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CombiMatrix Likely to Spin Out From Acacia In Q1 2007 as Firm Banks on CMDX Pipeline

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CombiMatrix will likely spin off from parent company Acacia Research by the first quarter of 2007, roughly six months after it had originally anticipated doing so.
 
At the same time, the firm’s CombiMatrix Molecular Diagnostics subsidiary is readying a suite of diagnostic tests that it believes will put it ahead of rivals in the array-based molecular diagnostic space next year.
 
According to Amit Kumar, CombiMatrix’s CEO, CMBX’s planned separation from Acacia was set back half a year due to “tax issues,” which led Acacia to request a private letter ruling from the Internal Revenue Service to make sure the separation would be considered a “tax-free event.” A private letter ruling is usually requested when a party would like the IRS to comment on tax issues regarding a large transaction.
 
Acacia Research, a wireless communication and licensing firm, said in January that its board of directors approved CombiMatrix’s plan to become an independent public company in the second quarter of 2006, subject to receiving a "satisfactory tax opinion from legal counsel" and other conditions (see BAN 1/10/2006).
 
“That’s still going forward,” Kumar told BioArray News this week. “As we explored the process of separating the two companies there were some tax issues that came up,” he said.
 
Kumar said the company sent its letter to the IRS in September and the IRS has responded favorably. Kumar said that CombiMatrix will address the separation further in its third quarter conference call. The company is hoping to become more attractive to investors once it separates from Acacia. Acacia's stock currently trades under the ACTG ticker.
 
"Wall Street prefers a normal capital system or stock that is just for one company, that doesn't have a parent that has influence," CombiMatrix’s former vice president of investor relations Bret Undem told BioArray News in January.
 
Genetic Portraits
While Wall Street is one place where CombiMatrix may soon be seeking capital on its own, Kumar told BioArray News at the American Society of Human Genetics meeting in New Orleans last week that the company believes that its CLIA-approved CombiMatrix Molecular Diagnostics unit will put the entire company ahead of rivals like Affymetrix and Osmetech in the molecular diagnostics space.
 
The formula? Sell homebrew tests to clinical labs to avoid a lengthy 510(k) submission process with the US Food and Drug Administration. For example, CMDX recently launched its Constitutional Genetic Array Test, which has since been renamed the Genomic Portraits program, in order to establish a foothold in the developing array CGH testing space.
 

“One of the disadvantages of the company is that we don’t have as much money as our competitors do. We don’t have the money that Affymetrix has or Illumina has, but we believe we have the technical advantage.”

According to Kumar, the company is offering the test both in its CLIA-approved Irivine, Calif., labs and as a “tech only” service where customers send samples and receive only data from CMDX. This enables the clients to make money off the analyses — an option that Kumar said could be attractive to the 300 cytogenetics labs CMDX is targeting.
 
“A lab might have to pay up to $1 million to set up all of the equipment” needed to run a CGH service, Kumar explained. “We can set it up so a customer can interpret and analyze the data online and we can share the revenue with the labs.”
 
Kumar said that the firm plans to expand its current bacterial artificial chromosome-based CGH array to include 1,000 BACs in the first half of next year. Its current array includes around 650 BACs for a variety of different syndromes. CMDX also plans to introduce a suite of gene expression-based diagnostic assays for melanoma and bladder, kidney, and prostate cancer.
 
The melanoma signature, developed with Scott Binder, chief of dermatopathology at the David Geffen School of Medicine at the University of California, Los Angeles, is designed to help clinicians assess whether a patient’s melanoma is malignant or benign.
 
Still, while Kumar touts his firm as the “only company that can offer both BAC and oligo-based tests,” he conceded that CombiMatrix is behind in the race when it comes to funding.
 
“One of the disadvantages of the company is that we don’t have as much money as our competitors do. We don’t have the money that Affymetrix has or Illumina has, but we believe we have the technical advantage.”

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