Cepheid Reports Fourth Quarter and Full Year 2011 Results
Record GeneXpert® System Placements Contribute to 39% Growth in Clinical Business

SUNNYVALE, Calif., Jan. 26, 2012 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the fourth quarter of 2011 of $80.1 million.  Net loss was $1.6 million, or $(0.03) per share, which compares to revenue of $58.7 million and net income of $1.3 million, or $0.02 per diluted share, in the fourth quarter of 2010.  As anticipated, the fourth quarter net loss reflected a one-time, non-cash charge to cost of sales of $5.4 million, or $0.08 per share, associated with the termination of a patent license.

Excluding stock compensation expenses, the non-cash charge of $5.4 million associated with the termination of a patent license, and amortization of acquired intangibles, non-GAAP net income for the fourth quarter of 2011 was $9.4 million, or $0.14 per share.  This compares to a non-GAAP net income of $6.1 million, or $0.09 per share, in the fourth quarter of 2010.

Fiscal 2011 Overview

For the year ended December 31, 2011, Cepheid reported revenue of $277.6 million which compares to revenue of $212.5 million in 2010.  Net income for the year was $2.6 million, or $0.04 per diluted share, which compares to a net loss of $5.9 million, or $(0.10) per share, in 2010.  Excluding stock compensation expenses, the non-cash charge of $5.4 million associated with the termination of a patent license, and amortization of acquired intangibles, non-GAAP net income for the year was $29.6 million, or $0.44 per share.  This compares to a non-GAAP net income of $12.5 million, or $0.20 per share, for the full year 2010.

"GeneXpert system placements continued at a very strong pace in the fourth quarter contributing to a record number of placements during 2011, in both our commercial and High Burden Developing Country programs," said John Bishop, Cepheid's Chief Executive Officer.  "The demand for our GeneXpert systems has continued to grow in spite of continuing tight capital availability in the US and Europe.  In 2012, we will continue to invest aggressively in Xpert® test menu expansion to enable the benefits of our system to be realized in broader segments of the market. We expect to further extend our technology leadership and strong growth momentum in the quarters and years ahead."

Operational Overview

  • Fourth quarter of 2011 Clinical sales of $68.9 million grew 39% from $49.5 million in the fourth quarter of 2010, and total fourth quarter of 2011 product sales of $76.9 million grew 37% from the same quarter a year ago.  For the year ended December 31, 2011, total Clinical sales of $236.0 million grew 36% from $173.8 million reported for the same period a year ago.  
  • By industry, product sales were, in millions:



Three Months Ended December 31,


Full Year Ended December 31,


2011


2010


Change


2011


2010


Change













Clinical Systems

$             19.9


$          12.7


58%


$           58.6


$             42.5


38%

Clinical Reagents

49.0


36.8


33%


177.4


131.3


35%

   Total Clinical

68.9


49.5


39%


236.0


173.8


36%

Non-Clinical

8.0


6.7


19%


29.5


33.1


-11%

Total Product Sales

$             76.9


$          56.2


37%


$         265.5


$           206.9


28%
















  • By geography, product sales were, in millions:







































Three Months Ended December 31,


Full Year Ended December 31,


2011


2010


Change


2011


2010


Change

North America












    Clinical

$             46.4


$          38.5


21%


$         167.9


$           137.3


22%

    Other

7.2


5.4


33%


25.0


27.3


-8%

Total North America

53.6


43.9


22%


192.9


164.6


17%













International












    Clinical

22.5


11.0


105%


68.1


36.5


87%

    Other

0.8


1.3


-38%


4.5


5.8


-22%

Total International

23.3


12.3


89%


72.6


42.3


72%













Total Product Sales

$             76.9


$          56.2


37%


$         265.5


$           206.9


28%




  • During the fourth quarter of 2011, Cepheid placed a total of 175 GeneXpert systems in its commercial Clinical business.  Additionally, the Company placed a total of 181 GeneXpert systems as part of its High Burden Developing Country (HBDC) program.  For the year ended December 31, 2011, Cepheid placed a total of 565 GeneXpert systems in its commercial Clinical business and an additional 418 GeneXpert systems as part of its HBDC program.  As of December 31, 2011, a cumulative total of 2,843 GeneXpert systems have been placed worldwide.
  • Cash and cash equivalents were $115.0 million as of December 31, 2011.
  • DSO was 40 days.

