Dec. 26, 2002 — The U.S. Postal Service awarded Northrop Grumman Corp. a contract to expand testing its anthrax detection system in mail sorting facilities after the successful completion of pilot tests in late 2002. The award will allow partner company Cepheid Inc. to continue testing and validating its automated DNA-based techniques in 14 postal facilities.

The second phase of tests could pave the way for a contract allowing Northrop Grumman to install its Bio-Agent Detection System into 292 mail sorting sites nationwide. The system periodically takes and analyzes air samples as mail passes through sorting machines. Cepheid’s GeneXpert, a miniaturized system for detecting genetic material rapidly and on site, monitors for airborne pathogens like anthrax spores.

Tom Gutshall, Cepheid’s chairman of the board and former chief executive, said the deal was a preproduction contract designed to broaden testing in different environments beyond the pilot test facility in Baltimore. The post office placed no time limits on this second stage of testing, he said.

The U.S. Postal Service selected veteran defense contractors Northrop Grumman and Lockheed Martin to develop and test approaches for spotting anthrax and other biothreats in mail.

Northrop Grumman received $3.7 million in initial funding, and named Cepheid as well as Smiths Detection-Edgewood Inc. and Sceptor Industries partners in the project. Northrop Grumman announced and its partners seem to be the sole contenders for the final contract, Gutshall said, but he didn’t rule out future competitors.

A permanent contract would add to Cepheid’s revenues because it would provide onetime sales for the GeneXpert’s detection component plus repeated sales for its disposable cartridges. Each postal facility is expected to house several Bio-Agent Detection Systems once the devices are officially approved.