8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 1, 2007

CEPHEID

(Exact name of Registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation) 000-30755
(Commission file number) 77-0441625
(I.R.S. Employer Identification
No.)

904 Caribbean Drive, Sunnyvale, CA	94089
(Address of principal executive offices)	(Zip Code)

(408) 541-4191

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2 below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition.
	Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
Exhibit Index
EXHIBIT 99.01

Item 2.02 Results of Operations and Financial Condition.

     (a)

     The information in this Item 2.02 and the exhibit attached hereto are being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing.

     On November 1, 2007, Cepheid issued a press release announcing its financial results for the quarter ended September 30, 2007 and certain other information. The press release is attached to this report as Exhibit 99.01.

     In the press release and during a conference call and webcast regarding Cepheid’s quarterly results, Cepheid supplemented its reported GAAP financials with non-GAAP measures. Cepheid uses the non-GAAP information internally to evaluate its continuing operational performance and its 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. However, non-GAAP measures are not stated in accordance with, should not be considered in isolation from, and are not a substitute for GAAP measures, and Cepheid’s non-GAAP measures may be different from similarly titled non-GAAP measures reported by other companies. A reconciliation of GAAP to non-GAAP results is provided in the tables immediately following the GAAP Consolidated Financial Statements included in the press release.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

     (b)

     On November 1, 2007, Cepheid announced that John R. Sluis, its Senior Vice President of Finance and Chief Financial Officer, intends to retire. Cepheid and Mr. Sluis intend that Mr. Sluis will continue in his current position during a transitional period through December 31, 2007. Cepheid is currently working with an outside executive search firm to identify a new chief financial officer.

Item 9.01 Financial Statements and Exhibits.

     (d)     Exhibits.

Exhibit No.	Exhibit Title
99.01	Press release dated November 1, 2007.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Cepheid
Date: November 1, 2007	By:	/s/ John L. Bishop
		Name:	John L. Bishop
		Title:	Chief Executive Officer

Exhibit Index

Exhibit No.	Exhibit Title
99.01	Press release dated November 1, 2007.

EX-99.01

Exhibit 99.01

Cepheid Reports Third Quarter 2007 Results

Realization of healthcare acquired infections market drives third quarter revenue growth

SUNNYVALE, Calif., November 1, 2007 — Cepheid (NASDAQ: CPHD) today announced financial results for the third quarter ended September 30, 2007. Key results for the third quarter 2007 include:

• Total revenues of $36.3 million, a 53 percent increase from $23.8 million in the third quarter of 2006.

• Clinical product sales of $20.7 million, a 258 percent increase from $5.8 million in the third quarter of 2006.

• Total product sales of $34.0 million, a 50 percent increase from $22.6 million in the third quarter of 2006.

• 1,376 diagnostic modules of the GeneXpert^® System installed in U.S. accounts as of September 30, 2007, an increase of 705 modules, or 105 percent, over the number of modules installed in accounts at the close of the second quarter of 2007.

• Gross margins on product sales, excluding stock compensation expense and the amortization of acquired intangibles, of 43 percent compared to 42 percent in the third quarter of 2006.

• Net loss, excluding stock compensation expense and the amortization of acquired intangibles, of $1.5 million, or $0.03 per share, compared to $2.4 million, or $0.04 per share, in the third quarter 2006.

Total revenues of $36.3 million for the third quarter of 2007 included $34.0 million of product sales and $2.3 million from contracts, grants and research revenue. Other revenue predominantly consists of reimbursement for research and development collaborations, including partnerships to develop assays for Tuberculosis with FIND and hemostasis with Instrumentation Laboratories.

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Total product sales for the third quarter ended September 30, 2007 increased 50 percent to $34.0 million from $22.6 million for the third quarter 2006. The increase in product sales for the third quarter 2007 reflects a 258 percent increase in clinical product sales, which more than offset a 26 percent decrease in biothreat sales and an 8 percent decrease in industrial sales, compared to the third quarter of 2006.

