Recently, Cepheid (CPHD) and Novartis (NVS) entered into a collaboration agreement to commercialize a test for monitoring the BCR-ABL gene in patients diagnosed with Philadelphia chromosome-positive chronic myelogenous leukemia (Ph+ CML). The test is approved in Europe and has been available outside the US since 2006. Successful commercialization of the test in the US is expected to boost the company’s revenues going forward.
Subsequent to the agreement with Novartis, the commercialization of the BCR-ABL test in the US will be stepped up as Novartis will finance the clinical studies and other developmental expenses. Cepheid will receive $5 million in an upfront payment, in addition to $3 million of milestone payments for the next year. The two companies will also work toward developing other diagnostic tests.
Cepheid’s portfolio consists of several tests, many of which have been witnessing greater acceptance. During the last quarter the company witnessed strong growth in the Xpert C. difficile test; a molecular diagnostic test to detect the bacterium that causes Clostridium difficile infection (CDI). Customer adoption has been quite satisfactory with close to 40% of the US installed base currently using this test, compared to 30% in the previous quarter.
Following the success of the C. difficile test, it has become the second biggest test in Cepheid’s portfolio (behind MRSA surveillance) with multimillion-dollar revenue contribution each quarter. The company has captured more than 60% of the C.difficile market at present.
We also note that Cepheid’s MRSA surveillance has been steadily growing and has maintained sequential growth over the past quarters since 2007. With these two tests Cepheid had a strong position in the healthcare-associated infections (HAI) market. The HAI test portfolio was strengthened further following the US Food and Drug Administration (FDA) approval of Xpert SA Nasal Complete in June 2010. It is designed for the simultaneous detection and differentiation of both Staphylococcus aureus (SA) and Methicillin-resistant Staphylococcus aureus (MRSA) colonization in less than one hour.
We are currently Neutral on the Cepheid.
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