54% Year-Over-Year Growth in Clinical Reagents Highlights Strong Adoption of GeneXpert System's Expanding Test Menu
SUNNYVALE, Calif., July 30 /PRNewswire-FirstCall/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the second quarter of 2009 of $41.0 million. Net loss was $6.8 million, or $(0.12) per share, which compares to revenue of $42.1 million and a net loss of $7.7 million, or $(0.13) per share, in the second quarter of 2008.
Excluding amortization of purchased intangible assets, stock compensation and restructuring expenses, non-GAAP net loss for the second quarter was $2.2 million, or $(0.04) per share. This compares to a non-GAAP net loss of $3.7 million, or $(0.06) per share, in the second quarter of 2008.
"Our Clinical reagent business demonstrated strong growth as expected, highlighting continued adoption of the GeneXpert System's expanding test menu which now includes six FDA-cleared products in the US and eleven CE-marked products outside the US," said John Bishop, Cepheid's Chief Executive Officer. "Despite the ongoing challenges in the broader economy, 105 GeneXpert Systems were placed during the second quarter, reflecting the unique aspects of the system in ease of use, accuracy of test results and efficient management of scarce and costly healthcare resources."
Operational Overview
- Total product sales of $39.6 million in the second quarter of 2009 compared to $39.0 million in the second quarter of 2008. By industry, product sales were, in millions:
Three Months Ended June 30,
2009 2008 Change
---- ---- ------
Clinical Systems $5.7 $6.6 -14%
Clinical Reagents 21.0 13.7 54%
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Total Clinical 26.7 20.3 32%
Industrial 4.3 3.7 17%
Biothreat 7.8 9.4 -18%
Partner 0.8 5.6 -85%
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Total Product Sales $39.6 $39.0 2%
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- By geography, product sales were, in millions:
Three Months Ended June 30,
2009 2008 Change
---- ---- ------
North America
Clinical $20.2 $15.5 30%
Other 11.2 14.2 -21%
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Total North America 31.4 29.7 6%
International
Clinical 6.5 4.8 36%
Other 1.7 4.5 -62%
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Total International 8.2 9.3 -12%
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Total Product Sales $39.6 $39.0 2%
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- During the quarter, Cepheid installed a total of 105 GeneXpert systems and 585 modules. As of June 30, 2009, a cumulative total of 1,147 GeneXpert systems and 6,128 modules have been placed worldwide.
- GAAP gross margin on product sales was 41% and non-GAAP gross margin on product sales was 44%, which compares to 41% and 42%, respectively, in the second quarter of 2008.
- Cash, cash equivalents and investments, net of associated debt, were $35.1 million as of June 30, 2009.
- DSO was 46 days.
Business Outlook
For the fiscal year ending December 31, 2009, the company expects:
- Total revenue to be in the range of $164 to $170 million;
- Net loss in the range of $(0.43) to $(0.48) per share;
- Non-GAAP net loss in the range of $(0.12) to $(0.18) per share.
The loss per share guidance ranges have each been reduced from Cepheid's previously announced guidance by $0.01 to reflect the patent license amortization adjustment discussed below.
Non-GAAP net loss excludes approximately $16 million related to stock compensation expense, $1 million related to the amortization of acquired intangibles, and $0.7 million related to restructuring expenses.
Patent License Amortization Adjustment
The company capitalizes patent licenses and amortizes them over their estimated useful lives on a straight-line basis. An internal review of our patent license useful lives during the second quarter of 2009 identified that certain patent licenses were being amortized over incorrect useful lives. This error resulted in the understatement of amortization expense over several reporting periods, starting in 2004. In accordance with SAB No. 108, "Financial Statements - Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"), in assessing the identified error, the company considered both the "rollover" approach, which quantifies misstatements originating in the current year statement of operations and the "iron curtain" approach, which quantifies misstatements based on the effects of correcting the misstatements existing in the balance sheet at the end of the reporting period. The company believes the impact of the patent license amortization errors was not material to prior years' statements of operations under the rollover approach. However, under the iron curtain method, the cumulative patent license amortization errors were material to the company's fiscal year 2009 condensed consolidated financial statements and the company has therefore restated the condensed consolidated statement of operations for the three and six month periods ended June 30, 2008, the condensed consolidated statement of cash flows for the six months ended June 30, 2008, and the condensed consolidated balance sheet at December 31, 2008. The company recognized the cumulative effect of the adjustments to assets as of the beginning of the second quarter of fiscal year 2009 and the offsetting adjustment to the opening balance of accumulated deficit for the second quarter of fiscal year 2009. The company recognized the following cumulative adjustment to the second quarter of fiscal year 2009 opening condensed consolidated balance sheet and to the opening December 31, 2008 condensed consolidated balance sheet (in thousands):
June 30, December 31,
2009 2008
---- ----
Decrease in intangible assets, net $(3,320) $(3,141)
Increase in accumulated deficit (3,320) (3,141)
The impact on accumulated deficit by quarter which is caused by an increase in cost of product sales and a corresponding increase in loss from operations and net loss, is comprised of the following amounts (in thousands):
Quarter Ended
-------------
(Unaudited)
March 31 June 30 Sept 30 Dec 31 Total
-------- ------- ------- ------ -----
Quarter Ended June 30,
2009 Beginning
Balance Adjustment: $(3,320)
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Increase in loss from operations, net loss, and increase in cost of
product sales:
Year Ended 2009 $(179) $- $- $- $(179)
Year Ended 2008 (168) (169) (169) (168) (674)
Year Ended 2007 (171) (168) (169) (169) (677)
Prior to Year Ended 2007 - - - - (1,790)
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$(3,320)
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Net loss per share did not change for the three and six months ended June 30, 2008 due to the patent license amortization error. In addition, net cash provided by operations in the condensed consolidated statement of cash flows for the six months ended June 30, 2008 did not change because the increase in the net loss of $338,000 was offset by the increase of $338,000 in the amortization of intangible assets.
As the errors were not material to prior years' financial statements when evaluated under the "rollover" approach but were material to the 2009 condensed consolidated financial statements when evaluated under the "iron curtain" method, the company will correct the previously issued financial statements referenced above prospectively. These financial statements to be corrected prospectively will be included in the June 30, 2009 Form 10-Q, the September 30, 2009 Form 10-Q, and the 2009 Form 10-K when they are filed.
The company's historical results since the first quarter of 2007, reflecting the above adjustments, are available on the investor relations pages of the company's website, at www.cepheid.com/investors.
Accessing Cepheid's Q209 Results Conference Call
The company will host a management presentation at 2:00 p.m. Pacific Time on Thursday, July 30, 2009 to discuss the results. To access the live webcast, please visit Cepheid's website at www.cepheid.com/investors at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. A replay of the webcast will be available shortly following the call and will remain available for at least 90 days.
Interested participants may also listen to the live teleconference call by dialing (866) 804-6927 (domestic) or (857) 350-1673 (international), and entering participant code 15214327. A replay will be available for seven days beginning at 4 p.m. Pacific Time.
