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Arrayit to Spin out Diagnostics Subsidiary to Encourage Investment, Speed Dx Commercialization

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By Justin Petrone

In a bid to attract investment for its pipeline of tests, Arrayit Diagnostics will become independent next year, parent company Arrayit said last week.

The Sunnyvale, Calif.-based array products and services provider intends to distribute to its existing shareholders its 78.18 percent interest in Arrayit Diagnostics as a stock dividend. The distribution date and further details are expected to be announced early in the first quarter of 2012. Upon gaining independence, Arrayit Diagnostics expects to be listed on the Over-the-Counter Bulletin Board securities market in the US.

Paul Haje, Arrayit's vice president of sales and marketing, told BioArray News this week that the company is spinning off Arrayit Diagnostics in order to attract investments that will facilitate the regulatory clearance and commercialization of its tests, the farthest along of which is OvaDx, an array-based diagnostic for early-stage ovarian cancer.

"We have investors who really want to make a focused investment in Arrayit Diagnostics, and who want to be involved in the milestones associated with that," Haje said.

Haje said that Arrayit Diagnostics is in negotiations with a potential investor — a company that is a "household word" and "wants to get into microarrays and life sciences" — but he declined to name the interested party.

Arrayit, which also trades on the OTCBB, believes that its investors will benefit by becoming direct shareholders of Arrayit Diagnostics. "It's very equitable for them," Haje said of the deal.

Arrayit Diagnostics was established in Houston in 2009 to advance Arrayit's interests in the molecular diagnostics market (BAN 8/18/2009). Since that time, the subsidiary has developed two tests, OvaDx, a protein array-based assay that relies on markers licensed from Wayne State University; and another assay for Parkinson's disease.

The company established two more subsidiaries in 2009 to oversee the commercialization of these tests, Arrayit Diagnostics Ovarian and Arrayit Diagnostics Parkinson's, but Arrayit Diagnostics Ovarian was collapsed back into Arrayit Diagnostics in May of this year, while Arrayit Diagnostics Parkinson's was renamed Arrayit Scientific Solutions, according to a filing with the US Securities and Exchange Commission.

Haje said that Arrayit Scientific Solutions would not be part of the Arrayit Diagnostics spin off.

Arrayit Diagnostics' headquarters also changed this year, when it relocated from Houston to Redmond, Ore. Haje said that the relocation was "better for commerce" as the parent company and subsidiary are now in the same time zone.

While Arrayit Diagnostics had previously discussed a potential launch date of early 2010 for OvaDx, Haje this week declined to discuss the test's commercialization timeline. The company previously said it planned to pursue a premarket authorization for the test rather than a 510(k) approval, but Haje did not provide an update on its negotiations with the US Food and Drug Administration.

John Howell, Arrayit Diagnostics' current CEO and president, will continue in that capacity. Howell, formerly vice president of administration at Arrayit, noted in a statement that by operating as a separate public entity, Arrayit will be able to focus on its "core business of advanced equipment sales and manufacturing," while allowing Arrayit Diagnostics the "opportunity to fully commercialize its ovarian cancer diagnostic technology."

'Last Man Standing'

According to Haje, Arrayit's core business is doing well. In August, the firm reported a 47-percent spike in array sales for its first fiscal quarter (BAN 8/9/2011). According to SEC filings, second-quarter revenues rose slightly to $804,125 from $792,110 in the prior year period, while third-quarter revenues jumped 13 percent to $780,445 from $688,779.

Haje said that the firm's past few months have been busy thanks to a "big pickup" in original equipment manufacturing deals, as well as consolidation in the life sciences industry as other firms have opted to exit the array tools space.

"Consolidation and outsourcing benefits companies like Arrayit that have the competency when it is needed," said Haje. "One good thing about a downturn in the biotech sector is that if you are the last man standing at the end, you get to pick up all the business," he said.

Haje went on to say that Arrayit had experienced the "best November" in its history terms of sales and that December should also break sales records at the firm. He declined to further elaborate.


Have topics you'd like to see covered in BioArray News? Contact the editor a1t jpetrone [at] genomeweb [.] com.

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