Product Sales by Market (millions)

		Q3 2007		Q3 2006
	Q3 2007	Percent of	Q3 2006	Percent of Product
	Product Sales	Product Sales	Product Sales	Sales
Clinical	$20.7	61	$5.8	26
Biothreat	$8.9	26	$12.0	53
Industrial	$4.4	13	$4.8	21

The increase in clinical sales was driven by market adoption of both the GeneXpert^® System and the Company’s menu of available tests, specifically the Xpert^™ MRSA product that provides rapid detection of Methicillin-resistant Staphylococcus aureus (MRSA). The Company focused on GeneXpert System installations during the third quarter, and expects test sales volumes to increase as accounts become fully operational. The U.S. Food and Drug Administration cleared Cepheid’s Xpert MRSA test in April 2007.

As of September 30, 2007, Cepheid has installed 1,786 diagnostic GeneXpert modules in Europe and the U.S., which is an increase of 800, or 81 percent, from the second quarter of 2007. Providing unique account scalability, the GeneXpert System is presently configurable with anywhere from one to 16 modules. The new Infinity Series of GeneXpert Systems, currently in development, will extend this capability up to 72 modules. This configuration flexibility and volume capacity has been particularly attractive to large hospitals seeking on-demand test capability as they have made time-critical, active MRSA surveillance a priority.

Instrument and Reagent Sales Mix (millions)

	Q3 2007	Q3 2007	Q3 2006	Q3 2006
	Product	Percent of	Product	Percent of
	Sales	Product Sales	Sales	Product Sales
Instruments	$15.9	47	$7.3	32
Reagents & Disposables	$18.1	53	$15.3	68

The third quarter 2007 product sales illustrate the overall shift of Cepheid’s business towards the substantially larger, higher-margin clinical market, away from the historically less consistent biothreat and industrial markets. The industrial market segment is now primarily supported by distributors, which results in a lower average selling price for products realized by the company, as compared to prices realized through direct sales. This was the primary driver for the decrease in product sales for the industrial market. The decrease in third quarter 2007 biothreat sales compared to the prior year quarter was

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the result of a planned decrease in the purchase price of Anthrax test cartridges to the United States Postal Service (USPS) in conjunction with a five-year contract and a shift in distribution of the quarterly purchase volumes taken during the 2007 USPS fiscal year.

GAAP-based gross margin on product sales was 41 percent for the third quarter of 2007, which is the same as the third quarter of 2006. Gross margin on product sales, without stock compensation expense and the amortization of acquired intangibles, was 43 percent for the third quarter of 2007, compared to 42 percent for the third quarter of 2006.

GAAP net loss for the third quarter of 2007 was approximately $4.7 million, or $0.09 per share, as compared to a net loss of approximately $4.0 million, or $0.07 per share, for the third quarter 2006. Net loss for the third quarter of 2007, adjusted for stock compensation expense and the amortization of acquired intangibles, was $1.5 million, or $0.03 per share, as compared to $2.4 million, or $0.04 per share, for the third quarter of 2006. See the attached table for a reconciliation of GAAP and Non-GAAP amounts.

“Our third quarter results were driven by recognition of the value that the GeneXpert System brings to laboratories of all sizes in its ability to provide clinically useful results on an on-demand basis, twenty four hours a day, seven days a week. We believe this attribute to be a key benefit to hospitals large and small in advancing the ability to reduce Healthcare Acquired Infection (HAI),” said John Bishop, Cepheid’s Chief Executive Officer. “As has been recently noted in the press nationwide, HAI is a significant problem. Unfortunately, the HAI problem also involves infections resulting from multiple organisms in addition to MRSA. We are actively developing additional tests for vancomycin-resistant enterococcus (VRE) and C. difficile. In addition, we expect the ability to more effectively combat community-acquired MRSA will be better enabled by the unique scalability and ability of the GeneXpert System to function in both highly complex laboratories and moderately complex settings such as hospital emergency departments. Based on our success, and the rapidly developing market, we are continuing to accelerate our investment in sales and marketing infrastructure.”

Third Quarter 2007 and Recent Business Highlights

In the third quarter 2007, Cepheid received two Veterans Affairs Federal Supply Service Schedule (VA/FSS) contracts. The contracts are expected to streamline the acquisition process and ensure VA hospitals and other federal agencies can purchase GeneXpert Systems and Xpert MRSA test kits without individual negotiations. To date, Cepheid has already won competitive contracts for MRSA testing in 77 out of approximately 97 VA hospitals looking to implement PCR-based MRSA surveillance, which includes a gain of 51 accounts in the third quarter.

