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FDA Nod for Cepheid's MRSA/SA BC Test

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Cepheid (CPHD) recently gained the U.S. Food and Drug Administration (:FDA) approval for the commercialization of its Xpert MRSA/SA Blood Culture (BC) test. The test, which runs on the company’s flagship GeneXpert System, is already available in Europe.

The Xpert MRSA/SA BC test will be used for examining Methicillin-resistant Staphylococcus aureus (:MRSA) and Staphylococcus aureus (SA, typically methicillin susceptible) in blood culture bottles showing gram-positive cocci in clusters in an hour. The commercialization of Xpert MRSA/SA BC test is expected to improve clinical outcomes for patients who suffer from these bloodstream infections.

Cepheid’s Xpert MRSA/SA BC test can detect and distinguish MRSA and S. aureus within one hour. This is likely to improve clinical results as it will reduce the risk of MRSA transmission in hospitalized patients. Additionally, the rapid detection should lower the probability of spreading the infections in the hospital environment.

The blood culture specimen will be put through Cepheid’s updated Xpert MRSA/SA BC test to detect whether it is infected with MRSA or SA. These bacteria are the leading cause of hospital-acquired sepsis, a life-threatening medical condition. Considering that sepsis is one of the leading causes of death in the U.S., Cepheid’s updated Xpert MRSA/SA BC test has a sizeable market opportunity.

Based on statistics from Centers for Disease Control and Prevention (:CDC), S. aureus (including MRSA) is one of the most widespread central line-associated bloodstream infections, particularly in hospitals. According to an article published in Infect Control Hosp Epidemiol this year, the infection along with coagulase-negative staphylococci (CoNS) account for roughly 24% of all central line infections.

The expansion of the company’s healthcare associated infections (:HAI) portfolio is encouraging. The addressable market should expand for Cepheid on the back of commercialization of the updated Xpert MRSA/SA BC test.

As bloodstream infections are a nationwide health issue, the company will make headway into a lucrative high-volume market. The updated test should also increase Cepheid’s hospital penetration in the U.S.

The company expects to launch a gamut of tests in the U.S. as well as the overseas market in 2013. In our opinion, test menu expansion is a significant growth catalyst for this molecular diagnostic company.

Currently, the stock carries a Zacks Rank #3 (Hold). While we remain on the sidelines for Cepheid, we are positive about Natus Medical Inc. (BABY). The stock carries a Zacks Rank #1 (Strong Buy). CryoLife Inc. (CRY) and Heartware International Inc. (HTWR), carrying a Zacks Rank #2 (Buy), are also worth considering.

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