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Ten Questions for CombiMatrix President and CEO Amit Kumar

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Amit Kumar, CEO of CombiMatrix, last week spoke to investors at the Stephens 2005 Nanotechnology Investors Conference in Pasadena, Calif. While much of his talk focused on introducing the crowd to CombiMatrix' core technologies, Kumar touched on some future efforts by his Mulkiteo, Wash.-based firm to bring their technologies into the diagnostics market. He also described CombiMatrix as a "diversified biotech" with products geared for biodefense, general research, and diagnostics.

Specifically, he mentioned that the company was planning to assist researchers in developing an expression database for diagnosing cancer in patients who suffer from cancer of unknown primary, where their primary tumors cannot be identified. Kumar also told investors sales of CombiMatrix' products have been growing at a "torrid pace" and that the company was doubling revenue quarter on quarter.

Following the conference, just two weeks ahead of their first-quarter results, BioArray News spoke with Kumar to discuss his company's present and future.

In late February the European Patent Office decided to revoke an Affymetrix patent after you and others opposed it. Now I see that you are appealing another decision from the EPO that allowed Affy to keep a different patent in an amended form after similar opposition, and that you would like to have to revoked.

Can you give me a little background on why these patents are important for CombiMatrix?

Well, I can't speak specifically to that patent, but I can give you a little background on our strategy here. For CombiMatrix, as well as a number of industry players, there are a number patents in the microarray field that we feel are overreaching, and as a result we are opposing them in Europe, where there is a procedure to do these oppositions. It's not uncommon in biotechnology intellectual property for patents to be overreaching, primarily because biotech intellectual property law is only three decades old. The whole industry is only three decades old. We feel that our industry, our specific market segment, has certain patents that we thinks are limiting competition, and are limiting the ability of companies to innovate. And as a result we are interested in rectifying that situation. CombiMatrix is one of a number of companies doing that. With regards to specifics it's hard for me to comment, especially in situations where things are pending. That's basically our position. In fact many companies have similar positions.

I know the system in Europe is more favorable to oppositions, but why aren't you challenging the same IP in the United States?

The United States doesn't have an official opposition procedure. If it did, we would be doing so. Now the US Patent Trademark Office is considering setting up something like that. If it happens tomorrow, we'll be there if it happens two years from now we'll be there as well, but the US just doesn't have that kind of system.

In your speech at Stephens you said you were a 'diversified biotech.' You have interests in biodefense, general research, and now you will be getting involved to a greater extent in diagnostics. Describe your new diagnostics strategy.

Diagnostics has always been a part of our microarray business, and probably has been for many companies besides us. Our goal has always been to launch our product into the research and development market, which we have done and our products are selling well. Subsequent to that, our goal was to take it into the diagnostics market using a number of different approaches. Those approaches include licensing the product to certain companies who are developing diagnostic content, meaning biomarkers and so forth, and are in discussions to do that. We also want to be able to develop certain diagnostic chips which we will eventually take through US Food and Drug Administration approval now that the guidelines have been provided through the FDA. And thirdly, our plan is also to utilize our desktop synthesizer as an enabler of diagnostics for certain homebrew applications which we think are going to be, at least in the near term, bigger market opportunities than FDA approved microarrays. So that's our strategy in the diagnostics space.

At Stephens you also spoke of developing a tumor-of-unknown origin classification database…

The tumor classification database is one application in diagnostics. As we understand it by enabling a laboratory to synthesize their own microarrays and develop their own assays, that laboratory would be able to provide services for arrays that they synthesize using our technology to their customers which are primarily highly specialized physicians and hospitals without having to through FDA approval, because these would be covered as laboratory developed tests for homebrew. Most of the assays done on pharmacogenetics, such as the cytochrome p450 assays that are run using standard PCR, and most of the other PCR molecular diagnostic assays that are run by labs for hospitals and physicians, are all homebrew assays. There really isn't a single microarray platform that's doing that now, and the reason is, under homebrew guidelines, one of the key components of the guidelines is that the lab has to be able to purchase the components and then design and build the chip themselves. Other companies cannot provide that capability, but we can, we have a desktop synthesizer. We have sold several of them already and we are going to be selling more. We will allow labs to be able to purchase that synthesizer and purchase the components as well, such as the blank slides, where necessary to synthesize their own sequences. So the idea is that the labs would not ask us for pre-made chips. They would simply buy all of the components from us and design them themselves based on biomarkers that they felt were important, such as the tumor-of-unknown origin or tumor classification.

When will they be on sale?

Our prototype versions of these tools are available today, and we are in discussions about selling some of them. But we will have within the next two months a more formal discussion about this strategy and specific activities that we are undertaking, as well as specific timelines available, and when we anticipate we will be generation revenue from those.

Can you give me an update on the technology that you are developing for the Department of Defense?

There are several goals. The first goal is to provide something that's accurate and specific and can provide to the DoD the ability to identify certain pathogens in different arenas. One of those arenas is in a laboratory-based test. The second level is in the field. Obviously this requires certain levels of ruggedness and portability that are not necessary for a lab test. Devices will ultimately be carried by soldiers. The third level - and this is something we haven't be contracted for yet, is that they want a highly automated system sort of like a smoke detector that will sit in the corner of a high-risk facility and constantly monitor the air, and will provide some input if a pathogen is detected.

That is something that all of our colleagues in the military are asking about. There are some difficulties in achieving it. But we feel it is achievable, and with the appropriate support and time we'll be able to do that.

The market potential for these types of devices is difficult to say. Despite the fact that we are constantly inundated with news and fear, there really has not been a biological or chemical weapons attack on the United States or in the world for that matter since the anthrax mailing right after 9/11. And so I think we are going to continue using the funds provided by the government and have these products ready. If the government feels they are necessary, that's great. If it doesn't, then that's fine. We will have developed the devices, and we will have developed technology that's applicable for civilian uses as well.

You mentioned you were doing very well in terms of product sales and revenue. What will it take for you to continue on this path of growth?

Obviously I think that we are a relatively young company in the commercial space. We have a small sales force and we are building that sales force. We have a unique product, but I recognize that having the best product doesn't always make you the winner. You have to be out there, and you have to sell it. Our strategy at this time is to simply be the best provider and enable a small but growing sales force to go out there to sell this product. Our sales are growing and we will be providing our first quarter numbers to the public in late April. So people can evaluate how we've done.

Do you anticipate that growth will translate into any structural changes in addition to the larger sales force?

We are going to be adding to our sales and marketing organization. That's a given. We are also involved in discussions with a number of distributors. We have some small ones, but we will have some larger ones, and we anticipate situations where we will be distributing certain chip types with some distributors, and then we will be signing on some larger distributors for more broad distribution. I hesitate to promise certain distribution deals until we have signed them. The bottom line, we will be selling this product and the sales are doing really well.

At this moment what are some of the greatest challenges facing CombiMatrix?

Well, I think the main challenge is just growing pains, and this is a good problem to have. We completed development of our primary product and its doing really well. There's a lot of buzz in the industry. Now, we are converting the company from being solely focused on R&D to a company that is now manufacturing and marketing and servicing the product. And that requires certain structural changes within the organization that we are dealing with right now. It's a process that we are committing to doing, and its going to take several quarters. I think that's the main challenge right now.

So you have to change hats?

I think everybody at the company has to change hats, or modify hats, to take this analogy a little further. Ultimately we were originally focused on making discoveries. Now it's talking to customers and selling to customers and talking about why our products are compelling. Those all require different skill sets which depends on us bringing in some of the people who are necessary to make those changes. So it's an exciting time, but it's a challenging time.

 

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