In signing a 15-year development and marketing deal, Roche Diagnostics and biochip startup CombiMatrix are betting that semiconductor chips will prove as useful for DNA and protein expression analysis as they are for the computer industry.
The non-exclusive deal, which the companies signed July 3, stipulates that Roche will use, develop, and resell CombiMatrix''''s semiconductor-based biochips. The companies have also agreed to develop platform technology for standardized biochips.
For the first three years of the agreement, Roche will make royalty, R&D, and product payments to CombiMatrix, a subsidiary of Snoqualmie, Wash.-based Acacia Research. The companies have not disclosed further financial terms of the agreement, but CombiMatrix has said the market for its chips could potentially reach $500 million, or even more if the chips become clinical diagnostic devices.
Initially, Basel, Switzerland-based Roche Diagnostics plans to offer these chips to the research market, according to Katja Prowald, a Roche spokesperson. Roche chose to partner with CombiMatrix, Prowald said, "because the technology platform delineated by CombiMatrix is unique in that you can customize the applications."
CombiMatrix''''s biochips, which it calls biological array processors, consist of a semiconductor coated with a three-dimensional layer of porous material in which DNA, RNA, peptides, or other small molecules can be synthesized or immobilized within discrete test sites. The company uses "virtual flasks," thousands of tiny chemicals arranged in a grid pattern on the surface of the semiconductor wafer, to prevent cross-contamination between test sites. Because the surface is porous and three-dimensional, the chip can hold a relatively large amount of sequence for synthesis, generating a stronger signal, the company said.
To direct the sequence synthesis on the chip, the company''''s software allows users to program the individual electrodes on the surface of the semiconductor. In this way, the user can control exactly which base or peptide goes on which electrode, and adapt the chips for almost any type of gene- or protein-based analysis, from SNP studies to protein screens.
In addition to this flexibility, the semiconductor base offers economic advantages, said Bret Undem, vice president of CombiMatrix. "Semiconductor technology is more economical because, as the semiconductor world spends billions of dollars in creating denser and denser chips, we can scale with them. We don''''t need to spend our R&D budget toward scaling down."
This Roche deal represents a huge vote of confidence for CombiMatrix. Not only is it the first partnership the company has signed, other than unannounced early access agreements, but it is also one of the longest partnerships ever signed between a biochip company and a pharmaceutical giant.
The deal is also one CombiMatrix needs. The company filed a registration statement for an initial public offering last November, hoping to raise $100 million to develop its biological array processors, but this IPO has been dead in the water since the stock market took a downturn earlier this year.
CombiMatrix has been buoyed by its publicly traded cash-rich parent Acacia Research, which owns a 58.3 percent stake in the company. Acacia, which had $87.4 million in cash and short-investments as of March 31, pumped the bulk of its $5.6 million in R&D costs into CombiMatrix. It also devoted a considerable proportion of its $11.6 million in marketing, general, and administrative costs towards expanding CombiMatrix, according to its first-quarter balance sheet. During this period, CombiMatrix had less than $200,000 in revenues.
Acacia originally said it would provide a market for CombiMatrix''''s arrays by developing and acquiring companies in the life sciences market that utilize CombiMatrix''''s technology.
Instead, the Roche deal allows CombiMatrix, and Acacia which holds a 20-year exclusive license to use CombiMatrix''''s technology in material sciences ó the time and money to focus on technology development rather than just marketing.
CombiMatrix plans to use the money from the Roche deal to move its arrays out on the market by the end of the year, Undem said. The company is currently developing array synthesizer units that can produce up to 2,400 custom chips a day, said Undem. A credit-card sized cassette will hold up to ten chips, which will go into a larger module synthesizer capable of holding 40 cassettes at a time. This means a single module can synthesize up to 800,000 chips a year.
Because of its capacity to produce so many chips so quickly, CombiMatrix hopes to form additional distribution deals with pharmaceutical, biotech, and academic customers. "We think our technology is pretty special and the flexibility is very wide, so we''''re talking to a range of folks," Undem said.