Cepheid Takes Hit on False MRSA Testing Claim


Before you read this, please know I do not own this stock. I do recommend it in my service. I am writing this because a hatchet job has been done on a product category that can save tens of thousands of lives and because a company's stock took a hit for no reason.

That company, Cepheid (NASDAQ:CPHD), took a major hit Monday after the close due to an article in the Journal of the American Medical Association -- an article that should never have been published and if it was vetted, the people who agreed to its publication should check into a hospital - next time they are not feeling well - that does not do any MRSA testing.

The article claimed that MRSA testing did not help reduce MRSA infections - which of course is not only illogical but utter nonsense if you live in the real world. The study at the core of the article was based in Switzerland (University of Geneva) and I have been told by sources that this hospital used home brewed, home built tests -- not a standard test from Cepheid or competitor Becton Dickinson (NYSE:BDX). A more detailed criticism was published by Betsy McCaughey, founder and chairman of the Committee to Reduce Infection Deaths, a non-profit with an obvious goal. Her critique is found below, verbatim. The organization's website is www.hospitalinfection.org.

Let's cut to the chase -- this article is quasi-science that is a short seller's dream. For those of you more interested in the truth and the potential for MRSA testing to save lives (and help companies succeed), look at the the Veterans Administration. The VA has arguably one of the toughest potential MRSA problems in the country due to the nature of their patient population. They reduced MRSA infections by more than 70% with a pilot program with testing at its core and is now pushing that program nationwide. Cepheid has captured the vast majority of the testing business at the VA. Enough said, read the letter from Ms. McCaughey.

Last note: some unsolicited, non-stock advice -- don't get any procedure done in a hospital that does not do comprehensive MRSA testing -- no one in my family will. Am I paranoid? A teacher in the school situated next door to my son's high school died a few months back for she was diagnosed with a malady other than MRSA and was sent home. She died of MRSA.

The rebuttal letter -- verbatim -- hope you don't mind Ms. McCaughey. If you do, contact me and I will pull it down.

March 11, 2008
New York, New York

JAMA Article Provides False Support for CDC's Do-Nothing Position on MRSA

A new study in the Journal of the American Medical Association [JAMA] purports to show that screening for MRSA (methicillin-resistant Staphylococus aureus), a simple skin or nasal swab, is not effective in reducing MRSA hospital infections ("Universal Screening for Methicillin-Resistant Staphylococcus aureus at Hospital Admission and Nosocomial Infection in Surgical Patients," JAMA vol. 299, no. 10, March 12, 2008).

The findings of the authors will be seized upon by the Centers for Disease Control and Prevention [CDC] and advocates of the do-nothing status quo. But the study is seriously flawed - rendering its findings meaningless.

1. Researchers used a 'rapid test,' but many patients were not tested until they had already been in the hospital for twelve hours. Furthermore, the results of the MRSA tests were not acted upon for another 22½ hours on average. Most patients had completed more than half of their hospital stay before their results were known. Therefore, the precautions they needed - isolation, proper antibiotics, chlorhexidine baths - were taken late or not at all.

2. Unbelievably, almost a third of surgical patients (31%) who tested positive didn't get their test results until after their surgery. Therefore they too didn't receive any of the precautions they needed. Some people carry MRSA germs in their noses or on their skin without realizing it. The bacteria do not cause infection unless they get inside the body - usually via a catheter, a ventilator, or an incision or other open wound.

3. No weekly MRSA testing was conducted, which is de rigour when conducting universal screening to prevent patients colonized with MRSA from passing it on to other patients in the hospital.

4. A previous study by the same lead author at the same location, The University of Geneva Hospital, found that universal screening on admission with preemptive contact precautions (the way it's supposed to be done) decreased MRSA infections in the medical intensive care unit.

The study released today, says Betsy McCaughey, Chairman of the Committee to Reduce Infection Deaths, "doesn't prove that MRSA screening is ineffective. The study omits the precautions that are supposed to follow a MRSA positive test result. It's like testing a recipe, but omitting half the ingredients or test-driving a car without the tires."

Today's JAMA article provides false support for the CDC's persistent do-nothing position on the dire problem of M.R.S.A. The CDC's lax guidelines continue to give hospitals an excuse to do too little.

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