As noted, Cepheid is continuing to accelerate expansion of its U.S. sales and field service support organization based on the rapidly developing HAI market. The Company plans to bring the total sales and field service support personnel from 28 to 43 by the first quarter of 2008. Recruiting is currently underway for various positions in sales and marketing.

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During the third quarter 2007, Northrop Grumman signed a five-year agreement with Cepheid to purchase up to $200 million in Bacillus anthracis (anthrax) test cartridges and associated materials for use in Biohazard Detection Systems installed at USPS mail processing centers nationwide. Under the agreement, the annual purchase quantity of anthrax tests will be determined prior to initiation of the USPS fiscal year, October 1 through September 30. The Company has received a purchase order for approximately two million anthrax test cartridges for the USPS fiscal 2008.

Outlook for Year-End 2007

Based upon market demand for the GeneXpert System and associated Xpert tests, the Company is raising its forward-looking financial guidance for product sales and resulting total revenues for 2007.

• Product sales are expected to be in the range of $112 million to $114 million.

• Other revenues are expected to be in the range of $12 million to $13 million.

• The Company expects 2007 total revenues to be in the range of $124 million to $127 million.

• The GAAP net loss for 2007, including the effect of stock compensation expense and the amortization of acquired intangibles, is expected to be in the range of $19 million to $22 million, or $0.34 to $0.40 per share based on expected weighted average shares outstanding of 55.4 million.

• In view of continuing incremental increases in sales and marketing expenditures, the net loss, not including the effect of stock compensation expense and the amortization of acquired intangibles for 2007, is expected to remain in the range of $8 million to $11 million or $0.14 to $0.20 per share based on the same number of weighted average shares outstanding.

• The Company has been demonstrating a trend towards profitability and currently expects to be profitable on a full-year basis for 2008, excluding stock compensation expense and the amortization of acquired intangibles.

Chief Financial Officer John Sluis to Retire at the End of the Year

Cepheid also announced today that Senior Vice President and Chief Financial Officer John Sluis will retire on December 31, 2007. Sluis will remain as a consultant for one year following his retirement. The Company is currently working with an outside executive search firm relative to identifying a successor candidate.

“John has been a valuable asset to the organization and I cannot thank him enough for his contributions to Cepheid. All of us at Cepheid wish him a long and happy retirement,” said John Bishop, Cepheid’s president and CEO. “As previously noted, John will remain as a consultant through 2008 to ensure a seamless transition with his successor.”

John Sluis joined Cepheid as Vice President, Finance and Chief Financial Officer in July 2002. Prior to joining Cepheid, Mr. Sluis was Senior Vice President and Chief Financial Officer of Vysis, a genomic disease management company from June 2000 through

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February 2002. Before joining Vysis, he held various senior financial management positions at Sanofi Diagnostics, Gen-Probe, and American Hospital Supply Corporation.

Conference Call Information

Cepheid’s CEO, John Bishop, and Senior V.P. and CFO, John Sluis will host the conference call today at 4:30 pm Eastern Time to discuss Cepheid’s financial results and business highlights. Interested participants and investors may access the teleconference call by dialing 866-713-8564 (U.S./Canada) or 617-597-5312 (international), participant code 54436442. A telephonic replay will be available for seven days beginning at 6:30 p.m. Eastern Time today. Access numbers for this replay are 888-286-8010 (U.S./Canada) and 617-801-6888 (international); participant code 20626524.

This news release contains certain non-GAAP financial measures. A reconciliation of these and other measures to the comparable GAAP measures is included in this release and in the attached financial tables.

The webcast of the call can be accessed on the Investor section of Cepheid’s Web site at www.cepheid.com. Web participants are encouraged to go to the Web site at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software. After the live webcast, a replay will remain available in the Investors section of Cepheid’s Web site for 90 days.

About Cepheid

Cepheid (Nasdaq: CPHD), based in Sunnyvale, Calif., is a molecular diagnostics company that develops, manufactures, and markets fully-integrated systems for genetic analysis in the clinical, industrial and biothreat markets. The Company’s systems enable rapid, sophisticated genetic testing for organisms and genetic-based diseases by automating otherwise complex manual laboratory procedures. Cepheid’s easy-to-use systems integrate a number of complicated and time-intensive steps, including sample preparation, DNA amplification and detection, which enable the analysis of complex biological samples in its proprietary test cartridges. Through its strong molecular biology capabilities, the Company is focusing on those applications where rapid molecular testing is particularly important, such as identifying infectious disease and cancer in the clinical market; food, agricultural, and environmental testing in the industrial market; and identifying bio-terrorism agents in the biothreat market. See http://www.cepheid.com for more information.