Business Outlook

For the fiscal year ending December 31, 2012, the Company expects:

  • Total revenue to be in the range of $333 to $347 million;
  • Net income in the range of $0.17 to $0.24 per share;  
  • Non-GAAP net income in the range of $0.55 to $0.60 per share.  

Expected non-GAAP net income excludes approximately $26 million related to stock compensation expense, approximately $2 million related to the amortization of acquired intangibles, and up to a $1.9 million non-cash tax benefit relating to a potential change to our international tax and legal entity structure.  The fully diluted share count for the year is expected to be between 70 and 71 million.

Accessing Cepheid's Fourth Quarter and Full Year 2011 Results Conference Call

The Company will host a management presentation at 2:00 p.m. Pacific Time on Thursday, January 26, 2012, 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 and investors may also listen to the live teleconference call by dialing (866) 713-8395 or (617) 597-5309, and entering participant code 42214013.  A replay will be available for seven days beginning at 4:00 p.m. Pacific Time.  Access numbers for this replay are (888) 286-8010 or (617) 801-6888, with passcode 57636855.

About Cepheid

Based in Sunnyvale, Calif., Cepheid (Nasdaq: CPHD) is a leading molecular diagnostics company that is dedicated to improving healthcare by developing, manufacturing, and marketing accurate yet easy-to-use molecular systems and tests.  By automating highly complex and time-consuming manual procedures, the Company's solutions deliver a better way for institutions of any size to perform sophisticated genetic testing for organisms and genetic-based diseases.  Through its strong molecular biology capabilities, the Company is focusing on those applications where accurate, rapid, and actionable test results are needed most, such as managing infectious diseases and cancer. For more information, visit http://www.cepheid.com.

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP financial information with non-GAAP measures that do not include employee share-based compensation expense, a non-cash charge associated with the termination of a patent license and amortization of purchased intangible assets.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP.   The Company's management uses the non-GAAP information internally to evaluate its ongoing business, continuing operational performance and cash requirements, and believes these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's cash requirements and additional insight into the underlying operating results and the Company's ongoing performance in the ordinary course of its operations.

These non-GAAP measures may be different from non-GAAP measures used by other companies.  In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.  The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

As described above, the Company excludes the following items from one or more of its non-GAAP measures when applicable:

Employee stock-based compensation expense. These expenses consist primarily of expenses for employee stock options and employee restricted stock under ASC 718 (formerly SFAS 123(R)).  The Company excludes employee stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results in the period incurred.  Further, as the Company applies ASC 718, it believes that it is useful to investors to understand the impact of the application of ASC 718 on its results of operations.

Termination of License.  The Company incurred a one-time expense of $5.4 million in the fourth quarter of 2011 related to the acceleration of the remaining amortization of the original up-front license fee related to the Roche license.  The Company excludes this item because it is one-time and non-cash in nature and not reflective of ongoing operating results in the period incurred.

Amortization of purchased intangible assets.  The Company incurs amortization of purchased intangible assets in connection with acquisitions.  The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred.  These amounts arise from the Company's prior acquisitions and have no direct correlation to the operation of the Company's business.

Forward-Looking Statements

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 potential growth, future revenues and future net income/loss, including on a non-GAAP basis, and test menu expansion. 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 success in increasing direct sales and the effectiveness of our sales personnel; the performance and market acceptance of new products; sufficient customer demand; our ability to develop new products and complete clinical trials successfully in a timely manner for new products; uncertainties related to the FDA regulatory and European regulatory processes; the level of testing at clinical customer sites, including for Healthcare Associated Infections (HAIs); the Company's ability to successfully introduce and sell products in clinical markets other than HAIs; the rate of environmental biothreat testing conducted by the USPS, which will affect the amount of consumable products sold to the USPS; variability in systems placements and reagent pull-through in the Company's HBDC program; unforeseen supply, development and manufacturing problems; the potential need for additional intellectual property licenses for tests and other products and the terms of such licenses; lengthy sales cycles in certain markets; the Company's reliance on distributors in some regions to market, sell and support its products; the occurrence of unforeseen expenditures, acquisitions or other transactions; costs associated with litigation; the impact of competitive products and pricing; the Company's 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, its most recent Quarterly Report on Form 10-Q, 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 TABLES FOLLOW



