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CombiMatrix Reaches $5.5M Milestone As it Readies Custom Arrays for Market

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Semiconductor microarray company CombiMatrix is approaching two milestones in the next two weeks in the commercialization of its technology.

The company is rolling out its CombiMatrix custom chip technology, developed and marketed in collaboration with Roche Applied Science, and said earlier this week it would receive $5.5 million during the fourth quarter from Roche as a milestone payment.

Additionally, the company is reaching out to the public markets as its parent company, Acacia Research of Newport Beach, Calif., divides its common stock into two, separating its media technology business and CombiMatrix’s microarray business into two tracking stocks. CombiMatrix will trade on the Nasdaq exchange under the symbol CBMX after Dec. 11, subject to shareholder and SEC approval. In its biochip development efforts, CombiMatrix is banking on a system of manufacturing to create a competitive niche and to take on industry leader Affymetrix. CombiMatrix utilizes a semiconductor-based technology, but avoids the photolithography process that some say is a manufacturing yoke around Affymetrix, because it necessitates lead times of as much as two months to create custom chips, and minimum orders of thousands of dollars. CombiMatrix says it can make custom chips in as little as a day.

The company’s initial product offering will be chips for gene expression or SNP analysis with 1,000 probes on them, with plans to ramp up to 10,000-spot arrays to follow within an indeterminate time. The company is positioning the technology as one that is flexible, and competitive with Affymetrix chips in price, with each chip averaging from $400 to $500.

By entering the public markets, CombiMatrix is accessing a new source of capital at the same time that it enters the next phase of commercialization microarray technology, in which individually controlled electrodes ask as “test sites,” isolating isolate specific polymers, including DNA, RNA, peptides or small molecules, directly on the surface of semiconductor chips. Chemical solutions create the boundaries around each site.

In October, the company paid $1 million, agreed to issue 17.5 percent of its outstanding shares, and pay royalties up to $1.5 million a year to Nanogen to settle a trade secret lawsuit, and to retain its rights to three patents at the core of its technology.

Parent Acacia in November reported third quarter revenues of $179,000 compared to $10,831,000 in the same quarter a year ago and took an $18.5 million charge for settlement of the suit. The company reported that CombiMatrix took in $3,532,000 in deferred revenues from its Roche collaboration.

Because of Securities and Exchange Commission black-out regulations in effect before a securities offering, executives of CombiMatrix were unable to comment for attribution for this article.

However, at the Chips to Hits conference in in October, the CombiMatrix management team, accompanied by Roche executives, officially introduced the custom microarray business. The company has been producing chips for beta users like NASA and Roche since the summer. The company also sells software and chemistry.

CombiMatrix, founded in 1995, was funded with $36 million in August 2000. Acacia Research, which has since bought a majority stake of the company’s equity, was the lead investor in the VC funding, anteing in $17.5 million with additional investments from a mix of Silicon Valley and New York venture capital investors — JDS Capital, Emerging Growth Partners, Oracle Partners, SAC Capital Management, Caduceus Private Investments, and Seneca Capital.

— MOK

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