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The biotech company Nanosphere (NASDAQ: NSPH), which develops and markets the proprietary Verigene System, doubled in value throughout the last twelve months due to a bunch of positive developments. Especially great for the company's long-term prospects was the FDA approval of the Gram-Positive Blood Culture Nucleic Acid Test (BC-GP), which allows very fast detection of bacteria that can cause fatal infections in patients.

One of the exciting traits about this new diagnostic test is that it can detect markets that indicate that the bacteria in a patient's bloodstream are resistant to methicillin/oxacillin and vancomycin. Hospitals have had an especially hard time dealing with these. Methicillin-resistant Staphylococcus aureus (MRSA) is one particularly prominent bacteria that has proven to be extremely dangerous, and is one of the many microbes that can be detected and identified with the Verigene System.

The FDA approval of the microbe diagnostic led to substantial appreciation in Nanosphere stock after the initial press release on June 27, 2012. NSPH rallied from $1.91/share to $3.41/share by July 9th. While the stock has not been able to consistently hold on to all of its gains at this point, there is no question that the market sees major potential in rapid diagnostic tests to prevent dangerous microbial infections.

The Verigene system is also used for a host of other diagnostic purposes. The company has a strong presence in cardiovascular risk factor identification - especially through the detection of genes that are associated with thrombosis (or blood clot formation). For instance, the company sells Verisign detectors that can quickly find traces of the F5, F2, and MTHFR genes which are all linked to higher incidence of thrombosis.

They also sell detection for the CYP2C19 gene, which produces an enzyme that metabolizes a whopping 15% of prescription medications and has important physiological applications for patients on anti-consultants, proton pump inhibitors, anti-platelet drugs, and even anti-depressants. Since these are all very common, Nanosphere should have no shortage of target patients for their CYP2C19 gene detecting Verigene systems.

The financial prospects for the company could also become quite outstanding in 2013. Nanosphere already has triple-digit sales growth, and is expected by analysts to nearly triple its total revenue for fiscal year 2013. This is based on the roughly $5.5 million in sales revenue it will have for FY 2012, and the possible $20.8 million it will have next year. This enthusiasm seems to be largely based on Verigene's prospects in microbial gene detection.

While the company is already being pumped by the analysts, it seems that the market is hesitating on a few factors. Perhaps the most obvious concern is related to the ability for Nanosphere to breach $20 million in revenue in 2013.

At this point, the company hasn't released any actual data on gram-positive sales, which puts virtually everyone in the dark about the figures from Verigene's most exciting target market. While Nanosphere has potential to expand Verigene's indications in coming years to include more microbes and other human genes that could benefit from rapid identification, NSPH could have trouble if the gram-positive market does not meet our expectations. It's also worth noting that short interest has declined significantly in recent months, which introduces the possibility of a milder bear-raid on any piece of bad news. On the bright side, NSPH will be trading significantly higher if the analysts are right. I would expect the stock to be north of $4/share if it gets on track for $20 million in sales revenue from fiscal year 2013.

The next quarterly earnings release is in early February, so there is still a bit of a wait left.

Source: The Market Awaits Financial Results From Nanosphere's Gram-Positive Test