CEPHEID

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



Three Months Ended December 31,


Years Ended December 31,


2011


2010


2011


2010









Revenues:








System sales

$       20,371


$       13,200


$       61,948


$       46,416

Reagent and disposable sales

56,576


42,969


203,576


160,460

Total product sales

76,947


56,169


265,524


206,876

Other revenues

3,167


2,557


12,051


5,592

Total revenues

80,114


58,726


277,575


212,468

Costs and operating expenses:








Cost of product sales

38,632


26,570


122,840


105,135

Collaboration profit sharing

1,582


1,093


4,863


6,806

Research and development

16,650


11,666


59,362


42,503

Sales and marketing

14,490


10,626


50,691


38,840

General and administrative

10,153


6,932


36,004


24,528

Total costs and operating expenses

81,507


56,887


273,760


217,812

Income (loss) from operations

(1,393)


1,839


3,815


(5,344)

Other expense, net

(506)


(346)


(1,143)


(992)

Income (loss) before income taxes

(1,899)


1,493


2,672


(6,336)

Benefit from (provision for) income taxes

250


(148)


(45)


419

Net income (loss)

$       (1,649)


$         1,345


$         2,627


$       (5,917)









Basic net income (loss) per share

$         (0.03)


$           0.02


$           0.04


$         (0.10)









Diluted net income (loss) per share

$         (0.03)


$           0.02


$           0.04


$         (0.10)









Shares used in computing basic net income (loss) per share

64,113


60,413


62,735


59,712









Shares used in computing diluted net income (loss) per share

64,113


63,372


66,750


59,712















CEPHEID


CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands)



December 31, 2011


December 31, 2010





ASSETS




Current assets:




Cash and cash equivalents

$          115,008


$              79,538

Accounts receivable, net

35,375


28,010

Inventory

62,239


37,598

Prepaid expenses and other current assets

5,245


4,138

Total current assets

217,867


149,284

Property and equipment, net

35,833


27,438

Other non-current assets

730


607

Intangible assets, net

13,795


24,688

Goodwill

18,445


18,594

Total assets

$          286,670


$            220,611





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$            32,167


$              21,957

Accrued compensation

17,928


12,594

Accrued royalties

8,357


7,994

Accrued and other liabilities

3,086


1,288

Current portion of deferred revenue

8,176


8,207

Current portion of notes payable

-


1,679

Total current liabilities

69,714


53,719

Long-term portion of deferred revenue

2,003


4,057

Notes payable, less current portion

-


4,991

Other liabilities

3,120


4,182

Total liabilities

74,837


66,949

Shareholders' equity:




Common stock

324,211


288,387

Additional paid-in capital

93,144


72,731

Accumulated other comprehensive income

33


726

Accumulated deficit

(205,555)


(208,182)

Total shareholders' equity

211,833


153,662

Total liabilities and shareholders' equity

$          286,670


$            220,611














CEPHEID


CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)


Years Ended December 31,


2011


2010

Cash flows from operating activities:




Net income (loss)

$          2,627


$        (5,917)

Adjustments to reconcile net income (loss) to net cash used in operating activities:




Depreciation and amortization of property and equipment

10,298


9,326

Amortization of intangible assets

6,523


6,966

Amortization of terminated patent license

5,372


-

Stock-based compensation related to employees and consulting services rendered

19,768


16,615

Write-offs of other intangible assets acquired in acquisitions

-


271

Unrealized gain on auction rate securities

-


(1,714)

Unrealized loss on put option

-


1,844

Deferred rent

18


85

Changes in operating assets and liabilities:




Accounts receivable

(7,830)


(4,394)

Inventory

(23,982)


124

Prepaid expenses and other current assets

(237)


(1,426)

Other non-current assets

(122)


(113)

Accounts payable and other current liabilities

11,347


(5,112)

Accrued compensation

5,334


3,726

Deferred revenue

(2,084)


7,062

Net cash provided by operating activities

27,032


27,343





Cash flows from investing activities:




Capital expenditures

(18,942)


(13,047)

