SUNNYVALE, Calif. — Cepheid today reported revenues for the third quarter of 2011 of $70.2 million. Net income was $1.9 million, or $0.03 per share, which compares to revenues of $56.1 million and a net loss of $1.1 million, or $(0.02) per share, in the third quarter of 2010.

Excluding amortization of purchased intangible assets and employee stock-based compensation expense, non-GAAP net income for the third quarter was $7.6 million, or $0.11 per share. This compares to a non-GAAP net income of $3.7 million, or $0.06 per share, in the third quarter of 2010.

“Our GeneXpert® system continued to gain recognition during the third quarter, reflected in record revenue driven by particularly strong growth in our commercial clinical reagent business in North America,” said John Bishop, Cepheid’s Chief Executive Officer. “Additionally, we saw very strong system placements associated with our Xpert® test for detection and identification of multi-drug resistant tuberculosis in High Burden Developing Countries.”

“With almost 2,500 GeneXpert systems placed globally to date,” continued Bishop, “our family of Xpert molecular diagnostic systems and tests is impacting the treatment decisions of more patients than ever before, thanks to our unique combination of accuracy, ease-of-use and speed.”

Operational Overview

•Total product sales of $67.3 million in the third quarter of 2011 compared to $54.9 million in the third quarter of 2010. By business, product sales were, in millions:

 Three Months Ended September 30,

                                   2011              2010            Change

   

 Clinical Systems                 $14.0             $11.6               20%

 Clinical Reagents                 45.6              33.2               37%

  Total Clinical                   59.6              44.8               33%

 Non-Clinical                       7.7              10.1              -24%

 Total Product Sales              $67.3             $54.9               23%

 •By geography, product sales were, in millions:

 Three Months Ended September 30,

                                   2011              2010            Change

 North America

  Clinical                        $43.1             $36.6               18%

  Non-Clinica                      l6.2               8.8              -30%

 Total North America               49.3              45.4                9%

 International

  Clinical                         16.5               8.2              101%

  Non-Clinica                      l1.5               1.3               16%

 Total International               18.0               9.5               89%

 Total Product Sales              $67.3             $54.9               23%

•During the quarter, Cepheid installed a total of 122 GeneXpert systems in its commercial Clinical business. Additionally, the Company placed a total of 141 GeneXpert systems as part of its High Burden Developing Country (HBDC) program. Including the HBDC systems, a cumulative total of 2,487 GeneXpert systems have been placed worldwide as of September 30, 2011.

•GAAP gross margin on product sales was 56% and non-GAAP gross margin on product sales was 57%, which compares to 50% and 52%, respectively, in the third quarter of 2010.

•Cash and cash equivalents were $110.8 million as of September 30, 2011.

•DSO was 40 days.

Termination of Roche License

Cepheid is terminating the remainder of its PCR license from F. Hoffmann-La Roche Ltd. and Roche Molecular Systems, Inc. (collectively “Roche”) after determining that any patents remaining under the license are not pertinent to Cepheid’s future business plans. As a result, Cepheid expects to take a one-time charge of approximately $5.4 million to cost of product sales in the fourth quarter of 2011 to reflect acceleration of the remaining amortization of the original up-front license fee.

Business Outlook

For the fiscal year ending December 31, 2011, the Company expects:

•Total revenue to be in the range of $269 to $272 million;

•Net income in the range of $0.00 to $0.03 per share. This includes a one-time charge to cost of product sales related to the termination of the remainder of the Roche PCR license detailed above of approximately $5.4 million, or $0.08 per share, in the fourth quarter of 2011;

•Non-GAAP net income in the range of $0.41 to $0.44 per share. Expected non-GAAP net income excludes approximately $20 million related to stock compensation expense, $5.4 million related to the one-time charge related to the termination of the remainder of the Roche PCR license detailed above, and approximately $2 million related to the amortization of acquired intangibles.

The fully diluted GAAP share count for the year is expected to be approximately 67 million and the fully diluted non-GAAP share count for the year is expected to be approximately 68 million.

Accessing Cepheid’s Third Quarter Results’ Conference Call

The Company will host a management presentation at 2:00 p.m. Pacific Time on Thursday, October 20, 2011 to discuss the results. To access the live webcast, please visit Cepheid’s website at www.cepheid.com/investors at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. A replay of the webcast will be available shortly following the call and will remain available for at least 90 days.

Interested participants may also listen to the live teleconference call by dialing (866) 510-0704 or (617) 597-5362, and entering participant code 73274303. A replay will be available for seven days beginning at 4:00 p.m. Pacific Time. Access numbers for this replay are (888) 286-8010 or (617) 801-6888, with passcode 98690152.

About Cepheid

Based in Sunnyvale, Calif., Cepheid (Nasdaq: CPHD) is a leading molecular diagnostics company that is dedicated to improving healthcare by developing, manufacturing, and marketing accurate yet easy-to-use molecular systems and tests. By automating highly complex and time-consuming manual procedures, the company’s solutions deliver a better way for institutions of any size to perform sophisticated genetic testing for organisms and genetic-based diseases. Through its strong molecular biology capabilities, the company is focusing on those applications where accurate, rapid, and actionable test results are needed most, such as managing infectious diseases and cancer. For more information, visit https://www.cepheid.com.

Use of Non-GAAP Measures

The Company has supplemented the GAAP financial information contained in this release with non-GAAP measures that do not include employee share-based compensation expense and amortization of purchased intangible assets and, with respect to expected non-GAAP net income and non-GAAP net income per share, the charge related to the termination of the Roche license. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company’s management uses the non-GAAP information internally to evaluate its ongoing business, continuing operational performance and 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.

These non-GAAP measures may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures.

As described above, the Company excludes the following items from one or more of its non-GAAP measures when applicable:

Employee stock-based compensation expense. These expenses consist primarily of expenses for employee stock options, the employee stock purchase plan and employee restricted stock under ASC 718 (formerly SFAS 123(R)). The Company excludes employee stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results. Further, as the Company applies ASC 718, it believes that it is useful to investors to understand the impact of the application of ASC 718 on its results of operations.

Amortization of purchased intangible assets. The Company incurs amortization of purchased intangible assets in connection with acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s business.

Termination of License. The Company will incur a one-time expense related to the acceleration of the remaining amortization of the original up-front license fee related to the Roche license. The Company excludes this item because it is one-time in nature and not reflective of ongoing operating results in the period incurred.