the Idaho patent dispute, which represented
$0.06 per share, and $2.1 million of stock compensation expense, representing
$0.04 per share. This is compared to a net loss of approximately $3.2 million,
or $0.08 per share, for the quarter ended December 31, 2005 when stock
compensation expense was not required to be included prior to the implementation
of SFAS 123(R). Net loss for the full year of 2006 was $26.0 million or $0.50
per share (including stock compensation expense) compared to a net loss of $13.6
million or $0.32 per share for the same period of last year (which did not
include stock compensation expense). The net loss for the full year of 2006
included the previously noted one time expense of a $3.4 million settlement of a
patent matter, or $0.06 per share, as well as $7.3 million of stock compensation
expense, or $0.14 per share.
Clinical product sales increased 81% to $6.2 million in the fourth quarter of
2006 from $3.4 million in the fourth quarter of 2005 and represented 29% of
total product sales for the fourth quarter of 2006 as compared to 15% of total
product sales for the fourth quarter of 2005. Clinical product sales increased
114% to $19.6 million for the full year of 2006 from $9.2 million for the full
year of 2005 and represented 24% of total product sales as compared to 11% of
total product sales for the full year of 2005.
Industrial product sales increased 5% to $3.8 million in the fourth quarter of
2006 from $3.6 million in the fourth quarter of 2005 and represented 17% of
total product sales in the fourth quarter of 2006 as compared to 16% of total
product sales in the fourth quarter of 2005 while Industrial product sales
increased 10% to $14.8 million for the full year of 2006 from $13.4 million for
the full year of 2005 and represented 18% of total product sales for the full
year of 2006 as compared to 17% for the full year of 2005.
Biothreat product sales decreased by 24% to $11.6 million in the fourth quarter
of 2006 from $15.2 million in the fourth quarter of 2005 and represented 54% of
total product sales in the fourth quarter of 2006 as compared to 69% in the
fourth quarter of 2005. Biothreat product sales decreased 17% to $48.0 million
for the full year of 2006 from $57.8 million for the full year of 2005 and
represented 58% of total product sales as compared to 72% of total product sales
for the full year of 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 Biohazard Detection System (BDS) units in the United States
Postal Service (USPS) processing centers and the resulting completion of
additional GeneXpert(R) modules sales for the USPS BDS program. In addition,
approximately $0.6 million of Anthrax cartridge sales were deferred pending the
outcome of current discussions of a potential five year test cartridge purchase
contract with Northrop Grumman and the USPS.
Other revenues, including contract and grant and government sponsored research
revenue, increased 41% to approximately $2.0 million for the fourth quarter of
2006 as compared to $1.4 million in the fourth quarter of 2005 while other
revenues increased 8% to approximately $5.0 million for the twelve months ended
December 31, 2006 as compared to $4.6 million for the twelve months ended
December 31, 2005. The increase in other revenues for the quarter and full year
as compared to the corresponding prior year periods was due primarily to the
initiation of development activities for the tuberculosis program with The
Foundation for Innovative New Diagnostics (FIND) and the Avian Flu program with
the Centers for Disease Control and Prevention (CDC).
The gross margin percentage on product sales for the quarter ended December 31,
2006 decreased to 42% from 43% compared to the prior year quarter. The cost of
product sales for the quarters ended December 31, 2006 and 2005 included $0.1
million and $0 of stock compensation expense, respectively, resulting in one
percentage point decrease on product gross margin in the fourth quarter of 2006.
The gross margin percentage on product sales decreased to 41% from 43% for the
full year of 2006 compared to the full year of 2005. The cost of product sales
for the full years of 2006 and 2005, included $0.6 million and $0 of stock
compensation expense, respectively, which had an impact of one percentage point
on product gross margin percentage for the full year of 2006. Aside from the
impact of stock compensation expense, the remaining decrease in gross margin for
2006 was primarily due to unfavorable product mix as compared to 2005.
"The Company continued to make good progress in expanding its Clinical product
line during the fourth quarter. The Xpert(TM) MRSA test was released as a CE IVD
marked product in Europe rounding out the Company's initial planned group of
GeneXpert system test products for the European market. To date the Company has
achieved an installed base of 136 GeneXpert systems in Europe and U.S. which
include 379 individual GeneXpert modules," commented John Bishop, Cepheid's CEO.
Mr. Bishop added, "510(k) clearance was also received during the fourth quarter
for the Smart(TM) GBS test on the SmartCycler(R) system. The Smart GBS test was
the Company's second product to be cleared through the FDA 510(k) process and
was completed in approximately 75 days."