Acquisition of leasehold improvements

-


125

Payments for technology licenses

(1,655)


(1,000)

Cost of acquisitions, net

(296)


(1,300)

Proceeds from the sales of short-term investments

-


24,800

Proceeds from the sale of fixed assets

20


138

Net cash provided by (used in) investing activities

(20,873)


9,716





Cash flows from financing activities:




Net proceeds from the issuance of common shares and exercise of stock options

35,857


15,334

Proceeds from notes payable

-


6,448

Principal payment of bank borrowing

-


(14,618)

Principal payment of notes payable

(6,669)


(618)

Net cash provided by financing activities

29,188


6,546





Effect of exchange rate change on cash

123


147

Net increase in cash and cash equivalents

35,470


43,752

Cash and cash equivalents at beginning of period

79,538


35,786

Cash and cash equivalents at end of period

$      115,008


$        79,538





CEPHEID


RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

(in thousands, except per share data)







Three Months Ended
December 31,


Years Ended
December 31,
























2011


2010


2011


2010


Cost of product sales





$       38,632


$     26,570


$       122,840


$     105,135


 Stock compensation expense




(443)


(687)


(1,684)


(2,522)


 Amortization of terminated patent license



(5,372)


-


(5,372)


-


 Amortization of purchased intangible assets



(347)


(394)


(1,383)


(1,422)


Non-GAAP measure of cost of product sales



$       32,470


$     25,489


$       114,401


$     101,191
















Gross margin on product sales per GAAP



50%


53%


54%


49%


Gross margin on product sales per Non-GAAP



58%


55%


57%


51%
















Operating expenses





$       41,293


$     29,224


$       146,057


$     105,871


 Stock compensation expense




(4,806)


(3,614)


(18,084)


(14,093)


 Amortization of purchased intangible assets



(107)


(78)


(429)


(409)


Non-GAAP measure of operating expenses



$       36,380


$     25,532


$       127,544


$       91,369
















Income (loss) from operations




$       (1,393)


$       1,839


$           3,815


$       (5,344)


 Stock compensation expense




5,249


4,301


19,768


16,615


 Amortization of terminated patent license



5,372


-


5,372


-


 Amortization of purchased intangible assets



454


472


1,812


1,831


Non-GAAP measure of income from operations



$         9,682


$       6,612


$         30,767


$       13,102
















Net income (loss)





$       (1,649)


$       1,345


$           2,627


$       (5,917)


 Stock compensation expense




5,249


4,301


19,768


16,615


 Amortization of terminated patent license



5,372


-


5,372


-


 Amortization of purchased intangible assets



454


472


1,812


1,831


Non-GAAP measure of net income




$         9,426


$       6,118


$         29,579


$       12,529
















Basic net income (loss) per share




$         (0.03)


$         0.02


$             0.04


$         (0.10)


 Stock compensation expense




0.08


0.07


0.32


0.28


 Amortization of terminated patent license



0.09


-


0.08


-


 Amortization of purchased intangible assets



0.01


0.01


0.03


0.03


Non-GAAP measure of net income per share



$           0.15


$         0.10


$             0.47


$           0.21
















Diluted net income (loss) per share




$         (0.03)


$         0.02


$             0.04


$         (0.10)


 Stock compensation expense




0.08


0.06


0.29


0.27


 Amortization of terminated patent license



0.08


-


0.08


-


 Amortization of purchased intangible assets



0.01


0.01


0.03


0.03


Non-GAAP measure of net income per share



$           0.14


$         0.09


$             0.44


$           0.20
















Shares used in computing Non-GAAP basic net income (loss) per share


64,113


60,413


62,735


59,712
















Shares used in computing diluted net income per share


64,113


63,372


66,750


59,712


Incremental shares from the assumed conversion of dilutive stock options


4,480


1,367


878


3,875


Shares used in computing Non-GAAP diluted net income per share


68,593


64,739


67,628


63,587


















































CONTACTS:




For Media Inquiries:

For Investor Inquiries:



Jared Tipton

Cepheid Corporate Communications

Tel: (408) 400 8377

communications@cepheid.com

Jacquie Ross

Cepheid Investor Relations

Tel: (408) 400 8329

investor.relations@cepheid.com






SOURCE Cepheid

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