Postal service delays rollout of Cepheid’s anthrax detector

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SUNNYVALE, Calif., April 30, 2004 – The U.S. Postal Service has delayed the national rollout of the Biohazard Detection System (BDS), which uses anthrax technology developed by Cepheid Inc., because of inconclusive results on several machines.

The inconclusive, or so-called “non-determinant” results do not indicate a threat is suspected; they mean that the test could not provide a positive or negative result when the machine tried to confirm its results.

The Postal Service said such instances were isolated, but decided to make sure the system is working properly before continuing with the deployment. The Postal Service awarded a $175-million contract last year to Cepheid collaborator Northrop Grumman Corp. for the BDS, which contains Cepheid’s GeneXpert platform for identifying pathogens. A second phase of the contract, expected later this year, should be equal or slightly larger in value. The two-year rollout will consist of installations at 283 of the Postal Service’s major processing and distribution centers.

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Postal Service spokesman Bob Anderson said the rollout began in March, and about a half-dozen centers in the eastern United States have received anywhere from three to six systems, depending on the volume of mail. BDS continuously samples the air being drawn off the machine that cancels stamps on letters that are processed and sent back to local post offices across the country.

Cepheid Chief Executive John Bishop said the Sunnyvale, Calif.-based firm is working with Northrop Grumman and the Postal Service to resolve the issues.

“What you have here is a circumstance that when one is deploying something new, you’re observing a phenomena that up to that point had not been seen,” he said. “The bulk of the units are working just fine.

“Taking everything into account, the BDS works extremely well. It’s gone very successfully through all stages of very extensive evaluation. We’re confident and comfortable with the BDS and … Cepheid’s GeneXpert.”

Anderson said the Postal Service also gives the system high marks.

“We’re fully confident in the system. There are no doubts whatsoever it’s the right thing to do for the safety of our employees and customers,” he said. “We hope the delay is very brief. Every expert in the world is crawling all over this stuff right now.”

Bishop said the Postal Service contract provides Cepheid a proving ground for further development and commercialization of the GeneXpert instrument platform for clinical use. The company also plans to sell standalone versions of the instrument later this year for biothreat detection.

Cepheid shares, listed on Nasdaq, fell as much as 35 percent Thursday, hitting a low of 6.16. It was trading late Friday at 7.52. The shares hit a 52-week high of 13.56.

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