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CombiMatrix to Launch up to Four More CMDX Tests in '07, Prepares Spin-Out from Acacia

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CombiMatrix Molecular Diagnostics will launch at least two more diagnostic assays this year in an effort to flood the array-based molecular diagnostics market before better-funded rivals in the space can catch up, according to a company official.
 
Amit Kumar, CEO of CMDX parent CombiMatrix, told investors during the company’s first-quarter earnings call two weeks ago that the firm plans to introduce a number of tests through its CMDX subsidiary this year.
 
"Our goal is to have on the market by mid-2007 the broadest portfolio by far of array-based diagnostic tests in the industry. For the remainder of this year we plan to release two to four more diagnostic tests," Kumar said.
 
"Our plan is to launch one diagnostic test per quarter and in some cases possibly two per quarter," he added.
 
In a follow-up interview this week with BioArray News, Kumar said that the market should expect future tests targeting leukemia as well as updates to the firm's Constitutional Genetic Array Test, which is used to detect congenital abnormalities in both pre-natal and post-natal patients.
 
CMDX recently updated its original bacterial artificial chromosome-based CGAT to include more clones for broader chromosomal coverage. The CGAT currently contains about 850 clones for various congenital diseases and defects, and Kumar said that future generations of the chip will offer even wider coverage for diagnostics.
 
CMDX was formed by CombiMatrix in May 2005 to establish the Mulkiteo, Wash.-based array company's presence in the nascent array-based diagnostics market. This sector has so far seen a handful of tests gain clearance from the US Food and Drug Administration, including Roche and Affymetrix's AmpliChip for drug metabolism assessment and Agendia's recently cleared MammaPrint test for breast cancer recurrence.
 
However, over the past year, CMDX has cut out a different path for its diagnostics portfolio, leveraging a dual-platform approach in which it offers tests based on its parent company’s oligonucleotide-based platform alongside a separate BAC platform for comparative genomic hybridization-based tests, like the CGAT.
 
CMDX has also decided to forego the process of submitting individual tests to the FDA, instead opting to offer each test in its CLIA-approved labs as a homebrew.  
 
"A key attribute of our arrays provides us with a significant strategic advantage related to diagnostic regulation in the US," Kumar said during the Q1 call. "We can launch diagnostics commercially without requiring regulatory approval," he said. "Because both of our platforms allow the manufacture of the array in the lab, we are allowed to launch our tests as laboratory-developed tests."
 
Aside from the CGAT, CMDX has so far launched an oligo-based test for distinguishing benign from malignant melanomas in skin cancer patients, as well as a CGH assay called HemeScan designed to detect prognostic markers in chronic lymphocytic leukemia. In March, CMDX CEO Mansoor Mohammed told BioArray News that future tests will also bear the HemeScan brand, and that a second HemeScan assay for an undisclosed condition is due this quarter (see BAN 3/20/2007).
 
Kumar told BioArray News in October that the firm had tests related to bladder, kidney, and prostate cancer in the pipeline. This week, though, he would only commit to launching a test for leukemia and upgrading the CGAT.
 
CMDX's overall strategy is one of diagnostic proliferation, and is an attempt to avoid a fate suffered by its parent company in the R&D market, where its business was paralyzed by the well-funded marketing campaigns of wealthier firms like Affymetrix and Agilent Technologies. Many of Combi's competitors, however, also have their sights on the molecular diagnostics market, which is widely believed to be larger than the gene expression and genotyping markets combined.
 
For instance, Affymetrix received CLIA approval for its clinical service laboratory last month. Like CMDX, Affy hopes to offer homebrew tests on its GeneChip platform as a vehicle for wider adoption of the platform in the molecular diagnostics market.
 
Illumina, too, hopes to launch assays developed with partners like DeCode Genetics on its digital microbead-based BeadXpress system. Given the fact that CombiMatrix ended the first quarter with roughly $10.5 million in cash and cash equivalents, around one-tenth of what Affy has on hand, Kumar said that CMDX's only route into the market lays in establishing itself and its technology before the bioarray behemoths catch up.   
 

"In this diagnostics market we feel that our technology platform has a very big advantage that will overcome the infrastructure and capital advantages of our competitors."

"All of our competitors that sell arrays into the R&D market also have strategies to enter and compete in the molecular diagnostics market and each competitor’s strategy is driven by their existing platform, their access to capital, and their existing business infrastructure," Kumar said during the call. "In this diagnostics market we feel that our technology platform has a very big advantage that we feel will overcome the infrastructure and capital advantages of our competitors."
 
Cutting Back and Spinning Out
 
While it prepares its future test menu for launch, CMDX has also embarked on improving its sales and marketing resources. For example, the firm last week hired Dindyal Ramkissoon to fill the position of vice president of sales and marketing.
 
On the other hand, CombiMatrix's R&D-targeted business has seen a reduction in headcount, and Mike Tognotti, formerly VP of sales and marketing at CombiMatrix, recently surfaced in the same capacity at Aushon Biosystems, a Boston area firm that sells arrayers (see People in the News, this issue).
 
Kumar said during the call that CombiMatrix has cut some costs, “which include cuts in headcount as well as other measures."
 
He added that "many of these cuts were made in the fourth quarter of 2006 and they are demonstrated in our first-quarter financial performance." In addition, he said, the company took a “number of measures” during the first quarter of 2007 to reduce costs and "their full effect will not be felt until the second quarter numbers are released and throughout the balance of 2007."
 
This week, Kumar said that CombiMatrix will now mostly rely on distributors to take orders for its R&D-oriented products. "Our focus going forward is on diagnostics services," he said. "We will sell into the R&D market as orders come in and as distributors sell products. We will rely on distributors to drive orders in the R&D market while we will drive orders ourselves in the molecular diagnostics market."
 
CombiMatrix is also preparing for an eventual spin-out from its parent Acacia Research, a plan that was originally announced in January. Kumar said this week that CombiMatrix filed its S1 form with the US Securities and Exchange Commission two weeks ago, and that CombiMatrix will begin trading under its own ticker symbol, CMBX, within 45 days after the S1 is accepted by the SEC.
 
To reinforce CombiMatrix's position prior to becoming independent, Kumar and CombiMatrix directors Tom AKin and John Abeles bought $5 million worth of CMBX stock this week from Acacia. Kumar said in a statement that the financing “strengthens our balance sheet as we split off from Acacia" and it will provide "additional capital to fund our expansion in the molecular diagnostics market.”

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