"During the quarter, the Company also announced the receipt of Phase 1&2 funding
from the CDC for development of a CLIA waived test for influenza testing on the
GeneXpert system. The contract was one of four contracts awarded to companies
for development of tests and systems to be used for the pandemic preparedness
program."
"Driven by momentum in the third quarter, fourth quarter sales in the Industrial
market outpaced the fourth quarter of 2005."
"Biothreat sales are continuing at the expected rate. As previously noted,
installation of BDS units within USPS processing centers was completed during
the fourth quarter of 2005. As expected, no sales of additional GeneXpert
modules for the USPS program occurred in 2006. The program continues to run well
with over 4.3 million tests run to-date with no false positives. As previously
noted, the Company is currently in discussions with Northrop Grumman and the
USPS to potentially develop a five year anthrax test cartridge purchase
agreement. The potential five year agreement would initiate with the USPS 2007
fiscal year beginning October 1, 2006, resulting in the noted deferral of $0.6
million of sales revenue in the fourth quarter 2006."
2007 OUTLOOK
Commenting on Cepheid's outlook for 2007, Mr. Bishop stated:
"We expect 2007 to be a significant year of achievement for the Company.
Clinically, we expect to complete the initial U.S. offering of tests for use on
the GeneXpert system with the introduction of our Xpert MRSA test in mid year. A
510(k) for the Xpert MRSA product has recently been filed with the FDA. Based on
progress to date, we expect to launch our Enterovirus product, Xpert EV, in the
U.S. during the current quarter. Based on the strong interest we are seeing in
our GeneXpert systems and both the Xpert EV and Xpert MRSA products, we expect
our product sales to increase significantly in the second half of the year.
These new product launches will be supported with increased marketing and
promotional expenses as the rate of product adoption will have a determining
impact on our timeline to profitability and positive cash flow."
"Further momentum is expected to be gained in programs for the rapid expansion
of our clinical test pipeline. Our strategy is to augment our own internal
development programs with key collaborative programs which are expected to
significantly extend both our test menu and market reach. We are in the early
stages of several important collaborations which have the potential for global
impact on public safety and healthcare. Our programs for development of a rapid
tuberculosis test which simultaneously identifies drug resistance with FIND and
the National Institutes of Health (NIH) have the potential to bring molecular
diagnostics to the most remote regions of the world, where prompt and highly
accurate diagnostics are not available and are most needed. Likewise our
collaboration with the CDC may offer a solution to detect and help control the
unfortunate potential of an avian flu pandemic. And, subsequent to the end of
2006, we announced a collaboration with bioMerieux to develop tests for the
rapid detection and differentiation of organisms causing sepsis. As these and
other collaborations progress, we expect our contract revenues to double, or
possibly triple, last year's contract revenues, potentially reaching the $12 to
$15 million range. These programs will be supported with significant investments
in research and development."
"In the Biothreat market, we expect to either complete the five year contract
under mutually agreeable terms with Northrop Grumman and the USPS during the
second quarter or to return to use of a year-by-year contract and the
corresponding pricing matrix. The USPS anthrax test cartridge volume is expected
to be approximately the same as that for 2006, which was approximately 2
million."
"We expect sales in the Industrial market to be similar to those obtained in
2006."
"Further to the programs and initiatives already noted, subsequent to the close
of 2006 we completed the acquisition of Sangtec Molecular Diagnostics AB from
the Nycomed-owned ALTANA Pharma AG for approximately $27 million in cash.
Sangtec, based in Bromma, Sweden, develops and manufactures PCR based molecular
diagnostics products. Sangtec currently has 59 employees and had revenues in
2006 of approximately $8 million."
"The acquisition of Sangtec immediately brings Cepheid three key strategic
benefits. First, Sangtec currently has a relatively complete line of products
for potential use in managing infections of immunocompromised patients. Second,
Sangtec has a very strong R&D team experienced in developing real time PCR based
products which will enable Cepheid to more expeditiously expand its clinical
test product menu. Third, Sangtec has an accomplished manufacturing organization
noted for its ability to produce high quality products. This will provide
Cepheid with an established quality reagent manufacturing base in Europe."