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 in clinical products sales, the status of government funding, future product releases, future revenues and demand for certain test products, future net losses and profitability and other future operating results. 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

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uncertainties such as those relating to: our success in increasing direct sales and marketing organization, and the effectiveness of any new sales personnel the Company hires; the performance and market acceptance of new products; sufficient customer demand; our ability to develop and complete clinical trials successfully in a timely manner for new products to be marketed in clinical markets; uncertainties related to the FDA regulatory and European regulatory processes; the scope of actual USPS funding in the future; the rate of environmental testing using the BDS conducted by the USPS, which will affect the amount of consumable products sold; the fact that future levels of government funding are inherently uncertain; unforeseen development and manufacturing problems; the potential need for additional licenses for new 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; the impact of acquisitions; the impact of competitive products and pricing; our 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 for 2006 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 STATEMENTS FOLLOW)

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CEPHEID

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF
OPERATIONS
(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Revenues:
Instrument sales	$	15,911		$	7,287		$	32,142		$	15,855
Reagent and disposable sales		18,105			15,360			47,525			44,945
Total product sales		34,016			22,647			79,667			60,800
Contract revenues		2,024			987			5,808			2,275
Grant and government sponsored research revenue		289			128			3,571			694
Total revenues		36,329			23,762			89,046			63,769
Costs and operating expenses:
Cost of product sales		19,966			13,281			47,722			36,357
Collaboration profit sharing		2,729			3,813			8,957			11,467
Research and development		8,371			5,568			22,732			17,204
In-process research and development		—			139			—			139
Selling, general and administrative		10,856			6,146			28,389			19,213
Total costs and operating expenses		41,922			28,947			107,800			84,380
Loss from operations		(5,593	)		(5,185	)		(18,754	)		(20,611	)
Other income, net		852			1,215			2,619			2,927
Net loss	$	(4,741	)	$	(3,970	)	$	(16,135	)	$	(17,684	)
Basic and diluted net loss per share	$	(0.09	)	$	(0.07	)	$	(0.29	)	$	(0.34	)
Shares used in computing basic and diluted net loss per share		55,356			54,771			55,174			51,448

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CEPHEID

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(in thousands)

	September 30,			December 31,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	8,269		$	17,186
Marketable securities		33,050			77,750
Accounts receivable, net		26,043			15,246
Inventory		21,961			10,240
Prepaid expenses and other current assets		2,379			1,390
Total current assets		91,702			121,812
Property and equipment, net		16,213			14,097
Restricted cash		661			661
Other non-current assets		284			666
Intangible assets and goodwill		56,205			30,425
Total assets	$	165,065		$	167,661
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,254		$	8,977
Accrued compensation		5,521			3,319
Accrued royalties		6,402			3,516
Accrued collaboration profit sharing		617			3,497
Accrued other liabilities		4,608			4,107
Accrued expense for patent-related matter		—			3,350
Current portion of deferred revenue		4,496			3,913
Current portion of license fees payable		—			447
Current portion of equipment financing		—			313
Current portion of note payable		3			11
Total current liabilities		33,901			31,450
Long-term portion of deferred revenue		3,085			2,663
Long-term portion of equipment financing		—			3
Long-term portion of note payable		2			41
Deferred rent		874			798
Total liabilities		37,862			34,955
Shareholders’ equity:
Common stock		253,788			251,132
Additional paid-in capital		22,755			15,065
Accumulated other comprehensive loss		281			(5	)
Accumulated deficit		(149,621	)		(133,486	)
Total shareholders’ equity		127,203			132,706
Total liabilities and shareholders’ equity	$	165,065		$	167,661

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Table A — GAAP vs. Non GAAP Measures

