CombiMatrix stands to pocket $10 million in the coming days after its parent company Acacia Research received commitments from investors to buy 9.8 million units of equity for $1.02 apiece, the company said this week.
CombiMatrix CEO Amit Kumar said the company expects to use the funding to support its diagnostic business with the hope that it will put the company on track to profitability.
Indeed, the expected cash infusion comes at a time when CombiMatrix has been facing a cash crunch. The company burned through more than $11 million in the first nine months of this year, it headed into the fourth quarter with $8.3 million in cash and short-term investments, and still hopes to deploy several diagnostic tests through its CombiMatrix Molecular Diagnostics subsidiary by the first half of 2007.
The cash is also likely to relieve some investors who feared that the company could become trapped in a “death spiral” as it ran out of cash just as it was preparing to launch products that would help drive renvenue (see BAN 10/31/2006).
“The market seems to be [showing that] we’re in a mad race between a death spiral between running out of cash versus the ability to unfold this diagnostic pipeline,” investor Steve Ellenbecker said during the firm’s third quarter earnings call.
Kumar told BioArray News this week that, “We finished Q3 with $8 million and change, soon we'll have this $10 million, and we probably won’t be seeking more [funding] as we expect to benefit from our diagnostics services plan as we move forward.”
“We are going to be allocating significant funds to our diagnostics services business because we see that as an expanding market opportunity,” he said.
CombiMatrix currently offers three microarray-based tests through its CLIA-approved CMDX labs in Irvine, Calif. The company has a constitutional genetic array test for genetic abnormalities, which has been on the market for about six months, and a gene expression signature-based melanoma test, released last month, which it claims can distinguish between benign and malignant melanomas and normal skin growth.
“In ’07 we anticipate that diagnostics revenue will increase quite nicely, and we expect that revenue will also be driven through the R&D market as well as our very profitable government contracting business.”
Kumar said that over the next six months CombiMatrix will introduce an updated version of the CGAT as well as a suite of gene expression-based diagnostic assays for melanoma and bladder, kidney, and prostate cancer. He told BioArray News in October that the bacterial artificial chromosome-based CGH array used in its CGAT test will include 1,000 BACs in the first half of next year. Its current array includes around 650 BACs for a variety of different syndromes (see BAN 10/17/2006).
CombiMatrix also continues to offer its FluChip, launched last year, through its CMDX subsidiary. Kumar said that, for humans, the platform is intended for emergency use only. He added that the chip is currently being used for surveillance purposes in Alaska, and pointed out that the company’s FluChip platform has received grants from the US Department of Defense and the US Air Force (see BAN 10/10/2006, BAN 2/28/2006).
“In ’07 we anticipate that diagnostics revenue will increase quite nicely, and we expect that revenue will also be driven through the R&D market as well as our very profitable government contracting business,” Kumar said.