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Biotech / Medical : Ciphergen Biosystems(CIPH): -- Ignore unavailable to you. Want to Upgrade?

To: tuck who wrote (258)	8/1/2004 11:50:26 PM
From: mopgcw	Respond to of 510

Piper: Ciphergen Biosystems edward.a.tenthoff@pjc.com Underperform Volatility: Medium (CIPH - $3.88) Price Tgt -- $4.00 52 Week High: $13.97 52 Week Low: $3.29 Shares Out (mil): 29.2 Market Cap. (mil): $113.3 Avg Daily Vol (000): 232 Book Value/Share: $0.96 Cash Per Share: $1.02 Debt to Total Capital: 38% Ciphergen Reports 2Q:04 Results KEY POINTS: * Ciphergen reported total 2Q:04 revenues of $10.8 million, in-line with preannounced guidance of $10-11 million. As a reminder, the disappointing top-line performance was primarily due to weak system placements in the U.S. * Due to increased inventory reserve and the timing of certain material cost payments, gross margins came in below expectations at 51% for the quarter. We expect margins to return to normal levels going forward. * Ciphergen reported 2Q:04 net loss of $13.1 million or $0.45) per share, worse than our estimated loss of $11.6million or ($0.40) per share. * We continue to forecast total revenues of $56.6 million this year. We believe competition has dramatically stepped up in the discovery and analysis of biomarkers, which is hurting Ciphergen's ability to maintain its early leadership in the space. Further, the BioSepra division will remain a drag on performance until 4Q:04. * Planned cost cutting initiatives will likely not take effect until 4Q:04. By then, the company plans to realize as much as $8 million in annual savings. * Based on our current projections, we look for Ciphergen to run out of money next year. This forecast does not include any contribution from a potential diagnostic deal. * Thus, everything is now relying on the diagnostic business. We expect Ciphergen will report results from the on-going OvaSure validation study in early October and could partner/commercialize this test with a clinical reference lab or even a diagnostic company this year. INVESTMENT RECOMMENDATION: We reiterate our Underperform rating on Ciphergen with a $4 price target. We arrive at this target by applying a 2x revenue multiple to our $56.5 million revenue forecast. This revenue multiple is at the low-end of the historical range of 2-4x and reflects a slower growth outlook. This price target does not include the potential impact of a diagnostic collaboration.