"On a consolidated basis, we currently expect our 2007 total revenues to be in
the range of $112 million to $120 million, with product sales to be in the range
of $100 million to $105 million. We expect our 2007 net loss, not including the
effect of stock compensation expense which is currently estimated at $7 million
and any amortization expense arising from our recently announced acquisition, to
be in the range of $8 million to $11 million or $0.14 to $0.20 per share based
on expected weighted average shares outstanding of 55.6 million. We expect our
2007 net loss, when including the effect of stock compensation expense but not
any amortization expense arising from our recently announced acquisition, to be
in the range of $15 million to $18 million or $0.27 to $0.32 per share based on
expected weighted average shares outstanding of 55.6 million. We expect our
quarterly net income to show a definitive trend towards profitability in the
second half of 2007 based upon successful introduction of our Xpert EV and Xpert
MRSA IVD tests in the U.S. market. We expect to achieve positive operating cash
flow by the end of 2007 and to be profitable for the entire year of 2008."
"As of December 31, 2006, the Company had $94.9 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 800-218-4007 (domestic) or 303-262-2125
(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 February 22, 2008. A replay of the conference call will
be available at 800-405-2236 (domestic) or 303-590-3000 (international) through
March 1, 2007; the conference ID is 11083844. 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 FDA
approvals, 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, potential benefits of the recent
Sangtec acquisition, 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 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; our success in increasing
direct sales; the performance and market acceptance of new products; sufficient
customer demand for new products; the Company's 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, including the operations and product lines of the
acquired businesses; the ability of Cepheid to retain and motivate key employees
of acquired businesses, particularly research and development personnel;
incurrence of unexpected liabilities in connection with 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 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 UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues:
Instrument sales $ 6,882 $ 6,342 $ 22,737 $ 28,263
Reagent and disposable sales 14,721 15,905 59,666 52,177
---------- ---------- ---------- ----------
Total product sales 21,603 22,247 82,403 80,440
Contract revenues 1,638 850 3,913 3,062
Grant and government sponsored research
revenue 341 551 1,036 1,508
---------- ---------- ---------- ----------
Total revenues 23,582 23,648 87,352 85,010
---------- ---------- ---------- ----------
Costs and operating expenses:
Cost of product sales 12,443 12,614 48,800 46,232
Collaboration profit sharing 3,507 4,371 14,974 14,483
Research and development 6,682 5,164 23,886 18,961
In-process research and development - - 139 -
Selling, general and administrative 7,257 4,791 26,470 18,901
Expense for patent related matter 3,350 - 3,350 -
---------- ---------- ---------- ----------
Total costs and operating expenses 33,239 26,940 117,619 98,577
---------- ---------- ---------- ----------
Loss from operations (9,657) (3,292) (30,267) (13,567)
Other income (expense), net 1,356 53 4,282 (27)
---------- ---------- ---------- ----------
Net loss $ (8,301) $ (3,239) $ (25,985) $ (13,594)
========== ========== ========== ==========
Basic and diluted net loss per share $ (0.15) $ (0.08) $ (0.50) $ (0.32)
========== ========== ========== ==========
Shares used in computing basic and
diluted net loss per share 54,930 42,684 52,325 42,494
CEPHEID
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(in thousands)
DECEMBER 31,
------------------------
2006 2005
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 17,186 $ 16,072
Marketable securities 77,750 21,150
Accounts receivable 15,246 13,976
Inventory 10,240 7,989
Prepaid expenses and other current assets 1,390 583
---------- ----------
Total current assets 121,812 59,770
Property and equipment, net 14,097 13,000
Restricted cash 661 661
Other non-current assets 666 -
Intangible assets, net 30,425 29,757
---------- ----------
Total assets $ 167,661 $ 103,188
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,977 $ 9,293
Accrued compensation 3,319 3,191
Accrued royalties 3,516 3,115
Accrued collaboration profit sharing 3,497 4,371
Accrued other liabilities 4,107 2,441
Accrued expense for patent-related matter 3,350 -
Current portion of deferred revenue 3,913 2,963
Current portion of license fees payable 447 8,538
Current portion of equipment financing 313 2,297
Current portion of note payable 11 -
Line of credit - 4,000
---------- ----------
Total current liabilities 31,450 40,209
Long-term portion of deferred revenue 2,663 4,402
Long-term portion of license fees payable - 387
Long-term portion of equipment financing 3 2,052
Long-term portion of note payable 41 -
Deferred rent 798 735
---------- ----------
Total liabilities 34,955 47,785
---------- ----------
Commitments and contingencies
Shareholders' equity:
Preferred stock - -
Common stock 251,132 155,347
Additional paid-in capital 15,065 7,518
Accumulated other comprehensive income (loss) (5) 39
Accumulated deficit (133,486) (107,501)
---------- ----------
Total shareholders' equity 132,706 55,403
---------- ----------
Total liabilities and shareholders' equity $ 167,661 $ 103,188
========== ==========