Market for superbug screening poised to grow

NEW YORK (CNNMoney.com) -- The market for diagnosing and preventing "superbug" staph infections could grow dramatically over the next few years, according to industry experts.

The companies Cepheid (Charts) and Becton Dickinson & Co. (Charts, Fortune 500) stand to gain the most from a spike in drug-resistant germ infections, analysts say. Both of these companies make test kits for the potentially deadly bug known as MRSA (methicillin-resistant Staphylococcus aureus.)

"We think this is a billion-dollar market opportunity," said William Quirk, analyst for Piper Jaffray. "We believe there are several companies well-positioned to capitalize on this, including Cepheid."

Cepheid shares jumped 4 percent in Wednesday trading, following news from the Journal of the American Medical Association that MRSA infections are more prevalent in the U.S. population than previously thought. The article reported that there are 32 invasive infections per 100,000 people.

Separately, the Centers for Disease Control said on Tuesday that 94,000 Americans were infected with MRSA in 2005, resulting in 19,000 deaths. One official went so far as to say that MRSA could result in more deaths than AIDS. And on Monday, a 17-year-old high school senior from Virginia died after MRSA spread to his vital organs, in what has become a highly publicized story.

Shares of Becton Dickinson & Co., which also sells test kits for MRSA, did not make noticeable gains in Wednesday trading, but are up 18 percent year-to-date.

Meanwhile, Cepheid has seen its stock gain 160 percent year-to-date. Cepheid chief executive John Bishop believes his molecular diagnostic testing system for MRSA, launched in April and capable of producing test results within one hour, has blockbuster potential.

"The [MRSA] market right now is very rapidly developing," said Bishop. "The actual purchases right now are just getting going."

Bishop said his new product screens for hospital infections, and he expects to have another product for infections in the general population on the U.S. market next year.

Zarak Khurshid, analyst for Caris & Co., said the small market for MRSA detection is poised to grow as much as 20-fold in the next few years.

"As we speak, the market is probably around $50 million and growing extremely fast," said Khurshid. "A billion-dollar market is not completely ludicrous."

Investor response to the various companies in the MRSA space has been mixed. The stock for Cadence Pharmaceuticals, which is testing a product to prevent catheter infections in hospitals, fell 1 percent on Wednesday.

Ted Schroeder, chief executive for Cadence Pharmaceuticals (Charts), plans to get his late-stage experimental product Omigard on the U.S. market by late 2009 or 2010.

Cadence's volatile stock has risen 11 percent this year, prior to today's drop. Schroeder said the stock isn't getting any benefit from the recent MRSA news because Omigard "been a little below the radar." But he insisted that his product has a lot to offer the medical community, if it successfully makes it to the market.

"It's always less expensive to prevent an infection than to treat it," said Schroeder.

MRSA infections are typically treated with the generic drug vancomycin, according to the Mayo Clinic, or by draining the abscesses when the staph is resistant to the drug.

The analysts quoted in this story do not own stock in the companies mentioned here, though their firms do make a market in them.