	Three months ended						Nine months ended
	September 30,						September 30,
	2007			2006			2007			2006
Total Product Sales	$	34,016		$	22,647		$	79,667		$	60,800
Total Revenues	$	36,329		$	23,762		$	89,046		$	63,769
Cost of product sales	$	19,966		$	13,281		$	47,722		$	36,357
Stock compensation expense		(229	)		(153	)		(530	)		(531	)
Amortization of acquired inventory step-up in basis		—			—			(170	)		—
Amortization of purchased intangible assets		(237	)		(8	)		(604	)		(8	)
Non-GAAP measure of cost of goods sold	$	19,500		$	13,120		$	46,418		$	35,818
Gross Margin on Product Sales per GAAP		41	%		41	%		40	%		40	%
Gross Margin on Product Sales per Non-GAAP		43	%		42	%		42	%		41	%
Gross Margin on Total Revenues per GAAP		45	%		44	%		46	%		43	%
Gross Margin on Total Revenues per Non-GAAP		46	%		45	%		48	%		44	%
Research and development	$	8,371		$	5,568		$	22,732		$	17,204
Stock compensation expense		(1,378	)		(597	)		(3,169	)		(1,915	)
Non-GAAP measure of cost of research and development	$	6,993		$	4,971		$	19,563		$	15,289
Non-GAAP R&D measure as percent of Total Revenues		19	%		21	%		22	%		24	%
Selling, general and administrative	$	10,856		$	6,146		$	28,389		$	19,213
Stock compensation expense		(1,394	)		(806	)		(3,600	)		(2,747	)
Non-GAAP measure of cost of selling, general and administrative	$	9,462		$	5,340		$	24,789		$	16,466
Non-GAAP SG&A measure as percent of Total Revenues		26	%		22	%		28	%		26	%
Net Loss	$	(4,741	)	$	(3,970	)	$	(16,135	)	$	(17,684	)
Stock compensation expense		3,001			1,556			7,299			5,193
Amortization of acquired inventory step-up in basis		—			—			170			—
Amortization of purchased intangible assets		237			(8	)		604			(8	)
Non-GAAP measure of Net Loss	$	(1,503	)	$	(2,422	)	$	(8,062	)	$	(12,499	)
Basic and diluted net loss per share	$	(0.086	)	$	(0.072	)	$	(0.292	)	$	(0.344	)
Stock compensation expense	$	0.054		$	0.028		$	0.132		$	0.101
Amortization of acquired inventory step-up in basis	$	—		$	—		$	0.003		$	—
Amortization of purchased intangible assets	$	0.004		$	(0.000	)	$	0.011		$	(0.000	)
Non-GAAP measure of Net Loss	$	(0.027	)	$	(0.044	)	$	(0.146	)	$	(0.243	)
Shares used in computing basic and diluted net loss per share		55,356			54,771			55,174			51,448

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Table B — Instrument and Reagent Sales Mix

	Three months ended						Nine months ended
	September 30,						September 30,
	2007			2006			2007			2006
Product Sales
Instrument sales	$	15,911		$	7,287		$	32,142		$	15,855
Reagent and disposable sales		18,105			15,360			47,525			44,945
Total product sales	$	34,016		$	22,647		$	79,667		$	60,800
Percent of Product Sales
Instruments		47	%		32	%		40	%		26	%
Reagents and disposables		53	%		68	%		60	%		74	%
Total product sales		100	%		100	%		100	%		100	%

Table C — Geographic Sales Mix

	Three months ended						Nine months ended
	September 30,						September 30,
	2007			2006			2007			2006
Percent of Instrument and service sales
US & ROW		81	%		72	%		74	%		73	%
Europe		19	%		28	%		26	%		27	%
Total Instrument and Service Sales		100	%		100	%		100	%		100	%
Percent of reagent and disposable sales (including USPS)
US & ROW		84	%		98	%		86	%		98	%
Europe		16	%		2	%		14	%		2	%
Total Reagent and Disposable Sales		100	%		100	%		100	%		100	%
Percent of Reagent and Disposable Sales (without USPS)
US & ROW		69	%		89	%		64	%		90	%
Europe		31	%		11	%		36	%		10	%
Total Reagent and Disposable Sales		100	%		100	%		100	%		100	%
Percent of Total Product Sales (including USPS)
US & ROW		83	%		89	%		81	%		91	%
Europe		17	%		11	%		19	%		9	%
Total Product Sales (including USPS)		100	%		100	%		100	%		100	%
Percent of Total Product Sales (without USPS)
US & ROW		77	%		78	%		70	%		79	%
Europe		23	%		22	%		30	%		21	%
Total Reagent and Disposable Sales		100	%		100	%		100	%		100	%

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