Cepheid Incurs Loss as Costs Rise - Analyst Blog
April 20 2012 - 5:15AM
Zacks
Cepheid (CPHD)
reported a net loss of $5.5 million or 8 cents per share in the
first quarter of fiscal 2012, in contrast to net income of $0.5
million or earnings per share (“EPS”) of 1 cent in the year-ago
quarter. After taking into account certain tax benefits and
amortization expense, the adjusted figure came in at a of loss of
10 cents, much wider than the Zacks Consensus Estimate of a loss of
2 cents and worse than adjusted EPS of 2 cents in the first quarter
of the previous fiscal.
Revenues during the quarter
increased 28% year over year to $77.3 million, in line with the
Zacks Consensus Estimate. The upside was driven by 33% growth at
the Clinical segment attributable to strong sales of reagents and
systems.
Among the different segments, the
Clinical segment consisting of Clinical Systems (up 8% year over
year to $12.5 million) and Clinical Reagents (up 41% to $54.4
million) contributed about 86.5% of the total sales during the
quarter. Cepheid’s Non-Clinical business increased 13% year over
year to $8.4 million. Product sales from North America and the
international market recorded a respective year-over-year increase
of 24% (to $52.4 million) and 49% (to $22.9 million).
Gross margin on product sales
dropped to 53% in the reported quarter from 56% in the year-ago
period. Operating expenses amounted to $47.7 million, up 46% year
over year, driven by higher research and development (62.8%
annually to $22.1 million), sales and marketing (26.8% to $14.5
million), and general and administrative expenses (44.8% to $11.1
million). The company reported $7.7 million as loss from operations
compared with an income of $1.16 million in the year-ago
period.
The performance in the quarter
suffered from escalating costs due to a scaling up of manufacturing
operations and higher-than-forecast investments for the completion
of the CT/NG clinical trial. However, the company is taking the
necessary steps to control its cost structure and remains confident
of returning to profitability in the second quarter.
Cepheid made a placement of 122
GeneXpert systems in the quarter in its commercial business. The
company’s High Burden Developing Country ("HBDC") Program continues
to gain traction with 151 system placements (181 in the fourth
quarter, 141 in the third quarter and 38 in the second quarter).
Including the HBDC systems, a cumulative 3,079 systems have
been placed worldwide as of March 31, 2012.
Outlook
While the revenue outlook for 2012
remained unchanged at $333–$347 million, the EPS guidance was
lowered to 12−17 cents from the previous level of 17−24 cents. The
current Zacks Consensus Estimate of $341 million in revenues is
within the company’s guidance range but the EPS consensus of 22
cents is way above the company estimates.
Recommendation
Rising expenses have marred the
top-line gains for Cepheid this quarter. Besides, the competitive
landscape is tough with the presence of players such as
Myriad Genetics (MYGN) and Qiagen
(QGEN), among others. However, with a broad portfolio of tests,
Cepheid is one of the leading players in the healthcare associated
infection (“HAI”) market. The company is working on test menu
expansion to further expand system placements.
We have an Outperform
recommendation for Cepheid. The stock retains a Zacks #1 Rank
(Strong Buy) in the short term.
CEPHEID INC (CPHD): Free Stock Analysis Report
MYRIAD GENETICS (MYGN): Free Stock Analysis Report
QIAGEN NV (QGEN): Free Stock Analysis Report
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