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CombiMatrix Sees Bright Future in Customizable Chips, Integrated Offerings

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Despite reporting modest revenues of $750,000 in its second quarter, CombiMatrix painted a rosy picture of its future this past week, highlighting its customizable chips and recent alliances as the key drivers of growth for the firm.

During a conference call following the release of the results, CombiMatrix President and CEO Amit Kumar provided a round-up of the initiatives that the life sciences unit of Acacia Research has undertaken to build its market share in the microarray field.

“The activities of this quarter were underscored by two key events,” Kumar said. “The first key event was the on-time commercial launch of our second microarray product, which we anticipate will make significant inroads into the market. The second key event was an update on our progress in our viral drug development program.”

During the quarter CombiMatrix entered into a strategic alliance with Axon Instruments, a manufacturer of microarray scanners that was recently purchased by Molecular Devices. The co-marketing deal allows the firms to promote each other’s products for use together in the research setting.

In addition, the company recently announced that it will co-market Strand Genomics’ Avadis software, a data analysis tool for microarray gene expression. The companies will also co-develop an interface that will facilitate ordering CombiMatrix CustomArray products through Avadis.

The objective of these pacts is to offer a kind of one-stop shop for customers of CombiMatrix’s custom arrays.

Kumar said, “What we found is when we went out into the marketplace, people were asking us to recommend certain readers and certain software applications. So we said, ‘Why don’t we establish relationships with some of these companies that are compatible with our technology and our products and enable a win-win situation for both?’”

Bret Undem, a spokesman for CombiMatrix, told BioArray News, “We believe researchers are starting to figure out what sequences they want for special studies. With our technology, you can order whatever you want on our chip and we’ll have it for you in a few days. Customers don’t have to buy any up-front license or any machines, and they work on existing Axon readers or most of the other readers in the marketplace. We think that’s going to be the key driver [of revenues].”

Strand is not likely to be the only software firm that CombiMatrix will seek as a collaborator. “I think you’ll see us partner with several of the software companies, because we’re offering an integrated solution once a researcher figures out what they want to put on the chip,” Undem said. He added that the firm would take a similar tack with reagent suppliers.

Although gaining market share in an industry that is so heavily dominated by one player, Affymetrix, is a daunting task, CombiMatrix is confident it can compete. Undem said, “First, it’s not cheap to be an Affy customer, there are up-front issues. We believe the quality of our chips, sensitivity, the dynamic range, and the freedom to order whatever you want — one at a time, ten at a time — that allows us to compete.”

The company sells two microarrays under its CustomArray brand, the low-density and mid-density customizable microarrays. It also is designing a series of catalog arrays for specific types of pharmaceutical research, including the human metabolism and human toxicology arrays that the firm recently launched.

Other microarrays in the pipeline are targeted at oncology, central nervous system disease, cardiovascular disease, and metabolic disease, Kumar said during the conference call.

When asked during the call about potential revenue growth of the new microarrays, Kumar responded, “Our policy is not to make projections, especially at such an early stage of commercialization. But shareholders can get an understanding of how this product will roll out by looking at the revenue growth of other companies in this industry that have launched similar chip-based products. In fact, you can take an early look at the revenue growth of companies like Affymetrix, and I would say our growth would be similar in nature.”

But the Mukilteo, Wash.-based firm has a long way to go to reach the revenue growth of an Affymetrix. Of the $750,000 in total revenues for the second quarter, $701,000 came from a biowarfare detection contract with the US Department of Defense and $49,000 came from sales of microarray products and other contract services.

The results compare with 2003 second-quarter revenues of $17.6 million. However, those results include $17.3 million in deferred contract revenue from a collaboration with Roche to develop a microarray platform called MatrixArray.

Although that collaboration has concluded, Roche has yet to announce a date for launch of the MatrixArray, and CombiMatrix officials declined to comment on what may be holding up the launch. During the conference call, Kumar acknowledged that there had been discussions with Roche about a possible equity investment, but he said he could not comment further on the issue.

On the same day the firm posted its second-quarter results, it also announced it would receive an additional $2.3 million from the Defense Department, once Congress signed the spending bill for the department (which happened on Thursday). With this new contract, CombiMatrix will exceed $8 million in funding from the DoD for development of a sensor system that will utilize the company’s biochip technology in detecting biological and chemical agents.

The firm also announced last week that it had expanded an ongoing collaboration with the IrsiCaixa Foundation to develop an anti-HIV compound. CombiMatrix said the firms had entered into a three-year research, development, and licensing pact and had selected two siRNA candidates for pre-clinical development against HIV.

In an interview with BioArray News’ sister publication RNAi News last week, Kumar said that CombiMatrix and IrsiCaixa researchers have found that the siRNAs, individually or together, were able to inhibit HIV-1 replication in an infected transformed leukemia cell line by between 500- to 1000-fold versus control siRNA. “I can’t comment on anything that’s in people’s laboratories [and] hasn’t been published, but we haven’t seen anything better” than these siRNAs, he said.(see RNAi News, 7/23/2004)

— EW

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